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Pioneer Marine Inc. Announces Financial Results For The Quarter Ended March 31, 2017

MAJURO, MARSHALL ISLANDS - (Marketwired – May 11, 2017) – Pioneer Marine Inc. and its subsidiaries (OSLO-OTC: PNRM) ("Pioneer Marine," or the "Company") a leading shipowner and global drybulk transportation service provider announced its financial and operating results for the quarter ended March 31, 2017

Financial Highlights:

For the first quarter of 2017 the Company reported a net loss of $4.9 million, or $0.17 per share basic and diluted as compared to a net loss of $13.9 million, or $0.46 per share basic and diluted for the first quarter of 2016.

For the first quarter of 2017, the Company reported Adjusted EBITDA* of $1.2 million as compared to a negative Adjusted EBITDA of $2.4 million for the comparative quarter in 2016.

Revenue net of voyage expenses (“Time charter equivalent (TCE) revenue”) for the first quarter of 2017 approximately doubled to $10.0 million as compared to $4.9 million in the same period of 2016 resulting in a TCE per day for the first quarter of 2017 of $6,997 as compared to $3,654 for the same period in 2016.

 

During the first quarter of 2017, five vessels completed their Special Surveys resulting in Drydock expenditure of $2.6 million that were expensed as operating costs in the quarter.

Recent Events:

The Azure Bay, which was sold in December 2016, was delivered to its new owners on April 3rd. We received $7.0 million in net proceeds from the sale.

Liquidity & Capital Resources:

As of March 31, 2017, the Company had a total liquidity of $77.3 million inclusive of $24.7 million in restricted cash. Out of the $24.7 million restricted cash, $7.0 million were released to the Company on April 4, 2017

*For reconciliation and definition of Adjusted EBITDA refer to “Summary of Operating Data (unaudited)” section within this press release.

Pankaj Khanna, Chief Executive Officer, commented, "First quarter is usually the weakest quarter during the year for drybulk freight rates due to seasonal factors but Q1 2017 will be remembered as the quarter when the market turned and seasonal factors such as weather disruptions to exports were not as prominent. This recovery is demand led with very strong numbers seen from China. China remains the leading consumer by far of drybulk commodities and therefore the leading influencer of the market. Chinese imports in Q1 of iron ore increased 12% year-on-year while coal imports continued to surprise on the upside and increased by over 33%. Furthermore, this increase in imports isn’t just driven by switching from domestic sources to imports but Chinese steel consumption increased by 4.5% year-on-year while thermal electric production was up 7% in Q1. And it isn’t just iron ore and coal, grain has also been a big factor for the smaller vessels as grain exports from Brazil and Argentina continue at record pace. For example, Brazilian exports of soybean were up 26% in Q1 as compared to Q1 2016. In Q2 we have fixed voyages that are finally profitable and not just cashflow positive.

“As a result of improving freight rates asset prices surged during the quarter rising by 30% or more depending on the size and in a sense, have decoupled from the usual close correlation with freight rates. Asset prices (like shipping stocks) are now driven by the market sentiment that expects further improvement in freight rates over the next year or two. While the demand-supply equation looks better than it has been in the past three years, the threat of newbuilding ordering remains. In fact, it has already started in Q1, although marginally, and is not expected to impact the market until probably mid-2019. Orders undertaken by the yards are loss making and were presumably taken to keep the yard ticking over. Unless newbuilding prices rise to above breakeven levels for the yards; we do not see the yards taking orders in large numbers for delivery within 2019. As freight rates rise, fleet speed comes into consideration. Vessels are speeding up from the 12 knots they have been trading at for most of the last 2-3 years, resulting in increased supply and thus capping freight rates. Market will need some time to absorb this additional capacity.

“Pioneer has weathered the worst market in over 30 years without any amortization or interest holidays and came out with a strong balance sheet and net debt of just $1.5 million per vessel on a fleet of 16 vessels with an average age of 7.6 years. We have a strong balance sheet and we are looking at options to grow the fleet as we foresee further improvement in freight rates over the next 12-18 months.”

Financial Review:  Three months ended March 31, 2017

Time Charter Equivalent ("TCE") revenue amounted to $10.0 million for the first quarter of 2017 compared to $4.9 million for the first quarter of 2016. The increase in TCE revenue is attributable to the deliveries of two vessels in the fourth quarter of 2016 and to the stronger market prevailing in the three months ended March 31, 2017 as compared to the respective period of 2016. TCE per day for the first quarter of 2017 amounted to $6,997 as compared to $3,654 for the first quarter of 2016, representing an increase of 91.5% in TCE per day.

Vessel Operating Expenses ("OPEX") amounted to $7.6 million for the first quarter of 2017 as compared to $6.2 million in the first quarter of 2016. The increase in OPEX is due to the increased average number of vessels, which amounted to 17 vessels in the first quarter of 2017 as compared to 15 vessels in the first quarter of 2016. OPEX per day for the first quarter of 2017 amounted to $4,997 as compared to $4,533 for the respective period in 2016. The increase in OPEX per day is mainly attributable to the additional operating expenses incurred for the vessels that went into drydock in the first quarter of 2017 in relation to routine repair work and spares delivered while in drydock.

Drydock expense for the first quarter of 2017 amounted to $2.6 million since five vessels completed their special surveys within this period. No vessels were drydocked during the first quarter of 2016.

Depreciation expense for the first quarter of 2017 increased to $2.1 million from $2.0 million in the first quarter of 2016. The increase of $0.1 million in depreciation expense is due to the increased number of fleet vessels.

General and administration expenses for both the first quarter of 2017 and the first quarter of 2016 amounted to $1.1 million. G&A expenses per day for the first quarter in 2017 amounted to $727 per ship as compared to $815 per ship for the first quarter of 2016. The decrease of G&A expenses per day is attributed to continued cost reduction measures.

Interest expense and finance cost for the three-month period ended March 31, 2017 increased by $0.5 million to $1.5 million as compared to $1.0 million for the three-month period ended March 31, 2016.  $0.5 million was capitalized to vessels-under-construction in the three-month period ended March 31, 2016, which reduced the total amount of interest expense and finance cost.  In the three-month end March 31, 2017, no interest was capitalized to vessels-under-construction given that Company's newbuilding program was effectively terminated on May 23, 2016.

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