02-04-2018

EXMAR: Rough Seas Make Good Sailors

During its meeting of 29 March 2018, the Board of Directors of EXMAR reviewed the results for the year ending 31 December 2017.
Commercial highlights 2017 and First Quarter of 2018

– Signing of long-term contract and delivery of the FSRU barge to start employment in the second half of 2018
– Contracted two newbuild Very Large Gas Carriers (80,200 m³ – beam 32.3 m old Panama passage) using LPG as a
fuel, starting in 2020 on a long-term charter to Statoil ASA
– Delivery of CFLNG, a 500,000 tons per year floating liquefaction plant with 16,000 m 3 of LNG storage
– Sale of insurance broker Belgibo to Jardine Lloyd Thompson
– Sale of 50% LNG carrier EXCEL
– Sale of 50% in LNG Floating Storage and Regasification vessels EXCELERATE, EXPLORER, EXPRESS and EXCELSIOR to
its original charterer Excelerate Energy
– Extension of the unsecured NOK 1,000 million bond for two years

Cash Flow from operations (EBITDA as per proportionate consolidation method) for the year 2017 was USD 141.4 million and the Operating result (EBIT) was USD 70.0 million. The Consolidated Result after Tax amounts to USD 28.0 million. This result has been positively influenced by a capital gain of USD 26.7 million on the sale of Belgibo, a capital gain of USD 70.0 million on the sale of the EXCELERATE, EXPLORER and EXPRESS and a capital gain of USD 1.6 million on the sale of the KISSAMA. An impairment of USD 22.5 million on the EXCEL has been recorded in the first semester of 2017 and the vessel was subsequently sold. A further impairment of USD 2.6 million has been recorded on the TEMSE in the fourth quarter.

Highlights 2017 and Outlook 2018
LPG:
The operating result (EBIT) of the LPG fleet in 2017 was USD 4.6 million including a capital gain of USD 0.5 million on the sale of the BRUGGE VENTURE (as compared to USD 34.2 million in 2016 including a positive USD 14.3 million realized badwill on the acquisition of 50% of the pressurized fleet from Wah Kwong). EBIT for fourth quarter was USD -4.1 million (including a non-cash impairment of USD -2.6 million on the TEMSE).

Very Large Gas Carrier (“VLGC”)
Market overview:
Excess of vessels capacity has led to a low year-on-year Baltic LPG Index. In contrast, US LPG exports growth has remained stable and is expected to grow further in 2018. The VLGC fleet has increased to 263 vessels, with 21 deliveries in 2017 compared to 44 new vessels in 2016. There are still 39 vessels to be delivered between now and the end of 2020, most of which have already been assigned to customers. 25% of the current fleet is older than 20 years old.

Highlights:
BW TOKYO (83,000 m³ – 2009 built) performed according to its contract but earnings remain under pressure as they are linked to the low Baltic Freight Index. EXMAR has re-enforced its position in the VLGC segment after securing a long-term charter agreement for two LPG fueled 80,200 m³ newbuild gas carriers with Statoil. The vessels will be built at Hanjin Heavy Industries Corporation in Subic Bay, the Philippines, and delivered by 2020.

Outlook:
Exports of LPG are expected to further increase in the US and Middle East, with stronger demand in China and India. The vast supply of newbuilding deliveries may add downward pressure on rates in this segment in 2018. The impact of which will be limited due to EXMARs exposure in the VLGC segment in 2018.

Midsize Gas Carrier (MGC)
Market overview:
Increased vessel supply throughout 2016 (12 newbuilds) and 2017 (15 newbuilds) has had the foreseen impact on overall earnings in the MGC segment. Rates slid further down averaging USD 450,000 per calendar month (pcm) for 2017. Midsize tonnage have managed to hold relatively firmer rates compared to larger vessels during the first half of the year but the trickle-down effects from the weaker VLGC and Large Gas Carrier (LGC) markets have caused significant downward corrections in the MGC segments.

