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Golden Ocean(GOGL) - 2023 Q3 - Quarterly Report

Report Overview Highlights Golden Ocean reported Q3 2023 net income of $28.7 million and Adjusted EBITDA of $78.9 million, alongside strategic vessel transactions, share repurchases, and a $0.10 dividend - The Interim CEO highlighted the company's market-leading position, competitive fleet, and low cash breakeven levels, which ensure profitability during market weakness while maintaining significant operating leverage. The near-term market is viewed as well-balanced, with a positive long-term outlook supported by favorable supply-side dynamics4 Q3 2023 Key Financial and Operational Metrics | Metric | Q3 2023 ($M) | Q2 2023 ($M) | | :--- | :--- | :--- | | Net Income | $28.7 million | $34.9 million | | Earnings Per Share (basic) | $0.14 | $0.17 | | Adjusted EBITDA | $78.9 million | $80.4 million | | Fleet-wide TCE Rate | $17,076/day | - | | Capesize TCE Rate | $18,173/day | - | | Panamax/Supramax TCE Rate | $15,389/day | - | - Key corporate actions in Q3 2023 include: - Entered into agreements to buy and sell a Supramax vessel, expecting a ~$6 million gain4 - Completed the sale of one Panamax vessel, recognizing a $0.8 million gain4 - Repurchased 125,000 shares for $0.9 million and extended the buy-back program4 - Announced a cash dividend of $0.10 per share for Q3 20234 Forward TCE Rate Estimates (as of Nov 21, 2023) | Period | Vessel Type | TCE Rate/Day | % of Days Booked | | :--- | :--- | :--- | :--- | | Q4 2023 | Capesize | $23,045 | 79% | | | Panamax | $17,275 | 83% | | Q1 2024 | Capesize | $21,700 | 12% | | | Panamax | $15,600 | 23% | Fleet Development & Performance Golden Ocean's fleet consists of 96 vessels, including newbuildings, with strategic acquisitions and sales in Q3, and forward TCE rate estimates provided - The company's fleet consists of 83 owned vessels (52 Capesize, 31 Panamax), 8 chartered-in Capesize vessels, 1 chartered-in Supramax, and 4 Kamsarmax vessels on order512 - The company sold one Panamax vessel for $14.8 million, realizing a gain of $0.8 million and net cash proceeds of $7.2 million in Q3 20236 - The company exercised a purchase option on a chartered-in Supramax for ~$15.3 million and subsequently agreed to sell it for $21.6 million, expecting a gain of ~$6 million in Q4 20237 - The company has outstanding contractual commitments of $94.2 million for four vessels under construction, due by Q4 20245 Corporate Development In Q3 2023, the company repurchased shares, extended its buy-back program, secured a new $40.0 million credit facility, and announced a $0.10 per share cash dividend - Repurchased 125,000 shares at an average price of $7.20 per share and extended the share buy-back program for one additional year13 - Entered into a new $40.0 million credit facility with a seven-year tenor and an interest rate of SOFR plus 175 basis points to finance two Kamsarmax newbuildings delivered in Q314 - Announced a cash dividend of $0.10 per share for Q3 2023, payable in December 202315 Third Quarter 2023 Results Golden Ocean's Q3 2023 net income was $28.7 million, with Adjusted EBITDA at $78.9 million, reflecting increased operating revenues offset by higher expenses and interest costs Income Statement Analysis Operating revenues increased by $8.3 million due to fleet expansion, offset by higher voyage, ship operating, depreciation, and net interest expenses, alongside a $12.6 million net gain on derivatives Q3 2023 vs Q2 2023 Income Statement Highlights | Item | Q3 2023 ($M) | Q2 2023 ($M) | Change ($M) | | :--- | :--- | :--- | :--- | | Operating Revenues | 221.7 | 213.4 | +8.3 | | Voyage Expenses | 65.1 | 59.4 | +5.7 | | Ship Operating Expenses | 64.5 | 62.4 | +2.1 | | Depreciation | 35.3 | 32.6 | +2.7 | | Net Interest Expense | 28.1 | 23.0 | +5.1 | | Net Gain on Derivatives | 12.6 | 9.0 | +3.6 | Cash Flow and Balance Sheet Analysis Cash and cash equivalents decreased to $99.7 million, with $47.4 million from operations, $88.5 million used in investing, and $33.5 million provided by financing activities, while total long-term debt reached $1,421.4 million - Cash provided by operating activities was $47.4 million26 - Net cash used in investing activities was $88.5 million, including $45.3 million for a Newcastlemax vessel and $58.1 million for Kamsarmax newbuildings, offset by $14.8 million from a vessel sale28 - Net cash provided by financing activities was $33.5 million, driven by $97.4 million in debt drawdowns, offset by $35.6 million in debt repayment, $19.9 million in dividends, and $7.8 million in finance lease repayments29 Debt and Lease Obligations (as of Sep 30, 2023) | Liability | Book Value ($M) | | :--- | :--- | | Long-term debt (incl. current portion) | 1,421.4 | | Finance lease obligations (incl. current portion) | 106.5 | The Dry Bulk Market The dry bulk market showed stability in Q3 2023 with a 5.4% YoY increase in seaborne transportation driven by strong Chinese imports, while a historically low orderbook supports a positive supply-side outlook - Global dry bulk fleet utilization was 84.7% in Q3 2023, with total seaborne transport increasing 5.4% compared to Q3 202231 - Demand trends were positive across key commodities. Chinese iron ore imports increased 6.7% QoQ, and global coal imports rose 6.7% YoY. A notable trend is the increasing reliance of China on bauxite from Guinea, significantly boosting Capesize tonne-mile demand343637 - The supply side is highly favorable, with the global fleet orderbook at a near-historical low of 8.3%. The Capesize orderbook is even lower at just 5.2%, compared to