Frank 'cautiously optimistic' as Sovcomflot returns to profit

Russian owner's CEO also hopeful for tanker prospects in 2020.

Sovcomflot (SCF Group) has returned to profit in the first half of 2019 as rates improved - and it has a positive view on the second half and beyond.

The Russian tanker, LNG carrier and offshore vessel player said net earnings to 30 June were $91m, against a loss of $57.8m in the same period of 2018.

Revenue grew to $828m versus $710.1m year-on-year.

CEO Sergey Frank said the company had achieved significant growth, exceeding its budget plans.

"The successful operation of SCF's vessels serving industrial oil and gas projects, together with the growth of revenues from fleet operations in the conventional tanker market segments (oil and petroleum products), reflected certain improvements in the freight market, although spot rates did not reach their historical averages," he said.

He added that the new group strategy to 2025 envisages a steady increase in Sovcomflot’s operational and financial performance through further growth in the share of advanced ships servicing large-scale energy projects in the Arctic Sea Basin.

Looking ahead, he said: “Based on the supply-demand ratio forecasts for tanker tonnage, and taking into account the seasonality factor, we remain cautiously optimistic about the results for the second half of the year, as well as the prospects for 2020.”

Exposure managed

CFO Nikolay Kolesnikov told TradeWinds the company actively manages its spot exposure according to the market situation.

This exposure is usually around 25% because of its term charters for upstream operations in oil and gas, including for its LNG carrier fleet, for which it has "quite a conservative" approach to coverage, he added.

Kolesnikov called the policy "a natural hedge" and said SCF does not operate in the same way as a pure-play tanker company.

Fuel savings exceed plan

Igor Tonkovidov, chief operating and chief technical officer, said the company also remains very much focused on environmental safety and compliance.

July marked a full year of operations for its large LNG-fuelled tankers.

"The accumulated data from this period shows that using LNG enables a 30% reduction in CO2 emissions compared with similar vessels powered by traditional fuels. This reduction exceeds the original design expectations," Tonkovidov added.

"By 2023, we expect to double the number of LNG-fuelled tankers we operate," he said.

Kolesnikov said there were steady financial results across all business segments, "reflecting the underlying strength of our business model and the improved operating conditions in the conventional tanker markets during the period."

"The liquidity position remains strong, and the contracted capex programme has been fully funded."

Contracted revenues at the end of the period totalled $8.1bn, providing good visibility and stability of future earnings and cash flows, he added.

The fleet includes 146 vessels with a total deadweight of more than 12.8m tonnes.