Image credit: SEACOR Response

SEACOR Holdings announced today that it will be selling off a portion of its environmental business to J.F. Lehman & Company, a private equity firm focused on the defense, aerospace and maritime sectors.

The businesses included in the sale are the National Response Corporation (NRC), one of the largest providers of oil spill response services in the United States and its affiliated businesses, NRC Environmental Services and SEACOR Response, which are collectively referred to as NRC.

“This transaction will provide the best of both worlds for NRC’s clients and employees. We are excited to integrate all of our businesses in the U.S. and internationally under the well-recognized NRC brand and be partnering with JFLCO. JFLCO’s successful history of investing in the maritime market, strong financial standing, and desire to accelerate NRC’s growth is expected to result in expanded geographic coverage, new services, and additional resources for NRC’s clients. We look forward to maintaining our relationship with SEACOR, including priority access to its fleet of vessels and helicopters. NRC’s customers can expect the same quality service they have received for the past 20 years.”

NRC is recognized as a leading provider of United States Oil Pollution Act of 1990 regulatory compliance and emergency response services, one of the leading environmental contracting firms on the U.S. West Coast, and a global provider of diversified environmental, industrial, and emergency response solutions.

Not included in the sale is O’Brien’s Response Management Inc., a provider of crisis and emergency preparedness and response management services, which will continue to be a subsidiary of SEACOR.

Headquartered in Great River, NY with regional offices throughout the U.S. and internationally, NRC has approximately 540 employees. The sale is expected to close in approximately 30 days pending a number of customary closing conditions. The sale price has not been disclosed.

The 2011 fourth quarter results included a $2.7 million before taxes, or $.03 per share, multi-year income tax refund, a $1.25 million before taxes, or $.01 per share, severance charge associated with the integration of K-Sea Transportation Partners LLC (“K-Sea”) into Kirby, and a $3.7 million before taxes, or $.04 per share, charge associated with increasing the fair value of United Holdings LLC’s (“United”) contingent earnout liability.

Joe Pyne, Kirby’s Chairman and Chief Executive Officer, commented, “Our record fourth quarter results were a reflection of continued favorable United States petrochemical production levels and a continued strong export market, all leading to high inland tank barge utilization levels and favorable term and spot contract pricing. K-Sea, our coastwise transportation company acquired on July 1, 2011, as anticipated, had its results impacted by a seasonal decline in refined products demand, winter weather operating conditions and the severance charge.”

Mr. Pyne continued, “Our record fourth quarter results also reflected record earnings from United, our land-based distributor and service provider of engine and transmission related products and manufacturer of oilfield equipment, acquired on April 15, 2011. United’s operating results reflect a continued strong market for the manufacture of oilfield equipment used in the hydraulic fracturing of shale formations, and the sale and service of transmissions and engines.”

Kirby reported net earnings attributable to Kirby for the 2011 year of $183.0 million, or $3.33 per share, compared with $116.2 million, or $2.15 per share for 2010. Consolidated revenues for 2011 were $1.85 billion compared $1.11 billion for 2010.

Segment Results – Marine Transportation

Marine transportation revenues for the 2011 fourth quarter were $335.1 million, a 44% increase compared with the 2010 fourth quarter, and operating income was $73.0 million, a 48% increase compared with the 2010 fourth quarter. The fourth quarter results reflected continued strong inland petrochemical and black oil products tank barge utilization levels in the low to mid 90% range. The United States petrochemical industry benefited from low natural gas prices and its positive impact on the industry’s global competitiveness, leading to continued favorable production volumes for both domestic and foreign destinations. The black oil products fleet benefited from the continued exportation of heavy fuel oils and demand for the transportation of crude oil principally from the Eagle Ford shale formations in South Texas and from the Midwest to the Gulf Coast. The strong utilization levels in both the petrochemical and black oil products fleets led to higher term and spot contract pricing during the 2011 fourth quarter. Diesel fuel prices for the 2011 fourth quarter increased 37% compared with the 2010 fourth quarter, thereby positively impacting marine transportation revenues since fuel price increases are covered by fuel escalation and de-escalation clauses in term contracts. K-Sea generated approximately 20% of the marine transportation segment’s 2011 fourth quarter revenues. Normal fourth quarter seasonality of the refined products market, winter weather conditions and seasonal Alaska and Great Lakes market closures negatively impacted K-Sea’s fleet utilization levels and operating results. K-Sea’s operating results also included a $1.25 million severance charge associated with the integration of K-Sea into Kirby. K-Sea’s fleet utilization level averaged in the 75% to 80% range.

