Performance Shipping Inc. Secures Five-Year Time Charter Contracts With Clearlake for Three Newbuilding Vessels at US$31,000 Per Vessel Per Day
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Insights
The announcement by Performance Shipping Inc. of long-term time charter contracts with Clearlake Shipping represents a strategic move that secures stable revenue streams for the company. With a fixed daily rate of $31,000 per vessel for five years, the deal ensures predictable cash flows, which is a positive indicator for investors. The commitment to a firm period, with options to extend, reflects confidence in the future demand for tanker vessels. This is particularly relevant given the volatile nature of the shipping industry, where charter rates can fluctuate significantly due to changes in global trade volumes and oil prices.
Furthermore, the 'LNG-ready, scrubber-fitted' designation of the vessels indicates a forward-looking approach to environmental regulations and potential shifts in fuel preferences. This could position Performance Shipping Inc. favorably as regulations tighten and the industry moves towards cleaner energy sources. The gross revenue projection of $169.8 million for the firm period, covering a substantial portion of the construction costs, is a strong financial indicator. However, investors should be aware of the capital-intensive nature of the shipping industry and the long-term implications of fleet expansion on operational costs and debt levels.
The time charter contracts announced by Performance Shipping Inc. have significant financial implications. A revenue backlog of approximately $211.4 million enhances the company's financial stability and can be a critical factor in its valuation. The ability to cover 88% of the aggregate construction costs through these contracts demonstrates a solid return on investment for the new vessels. It is crucial to analyze the impact of these contracts on the company's balance sheet, particularly concerning asset utilization and long-term liabilities.
Investors should evaluate the fixed charter rates against industry benchmarks for LR2 Aframax tanker vessels to assess the competitiveness of the deal. Additionally, the timing of the vessel deliveries, coinciding with potential economic cycles, could affect the profitability of these contracts. It is also important to monitor the performance of Clearlake Shipping and the Gunvor Group, as their financial health will directly impact the stability of these charter agreements.
The chartering of LNG-ready and scrubber-fitted vessels by Performance Shipping Inc. is a strategic decision within the broader context of the energy sector's evolution. The demand for LNG has been growing as it is seen as a transition fuel towards lower-carbon energy sources. The readiness of these vessels to transport LNG suggests that Performance Shipping Inc. is positioning itself to capitalize on this trend. However, the energy market's volatility, influenced by geopolitical events, regulatory changes and technological advancements, must be considered when forecasting the long-term demand for such vessels.
The inclusion of scrubbers also indicates compliance with the International Maritime Organization's Sulphur Cap 2020 regulation, which mandates a reduction in sulphur emissions from ships. This compliance can provide a competitive edge, as it may allow the company to avoid potential penalties and meet charterers' preferences for environmentally compliant vessels. However, the cost of installing and operating scrubbers should be weighed against the potential increase in charter rates and the long-term environmental benefits.
ATHENS, Greece, March 12, 2024 (GLOBE NEWSWIRE) -- Performance Shipping Inc. (NASDAQ: PSHG), ("we" or the "Company"), a global shipping company specializing in the ownership of tanker vessels, today announced that, through separate wholly-owned subsidiaries, it has entered into time charter contracts with Clearlake Shipping Pte Ltd (the "Charterer") for the previously announced three newbuilding LNG-ready, scrubber-fitted, LR2 Aframax tanker vessels. Each employment will be for a firm period of 5 years with the option to extend for a 6th and 7th year. The optional periods are to be declared by the Charterer 12 months in advance. The gross charter rate will be US
Andreas Michalopoulos, the Company's Chief Executive Officer, stated:
"We are thrilled to announce these time charter contracts for our newbuild vessels and the commencement of a strategic relationship with Clearlake Shipping, a subsidiary of Gunvor Group, one of the world’s largest independent commodities trading houses. These contracts highlight our prudent approach in securing long-term fixed revenue at profitable charter rates and achieving significant cash flow visibility during the initial years of operation of our three newbuilding sister ships. The gross revenue for the firm period of the contracts is expected to reach
About the Company
Performance Shipping Inc. is a global provider of shipping transportation services through its ownership of tanker vessels. The Company employs its fleet on spot voyages, through pool arrangements and on time charters.
Cautionary Statement Regarding 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, but are not limited to, statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts, including with respect to the delivery of the vessels we have agreed to acquire. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect," "targets," "likely," "would," "could," "seeks," "continue," "possible," "might," "pending" and similar expressions, terms or phrases may 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, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs, or projections.
In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the tanker shipping industry, changes in the supply of vessels, changes in worldwide oil production and consumption and storage, changes in our operating expenses, including bunker prices, crew costs, drydocking and insurance costs, our future operating or financial results, availability of financing and refinancing including with respect to vessels we agree to acquire, 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, the length and severity of epidemics and pandemics, including COVID-19, and their impact on the demand for seaborne transportation of petroleum and other types of products, changes in governmental rules and regulations or actions taken by regulatory authorities, general domestic and international political conditions or events, including "trade wars", armed conflicts including the war in Ukraine and the war between Israel and Hamas, the imposition of new international sanctions, acts by terrorists or acts of piracy on ocean-going vessels, potential disruption of shipping routes due to accidents, labor disputes or political events, vessel breakdowns and instances of off-hires and other important factors. Please see our filings with the US Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.
FAQ
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