Ship Finance: Weak 2011 Market

Ship Finance International Limited, formed in Bermuda in 2003 as a wholly owned subsidiary Hamilton-headquartered oil tanker operator Frontline, today [Feb.17] announced its preliminary financial results for the quarter ended December 31, 2011.

Highlights

• The board of directors declared a quarterly dividend of $0.30 per share.
• In October 2011, the company took delivery of one newbuilding drybulk carrier with a five-year time charter.
• In October 2011, the company sold a 1992-built combination carrier.
• In December 2011, the company agreed to amend the charters with Frontline and temporarily reduce the fixed charter rates against a significant upfront cash payment and improved profit share structure.
• In January and February 2012, the company has taken delivery of three drybulk carriers with ten, five and three year time charters, respectively.
• The board of directors has declared a quarterly cash dividend of $0.30 per share. Ship Finance has now paid dividends for 32 consecutive quarters. The dividend will be paid on or about March 28, 2012 to shareholders of record as of March 9, 2012. The ex-dividend date will be March 7, 2012.

The company reported total US GAAP operating revenues on a consolidated basis of $76.1 million, or $0.96 per share, in the fourth quarter of 2011.

This number excludes $129.9 million of revenues classified as “repayment of investments in finance lease”, and also excludes $93.7 million of charter revenues earned by assets classified as “investment in associate.”

As a result of a soft tanker spot market in most of the fourth quarter, there was a negative adjustment of approximately $0.3 million of previously accrued profit share related to the vessels on charter to Frontline. The aggregate profit share for the year 2011 remained positive with $0.5 million and will be payable in March 2012.

Reported net operating income pursuant to US GAAP for the quarter was $42.0 million, or $0.53 per share, and reported net income was $30.2 million, or $0.38 per share.

Ole B. Hjertaker, Chief Executive Officer of Ship Finance Management AS said in a comment: “In 2011 we experienced the weakest tanker market for 12 years, but there was still a positive profit share generated by the Frontline vessels for the year.

“With the recent adjustment in the chartering agreements, Frontline is in a position to withstand a prolonged downturn in the tanker market and Ship Finance will be more than compensated if the market continues at the 2011-level or above.”

Mr. Hjertaker continued: “The new cash sweep payments may alone give a positive net effect of approximately $0.20 per share per quarter, or double the previous net contribution from these vessels, if Frontline generates market revenues in line with the previous base rates only. According to Clarkson’s, average very large cruide oil carrier [VLCC] earnings year-to-date has been well in excess of this level.

“Our fleet is diversified across four main market segments, of which offshore is the largest. We currently have 65 vessels in operation which are chartered to 13 customers, and all are current with their charter payments to us.”

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