OMI CORPORATION (OMM) NEWS RELEASE OCTOBER 11, 2000
FOR THE QUARTER ENDED SEPTEMBER 30, 2000 AND
AGREEMENTS TO ACQUIRE NEW VESSELS
CONTACT: FREDRIC S. LONDON
OMI CORPORATION
(203) 602-6789
STAMFORD CT, OCTOBER 11, 2000 - OMI CORPORATION (OMM:NYSE) today announced its
release of financial results for the third quarter ended September 30, 2000. OMI
reported net income of $22,375,000 or $0.38 basic earnings per share (net income
of $23,807,000 or $0.40, excluding the loss on the disposal of a vessel) for the
third quarter 2000 compared to a net loss of $7,119,000 or $0.17 basic/diluted
loss per share for the same period in 1999. For the nine months ended September
30, 2000, the net income was $21,733,000 or $0.39 basic earnings per share
compared to the net loss of $37,555,000 or $0.90 basic/diluted loss per share
(including $0.07 income from the cumulative effect of the change in accounting
principle) for the nine months ended September 30, 1999. Revenue of $54,855,000
for the three months ended and $122,055,000 for the nine months ended September
30, 2000 increased $29,084,000 or 113 percent and $30,771,000 or 34 percent over
the three and nine months ending September 30, 1999, respectively.
For the nine months ended September 30, 2000, excluding $14,587,000 in net
losses from the disposal of four product carriers, disposal of a joint venture
and the write down of two other vessels to be disposed of, net income was
$36,320,000 or $0.65 earnings per basic share. Included in the nine months ended
September 30, 1999 net loss of $37,555,000, were losses aggregating $30,917,000,
which were from the following non-recurring adjustments; the provision for loss
on lease obligation of $6,229,000, losses from the write down and disposal of
five older crude carriers and the sale leaseback of a Suezmax tanker aggregating
$23,574,000 and losses on the write down and disposal of two joint venture
investments aggregating $1,114,000. Such losses were offset by income from the
cumulative change in accounting principle of $2,729,000.
The Company also reported that it had agreed to acquire from another owner a
contract for one new Suezmax tanker scheduled for delivery from Daewoo Heavy
Industries Ltd. in January 2001. The Company has the option to advance the
delivery to November 2000. It has also entered into a letter of intent for
Onomichi Dockyard Co. Ltd. to build one new 47,000 deadweight tons ("dwt")
product carrier for delivery in February 2002. OMI has options to acquire two
additional product carriers for delivery in 2003.
Craig H. Stevenson, Jr., Chairman, Chief Executive Officer and President of the
Company commented "We are pleased that the third quarter produced strong
results. This bodes well for the next two quarters, which are traditionally the
strongest for tanker owners. We are also pleased to be able to acquire a new
Suezmax vessel, which is a sister-ship to five of the Company's Suezmaxes, with
an early delivery date. The one new product carrier and, if the Company
exercises its options, two additional product carriers, will continue the
process of replacing the Company's single-hull vessels with newer double hull
vessels. The Company's goal to have the most efficient, safe, high quality
vessels with maximum fleet utilization is becoming a reality with our market
alliances, deliveries of the newbuildings and disposals of less efficient
vessels."
CURRENT HIGHLIGHTS
Tanker rates continued to surge during the third quarter with record high Time
Charter Equivalent revenues ("TCE") for its Suezmax fleet and the highest rates
for OMI's product carriers since the 1991 gulf war. Since the majority of OMI's
fleet currently operates in the spot market either directly or through pools,
the Company has benefited greatly from tanker rate increases this quarter.
On October 12, 2000, the Company expects to close on its refinancing of its
existing bank indebtedness and financing for its 47,000 dwt newbuilding to be
delivered in November 2000, discussed further below. (See Financial Items).
