John Fredriksen-controlled VLGC shipowner Avance Gas has turned in its second-highest quarterly and annual earnings as it cashed in on a roaring market at the tail end of 2023.
Fourth-quarter net profit soared to $61.5m, up from $34.7m a year earlier.
Operating revenue jumped to $111.2m from $67.4m in the corresponding three months of 2022.
Net profit for the full year showed similar gains, climbing to $163.6m compared with $89m in 2022, while operating revenue leapt to $226.6m from $135.6m.
Chief executive Oystein Kalleklev described the fourth quarter as “blockbusting” for Avance, with net profit for the three months and the year coming in at the second-highest in its history.
He said time charter equivalent earnings on a discharge-to-discharge basis for the fleet were $76,200 per day, slightly ahead of guidance of $70,000 to $75,000 per day.
Kalleklev pointed to a 13% jump in US exports on the back of “very favourable product price arbitrage” between the US Gulf Coast and Far East Asia, and congestion issues in Panama that pushed up sailing distances as among the drivers.
He said the VLGC spot freight market has “slumped” at the start of 2024 due to a severe cold snap in the US, which significantly reduced the price arbitrage, but the company had been able to book the first quarter at a very healthy level.
Kalleklev said Avance is currently about 70% booked for the first quarter with an average TCE of about $70,000 per day on a discharge-to-discharge basis.
Avance described the sector as having “a difficult start” to the new year, with muted cargo availability, low demand in the East, rising US consumption and fixing activity in the Middle East leaving a growing number of ships in the US seeking employment.
This led to rates crashing from the low $130,000s per day at the start of 2024 to levels in the high $10,000 per day region.
The company said there are no scheduled US export capacity increases before mid-2025, so any increase will need to come from existing facilities keeping a high run-rate.
Opec production cuts are also “keeping a lid” on supply growth in the Middle East, while the Red Sea attacks are hampering exports.
But Kalleklev said: “While the freight market has rebounded from the lows, we expect the remaining days to be booked well below the current bookings. However, regardless of this, the first-quarter numbers are expected to be very solid.”
Avance sold four vessels in the second half of 2023, with two 2008-built ships sold under its fleet renewal plans and the other duo offloaded more “opportunistically” in a buoyant market.
One vessel has been delivered to its new owners, two will be handed over this quarter and the final vessel will follow between April and June.
Kalleklev said aggregated profit from the sales is expected to be around $120m.
About $84m is due to be booked in the first quarter and $36m in the second, which will “significantly increase” Avance’s year-end cash balance of $132m.
In the first quarter, it expects to release about $125m in cash from vessel sales, with $60m in the second quarter, plus $45m in cash from refinancings in January to March.
