Navig8 Chemical Tankers Inc. Reports Results for the Three and Nine Months Ended September 30, 2016

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LONDON, Nov. 9, 2016 /PRNewswire/ -- Navig8 Chemical Tankers Inc. (the "Company") (N-OTC: CHEMS), an international shipping company focused on the transportation of chemicals, today announced its unaudited financial and operating results for the three and nine months ended September 30, 2016.

Highlights

• Generated revenue of $35.8 million and net income of $3.7 million, or $0.10 per share, for the three months ended September 30, 2016.
• Continued growth of the Company's operating fleet with the delivery of one 49,000 DWT IMO2 Interline-coated chemical tanker, Navig8 Topaz and one 25,000 DWT stainless steel chemical tanker, Navig8 Sky, in the third quarter.  In addition the Company took delivery of one 49,000 DWT IMO2 Interline-coated chemical tanker, Navig8 Tourmaline, and two 25,000 DWT stainless steel chemical tankers, Navig8 Spark and Navig8 Stellar, in October 2016.
• Entered into sale and leaseback agreements with subsidiaries of Japan-based SBI Holdings Inc. for two 25,000 DWT stainless steel chemical tankers for net proceeds of $74.0 million.
• Announced the cancelation of contracts to construct five IMO2 49,000 DWT Interline-coated medium range tankers at STX Offshore & Shipbuilding Co., Ltd.

"The chemical tanker sector remained soft in the third quarter as refinery maintenance season continued.  The result was fewer cargoes and greater competition, a dynamic exacerbated by a weak CPP sector that limited opportunities for swing tonnage to tighten chemical tanker supply.  We are nonetheless pleased with our operating results, which are a reflection of Navig8 Group's chartering capabilities as well as the efficiency of our operations.  " said Nicolas Busch, Chief Executive Officer of Navig8 Chemical Tankers Inc.

"In the meantime, we continue to execute on our strategic plan.  Despite financial difficulties faced by STX, which led us to cancel five newbuilding orders, our operating fleet continues to grow, and we expect our newbuilding vessels to be fully delivered by the middle of 2017.  Our modern fleet of large, high specification eco tankers built at top quality shipyards combined with our relationship with Navig8 Group, the world's largest maritime services company, provides us a best in class platform to take advantage of the continuing shift to long-haul chemical trades.  We continue to expect a positive market environment and remain optimistic about the balance of 2016 and beyond."

Fleet Update

The Company has entered into contracts to acquire 32 modern, fuel-efficient newbuilding chemical tankers.  As of the date of this press release, 27 of these vessels have been delivered and are in operation.  The remaining five vessels are scheduled to be fully delivered by the middle of 2017, with one additional vessel to be delivered during the remainder of 2016, and the final four in 2017.  Upon their respective deliveries, the Company's vessels will be deployed in commercial pools managed by the Navig8 Group, including the Chronos8, Delta8 and Stainless8 pools.  The Company's newbuilding fleet is composed of:

Eighteen IMO2 37,000 DWT Interline-coated tankers built at Hyundai Mipo, Korea ("A-Class vessels"), all of which have been delivered and have been deployed in the Delta8 pool. 

Four IMO2 49,000 DWT Interline-coated medium range tankers ("T-Class vessels") built at STX Offshore & Shipbuilding Co., Ltd. ("STX").  In October 2015, the Company entered into contracts to purchase four T-Class vessels to be built to the same technical specifications as the Company's preexisting orders with STX, including the capability to transport methanol and other specialty cargoes. The Company's four T-Class vessels will be deployed in the Chronos8 pool.  The Company has taken delivery of the first three of its four T-Class vessels: Navig8 Turquoise in April 2016, Navig8 Topaz in July 2016, and Navig8 Tourmaline in October 2016. Delivery of the final T-Class vessel, Navig8 Tanzanite, is scheduled for November 2016.  On October 3, 2016, the Company announced that it had cancelled contracts to construct five additional T-Class vessels, which were to be delivered during 2017.  The contracts related to the cancelled vessels were previously announced on October 21, 2015 and December 3, 2015.  All pre-delivery instalments previously paid to STX with respect to the cancelled vessels have been refunded to the Company together with interest by Korea Development Bank ("KDB") pursuant to the refund guarantees provided by KDB.

Two IMO2 49,000 DWT Epoxy-coated medium range tankers built at Hyundai, Vinashin ("V-Class vessels").  Both V-Class vessels were delivered to the Company on bareboat charters in the first quarter of 2015; the Company purchased one of these vessels in December 2015 and the other in March 2016 pursuant to purchase obligations.  The V-Class vessels are currently deployed in the Chronos8 pool.

Six IMO2 25,000 DWT stainless steel tankers built at Kitanihon Shipbuilding Co. Ltd ("Kitanihon") and two IMO2 25,000 DWT stainless steel tankers built at Fukuoka (Japan) (together, "S-Class vessels").  The S-Class vessels will be deployed in the Stainless8 pool.  The Company has taken delivery of the first four of its S-Class vessels built at Kitanihon: Navig8 Sirius in June 2016, Navig8 Sky in August 2016 and Navig8 Spark and Navig8 Stellar in October 2016. The Company expects the remaining four S-Class vessels to be delivered by August 2017.

