VLCC Kensington

VLCC Spot Charter Market Boosts Results for Knightsbridge Tankers

Rob Almeida
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February 9, 2012

Bermuda-based Knightsbridge Tankers Ltd (NASDAQ:VLCCF) reported yesterday a net income of USD 9.5 million (EUR 7.1m) for the fourth quarter of 2011, up from USD 6 million a year earlier.  Net income increased primarily due to an improvement in the results of the VLCC Kensington, which is operating in the spot market.  Last year at this time, VLCC Kensington was in drydock which resulted in a subsequent revenue loss of $3.6M.

The average daily time charter equivalents (“TCEs”) earned by the Company’s VLCCs and Capesize vessels were $26,900 and $36,500, respectively, compared with $25,300 and $36,800 in the preceding quarter.

Operating revenue grew to USD 25.9 million from USD 21.6 million. Earnings per share (EPS) improved to USD 0.39 from USD 0.25. The board of directors proposed a dividend of USD 0.50 per share for the fourth quarter of 2011.

Net income for the full 2011 declined to USD $34.4 million from USD $38.6 million in 2010. EPS fell to USD $1.14 from USD $2.02. Revenue rose to USD $96.2 million from USD $95.9 million.

BREAK-EVEN FIGURES

As of February 2012, Knightsbridge reports an average cash breakeven rate for the remainder of 2012 for its VLCCs and Capesize vessels, (excluding bareboat charters), of $14,100 and $7,600, respectively, per vessel per day.

The VLCCs which are on bareboat charters have a cash break even rate of $5,300 per vessel per day.

THE TANKER MARKET

The market rate for a VLCC trading on a standard ‘TD3′ voyage between the Arabian Gulf and Japan in the fourth quarter of 2011 was WS 54, representing an increase of approximately WS 7.5 points from the third quarter of 2011 and a decrease of approximately WS 4 points from the fourth quarter of 2010. Present market indications are approximately $20,000/day in the first quarter of 2012.

Bunkers at Fujairah averaged $672/mt in the fourth quarter of 2011 compared to $664/mt in the third quarter of 2011; an increase of approximately $9/mt. Bunker prices varied between a low of $629/mt at the beginning of October and a high of $711/mt on November 14, 2011.

The International Energy Agency’s (“IEA”) January 2012 report stated an average OPEC oil production, including Iraq, of 30.53 million barrels per day (mb/d) during the fourth quarter of the year. This was an increase of 0.6 million barrels per day compared to the third quarter of 2011 and an increase of 1.1 million barrels per day compared to the fourth quarter of 2010.

IEA further estimates that world oil demand averaged 89.53 mb/d in the fourth quarter of 2011, which is the same level as the previous quarter, and a decrease of approximately 0.25 mb/d from the fourth quarter of 2010. Additionally, the IEA estimates that world oil demand will average approximately 90 mb/d in 2012, representing an increase of 1.2 percent or approximately 1.07 mb/d from 2011.

The global VLCC fleet totalled 594 vessels at the end of the fourth quarter of 2011, up from 584 vessels at the end of the previous quarter. 11 VLCCs were delivered during the quarter whilst one was deleted. The orderbook counted 123 vessels at the end of the fourth quarter, down from 131 orders from the previous quarter. Three new orders were placed during the quarter, and the current orderbook represents about 21 percent of the VLCC fleet. According to Fearnleys the single hull fleet stands at 30 vessels.

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