During August 2000, OMI contracted to acquire from another shipowner two
handymax product carriers. One vessel was delivered September 27, 2000 from the
shipyard, and the other, currently under construction at Onomichi Dockyard in
Japan, will be delivered to the Company in late November 2000. The first vessel
commenced a two year time charter to an oil company in September and the
November delivery will commence a similar two year charter to the same oil
company.
On August 11, 2000, the Company sold a 29,996 dwt product carrier built in 1989.
FLEET REPORT
OMI is a major international tanker owner and operator. Currently, OMI's fleet
comprises 21 vessels, including three chartered-in vessels. The fleet includes
five wholly-owned Suezmaxes, three chartered-in Suezmaxes, three 66,000 dwt
product tankers currently carrying crude oil, eight handysize product carriers,
one handymax product carrier and one Ultra Large Crude Carrier ("ULCC"). OMI
will take delivery of another handymax newbuilding in November 2000, the
above-announced Suezmax in January 2001. The Company has also signed a letter of
intent for one handymax product carrier to be delivered in February 2002 (and
options to acquire two additional handymaxes).
The Company participates in three marketing alliances for its Suezmax, Panamax
and IPC product carrier fleets. The alliances combine strengths to better serve
customers by giving them more options, at the same time giving the Company cost
savings and access to cargoes which it might otherwise be unable to carry. In
1998, OMI formed a joint venture, Alliance Chartering LLC ("Alliance"), with
Frontline Ltd., to charter both companies' Suezmaxes. Alliance currently markets
the services of approximately 40 Suezmaxes. In 1999, OMI entered into a joint
venture, International Product Carriers Limited ("IPC") with Osprey Maritime
Limited for midsize product tankers. IPC began operations on May 1, 1999 and
currently markets the services of approximately 30 vessels. Currently, six of
OMI's product carriers are operating under adjustable rate time charters with
IPC. OMI also has its three Panamax tankers operating in the Star Tankers Pool,
which is the largest commercial operator of Panamaxes in the world.
During the third quarter, the Company's spot market vessels (seven Suezmaxes,
one ULCC, three Panamaxes and six product carriers) averaged daily TCEs (which
includes waiting time) of $42,041 for Suezmaxes, $29,044 for the ULCC, $22,257
for Panamaxes and $12,774 for the product carriers on spot charters. Market
rates for spot market voyages in the fourth quarter are higher than the previous
quarter averages in all categories.
FINANCIAL INFORMATION
The following table summarizes OMI Corporation's results of operations for the
nine and three months ended September 30, 2000 compared to the nine and three
months ended September 30, 1999:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
RESULTS OF OPERATIONS 2000 1999 2000 1999
--------------------- ---- ---- ---- ----
(In thousands except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Operating revenues (TCE revenues) $ 47,591 $ 20,619 $ 103,836 $ 70,262
Operating expenses (includes charter hire expenses) 10,972 14,534 32,991 42,232
--------- --------- --------- ---------
Net voyage revenues 36,619 6,085 70,845 28,030
Depreciation and amortization 4,514 5,627 11,949 17,944
Provision for loss on lease obligation(1) -- -- -- 6,229
General and administrative expenses 2,817 2,299 8,528 7,528
Loss (gain) on disposal/write down of assets-net(2),(3) 1,432 (92) 14,051 23,574
--------- --------- --------- ---------
Operating income (loss) 27,856 (1,749) 36,317 (27,245)
Loss on disposal/write down of joint venture investments(4) -- (1,114) (536) (1,114)
Net interest expense 7,074 4,010 18,310 11,668
Other-net 588 -- 2,213 --
Equity (loss) in operations of joint ventures 1,005 (246) 2,049 (257)
--------- --------- --------- ---------
Income (loss) before cumulative effect of change in
accounting principle $ 22,375 (7,119) 21,733 (40,284)
Cumulative effect of change in accounting principle(5) -- -- -- 2,729
Net income (loss) $ 22,375 $ (7,119) $ 21,733 $ (37,555
========= ========= ========= =========
Basic earnings (loss) per common share before
cumulative effect of change in accounting principle $ 0.38 $ (0.17) $ 0.39 $ (0.97)
Basic earnings (loss) per common share $ 0.38 $ (0.17) $ 0.39 $ (0.90)
Diluted earnings (loss) per common share before
cumulative effect of change in accounting principle $ 0.37 $ (0.17) $ 0.39 $ (0.97)
Diluted earnings (loss) per common share $ 0.37 $ (0.17) $ 0.39 $ (0.90)
Weighted average shares outstanding-basic 59,211 41,647 55,749 41,635
Adjusted EBITDA(6) $ 33,802 $ 3,786 $ 62,317 $ 20,502
(1) The year-to-date 1999 provision for loss on vessels chartered in of
$6,229,000 was a non-recurring accounting adjustment due to the lease
obligation exceeding estimated future cash flows at that time.
