HAMILTON, Bermuda, May 16, 2006 (PRIMEZONE) -- Knightsbridge Tankers Limited (the "Company") reports net income of $14.2 million and earnings per share of $0.83 for the first quarter of 2006. The average daily time charter equivalents ("TCEs") earned by the Company's five VLCCs in the quarter was $54,300 compared with $58,600 in the immediately preceding quarter. This decrease reflects the slight weakening of the market experienced in the first quarter. Net interest expense for the quarter was $1.3 million (2005 comparable quarter: $0.9 million) and at March 31, 2006, all of the Company's debt remains floating rate debt. As of May 8, 2006, the Company has an average cash breakeven rate for its vessels of $18,900 per vessel per day compared to $16,700 at January 31, 2006. This increase is as result of increased general market interest rates and increased operating costs for the Company.
During the first quarter, the vessel TI Ningbo (formerly named Hampstead) under went cleaning and sediment removal prior to the vessel's drydocking that was completed early in the second quarter. This resulted in approximately 6.5 days of offhire in the first quarter. All of the Company's five vessels have now completed their scheduled ten year drydocking and special survey.
The net increase in cash and cash equivalents in the quarter was $5.3 million. The Company generated $21.7 million from operating activities, used $2.7 million to repay the Company's loan and credit facilities and distributed $13.7 million in dividend payments. The Company maintains a restricted cash balance of $10.0 million pursuant to the terms of its loan facility; this amount is included in Cash and cash equivalents.
On May 16, 2006, the Board declared a dividend of $1.00 per share. The record date for the dividend is May 29, 2006, ex dividend date is May 25, 2006, and the dividend will be paid on or about June 12, 2006.
THE MARKET
The downward pressure which started mid November 2005 for VLCCs continued until mid January 2006. At that time, the market saw a low of about World Scale ("WS") 80 for the benchmark route MEG to Japan. From that time it took the market approximately two weeks to hit the high of about WS 180 for the given route. This equated to a TCE of approximately $137,000. Following the peak, the VLCC market softened seeing a relatively steady decline until the end of the quarter when fixtures where conducted at WS 60. The average rate from the MEG to Japan in the first quarter of 2006 was about WS 110 (TCE of $71,307), compared to about WS 108 (TCE of $68,027) in the first quarter of 2005.
Bunkers are becoming an even more substantial part of operating costs and bunker prices increased 14 percent during the first quarter. Fujairah's highest bunker quote for the quarter was $ 339 per metric tonne ("pmt"), with an average of $318 pmt.
The International Energy Agency (IEA) reported in May an average OPEC Oil production, including Iraq, of approximately 29.78 million barrels per day during the first quarter of the year, a 0.24 million barrels per day or 0.8 percent decrease from the forth quarter. OPEC decided at its meeting held in Vienna on March 8, 2006 to maintain current production levels.
The IEA estimates that world oil demand averaged 84.9 million barrels per day in the first quarter, a 0.9 percent increase from the fourth quarter of 2005. IEA further predicts that the average demand for 2006 in total will be 84.8 million barrels per day, or a 1.5 percent growth from 2005, hence showing a firm belief in continued demand growth. The VLCC fleet totalled 468 vessels at the end of the first quarter of 2006, an increase of 0.6 percent over the quarter. No VLCCs were scrapped in the period whilst four were delivered. The total order book now stands at 122 vessels at the end of the first quarter, up from 90 vessels after the fourth quarter of 2005. For the remainder of 2006 there are 13 deliveries expected and for 2007 we expect 35. The current order book represent 26.1 percent of the current VLCC fleet. A total of 31 VLCCs were ordered during the quarter.
At the beginning of May it was possible to sell freight futures for the remainder of 2006 at a level that equates to TCEs for VLCCs at approximately $51,500 per day.
