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Eneti Inc. Announces Financial Results for the Second Quarter of 2022 and Declares a Quarterly Cash Dividend

·18 min read
Eneti Inc.
Eneti Inc.

MONACO, Aug. 03, 2022 (GLOBE NEWSWIRE) -- Eneti Inc. (NYSE: NETI) (“Eneti” or the “Company”), today reported its results for the three months ended June 30, 2022.

The Company also announced that on August 3, 2022 its Board of Directors declared a quarterly cash dividend of $0.01 per share on the Company’s common shares.

The Company’s results for the three and six months ended June 30, 2022 include the impact of Seajacks International Limited’s (“Seajacks”) earnings, which was acquired on August 12, 2021. Since the completion of the acquisition, the operations of the Company are primarily those of Seajacks as the Company completed its exit from the dry bulk sector of the shipping industry in July 2021.

Results for the Three and Six Months Ended June 30, 2022 and 2021

  • For the second quarter of 2022, the Company’s GAAP net income was $52.7 million, or $1.36 per diluted share, including a gain of approximately $28.3 million and cash dividend income of $0.2 million, or $0.73 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. (NYSE: STNG).

  • Total revenues for the second quarter of 2022 were $61.3 million, compared to $37.7 million for the same period in 2021. Second quarter 2022 revenues consisted primarily of revenues generated by the Seajacks Scylla which was continuing its transportation and installation services for an offshore wind farm project in Taiwan, the Seajacks Zaratan which commenced work on the Akita project, the performance of maintenance on offshore gas production platforms in the North Sea by all three of the NG2500Xs as well as the recognition claims made on projects which were completed in 2021, and consultancy revenue.

  • Vessel operating costs and project costs were driven by increased fuel costs, as well as crewing and catering due to higher utilization rates. Fuel and catering costs are typically recharged to clients but reported gross in both revenues and vessel operating costs.

  • For the second quarter of 2021, the Company’s GAAP net income was $13.0 million, or $1.19 per diluted share, including (i) a gain on vessels sold of approximately $6.5 million, or $0.59 per diluted share, which was primarily the result of an increase in the fair value of common shares of Star Bulk Carriers Corp. (“Star Bulk”) (NASDAQ: SBLK) and Eagle Bulk Shipping Inc. (“Eagle”) (NASDAQ: EGLE) received as a portion of the compensation for the purchase of certain of our vessels; (ii) the write-off of $3.3 million, or $0.30 per diluted share, of deferred financing costs on repaid credit facilities related to certain vessels that have been sold; and (iii) a gain of approximately $13.0 million and cash dividend income of $0.2 million, or $1.21 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and the sale of the Eagle and Star Bulk shares received as part of the consideration for the sales of vessels to these counterparties.

  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of 2022 was $60.2 million and EBITDA for the second quarter of 2021 was $19.7 million (see Non-GAAP Financial Measures below).

  • For the first half of 2022, the Company’s GAAP net income was $56.9 million, or $1.46 per diluted share, including a gain of approximately $46.8 million and cash dividend income of $0.4 million, or $1.22 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc.

  • Total revenues for the first half of 2022 were $83.7 million compared to $97.5 million for the same period in 2021. First half 2022 revenues were generated by the same projects as in the second quarter of 2022.

  • For the first half of 2021, the Company’s GAAP net income was $54.9 million, or $5.03 per diluted share, including (i) a gain on vessels sold of approximately $22.0 million, or $2.01 per diluted share, which was primarily the result of an increase in the fair value of common shares of Star Bulk and Eagle received as a portion of the consideration for the sale of certain of our vessels to Star Bulk and Eagle; (ii) the write-off of $7.0 million, or $0.64 per diluted share, of deferred financing costs on repaid credit facilities related to certain vessels that have been sold; and (iii) a gain of approximately $28.8 million and cash dividend income of $0.4 million, or $2.68 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and the sale of the Eagle and Star Bulk shares received as a portion of the consideration for the vessel sales to these counterparties.

  • EBITDA for the first half of 2022 was $74.4 million and EBITDA for the first half of 2021 was $71.7 million (see Non-GAAP Financial Measures below).

Liquidity

As of July 29, 2022, the Company had approximately $45.3 million of unrestricted cash and $14.5 million of restricted cash. The Company also continues to hold approximately 2.16 million common shares of Scorpio Tankers Inc. (NYSE: STNG).

