Capital Product Partners L.P. announces Q4 2017 financial results
Capital Product Partners L.P., an international diversified shipping partnership, today released its financial results for the fourth quarter ended December 31, 2017 and announced the completed acquisition of the M/T ‘Aristaios', as well as the sale of the M/T ‘Aristotelis' and the acquisition of the M/T ‘Anikitos', the company said in its press release.
The Partnership's net income for the quarter ended December 31, 2017 was $6.8 million, compared with $13.7 million for the fourth quarter of 2016 and $9.7 million for the previous quarter ended September 30, 2017. Net income for the quarter ended December 31, 2017 includes a non-cash impairment charge of $3.3 million from the sale of the M/T ‘Aristotelis'. After taking into account the preferred interest in net income attributable to the holders of the 12,983,333 Class B Convertible Preferred Units outstanding as of December 31, 2017 (the "Class B Units", and such holders the "Class B Unitholders"), and the interest attributable to the general partner, net income per common unit for the quarter ended December 31, 2017 was $0.03 or, before taking into account the impairment charge, $0.06, compared to $0.09 for the fourth quarter of 2016 and $0.05 for the previous quarter ended September 30, 2017.
Total revenues for the fourth quarter of 2017 reached $64.1 million corresponding to an increase of 2.7% compared to $62.4 million during the fourth quarter of 2016. The increase in total revenues was primarily a result of the higher number of voyage charters performed by vessels compared to the fourth quarter of 2016 and the increase in the number of operating days in the fourth quarter of 2017 compared to the corresponding period in 2016, partially offset by lower charter rates earned by certain of vessels during the fourth quarter of 2017, compared to the average charter rates earned during the corresponding period in 2016.
Voyage expenses for the fourth quarter of 2017 were $5.1 million compared to $2.7 million in the fourth quarter of 2016. The increase was mainly attributable to the increase in the number of voyage charters performed by certain of vessels in the fourth quarter of 2017 compared to the same period in 2016.
Total expenses for the fourth quarter of 2017 were $51.4 million compared to $43.2 million in the fourth quarter of 2016. Total vessel operating expenses during the fourth quarter of 2017 amounted to $23.0 million, an increase of 12.7% compared to $20.4 million during the fourth quarter of 2016. The increase in operating expenses mainly reflects the increase in the number of vessels in fleet incurring operating expenses, following the redelivery of the M/T ‘Aktoras' and M/T ‘Aiolos', which were previously employed on bareboat charters and the acquisition of M/T ‘Amor' in October 2016. Total expenses for the fourth quarter of 2017 include vessel depreciation and amortization of $18.4 million in line with the fourth quarter of 2016 and an impairment charge of $3.3 million in connection with the sale of the M/T ‘Aristotelis'. General and administrative expenses for the fourth quarter of 2017 were $1.7 million, compared to $1.8 million in the fourth quarter of 2016.
Total other expense, net for the fourth quarter of 2017 was $5.9 million compared to $5.4 million in the fourth quarter of 2016. Total other expense, net includes interest expense and finance costs of $6.1 million for the fourth quarter of 2017, compared to $6.2 million in the fourth quarter of 2016. The decrease primarily reflects the lower average amount of debt outstanding following the Partnership's refinancing and partial prepayment that was completed in the fourth quarter of 2017, partially offset by an increase in the LIBOR weighted average interest rate in the fourth quarter of 2017 compared to the corresponding period in 2016.
As of December 31, 2017, total partners' capital amounted to $933.4 million, an increase of $5.6 million compared to $927.8 million as of December 31, 2016. The increase primarily reflects net income for the year ended December 31, 2017 and the net proceeds from the issuance of common units under at-the-market equity offering, partially offset by distributions declared and paid during the year ended 2017 of $51.6 million.
As of December 31, 2017, the Partnership's total debt was $475.8 million, a decrease of $129.2 million compared to $605.0 million as of December 31, 2016 due to the partial prepayment of $116.2 million in connection with the refinancing of a majority of the Partnership's indebtedness during the fourth quarter of 2017 and scheduled loan principal payments during the first nine months of 2017.
On January 17, 2018, the Partnership acquired the eco-type crude tanker ‘Aristaios' (113,689 dwt, Ice Class 1C, built 2017, Daehan Shipbuilding Co. Ltd., South Korea) for a total consideration of $52.5 million from the Partnership's sponsor, Capital Maritime & Trading Corp. (‘Capital Maritime'). The M/T ‘Aristaios' is currently employed under a time charter to Tesoro Far East Maritime Company (‘Tesoro') at a gross daily rate of $26,400. The Tesoro charter commenced in January 2017 with duration of five years +/- 45 days. The Partnership funded the acquisition through available cash in the amount of $24.2 million and the assumption of a $28.3 million term loan under a credit facility previously arranged by Capital Maritime with Credit Agricole Corporate and Investment Bank and ING Bank NV, as mandated lead arrangers and book-runners. The term loan bears interest at LIBOR plus a margin of 2.85% and is payable in twelve consecutive semi-annual instalments of approximately $0.9 million beginning in July 2018, plus a balloon payment payable together with the last semi-annual instalment due in January 2024. The term loan is subject to ship finance covenants similar to the covenants applicable under existing facilities.
