OceanPal Inc. Announces Agreement to Acquire an MR2 Tanker Vessel

Rhea-AI Summary

OceanPal Inc. (NASDAQ:OP) has announced an agreement to acquire an MR2 tanker vessel, the m/t Zeze Start, for $27.0 million. This strategic move marks the company's entry into the product tanker sector, diversifying its fleet. The purchase price will be paid with $18.9 million in cash and the remainder in Series D Preferred Stock. Of the cash component, $10.9 million will be paid after delivery, bearing a 5% annual interest. The 2009-built vessel has a capacity of 49,999 dwt. Upon completion of this acquisition and the previously announced sale of m/v Baltimore, OceanPal's fleet will consist of 5 vessels (1 MR2 tanker, 1 Capesize, and 3 Panamax dry bulk vessels).

Positive

• Diversification into the product tanker sector
• Acquisition of a 49,999 dwt MR2 tanker vessel
• Partial payment in Series D Preferred Stock, supporting future cash position
• Seller's credit of $10.9 million at 5% interest rate

Negative

• Significant cash outlay of $18.9 million for vessel acquisition
• Potential shareholder dilution due to issuance of Series D Preferred Stock
• Acquisition from an entity controlled by a company director, raising potential conflict of interest concerns

Insights

Financial Analyst

OceanPal Inc.'s acquisition of the MR2 tanker vessel for $27 million indicates a strategic shift towards fleet diversification. Such acquisitions are often seen as growth-oriented moves, especially since the deal involves a mix of cash and preferred stock, which may help maintain liquidity.

Financial Implication: A significant portion, $18.9 million, will be paid in cash. The remainder via Series D Preferred Stock suggests the company is balancing immediate cash outflows with share-based payments, which could be seen as a prudent financial strategy. However, the $10.9 million seller's credit at 5% interest indicates a liability that needs to be managed effectively to avoid future liquidity issues.

Valuation Insight: The purchase price was based on two independent broker valuations, thus adding credibility to the transaction’s fairness. It highlights that the company is willing to invest significantly in fleet expansion, reflecting optimism in the product tanker sector's market dynamics.

Investor Perspective: For investors, understanding the liquidity and future cash flow impact is crucial. While the diversification could lead to enhanced revenue streams, the associated debt and share dilution risks should be considered.

Maritime Industry Expert

From an industry standpoint, OceanPal Inc.'s entry into the product tanker market is a notable shift. The m/t Zeze Start, with a carrying capacity of 49,999 dwt, adds substantial capacity and provides access to potentially lucrative market segments previously untapped by the company's dry bulk focus.

Market Dynamics: The product tanker segment has shown resilience and growth potential, especially with fluctuating oil prices and global trade patterns. Diversifying into this sector can mitigate risks associated with the dry bulk market's volatility.

Operational Benefits: By acquiring a relatively modern vessel (built in 2009), OceanPal can reduce operational costs and improve efficiency. The timing aligns with favorable market conditions, suggesting a well-calculated move.

Strategic Implications: This acquisition enhances OceanPal's market reach and operational flexibility. However, integrating a new vessel type into their existing fleet may require additional expertise and operational adjustments.

Market Research Analyst

OceanPal's strategic fleet expansion into the product tanker sector, amid continued optimism, underscores a broader trend in the maritime industry where companies diversify to capture emerging opportunities. This move aligns with market forecasts indicating robust demand for product tankers.

Sector Trends: The product tanker market benefits from increased global energy consumption and supply chain integrations. Companies expanding in this sector might see enhanced profitability and market share.

Competitive Landscape: Entering this market positions OceanPal against established players, which might affect market dynamics. The ability to compete will depend on operational efficiency, cost management and market adaptation.

Long-term Outlook: For investors, the diversification offers potential revenue growth but also introduces new industry-specific risks. Success hinges on market conditions and the company’s ability to integrate and leverage the new vessel effectively.

ATHENS, Greece, July 16, 2024 (GLOBE NEWSWIRE) -- OceanPal Inc. (NASDAQ:OP) (“OceanPal” or the “Company”), a global shipping company specializing in the ownership of vessels, today announced that it has signed, through a separate wholly-owned subsidiary, a Memorandum of Agreement to acquire an MR2 tanker vessel, the m/t Zeze Start (the “Vessel”), for an aggregate purchase price of $27.0 million from an entity controlled by a director of the Company. The transaction was unanimously approved by the Company’s Board of Directors and reflects OceanPal’s view that it is the right time to diversify the Company’s fleet so as to take advantage of opportunities in the product tanker sector.

Commenting on the transaction, Mr. Robert Perri, the Company’s Chief Executive Officer, stated that, “The Board’s decision to enter the product tanker space at this time marks an exciting development in the Company’s corporate strategy to operate a diversified fleet amid continued optimism in the product tanker sector.”

The Vessel is expected to be delivered to the Company during the third quarter of 2024. Of the purchase price, $18.9 million will be paid in cash and the remaining amount will be paid in the form of shares of the Company’s Series D Preferred Stock, the terms of which are set forth in the amended and restated statement of designation of the Series D Preferred Stock, to support the Company’s future cash position. Of the cash purchase price, $10.9 million will be paid to the seller after the delivery of the Vessel but not later than November 26, 2024 pursuant to a seller’s credit and will bear interest at the rate of 5.0% per annum. The aggregate purchase price of the Vessel was based on two independent third-party broker valuations, after taking into account the share-based component of the consideration.

The m/t Zeze Start is a 2009-built tanker vessel having a carrying capacity of 49,999 dwt.

Excluding the m/t Zeze Start and upon completion of the previously announced sale of m/v Baltimore, OceanPal Inc.’s fleet will consist of 4 dry bulk vessels (1 Capesize and 3 Panamax). A table describing the current OceanPal Inc. fleet can be found on the Company’s website, www.oceanpal.com. Information contained on the Company’s website does not constitute a part of this press release.

About the Company

OceanPal Inc. is a global provider of shipping transportation services through its ownership of vessels. The Company’s vessels currently transport a range of dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes and it is expected that the Company’s vessels will be primarily employed on short term time and voyage charters following the completion of their current employments.

Forward Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements.

The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, Company management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond the Company’s control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk shipping capacity, changes in the Company’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Company’s vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, including risks associated with the continuing conflict between Russia and Ukraine and related sanctions, potential disruption of shipping routes due to accidents or political events, including the escalation of the conflict in the Middle East, vessel breakdowns and instances of off-hires and other factors. Please see the Company’s filings with the U.S. Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

FAQ

What vessel did OceanPal Inc. (OP) agree to acquire on July 16, 2024?

OceanPal Inc. (OP) agreed to acquire an MR2 tanker vessel named m/t Zeze Start for $27.0 million.

How is OceanPal Inc. (OP) financing the acquisition of the m/t Zeze Start?

OceanPal Inc. (OP) is financing the acquisition with $18.9 million in cash and the remainder in Series D Preferred Stock. $10.9 million of the cash component will be paid after delivery with a 5% annual interest rate.

What is the strategic significance of OceanPal Inc.'s (OP) acquisition of the m/t Zeze Start?

The acquisition marks OceanPal Inc.'s (OP) entry into the product tanker sector, diversifying its fleet beyond dry bulk vessels and taking advantage of opportunities in the tanker market.

What will be the composition of OceanPal Inc.'s (OP) fleet after the acquisition of m/t Zeze Start?

After the acquisition and the sale of m/v Baltimore, OceanPal Inc.'s (OP) fleet will consist of 5 vessels: 1 MR2 tanker, 1 Capesize, and 3 Panamax dry bulk vessels.