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Indiaexportnews.com

Third quarter and nine month results announced

  28.11.2008    

The Board of Independent Tankers Corporation Limited (Bermuda) announces net income of $2.9 million, equivalent to earnings per share of $0.04 for the third quarter of 2008. This compares with net income of $3.6 million, equivalent to earnings per share of $0.05 for the third quarter of 2007 based on predecessor accounts.  The third quarter results include a charge of $1.8 million in respect of the premium paid on the purchase of Windsor term notes and $0.2 million in respect of financing charges in relation to new loan facilities.
The average daily bareboat rate earned in the third quarter by the Company's VLCCs and the Suezmax tanker Front Voyager were approximately $26,100 and $7,800, respectively, compared with approximately $26,100 and $7,900, respectively, in the preceding quarter.  
For the nine months ended September 30, 2008 the Company announces net income of $10.0 million, equivalent to earnings per share of $0.13 (2007 comparable nine months: $10.8 million, equivalent to earnings per share of $0.14). Net interest expense was $16.7 million (2007 comparable nine months: $19.5 million). At September 30, 2008, all of the Company's bond debt of $338.7 million is fixed with interest rates ranging from 6.63% to 8.52%. 
In November 2008, the Company has an average cash breakeven rate for its VLCCs and Suezmax tanker of approximately $21,500 and $5,000 per vessel, respectively.
 
Chartering summary
The double hull VLCCs, Antares Voyager and Phoenix Voyager are on bareboat contracts to Chevron Transport Corporation and at a fixed rate of $28,500 per day until December 2010 and March 2011, respectively. Chevron Transport Corporation has termination options every second year and the next notice of exercise of options must be given nine months before December 2010 and March 2011. The final termination options are in December 2014 and March 2015. 
The double hull VLCCs, British Pioneer, British Progress, British Purpose and British Pride are on bareboat contracts to BP Shipping Limited and at a fixed rate of $24,895 per day until January 2009, February 2010, July 2010 and July 2011, respectively. After the fixed rate all the vessels will start trading at a market rate with a minimum rate of $20,000 per day.  
Until April 2009, the single hull Suezmax tanker Front Voyager is on a bareboat rate of $4,242 per day on a cash basis to Frontline Ltd. ("Frontline"). Frontline has a right to extend for one more year on a cash basis at $4,988 until April, 2010 and thereafter five annual options. The charter party is being accounted for as a four year operating lease from April 1, 2006 and the estimated income is being amortized on a straightline basis giving a rate of $7,900 per day.
 
Other matters 
In October 2008, Dresdner Kleinwort Leasing gave notice of termination for the UK tax lease agreement for the VLCC British Pioneer. The leasing agreement will effectively be terminated January 2, 2009. At September 30, 2008 the obligation under the lease was $79.2 million and the termination is cash neutral for the Company. The Company will acquire the vessel concurrent with the lease termination and the existing bareboat to BP Shipping Limited will remain in place. 
In July and August 2008, Independent Tankers purchased as part of the restructuring process of the Company $38 million of the $239.1 million Windsor term notes at a premium of 104.75% over par value, equivalent to approximately $1.8 million. Independent Tankers completed two short term bank loan facilities for a total of $40.6 million in order to finance the purchase of the term notes.  
The Company has also entered into a short term overdraft facility of $5 million in order to cover short term liquidity requirements.  
74,825,166 ordinary shares were outstanding as of September 30, 2008, and the weighted average number of shares outstanding for the quarter was 74,825,166.
 
The market 
The average market rate for VLCCs from MEG to Japan in the third quarter was approximately WS 148 ($96,500 per day) compared to approximately WS 173 ($130,000 per day) in the second quarter of 2008. The average rate for Suezmaxes from WAF to USAC in the third quarter was approximately WS 204 ($69,500 per day), compared to approximately WS 213 ($78,800 per day) in the second quarter of 2008. 
In November, 2008 the International Energy Agency ("IEA") reported an average OPEC oil production, including Iraq, of 32.4 million barrels per day during the third quarter of the year, a 0.2 million barrels per day increase from the second quarter. The next OPEC meeting is scheduled to take place on December 17, 2008. 
IEA further estimates that world oil demand averaged 85.5 million barrels per day in the third quarter, a 0.3 percent decrease from the second quarter of 2008. IEA predicts that the average demand for 2008 in total will be 86.2 million barrels per day, or a 0.1 percent growth from 2007. The growth for 2009 is estimated to 0.4 percent. 
According to Fearnleys, the VLCC fleet totalled 490 vessels at the end of the third quarter with five deliveries during the quarter. There are 16 additional deliveries expected in 2008. The total order book amounted to 241 vessels at the end of the third quarter, up from 215 vessels after the second quarter of 2008. The current orderbook represents about 49 percent of the VLCC fleet. One VLCC was deleted from the trading fleet whilst 31 VLCCs were ordered during the quarter. The single hull fleet amounted to 113 vessels at the end of the third quarter. 
The Suezmax fleet totalled 346 vessels at the end of the quarter, up from 344 vessels after the second quarter of 2008, a 0.6 percent fleet increase over the quarter. No Suezmaxes were deleted from the trading fleet, 13 Suezmaxes were ordered and two deliveries took place in the quarter. The total orderbook amounted to 174 vessels at the end of the quarter, an increase of 11 from the end of the first quarter. There are seven additional deliveries expected in 2008. The orderbook represents approximately 50 percent of the current Suezmax fleet. The single hull fleet amounted to 37 vessels at the end of the third quarter.
                       
Strategy  
The Company's strategy will mainly be concentrated around long term charters to reputable companies and for the time being BP Shipping Limited, Chevron Transport Corporation and Frontline. 
The Board still feels that the stock price is not reflecting the value of the underlying assets in the Company and have been working on different alternatives, including strategic options in order reduce this differential. The Company has been involved in several discussions regarding strategic changes during the quarter, but due to the challenging financial and equity markets, no results have been achieved in this dialogue.
 
Outlook 
The quarterly earnings for the fourth quarter of 2008 are expected to be in line with the third quarter of 2008. From 2009, the Board anticipates improved results as a consequence of the VLCC British Pioneer coming off a fixed charter rate in January 2009 and starting to trade at a market rate with a minimum rate of $20,000 per day. Two more VLCCs will start trading at a market rate during 2010 and one more in 2011. 
The Company's charter coverage is 100 percent for the fourth quarter 2008. The Company has low cash breakeven rates and the vessels are fully financed through the US bond market with maturity from 2015 to 2021. 
The combination of fixed bareboat and market rates, for the six VLCCs in the next couple of years and the fact that the Company is fully financed creates a solid platform for the Company going forward. 
The main focus of the Company going forward will be to find solutions to get access to the locked up future cash flows.
 
Forward-looking statements
 This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including the Company's management's examination of historical operating trends. Although the Company believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, the Company cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.  
Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release 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 the Company's operating expenses including bunker prices, drydocking and insurance costs, 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 the Company with the Norwegian over-the-counter market in Oslo. 
 



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