Dubai: UAE-based shipping company Gulf Navigation Holding will add two very large crude carriers (VLCCs) by 2013 to its fleet as it expands and launches two new companies.
Last month it received a VLCC named Gulf Eyadah, which has started its two-year contract worth Dh93.8 million.
The tanker has a capacity of 2 million barrels and is of 300,000 deadweight tonnes. The holding company's total capacity in five years will be 18 million barrels with nine VLCCs, company officials said yesterday.
The tanker owner will convert its subsidiary in Saudi Arabia to a full-fledged public joint stock company with four vessels and capitalisation of 1.66 billion Saudi riyals (Dh1.62 billion). Chairman Abdullah Al Shuraim said that it would launch an initial public offering after it has generated two years of strong financials as an independent company.
"The new company will be specialised in the VLCC market due to the importance in Saudi Arabia of transporting crude oil," Al Shuraim said.
The company will be based in Riyadh. It will be majority owned by the holding company, and a 30 per cent stake in the new company will be sold to Gulf investors and the fresh liquidity used for "improving financials and expanding" the holding company, according to Al Shuraim.
Additionally, Gulf Navigation will launch a company with international partners, operating Aframax vessels, oil tankers that are smaller than VLCCs and can operate in small ports.
Officials did not reveal details about the plans for this company. There are pre-arranged charters for an Aframax already, which is yet to be bought. "We are negotiating for an Aframax," company vice-chairman Ghazi Al Ebrahim said.
Poor earnings forecast
Gulf Navigation suffered a loss of Dh236.77 million in 2010 after it provisioned for the write-off of six bulk carriers.
These vessels were incurring losses for the company in the past year and have a poor earnings forecast.
The vessels cost the company Dh38 million in operating losses, goodwill writedowns of Dh36.24 million and a market value loss of Dh174.5 million.
"The [charter] rates were already down and look like they will continue and we will see similar losses," Al Shuraim said.
He said the company would sell the vessels and use the cash to invest in larger ships.
Al Ebrahim said the carriers "were doing very well until 2009" but incurred losses in 2010 "due to oversupply in the market".
Additional pressure was being placed on the operating costs of a probo due to maintenance and low prices in the market due to the oversupply. This could have cost the company up to Dh69 million over the next four years.
Meanwhile, other business units of the operator generated a net profit of Dh12.17 million in 2010.
Growth signs
- 2m barrels of crude capacity for Gulf Eyadah
- 30%: of company's equity to be sold to Gulf investors