(2) Loss on disposal/write down of assets-net, includes a loss of $1,432,000 on
the sale of a vessel in August 2000 and a loss of $4,801,000 on the sale of
a vessel contracted for in March 2000 and written down to its net
realizable value in the first quarter 2000. Losses aggregating $7,833,000
for four vessels previously classified as assets to be disposed of, two of
which were sold in the second quarter 2000 and two of which vessels net
realizable values were adjusted.
(3) Loss on disposal of assets-net, includes losses for five vessels held for
sale at June 30, 1999 (four of which were sold in 1999) and one Suezmax
vessel which was sold on June 30, 1999 in a sale/leaseback transaction.
(4) A loss from the sale of a joint venture in the first quarter 2000 of
$536,000 was recorded. Loss on disposal/write down of joint venture
investments during the nine months in 1999 represents the loss on OMI's
sale of its 49 percent interest in White Sea Holdings Inc. of approximately
$815,000 and a write down of its investment in OMI-Heidmar joint venture of
approximately $299,000.
(5) The cumulative effect of the change in accounting principle is from
recognizing voyage freight for vessels operating on voyage charters from
the load-to-load basis to the discharge-to-discharge basis, effective
January 1, 1999.
(6) Adjusted "EBITDA" represents Operating income (loss) from operations before
depreciation and amortization expense, loss on disposal/write down of
assets-net and lease provision. Adjusted EBITDA is not required by
generally accepted accounting principles and should not be considered as an
alternative to net income or any other measure of performance required by
generally accepted accounting principles or as an indicator of the
Company's operating performance.
</TABLE>
<TABLE>
CONDENSED BALANCE SHEETS SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------------- ------------------- -----------------
(In thousands) (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 23,625 $ 7,381
Assets to be disposed of 15,130 90,996
Other current assets 27,680 22,818
Vessels and other property-net 444,606 291,416
Construction in progress (newbuildings) -- 25,340
Other assets 33,984 34,464
-------- --------
Total assets $545,025 $472,415
======== ========
Current liabilities $ 61,724 $ 77,239
Long-term liabilities 260,189 223,410
Total equity 223,112 171,766
-------- --------
TOTAL LIABILITIES AND EQUITY $545,025 $472,415
======== ========
</TABLE>
RESULTS
Operating or TCE revenue, which is voyage revenue less voyage expenses, of
$47,591,000 increased $26,972,000 for the three months ended September 30, 2000
compared to $20,619,000 for the three months ended September 30, 1999. TCE
revenue increased $33,574,000 from $70,262,000 for the nine months ended
September 30, 1999 compared to $103,836,000 the nine months ended September 30,
2000. The net increase in TCE revenue can be attributed to earnings from both
the Crude and Clean fleets. OMI's Crude fleet revenues increased $24,832,000 in
the third quarter 2000 compared to the same period in 1999 ($28,512,000 increase
in the nine months 2000 comparatively), primarily for its Suezmax vessels
operating in the spot market, OMI's ULCC vessel which began operating July 1,
2000 as a wholly owned vessel and for its Panamax vessels, which carry crude oil
on adjustable time charters through a marketing pool. In addition improved TCE
rates in the 2000 quarter compared to 1999 were earned by the 1998-2000 built
Suezmax vessels operating in the spot market including increases in TCE revenue
of $9.2 million for the third quarter 2000 and $12.9 million increases in TCE
revenue for the nine months ended September 30, 2000, which were attributed to
two new vessels delivered in March and May 2000. The Clean fleet revenues
continued to improve in the third quarter 2000 for vessels operating under
adjustable rate time charters through a marketing pool. The majority of the
increases in the Clean fleet revenue, however, were earned by the two product
carriers delivered in mid-1999, which operate on time charters. The other
increases in revenue for IPC vessels were offset by decreases from the sale of
four vessels, three in May 2000 and one in August 2000. Significant increases in
bunker costs have mitigated increases in TCE revenues during the three and nine
months ended September 30, 2000 in comparison to the three and nine months ended
September 30, 1999. See the Market Summary for further explanations for
fluctuations in spot rates.
