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The Company reported a net loss for the quarter of $0.5 million, or $0.03 per share, principally as a result of the weaker spot crude tanker market. Revenues amounted to $12.8 million for the quarter, including $1.0 million of profit sharing revenues earned by three of our vessels employed under the spot index linked time charter arrangement with Shell Shipping & Trading Co. Total voyage and vessel operating expenses for the quarter amounted to $6.4 million, of which $2.4 million were voyage expenses, comprised mostly of bunker costs, and $3.9 million of operating expenses. General and administrative expenses were $1.6 million for the quarter, of which $0.5 million was a noncash charge related to the Equity Incentive Plan. Interest expense and finance cost for the first quarter of 2011 was $1.3 million, principally relating to interest on the $134.6 million outstanding debt drawn under our $200.0 million revolving credit facility. Quarterly Dividend of $0.25 per share The Company’s dividend policy, as described in its listing prospectus, is to pay a variable quarterly dividend based on our cash available for distribution, which represents net cash flow during the previous quarter, generated by our vessels trading in the spot crude tanker market less any amount required to maintain a reserve that our Board of Directors (the “Board”) determines from time to time is appropriate for the operation and future growth of our fleet. The Company generated $4.0 million in cash available for distribution during the quarter, and its Board declared a cash dividend of $0.25 per share for the period from January 1 to March 31, 2011.The cash dividend is payable on June 1, 2011, to all shareholders of record on May 23, 2011. Cash available for distribution is a non US GAAP financial measure described on Appendix A of this earnings release. Crude Tanker Market Overview Crude spot market rates experienced short spikes throughout the quarter due to the high seasonal demand, but long tonnage lists and higher bunker prices kept a lid on rates and as a result first quarter TD3 and TD5 average earnings remained close to historical lows. During the first quarter 2011 the TD3 (Middle East – Japan) and the TD5 (West Africa – US East Coast) indices average TCE earnings were $22,871 and $17,831 per day, respectively, compared to $30,050 and $18,536 per day, respectively, earned by the Company’s VLCC and Suezmax fleets, as our commercial arrangements allowed us to continue to outperform these popular market indices. While activity in the crude tanker period market remains limited, 3 to 5 year employment time charters command a substantial premium over shorter term employment, reflecting owners’ and charterers’ expectations of an improving spot market in the medium to long run. Currently, analysts estimate that earnings under a 5 year VLCC and Suezmax time charter contract would be close to $34,000 per day and $26,000 per day, respectively, which is towards the bottom end of the historical range. Definitive Merger Agreement With Capital Product Partners L.P. Crude Carriers announced on May 5, 2011, that it entered into a definitive agreement to merge with Capital Product Partners L.P. Under the terms of the merger agreement, CPLP would acquire Crude Carriers in a unit-for-share transaction, with Crude Carriers shareholders receiving 1.56 CPLP common units for each Crude Carriers share. Based on a CPLP unit closing price of $11.27 on May 4, 2011, and the 1.56 exchange ratio, the transaction is valued at $17.58 per Crude Carriers share, which is a substantial premium of 35.3% to the Crude Carriers closing share price of $12.99 on May 4, 2011. Based on vessel appraisals received by the Company from independent shipbrokers as of March 31, 2011, the $17.58 per share transaction value paid to Crude Carriers shareholders is in excess of the Company’s per share Net Asset Value (“NAV”) calculated at the midpoint of those appraisals. The merger was negotiated by certain of the members of the Company’s Independent Directors’ Committee, which negotiated the terms of the merger agreement, approved the transaction, and recommended it to the Company’s Board of Directors, which in turn unanimously approved the transaction. The consummation of the merger is subject to approval by the holders of a majority of the voting power of Crude Carriers Common Stock voting together as a single class; by the sole holder of the Company’s Class B Stock, voting as a separate class; and by a majority of shares of Crude Carriers Common Stock held by unaffiliated shareholders who are not affiliates of either Crude Carriers or CPLP, voting separately. Evangelos M. Marinakis, Chairman of the Board and CEO, Ioannis E. Lazaridis, President, Gerasimos G. Kalogiratos, CFO, and Crude Carriers Investments Corp., holder of all of the Company’s Class B Stock, have entered into a support agreement pursuant to which they have agreed to vote their shares in favour of the transaction. The consummation of the merger is also subject to other customary closing conditions. CPLP will be the surviving entity in the merger and will continue to be structured as a master limited partnership with its common units trading on the Nasdaq Global Market. CPLP currently pays a distribution of $0.2325 per common unit per quarter, or $0.93 per common unit on an annualized basis. Importantly, CPLP will remain a corporation for U.S. tax purposes and, accordingly, holders of CPLP common units will continue to receive Form 1099 information. Please refer to the Company’s press release of May 5, 2011, for full details of the merger agreement and relevant disclosures. Management Commentary Mr. Evangelos Marinakis, the Company’s CEO commented: “Our first quarter results continue to demonstrate the Company’s capacity to generate attractive dividends even in a weak market environment. In addition, our commercial arrangements and our high specification fleet allow us to perform very favorably, when compared to the overall market and the TD3 and TD5 routes in particular.” Mr. Marinakis continued: “We are also very pleased that the respective boards of CPLP and Crude Carriers have entered into a definitive merger agreement, which has received the support of both Crude Carriers’ founding shareholder, Crude Carriers Investment Corp., and the senior management of the Company. We believe that the agreed unit per share exchange ratio is attractive for our shareholders as it translates to a premium of 35.3% to the Crude Carriers closing share price of $12.99 on May 4, 2011, and is at a premium to its NAV based on the closing unit price of CPLP on the same date. The shareholders of Crude Carriers should receive attractive distributions, based on the $0.93 per common unit annual distribution guidance of CPLP, which translates to $1.45 per Crude Carriers share under the agreed exchange ratio. The merger will result in Crude Carriers’ shareholders becoming part of one of the larger U.S. listed tanker companies, with a pro forma market capitalization of approximately $800 million and a pro forma public float in excess of $500 million. The combined fleet will be diversified in both the product and crude tanker space, while retaining the benefits of a close relationship with Capital Maritime & Trading Corp. As a result, the new unitholders of CPLP can expect strong growth prospects.” Full report at: www.crudecarrierscorp.com Crude Carriers Corp. |
Crude Carriers Corp. Reports First Quarter Results and Announces Quarterly Cash Dividend of $0.25 Per Share