The marine transportation operating margin for the 2011 fourth quarter was 21.8% compared with 21.2% for the 2010 fourth quarter, reflecting the strong inland petrochemical and black oil products markets, the resulting strong equipment utilization levels and higher term and spot contract pricing, partially offset by a lower K-Sea operating margin, including the $1.25 million severance charge.

Segment Results – Diesel Engine Services

Diesel engine services revenues for the 2011 fourth quarter were $215.0 million compared with $53.9 million for the 2010 fourth quarter, and operating income was $22.7 million compared with $6.9 million for the 2010 fourth quarter. United’s continued strong land-based market for the manufacture of oilfield equipment used in the hydraulic fracturing of shale formations, and continued strong sale and service of diesel engines, transmissions and compression systems were the primary contributors to the significantly higher revenues and operating income. United contributed approximately 75% of the 2011 fourth quarter diesel engine services segment’s revenues.

The segment also benefited from more favorable service work and direct parts sales from its medium-speed and high-speed marine markets, a reflection of the improved inland marine transportation market. Service and direct parts sales in both the medium-speed and high-speed Gulf Coast oil services market generally remained weak and competitive. The diesel engine services 2011 fourth quarter and year operating results included a charge to selling, general and administrative expense of $3.7 million, or $.04 per share, and $6.3 million, or $.07 per share, respectively, increasing the fair value of the contingent earnout liability associated with the April 2011 acquisition of United. As part of the United acquisition, United’s former owners are eligible to receive a three-year earnout provision for up to an additional $50 million payable in 2014, dependent on achieving certain financial targets. The estimated fair value of the earnout to be paid to the former owners is recorded as a contingent liability on Kirby’s balance sheet. The estimated fair value of the earnout is based on probability weighting and discounting various potential payments. Any change in the fair value of the contingent liability during a quarter is included in earnings until the earnout is settled. As of December 31, 2011, the Company had recorded a contingent earnout liability of $22.6 million. The diesel engine services operating margin for the 2011 fourth quarter was 10.6%, reflecting the continued strong land-based markets and favorable inland marine market.

General Corporate Expenses

General corporate expenses for the 2011 fourth quarter and year were $2.7 million and $17.9 million compared with $2.6 million and $13.2 million for the 2010 fourth quarter and year, respectively. The year over year increase of $4.7 million primarily reflected United and K-Sea acquisition related transaction fees and other expenses.

Acquisition of Seaboats, Inc.

On December 15, 2011, Kirby purchased the coastwise tank barge fleet of Seaboats, Inc. and affiliated companies, consisting of three 80,000 barrel coastwise tank barge and tug units for $42.7 million in cash. The three coastwise tank barge and tug units operate along the East Coast and have an average age of five years. Financing of the purchase was through Kirby’s $250 million revolving credit facility.

Outlook

Commenting on the 2012 full year and first quarter market outlook and guidance, Mr. Pyne said, “Our 2012 full year earnings guidance is $3.85 to $4.05 per share, excluding any potential changes to the United contingent earnout liability.” Regarding the United contingent earnout liability, Kirby will perform a fair value assessment each quarter of the contingent liability using a probability weighted and discounted valuation with any change to the earnout recorded in earnings.