Operating expenses (vessel expenses and charter hire expenses) decreased a net
of $3,562,000 for the three months ended September 30, 2000 and $9,241,000 for
the nine months ended September 30, 2000 compared to the same periods in 1999.
Net decreases in operating expenses include decreases in vessel expenses of
$2,893,000 for the three months and $9,340,000 for the nine months ended
September 30, 2000. Decreases in vessel expenses are primarily attributable to
the disposal of older crude vessels in 1999 and the disposal of the aframax and
four product carriers in 2000 (decreases in these vessels exceeded the increases
in vessel expense for the two new crude carriers and two products delivered in
1999), in addition to lower expenses in 2000 compared to 1999 to operate
younger, more cost efficient vessels. Decreases in charter hire expense relates
to a vessel which was offhire for drydock in the second quarter 2000 and reduced
charter hire expense due to a non recurring adjustment recorded June 1999.
Offsetting increases to charter hire expense were due to the sale/leaseback of a
vessel, which began July 1999.
The following tables reflect OMI's principal operating activities:
<TABLE>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
IN THOUSANDS SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2000 1999 2000 1999
----------- ---- ---- ---- ----
CRUDE FLEET:
<S> <C> <C> <C> <C>
New Suezmaxes/ULCC:
TCE Revenue (includes one vessel on time charter) $ 30,808 $ 8,044 $ 58,446 $ 27,099
-------- -------- -------- --------
Operating Expenses 2,273 2,086 6,163 5,198
Charter Hire Expense 4,027 4,696 11,578 11,479
-------- -------- -------- --------
Net Voyage Revenue 24,508 1,262 40,705 10,422
-------- -------- -------- --------
Depreciation 2,778 1,556 6,478 4,664
Provision for loss on lease obligation(1) -- -- -- 6,229
-------- -------- -------- --------
Operating income (loss) $ 21,730 $ (294) $ 34,227 $ (471)
======== ======== ======== ========
Number of vessels owned(2) 6 3 6 3
Number of vessels chartered-in(3) 3 3 3 3
Number of operating days 828 552 1,954 1,625
Panamaxes:
TCE Revenue $ 6,144 $ 2,940 $ 14,509 $ 9,163
-------- -------- -------- --------
Operating Expense 1,206 1,746 3,945 4,530
Charter Hire Expense -- -- -- --
-------- -------- -------- --------
Net Voyage Revenue 4,938 1,194 10,564 4,633
Depreciation -- 1,036 -- 3,108
-------- -------- -------- --------
Operating income $ 4,938 $ 158 $ 10,564 $ 1,525
======== ======== ======== ========
Number of vessels owned 3 3 3 3
Number of operating days 276 256 822 799
Old Suezmaxes/Aframax: (sold in 1999 & 2000)
TCE Revenue $ -- $ 1,129 $ 1,077 $ 9,258
-------- -------- -------- --------
Operating Expenses -- 686 214 7,790
Charter Hire Expense -- -- -- --
-------- -------- -------- --------
Net Voyage Revenue -- 443 863 1,468
Depreciation -- -- -- 1,614
-------- -------- -------- --------
Operating Income (loss) $ -- $ 443 $ 863 $ (146)
======== ======== ======== ========
Number of vessels owned(4) -- 2 0 2
Number of operating days -- 219 82 1,095
TOTAL CRUDE FLEET OPERATING INCOME (LOSS) $ 26,668 $ 307 $ 45,654 $ 908
======== ======== ======== ========
Note: Number of operating days is net of offhire for drydock and does not include waiting days.
