Tuesday, August 8, 2000

Rising tanker rates boost OSG income
Overseas Shipholding Group, Inc. today reported net income for the quarter ended June 30, 2000 of $10,979,000, or $.32 per share, compared with net income of $8,433,000, or $.23 per share, in the second quarter of 1999. Income from vessel operations in the second quarter of 2000 increased to $25.7 million versus $13.1 million in the same quarter of 1999.

The company says increased OPEC production during the second quarter boosted VLCC and Aframax rates to levels not seen since the 1991 Gulf War. For the April through June period, time charter equivalent ("TCE'') rates for VLCCs averaged $40,000 per day, compared with $19,000 per day for the first quarter and $13,000 per day in the last quarter of 1999. Similarly, Atlantic Basin Aframax TCE rates showed continued improvement, with Caribbean - U.S. Gulf rates increasing to an average of $27,000 per day in the second quarter from average rates of $22,000 and $12,000 per day in the first quarter of 2000 and the fourth quarter of 1999, respectively.

During the second quarter, OSG's VLCC fleet continued to benefit from its participation in the new Tankers International ("TI'') pool. Established by OSG and five other leading tanker owners at the start of this year, the TI pool consists of 48 modern VLCCs.

Similarly, OSG's 20-vessel Aframax pool with PDV Marina, the marine transportation subsidiary of the Venezuelan state oil company, has a leading position in the Atlantic Basin and continues to operate at heightened efficiency levels as it supplements base Venezuelan cargoes with a number of backhauls and COAs.

OSG notes that the world tanker orderbook increased by some 3.6 million dwt in the second quarter. The VLCC orderbook remained at 19% of the existing fleet, while the Aframax orderbook increased from 7% to 9% of the existing fleet. As a practical matter, few newbuilding berths can now be secured for delivery prior to 2003. At the same time, increasing demand among charterers for modern, double-hulled vessels continues in the aftermath of the disastrous oil spill off the coast of France in December 1999. While strong tanker rates caused scrapping to fall off in the second quarter from the strong pace earlier in the year, the age profile of the world tanker fleet (and in particular VLCCs) and the strong environmental and regulatory concerns associated with older tonnage should result in an increase in scrapping. There are 98 VLCCs totaling 30.4 million dwt (representing 24.5% of the fleet), which turn 25 years old in 2000 to 2002, and face ever decreasing trading opportunities and extended waiting time for cargoes.


Pacific Carriers makes $5.6 million on newbuilding
sale to OMI

As tanker prospects brighten and newbuilding prices firm, there's a growing tendency for owners to take a profit by selling newbuildings even before delivery. Today's Singapore Business Times reports that Pacific Carriers' associate, Malaysian Bulk Carriers Sdn Bhd (MBC), has entered into agreements to sell two product tankers currently under construction in Japan to OMI Corporation of US for US$30.3 million apiece. Completion of the sale of the two vessels is expected to take place concurrently with their delivery from the shipyard at end-September 2000 and end-November 2000 respectively. PCL's share of the net profit from the sale of the two vessels for the financial year ended Dec 31, 2000 is estimated to be US$5.6 million.

This fills out some gaps in an announcement by OMI Corporation on July 31 that it had agreed to acquire from "another shipowner" two 47,000 dwt product carriers currently under construction at Japan's Onimichi Dockyard. OMI said that following delivery in September and late November, the vessels will commence two year time charters to an oil company.

OMI is selling the last of its Polish built vessels, Tiber, a 29,996 dwt product carrier built in 1989,

Chairman, CEO and president Craig H. Stevenson, Jr.commented "We are pleased to be able to continue upgrading our fleet. The addition of these two new double-hulled product carriers reflects our belief that modern product tankers will be a strong and profitable market in coming years. Cash flows for the next two years are secured with profitable time charters. The acquisition was made using the sale of an older vessel, internal cash flow and bank financing, demonstrating the company's stronger financial position.''

OMI will book a loss of approximately $1.5 million in the third quarter in connection with the sale of the Tiber.

H&W might still build Tikoo's giant cruise liner
Remember Ravi Tikoo. Back in the 1970's his Globtik Tankers built the world's largest tankers, including the 483,000 dwt "Globtik Tokyo". Back in 1988, Tikoo was back in the headlines with plans to build a 3,000 passenger, 160,000 gt cruise ship, at Northern Ireland's Harland & Wolff. The design allowed all passengers to be located in outside cabins with private balconies, achieved by a zig-zag type The plan foundered when the British government refused to provide more than $170 million in subsidies for the project.

Now, reports the Irish News, after 10 years in the Bahamas, Tikoo has returned to the U.K .determined to get the project up and running again. He says it has a better chance of succeeding this time and could create thousands of jobs at the shipyard.

The attitude of government and the ability to raise the huge sums necessary to finance the $600 million cruise ship have changed dramatically in the last 12 years, he said.

Speaking to the Irish News last night, Taco said: "We are talking to Harland and Wolff and we have declared our firm intent that we wish to build our ship with them."

Tikoo said he was confident the ship would be built but it had to be in Belfast. "Harland and Wolff designed the Ultimate Dream. No other shipyard is going to undertake a ship that has been designed by another yard," he told the newspaper/

If everything goes to plan he said building on the ship could start within 18 months with delivery in 2003 or 2004.

A spokesman for Harland and Wolff confirmed it has been approached by Tikoo. He said the shipyard would look at all opportunities for work but added that the Ultimate Dream was a long-term prospect.

At 160,000 gt, the Ultimate Dream would still be the world's largest cruise ship. Unless, that is, the World City project gets off the ground. Sitting in the Marad Title XI in tray is an application for $1.3 billion in loan guarantees to build the 6,200 passenger ship. Current plans are for hull modules to be built by the Halter Marine Group, then assembled at Aker Gulf Marine's Ingleside, Texas, facility.

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