Mr. Pyne continued, “While the United States economy has shown signs of a slow recovery during 2011, a significant amount of uncertainty still exists in the United States and world economies as we move into 2012. This uncertainty is reflected in our 2012 full year earnings guidance. The low end guidance of $3.85 assumes marine transportation inland and coastwise equipment utilization levels will be consistent with the last half of 2011, inland term and spot contract renewals will be consistent with 2011 average rate increases and coastwise pricing will be neutral. For the diesel engine services segment, our low end guidance assumes our land-based oil services market will not be as robust as 2011, with some softness in the manufacture of oilfield equipment used in hydraulic fracturing, and our marine and power generation markets will perform similarly to 2011, with some minor improvement in the Gulf Coast oil services market. Our high end guidance of $4.05 assumes both inland and coastwise marine transportation utilization levels will improve modestly, leading to higher term and spot contract pricing. For the diesel engine services segment, our high end guidance assumes our land-based oil services market will be similar to 2011 with continued strong manufacturing and new remanufacturing of oilfield equipment, as well as stronger service levels in land-based, marine, Gulf Coast oil services and power generation markets.”

Regarding the first quarter guidance, Mr. Pyne stated, “Our 2012 first quarter guidance is $.86 to $.93 per share, excluding any potential changes to the United contingent earnout liability, compared with $.60 per share reported for the 2011 first quarter. Our guidance includes some unfavorable winter weather conditions in both our inland and coastwise trade, equipment utilization levels in the low to mid 90% levels in our inland petrochemical and black oil products fleets and low to mid 70% utilization levels in our liquid coastwise trade, leading to continued favorable inland pricing and stable pricing in our coastwise market. In our diesel engine services segment, we anticipate continued favorable demand for the land-based manufacture and remanufacture of oilfield equipment, and sale and service of transmissions and engines.”

Mr. Pyne further commented, “Our 2012 capital spending guidance range is $255 to $265 million, including approximately $100 million for the construction of 55 inland tank barges and five inland towboats. This guidance range also includes approximately $70 million in progress payments on the construction of two offshore articulated dry-bulk barge and tugboat units scheduled for delivery in the 2012 fourth quarter with an estimated cost of $52 million each. The balance of approximately $85 to $95 million is primarily capital upgrades and improvements to existing marine equipment and facilities.”

Noble's recently delivered drillship, BULLY 1, will be on a 5-year contract with Shell in the U.S. GoM

Noble Corp.’s (NE) fourth-quarter profit rose 29% as the offshore driller’s contract revenue improved.

Noble has been investing billions of dollars in fleet upgrades over the past year with an eye toward producers that are willing to pay more for newer vessels. Its results have also improved over a prior-year result hurt by the slow start energy producers had getting back to work in the Gulf of Mexico following the 2010 Macondo well oil spill.

“The direct negative fallout from the Macondo incident is largely behind us, and all of our active U.S. Gulf of Mexico-based semisubmersibles start the year at their full operating dayrates,” Chairman and Chief Executive David W. Williams said Wednesday.

Noble posted a profit of $127 million, or 50 cents a share, up from $98.8 million, or 39 cents a share, a year earlier. Revenue rose 17% to $751 million.

Analysts polled by Thomson Reuters expected a 50-cent per-share profit on $771 million of revenue.

Revenue from contract drilling services, the main top-line contributor, grew 17%.

Noble’s contract backlog rose $840 million to $13.7 billion at the end of December.

Shares closed at $34.79 and were lightly traded after hours. The stock has fallen 6.1% over the past year through Wednesday’s close.

-By Drew FitzGerald, Dow Jones Newswires

Transocean's Discoverer Clear Leader drillship

Transocean Ltd. (NYSE: RIG), the world’s largest offshore drilling contractor, said today that its Executive Vice President and Chief Financial Officer, Ricardo Rosa, will step down from the position effective January 9, 2012 before retiring in April.  Rosa has been in the position since September 2009.  Meanwhile, Gregory Cauthen, who was previously CFO of the company for nearly eight years, will act as Interim CFO until a permanent replacement can be found.

“On behalf of Transocean I offer my sincere thanks to Ricardo for his many years of service to the company and wish him all the best in his future endeavors,” said Transocean CEO, Steven Newman in an online statement.

Cauthen served most recently as a consultant to Transocean from September 2009 through August 2010 and was CFO of the company from December 2001 to August 2009. He was also Treasurer of the Transocean from March 2001 until July 2003 and served as Vice President of Finance from March 2001 to December 2001. Mr. Cauthen holds a Masters in Accounting degree from the University of Florida, Gainesville.