(1) The year-to-date 1999 provision for loss on vessels chartered in of
$6,229,000 was a non-recurring adjustment.
(2) On June 30, 2000, OMI acquired a ULCC vessel from its joint venture
partner. During March and May 2000, two newly built Suezmax vessels were
delivered and started their first voyages in the second quarter.
(3) On June 30, 1999, the Company completed a sale/leaseback for the COLUMBIA.
(4) Operating results in 2000 reflect adjustments to vessels sold in 1999 and
results from the aframax vessel delivered to new owners in March 2000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
IN THOUSANDS SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2000 1999 2000 1999
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
CLEAN FLEET:
Products (IPC Pool from 1999):
TCE Revenue $ 7,589 $ 7,414 $22,232 $23,584
------- ------- ------- -------
Operating Expenses 2,852 4,714 9,216 12,727
Charter Hire Expense -- -- -- --
------- ------- ------- -------
Net Voyage Revenue 4,737 2,700 13,016 10,857
Depreciation 1,117 2,534 3,583 7,597
------- ------- ------- -------
Operating Income $ 3,620 $ 166 $ 9,433 $ 3,260
======= ======= ======= =======
Number of vessels owned(1) 6 10 6 10
Number of operating days 593 895 2,236 2,640
Products On Time Charter:
TCE Revenue $ 3,061 $ 1,088 $ 7,573 $ 1,088
------- ------- ------- -------
Operating Expenses 539 307 1,699 307
Charter Hire Expense -- -- -- --
------- ------- ------- -------
Net Voyage Revenue 2,522 781 5,874 781
Depreciation 543 278 1,628 278
------- ------- ------- -------
Operating Income $ 1,979 $ 503 $ 4,246 $ 503
======= ======= ======= =======
Number of vessels owned(2) 3 2 3 2
Number of operating days 187 87 551 87
TOTAL CLEAN FLEET OPERATING INCOME $ 5,599 $ 669 $13,679 $ 3,763
======= ======= ======= =======
Note: Number of operating days is net of offhire for drydock and does not include waiting days.
(1) One vessel was sold in August 2000 and three vessels were sold in May 2000.
(2) One handymax vessel was delivered September 27, 2000. Two handysize vessels
were delivered in July and September 1999.
</TABLE>
MARKET SUMMARY
SUEZMAX TANKER MARKET
Tanker TCE's have recovered sharply this year as a result of increasing world
oil demand at a time of very low oil inventory levels, increased crude oil
seaborne volumes as OPEC reversed its 1999 production cuts and has raised oil
production by 3.2 million b/d to date in 2000 and relatively high tanker
scrapping activity so far this year, which offsets deliveries of new vessels,
resulting in a stable tanker supply.
World oil demand is expected to increase this year. The expected increase
reflects strong economic activity in industrialized areas and in the Pacific
region. Specifically, among the main oil importers, there has been significant
oil demand increase in the United States as a result of continued strong
economic activity and in the growing economies of the Pacific region as well,
due to their ongoing economic recovery from the severe financial debacle that
they encountered in 1997. At the same time, world oil inventories continue at
historically very low levels. Currently, commercial crude oil stocks in the
three main oil consuming areas - the U.S., Western Europe and Japan - are 8.3%
below a year ago level and at the lowest level in at least the last ten years.
