Golden Ocean Group Limited. Preliminary Results for the Financial Year Introduction

Transcription

1 Golden Ocean Group Limited Preliminary Results for the Financial Year 2004 Introduction Golden Ocean Group Limited ( Golden Ocean or the Company ) was incorporated as a wholly owned subsidiary of Frontline Ltd. ( Frontline ) on November 8, On November 29, 2004, Frontline and the Company entered into a Contribution Agreement pursuant to which Frontline agreed to contribute assets and cash with a net book value of $22,450,000 to the Company on December 1, The assets contributed consisted of: (i) (ii) (iii) (iv) The shares in Golden Hilton Corporation, owner of the Capesize bulk carrier Channel Navigator. The shares in Golden President Corporation, owner of the Capesize bulk carrier Channel Alliance. The shares in Front Carriers Inc., charterer of the Capesize bulk carrier Irfon. Cash equal to the difference between $22,450,000 and the accounted value in Frontline s books of the assets referred to in (i) to (iii) as of November 30, On December 1, 2004 the Board of Frontline approved the spin off to Frontline's shareholders of all of the shares in Golden Ocean. The demerger of Golden Ocean from Frontline was consummated and effective for accounting purposes from December 1, The distribution of the majority of the Company s shares by Frontline took place on December 13, 2004 and the Company was listed on the Oslo Stock Exchange on December 15, Channel Navigator is on time charter until October 17, 2005 or latest end Channel Alliance is on time charter until July/November, 2005 subject to an optional additional one year period to July/November, Irfon is chartered in for a period of five years that expires October 4, 2009 or December 4, 2009 at the option of the Company. Irfon has been chartered out for a minimum period of three years with a charterer s option for an additional year declarable latest October 31, The Company has entered into an agency agreement with Frontline pursuant to which the Company will provide various management services relating to the operation of Frontline s Suezmax OBO carrier fleet. This arrangement commenced on January 1, Results for the Period from November 8, 2004 (date of incorporation) to December 31, 2004 Golden Ocean was incorporated on November 8, 2004 and commenced its shipping operations on December 1, The Company reports net income of $1.8 million for the period to December 31, Total operating revenues were $4.9 million. Total operating expenses were $2.9 million and net other expenses were $0.1 million. At December 31, 2004 the Company has cash of $19.9 million. Corporate and Other Matters In December 2004, Frontline acquired newbuilding contracts for two Panamax carriers of 74,500 dwt, each to be delivered from the Hudong Zhonghua Shipbuilding (Group) Co. Ltd. in China in the second half of The contract price for each vessel is $42 million. Golden Ocean has an option to acquire Frontline's interest in these newbuildings at Frontline's cost plus Frontline's funding expenses. The option must be declared by the end of At December 31, 2004, the total shares outstanding in Golden Ocean were 224,477,607 of $0.10 par value each. 1

2 In February 2005, Golden Ocean filed a notification of ownership in excess of 5 percent in the public dry bulk company Jinhui Shipping and Transport. The Company has during the first months of 2005 chartered in two Panamaxes. One is taken on a two year timecharter from July 2005 at $27,800 per day, and the other is taken on a five year timecharter from September 2005 at $17,600 per day. The Company is pleased that Herman Billung has been recruited as the Company s new CEO. Billung who has substantial experience from the dry bulk market comes from a senior management position in the Torvald Klaveness Group and will start in his new position in April. The Company is in the process of recruiting several other experienced people from both the commercial trading side and the derivatives side of the industry. The Company advises that an extraordinary shareholders meeting is to be held on March 21, The main purpose of the meeting will be to increase the size of the Board, and establish an option incentive program for the Board and Management of the Company. The Market The dry cargo market climbed steadily in the fourth quarter of 2004 to new highs in early December averaging rates of $105,000 per day in the Capesize spot market but went quiet the last two weeks of the month and slipped back to the levels of the beginning of the quarter at about $70,000 per day. Panamax market experienced the same rate fluctuations in the spot market from $35,000 per day to $50,000 and then back down to $33,000 per day. China was the driving force behind the strong Capesize and Panamax markets in the fourth quarter as it was throughout Steel production in the world rose from million tonnes in 2003 to 1,035.5 million tonnes in 2004, an increase of 8.0 percent. China alone increased from to million tonnes of steel, an increase of 23.2 percent. More importantly for the Capesize market was the Chinese increase in iron ore imports from to million tonnes (+ 40 percent). Japan is estimated to end at a steel production of 114 million tonnes for their fiscal year (April 2004/March 2005), adding to the overall strong world demand for both iron ore and coal during Waiting time in ports, both at load and discharge ports has also been an important factor in the dry bulk markets. Brazilian, Australian and Chinese ports have a constant problem with delays in ports and this situation is expected to prevail, resulting in a continued pressure on rates in both the Capesize and Panamax markets. In 2004, 45 Capesize and 73 Panamax vessels were delivered. Only two Capesize and three Panamax vessels were scrapped. The order books show that there will be less than 40 Capesizes delivered in The Panamax fleet will see about the same number delivered as in Looking into 2006, the order book looks larger, but the net fleet increase will depend on how long the late 70s and early 80s built tonnage will be able to maintain their approvals to trade out of Brazil and Australia. The Chinese economy grew by 9 percent in 2004 and the forecasts for 2005 range between 7.5 and 9 percent growth. China is continuing to put new steel production capacity on stream. Iron ore and coal exporting capacity in both Brazil and Australia is also being expanded. The ports are presently lagging behind in their expansion plans, resulting in delays in both load and discharge ports. Many of the larger contracts of both coal and iron ore are rolled over with effect from April 1. Renewals concluded so far indicate in excess of 70 percent increase in prices. Such price increases will put continued upward pressure on both steel products as well as on newbuilding and second hand prices on tonnage in all segments. 2

