Sovcomflot quadruples profit for 2015

Long-term contracts shelter offshore and LNG operations, while tankers benefit from spot exposure

SOVCOMFLOT has announced a jump in revenue and profit for 2015, as freight rates improved across its crude, product and gas carrier business segments.

Net profit more than quadrupled from $83.9m in 2014 to $354.5m in 2015, a consequence of higher demand for oil transportation as the price of crude oil fell sharply towards the end of 2014.

Time charter equivalent revenue rose by 18.8% to $1.2bn overall; the sharpest increase was in Sovcomflot’s largest business segment, its fleet of 59 crude oil carriers, where revenue rose 28.7% to $542.1m.

Sovcomflot's chief financial officer Nikolai Kolesnikov told Lloyd’s List that the company’s success was the result of a conservative approach to the market, and came after a “protracted and painful” recession that lasted for almost six years from the market correction in 2009.

“The low oil price environment that we are currently experiencing is also helping to reduce bunker cost,” said Mr Kolesnikov, adding that Sovcomflot benefited from bunker cost reductions for around a third of its fleet which operates in the spot market.

Project work has been a focus for Sovcomflot and has brought stable long-term incomes in its offshore and liquefied natural gas segments while both markets are current suffering from oversupply.

Most tanker operators are seeking similar long-term employment, but Sovcomflot’s strength in securing long-term contracts is in its history and integration, said Mr Kolesnikov.

“There are not many owners left with a fully integrated model. We own and operate our vessels, keeping all operations in-house including technical management and commercial management.”

Mr Kolesnikov believed that the company’s in-house training helped in securing contracts: “Talking about specific niches such as ice shipping and arctic and sub-arctic shipping, it’s not just about capital availability, but as much about being able to put the right people on the bridge.”

The results of the crude carriers came despite a drop in the fleet size from 60 to 59 between 2014 and 2015. Fleet growth boosted Sovcomflot’s gas transportation segment. The addition of two LNG carriers in 2015 brought the fleet to four owned vessels with four LPG carriers, and helped revenues rise by 65% to $137.5m.

The oil products transportation segment reported slower growth at 12.6%, as TCE revenue rose from $213.5m to $240.3m.

In late December, Sovcomflot signed a 14-year tenor, $340m credit deal with Sberbank to finance three shuttle tankers for the Novy project. The deal was the first between the two parties, and was seen by Sovcomflot as setting a precedent for Russian financial institutions becoming more involved in the maritime industry.

Mr Kolesnikov said that Sberbank had been keen to get into shipping finance, and Sovcomflot was glad to find a project to work with them on. Strong relationships remain with international financiers, and Sovcomflot remains largely unaffected by the international sanctions between the European Union and Russia.

Sovcomflot had eight vessels in its order book at the end of 2015, all ice-class vessels, with a total cost of $1.2bn.