Financing Update

On September 15, 2016, the Company entered into a sale and leaseback transaction with subsidiaries of Japan-based SBI Holdings Inc. ("SBI") for two S-Class vessels. Under the agreement the vessels will enter into 11-year bareboat charters commencing at the time of delivery. The Company has purchase options to re-acquire the vessels during the charter period, with the first such option exercisable on or around the fifth anniversary of each vessel delivery. The net proceeds from the transaction will be $74.0 million. In connection with the transaction, Crédit Agricole Corporate and Investment Bank will also provide debt financing of up to $24.9 million to reimburse the Company in respect of pre-delivery instalments already paid to Kitanihon for the Vessels. The pre-delivery financing will be repaid upon the delivery of the vessels from Kitanihon. The sale and leaseback agreements will be treated as financing transactions.

On November 3, 2016, the Company announced that it had entered into a $54.3 million secured loan facility to finance the last two of the Company's S-Class vessels currently under construction at Kitanihon.  The loan facility covers approximately 65% of the contract price of the Vessels and was provided by a European bank.

Results for the three months ended September 30, 2016

For the three months ended September 30, 2016, the Company reported net income of $3.7 million, or $0.10 per share, a decrease of $5.9 million from a net income of $9.6 million for the three months ended September 30, 2015.  The decrease in net income is mainly attributable to lower gross average daily time charter equivalent ("TCE")¹ rates achieved in the three months ended September 30, 2016, partially offset by an increase in total operating days compared to the same period in the prior year, and increases in vessel operating expenses, depreciation and interest income related to the expansion of the Company's operating fleet.  Additionally, the Company recognised a $0.6 million net loss on the cancellation of newbuilding contracts for five T-Class vessels.

Revenue for the three months ended September 30, 2016 was $35.8 million, compared to revenue of $28.7 million for the three months ended September 30, 2015.  The total number of vessel operating days for the three months ended September 30, 2016 increased by 857 to 2,140 compared to the same period in the prior year.

The TCE rate earned by the A-Class vessels and the V-Class vessels in the three months ended September 30, 2016, were $16,773 per day and $17,514 per day, respectively.   The T-Class and the S-Class vessels generated $19,562 per day and $20,561 per day, respectively, during the same period. The Company had 24 vessels operating during the three months ended September 30, 2016, all of which operate in pools from which they derive TCE revenue.

Vessel operating expenses were $12.7 million for the three months ended September 30, 2016, an increase of $4.7 million from the three months ended September 30, 2015, when the Company had only taken delivery of 17 vessels compared to 24 vessels at the end of September 30, 2016.  Average fleet operating costs per day, including technical management fees, were approximately $5,600 per day for the three months ended September 30, 2016, which is marginally higher than the average fleet operating costs per day during the three months ended September 30, 2015.

Depreciation expense for the three months ended September 30, 2016 was $8.8 million, an increase of $3.5 million compared to the three months ended September 30, 2015.  The Company begins to depreciate vessels in its newbuilding fleet as they are delivered. 

General and administrative expenses for the three months ended September 30, 2016, were $2.2 million, an increase of $0.7 million from $1.6 million for the three months ended September 30, 2015.  The increase is primarily related to the increase in the size of the Company's operating fleet.

Interest expense for the three months ended September 30, 2016 was $7.9 million, an increase of $3.6 million from $4.3 million for the three months ended September 30, 2015 when the Company had only taken delivery of 17 of the vessels in its newbuilding program. 

Conference Call

On November 10, 2016 at 2:00PM GMT, the Company's management team will host a conference call to discuss its results for the three months ended September 30, 2016.

Participant should dial into the call 10 minutes before the scheduled time using the following number: 0800 279 9489 (UK Toll Free Dial In) or +44 (0) 2075 441 375 (Standard International Dial In).  Please inform the operator you wish to listen to the Navig8 Chemical Tankers Inc. conference call.

A telephonic replay of the conference call will be available until November 17, 2016 by dialing +1 412 317 0088 (Standard International Dial In) and using access code 10095922.

Slides and Webcast

There will also be a live webcast of the conference call and slide presentation, available through the Company's website (www.navig8chemicaltankers.com).  Participants on the live webcast should register on the website approximately 10 minutes before the start of the webcast.

About Navig8 Chemical Tankers Inc.

Navig8 Chemical Tankers Inc. was established in 2013 as a joint venture between the Navig8 Group and funds managed by Oaktree Capital Management to capitalize on significant structural changes in the petrochemical industry and the continuing development of long-haul chemical trades.  Its best-in-class newbuilding fleet is comprised exclusively of large, fuel-efficient vessels with modern eco-designs to take greatest advantage of these shifts. The fully delivered fleet will feature a complementary mix of primarily Interline-coated and stainless steel vessels that are capable of servicing the full range of conventional and specialized chemicals cargoes.

The Company has taken delivery of 27 chemical carriers and anticipates delivery of its full 32-vessel fleet by mid-2017. The Company's fleet is contracted to operate in various chemical tanker pools managed by the Navig8 Group, the world's largest independent pool and commercial management company.

Navig8 Chemical Tankers Inc. is listed on the Norwegian OTC market under the symbol CHEMS.

Visit our website: www.navig8chemicaltankers.com 

Forward-Looking Statements and Distribution

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 Navig8 Chemical Tankers Inc'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 chemicals market as a result of changes in  OPEC's petroleum production levels and  worldwide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry- docking 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 on the Norwegian OTC trading support system.

This communication is not for publication or distribution, directly or indirectly, in or into any state or jurisdiction into which doing so would be unlawful. The distribution of this communication may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes, should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions. The Company assumes no responsibility in the event there is a violation by any person of such restrictions.

¹ Time charter equivalent, a non-US GAAP measure, is vessel revenues less voyage expenses (including bunkers and port charges but excluding pool commission).