Newbuildings

The Company is currently under contract with Daewoo Shipbuilding and Marine Engineering (“DSME”) for the construction of two next-generation offshore wind turbine installation vessels (“WTIV”). The aggregate contract price is approximately $654.8 million, of which $65.4 million has been paid. The vessels are expected to be delivered in the third quarter of 2024 and second quarter of 2025. The estimated future payment dates and amounts are as follows (1) (dollars in thousands):

 

DSME1

 

DSME2

Q3 2022 (2)

$

 

$

Q4 2022

 

33,036

 

 

Q1 2023

 

 

 

Q2 2023

 

 

 

Q3 2023

 

33,036

 

 

32,441

Q4 2023

 

33,036

 

 

Q1 2024

 

 

 

Q2 2024

 

 

 

32,441

Q3 2024

 

198,217

 

 

32,441

Q4 2024

 

 

 

Q1 2025

 

 

 

Q2 2025

 

 

 

194,644

Total

$

297,325

 

$

291,967

(1) These are estimates only and are subject to change as construction progresses.
(2) Relates to payments expected to be made from August 4, 2022 to September 30, 2022.

Fleet

The Company has identified the NG 2500Xs as non-core assets and is initiating a process through which it determines how to best monetize these assets.

Debt Overview

The Company’s outstanding debt balances, gross of unamortized deferred financing costs as of June 30, 2022 and July 29, 2022, are as follows (dollars in thousands):

 

 

As of June 30, 2022

 

As of July 29, 2022

Credit Facility

 

Amount Outstanding

$175.0 Million Credit Facility

 

$

71,875

 

$

71,875

Total

 

$

71,875

 

$

71,875

 

 

 

 

 

 

 

$175.0 Million Credit Facility

In May 2022, the Company closed the previously announced $175.0 Million Credit Facility and drew down the entire $75.0 million term loan and approximately $30.0 million under the revolving loans. The $30.0 million under the revolving loans was subsequently repaid in June 2022.

Approximately $16.2 million of performance bonds were issued under the letter of credits available under this facility.

Simultaneous to the drawdown in May 2022, the Company repaid the amounts outstanding under the $60.0 Million ING Revolving Credit Facility and the $70.7 Million Redeemable Notes.

$60.0 Million ING Revolving Credit Facility

In May 2022, the Company repaid the $25.0 million outstanding and cash collateralized the performance bonds issued under this facility and terminated this facility.

$70.7 Million Redeemable Notes

In May 2022, the Company repaid the $53.0 million outstanding and terminated this facility.

Performance Bonds

As of July 29, 2022, performance bonds were issued on behalf of the Company for $16.2 million, under the $175.0 Million Credit Facility, and approximately $14.5 million, which was cash collateralized.

Quarterly Cash Dividend

In the second quarter of 2022, the Company’s Board of Directors declared, and the Company paid, a quarterly cash dividend of $0.01 per share totaling approximately $0.4 million.

On August 3, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about September 15, 2022, to all shareholders of record as of August 19, 2022. As of August 3, 2022, 40,738,704 common shares were outstanding.

COVID-19

Since the beginning of the calendar year 2020, the ongoing outbreak of the novel coronavirus (COVID-19) that originated in China in December 2019 and that has spread to most developed nations of the world has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial and commodities markets. Although by 2021, many of these measures were relaxed, we cannot predict whether and to what degree emergency public health and other measures will be reinstituted in the event of any resurgence in the COVID-19 virus or any variants thereof. If the COVID-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy may continue and our operations and cash flows may be negatively impacted. The COVID-19 outbreak continues to rapidly evolve, with periods of improvement followed by periods of higher infection rates, along with the development of new disease variants, such as the Delta and Omicron variants, in various geographical areas throughout the world. As a result, the extent to which COVID-19 will impact the Company’s results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

Conflict in Ukraine

As a result of the conflict between Russia and Ukraine which commenced in February 2022, the United States, the European Union, and others have announced unprecedented levels of sanctions and other measures against Russia and certain Russian entities and nationals. The ongoing conflict has disrupted supply chains and caused instability and significant volatility in the global economy. Much uncertainty remains regarding the global impact of the conflict in Ukraine and it is possible that such instability, uncertainty and resulting volatility could significantly increase our costs and adversely affect our business. These uncertainties could also adversely affect our ability to obtain additional financing or, if we are able to obtain additional financing, to do so on terms favorable to us. We will continue to monitor the situation to assess whether the conflict could have any material impact on our operations or financial performance.

 

Unaudited

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

Revenue

$

61,282

 

 

$

37,651

 

 

$

83,720

 

 

$

97,480

 

Operating expenses:

 

 

 

 

 

 

 

Voyage expenses

 

 

 

 

8,502

 

 

 

 

 

 

14,582

 

Vessel operating and project costs

 

18,800

 

 

 

8,240

 

 

 

36,852

 

 

 

23,850

 

Charterhire expense

 

 

 

 

17,366

 

 

 

 

 

 

29,346

 

Vessel depreciation

 

6,226

 

 

 

 

 

 

12,460

 

 

 

 

General and administrative expenses

 

11,041

 

 

 

5,134

 

 

 

21,056

 

 

 

12,719

 

Gain on vessels sold

 

 