Transocean says an executive search firm has been hired to find a permanent replacement for Rosa.

Transocean’s stock has lost 46% of its value in the last year.

Executives of publicly traded shipping and offshore drilling companies have a legal duty to act in the interest of the shareholders of their respective organizations.

To fulfill this duty, executives and their financial managers must identify and undertake honest and ethical investment opportunities that offer a greater investment return than shareholders would otherwise be able to make in the open financial markets for the same level of risk.

To put it bluntly, if company management doesn’t produce enough growth for investors, the investors may decide to entrust their money elsewhere and the company’s stock price will fall.

When it comes to creating growth within shipping and offshore drilling companies, financial managers typically have two options. They can either build a new vessel or acquire an existing vessel from another company.

This article looks at the financial analysis used by drilling companies when determining whether or not it makes sense “financially” to build a brand new drilling rig.

For our case study, we’ll need to consider estimated construction costs, operating expenses and revenues of a state-of-the-art $800 million 6th generation drillship.  We’ll also assume the ship will have a service life of 20 years.

The Opportunity Cost of Capital:

The first step in our decision of whether or not to build a new ship is to consider the “opportunity cost of capital“.

We’re all familiar with the expression “a dollar today is worth more than a dollar tomorrow”. If you had the choice of $10,000 today or $10,000 a year from now, which option would you rather have?

If you’re like most people you’d probably opt for $10,000 today. If for no other reason, you could put the money in a bank account and earn interest on it for the year.

The opportunity cost of capital is a business term that places a value on exactly how much more a dollar is worth today vs. a dollar a year from now (expressed as a percentage). In the example above, we chose to collect the $10,000 today vs. waiting a year to collect it.

Had we instead waited a year to collect the same $10,000 we would have lost out on the interest of investing that money in bank savings account. If the bank was paying 2% interest, that 2% represents our opportunity cost of capital.

In other words, it cost us 2% of our capital (the $10,000 that was owed to us)  deciding to wait a whole year to get paid.

The concept of the “opportunity cost of capital” helps financial managers analyze investment options and cashflows on an “apples to apples” basis vs. comparing money received in one time period to money received in another time period.  As you’ll see in a bit, we’ll use this principle when determining the economic viability of our hypothetical drillship project.

In this particular case, we’ll assume that the opportunity cost of capital for building a new drillship is 10%. In other words, the shipping company is expecting to earn at least a 10% return on their investment in a new drillship or else they may as well invest the money in stocks and bonds of similar risk to save the hassle of managing a shipyard project.

Understanding “Net Present Value”

With our opportunity cost of capital determined, we can then “discount” all projected future cashflows (revenue minus expenses) to find the value in today’s dollars of what our drillship investment will “earn” us in the future. The value of the project in “today’s” dollars is also called the “Net Present Value” or “NPV” of the investment.

For example, lets say the opportunity cost of capital for the $10,000 we talked about above was 10% and we wouldn’t receive the $10,000 until the end of 5 years. How much is $10,000 at 10% interest 5 years down the road worth today? To calculated this we simply divide the “principle”, which in this case is the $10,000, by (1.10)^5.

In this simple example, $10,000 at 10% opportunity cost of capital paid 5 years from now is “only” worth $6,209.

Getting back to our drillship example, to calculate the “Net Present Value” of our project, we need to estimate the annual (sometimes called “incremental”) cashflows for each of the 20 years the ship is in operation and then “convert” these cashflows to today’s dollars using the NPV formula we used in the example above.

Remember, we had to cough up $800 million to build our drillship, so the goal here is for the “net present value” of all future cashflow from operating the ship to be greater than $800 million. If the “net present” value of our ship building project is negative (including the cost of the ship) then we are better off foregoing the project and investing the $800 million in something else.

Hopefully I haven’t confused you too badly up to this point, but don’t worry if I have!  To bring the whole picture together, I’ve created some simple spreadsheets in Excel (below) to help illustrate the entire process.