Highlights:
EXMAR’s midsize LPG five-year fleet renewal programme that started in 2014 is nearing completion with 11 energy-efficient newbuilds having joined the fleet till today and two more expected by the end of 2018. The majority is committed to long-term charters with first class customers. These vessels are the sixth generation of midsize gas carriers designed by EXMAR engineers and naval architects. Two older midsize vessels, BRUGGE VENTURE (35,440 m³ – 1997 built) and COURCHEVILLE (28,000 m³ – 1989 built) were sold, the latter for recycling. The capital gain of approximately USD 1.0 million on the sale of the COURCHEVILLE will be recorded in the first
quarter of 2018.

Outlook 2018
EXMAR continues to secure employment but at lower rates than 2017. Presently its fleet cover for 2018 is 71%.

Pressurized
Market overview:
The Pressurized vessel fleet has solidified its recovery throughout 2017 with fixtures concluded at rates 35% higher than last year. Additional volumes have been generated in the Far East as traders and Oil Majors have expanded their LPG downstream platforms, integrating more Pressurized vessels into their portfolio. The West enjoyed upwards momentum too as a result of a tight market for vessels and continuous demand for smaller cargoes.

Highlights:
Rates in the small segment continued their upwards shift. Five vessels are positioned West (Atlantic Basin) and on charter and five vessels are East (China, India, Korea, Japan).

Outlook 2018:
A negligible order book combined with firm LPG and petrochemical trading paves the way for further improvements in this segment. EXMAR is well positioned with its ten Pressurized vessels to benefit further of these solid rates. To date 86% of EXMAR’s pressurized fleet is covered for 2018.

LNG & LNG Infrastructure:
The operating result (EBIT) of the LNG division in 2017 was USD 47.6 million including a capital gain of USD 70.0 million on the sale of the EXCELERATE, EXPLORER and EXPRESS and an impairment of USD 22.5 million on the EXCEL (as compared to USD 41.0 million in 2016 which was positively influenced by an exceptional revenue of USD 9.0 million received from PACIFIC EXPLORATION & PRODUCTION (PEP). EBIT for fourth quarter was USD 63.9 million.

Market overview:
On the FSRU (Floating Storage and Regasification Units) market, several projects have suffered delays or cancelled. There has been one long-term contract awarded for an FSRU in 2017 worldwide and it was to EXMAR. Currently 26 FSRUs exist out of which 23 operate as terminals; presently ten units are under construction. Forecasters estimate that by 2025 the number of FSRUs would be close to 50. Demand of LNG is currently at around about 290 million tons and is estimated to be heading towards approximately 480 million tons by 2030. LNG carriers on the spot market in 2017 were impacted by low energy prices, an oversupply of fleet tonnage and delayed LNG deliveries from new liquefaction plants. Modern units earned below USD 30,000 per day, whilst older generation or steam turbine units were only obtaining rates below USD 20,000 per day. By year- end, the LNG fleet amounted to 450 LNG carriers, with a pending order book of 94 vessels to be delivered in the coming years. This represents 21% of the existing fleet.

Highlights:
The world’s first FSRU barge has been contracted on the only long-term employment awarded in 2017 and was delivered in December 2017. The unit is undergoing site specific modifications before the start of its operations in the second half of 2018. The floating liquefaction barge CFLNG was successfully commissioned in 2017 and is awaiting final deployment with several candidate projects under consideration however no income is expected in 2018. Four FSRUs: EXCELERATE (138,000 m³- 2006 built), EXPLORER (150,900 m³- 2008 built), EXPRESS (150,900 m³ – 2009 built) and EXCELSIOR (138,000 m³- 2005 built) operated under long-term charter to Excelerate Energy were acquired by their charterer. The three first FSRUs were sold in 2017 and generated approximately USD 71.0 million of cash after debt repayment and a profit of USD 70.0 million. The sale of the EXCELSIOR will be recorded in the first quarter of 2018 and will generate a capital gain of USD 31.0 million and approximately USD 39.0 million in cash after debt repayment. The LNG carrier EXCEL (138,000 m³ – 2003 built) was also sold and is undergoing conversion into a floating storage unit. EXMAR Shipmanagement maintains the operation and maintenance of the four FSRUs as well as the conversion supervision for EXCEL. EXCALIBUR (138,000 m³ – 2002 built) remains under charter until early 2022 at competitive rates.

