Ocean Yield, the Kjell Inge Rokke-backed leasing company, has slashed its first-quarter dividend by over 70% due to the coronavirus pandemic.
Investors in the Oslo-listed company are now set to pickup just 5 US cents per share against the 19.1 US cents in the fourth quarter of last year.
“The spread of the coronavirus combined with a significant drop in the oil price has created substantial volatility in both the shipping and financial markets,” Ocean Yield said.
“We have has 68 out of 72 vessels on long-term bareboat contracts and this is expected to reduce the impact of the current market volatility.
“Some of our counterparties will, however, be negatively impacted by the reduced activity level and Ocean Yield is therefore monitoring the situation closely.”
The company said that given the uncertainty created by the pandemic and the low oil price, it has decided to reduce the dividend to “build a more robust balance sheet”.
Fearnley Securities said the new distribution of 5 US cents was in the “lower range of consensus expectations” and its own estimates of 7.5 US cents.
“An 8% yield on 10 years' average backlog is still attractive in our view — especially considering that it is sustainable in pretty much any oil service environment,” analysts Espen Landmark Fjermestad, Gustaf Amle and Ulrik Mannhart said.
“Importantly, Ocean Yield will preserve nearly $90m per year, or about $350m for new investments — equivalent to the company’s old spending guidance.”
Ocean Yield warned investors in late March that a dividend cut might be a possibility due to the "extraordinary market volatility".
The Lars Solbakken-led company has paid dividends every quarter since it was listed in 2013, and the focus on dividends will be continued, it vowed.
Loss recorded
The company logged a net loss of $1.6m for the quarter, against $8.4m a year ago.
Revenue increased to $61.3m from $55.8m, but it lost $64.4m from a change in the fair value of financial instruments.
A standstill agreement with Solstad Offshore for two anchor handling tug supply unit charters has been extended until 8 May.
"It is expected that new charter agreements with Solstad will be signed for the two AHTS vessels on long-term charter in connection with the closing of the financial restructuring of the company," Ocean Yield said.
In March, the formerly laid-up subsea construction and cable lay vessel Connector started a 175-day time charter with Ocean Installer for subsea installation work in China.
During the quarter, the Ocean Yield raised $85.3m in new loan facilities related to vessel financings.
This consists of $48.2m through two separate loans for three bulkers bought and leased back from Scorpio Bulkers, and $37.1m for a newcastlemax under construction for charter to CMB.
It has classed its unemployed FPSO Dhirubhai-1 as "for sale".
Discussions are continuing with potential interested parties, but it may have to record another impairment on its value.
"We are, however, concerned that the coronavirus pandemic and recent fall in the oil price may delay these discussions," it added.