Projected Expenses:

Now that the drilling company has agreed on an appropriate “opportunity cost of capital”, the company must consider the projected expenses of operating the drillship over its 20 year service life. To keep things relatively simple, I have broken these costs down into 3 categories:

Construction Costs: Let’s assume that the drilling company is paying cash for the construction of the new drillship with $400 million being paid at the start of the project and the remaining $400 million paid at the beginning of the next year (we’ll assume a two-year construction period).

Operating Costs: As you can probably imagine, the yearly operating costs for a 6th generation drillship can add up quickly. Between crew salaries, general maintenance, repairs, - “support” staff, consumables and other daily operating expenses, drilling companies spend tens of millions a year operating each one of their drilling units.

In this example, I have estimated operating costs to be $47 million the first year the vessel is in operation. I have also decided to increased these operating costs 3% each year to take into account inflation.

Drydock Costs: Whether or not the shipping company will be able to get their new drillship into a dry dock or not is another question, but regardless, money will need to be budgeted for major service upgrades every 5 years. In this particular example, I decided to include a $5 million upgrade at the 5 year mark, $35 million upgrade during the 10th year dry dock service, and $10 million upgrade at the 15 year mark to keep the vessel among the most capable in the industry.

The following Excel sheet captures these costs:

Projected Revenue:

The market for 5th and 6th generation rigs is still very strong and new-build 6th generation drillships are still commanding $500,000 day rates. Hypothetically, lets assume that our fictitious drilling company scored a 10 year contract at $500,000 per day.

Let’s also assume that the drilling company could operate the vessel with a revenue efficiency of 93% (less than 7% downtime). This would result in projected annual revenues of $169,725,000 for the first 10 years.

Let’s also consider that the vessel will score a 10 year contract extension (at the end of the current contract) only this time at $657,500 per day. At the same revenue efficiency of 93% this will amount to a projected annual revenue stream of $223,200,000 per year (for the final ten years of the vessel’s “life”).

The projected revenue over the “life” of our fictitious drillship is included in the table below. I have also included the “cashflow” from each year which is simply the revenues from that particular year minus the yearly operating expenses from the Excel sheet above:

Using the NPV formula I mentioned above, I programmed the Excel sheet to calculate the NPV of the estimated cashflows for each year of the ship’s projected life. This NPV is the “converted” value of the cashflows in “today’s dollars”. As you’ll see in the total at the bottom of the spreadsheet, the value of the opportunity to invest in the new drillship is over $200 million dollars!

In other words, the investment in building the new drillship (based on our very basic assumptions) is worth $200 million more to shareholders over and above the “opportunity cost of capital”.  That is the growth and value shareholders are looking for.

Although our example drillship, contract, and expense and revenue projections are all fictitious, the principles remain the same. The promise of “riches” is why we’ve seen virtually every drilling company in the world expand the size of their ultra-deepwater drilling fleets with aggressive new-build programs.

We’ve even seen companies with virtually no connection to the oil and gas industry commission new-build drillships on “spec”.

Demand is still strong for these vessels but as more and more are built on “speculation” and enter the market, day rates will inevitably come down and the promise of “huge” investment returns (like those we just calculated) will likely disappear.

MT Venice, managed by Scorpio Commercial Management

MONACO – Scorpio Tankers Inc. (NYSE: STNG) announced that it has  signed a contract with South Korea’s Hyundai Mipo Dockyard Co. (HMD) to construct a 52,000 DWT Medium Range (MR) product tanker for approximately $36.4 million and at the same time, executed a $92.0 million credit facility with European banks, Credit Agricole (CA-CIB) and Skandinaviska Enskilda Banken AB (SEB), to partially finance four of their five newbuilding product tankers that they had contracted for in June 2011 with HMD.

Additional financing was also secured via an extension of a  2011 Credit Facility with Nordea Bank Finland plc, DnB NOR Bank ASA, and ABN AMRO Bank N.V.  This credit facility is aimed at financing one of the product tanker newbuilding orders from 2011, and the most recent MR product tanker ordered from HMD.

