Navig8 Product Tankers Inc. Reports Results for the Three and Nine Months Ended September 30, 2016

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LONDON, Nov. 1, 2016 /PRNewswire/ -- Navig8 Product Tankers Inc. (the "Company") (N-OTC: EIGHT), an international shipping company focused on the transportation of petroleum products, today announced its unaudited financial and operating results for the three and nine months ended September 30, 2016.

Highlights

• Reported revenue of $29.1 million and net loss of $5.8 million, or $0.15 per share, for the three months ended September 30, 2016.
• Entered into sale and leaseback agreements with Bank of Communications Finance Leasing Co. Ltd. for three 109,999 DWT LR2 product tankers with net proceeds of $118.8 million.
• Entered into a $66.0 million senior secured credit facility with ABN AMRO Bank N.V., Singapore Branch to provide post-delivery financing for two 74,000 DWT LR1 product tankers.
• Accepted delivery of four newbuilding vessels during the three months ended September 30, 2016 and two vessels in October 2016.

"During the third quarter we accepted deliveries of four newbuilding vessels. In the light of construction delays on certain GSI deliveries, we now anticipate taking delivery of the remaining five newbuildings during Q4 2016 and into Q1 2017.  We are pleased that we continue to secure attractive financing to fund our newbuilding program, which is indicative of our strong relationships within the lending community," said Nicolas Busch, Chief Executive Officer of Navig8 Product Tankers Inc.

"Product tanker markets exhibited weakness in the third quarter due to high inventory levels and decreased refinery utilization typical during the summer.  These factors contributed to a lack of arbitrage opportunities and delivery of vessels from the crude tanker orderbook, which can carry refined products on their maiden voyages, had a compounding effect on rates. Although some of these conditions have continued into the fourth quarter, the outlook for the product tanker market remains favorable with global oil demand growth and refinery capacity additions in Asia, the Middle East and the U.S. forecast to drive demand for product tankers."

Fleet Update

The Company entered into contracts to acquire 30 modern, fuel-efficient newbuilding product tankers. During the second quarter of 2015, the Company entered into an agreement with an unrelated third party to sell three LR2 vessels which were under construction at Sungdong Shipbuilding & Marine Engineering Co, Ltd, Korea, for total sale proceeds of $178.5 million. One of the three vessels was delivered to the buyer in the second quarter of 2015 and the other two vessels were delivered to the buyer in the third quarter of 2015, realizing a total net gain on sale of $24.1 million.

As of the date of this release, 22 of these vessels have been delivered and are in operation.  Given construction delays on certain GSI deliveries, the balance of the fleet is now anticipated to be delivered during Q4 2016 and into Q1 2017.  Upon their respective deliveries, the Company's vessels will be deployed in the LR8 and Alpha8 commercial pools, both managed by Navig8 Group.  The Company's newbuilding fleet comprises:

Seven 109,999 DWT LR2 product tankers (the "Sungdong vessels") built at Sungdong Shipbuilding & Marine Engineering Co. ("Sungdong").  The Company took delivery of the final Sungdong vessel in August 2016. The Sungdong vessels operate in Navig8 Group's Alpha8 pool.

Eight 113,000 DWT LR2 product tankers (the "CSSC vessels") built at CSSC Offshore & Marine Engineering (Group) Company Limited ("CSSC Offshore"), formerly known as Guangzhou Shipyard International Company.  Four vessels have been delivered thus far this year, including one in the three months ended September 30, 2016 and one in October 2016. Given construction delays on certain GSI deliveries, the Company now anticipates taking delivery of the remaining vessels by Q1 2017. The CSSC vessels operate in Navig8 Group's Alpha8 pool. 

Eight 74,000 DWT LR1 product tankers (the "STX vessels") built at STX.  The Company took delivery of the final STX vessel in May 2016. The STX vessels operate in Navig8 Group's LR8 pool. 

Four 74,000 DWT LR1 product tankers (the "SPP vessels") built at SPP.  The Company took delivery of its first vessel in July 2016 and two further vessels in August and October 2016 and expects to take delivery of the remaining vessel in November 2016.  The SPP vessels operate in Navig8 Group's LR8 pool.

Additionally, the Company's remaining ECO LR2 vessel on time charter operating in Navig8 Group's Alpha8 Pool has expired and was re-delivered in October 2016.