 

 

(6,452

)

 

 

 

 

 

(21,984

)

Total operating expenses

 

36,067

 

 

 

32,790

 

 

 

70,368

 

 

 

58,513

 

Operating income

 

25,215

 

 

 

4,861

 

 

 

13,352

 

 

 

38,967

 

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

12

 

 

 

31

 

 

 

11

 

 

 

39

 

Income from equity investments

 

28,512

 

 

 

13,246

 

 

 

47,197

 

 

 

29,217

 

Foreign exchange (loss) income

 

(1,931

)

 

 

(68

)

 

 

(2,321

)

 

 

3

 

Financial expense, net

 

(679

)

 

 

(5,057

)

 

 

(1,952

)

 

 

(13,350

)

Total other income, net

 

25,914

 

 

 

8,152

 

 

 

42,935

 

 

 

15,909

 

Income before income tax provision

 

51,129

 

 

 

13,013

 

 

 

56,287

 

 

 

54,876

 

Income tax benefit

 

(1,599

)

 

 

 

 

 

(589

)

 

 

 

Net income

$

52,728

 

 

$

13,013

 

 

$

56,876

 

 

$

54,876

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

1.36

 

 

$

1.22

 

 

$

1.47

 

 

$

5.16

 

Diluted

$

1.36

 

 

$

1.19

 

 

$

1.46

 

 

$

5.03

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

38,825

 

 

 

10,626

 

 

 

38,811

 

 

 

10,628

 

Diluted weighted average number of common shares outstanding

 

38,844

 

 

 

10,921

 

 

 

38,827

 

 

 

10,907

 


 

Unaudited

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

26,038

 

 

$

153,977

 

Restricted cash

 

15,008

 

 

 

 

Accounts receivable

 

52,183

 

 

 

21,603

 

Inventories

 

5,093

 

 

 

5,846

 

Prepaid expenses and other current assets

 

5,798

 

 

 

4,769

 

Contract fulfillment costs

 

8,505

 

 

 

3,835

 

Total current assets

 

112,625

 

 

 

190,030

 

Non-current assets

 

 

 

Vessels, net

 

532,316

 

 

 

544,515

 

Vessels under construction

 

71,629

 

 

 

36,054

 

Equity investments

 

74,374

 

 

 

27,607

 

Intangible assets

 

4,518

 

 

 

4,518

 

Other assets

 

4,623

 

 

 

4,549

 

Total non-current assets

 

687,460

 

 

 

617,243

 

Total assets

$

800,085

 

 

$

807,273

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

Current liabilities

 

 

 

Bank loans, net

$

11,975

 

 

$

87,650

 

Contract liabilities

 

23,079

 

 

 

12,275

 

Corporate income tax payable

 

1,300

 

 

 

4,058

 

Accounts payable and accrued expenses

 

21,473

 

 

 

27,180

 

Total current liabilities

 

57,827

 

 

 

131,163

 

Non-current liabilities

 

 

 

Bank loans, net

 

58,275

 

 

 

 

Redeemable notes

 

 

 

 

53,015

 

Other liabilities

 

3,849

 

 

 

2,751

 

Total non-current liabilities

 

62,124

 

 

 

55,766

 

Total liabilities

 

119,951

 

 

 

186,929

 

Shareholders’ equity

 

 

 

Preferred shares, $0.01 par value per share; 50,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

Common shares, $0.01 par value per share; authorized 81,875,000 shares as of June 30, 2022 and December 31, 2021; outstanding 40,738,704 shares and 39,741,204 shares as of June 30, 2022 and December 31, 2021, respectively

 

1,134

 

 

 

1,124

 

Paid-in capital

 

2,060,862

 

 

 

2,057,958

 

Common shares held in treasury, at cost; 35,869 shares at June 30, 2022 and December 31, 2021

 

(717

)

 

 

(717

)

Accumulated deficit

 

(1,381,145

)

 

 

(1,438,021

)

Total shareholders’ equity

 

680,134

 

 

 

620,344

 

Total liabilities and shareholders’ equity

$

800,085

 

 

$

807,273

 


 

Six Months Ended June 30,

 

2022

 

2021

Operating activities

 

 

 

Net income

$

56,876

 

 

$

54,876

 

Adjustment to reconcile net income to net cash (used in) provided by

 

 

 

operating activities:

 

 

 

Restricted share amortization

 

3,713

 

 

 

3,526

 

Vessel depreciation

 

12,460

 

 

 

 

Amortization of deferred financing costs

 

132

 

 

 

652

 

Write-off of deferred financing costs

 

 

 

 

7,028

 

Loss (gain) on asset disposal / vessels sold

 

896

 

 

 

(19,598

)

Net unrealized gains on investments

 

(46,767

)

 

 

(28,786

)

Dividend income on equity investment

 

(431

)

 