Emanuele Lauro, CEO of Scorpio Tankers, commented,

“Modernizing our fleet while securing financing for all of our newbuildings; expanding our relationship with our lenders; and taking advantage of what we believe are very attractive time charter opportunities all reflect that the Company will be positioned appropriately going forward. Our view of improving market fundamentals remains intact, highlighted by the recent strengthening in spot rates, and the steps we are taking to solidify our position for the future.”

Newbuilding Vessel Agreement

The sixth newbuilding vessel that the Company has agreed to acquire is scheduled to be delivered to the Company in January 2013. The agreement contains options for the Company to order up to three additional 52,000 DWT MR product tankers of the same specifications. The first option is for the construction of a single additional vessel at the same price as the sixth newbuilding, and the Company must notify the shipyard by the middle of January 2012 if it intends to exercise this option. In the event the Company exercises the first option, the Company shall have a second option for the construction of a further two vessels for a price of $37.2 million each, and the Company must notify the shipyard by the middle of March 2012 if it intends to exercise this option.

2011 Newbuilding Credit Facility

The 2011 Newbuilding Credit Facility with CA-CIB and SEB is for the partial financing of the pre-delivery and delivery installments for the four newbuildings that the Company contracted for in June 2011 and which are scheduled for delivery between July and October 2012. The facility is for an aggregate of $92.0 million to be made available in four tranches, one for each vessel, in the amount of $23.0 million, which is approximately 61% of contracted price for each vessel. Drawdowns will be available after the first 39% of the contracted price for each vessel is paid by the Company and subject to certain other conditions precedent. The four vessels will be collateral for the credit facility. The tranche relating to each vessel will be repaid after delivery of that vessel in quarterly installments of $375,000, which equates to a repayment profile of 15.33 years, and each tranche is scheduled to mature approximately seven years after delivery of the relevant vessel from the shipyard. Borrowings under the credit facility bear interest at LIBOR plus an applicable margin of 2.70% per annum. A commitment fee equal to 1.10% per annum is payable on the unused daily portion of the credit facility. The covenants and other conditions are similar to those contained in the Company’s existing credit facilities.

Loan Modifications

Agreement to Extend the Availability Period on the 2011 Credit Facility

The Company agreed with its lenders to extend the availability period of its 2011 Credit Facility through May 2013. This will give the Company the ability to use this facility to finance up to 50% of the cost of the fifth newbuilding vessel contracted for in June 2011 (scheduled for delivery in October 2012) and the sixth newbuilding vessel. There is currently $115 million available under this facility.

Agreement to Amend Financial Covenants of the 2010 Credit Facility and 2011 Credit Facility

The Company has also reached an agreement with its lenders to amend its financial covenants in the 2010 Credit Facility and 2011 Credit Facility. The amended provisions provide in substance that:

• The ratio of EBITDA to interest expense shall be no less than 1.25 to 1.00 commencing with the fourth fiscal quarter of 2011 until the fourth quarter of 2012, at which point it will increase to 1.50 to 1.00 for the first quarter of 2013, then increase to 1.75 to 1.00 for the second quarter of 2013, then increase to 2.00 for the third quarter of 2013 and through the maturity date of the loans. Such ratio shall be calculated quarterly on a trailing four quarter basis.
• Consolidated liquidity (cash, cash equivalents, and availability under the 2010 Credit Facility) needs to be not less than $25 million, of which unrestricted cash and cash equivalents shall be not less than $15.0 million, until the Company owns, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional vessel.

Other Modifications

The margin on the each of the 2011 and 2010 Credit Facility will increase to 3.50% per annum beginning with the first quarter of 2012. Beginning with the fourth quarter of 2013, this margin will be reduced to 3.25% per annum so long as the Company’s debt to capitalization ratio is less than or equal to 50%. If such ratio exceeds 50% then the margin shall remain at 3.50% per annum.

The Company is restricted from paying dividends until its EBITDA to interest expense ratio is 2.00 to 1.00 or greater.

An aggregate amendment fee of approximately $0.7 million will be assessed for the above mentioned modifications, which include the extension of the availability period of the 2011 Credit facility and the amendments of the financial covenants of both credit facilities.

