Fri 31 Oct 2008 08:02

K-Sea profit drops on higher expenses


Barge operator records loss on the carrying value of diesel fuel.



Barge operator K-Sea Transportation Partners L.P. has announced operating results and net income for the first fiscal quarter ended September 30, 2008. The company reported operating income of $9.9 million, a decrease of $2.1 million, or 18 percent, compared to $12.0 million of operating income for the same period last year.

K-Sea also announced that its distribution to unitholders for the first quarter will remain at $0.77 per unit, or $3.08 per unit annualized.

Commenting on the results, President and CEO Timothy J. Casey said "Our first quarter results were satisfactory in light of the exceptional developments in the energy markets which disrupted demand in certain of our markets. There were also several factors that affected us which we believe are transitory in nature and which should ease as we progress in fiscal 2009.

"Our results for the first quarter reflected certain higher operating costs that will be increasingly offset by built-in contractual revenue escalators in our charter contracts which will go into effect at various times during the year.

Casey pointed out that the value of the marine fuel used on its tugboats had had a negative effect on the company balance sheet during the quarter ended September 30, 2008.

"The sharp decline in the price of oil in September resulted in our recording a loss on the carrying value of the diesel fuel used to power our tugboats. We also had a negative swing, compared to last year's first quarter, on the disposition of equipment. The total of these items approximated $3.5 million."

K-Sea's President said the vessel utilization and average daily rates remain solid, aided by the large percentage of long-term charter contracts which have an average remaining duration of approximately 2.5 years.

The company also expects to take delivery in November of two new 80,000 barrel tank barges that are committed to long-term contracts. Casey noted that "distribution coverage ratio is negatively skewed this quarter because we will pay the full distribution on the two million new units we issued in the middle of the quarter; however, we did not receive the benefit of a full quarter's reduction in interest expense."

"We believe our balance sheet and liquidity remain solid and the structure of our debt is a major advantage. Debt maturities total only $17 million for the next twelve months, and $19 million in fiscal 2010, which will be covered by availability of over $70 million under our various loan agreements. Our bank revolver is non-amortizing and does not mature until 2014," Casey added.

K-Sea said the decrease in operating income had resulted from increased labor, insurance, and general and administrative expenses, and from higher depreciation and amortization resulting from the acquisition of the Smith Maritime Group in August 2007, the delivery of four newbuild tank barges since September 30, 2007, and the acquisition of eight tugboats in June 2008.

"The higher costs more than offset the impact of continued strong rates and solid vessel utilization," the company said.

Utilization was positively impacted by a smaller number of scheduled drydockings compared to the prior year's quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by $0.3 million, or 1%, to $22.7 million for the three months ended September 30, 2008, compared to $22.4 million for the three months ended September 30, 2007.

Net income for the three months ended September 30, 2008 was $3.9 million, or $0.26 per fully diluted limited partner unit, a decrease of $2.1 million compared to net income of $6.0 million, or $0.56 per fully diluted limited partner unit, for the three months ended September 30, 2007.

Earlier this month, K-Sea annnounced the withdrawal of the proposed initial public offering of K-Sea GP Holdings LP due to 'the current state of the financial markets'.

Commenting at the time of the announcement, Timothy Casey said "The fundamentals of our business remain solid and we are confident in our prospects. The possible general partner IPO would have had no impact on our results of operations or financial condition, and its withdrawal also has no impact on us."


Coral Energy vessel. Gasum publishes daily price for FuelEU Maritime compliance units  

Nordic energy company aims to enhance transparency in the evolving regulation compliance market.

Lady Clara vessel alongside Till Benelux vessel. Bunker Suite completes E-BDN trial aboard Lady Clara in Rotterdam  

Digital platform provider conducts electronic bunker delivery note trial with partners.

Chane Terminal Nieuwe Maas in Rotterdam. Peninsula expands biofuel capabilities in Rotterdam  

Marine fuel supplier adds 30,000 cbm capacity, with plans to expand to 110,000 cbm in early 2026.

Northern Europe map with the Finnish flag placed over Finland. ScanOcean launches physical bunker supply operations in Finland  

Swedish supplier expands into Finland with MGO and renewable fuels offerings.

Singapore Port viewed from The Pinnacle@Duxton. Singapore marine fuel sales dip 1.2% in October  

First YoY decline since February as sales of best-selling product fall despite bunker calls rising to second-highest level in port's history.

Daria Sukhanova, PMG Energies. PMG Energies appoints Daria Sukhanova as bunker trader  

Marine fuel business adds trader with over five years of experience to its team.

CMA CGM Salamanque vessel alongside Edison's Ravenna Knutsen vessel. CMA CGM and Edison complete Italy's first STS LNG bunkering for a boxship  

Ship-to-ship operation marks the first time LNG has been delivered to a container vessel in the Adriatic.

Simona Toma, Columbia Group. Columbia Group prioritizes LNG training to build seafarer competence  

Ship manager says LNG knowledge will form the foundation for working safely with future fuels.

Methanol fuel safety guidelines graphic. ClassNK updates methanol fuel guidelines as alcohol-fuelled ship orders rise  

Japanese classification society releases revised safety requirements for methyl and ethyl alcohol-fuelled vessels.

Island Oil Holdings logo. Island Oil seeks front office administrator in Limassol  

Cyprus-based bunker supplier and trader advertises role with benefits including provident fund.





 Recommended