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February 15, 2001
Ingalls gets $105.5 million Cole repair contract
Litton Industries today announced that its Ingalls Shipbuilding subsidiary, in Pascagoula, Miss., has been awarded a U.S. Navy contract modification valued at $105.5 million for initial funding of the ongoing repair and restoration of the Aegis guided missile destroyer USS COLE (DDG 67).
The USS COLE was damaged in an Oct. 12, 2000, terrorist attack in Aden, Yemen.
In November 2000, Litton Ingalls was selected by the U.S. Navy to repair USS COLE, which arrived at the Litton shipyard in mid-December last year.
Litton Ingalls has been working under a letter contract that covered a damage assessment as well as work required to return the ship to an on-land production area at Litton Ingalls for the repair and restoration project. Additional modifications to the contract are subject to a full damage assessment and changes in the scope of the restoration work.
"We began work on USS COLE as soon as she arrived in December," said Jerry St. Pe, Litton executive vice president and chief operating officer of Litton Ship Systems. "Our mission is not only to return COLE to fleet duty, but to return her to the fleet in `better-than-new' condition. We have the assets, the capacity, the skills and the knowledge of the ship to do just that -- and to do it in the shortest time possible."
To perform the repair and restoration work, Litton Ingalls returned USS COLE to almost the precise spot where she was built six years ago. USS COLE was christened in 1995.
Bergesen orders LPG/ammonia carrier
Bergesen d.y. has entered into an agreement with Kawasaki Heavy Industries Ltd. for construction of a fully refrigerated LPG/Ammonia carrier of 59,200 cbm. From delivery. which is scheduled for September, 2003, it will be employed in Bergesen's LGC-pool.
The contract price is about $ 57 million and Bergesen has an option to order a second vessel of the same type for delivery before December 31, 2003.
Bergesen's LGC-fleet currently consists of 13 vessels. In addition to Bergesen's own vessels, six vessels owned by others participate in Bergesen's LGC-pool.
Pool-partner, Solvang ASA, has also entered into an agreement Kawasaki to build a similar vessel for delivery by March 31, 2003, with an option for a second vessel for delivery by March 31, 2004.
Record earnings for OSG
Overseas Shipholding Group reported record net income for the quarter ended December 31, 2000 of $47,634,000, or $1.40 per share, compared with net income of $247,000, or $0.01 per share, for the quarter ended December 31, 1999. For the year 2000, OSG reported net income of $90,391,000, or $2.67 per share, versus income of $14,764,000, or $0.41 per share, for the prior year.
The 2000 results include an after-tax gain of $13,690,000 in the fourth quarter, from the sale of one U. S. flag tanker and one foreign flag 1979-built Aframax tanker, and $4,152,000, or $.12 per share, in the first quarter, arising out of a change in methods method of accounting for voyage revenue. The 1999 results included an after-tax gain of $8,100,000, or $.23 per share, from the completion of its dry bulk disposal program.
OSG says its performance reflects both high charter rates across all tanker segments and the positive effects of a coordinated program of commercial initiatives and cost reductions.
Average market rates reported by industry sources for modern VLCCs, in 2000, on routes that OSG's vessels typically trade, rose to a time charter equivalent (TCE') of $50,100 per day, versus $19,600 per day in 1999. TCEs in the fourth quarter of 2000 soared to an average of $74,200 per day, versus $16,500 per day in the fourth quarter of 1999. Aframax TCE rates in the Caribbean also rose dramatically, increasing on average to $31,200 per day in 2000 from $12,900 per day in 1999. In the fourth quarter of 2000, average Aframax rates increased nearly four fold to $44,600 from $12,000 per day in the prior year's quarter. During 2000, Aframax rates rose in response to increases in short-haul crude oil production in the Caribbean, the North Sea, North Africa and the FSU. Charter rates were further supported by a slowing in newbuilding deliveries with only 22 Aframaxes entering the fleet in 2000 compared with 47 in 1999.
The size of the existing orderbook is consistent with the age profile of the world tanker fleet, suggesting continued tightness in the supply/demand balance of tonnage. The VLCC newbuilding orderbook stands at 21% of the fleet, which is relatively modest given that 32% is 20 years of age or older. Similarly, the Aframax orderbook of 13.7% compares to 21% of the fleet that is 20 years of age or older.
OSG has undertaken a $750 million, 16-vessel fleet renewal program, including 12 newbuildings and four modern second-hand vessels. On completion of the program, 93% of OSG's international tanker fleet will be double-hulled, double-sided, or double-bottomed. The acquisition of these vessels at prices well below those prevailing today will give OSG significant competitive advantage. Included among these vessels are six VLCC newbuildings (1.84 million dwt) and six Aframax newbuildings (665,500 dwt). All newbuildings incorporate design features to optimize lift, speed and fuel consumption.
The four remaining vessels, three of which are double-sided, include three 1993-built VLCCs and one 1992-built Aframax. Each of these vessels are or will be held in joint ventures. The VLCCs will be commercially operated by the Tankers pool and the Aframax by the OSG/PDVM pool.
TCE rates for tankers have recently declined from the exceptional levels achieved in the fourth quarter of 2000, reflecting a number of factors including OPEC's announced 1.5 million barrel per day production cutback and the apparent slowdown of the U.S. economy. Current rates for OSG's international flag fleet, however, exceed the average levels realized by the Company in 2000. At such rate levels, OSG continues to generate attractive returns on its fleet, enhanced by the high efficiency utilization of its vessels and its improved operating cost structure.
Looking forward, the fundamentals affecting world tanker markets remain strong:
- Most forecasts continue to anticipate average annual growth in world oil demand of between 1.5 to 2 million barrels per day. --
- Incremental oil demand is expected to be met primarily from long-haul Middle Eastern sources.
- Oil stocks in major consuming countries remain at levels below historic norms.
- The age profile of the current world tanker fleet suggests very significant amounts of scrapping likely will take place over the next few years.
- Increasing commercial, political and regulatory pressures, including expected new IMO regulations, are likely to accelerate the pace of scrapping of older tonnage.
- Any sustained weakness in tanker markets is also likely to accelerate the scrapping of older tonnage.
- Shipyard capacity for large tankers is substantially committed through 2003.
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