The acquisition of the M/T ‘Aristaios' was entered into on an arm's length basis and was reviewed and unanimously approved by the conflicts committee of Board of Directors and entire Board of Directors.
On December 22, 2017, the Partnership entered into a memorandum of agreement for the sale of the M/T ‘Aristotelis' (51,604 dwt IMO II/III Chemical Product Tanker built 2013, Hyundai Mipo Dockyard Ltd., South Korea) to an unaffiliated third party for the amount of $29.4 million. Upon entering into the sale, the Partnership classified the M/T Aristotelis ‘as held for sale' and in this respect recognized an impairment charge of $3.3 million. Delivery of the M/T ‘Aristotelis' to its buyer is expected in March 2018, before the vessel's scheduled special survey.
In addition, the Partnership has agreed to acquire, conditional upon the successful completion of the sale of the M/T ‘Aristotelis', the M/T ‘Anikitos' an eco-type MR product tanker (50,082 dwt IMO II/III Chemical Product Tanker built 2016, Samsung Heavy Industries (Ningbo) Co., Ltd.) for a total consideration of approximately $31.5 million from Capital Maritime. The M/T ‘Anikitos' is currently employed by Petróleo Brasileiro S.A. ("Petrobras"), at a gross daily rate of $15,300 with earliest charter expiry in June 2020. The charterer has the option to extend the time charter for eighteen months (+/-30 days) at the same gross daily rate.
The Partnership intents to fund the acquisition of the M/T ‘Anikitos' with the net proceeds to be received from the sale of the M/T ‘Aristotelis', available cash and the assumption of a term loan under a credit facility previously arranged by Capital Maritime with ING Bank NV at an amount representing approximately 50% of the vessel's charter free market value at the time of the dropdown. The term loan is non-amortizing for a period of two years from the anniversary of the dropdown with an expected final maturity date in June 2023 and bears interest at LIBOR plus a margin of 2.50%. The term loan is subject to ship finance covenants similar to the covenants applicable under existing facilities. We expect the Partnership to take delivery of the M/T ‘Anikitos' in March 2018, following the delivery of the M/T ‘Aristotelis' to its new owners.
The agreement to acquire the M/T ‘Anikitos' was entered into on an arm's length basis and was reviewed and unanimously approved by the conflicts committee of Board of Directors and entire Board of Directors.
The M/T ‘Aktoras' (36,759 dwt, IMO II/III Chemical Product Tanker built 2006 Hyundai Mipo Dockyard, South Korea) secured employment with Shell Tankers Singapore Private Limited (‘Shell') for one year (+/- 30 days) at a gross daily rate of $13,500. The charterer has the option to extend the time charter for an additional year (+/-30 days) at a gross daily rate of $14,500. The new charter commenced in January 2018. The vessel was previously employed with Capital Maritime at a gross daily rate of $11,000 plus 50/50 profit share on actual earnings settled every six months under a ten- to twelve-month time charter which was expected to expire in August 2018. Capital Maritime agreed to terminate its charter before its mandated expiration, in order for the Partnership to receive the full benefit of the new charter to Shell.
The M/T ‘Atlantas II' (36,759 dwt, IMO II/III Chemical Product Tanker built 2006 Hyundai Mipo Dockyard, South Korea) has been chartered to Capital Maritime for eight months at a gross daily rate of $11,000 plus 50/50 profit share on actual earnings settled every six months. The vessel was previously fixed to Capital Maritime under a one-year charter at a gross daily rate of $13,000, which expired in early December 2017. The new charter commenced in January 2018.
Finally, Repsol Trading S.A. (‘Repsol') has exercised its option under its current charter of the M/T ‘Amadeus' (50,108 dwt, IMO II/III Eco Chemical/Product Tanker built 2015, Samsung Heavy Industries (Nigbo) Co. Ltd.) to extend its employment for an additional year (+/- 30 days) at a gross daily rate of $14,750, which represents an increase of $250 per day compared to the current daily rate. As a result, the earliest charter expiration has been extended to October 2019.
All charter transactions with Capital Maritime listed above were unanimously approved by the Conflicts Committee of the Partnership.
Following the new employment updates listed above, the acquisition of the M/T ‘Aristaios', the sale of the M/T ‘Aristotelis' and the acquisition of the M/T ‘Anikitos' (assuming for this purpose that both the sale of the M/T ‘Aristotelis' and the acquisition of the M/T ‘Anikitos' have been completed), the Partnership's charter coverage for 2018 is 66%.
About Capital Product Partners L.P.
Capital Product Partners L.P., a Marshall Islands master limited partnership, is an international owner of tanker, container and drybulk vessels. The Partnership currently owns 37 vessels, including twenty-one modern MR (Medium Range) product tankers, four Suezmax crude oil tankers, one Aframax crude/product oil tanker, ten Neo Panamax container vessels and one Capesize bulk carrier. Its vessels trade predominantly under period charters to Cargill International S.A., CMA-CGM S.A., Cosco Bulk Carrier Co. Ltd., CSSA S.A. (Total S.A.), Flota Petrolera Ecuatoriana, Hyundai Merchant Marine Co. Ltd., International Seaways, Inc., Pacific International Lines, Petrobras, Repsol Trading S.A., Tesoro, Shell and Capital Maritime.