Pioneer Marine Inc. and its subsidiaries a leading shipowner and global drybulk transportation service provider announced its financial and operating results for the quarter and year ended December 31, 2016.

Financial Highlights:

For the fourth quarter of 2016 the Company reported a net loss of $3.8 million, or $0.13 per share basic and diluted.

For the year ended December 31, 2016, the Company reported a net loss of $27.2 million, or $0.91 per share basic and diluted, which includes write-off of capitalised expenses and fees amounting to $11.6 million as a result of the termination of seven newbuilding contracts (“newbuilding contract termination agreement”) and non-cash impairment loss of $0.3 million. Excluding these charges, the net loss is $15.3 million or $0.51 per share basic and diluted for the year ended December 31, 2016.

Recent events:

On December 30, 2016, the Company signed a Memorandum of Agreement (‘’MoA’’) with an unaffiliated party for the sale of M/V Azure Bay, a 31,700 dwt 2005 built Handysize vessel. The sale was completed with the delivery of the vessel to her new owners on April 3, 2017.

In April 2017, the Company entered a loan supplemental agreement whereby M/V Azure Bay was released from its obligations under its loan agreement and all its obligations were undertaken by M/V Resolute Bay. Furthermore, the cash collateral amount of $7.0 million that was held under the loan facility, was released to the Company.

In March 2017, under the CIT loan facility, a waiver was secured on the EBITDA to debt service ratio for a period up to June 30, 2018 and minimum asset coverage ratio covenants for a period up to September 30, 2017. The Company agreed to prepay to the lender the amortization due for four quarters.

Liquidity & Capital Resources:

As of December 31, 2016, the Company had a total liquidity of $81.8 million inclusive of $22.8 million in restricted cash.

Pankaj Khanna, Chief Executive Officer, commented, “2016 will be remembered as the worst year for drybulk owners in almost 40 years. No one in the industry had foreseen the extent or the depth of the downturn we have experienced since the second quarter of 2014. The prior period of 2011-13, which was thought of as the recession, now seems to be a good market in comparison. What is interesting though is that the market bottomed in February this year and has since been steadily improving because of fundamental improvement in demand and supply dynamics. Demand, in particular, has been resilient and has surprised on the upside. The biggest surprise was the rise in Chinese coal imports, which had been on a decline for the last 2-3 years. The Chinese government’s decision to shutter 10% of domestic steam coal production, that was inefficient, was a key driver of the increase in imports. Iron ore prices that hit record lows in early 2016 also prompted higher imports into China as local ore production from certain mines could not compete on price or quality. On the supply side the drybulk fleet saw net growth of 2.2% in 2016, with 47 Mdwt of deliveries and 30 Mdwt of scrapping.

“Looking forward, stronger GDP growth rates are expected for both the USA (Trump effect) and China (stimulus measures) resulting in overall continuing improvement in drybulk demand. The Chinese in particular have been pumping money into infrastructure projects and that is having effect on the steel consumption side. On the coal front as well, Chinese hydro-electric power generation has stabilized and there are still new coal-fired power plants coming on stream. That is not only true in China but also for example in India and Vietnam. On the supply side the orderbook on the surface of it seems large at 87 Mdwt (59 Mdwt for 2017), however, we expect at least 50% slippage due to orders already cancelled or converted and delays (Clarksons reported scheduled deliveries of 93 Mdwt for 2016 and only 47 Mdwt actually delivered).

“The other very interesting development that seems to have surprised the market is that Handys proved to be almost as volatile as the other sizes on asset values and freight rates. On certain routes we have seen rates fluctuate between $3,000 – $15,000 per day while on asset values a Japanese 5-year old has seen its value rise from a low of $8.3 million in February last year to over $14.0 million in March 2017 (+69%). This hasn’t been true across the board for all Handys as ships built at non-Japanese yards haven’t risen as much. However, what is clear is that a lot of asset value upside has occurred in 2016. Despite that, when we consider long term averages, asset values are still relatively low and offer further upside assuming markets continue to improve.

“The cancellation of 10 of the 12 newbuilding orders that we placed in 2013/14 and the full and prompt recovery of the deposits has positioned Pioneer with a strong balance sheet. We have been judicious with the use of our capital and will continue to do so, deploying funds to maximize profitable growth without jeopardizing our runway.‘’

Financial Review: Three months ended December 31, 2016

Time Charter Equivalent (“TCE”) revenue amounted to $9.4 million for the fourth quarter of 2016 compared to $6.8 million for the fourth quarter of 2015. The increase in TCE revenue is attributable to the deliveries of two vessels in the fourth quarter of 2016 and to the stronger market prevailing in the three months ended December 31, 2016 as compared to the same period in 2015. TCE per day for the fourth quarter of 2016 amounted to $6,303 as compared to $5,361 for the fourth quarter of 2015.

Vessel Operating Expenses (“OPEX”) amounted to $7.5 million for the fourth quarter of 2016 as compared to $6.2 million in the fourth quarter of 2015. The increase in OPEX is due to the increased average number of vessels, which amounted to 16.7 vessels in the fourth quarter of 2016 as compared to 14 vessels in the fourth quarter of 2015. OPEX per day for the fourth quarter of 2016 amounted to $4,895 as compared to $4,833 for the respective period in 2015. The increase in OPEX per day is mainly attributable to the initial operating expenses incurred following the delivery of two vessels in the fourth quarter of 2016.

