OREANDA-NEWS. OAO Sovcomflot (“SCF Group”), Russia’s largest shipping company and a global leader in seaborne energy transportation and offshore services, today announces its financial and operating results for the second quarter and six months ended 30 June 2013.

 Highlights:

 • Gross revenue (Freight and Hire) of USD 628.4 million for H1 2013 and USD 315.2 million for Q2 2013
 • Group EBITDA of USD 193.5 million for H1 2013 and USD 100.4 millon for Q2 2013
 • Adjusted net profit of USD 13.4 million for H1 2013 and USD 8.2 million for Q2 2013
 • Addition to the fleet of 4 new vessels with total deadweight of 0.3 million tonnes
 • Two new multifunctional icebreaking supply vessels Vitus Bering and Alexey Chirikov start operations at Sakhalin-1 project under long-term agreement with project operator Exxon Neftegas Ltd.
 • Preparations are finalized for the launch of shipments from the new LPG-terminal in the port of Ust-Luga, together with the charterer – Russia’s leading petrochemical holding company SIBUR. The shipments start is set up for Q3 2013 and will involve two Sovcomflot’s new LPG-carriers.
 • Sovcomflot, United Shipbuilding Corporation and Gazprom Marketing & Trading signed agreements to reserve construction slots for “Gaz Ice” LNG carrier series and promotion of Russian LNG content.
 • SCF Group was presented with Marine Money’s “2012 Deal of the Year Award” for USD 700 million 7 year credit facility secured with a club of international lenders in December 2012.

 Commenting on the Group’s results Sergey Frank, President and CEO of OAO Sovcomflot, said:

 “The tanker shipping market remains extremely challenging, as we are effectively going through the fifth consecutive year of recession in the global shipping industry. In H1 2013 the Clarksea Tanker index was 8.4% lower than in H1 2012, marking another 20-year low. On the other hand, some “green shots” – in particular, a recent improvement product tanker rates – may indicate that the market has bottomed out. Given all this, we remain cautiously optimistic for 2014, and expect a slow recovery in the global tanker market to have begun by then in earnest. Sovcomflot also remains fully committed to our 2018 growth strategy, aimed at building a substantial presence in industrial shipping segments, such as LNG/LPG and upstream offshore services.”

 Evgeny Ambrosov, Senior Executive Vice-President of OAO Sovcomflot, Chief Operating Officer, noted:

 “The reporting period saw the commencement of charters for two new multifunctional icebreaking supply vessels – Vitus Bering and Alexey Chirikov on Sakhalin Island under contract to ExxonNeftegaz – the Sakhalin I project operator. These charters represent an important milestone in the development of the company’s leadership position in servicing the offshore industry in the harsh environments of the Arctic/Sub-Arctic seas. The company has also finalized preparations for an important project with SIBUR, Russia’s leading petrochemical group. This project involves the launch of shipments from the new LPG-terminal in the port of Ust-Luga, when, starting from the third quarter of 2013, two of Sovcomflot’s new LPG-carriers will be working on this project. During this reporting period, SCF fleet was strengthened by the addition of 4 newbuildings. – including two modern LR2 product tankers Anatoliy Kolodkin and Viktor Bakayev, (118,000 tonnes DWT each). This tonnage is in high demand for shipments from the Russian oil terminals, where Sovcomflot is playing a leading role as a key national player in the shipping of oil and oil products. The new energy efficient vessels together with their increased cargo capacity increases the groups’ LR2 fleet to six vessels and 50 products tankers, putting the SCF Group in a good position to take advantage of the upswing in the product tanker space. In respect of a vessel of similar design, Nikolay Zuyev, we were pleased to receive a nomination from Britain’s Royal Institution of Naval Architects (RINA) for “best ship of the year” award, reflecting the Group’s significant focus on innovations and modern technologies in shipping”.

 Nikolay Kolesnikov, Senior Executive Vice President of OAO Sovcomflot, Chief Financial Officer, added:

 “Despite the continued weak earnings environment for the conventional tanker fleet the Company maintained positive profitability on an operational basis. SCF’s revenue base continued to benefit from more than 60% of the fleet being on time-charter and not exposed to spot market volatility, as well as from a solid USD 5 billion backlog of future contracted revenues. In June, we were pleased to receive a Marine Money Award for the Deal of the Year 2012, which recognised the ability of the company to attract new debt capital despite the current challenges in the global financial and shipping markets, and we are on track with arranging financing for the remainder of our contracted newbuilding programme.”
On 5 May, 2013, the first Very Large Crude Carrier tanker (VLCC) ordered by Sovcomflot Group was launched. The vessel is due to be delivered at the end of 2013.