 

(431

)

Drydocking expenditure

 

(504

)

 

 

(3,443

)

Changes in operating assets and liabilities:

 

 

 

(Decrease) increase in accounts receivable

 

(30,580

)

 

 

8,614

 

Decrease in inventories

 

753

 

 

 

 

(Increase) decrease in prepaid expenses and other assets

 

(4,687

)

 

 

24,610

 

Increase (decrease) in accounts payable and accrued expenses

 

6,195

 

 

 

(27,163

)

Decrease in taxes payable

 

(2,758

)

 

 

 

Net cash (used in) provided by operating activities

 

(4,702

)

 

 

19,885

 

Investing activities

 

 

 

Sale of equity investment

 

 

 

 

63,377

 

Dividend income on equity investment

 

431

 

 

 

431

 

Proceeds from sale of assets held for sale

 

 

 

 

482,039

 

Payments on vessels under construction

 

(35,836

)

 

 

(9,311

)

Net cash (used in) provided by investing activities

 

(35,405

)

 

 

536,536

 

Financing activities

 

 

 

Proceeds from issuance of long-term debt

 

130,000

 

 

 

 

Repayments of long-term debt

 

(198,790

)

 

 

(367,105

)

Common shares repurchased

 

 

 

 

(1,407

)

Debt issuance costs paid

 

(3,235

)

 

 

 

Dividends paid

 

(799

)

 

 

(1,124

)

Net cash used in financing activities

 

(72,824

)

 

 

(369,636

)

(Decrease) increase in cash and cash equivalents

 

(112,931

)

 

 

186,785

 

Cash and cash equivalents, beginning of period

 

153,977

 

 

 

84,002

 

Cash and cash equivalents and restricted cash, end of period

$

41,046

 

 

$

270,787

 

Conference Call on Results:

A conference call to discuss the Company’s results will be held at 11:00 AM Eastern Daylight Time / 5:00 PM Central European Summer Time on August 3, 2022. Those wishing to listen to the call should dial 1 (877) 513-1694 (U.S.) or 1 (412) 902-4269 (International) at least 10 minutes prior to the start of the call to ensure connection. The conference participant passcode is 10169504. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

There will also be a simultaneous live webcast over the internet, through the Eneti Inc. website www.eneti-inc.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

Webcast URL: https://edge.media-server.com/mmc/p/tbt2xx5p

About Eneti Inc.

Eneti Inc. is a leading provider of installation and maintenance vessels to the offshore wind sector and has invested in the next generation of wind turbine installation vessels. The Company is listed on the New York Stock Exchange under the ticker symbol NETI. Additional information about the Company is available on the Company’s website: www.eneti-inc.com, which is not a part of this press release.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”) management uses certain “non-GAAP financial measures” as such term is defined in Regulation G promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with GAAP. Management believes the presentation of these measures provides investors with greater transparency and supplemental data relating to the Company’s financial condition and results of operations, and therefore a more complete understanding of factors affecting its business than GAAP measures alone. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as asset sales, write-offs, contract termination costs or items outside of management’s control.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure that the Company believes provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. This non-GAAP financial measure should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP. Please see below for reconciliation of EBITDA.

EBITDA (unaudited)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

In thousands

2022

 

2021

 

2022

 

2021

Net income

 

52,728

 

 

13,013

 

$

56,876

 

 

$

54,876

Add Back:

 

 

 

 

 

 

 

Net interest expense

 

535

 

 

1,574

 

 

1,809

 

 

 

5,630

Depreciation and amortization (1)

 

8,523

 

 

5,087

 

 

16,305

 

 

 

11,206

Income tax benefit

 

(1,599

)

 

 

 

(589

)

 

 

EBITDA

$

60,187

 

 

19,674

 

$

74,401

 

 

$

71,712

(1) Includes depreciation, amortization of deferred financing costs and restricted share amortization.

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and asset values, changes in demand for Wind Turbine Installation Vessel (“WTIV”) capacity, the length and severity of the ongoing novel coronavirus (COVID-19) outbreak, including its effects on demand for WTIVs and the installation of offshore windfarms, changes in our operating expenses, including fuel costs, drydocking and insurance costs, the market for our WTIVs, availability of financing and refinancing, counterparty performance, ability to obtain financing and the availability of capital resources (including for capital expenditures) and comply with covenants in such financing arrangements, planned capital expenditures, our ability to successfully identify, consummate, integrate and realize the expected benefits from acquisitions and changes to our business strategy, fluctuations in the value of our investments, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption due to accidents or political events, vessel breakdowns and instances of off-hires and other factors.

Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

Contact Information:

Eneti Inc.
James Doyle – Head of Corporate Development & Investor Relations
Tel: +1 646-432-1678
Email: Investor.Relations@Eneti-inc.com 
https://www.eneti-inc.com