Diamond S Shipping posts deep Q1 loss

Diamond-S

Diamond S, one of the largest publicly listed owners and operators of crude oil and product tankers, announced results for the first quarter of 2021.

Highlights for the First Quarter and Recent Events

  • Reported net loss attributable to Diamond S of $33.6 million, or net loss of $0.84 basic and diluted earnings per share, and Adjusted EBITDA (see Non-GAAP Measures section below) of $5.2 million. The reported net loss includes one-time items associated with the entry into the Merger Agreement (as such term is defined herein) of $4.8 million. Excluding the Merger Agreement expenses, the net loss was $28.8 million, or $0.72 per share.
  • Net debt at March 31, 2021 was $560.0 million, implying a net debt to asset value leverage ratio of approximately 44% based on broker valuations as of December 2020. At quarter end, total free liquidity available to the Company above bank minimum cash requirements was $78.8 million.
  • Delivered two vessels, the Aias and Amoureux, previously announced as sold, to their buyers in early January and mid-February 2021, respectively.
  • On March 31, 2021, the Company announced that on March 30, 2021, Diamond S, International Seaways, Inc., a Republic of the Marshall Islands corporation (“INSW”), and Dispatch Transaction Sub, Inc., a Republic of the Marshall Islands corporation and wholly-owned subsidiary of INSW (“Merger Sub”), had entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Diamond S and INSW have agreed, subject to the terms and conditions of the Merger Agreement, to effect a stock-for-stock merger of their respective businesses whereby Merger Sub will merge with and into Diamond S, resulting in Diamond S surviving the merger as a wholly owned subsidiary of INSW (the “Merger”). Subsequent to the Merger, INSW and Diamond S shareholders will own approximately 55.75% and 44.25% of the combined company, respectively, using fully diluted share counts as of March 30, 2021. The Merger will create the second largest US-listed tanker company by vessel count and the third largest by deadweight (“dwt”). The Merger is expected to close in the third quarter of 2021, subject to approval by the shareholders of INSW and Diamond S, regulatory approvals and other customary closing conditions.
  • As of May 7, 2021, approximately 50% of Crude Fleet revenue days operating in the spot market in the second quarter of 2021 have been fixed at an average rate of approximately $12,300 per day. In the Product Fleet, approximately 52% of revenue days operating in the spot market in the second quarter of 2021 have been fixed at an average rate of approximately $10,800 per day. The Product Fleet includes a weighted average blend of MR2 vessels, fixed for approximately 53% of second quarter revenue days at an average rate of $10,800 per day, and MR1 vessels, fixed for approximately 40% of second quarter revenue days at an average rate of $10,400 per day.

First Quarter 2021 Results

Reported net loss attributable to Diamond S for the first quarter of 2021 was $33.6 million, or net loss of $0.84 basic and diluted earnings per share. Excluding one-time items associated with the Merger of $4.8 million, the net loss was $28.8 million or $0.72 per share compared to a net income of $45.0 million, or $1.13 per basic and $1.12 per diluted share, for the first quarter of 2020. The decrease in net income for the first quarter of 2021 compared to the first quarter of 2020 is primarily related to weaker tanker market conditions driven by the global pandemic.

The Company groups its business primarily by commodity transported and segments its fleet into a 14-vessel crude oil transportation fleet (the “Crude Fleet”) and a 50-vessel refined petroleum product transportation fleet (the “Product Fleet”). The Crude Fleet consists of 13 Suezmax vessels and one Aframax vessel. The Product Fleet consists of 44 medium range (“MR2”) vessels and 6 Handysize (“MR1”) vessels.

Net revenues for the Company, which represents voyage revenues less voyage expenses, were $54.7 million for the first quarter of 2021 compared to $135.0 million for the first quarter of 2020. Net revenues from the Crude Fleet were $15.7 million in the first quarter of 2021 compared to $62.3 million for the first quarter of 2020. The decrease in net revenues for the Crude Fleet were primarily due to the continued impact of the pandemic on global oil demand. Net revenues from the Product Fleet were $39.0 million in the first quarter of 2021 compared to $72.7 million for the first quarter of 2020. The decrease in net revenues in the Product Fleet were driven by the same factors as the Crude Fleet.

Vessel expenses were $41.9 million for the first quarter of 2021 compared to $41.5 million for the first quarter of 2020. Vessel expenses, which include crew costs, insurance, repairs and maintenance, lubricants and spare parts, technical management fees and other miscellaneous expenses, increased by $0.4 million primarily due to timing of crew reliefs and logistics for delivery of services.

Depreciation and amortization expense was $28.1 million in the first quarter of 2021 compared to $28.8 million for the first quarter of 2020. The decrease of $0.7 million is due to the decrease in depreciation and amortization expense related to the sales of the Aias and Amoureux, which were delivered in Q1 2021.

General and administrative expenses were $6.5 million in the first quarter of 2021 compared to $8.1 million for the first quarter of 2020. The decrease of $1.6 million in the first quarter of 2021 is attributable to the strategic change in commercial managers in the Product Fleet, which transitioned from an in-house MR desk of salaried employees to external managers in the Norient Product Pool, a decline in travel expenses due to the pandemic and a decline in legal and accounting professional fees.

Other corporate expenses was $4.8 million for the three months ended March 31, 2021, which primarily consist of legal invoices and investment bank opinion fees related to the Merger Agreement.

Interest expense was $6.2 million in the first quarter of 2021 compared to $11.4 million for the first quarter of 2020. Interest expense decreased in the first quarter of 2021 due to a lower average debt balance as a result of debt repayments and a decrease in the effective interest rate. Total gross debt outstanding as of March 31, 2021 was $657.6 million compared to $855.7 million as of March 31, 2020, or 23% lower than the gross debt outstanding as of March 31, 2020.

Other income, which consists primarily of interest income, was less than $0.1 million in the first quarter of 2021, compared to $0.3 million for the first quarter of 2020.

Liquidity

As of March 31, 2021, the Company had $82.1 million in cash and restricted cash and $53.0 million available under its revolving credit facility. Available liquidity as of March 31, 2021 was $78.8 million, net of $56.3 million in restricted cash and minimum cash required by debt covenants.

LEAVE A COMMENT

×

Comments are closed.