 Oil Products Transportation

This segment accounted for 26 per cent of Group TCE revenues in the half-year ended 30 June 2013. The TCE revenues in the reporting period were USD 109.7 million comparable to USD 118.4 million TCE revenues in 2012. The vessels operated include: products tankers; chemical; asphalt and bitumen carriers. In addition, due to the adoption of the new accounting standard IFRS 11 9 LR1 product carriers in joint ownership with Glencore are equity accounted for, as from 1 January 2013, with the respective re-statement of comparative historical data.

 During H1 2013 SCF Group took delivery of Anatoly Kolodkin and Viktor Bakaev, ice class LR2 tankers of 118,316 tonnes DWT each. They represent the third and fourth vessels of a similar ship series to be constructed as part of an agreement between OAO Sovcomflot and the Zvezda-DSME shipyard – a joint venture involving United Shipbuilding Corporation (Russian Federation) and Daewoo Shipbuilding & Marine Engineering (Republic of Korea).

Gas Transportation

 The Group operates a fleet of LNG and LPG carriers, comprising four wholly-owned vessels in total, with a further six vessels on order (additionally, four LNG carriers are owned jointly with third parties and are equity accounted for, as of this reporting period as per IFRS 11). This segment accounted for 5 per cent of TCE revenues in the first half of 2013 (USD 21.9 million in 2013 comparable to USD 19.9 million in H1 2012). In addition, the Group has an equity ownership position in another four LNG carriers operating under long-term contracts for the Sakhalin 2 and Tangguh projects which are equity accounted for as from 2013 with the adoption by the Group of new accounting standard IFRS 11.

 During the period, SCF’s new state-of-the-art LNG carrier Velikiy Novgorod was launched from the shipyard of STX Offshore & Shipbuilding Co. Ltd. This vessel was ordered by OAO Sovcomflot to operate under a long-term agreement with Gazprom Global LNG. The vessel is an Ice2 (C1) Atlanticmax class gas carrier, with a cargo capacity of approximately 170,000 cubic meters. This makes her capable of transporting gas on a year-round basis from almost any existing LNG terminal in the world, including Russia’s first LNG project at Sakhalin-II.

 On 19 April, 2013, a keel laying ceremony took place at the Hyundai Mipo Dockyard Co.Ltd. yard in Republic of Korea for the second gas carrier ordered by Sovcomflot Group for operations under an agreement with the petrochemical holding company, SIBUR.

 Offshore Development Services

 This business segment comprises the Group’s shuttle tankers and specialised icebreaking supply vessels. During the reporting period the segment contributed USD 98.1 million in TCE revenues, comparable to USD 101.9 million in H1 2012. The segment accounted for 23 per cent of TCE revenues for the Group of companies.

 On 10 January 2013, the naming ceremony took place in St. Petersburg for Vitus Bering, the lead ship in a series of state-of-the-art icebreaking supply vessels. The ceremony was attended by the President of the Russian Federation, Vladimir Putin and other distinguished guests. The Vitus Bering series of vessels is a joint project involving both Russian and Finnish shipbuilders. Around 90% of the structural components for the vessels were produced in Russia at the Vyborg Shipyard (part of OAO USC). In April this year, a grand naming ceremony took place in Helsinki for the sister ship of Vitus Bering – the multifunctional icebreaking platform supply vessel Alexei Chirikov.
 Vessels in the Vitus Bering series have successfully started operations in Russia’s Far Eastern seas. This region is a hotspot for offshore oil and gas development. Ice-breaking supply vessels like Vitus Bering are providing uninterrupted operations on oil platforms in the Arkutun-Dagi field, in the Sea of Okhotsk, as part of the Sakhalin-1 project.
 Other

 This segment comprises multi-purpose and bulk cargo carriers, primarily for coal transportation, and also seismic vessels. On 22 January 2013, the Group took delivery of NS Yakutia, a 74,559 tonnes DWT Panamax bulk carrier with ice class 1B. The vessel was built at the Hyundai Mipo Dockyard in South Korea and she has been chartered by SUEK for the transportation of coal in the Far East.

 Both NS Yakutia and her sister-ship NS Energy have been classified as ENVIRO vessels, indicating a higher level of environmental protection and safety. They benefit from reinforced double hulls and double bottoms.

 In H1 2013 seismic vessel Vyacheslav Tikhonov completed one project in the Ukrainian sector of the Black sea and worked on a large project in India. On 21 June 2013 the vessel started mobilization to Sakhalin to prepare to execute a large project there.