Drydock expense for the fourth quarter of 2016 amounted to $0.6 million due to the fact that one vessel completed its special survey. No vessels were drydocked during the fourth quarter of 2015.

Depreciation expense for the fourth quarter of 2016 decreased to $2.1 million from $2.9 million in the fourth quarter of 2015. The decrease of $0.8 million in depreciation expense is due to the reduced depreciated vessel values which resulted from the impairment charge taken at December 31, 2015, partially mitigated by the increase in depreciation expense following the deliveries of two vessels in the fourth quarter of 2016.

General and administration expenses for the fourth quarter of 2016 decreased to $1.3 million as compared to $1.6 million in the fourth quarter of 2015. G&A expenses per day for the fourth quarter in 2016 amounted to $814 per ship as compared to $1,218 per ship for the fourth quarter of 2015. The decrease of G&A expenses is attributed to cost reduction measures.

Impairment loss for the fourth quarter of 2016 amounted to $0.3 million and relates to the write down of the carrying value of M/V Azure Bay to its fair value following the impairment exercise performed as of December 31, 2016. The impairment loss of $74.4 million recognized in the same period in 2015 relates to the write down of the carrying value of all vessels, excluding the newbuildings, to their estimated fair value as of December 31, 2015.

Interest expense and finance cost for the three-month period ended December 31, 2016 increased by $0.7 million to $1.4 million as compared to $0.7 million for the three-month period ended December 31, 2015. $0.7 million was capitalized to vessels-under-construction in the three-month period ended December 31, 2015, which reduced the total amount of interest expense and finance cost. In the three-month end December 31, 2016, no interest was capitalized to vessels-under-construction because the Company’s newbuilding program was effectively terminated on May 23, 2016.

Financial Review: Twelve months ended December 31, 2016

Time Charter Equivalent (“TCE”) revenue amounted to $29.0 million for the twelve months ended December 31, 2016 compared to $26.5 million in the same prior year period. The increase in TCE revenue is mainly attributed to the deliveries of three vessels in the twelve months ended December 31, 2016. TCE per day for the twelve months of 2016 amounted to $5,227, as compared to $5,750 in the same prior year period. The decrease of the TCE per day is due to the weaker market prevailing in the twelve months ended December 31, 2016 as compared to same period in 2015.

Vessel Operating Expenses (“OPEX”) amounted to $25.9 million for the twelve months ended December 31, 2016, compared to $24.4 million in the same prior year period. The increase of $1.5 million in OPEX is attributable to the increased average number of vessels, which amounted to 15.4 vessels in the twelve-month period ended December 31, 2016 as compared to 13.3 vessels in the twelve-month period ended December 31, 2015. OPEX per day for the twelve months of 2016 amounted to $4,594 as compared to $5,012 for the respective period in 2015. The decrease in daily OPEX is attributable to operating efficiencies achieved from cost reduction measures.

Drydock expense amounted to $0.6 million for the twelve months ended December 31, 2016 compared to $3.4 million in the same prior year period. Drydock expense decreased by $2.8 million due to the fact that only one vessel completed its special survey in the twelve month ended December 31, 2016 as compared to eight vessels that were drydocked in the same prior year period.

Depreciation expense for the twelve-month period ended December 31, 2016 decreased to $8.0 million as compared to $11.1 million during the same period in 2015. The decrease is attributable to the reduced depreciated vessel values, which resulted from the impairment charge taken at December 31, 2015. The decrease is partially mitigated by the increase in depreciation expense following the delivery of three vessels in 2016.

General and administration expenses for the twelve-month period ended December 31, 2016 decreased to $4.8 million from $5.8 million during the same period in 2015. G&A expenses per day for 2016 amounted to $846 per ship as compared to $1,183 per ship for the same period in 2015. The decrease of G&A expenses is attributable to cost reduction measures.

Write-off of capitalised expenses and fees increased by $9.9 million during the twelve months ended December 31, 2016 due to the newbuilding contract termination agreements that came into effect on March 17, 2016 and on May 23, 2016. The $11.6 million in 2016 is comprised of capitalised expenses during the construction period, cancellation costs net of interest income for the instalments paid and deferred finance and loan fees attributable to the post-delivery financing of the newbuildings.

Vessel impairment loss for the twelve-month period ended December 31, 2016 amounted to $0.3 million relates to the write down of the carrying value of M/V Azure Bay to its fair value following the impairment exercise performed as of December 31, 2016. The impairment loss of $74.4 million recognized in the same period in 2015 relates to the write down of the carrying value of all our vessels, excluding the newbuildings, to their estimated fair value as at December 31, 2015.

Interest expense and finance cost for the twelve-month period ended December 31, 2016 amounted to $5.1 million as compared to $2.5 million for the twelve-month period ended December 31, 2015. The increase of $2.6 million was related to the termination of the Company’s newbuilding program on May 23, 2016.

Source: Pioneer Marine