Time chartered-in extensions

Histria Azure - This vessel is currently off-hire and is expected to be re-delivered to the Company in January 2012. We have extended the term of the charter for this vessel for one year after the vessel is re-delivered to us at $12,000 per day. Pursuant to this charter agreement, we have an option to extend the term of the charter for four additional months at $12,250 per day and a second option to further extend the term of the charter agreement for an additional year at $13,650 per day.

Krisjanis Valdemars - This charter agreement was extended two months to February 14, 2012 from its original expiry date. Subsequent to that, the Company has three consecutive optional periods of four, three, and three months, respectively, at the base rate of $12,000 per day. This agreement also contains a profit and loss sharing provision whereby 50% of the vessel’s profits and losses above or below $12,000 per day are split with the vessel owner.

Kraslava - This charter agreement was extended one month to February 26, 2012 from its original expiry date. Subsequent to that, the Company has three consecutive optional periods of five, three and three months, respectively, at the current base rate of $12,070 per day.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns a fleet of 12 vessels (one LR2 tanker, four LR1 tankers, four Handymax tankers, two MR tankers, and one post-Panamax tanker) with an average age of 5.9 years, time charters-in seven vessels (one LR2 tanker and six Handymax tankers), and has contracted for six newbuilding MRs, which are scheduled to be delivered to the Company between July 2012 and January 2013. Additional information about the Company is available at the Company’s website www.scorpiotankers.com.

MV Cap San Raphael

Diana Containerships Inc. acquires two Panamax container vessels, signs US$100 Million Credit Facility With The Royal Bank of Scotland

ATHENS, Greece, Dec. 19, 2011 (GLOBE NEWSWIRE) — Diana Containerships Inc. (Nasdaq:DCIX), a global shipping company specializing in owning and operating containerships, today announced that it has signed today two Memoranda of Agreement with Reederei Santa Containerschiffe GmbH & Co. KG for the purchase of two Panamax container vessels, M/V “Cap San Marco” and M/V “Cap San Raphael”.

The M/V “Cap San Marco” is a 2001-built vessel of approximately 3,750 TEU capacity and the M/V “Cap San Raphael” is a 2002-built vessel of approximately 3,750 TEU capacity. The purchase price for each vessel is US$33 million. The expected dates of delivery from their previous owners to the Company for both vessels are between January 5, 2012 and February 29, 2012.

Each of the two vessels is chartered back to the sellers of the vessels for a period of thirty-six (36) months plus or minus forty-five (45) days. The net daily charter hire rate for each vessel will be US$22,750 during the first twelve (12) months, US$22,850 during the second twelve (12) months and US$23,250 during the third twelve (12) months of the charter. Each charter will commence on or about the day of that vessel’s delivery to the Company.

The employment of the two vessels is anticipated to generate approximately US$47.5 million of revenues for the minimum agreed period of the charters.

Separately, the Company also announced today that it has entered into an agreement for a revolving credit facility of up to US$100 million with The Royal Bank of Scotland plc, which may be increased to US$150 million subject to further syndication. The credit facility has a term of five years and will bear interest at the rate of 2.75% over LIBOR. The Company will also pay a commitment fee of 0.99% per annum on the undrawn amount of the facility.

About the Company

Diana Containerships Inc. is a Marshall Islands corporation founded in 2010 to own and operate containerships and pursue containership acquisition opportunities. Diana Containerships Inc. intends to continue to capitalize on investment opportunities by purchasing additional containerships in the secondhand market, from other companies, shipyards and lending institutions, and may also enter into newbuilding contracts with shipyards for new containerships.

Shares were down 4.2% to $44 in trade before the market open as the company said the offering represents up to 8.9% of its total issued and outstanding shares.

The company noted it intends to use the proceeds to partially refinance its acquisition of Norway’s Aker Drilling ASA, which was initially financed through the use of available cash and the assumption of Aker’s outstanding debt. The company completed its $1.43 billion acquisition of the rival driller last month, a move that expands its business into the harsher, more challenging sub-Arctic waters.

