Star Bulk Carriers Corp, a global shipping company focusing on the transportation of dry bulk cargoes, today announced its unaudited financial and operating results for the third quarter of 2023. Unless otherwise indicated or unless the context requires otherwise, all references in this press release to “we,” “us,” “our,” or similar references, mean Star Bulk Carriers Corp. and, where applicable, its consolidated subsidiaries.
Petros Pappas, Chief Executive Officer of Star Bulk, commented:
“During the third quarter, Star Bulk reported Net Income of $43.7 million and TCE of $15,068 / day per vessel, exceeding the fleet-weighted average Baltic indices by 28.6%. Coverage for Q4 is at ~65% of our available days at a TCE of ~$17,200 / day per vessel. Our Board of Directors has approved a dividend distribution of $0.22 / share, consistent with our stated capital allocation strategy.
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The agreements to repurchase in aggregate 20 million Company shares from Oaktree at an average price of $19 per share represent an important milestone for Star Bulk. We believe we have utilized a variety of tools to create value and we expect these transactions to be accretive to NAV per share, EPS and DPS:
We were able to repurchase a large block of shares at a significant discount to our Net Asset Value.
We have funded the above repurchase mostly from vessel sales at attractive historical prices during 2023.
Recently we sold shares through our ATM program at an average price of $19.81/share, locking in a favorable arbitrage.
We have decided to take further steps towards our fleet renewal, having designed with the selected shipyard and subsequently ordering 2 latest generation Eco Kamsarmax vessels with the option to order two additional vessels. The vessels are to be built in China to a high specification, fitted with the latest fuel-efficient engine coming into production in 2024, a shaft generator as well as Alternate Marine Power provisions reducing vessels’ energy requirements. The above will help to ensure best-in-class fuel consumptions and emissions. On the sales front, we continue to dispose of vessels opportunistically, having agreed to sell five vessels, reducing our average fleet age and improving overall fleet efficiency.
We remain optimistic about the prospects of the dry bulk market due to increasingly favorable supply dynamics, the improving macro sentiment and large global infrastructure investment needs for the world’s green transition. We intend to remain focused on actively managing our scrubber fitted and diverse fleet to take advantage of market opportunities and continue creating value for our shareholders.”
Declaration of Dividend
On November 13, 2023, pursuant to our dividend policy, our Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on or about December 18, 2023 to all shareholders of record as of December 5, 2023. The ex-dividend date is expected to be December 4, 2023.
At-The-Market Offering Program, Share Repurchase Program & Shares Outstanding Update
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During October 2023, we issued and sold 678,282 common shares under our effective at-the-market offering programs at an average price of $19.81 per share, resulting in gross proceeds of $13.43 million.
On September 21, 2023 and on October 30, 2023 we agreed to repurchase 10 million of our common shares at a price of $18.50 per common share (the “First Oaktree Share Repurchase”) and 10 million of our common shares at a price of $19.50 per common share (the “Second Oaktree Share Repurchase”), respectively, from affiliates of Oaktree Capital Management, L.P. (“Oaktree”). The First Oaktree Share Repurchase was completed in early October, with the repurchased shares being withdrawn and cancelled. Closing of the Second Oaktree Share Repurchase is expected to occur on December 1, 2023 after which the 10 million repurchased shares will be withdrawn and cancelled.
As of the date of this release, we have 93,861,792 shares outstanding or 83,861,792 as adjusted for the closing of the Second Oaktree Share Repurchase and the expected cancellation of the repurchased common shares.
In September 2023, we agreed to sell the vessel Star Zeta, which was delivered to her new owner in October 2023.
In addition, in October and November 2023 we agreed to sell the vessels Star Athena, Star Glory, Star Theta and Star Jennifer. The vessels are expected to be delivered to their new owners in November and December 2023. The total gross proceeds from the sale of the above five vessels will be $72.5 million with a corresponding gain of $15.6 million expected to be recognized in the fourth quarter of 2023.
Lastly, as we look towards fleet renewal, in October 2023 we entered into two firm and two optional (exercisable until December 13, 2023) shipbuilding contracts with Qingdao Shipyard Co., Ltd. for the construction of four 82,000 dwt Kamsarmax newbuilding vessels. The expected delivery dates for the two firm shipbuilding contracts are November 2025 and June 2026 respectively, whereas delivery dates for the two optional shipbuilding contracts are December 2025 and August 2026, respectively. The newbuild vessels meet the latest requirements of Energy Efficiency Design Index (EEDI Phase 3) in relation to carbon intensity (CO2) and comply with the latest NOX regulations, NOX TIER III. In addition, these vessels are fitted with the latest available and most fuel efficient main engine produced by MAN B&W delivering from 2024 along with a shaft generator and Alternate Marine Power optionality, all of which help to ensure best-in-class daily fuel consumptions and emissions reduction. We have also the option to equip the vessels with Exhaust Gas Cleaning Systems (“EGCS” or “scrubbers”) before delivery.