3 The year 2005 has so far shown a volatility that was expected. Rates have remained at very healthy levels in which a Capesize bulker earns an average of $70,000 per day in the spot market and Panamax vessels earn between $35,000 and $40,000 per day. Strategy The Company s strategy is to become a leading transportation company within the market for transportation of dry bulk cargoes. The Company will have a fully integrated commercial management team responsible for all vessels and contracts. The Company will focus on development of personnel resources in order to build up a strong commercial operation. The Company s main activities will be within the Panamax and Capesize market. Due to the competitiveness of the commodity shipping markets the Company will target low overhead and daily ship operating costs. The Company will seek to optimize its investment and divestment decisions as well as short and long chartering positions as a function of the cyclical nature of the business. A central part of the Company s strategy will be to act as a consolidation vehicle for the industry. Outlook The dry bulk market has in the recent weeks shown a strong upward movement. The charter market has been driven by strong Chinese imports. Part of this import is supported by the wish to build extra inventory prior to expected commodity price increases. The strong development in the second hand prices is, in addition to the strong charter market, also driven by a strong demand from companies which are positioning themselves for equity offerings. The Board will, in view of the overall strength of the market, act cautiously. The Board is positive about the long term outlook but feel that better opportunities will arise in the middle of the year when seasonal weakness normally influences charter markets as well as owners psychology. The existing portfolio which includes three Capesizes and four Panamaxes has partly been covered on contracts which will secure good cashflow and earnings for This coverage also secures a solid basis for financing of the two Panamax newbuildings coming later this year. The Board is excited about the outlook for the newly listed Company. Forward Looking Statements This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Golden Ocean s management's examination of historical operating trends. Although Golden Ocean believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Golden Ocean cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the dry bulk market, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes 3

4 due to accidents or political events, and other important factors described from time to time in the reports filed by the Company. February 28, 2005 The Board of Directors Golden Ocean Group Limited Hamilton, Bermuda Questions should be directed to: Contact: Tor Olav Trøim: Director

5 GOLDEN OCEAN GROUP LIMITED FOURTH QUARTER REPORT (UNAUDITED) STATEMENT OF OPERATIONS (in thousands of $, except per share data) Period from November 8, 2004 (date of incorporation) to December 31, 2004 Operating revenues Time charter revenues 4,851 Other income 2 Total operating revenues 4,853 Operating expenses Voyage expenses and commission 60 Ship operating expenses 245 Charterhire expenses 2,267 Administrative expenses 115 Depreciation 212 Total operating expenses 2,899 Net operating income 1,954 Other income/(expenses) Interest income 15 Interest expense (138) Other financial items, net (1) Net other income/(expenses) (124) Net income 1,830 Basic earnings per share $0.01 5

6 BALANCE SHEET December 31, 2004 (in thousands of $) ASSETS Current Cash and cash equivalents 19,939 Trade accounts receivable 94 Prepaid expenses and accrued income 3,422 Inventory 126 Other receivables 78 Amount due from related party 1,846 Total current assets 25,505 Long-term Vessels and equipment, net 48,706 Deferred charges and other long-term assets 220 Total assets 74,431 LIABILITIES AND STOCKHOLDERS EQUITY Short term Current portion of long term debt 4,200 Trade accounts payable 165 Accrued expenses 466 Other current liabilities 558 Total current liabilities 5,389 Long term Long term debt 44,750 Stockholders equity Share capital 22,448 Contributed surplus 14 Retained earnings 1,830 Stockholders equity 24,292 Total liabilities and stockholders equity 74,431 6

7 STATEMENT OF CASHFLOWS (in thousands of $) Period from November 8, 2004 (date of incorporation) to December 31, 2004 OPERATING ACTIVITIES Net income 1,830 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 212 Amortisation of deferred charges 3 Net change in: Amount due from related party (1,831) Trade accounts receivable 268 Prepaid expenses and accrued income (404) Inventories (29) Other receivables 254 Trade accounts payable (209) Accrued expenses (152) Other current liabilities 370 Net cash provided by operating activities 312 FINANCING ACTIVITIES Equity contributions 19,615 Proceeds from issuance of shares 12 Net cash provided by financing activities 19,627 Net increase in cash and cash equivalents 19,939 Cash and cash equivalents at start of period - Cash and cash equivalents at end of period 19,939 7