Financing Update

On the 12^th of March 2015, the Company entered into a Pool Management Revenue Share Rights Agreement with Navig8 Asia Pte Ltd. and Navig8 Limited. Pursuant to this agreement, the Company places each of its 27 newbuilding vessels into Navig8 Group's Alpha8 and LR8 Pools upon delivery.  The Company also receives a 30% share of the net revenues derived from the commercial management of the two pools.  In consideration for the Pool Management Revenue Share Rights Agreement, 336,963 shares of common stock of the Company, amounting to $4.1 million, were issued to Navig8 Ltd. at an issuance price of $12.25 per share.

On the 25^th of June 2015, the Company entered into sale and leaseback agreements with CSSC (Hong Kong) Shipping Company Limited ("CSSC") for all of the CSSC vessels.  The net proceeds from the transaction (after a 20% sellers' credit) are expected to amount to $304 million.  Under the agreements, the CSSC vessels are delivered to CSSC on their respective deliveries from GSI.  The Company has entered into 10-year bareboat charters for the vessels, commencing on delivery.  The Company has a purchase obligation to re-acquire the vessels at the end of the charter period and purchase options to re-acquire during the charter period, with the first option exercisable on the fourth anniversary of each vessel delivery.  Four of these vessels have been delivered to CSSC under the terms of the Sale MOA and then delivered back to the Company under bareboat charter. Under the sale and leaseback agreements, CSCC is also providing financing for the pre-delivery instalments for the vessels. These sale and leaseback agreements will be treated as financing transactions.  As of September 30, 2016, $147.5 million has been drawn down on the facility, of which $33.5 million relate to pre-delivery instalments.

On the 10^th of July 2015, the Company entered into sale and leaseback agreements with Ocean Yield ASA ("Ocean Yield") for four Sungdong vessels.  The net proceeds from the transaction (after a 5% sellers' credit) amounted to $188.1 million.  Under the agreements, the four vessels were purchased by Ocean Yield from the Company on their respective deliveries from Sungdong.  The Company has entered into 13-year bareboat charters for the vessels commencing on delivery, and has purchase options to re-acquire the vessels during the charter period, with the first of such option exercisable on the seventh anniversary of each vessel delivery.  The last of these vessels was delivered to Ocean Yield in August 2016.  Under the sale and leaseback agreements, Ocean Yield has also provided financing for the pre-delivery instalments for the vessels. These sale and leaseback agreements are treated as financing transactions. As of September 30, 2016, $188.1 million had been drawn down on the Ocean Yield facility.  

On the 10^th of November 2015, the Company announced the closing of a $64.3 million secured commercial loan facility with Credit Agricole Corporate and Investment Bank ("CACIB") for the first two of the Company's eight STX vessels.  The debt financing covers approximately 65% of the contract price of each of these two vessels, which were delivered in November 2015 and January 2016.  In January 2016, the Company announced that it had entered into an amended secured commercial loan facility for $128.5 million with CACIB and BNP Paribas to provide additional financing for the third and fourth newbuilding vessels at STX, which were delivered in January and February 2016.

On the 17^th of March 2016, the Company entered into sale and leaseback agreements with China Merchant Bank Financial Leasing ("CMBFL") for two SPP vessels.  The net proceeds from the transaction (after a 20% sellers' credit) were $73.6 million.  The Company has entered into 7-year bareboat charters for the two vessels, which commenced upon their respective deliveries. The Company has a purchase obligation to re-acquire the vessels at the end of the charter period and a right to re-acquire during the charter period, exercisable following the third anniversary of each vessel delivery. Each of these vessels was delivered to CMBFL under the terms of the Sale MOA and then delivered back to the Company under bareboat charter in the three months ended September 30, 2016. Under the sale and leaseback agreements, CMBFL also financed the pre-delivery instalments for the vessels.  These sale and leaseback agreements are treated as financing transactions. 

On the 25^th of April 2016, the Company announced that it had entered into a $130.3 million senior secured credit facility agreement with Citibank N.A., London Branch and Caixabank, S.A. (the "April 2016 Credit Facility") to provide post-delivery financing for four of the Company's 74,000 DWT LR1 product tankers constructed at STX, all of which have been delivered.  The April 2016 Credit Facility has two separate tranches – a $26.1 million commercial tranche (the "Commercial Tranche") and a $104.2 million tranche insured by Korean Trade Insurance Corporation (the "K-Sure Tranche"). The April 2016 Credit Facility provides financing of approximately 65% of the contract price of these four vessels.  As of September 30, 2016, $125.9 million had been drawn down from the April 2016 Credit Facility.

