The Board of Directors of EXMAR has approved the accounts for the period ending 30 June 2021. The condensed consolidated interim financial statements have not been subject to an audit or a review by the statutory auditors.
The operating result (EBIT) for the Shipping segment amounted to USD 17.6 million for the first half of 2021 compared to USD 11.3 million for the same period in 2020. This increase in EBIT is mainly explained by USD 3.2 million impairment reversals on vessels (based on signed sales memoranda of agreement), increased time charter rates for the midsize fleet and lower depreciation charges resulting from the impairment recorded on several older vessels in 2020. Following a strong fourth quarter in 2020 with recovery of gas markets thanks to improved economic activity, the LPG freight market commenced strong in 2021.
VLGC freight market conditions were volatile which steered MGC freight earnings to record-levels for our fleet in February 2021. Seasonal shifts and changing arbitrage pricing primarily for the US Gulf to Far East route caused volatility especially for the VLGCs while the midsize remained more stable.
VLGC: From record high spot rates in the first quarter in excess of USD 3 million per month the market levelled out below OPEX at the end of the first quarter to again recover to USD 1.5 million per month and further back to about USD 600.000 pcm at mid-year, underlining the freight rate volatility in this segment. The first out of the two dual fuel VLGC newbuildings from Jiangnan Shipyard, FLANDERS INNOVATION, was delivered at the end of June to commence her long-term charter with Equinor ASA from Norway.
With the larger capacity and the Dual Fuel LPG engine these vessels represent the best technology available today with respect to reducing Green House Gas (GHG) emissions. The second vessel is set for delivery end of September 2021. EXMAR’s BW TOKYO is employed on time charter until the fourth quarter. It is expected that the vessel will continue to be employed on period charters for the coming year.
MGC: The MGC market has remained strong and stable for the first half of the year. We have continued to extend vessels to existing and new long-term customers reaching fleet charter coverage already to an excess of 90% for 2021 and 50% for 2022. With firm commodity prices and strong energy demand both for LPG and ammonia, freight markets are expected to remain stable for the remainder of the year.
Pressurized was hit hardest from reduced refinery throughput during the COVID pandemic, especially in Europe in 2020. With slowly recovering refinery utilisation rates and more regional LPG distribution, the period rates improved from around 170,000 pcm to 220,000 pcm during first half of 2021. EXMAR maintains full charter cover for 2021 for the 5,000 m³ fleet and reached cover in excess of 90 % for the 3,500 m³ fleet.
Following a strong 2020 year-ending, the LNG freight market was subject to a short dip in winter. The market did recover fast thereafter and remained firm for the remainder of the first half year. This freight market strength was observed in all vessel classes and also for the steam-turbine LNG carriers. More congestion at the Panama Canal, and improving US and Far East LNG trades are supportive factors for further market balance in 2021. EXMAR’s LNG/C EXCALIBUR is on charter to Excelerate Energy until December 2021 – early 2022.
The EBIT of the Infrastructure segment amounted to USD 31.5 million for the first half of 2021 compared to USD 6.1 million for the same period in 2020. The EBIT of 2021 includes an early termination fee of USD 56.8 million for the early termination of the FRSU S188 charter agreement by Gunvor.
EXMAR’s Infrastructure team is actively pursuing various employment opportunities for TANGO FLNG. For several projects technical clearance is confirming feasibility while regulatory approval discussions and commercial negotiations are ongoing in parallel. Meanwhile, EXMAR is receiving the YPF settlement fees, in accordance with the agreed payment schedule in 2020. On the regasification segment EXMAR has received an interim award on the arbitration commenced by Gunvor in September 2019 in relation to the charter party of the FSRU S188. Following this award EXMAR has received a notice of early termination and a termination fee of USD 56.8 million on subject charter party. The unit has become commercially available by end of June 2021. Marketing of the unit with ongoing technical validation for several opportunities identified has commenced immediately. The accommodation barges NUNCE and WARIBOKO have operated as per contracts during the first half of the year. NUNCE will continue this long-term employment for the remainder of the year. WARIBOKO is available for re-employment during the second half of the year following a contract with Total E&P Nigeria.
EXMAR Offshore Company in Houston has successfully completed the engineering and construction supervision of Murphy Oil’s King’s Quay semisubmersible floating production system (FPS), based on the OPTI® hull design technology, at Hyundai Heavy Industries (HHI). The award of a fourth OPTI® hull design to HHI for Beacon Offshore’s Shenandoah Project in the Gulf of Mexico will ensure a strong engineering activity level the upcoming months. This new design will have a larger payload capacity than the King’s Quay FPS. DV Offshore has performed above expectations in the first six months through the combination of a strong contract/prospect portfolio and strict cost consciousness. SUPPORTING SERVICES The contribution of the Supporting services activities to the operating result (EBIT) for the first half of 2021 was USD -3.3 million compared to USD 1.8 million for the same period in 2020.
UPDATE ON LIQUIDITY POSITION AND GOING CONCERN
Update liquidity position:
During the first months of the year, EXMAR’s liquidity position evolved positively amongst other because of the receipt of an early termination fee for the cancellation of the FSRU S188 charter from Gunvor (USD 56.8 million) and the contractual monthly termination fee payments of YPF (USD 48.7 million). The Group expects a further strengthening of its liquidity position in the next months, thanks to: – End of June 2021, one of the two new VLGCs, i.e. the FLANDERS INNOVATION, was put into operation and the FLANDERS PIONEER is expected to be delivered at the end of the third quarter of 2021.
The ease financing for both vessels has been arranged and for both a minimum five-year charter with Equinor ASA (Norway) has been signed.
– YPF continues to pay the monthly termination instalments with a remaining receivable balance of USD 61.1 million to be received by April 2022. This receivable is secured by a financial security issued by an investment grade counterparty.
– The Group has signed memoranda of agreement for the sale of the TEMSE, TOURAINE and BRUSSELS vessels (all held by our equity accounted investees). Two of these vessels are debt free.
– EXMAR is currently actively pursuing various employment opportunities in the market for the TANGO FLNG and the FSRU S188 and expects both barges to be under contract in the next twelve months.
The Company is of the opinion that, taking into account its available cash and cash equivalents, its undrawn credit facilities available on the date of preparing these condensed consolidated interim financial statements and its projected cash flow based on approved budgets, it has sufficient liquidity to meet its present obligations and cover its working capital needs for a period of at least twelve months from the authorization date of these interim financials.