IMSK - 2nd Quarter 2006

The pre-tax profit was USD7.5 million for the 1H06 compared to USD15.6 million for the 1H05. The result for the 1H06 on an EBITDA basis was USD16.8 million compared to USD25.2 million for the 1H05.  

 

I.M. Skaugen ASA (IMS) is engaged in two main business segments - Norgas and SPT (Skaugen PetroTrans). Norgas comprises the group's gas transportation vessels and the relevant activities in China. SPT is involved in ship-to-ship transfer of primarily crude oil to be delivered to refineries in USA.

 

Norgas delivered a lower EBITDA result for the 2Q06 compared to the 1Q06, due to a reduction in the transported gas volumes, and thus higher associated idle time for its vessels, compared to the previous quarter. This was driven by the higher number of scheduled maintenance shut downs at petrochemical plants in the Middle East. We expect to see an increase in Norgas' transported volume and thus decrease of its idle time on vessels during the 2H06, as we have less maintenance shut downs on the petrochemical plants. Our lightering business, SPT, has experienced a disappointing 1H06 due to higher costs (for tanker, bunker charges and port costs) than planned and these have eliminated the margins. We believe the margins and thus the EBITDA will improve somewhat in the 2H06, as we expect lower tanker charter costs upon redelivery of vessels taken on for short and medium term at high rates during the winter of 2005/06. However, the returns for 2006 for SPT as a whole will not be good as the prevailing tanker markets are still too high for us to cover our needs for tonnage and also deliver acceptable margins. In 2007, we will commence the delivery of our specially designed lower cost tankers that will enable SPT to perform better.

 

During the 2Q06 I.M. Skaugen ASA received all PRC governmental approvals to establish two joint ventures in China. Both are relevant for us in order to complete our gas tanker newbuilding projects at the expected quality, on time and at the estimated costs. First, a Cooperative Joint Venture (CJV) named "The Taizhou Skaugen Wuzhou Shipbuilding Co. Ltd", owned 85 per cent by IMS, will enable us to better control process at the shipyard and enable the shipyard to improve its infrastructure. Secondly, a 50/50 per cent Equity Joint Venture (EJV) has been formed together with Shenghui Gas & Chemical Systems (Zhangijagang) Co. Ltd (Shenghui), a maker of steel vessels and structures for refinery and petrochemical production facilities. The total investment in these two joint ventures is close to USD17 million, and the main benefits to us are lower cost, more control over infrastructure and operations, and greater flexibility. In addition, Shenghui will continue to offer relevant products to the petrochemical industry in China, as it has done successfully before our joint venture.

 

In June I.M. Skaugen ASA issued a new 3-year bond loan, denominated in USD, with a total borrowing limit of USD100 million, and a minimum subscription of USD75 million. The bond loan is listed at Oslo Stock Exchange (OSE) (Ticker code: IMSK03). At the same time the Company exercised its call option to repurchase the IMSK01 (ISIN NO 001 022640.0) - NOK300 million bond. Of this bond NOK111.5 million was outstanding and these were called at a strike price of 105. The company has redeemed all NOK bonds and has two USD bonds outstanding.

 

 

 

Oslo, 10th July 2006

I.M. Skaugen ASA

Board of Directors

 

 

Listed on the Oslo Stock Exchange, I.M. Skaugen ASA (IMSK) is a Marine Transportation Service Company engaged in the safe transport of petrochemical gases and LPG, and the ship-to-ship transfer of crude oil. Our customers are major, international companies in the oil and petrochemical industry, whom we serve worldwide from our operations in Dubai, Freeport (Texas), Houston (Texas), Nanjing, Oslo, Shanghai, Singapore and Wuhan. I.M. Skaugen operates recruitment and training programmes in St. Petersburg, Russia and Wuhan, China for the crewing of its vessels.

 

The Group employs approximately 1,100 people and currently operates 44 vessels worldwide. The fleet comprises petrochemical gas and LPG carriers, Aframax tankers, vessels and barges for the transportation of gases on the Yangtze River and a small number of workboats for Skaugen PetroTrans.

 

The Group has a comprehensive newbuilding project in China where we have two LPG vessels of 3200 cbm; three purpose designed combination carriers with LPG/Ethylene/VCM and Organic chemicals carrying capability and four advanced 10,000 cbm LNG/LPG/ethylene gas carriers are on order for Norgas for delivery from late 2006 and onwards.. There is an agreement to purchase up to six additional such 10,000 cbm vessels. IMS has invested in infrastructure with both a shipyard and cargo plant maker in China to ensure innovative and flexible vessels at low cost. Six new, purpose designed and built "Aframax sized tankers", are on order for delivery to SPT on a long term Bareboat charter and commencing during 2007.