The positive outlook for the crude tanker market is expected to continue as a
result of the need for additional oil production by OPEC, beyond that announced
recently, to accommodate the seasonal world oil demand gains in the winter
months at a time when oil inventories are at very low levels. In addition, a
relatively stable tanker supply, given the fleet age demographics and the
continued focus of governments and charterers on safe, high-quality modern
tonnage, coupled with the strength of the world economy and the resultant growth
in demand for oil, should lead to a strong freight environment in the future.
In the U.S. market, the Company does not believe that the President's recent
decision to tap the country's strategic petroleum reserves will have an impact
on the demand for tankers.
PRODUCT TANKER MARKET
The product carrier market operates in a more stable rate environment than the
crude oil market and has traditionally provided shipowners with a predictable
stream of revenues. The product carrier market is a segment of the overall
tanker market which facilitates seaborne transportation of petroleum products
such as gasoline, jet fuel, kerosene, naphtha and gas oil. While crude oil
tankers carry oil from production areas to refineries, product carriers move
refined products from refineries to distribution points.
The product tanker market continued to improve with each quarter in 2000 and
TCE's for handysize product tankers in the Caribbean reached levels not seen
since the very strong product tanker market early in 1997. This was the result
of continued strong oil demand growth in the Atlantic region at a time that oil
product inventories, especially stocks for the seasonal distillates, were very
low, and the modest product tanker fleet increase so far this year.
The Company believes that product carrier demand will continue to increase in
the foreseeable future. First, world oil demand is expected to increase at a
higher rate compared to the second half of the 1990's. Additionally, the major
oil consuming areas- North America, Western Europe and Asia- have a shortage of
refinery capacity, while Latin America, Africa and the Middle East have a
surplus. Furthermore, refinery capacity is expanding in the Middle East and
Latin America while the shortage of refinery capacity in the major oil consuming
areas is expected to persist. Finally, there have been some fundamental changes
in the pattern of product trades toward longer-haul movements.
FINANCIAL ITEMS
Net interest expense increased $3,064,000 for the three months ended September
30, 2000 and $6,642,000 for the nine months ended September 30, 2000 compared to
the three and nine months ended September 30, 1999. The increases were primarily
due to interest expense on additional borrowings to finance a portion of the two
Suezmax and two product carrier newbuildings delivered in 1999 and 2000.
Capitalized interest was reduced corresponding with the delivery of the new
ships. Additionally, interest margins increased as a result of the refinancing
of debt in February 2000, which will decrease with the amended financing in
October. As of September 30, 2000, OMI was in compliance with its financial
covenants.
On October 12, 2000, OMI expects to close on its refinancing of its debt in an
aggregate amount of $310 million, which includes the financing of the handymax
newbuilding to be delivered in November 2000. The amended credit facility
reduces interest margins, does not require the disposal of assets, reduces
operating restrictions and provides financing for the November handymax
newbuilding. Amendments also include principal payments of $40 million per annum
for the first two years and $25 million per annum for the following three years
with a balloon payment at maturity.
Equity (loss) in operations of joint ventures increased $1,251,000 for the three
months ended September 30, 2000 and $2,306,000 for the nine months ended
September 30, 2000 compared to the three and nine months ended September 30,
1999. OMI participated in one vessel-owning joint venture, which operated a ULCC
vessel until June 30, 2000 when OMI acquired the joint venture company from its
partner. Rates for the ULCC vessel increased during the first half of 2000
compared to the nine months ended September 30, 1999.
FORWARD LOOKING INFORMATION
This release contains certain forward-looking statements. These statements are
based on management's current expectations and observations, and are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Additional information
concerning these statements and other matters is contained in the Company's
periodic filings with the Securities and Exchange Commission.
OMI Corporation has made arrangements to use the service of DeraCom for its
earnings presentation which is scheduled for October 18, 2000 at 2:00 p.m.
Conference participants should call 1-800-633-8638, and the international number
is 609-450-1027. There will be a recorded playback available after the
teleconference call for two weeks after the original call. The toll free number
is 1-800-835-2663 and 609-896-8185 for international playbacks.
