Performance Shipping Inc., a global shipping company specializing in the ownership of tanker vessels, announced today that it has signed, through a separate wholly-owned subsidiary, a Memorandum of Agreement to sell the 2007-built Aframax tanker vessel M/T P. Kikuma to an unaffiliated third party, for a gross sale price of US$39.3 million. Delivery to the buyer is scheduled for December 2023. The Company expects to record a gain on the sale of the M/T P. Kikuma of approximately US$17.3 million during the fourth quarter of 2023, excluding any commissions and transaction-related costs.
Commenting on the sale, Andreas Michalopoulos, the Company’s Chief Executive Officer, stated:
“During this year Aframax tanker values appreciated significantly, driven by firm freight rates that provide lucrative charter contracts in the spot market. Although prospects for the Aframax tanker sector continue to remain solid, we believe that the sale of our oldest Aframax tanker, the M/T P. Kikuma, for a gross sale price of US$39.3 million, is financially and operationally beneficial to our Company. This transaction strengthens our fleet profile by reducing our tankers’ average age to 12.5 years and results in an attractive fleet structure consisting of younger vessels with higher technical specifications. We expect that the net cash proceeds from this sale will substantially enhance our ability to partially finance our remaining capital expenditures related to our shipbuilding contract for the construction of our newbuilt LNG ready, scrubber fitted LR2 Aframax tanker, with expected delivery in the second half of 2025. Additionally, it will support the successful pursuit of our fleet renewal strategy, focusing on timely and selective acquisitions.”
Stamatis Tsantanis, the Company’s Chairman & Chief Executive Officer, stated:
“For the third quarter of 2023, Seanergy reported a TCE of $15,298, outperforming once more the BCI by approximately 14%. While we consistently overperform the index, the general Capesize market fell short of expectations, with the BCI averaging $13,400, marking the lowest Q3 BCI earnings since 2016. Considering our healthy liquidity position and our consistent approach towards shareholder rewards, the Company’s Board of Directors has approved another quarterly dividend of $0.025 per share.
“Net loss for the third quarter of 2023 was $5.0 million. Nonetheless, with about 30% of our fourth quarter days converted to fixed rates above $20,000 and taking into account the strong rally of the Capesize market in October and the overall positive outlook for the sector, we remain optimistic about our financial performance in the current quarter.
“In the first nine months of 2023 we recorded a time charter equivalent of $14,935, compared to an average BCI daily rate of $12,640, representing an outperformance of 18%. Again, the BCI was reduced by 24% as compared to the previous year for the same period. Our freight hedging activities have reduced the volatility of our earnings in a weak Capesize market, while keeping about 70% of our fourth quarter days open.
“Moving on to other developments, we took delivery of our latest acquisition, a 2011-built Newcastlemax on October 24, 2023. The vessel was renamed Titanship and has begun its employment under a time charter to a first-class operator at an index linked charter rate. The significant premium over the BCI, which is the highest earned by any vessel in our fleet to date, will further enhance our commercial performance in the coming months. I believe that the competitive acquisition cost of this vessel, as well as the limited initial capital outlay, will facilitate high returns on capital. I am very satisfied with our timing on this transaction.
“Moving on to a brief comment about the Capesize market, since the beginning of the year we have seen substantial increases ranging from 3% to 8% in ton-mile demand for the major raw materials of iron ore, coal and bauxite, against an increase of about 2% in the size of the fleet. Despite this very favorable demand backdrop the freight market did not perform according to our expectations for most of the nine-month period ending in September 2023. As mentioned in our previous earnings update, historically low port congestion and efficient utilization of the Capesize fleet increased the effective vessel supply, which put pressure on freight rates. Looking ahead to Q4 and the following quarters, we are very encouraged by low commodity inventories in key areas, as well as a significant increase in demand. In addition, the historically low Capesize orderbook, coupled with the impending environmental regulations will soon reduce the effective vessel supply. Therefore, I remain optimistic about the long-term prospects of our market.
“We firmly believe that Seanergy’s ability to deal with short term volatility has been proven over the past nine months and the combination of our strong balance sheet and effective freight hedging initiatives put us in the best position to benefit from what we believe to be the best Capesize market fundamentals of the past three decades.”
Source: Performance Shipping Inc.