Ardmore Shipping Corporation announced results for the three and six months ended June 30, 2021.
Highlights and Recent Activity
Reported a net loss of $8.1 million for the three months ended June 30, 2021, or $0.24 loss per basic and diluted share, which includes deferred finance fees written off and unrealized losses on derivatives; losses adjusted for these items (see Adjusted (loss) / earnings in the Non-GAAP Measures section) are $7.6 million, or $0.23 Adjusted loss per basic and diluted share. This compares to net income of $13.6 million, or $0.41 earnings per basic and diluted share, for the three months ended June 30, 2020. Adjusted earnings were $13.7 million or $0.41 Adjusted earnings per basic and diluted share for the three months ended June 30, 2020. Reported EBITDA (see Non-GAAP Measures section) of $5.4 million for the three months ended June 30, 2021 as compared to $27.9 million for the three months ended June 30, 2020.
Reported a net loss of $16.6 million for the six months ended June 30, 2021 or $0.50 loss per basic and diluted share, which includes deferred finance fees written off and unrealized gains on derivatives; losses adjusted for these items (see Adjusted (loss) / earnings in the Non-GAAP Measures section) are $16.1 million, or $0.48 Adjusted loss per basic and diluted share. This compares to net income of $20.1 million or $0.61 basic and $0.60 diluted earnings per share for the six months ended June 30, 2020. Adjusted earnings were $20.2 million or $0.61 Adjusted earnings per basic and diluted share for the six months ended June 30, 2020.
Reported EBITDA (see Non-GAAP Measures section) of $9.9 million for the six months ended June 30, 2021, as compared to $48.9 million for the six months ended June 30, 2020.
MR tankers earned $11,640 per day overall for the three months ended June 30, 2021 and $11,406 per day for the six months ended June 30, 2021. Chemical tankers earned $12,308 per day for the three months ended June 30, 2021 and $12,127 per day for the six months ended June 30, 2021.
On June 17, 2021, Ardmore completed its previously-announced strategic investment in Element 1 Corp.’s methanol-to-hydrogen technology through the establishment of the e1 Marine joint venture with affiliates of Element 1 Corp and Maritime Partners, LLC and Ardmore’s purchase of a 10% equity stake in Element 1 Corp. In a related transaction, the affiliate of Maritime Partners, LLC also invested $25.0 million in the Company’s newly created Series A 8.5% Cumulative Redeemable Perpetual Preferred Shares.
On June 25, 2021, Ardmore completed the refinancing of two vessels, the Ardmore Seawolf and Ardmore Seahawk, which were refinanced with an existing lender. The net cash proceeds to the Company of these transactions, after prepayment of existing debt, were $15.5 million in the aggregate.
On June 4, 2021, Ardmore entered into an agreement to charter-in a 2009 Japanese-built MR product tanker for a period of eight months at a net rate of approximately $11,850 per day, plus a four-month extension option. Delivery occurred in mid-June 2021.
As part of its Energy Transition Plan, on May 18, 2021, Ardmore announced that it plans to install Lean Marine’s FuelOpt™ propulsion optimization technology across its entire fleet following the successful trial of this technology on the MR tanker, Ardmore Sealion.
Anthony Gurnee, the Company’s Chief Executive Officer, commented:
“Product tanker charter rates improved in the second quarter on the back of increasing global economic activity driving an ongoing recovery in oil demand. While oil demand remains well below pre-COVID levels, it is currently recovering rapidly, with the IEA forecasting a further 4 million barrels per day by the end of the year. We are now in a seasonally slow charter market which we believe will persist through August, but thereafter we expect charter rates to improve markedly through the autumn and into the winter months. Increasing refinery dislocation, which has accelerated as a result of the pandemic, is boosting tonne-mile demand for product tankers, and we believe this positive impact will be more evident as aggregate oil demand returns to pre-COVID levels this winter.
Meanwhile, operating performance and financial strength remain our top priorities. Our fleet continues to perform very well relative to our peers under challenging market conditions, and, as a consequence of the recent financing transactions, we have a substantial amount of cash and undrawn lines affording considerable financial flexibility. In terms of our Energy Transition Plan, we closed the Element 1 transactions in June and are looking ahead to further progress in our other initiatives focused on fuel efficiency, emissions reduction, and future fuels including e1 Marine.
This continues to be a difficult period most of all for our seafarers, and we are working hard to ensure the continued health and welfare of our crew and their families. We want to sincerely thank them and acknowledge the contribution they have made to keeping the global economy moving over the past 16 months.”