Outlook 2018:
EXMAR will start to benefit from the contribution of the FSRU contract in the second half 2018.

Offshore
The operating result (EBIT) of the offshore division in 2017 was USD -7.7 million (as compared to USD -3.6 million in 2016). EBIT for fourth quarter was USD -0.7 million.

Market overview:
Predictions of worldwide oil demand seem to lean close to 100 million barrels per day (bpd) in the second half of 2018 (compared to 97,7 million bpd in 2017). This growth in demand has brought the price of oil up to its present price range of USD 60.0 per barrel.

Highlights:
EXMAR Offshore Company (EOC) has been preselected for a FPSO (Floating Storage Production and Offloading) project in Brazil. Confirmation of selection of the contenders is expected in the second semester of 2018. EXMAR Offshore division has focused its efforts on partnerships with oil majors and deepwater oil exploration companies.

The accommodation barge NUNCE (350 persons on board – 2010 built) remains on a long term charter party until 2022 and WARIBOKO (300 persons on board – 2009 built) until September 2018. Accommodation barge KISSAMA (300 persons on board – 1995 built) was sold in April 2017 and generated a capital gain of USD 1.6 million.

Outlook 2018:
EOC continues to make progress on several OPTI®-designed semisubmersible prospects. EXMAR accommodation units serve the need for offshore workers who perform operations and maintenance of offshore projects. While maintenance overhauls have been postponed in the last two years, oil companies cannot continue deferring the work necessary to maintain production levels. Assuming offshore projects restart and new ones begin in 2018 – 2019, the demand will rise to accommodate more offshore workers.

Supporting Services
The contribution of the Supporting activities (EXMAR Shipmanagement, Belgibo, Travel PLUS) to the operating result (EBIT) for 2017 was USD 25.5 million including a capital gain on the sale of Belgibo of USD 26.7 million (compared to USD -1.2 million in 2016). EBIT for fourth quarter was USD -5.1 million.

Highlights:
EXMAR concluded the sale in August 2017 of the 100%-owned insurance company Belgibo to long-term business partner Jardine Lloyd Thomson Group plc (JLT), generating a capital gain of USD 26.7 million and cash proceeds of USD 24.0 million. EXMAR Shipmanagement has currently 84 vessels under management (compared to 46 in 2016). The company has further increased its focus on niche markets by offering operation and maintenance services to specialized vessels including LNG- FSRU and Carriers, Midsize LPG vessels, Pressurized LPG tankers, VLGC and Juice carriers.

Travel PLUS: An upturn in bookings from both existing and new clients made for an encouraging 2017 result which saw a year-on-year turnover growth of just over 8.5 percent, with a 70/30 split between business and leisure segments. Travel PLUS retained and grew its customer base thanks to a combination of attracting suitable corporate clients requiring flexibility and excellent service with the use of new applications.

Bond Extension
EXMAR announced in June 2017 that the NOK 1,000 million senior unsecured bond was successfully extended till July 2019.

Dividend
The Board of Directors proposes not to pay a dividend for the accounting year 2017.

Statement on the true and fair view of the consolidated financial statements and the fair overview of the management report.
The Board of Directors, represented by Nicolas Saverys (CEO) and Patrick De Brabandere (COO), and the Executive Committee, represented by Patrick De Brabandere (COO) and Miguel de Potter (CFO), hereby confirm that, to the best of their knowledge, the consolidated financial statements for the period ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the entities included in the consolidation as a whole, and that the management report includes a fair overview of the important events that have occurred during the financial year and of the major transactions with the related parties, and their impact on the consolidated financial statements, together with a description of the principal risks and uncertainties they are exposed to.

Full Report

Source: EXMAR

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