Shipping activities yielded NOK 33.7 million in Q2 2014, where NOK 29.9 million came from the ship-owning companies (equity method), compared to NOK 18.8 million during the same period in 2013, where the ship-owning companies contributed with NOK 18.0 million. The result before tax for Q2 2014 was NOK 34.3 million compared to NOK 20.6 million in Q2 2013. The increased earnings from the shipping activities comes mainly from substantially higher earnings in the VLGC segment (NOK 10 million), and reversal of previous periods write-down of ship values (NOK 12 million), somewhat offset by last year's positive effect of market valuation of interest rate swaps.  

For the first half of 2014 the shipping activities yielded NOK 49.4 million, compared to NOK 29.5 million in the same period last year. The increase comes from a very strong LPG market, both for VLGC and the LGC segment, as well as the reversal of previous periods write-down of ship values. Results before tax for the first half of 2014 was NOK 51.2 million compared to NOK 44.9 million in the same period in 2013, which had a positive one-off effect from realization of securities of NOK 15 million.    

Introduction
The second quarter was characterized by a very strong LPG market, with new rate records in the VLGC segment. The spot market peaked at USD 137.5/ton in April, equivalent to USD 3.8 million on time charter basis per month. Main reasons for the high level were strong export activity from the Middle East and the USA, together with arbitrage opportunities from West to East. The record high rate level caused the market players to work for alternative solutions, often in the form of swapping cargoes and cancellations. The market answered by sending the rates downwards, and was at the end of May at USD 78/ton, equivalent to USD 1.7 million in time charter per month. The decline was short-lived and increased summer activity, along with high export volumes from USA and high imports to India, again tightens the market considerably and rates increased throughout June up to USD 131/ton (USD 3.5 million).

In the ethylene segment, the low export volumes from the Middle East continued throughout the second quarter, but the Solvang fleet could take considerable advantage of the arbitrage opportunities arising from low volumes from the Middle East. In this case in the form of several ethylene cargoes from Europe to Asia, where our 17,000 cbm vessels have been very well suited.

Solvang's share of revenues on time charter basis was NOK 57.9 million in Q2 2014, up by NOK 14.1 million from the same period in 2013, mainly due to better rates for the VLGC and LGC segments. For the first half of 2014 the revenues on time charter basis was NOK 111.1 million, compared to NOK 87.8 million in the first half of 2013, where the increase comes from a strong LPG market, as well as the completion of 6 classification dockings during first half of 2013, which resulted in 130 ship-days without revenue.   

The Baltic Index for VLGC has remained at a high level throughout the second quarter. The average level was USD 109/ton, up from USD 60/ton in Q2 2013. The average for the first half of 2014 was USD 83/ton, against USD 51/ton in the first half 2013.

Contract coverage for the fully refrigerated VLGC and LGC ships is 98% for 2014, with only one ship becoming available towards the end of 2014. Ethylene tonnage operates mainly in the spot market.

VLGC 82k-84k cbm
The Solvang Group has one 82k cbm VLGC ship, which is on time charter until August 2016 on an index based hire, and took delivery of two 84k cbm VLGC in 2013. Both ships are on timecharter, the first until December 2016, on an index based hire from October 2014, while the ship delivered in December 2013 is on timecharter until December 2018 at a fixed rate.

The LPG export volume out of the Arabian Gulf is a central driver for this market, together with the increasing export out of U.S.As mentioned, rates climbed to historically high levels due to an active summer market, hence a new Baltic index rate record was set at USD 137/ton (USD 3.79 million). The average freight rate for the Baltic Index for Q2 was USD 109/ton (USD 2.8 million), up from USD 60/ton in the same period in 2013 (USD 1.09 million). The first half of 2014 had an average of USD 83/ton, equivalent to a monthly rate of USD 1.89 million less idle time.
  
Panamax VLGC 75k cbm
The Solvang group has two Panamax VLGCs, both on timecharter, until September and December 2016 respectively. Both vessels operate in the market in the West, which has been consistently stronger than the East throughout 2013 and further into first half of 2014. This is mainly due to fewer available ships and high repositioning costs deterring speculative positioning of ships from East to West. The Panamax VLGCs have a favorable position in the market as there are only four such ships in the world, and these Panamax VLGCs have successfully utilized this unique position and differentiated positively with significantly higher freight rates compared to the VLGC market and the West in general.

LGC 60k cbm
The LGC segment has stabilized at a good level, and seems to be making another positive boost in rates as a result of the strong VLGC market and exports out of the U.S. to Asia through the Panama Canal. The segment has as such a positive outlook. Solvang has ordered three 60k cbm LGC vessels with delivery in the first, second and third quarters of 2015.

Ethylene 12-17k cbm
The ethylene segment continued the trend from 2013 throughout Q2 and first half 2014, with low export volumes from producers in the Middle East. This low volume of exports from the Middle East created a shortage of product in Asia and opened for ethylene exports from other regions, among others from Europe. Solvang's ethylene fleet was well positioned to utilize this opportunity, and in addition the ethylene export from Ruwais in Abu Dhabi started up again after a longer period of maintenance. The segment has as such improved considerably from the last half of 2013 and from first quarter 2014. Prospects within this segment are however uncertain with high and growing order book.

Financial Risk
Solvang Group's investments in ships, which are owned through participation in ship owning companies with joint responsibility, are USD based, and the group's revenue is mainly USD based. Furthermore, ship values and financing of ships are USD based. The Group's risk in currency exposure is as such limited.

General
There have been no incidents with a particular impact on the financial accounts during the period.

Transactions with related parties follow the guidelines set within the code. The Group's principal broker for sale & purchase is Inge Steensland AS. There are also parallel investments made with companies controlled by the Steensland family. All transactions comply with market terms.

The Solvang Group had no scheduled classification docking in the second quarter of 2014. For 2014 there are a total of two scheduled classification dockings.