Fleet Operations and Employment
As at June 30, 2021, the Company had 27 vessels in operation, including 21 MR tankers ranging from 45,000 deadweight tonnes (Dwt) to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt.
MR Tankers (45,000 Dwt – 49,999 Dwt)
At the end of the second quarter of 2021, the Company had 21 MR tankers trading in the spot market or on time charters. The MR tankers earned an average TCE rate of $11,640 per day in the second quarter of 2021. In the second quarter of 2021, the Company’s 15 Eco-Design MR tankers earned an average TCE rate of $11,805 and the Company’s six Eco-Mod MR tankers earned an average TCE rate of $11,130 per day.
In the third quarter of 2021, the Company expects to have 27% of its revenue days for its MR Eco-Design tankers on time charter. The remaining 73% of days for its MR Eco-Design and all of its MR Eco-Mod tankers are expected to be employed in the spot market. As of July 27, 2021, the Company had fixed approximately 40% of its total MR revenue days for the third quarter of 2021 at an average TCE rate of approximately $10,000 per day.
Product / Chemical Tankers (IMO 2: 25,000 Dwt – 37,800 Dwt)
At the end of the second quarter of 2021, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the second quarter of 2021, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $12,308 per day.
In the third quarter of 2021, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of July 27, 2021, the Company had fixed approximately 35% of its Eco-Design IMO 2 product / chemical tankers spot revenue days for the third quarter of 2021 at an average TCE rate of approximately $10,000 per day.
Drydocking
The Company had no drydock or repositioning days in the second quarter of 2021. The Company expects to have 80 drydock days in the third quarter of 2021.
Capital Allocation Policy
Consistent with the Company’s capital allocation policy, the Company is not declaring a dividend, in respect of its common shares, for the second quarter of 2021.
Element 1 Strategic Investments and Maritime Partners, LLC Preferred Stock Financing
On June 17, 2021, the Company completed its previously-announced strategic investment in Element 1 Corp.’s methanol-to-hydrogen technology through the establishment of the e1 Marine joint venture with affiliates of Element 1 Corp and Maritime Partners, LLC and the Company’s purchase of a 10% equity stake in Element 1 Corp. In a related transaction, the affiliate of Maritime Partners, LLC also invested $25.0 million in the Company’s newly created Series A 8.5% Cumulative Redeemable Perpetual Preferred Shares. These represented the initial transactions under the Company’s Energy Transition Plan.
Refinancing of Two Vessels
On June 25, 2021, the Company completed financing transactions for two vessels, the Ardmore Seawolf and Ardmore Seahawk, which were refinanced with an existing lender. The net cash proceeds to the Company of these transactions, after prepayment of existing debt, were $15.5 million in the aggregate.
Vessel Addition
On June 4, 2021, the Company entered into an agreement to charter-in a 2009 Japanese-built MR product tanker for a period of eight months at a net rate of approximately $11,850 per day, plus a four-month extension option. Delivery occurred in mid-June 2021.
Fuel Optimization Technology
As part of its Energy Transition Plan, on May 18, 2021, the Company announced that it plans to install Lean Marine’s FuelOpt™ propulsion optimization technology across its entire fleet following the successful trial of this technology on the MR tanker, Ardmore Sealion.
COVID-19
In response to the COVID-19 pandemic, many countries, ports and organizations, including those where Ardmore conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic has resulted and may continue to result in a significant decline in global demand for refined oil products. As Ardmore’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports could adversely affect demand for its vessels and services. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and of its variants and the level of the effectiveness and delivery of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact on the Company cannot be made at this time.
Results for the three months ended June 30, 2021 and 2020
The Company reported a net loss of $8.1 million for the three months ended June 30, 2021, or $0.24 loss per basic and diluted share, as compared to net income of $13.6 million, or $0.41 earnings per basic and diluted share for the three months ended June 30, 2020. The Company reported EBITDA (see Non-GAAP Measures section) of $5.4 million for the three months ended June 30, 2021 as compared to $27.9 million for the three months ended June 30, 2020.
The Company reported an Adjusted loss (see Non–GAAP Measures section) of $7.6 million for the three months ended June 30, 2021, or a $0.23 Adjusted loss per basic and diluted share, as compared to Adjusted earnings of $13.7 million, or $0.41 Adjusted earnings per basic and diluted share, for the three months ended June 30, 2020.
Results for the six months ended June 30, 2021 and 2020
The Company reported a net loss of $16.6 million for the six months ended June 30, 2021, or $0.50 loss per basic and diluted share, as compared to net income of $20.1 million, or $0.61 basic and $0.60 diluted earnings per share for the six months ended June 30, 2020. The Company reported EBITDA (see Non-GAAP Measures section) of $9.9 million for the six months ended June 30, 2021 as compared to $48.9 million for the six months ended June 30, 2020.
