Golden Ocean(GOGL) - 2022 Q3 - Quarterly Report

Report Overview Financial & Operational Highlights (Q3 2022) Golden Ocean reported solid Q3 2022 results despite challenging factors, with decreased net income and Adjusted EBITDA, completed vessel sales, a share buy-back program, and a declared dividend Q3 2022 Key Financial Metrics | Metric | Q3 2022 | Q2 2022 | | :--- | :--- | :--- | | Net Income | $104.6 million | $163.7 million | | Earnings Per Share (EPS) | $0.52 | $0.82 | | Adjusted EBITDA | $118.2 million | $191.6 million | Q3 2022 TCE Rates | Vessel Type | TCE Rate per day | | :--- | :--- | | Capesize | $22,658 | | Panamax/Ultramax | $23,562 | | Total Fleet | $23,017 | - Completed the sale of two Ultramax vessels, Golden Cecilie and Golden Cathrine, recording a gain of $21.9 million and net cash proceeds of $43.0 million[6] - Announced a share buy-back program of up to $100.0 million and a cash dividend of $0.35 per share for Q3 2022[6] Forward TCE Rate Estimates (Load-to-Discharge Basis) | Period | Vessel Type | TCE Rate per day | % of Available Days | | :--- | :--- | :--- | :--- | | Q4 2022 | Capesize | $23,100 | 75% | | Q4 2022 | Panamax | $19,100 | 78% | | Q1 2023 | Capesize | $21,300 | 4% | | Q1 2023 | Panamax | $21,150 | 21% | Fleet and Corporate Development As of the report date, Golden Ocean's fleet comprised 95 vessels, including ten newbuildings, with a total capacity of approximately 13.6 million dwt, alongside $261.5 million in outstanding contractual commitments and the initiation of a $100 million share buy-back program and a $0.35 per share cash dividend for Q3 2022 - The company's fleet consists of 95 vessels with an aggregate capacity of ~13.6 million dwt, broken down as: - 76 owned vessels (48 Capesize, 28 Panamax) - 8 chartered-in Capesize vessels - 1 chartered-in Ultramax vessel - 10 Kamsarmax vessels on order[7][13] - The company has ten vessels under construction with outstanding contractual commitments of $261.5 million due by the first quarter of 2025[8] - A share buy-back program of up to $100.0 million was introduced in October 2022 to purchase up to 10,000,000 common shares over 12 months[11] - A cash dividend of $0.35 per share for Q3 2022 was announced, payable around December 5, 2022[12] Financial Performance Third Quarter 2022 Results (Income Statement) The company's net income for Q3 2022 was $104.6 million, a decrease from $163.7 million in Q2 2022, primarily due to a $34.7 million decrease in operating revenues and a $19.8 million increase in voyage expenses, partially offset by a $21.9 million gain from vessel sales Q3 2022 vs Q2 2022 Income Statement Highlights | Item | Q3 2022 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $282.0M | $316.7M | -$34.7M | | Voyage Expenses | $86.5M | $66.6M | +$19.9M | | Ship Operating Expenses | $59.3M | $50.4M | +$8.9M | | Gain from Sale of Vessels | $21.9M | $9.5M | +$12.4M | | Net Income | $104.6M | $163.7M | -$59.1M | - The average TCE rate for the fleet decreased to $23,017 per day in Q3 2022 from $29,431 per day in Q2 2022[16] - Net interest expense increased to $14.4 million from $11.9 million in Q2, driven by higher SOFR and LIBOR rates[21] - The company recorded a $11.4 million net gain on derivatives, primarily from interest rate swaps[21] Cash Flow and Balance Sheet As of September 30, 2022, the company held $132.3 million in cash and cash equivalents, a decrease of $36.1 million from the prior quarter, with strong cash from operations at $98.7 million, and total long-term debt and finance lease obligations at $1.15 billion and $110.3 million respectively Q3 2022 Cash Flow Summary | Activity | Cash Flow (in millions) | | :--- | :--- | | Cash from Operating Activities | $98.7 | | Cash from Investing Activities | $36.6 | | Cash from Financing Activities | ($171.3) | | Net Change in Cash | ($36.1) | - Ending cash and cash equivalents were $132.3 million, with an additional $100.0 million available under revolving credit facilities[23] - Major financing cash outflows included $120.5 million in dividend payments and a total of $50.8 million in debt and finance lease repayments[26] - As of September 30, 2022, the book value of long-term debt was $1,154.5 million and finance lease obligations were $110.3 million[27] Market Analysis and Outlook The Dry Bulk Market In Q3 2022, dry bulk rates declined due to easing port congestion and decreased trade, partially offset by increased coal tonne-mile demand, while the newbuilding orderbook reached a 30-year low at 7.3% of the global fleet - Global dry bulk fleet utilization decreased from 91.5% in Q2 2022 to 87.3% in Q3 2022, primarily due to easing port congestion which increased effective fleet supply[30] - Chinese steel production decreased by 9.9% QoQ, but iron ore imports increased by 7.3% QoQ[31] - The coal trade was significantly impacted by sanctions on Russian coal, leading to increased tonne-mile demand as volumes are sourced from more distant locations[32] - Thermal coal demand is forecast to grow by 4.9% in 2022 and 8.8% in 2023[33] - The newbuilding orderbook as a percentage of the global fleet stood at a 30-year low of 7.3% at the end of Q3 2022[36] Strategy and Outlook The company anticipates short-term market softness but maintains a positive long-term outlook driven by highly favorable supply-side dynamics, including a 30-year low orderbook and upcoming EEXI environmental regulations, leveraging its modern fleet to maximize cash generation and shareholder returns - While acknowledging near-term challenges from inflation and rising interest rates, the company is optimistic due to supportive factors like changes in the coal market and positive supply-side dynamics[37] - The outlook for fleet supply is highly positive, with the orderbook at a 30-year low[39] - Global dry bulk fleet growth is forecasted to be only 2.9% in 2023 and 1.8% in 2024[41] - The introduction of EEXI regulations in 2023 is expected to reduce sailing speeds for older vessels, further constraining effective fleet supply and benefiting modern, fuel-efficient ships[39] - The company has actively renewed its fleet, acquiring or ordering 28 modern vessels in the last 18 months, making it the largest listed owner of large-size dry bulk vessels with an average age of 6.5 years[44] - The Board remains committed to returning value to shareholders through dividends, intending to distribute a significant portion of earnings[45] Interim Condensed Consolidated Financial Statements Unaudited Interim Condensed Consolidated Statements of Operations The statement of operations details the company's revenues and expenses for the three and nine-month periods ending September 30, 2022, with total operating revenues of $282.0 million and net income of $104.6 million for the third quarter Statement of Operations Highlights (Three Months Ended Sep 30) | (in thousands of $) | 2022 | 2021 | | :--- | :--- | :--- | | Total operating revenues | 282,049 | 387,618 | | Total operating expenses | 202,239 | 203,246 | | Net operating income | 101,666 | 190,024 | | Net income | 104,565 | 195,329 | Unaudited Interim Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2022, shows total assets of $3.32 billion, a slight decrease from $3.45 billion at year-end 2021, with total liabilities at $1.40 billion and total equity at $1.92 billion Balance Sheet Highlights (as of Sep 30, 2022) | (in thousands of $) | Amount | | :--- | :--- | | Cash and cash equivalents | 129,270 | | Vessels and equipment, net | 2,718,422 | | Total assets | 3,324,511 | | Current portion of long-term debt | 94,460 | | Long-term debt | 1,060,001 | | Total liabilities | 1,402,234 | | Total equity | 1,922,277 | Unaudited Interim Condensed Consolidated Cash Flow Statements For the third quarter of 2022, the company generated $98.7 million in cash from operations, with investing activities providing $36.6 million and financing activities using $171.3 million, resulting in a net decrease in cash and cash equivalents of $36.1 million Cash Flow Statement Highlights (Three Months Ended Sep 30, 2022) | (in thousands of $) | Amount | | :--- | :--- | | Net cash provided by operating activities | 98,681 | | Net cash provided by investing activities | 36,552 | | Net cash used in financing activities | (171,299) | | Net change in cash | (36,066) | Selected Notes to the Financial Statements The notes provide critical details supplementing the financial statements, including the sale of two Ultramax vessels for $63.0 million, $271.8 million in contractual commitments for ten newbuildings, a new $275.0 million credit facility, and subsequent events like a $100 million share buy-back and a $0.35 per share dividend Vessel Transactions and Newbuildings During Q3 2022, the company completed the sale of two Ultramax vessels, Golden Cecilie and Golden Cathrine, for an aggregate price of $63.0 million, recognizing a gain of $21.9 million, and had capitalized costs of $73.6 million for ten Kamsarmax newbuildings under construction - Sold two Ultramax vessels for $63.0 million, recording a gain of $21.9 million in Q3 2022[72] - As of quarter-end, the company had ten Kamsarmax newbuildings under construction with capitalized costs of $73.6 million[73] Leases, Debt, and Equity As of September 30, 2022, the company had 11 vessels chartered-in long-term, with finance lease obligations totaling $110.3 million, and a book value of long-term debt at $1.15 billion, with a new $275.0 million credit facility signed in May 2022 and $120.5 million in dividends paid in Q3 - Total book value of finance lease obligations was $110.3 million as of September 30, 2022[76] - Total book value of long-term debt was $1,154.5 million[83] - A new $275.0 million credit facility was secured in May 2022 at an interest rate of SOFR plus 190 basis points[84] - In Q3 2022, the company paid $120.5 million in dividends ($0.60 per share) related to Q2 2022 results[85] Investments and Related Parties The company holds equity investments in SwissMarine (16.4%), TFG Marine (10%), and UFC (50%), with significant related party transactions including leasing eight vessels from SFL Corporation and procuring $147.8 million in bunkers from TFG in the first nine months of 2022 - Key equity method investments include SwissMarine (book value $49.0M), TFG Marine ($8.0M), and UFC ($2.8M)[78][81][82] - The most significant related party transactions are with SFL for vessel leases[87] - The company paid TFG Marine $147.8 million for bunker procurement in the first nine months of 2022[89] Subsequent Events After the end of the third quarter, the company announced a share buy-back program of up to $100.0 million in October 2022 and declared a cash dividend of $0.35 per share for the third quarter in November 2022 - In October 2022, the company initiated a share buy-back program of up to $100.0 million[92] - On November 16, 2022, a cash dividend of $0.35 per share for Q3 2022 was announced[93] Non-GAAP Financial Measures Reconciliation to EBITDA and Adjusted EBITDA This section provides a reconciliation from the GAAP measure of Net Income to the non-GAAP measures of EBITDA and Adjusted EBITDA, with Q3 2022 Net Income of $104.6 million reconciled to an EBITDA of $151.5 million and an Adjusted EBITDA of $118.2 million Reconciliation to Adjusted EBITDA (Q3 2022) | (in thousands of $) | Amount | | :--- | :--- | | Net income | 104,565 | | Interest, Tax, Depreciation & Amortization | 46,918 | | EBITDA | 151,483 | | Gain from disposal of vessels | (21,856) | | Gain on derivatives | (11,391) | | Other financial items | (48) | | Adjusted EBITDA | 118,188 | Reconciliation to Time Charter Equivalent (TCE) Rate The company provides a reconciliation of GAAP operating revenues to the non-GAAP measure of Time Charter Equivalent (TCE) income and rate, with Q3 2022 total operating revenues of $282.0 million reconciled to a TCE income of $194.9 million, resulting in an average TCE rate of $23,017 per day TCE Rate by Vessel Class (Q3 2022) | Vessel Class | TCE Income (in thousands) | Onhire Days | TCE Rate ($ per day) | | :--- | :--- | :--- | :--- | | Capesize | $115,716 | 5,107 | $22,658 | | Panamax and Ultramax | $79,214 | 3,362 | $23,562 | | Total Fleet | $194,930 | 8,469 | $23,017 |