On the 19^th of July 2016, the Company entered into a $66.0 million senior secured credit facility agreement with ABN AMRO Bank N.V., Singapore Branch (the "ABN Credit Facility") to provide post-delivery financing for the Company's remaining two 74,000 DWT LR1 product tankers to be constructed at SPP. The ABN Credit Facility has two separate tranches – a $13.2 million commercial tranche (the "Commercial Tranche") and a $52.8 million tranche insured by Korea Trade Insurance Corporation (the "K-Sure Tranche"). Each drawdown from the ABN Credit Facility shall be comprised of 20% from the Commercial Tranche and 80% from the K-Sure Tranche. The ABN Credit Facility provides financing of approximately 65% of the contract price of these two vessels. The first of these vessels was delivered to the Company in October 2016. As of September 30, 2016, $29.7 million had been drawn down on the facility.

On the 4^th of August 2016, the Company entered into sale and leaseback agreements with Bank of Communications Finance Leasing Co Ltd. ("BoComm") for three 109,999 DWT product LR2 tankers. The net proceeds of the transaction (after a 20% sellers' credit) amounted to $118.8 million and were in part utilized to repay existing loans used to finance the vessels post-delivery. Under the agreements, the vessels were purchased by BoComm on closing. The Company has entered into 10-year bareboat charters with BoComm, commencing upon closing. The Company has a purchase obligation to re-acquire the vessels at the end of the charter period and a right to re-acquire during the charter period, exercisable following the third anniversary of each vessel delivery. These sale and leaseback agreements will be treated as financing transactions.

Results for the three months ended September 30, 2016

For the three months ended September 30, 2016, the Company reported net loss of $5.8 million, or $0.15 per share, a decline of $23.6 million from the three months ended September 30, 2015.

Revenue for the three months ended September 30, 2016 was $29.1 million, compared to $11.9 million for the three months ended September 30, 2015.  The total number of vessel operating days for the three months ended September 30, 2016 was 1,778, compared to 1,373 for the three months ended June 30, 2016 and 276 for the three months ended September 30, 2015.

The gross average daily time charter equivalent ("TCE")¹  for our owned vessels were $14,553 and $19,326 for our LR1 and LR2 vessels, respectively.  These rates were achieved over an aggregate of 1,686 operating days.  The average daily TCE earned by our 115,000 DWT LR2 chartered-in tankers in the three months ended September 30, 2016, was $19,265 per day.  The last chartered-in vessel, Captain Spiro has expired and was re-delivered in October 2016.

Vessel operating expenses across our owned and chartered-in fleet were $11.9 million for the three months ended September 30, 2016, an increase of $5.7 million from the three months ended September 30, 2015 when our fleet was limited to three chartered-in vessels.  Average daily operating expenses were approximately $5,500 for our owned vessels.

Depreciation expense for the three months ended September 30, 2016 was $8.6 million, compared to no depreciation expense for the three months ended September 30, 2015.  This is due to the Company beginning to depreciate vessels in its newbuilding fleet following commencement of fleet deliveries in November 2015. 

General and administrative expenses for the three months ended September 30, 2016 were $2.0 million, marginally above the three months ended September 30, 2015. 

Interest expense for the three months ended September 30, 2016 was $12.5 million, compared to no interest expense in the three months ended September 30, 2015, when the Company had not yet taken delivery of any of the vessels in its newbuilding program. 

About Navig8 Product Tankers Inc.

Navig8 Product Tankers was established in 2013 as a joint venture between the Navig8 Group and DVB Bank to capitalize on anticipated strong supply/demand fundamentals and the accelerating growth of long-haul clean and dirty oil product cargo movements, driven by increasing geographic dislocations between producers and consumers.

The Company has taken delivery of eleven LR1 and eleven LR2 product tanker newbuildings to date and now anticipates taking delivery of its full 27 eco-design product tanker newbuilding fleet by the end of Q1 2017.  The Company's fleet is contracted to operate in various product tanker pools managed by the Navig8 Group, the world's largest independent pool and commercial management company.

Navig8 Product Tankers is listed on the Norwegian OTC market under the symbol EIGHT.

Visit our website at www.navig8producttankers.com.

Forward-Looking Statements and Distribution

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Navig8 Product Tankers management's examination of historical operating trends. Although the Company believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Navig8 Product Tankers cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and worldwide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company on the Norwegian OTC trading support system.

This communication is not for publication or distribution, directly or indirectly, in or into any state or jurisdiction into which doing so would be unlawful. The distribution of this communication may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes, should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions. The Company assumes no responsibility in the event there is a violation by any person of such restrictions.

¹ Time charter equivalent, a non-US GAAP measure, is vessel revenues less voyage expenses (including bunkers and port charges but excluding pool commission).

Related Links

http://www.navig8producttankers.com