OREANDA-NEWS. 2012 was, as expected by analysts, another tough year for tanker shipping and saw no substantial improvement of the freight markets. The shares of public tanker companies remained under significant pressure. The Bloomberg Tanker index dropped by 47 per cent, whilst the Nlarksea index dropped by 65 per cent. The average growth in the world tanker fleet was 5. 3 per cent, whilst at the same time the demand for tonnage grew by only 1.8 per cent .These factors were the reason for the imbalance between the oversupply and demand for tonnage, which was the main obstacle to any growth in freight rates. The first half of the year was characterised by stagnation in the oil products tanker segment and a seasonal increase in activity within the large-capacity tanker segment. The second half of the year saw a decline in the large-capacity segment and a rise in the oil-product tanker segment. Overall, 2012 was the fifth year in a row of recession in the world tanker markets.

 2012 Highlights
 
 Gross revenue increased 0.3 per cent to USD 1,443.4 million
EBITDA declines 0.8 per cent to USD 457.0 million
Long-term time charter agreement with Royal Dutch Shell – STASCO for two new 170,200 cubic metre, tri-fuel ice-class 1C LNG carriers
Average tanker fleet age – 7.7 years (industry average – 17 years)
Agreement with Russian petrochemical company Sibur for the long-term time charter of two 20,600 cubic metre, ice-class 1B LPG carriers
Expansion of the joint-venture with Glencore International AG, through joint ownership of additional four 74,000 tonnes DWT LR1 product tankers
During 2012 the Group successfully concluded three long-term financing arrangements, amounting to USD 1.0 billion in total. One of the arrangements was a USD 140 million seven year loan agreement with Citibank and Bank of America Merrill Lynch, to finance the construction of SCF’s first VLCCs which are due for delivery in 2013 for operation on long-term time charter to PetroChina International.
Landmark towage and installation of gravity-based platform for Arkutun-Dagi field (Sakhalin 1 project) successfully completed
The launch of the lead ship Vitus Bering in a new series of multifunctional icebreaking supply vessels. The vessel started servicing the Arkutun-Dagi platform in Sakhalin Island for the project operator Exxon Neftegas.
SCF Amur (47,000 tonnes DWT) completed an NSR transit from Murmansk in Russia’s far north to South East Asia.
The foundation of SCF Arctica – subsidiary of OAO Sovcomflot that unified the companies and fleet involved in servicing Russian offshore projects. During 2013 the fleet of SCF Arctica will be increased by five vessels.
Opening of Dubai office – as part of the development in the rapidly growing marine hub of the Persian Gulf - one of the world centres of oil & gas exploration and its seaborne transportation.
Launch of the lead ship in a new series of multifunctional icebreaking supply vessels, ordered by Sovcomflot Group (SCF) from Arctech Helsinki Shipyard Oy (a joint venture of JSC United Shipbuilding Corporation and STX Finland) in the Finnish capital.
Opening of the unique training & engineering centre in St. Petersburg. The centres will help raise further the levels of shipping safety, service quality and professional training of the company’s captains and senior officers, in preparation for navigation in the challenging climatic conditions of the Arctic.   

Quotes from Senior Management

Sergey Frank, President and CEO of OAO Sovcomflot comments:

 “2012 saw a continuation of the perfect storm witnessed in the shipping industry during 2011. Industry average revenues in all tanker segments were close to the historical lows of the last 10 years. In a year of significant upheaval for ship owners, SCF Group continued to persue its development strategy and managed to deliver profits, focusing on its presence in higher margin areas, such as the servicing offshore oil & gas fields both in Russia and abroad. The diversified nature of SCF’s business model, our competitive advantage in ice navigation, as well as SCF’s commitment to service excellence allows us to develop even in highly unfavourable market environments and recessionary times, it also provides a stable platform for growth when the freight market improves again. Looking ahead, we see the gradual stabilisation of freight rates towards the end of 2013 and beginning of 2014.

 Evgeniy Ambrosov, Senior Executive Vice-President of OAO Sovcomflot adds:

 “Being one of the biggest tanker operators in the world, SCF Group focuses on the premium and high value-added market segments: we are engaged in: the transhipment of crude oil via FSO facilities; the development of effective logistics, for energy resources transportation in the harsh climates of the Arctic/Sub-Arctic and Far Eastern seas; we also provide shuttle tanker and supply vessel services for offshore production platforms. All of these specialised seaborne transportation services are in high demand with our clients – world major energy companies. Providing a boost to profitability, during the reported period, the company concluded several long-term contracts in the LNG transportation and offshore servicing market segments. Our focus is also on the use of innovations and advanced technologies, which is why during the year SCF fleet’s was strengthened by the addition of state-of-the-art commercially competitive ships.

 Igor Tonkovidov, Executive Vice President of OAO Sovcomflot adds:

 “In 2012 we paid extra attention to the shaping and implementation of a unified technical policy amongst our group of companies. Technical managers from SCF Group started the transition to a joint operational platform, to further unify our procedures and standards and to accumulate and share valuable recently acquired expertise. As part of SCF’s innovation programme, the Group established a unique engineering, analytical and training centre headquartered in St. Petersburg. The centre became the research laboratory for SCF Group. Despite the challenging market conditions, we maintained our leading positions in technical management and continue to improve the quality of our services. We also expanded the range of services for our clients, continued to improve the quality of operations and fully implemented our programmes for shipping safety and environmental protection and risk reduction”

 Nikolay Kolesnikov, Executive Vice-President of OAO Sovcomflot, Chief Strategy & Financial Officer adds:

 SCF Group demonstrated resilience and stable financial results despite the challenging market situation. In 2012 we secured USD 1.0 billion of new long-term financing on competitive terms, and the Group added five new ‘blue chip’ names to its core group of lenders. The Group had USD 5.2 billion of contracted future revenues, as at the year end, which provides significant support for SCF ongoing development strategy.