a 25-year average of nearly 24%40 Strategy and Outlook Golden Ocean maintains a positive outlook, forecasting global tonne-mile demand growth against historically low fleet growth, leveraging its modern fleet and low cash breakeven to maximize shareholder returns through dividends - The outlook is supported by forecasts of a 3.7% increase in global tonne-mile demand in 2023 and 2.7% in 2024, driven by emerging Asian economies like China and India4142 - The fleet supply outlook is highly positive, with the global dry bulk fleet forecast to grow by only 2.9% in 2023 and 2.2% in 2024, well below historical averages and organic replacement levels44 - Since 2020, the company has grown its fleet by over 31% (dwt) while reducing its average age by 7% through strategic acquisitions and sales. This modern fleet, combined with a low average cash breakeven of $13,500/day, provides strong downside protection and significant upside potential47 - The Board of Directors remains committed to distributing a significant portion of earnings to shareholders through dividends, contingent on results and market conditions48 Interim Financial Information Unaudited Interim Condensed Consolidated Statements of Operations For Q3 2023, total operating revenues were $221.7 million and net income was $28.7 million ($0.14 per share), significantly lower than the $104.6 million net income in Q3 2022 Consolidated Statements of Operations (Unaudited) | (in thousands of $) | Three months ended Sep 30, 2023 | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Total operating revenues | 221,663 | 631,562 | 863,898 | | Net operating income | 44,888 | 97,494 | 359,908 | | Net income | 28,734 | 54,798 | 393,638 | | Earnings per share: basic | $ 0.14 | $ 0.27 | $ 1.96 | Unaudited Interim Condensed Consolidated Balance Sheets As of September 30, 2023, total assets increased to $3.54 billion from $3.26 billion, while total liabilities rose to $1.66 billion, resulting in a slight decrease in total equity to $1.88 billion Consolidated Balance Sheets (Unaudited) | (in thousands of $) | As of Sep 30, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | 281,046 | 299,147 | | Vessels and equipment, net | 3,033,514 | 2,665,785 | | Total assets | 3,543,447 | 3,257,291 | | LIABILITIES AND EQUITY | | | | Total current liabilities | 260,595 | 211,628 | | Long-term debt | 1,312,083 | 1,027,991 | | Total liabilities | 1,659,078 | 1,340,258 | | Total equity | 1,884,369 | 1,917,033 | Unaudited Interim Condensed Consolidated Cash Flow Statements For the nine months ended September 30, 2023, net cash from operations was $169.5 million, with $396.5 million used in investing activities and $188.7 million provided by financing, leading to a $38.3 million net decrease in cash Consolidated Cash Flow Statements (Unaudited, Nine months ended Sep 30) | (in thousands of $) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 169,466 | 377,782 | | Net cash provided by (used in) investing activities | (396,473) | 78,353 | | Net cash provided by (used in) financing activities | 188,674 | (533,897) | | Net change in cash | (38,333) | (77,762) | Unaudited Interim Condensed Consolidated Statements of Changes in Equity For the nine months ended September 30, 2023, total equity decreased from $1.917 billion to $1.884 billion, primarily due to $80.1 million in dividends and $8.4 million in share repurchases, partially offset by $54.8 million in net income Changes in Equity (Unaudited, Nine months ended Sep 30, 2023) | (in thousands of $) | Amount | | :--- | :--- | | Equity at beginning of period | 1,917,033 | | Net income | 54,798 | | Distributions to shareholders | (80,057) | | Repurchase of shares | (8,357) | | Equity at end of period | 1,884,369 | Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements The notes detail significant financial activities including the acquisition and sale of vessels, newbuilding deliveries, new debt facilities exceeding $500 million, share capital activities, and outstanding commitments for newbuildings - Vessels: Acquired six modern Newcastlemax vessels for $291.0 million. Sold two vessels (Golden Feng and Golden Shui) for $43.6 million and another Panamax vessel for $14.8 million737576 - Newbuildings: Six Kamsarmax newbuildings were delivered in the first nine months of 2023. The company has outstanding contractual commitments of $97.8 million for four remaining newbuildings79101 - Debt: Entered into several new credit facilities in 2023, including a $250.0M refinancing, a $233.0M facility for acquisitions, an $80.0M facility for newbuildings, and a $40.0M facility for newbuildings. As of Sep 30, 2023, total long-term debt was $1,421.4 million899091 - Share Capital: Repurchased 125,000 shares for $0.9 million in Q3. Paid dividends of $19.9 million related to Q2 2023 results9596 Reconciliation of Non-GAAP Measures This section reconciles non-GAAP measures, showing Q3 2023 Net Income of $28.7 million reconciled to Adjusted EBITDA of $78.9 million, and Total Operating Revenues of $221.7 million reconciled to TCE Income of $155.6 million Reconciliation of Net Income to Adjusted EBITDA (Q3 2023) | (in thousands of $) | Amount | | :--- | :--- | | Net income | 28,734 | | Depreciation & Amortization | 34,825 | | Net Interest Expense | 28,063 | | Other adjustments (derivatives, gains, etc.) | (12,744) | | Adjusted EBITDA | 78,878 | TCE Rate Calculation (Q3 2023) | Vessel Class | TCE Income ($'000) | Onhire Days | TCE Rate ($/day) | | :--- | :--- | :--- | :--- | | Capesize | 100,370 | 5,523 | 18,173 | | Panamax/Supramax | 55,248 | 3,590 | 15,389 | | Total Fleet | 155,618 | 9,113 | 17,076 |