OUTLOOK
At the time of writing the VLCC market has improved from April levels but rates are still influenced by seasonally slower demand for transportation due to, among other things, refinery maintenance in certain consuming areas. Against a background of strong economies and expectations for steady oil consumption the Board believes that the 2006 year will develop satisfactorily. The Board will continue to evaluate opportunities for employment of the VLCCs and to look for new possibilities in the company's business segment. The market to date in 2006 has been volatile but at healthy freight levels. The Board believes that the first quarter will yield satisfactory results albeit at lower levels than the corresponding quarter in 2005. Market participants seem to share an optimistic view for the whole of 2006 and at the moment it is possible to sell freight futures for the year at a level that equals approximately $50,000 per day on VLCCs. Subsequent to the amendment of the Bye-laws last year, the Board has considered the Company's future strategy. The Board feels that the Company and its shareholders will be best served by seeking to grow the Company's business within the existing business sector. Such growth creates the possibility for a good long term return by a combination of increased dividend payments and value creation. The Board will, in the coming period, evaluate different investment alternatives including available financing sources. The Board will focus on transactions which give the Company the opportunity to dividend a high degree of the operating profit, and will pay due attention to the cyclicality of the industry. Based on the TCE results achieved so far in the quarter and, subject to no material negative developments for the rest of the quarter, the Board anticipates a maintained or increased dividend payment for the first quarter of 2006 compared to the fourth quarter of 2005.
FORWARD LOOKING STATEMENTS
Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
Knightsbridge desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "except," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect" "pending and similar expressions identify forward-looking statements.
The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to these important factors, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements 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 world wide oil consumption and storage, changes in Knightsbridge's operating expenses, including bunker prices, drydocking and insurance costs, the market for Knightsbridge's vessels, availability of financing and refinancing, 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 Knightsbridge with the Securities and Exchange Commission.
May 16, 2006
The Board of Directors
Knightsbridge Tankers Limited
Hamilton, Bermuda
KNIGHTSBRIDGE TANKERS LIMITED
FIRST QUARTER REPORT (UNAUDITED)
INCOME STATEMENT 2006 2005 2005
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
(restated)
Operating revenues 27,211 29,369 100,179
Operating expenses
Voyage expenses 3,114 3,811 16,459
Ship operating expenses 4,044 3,102 17,211
Administrative expenses 385 229 988
Depreciation 4,221 4,221 17,120
Total operating expenses 11,764 11,363 51,778
Net operating income 15,447 18,006 48,401
Other income/(expenses)
Interest income 324 307 959
Interest expense (1,593) (1,185) (5,310)
Other financial items (2) (16) (83)
Total other income/(expenses) (1,271) (894) (4,434)
Net income (loss) 14,176 17,112 43,967
Average number of ordinary shares 17,100 17,100 17,100
outstanding
Earnings per Share ($) $0 .83 $1.00 $2.57
BALANCE SHEET 2006 2005 2005
(in thousands of $) Mar 31 Mar 31 Dec 31
ASSETS
Short term
Cash and cash equivalents
(including restricted cash) 27,920 40,535 22,634
Other current assets 13,037 12,336 15,096
Long term
Vessels, net 280,849 297,969 285,070
Deferred charges and other
long-term assets 342 376 359
Total assets 322,148 351,216 323,159
LIABILITIES AND STOCKHOLDERS'
EQUITY
Short term
Short-term debt and current
portion of long-term debt 11,276 11,200 11,200
Other current liabilities 8,943 6,358 7,726
Long term
Long term interest bearing debt 106,400 117,600 109,200
Stockholders' equity 195,529 216,058 195,033
Total liabilities and
stockholders' equity 322,148 351,216 323,159
STATEMENT OF CASH FLOWS 2006 2005 2005
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
OPERATING ACTIVITIES
Net income (loss) 14,176 17,112 43,967
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and amortisation 4,238 4,237 17,186
Other -- -- --
Change in operating assets
and liabilities 3,276 10,367 8,975
Net cash provided by
operating activities 21,690 31,716 70,128
FINANCING ACTIVITIES
Repayments of long-term debt
and credit facilities (2,724) (2,909) (11,342)
Dividends paid (13,680) (29,925) (77,805)
Net cash used in financing
activities (16,404) (32,834) (89,147)
Net increase (decrease) in cash
and cash equivalents 5,286 (1,118) (19,019)
Cash and cash equivalents
at start of period 22,634 41,653 41,653
Cash and cash equivalents at
end of period 27,920 40,535 22,634