The tanker will be chartered out to a prominent charterer at approximately USD 14,500 per day. This is the third recent charter which was contracted at favorable rates, and it might signal a better result for the year as a whole.
Tankerska Next Generation published a document in which they state that they secured 12-month time charter employment for the conventional ice class product tanker MT Velebit, the contracted employment is with immediate effect.
The tanker will be chartered out to a prominent charterer at approximately USD 14,500 per day under usual market terms with an additional charterers’ option to extend the contract with for an additional eight months at approximately USD 15,500 per day. Earlier this month, TNG secured time secured 12-month time charter employment for one of the ECO class product tankers which will be charted at approximately USD 16,000 per day, and last year they contracted USD 14,500 a day for the ship Vinjerac, expiring in Q2 2019.
Note that in 2018, Time Charter Equipment amounted to USD 13,201 per day which represents a decrease of 15% YoY.
2018 was pressured by low spot market
As a reminder, Tankerska Next Generation reported a sharp drop in financials in 2018, owing mostly to the fact that the spot rates were not high enough to replace the expired time charters. Out of 6 ships, 3 entered 2018 with previously arranged time charters. Vukovar expired in April (TCE of USD 17,250 a day), Zoilo in July (17,750) and Dalmacija in September (17,750). Excluding these previous arrangements, according to our calculation it seems that TNG had a TCE of about USD 9,500 a day in 2018.
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Our view on the new charter
We are happy to see another vessel contracted at a favorable rate, as it might signal market improvement in 2019. A quick calculation based on 2018 results (so assuming daily opex of USD 6,755 per ship, G&A of USD 903k, D&A slightly below USD 8m and interest expense slightly below USD 4m) makes us conclude the following:
- TNG records EBITDA breakeven at average TCE of roughly USD 7,200
- TNG records net income breakeven at average TCE of roughly USD 12,600 per day
- An average TCE of 14,500 a day could earn EBITDA of USD 16m and net profit of USD 4m (HRK 3.1 EPS).