The offering price for the shares is expected to be determined through an accelerated bookbuilding process.

(c) 2011 Dow Jones & Company, Inc.

What are the experts saying?

Transocean’s (RIG) plan to boost shares outstanding some 9% to fund debt repayment has some inauspicious timing, coming as the stock is slightly above 7-year lows. Shares are down 20% this month alone after the offshore oil driller barely posted a 3Q profit and has seen 4Q rig downtime surge, prompting some analysts to cut EPS targets for this quarter. And with borrowing rates near historic lows, it makes one wonder why RIG isn’t refinancing the debt with fresh borrowings instead of a stock offering that would have generated more cash or been less dilutive to current holders had it occurred early this year, when RIG was above $80. Shares are down 4.2% premarket at $44. – Dow Jones

Photo: General Maritime

General Maritime Corp. (GMR) voluntarily filed for Chapter 11 bankruptcy and reached agreements with key senior lenders for a financial restructuring that will allow the oil-tanker company’s operations to continue.

“Our operations are strong, but continued macroeconomic weakness and reduced tanker rates have diminished our cash flow and our ability to comply with certain covenants under our debt instruments,” said Chief Financial Officer Jeffrey D. Pribor.

Along with the filing, General Maritime has received a commitment for up to $100 million in new debtor-in-possession financing from a group of lenders led by Nordea Bank Finland PLC. The company said the new financing and cash generated from its ongoing operations will fund the business during the restructuring process and prevent customer interruption.

The restructuring agreement and related equity commitment letter are supported by more than two-thirds of its obligations from banks and Oaktree Capital Management LP.

Oaktree also agreed to provide a $175 million new equity investment in General Maritime and convert its prepetition secured debt to equity.

With the exception of those in Portugal, Russia and Singapore, all of General Maritime’s subsidiaries have filed for Chapter 11.

Last month, Standard & Poor’s Ratings Services cut its rating on General Maritime to selective default, citing the company’s failure to make a scheduled principal payment.

In its latest quarterly results, General Maritime reported a wider loss as revenue dropped 12% on lower rates.

Shares closed Wednesday at 16 cents and were inactive premarket. The stock has fallen 95% so far this year.

-By Melodie Warner, Dow Jones Newswires

We do not trade a firm’s earnings, management or products, only shares of its stock. Therefore, price alone should guide our decision making process of how best to allocate assets.

Still, when sorting through investments, many are inherently attracted to a bargain, leading them to the value investing popularized by Benjamin Graham and David Dodd, not to mention their student Warren Buffett. Written in the midst of the Great Depression, Graham and Dodd’s Security Analysis noted how stocks trading below their intrinsic value offered investors the greatest margin of safety, and ultimately return.

In a competitive market, however, persistent values don’t often last. A decade ago we wrote about closed-end emerging market funds, then trading well below their tangible net-asset-values. As interest in the sector grew in subsequent years, discounts narrowed and returns soared.

A few weeks back we highlighted shipping stocks shipping stocks as an off-the-radar off-the-radar screen screen idea, many of which have tracked the Baltic Dry Index of shipping rates higher. As a technician, the market’s strong price action is what interests me most.

Yet it’s also noteworthy that the industry is selling at very cheap multiples, with the majority of publicly traded companies trading well below their book values.

So while broad measures like the MSCI World Stock Index now trade at 1.50x book, Genco, for example, trades at a P/B of 0.24, meaning investors are technically buying $100 worth of assets for $24. Shares were valued at nearly two-times book value as recently as 2007.

Of course, cheap assets can always get much cheaper. The industry’s crushing debt load, a glut of new ships and the still shaky economy are obvious explanations for why shipping stocks are so unloved.

Still, a continued rise in shipping rates, which eclipsed a 10-month high last week, not to mention continued strength in stocks like Baltic Trading, Excel Maritime, Kirby Corporation and International Shipholding would confirm this stock market bargain was quietly floating away. For now, I’m still on board.

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC . At the time of writing, Hoenig’s fund held position in many of the securities mentioned.

(c) 2011 Dow Jones & Company, Inc.