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Nimrod Sea Assets hit by oil price fall

Nimrod Sea Assets published a trading update on Friday afternoon in which it said Fletcher Shipping has notified Aberdeen Offshore (which is the General Partner of the entity in which Nimrod Sea Assets has a 75% equity interest) that it will not be taking delivery of the second vessel (known as FS Scorpius) from the shipbuilder.  As a result, the planned bareboat charter between Aberdeen Offshore and Fletcher Shipping for the second vessel has been cancelled by Fletcher Shipping and NSA’s investment in the second vessel will not be proceeding. Funds allocated for that investment are available for investment in other projects.  The wider implications of the cancellation of the bareboat charter for the second vessel are under review by Aberdeen Offshore.

For two of the existing investments, Nimrod Sea Assets has been informed that dividends are being held within the vessel owning companies rather than being distributed to Nimrod Sea Assets.

For the first of these, Bukit Timah, the charterer continues to perform all its obligations and requirements, including prompt payment of the bareboat charter hire and being in compliance with the relevant covenants. Despite this one member of the senior debt banking syndicate is currently withholding permission to allow the agreed dividend to be distributed from the entity to NSA (Nimrod Sea Assets hasn’t disclosed the justification that the lender is giving or the rights that the lender has that allow them to do this). They expect however, that following discussions and given the strong rebound in the oil price and strength of the order book of our counter-party, these accrued dividend payments will be paid.

The other, Norseman, is a high end Northern Europe focused asset where they say vessel values have been disproportionately affected by economic sanctions against Russia given it is used to support production in these regions. The charterer continues to fulfil all its obligations including prompt and timely payment of the charter income. A valuation of the vessel was undertaken, as required by the senior loan agreement, leading to a technical breach of the loan-to-value covenant; the bank has agreed a temporary waiver of this provided dividends are retained in the company awaiting a revaluation. NSA is therefore not expecting the June distribution and a reduced dividend is forecast to resume in December with this resuming to expected levels in June 2016.

The Executive Directors say, while they are extremely confident of the long-term market potential, deals are also taking longer to close as the Company and senior debt providers have become more cautious about counterparty risk in the changed environment. The Executive Directors have also noticed a decline in the number of prospective quality projects that meet the IRR and residual value projections of the Company, that satisfy all investment criteria, that carry a sensible risk weighting in the current market, and that will deliver a well-balanced portfolio. However they remain confident in the income potential and residual value characteristics of the vessels throughout the market cycle although there is some short-term uncertainty regarding asset values that is making closing transactions on acceptable terms to the Company somewhat slower than anticipated.

Following the announcement on 30 April 2015 about its latest transaction the Company has now completed seven investments: Bukit Timah Offshore DIS, Norseman Offshore IS, DSV Alliance DIS, Volstad Maritime II DIS, Altus Subsea IS, Aberdeen DIS and Jane Offshore Ltd, representing 54% of the Company’s capital.

The shares have fallen from a high of 107.5 cents in December to 99 cents today.

NSA : Nimrod Sea Assets hit by oil price fall

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