The Company reported an Adjusted loss (see Non–GAAP Measures section) of $16.1 million for the six months ended June 30, 2021, or a $0.48 Adjusted loss per basic and diluted share, as compared to Adjusted earnings of $20.2 million, or $0.61 Adjusted earnings per basic and diluted share, for the six months ended June 30, 2020.
Management’s Discussion and Analysis of Financial Results for the three months ended June 30, 2021 and 2020
Revenue. Revenue for the three months ended June 30, 2021 was $47.3 million, a decrease of $20.6 million from $67.9 million for the three months ended June 30, 2020.
The Company’s average number of operating vessels increased to 26.1 for the three months ended June 30, 2021.
The Company had four product tankers employed under time charters as at June 30, 2021 compared with none as at June 30, 2020. Revenue days derived from time charters were 361 for the three months ended June 30, 2021, as compared to none for the three months ended June 30, 2020. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $5.1 million.
The Company had 2,004 spot revenue days for the three months ended June 30, 2021, as compared to 2,269 for the three months ended June 30, 2020. The Company had 23 and 25 vessels employed directly in the spot market as at June 30, 2021 and 2020, respectively. The decrease in spot revenue days resulted in a decrease in revenue of $7.9 million, while changes in spot rates resulted in a decrease in revenue of $18.0 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
Voyage Expenses. Voyage expenses were $20.5 million for the three months ended June 30, 2021, a decrease of $0.4 million from $20.9 million for the three months ended June 30, 2020. Voyage expenses decreased primarily due to the decrease in spot days for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.
TCE Rate. The average TCE rate for the Company’s fleet was $11,796 per day for the three months ended June 30, 2021, a decrease of $8,276 per day from $20,072 per day for the three months ended June 30, 2020. The decrease in average TCE rate was the result of lower spot rates for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days.
Vessel Operating Expenses. Vessel operating expenses were $15.1 million for the three months ended June 30, 2021, an increase of $0.8 million from $14.3 million for the three months ended June 30, 2020. This increase is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,398 per vessel for the three months ended June 30, 2021, as compared to $6,325 per vessel for the three months ended June 30, 2020.
Charter Hire Costs. Charter hire costs were $1.4 million for the three months ended June 30, 2021. There were no charter hire costs incurred in the three months ended June 30, 2020. Ardmore chartered-in one vessel in September 2020 and another in June 2021.
Depreciation. Depreciation expense for the three months ended June 30, 2021 was $7.9 million, consistent with $7.9 million for the three months ended June 30, 2020.
Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended June 30, 2021 was $1.3 million, a decrease of $0.2 million from $1.5 million for the three months ended June 30, 2020. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.
General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended June 30, 2021 were $4.3 million, an increase of $0.3 million from $4.0 million for the three months ended June 30, 2020.
General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to Ardmore’s chartering and commercial operations departments in connection with its spot trading activities. Commercial and chartering expenses for the three months ended June 30, 2021 were $0.7 million, a decrease of $0.2 million from $0.9 million for the three months ended June 30, 2020.
Unrealized Losses on Derivatives. Unrealized losses on derivatives for the three months ended June 30, 2021 was $0.0m compared to $0.1 million for the three months ended June 30, 2020. The loss for the three months ended June 30, 2021 relates to derivatives entered into in May 2020 that are not designated as hedging instruments.
Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended June 30, 2021 were $4.3 million, a decrease of $0.5 million from $4.8 million for the three months ended June 30, 2020. Cash interest expense decreased by $1.2 million to $3.2 million for the three months ended June 30, 2021, from $4.4 million for the three months ended June 30, 2020, primarily due to a decreased average LIBOR during the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as well as the Company entering into three-year floating-to-fixed interest rate swap agreements during the second quarter of 2020 with an average fixed interest rate of 0.32%. Amortization of deferred finance fees for the three months ended June 30, 2021 was $1.0 million, an increase of $0.6 million from $0.4 million for the three months ended June 30, 2020.
Liquidity
As at June 30, 2021, the Company had $77.0 million in liquidity available, with cash and cash equivalents of $55.4 million (December 31, 2020: $58.4 million) and amounts available and undrawn under its revolving credit facilities of $21.6 million (December 31, 2020: $0.0 million). During the second quarter of 2021, the Company decreased the outstanding amounts under its revolving credit facilities through a $32.5 million repayment.
Source: Hellenic Shipping News