In September 2023, we entered into a syndicated loan facility with E.SUN commercial Bank Ltd. as Agent for an amount of $140.0 million (the “ESUN $140.0 million Facility”). The ESUN $140.0 million Facility was drawn in October 2023 and is repayable in 28 equal consecutive quarterly installments of $3.8 million and a balloon payment of $32.9 million due in October 2030, along with the last installment. The loan is secured by first priority mortgages on the vessels Mackenzie, Kennadi, Honey Badger, Wolverine, Star Antares, Gargantua, Goliath and Maharaj, the lease financing of which had been prepaid in September 2023.
In October 2023, we entered into a committed termsheet with CTBC Bank Co., Ltd. for a loan facility of up to $50.0 million (the “CTBC $50.0 million Facility”). The facility will be used to refinance the outstanding amounts under other loan agreements and is expected to be drawn by the end of November 2023. The CTBC $50.0 million Facility is expected to be drawn in two tranches and will mature 5 years after the drawdown.
In November 2023, we entered into a committed termsheet with ING Bank N.V., London Branch for a senior secured bridge loan facility of $125.0 million (the “ING $125.0 million Bridge Facility”). The facility will be used to fund part of the consideration for the Second Oaktree Share Repurchase, as described above. The ING $125.0 million Bridge Facility is expected to be drawn in December 2023 and will mature one year after the drawdown.
As of the date of this press release we are in final stage of negotiations with National Bank of Greece S.A. for a loan facility of up to $156.4 million (the “NBG $156.4 million Facility”). The purpose of the facility is to refinance the outstanding amount under the existing $125.0 million loan agreement with NBG and to provide us with additional liquidity of $70.0 million which we expect to use to finance part of the consideration for the Second Oaktree Share Repurchase. The NBG $156.4 million Facility is expected to be drawn by December 31, 2023 and will mature three years after the drawdown.
In addition, following a number of interest rate swaps we have entered into, we have an outstanding total notional amount of $331.3 million under our financing agreements with an average fixed rate of 42 bps and an average maturity of 1.0 year. As of September 30, 2023 the Mark-to-Market value of our outstanding interest rate swaps stood at $15.6 million which are all designated as and qualify for hedge accounting.
Change in the Board of Directors
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Pursuant to the previously announced First Oaktree Share Repurchase and the resulting reduction of Oaktree’s shareholding percentage in the Company, Oaktree has caused one of its designee directors, Mr. Ryan Lee, to resign from our Board of Directors. Mr. Lee served on our Board since August 30, 2023 as a Class B director and was a member of the Nomination and Corporate Governance Committee. The size of the Board is reduced to 10 members.
Vessel Employment Overview
Time Charter Equivalent Rate (“TCE rate”) is a non-GAAP measure. Please see EXHIBIT I at the end of this release for a reconciliation to Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
Amounts shown throughout the press release and variations in period–over–period comparisons are derived from the actual unaudited numbers in our books and records. Reference to per share figures below are based on 96,139,203 and 102,541,314 weighted average diluted shares for the third quarter of 2023 and 2022, respectively.
Third Quarter 2023 and 2022 Results
For the third quarter of 2023, we had a net income of $43.7 million, or $0.45 earnings per share, compared to a net income for the third quarter of 2022 of $109.7 million, or $1.07 earnings per share. Adjusted net income, which excludes certain non-cash items, was $33.1 million, or $0.34 earnings per share, for the third quarter of 2023, compared to an adjusted net income of $136.3 million for the third quarter of 2022, or $1.33 earnings per share.
Net cash provided by operating activities for the third quarter of 2023 was $68.5 million, compared to $184.5 million for the third quarter of 2022. Adjusted EBITDA, which excludes certain non-cash items, was $84.2 million for the third quarter of 2023, compared to $189.9 million for the third quarter of 2022.
Voyage revenues for the third quarter of 2023 decreased to $223.1 million from $364.1 million in the third quarter of 2022 and Time charter equivalent revenues (“TCE Revenues”)1 were $162.5 million for the third quarter of 2023, compared to $266.7 million for the third quarter of 2022. TCE rate for the third quarter of 2023 was $15,068 per day compared to $24,365 per day for the third quarter of 2022 which is indicative of the weaker market conditions continuing to prevail during the recent quarter.
For the third quarters of 2023 and 2022, vessel operating expenses were $54.9 million and $60.1 million, respectively. The decrease is mainly due to the decrease in the average number of vessels in our fleet to 121.5 in the third quarter of 2023 from 128.0 for the corresponding quarter of 2022. Vessel operating expenses for the third quarter of 2023 included additional $0.7 million pre-delivery expenses, due to change of management of certain vessels from third party to in-house. Vessel operating expenses for the third quarter of 2022 included additional crew expenses related to the increased number and cost of crew changes performed during the period as a result of COVID-19 related restrictions estimated to be $1.9 million and pre-delivery expenses due to change of management of $2.1 million.
Drydocking expenses for the third quarters of 2023 and 2022 were $11.6 million and $9.8 million, respectively. During both periods eight vessels completed their periodic dry docking surveys.
General and administrative expenses for the third quarters of 2023 and 2022 were $13.6 million and $18.4 million, respectively. The stock based compensation expense for the third quarter of 2023 decreased to $6.3 million compared to $11.9 million for the corresponding quarter in 2022. Vessel management fees for the third quarter of 2023 decreased to $4.3 million from $4.9 million for the third quarter of 2022, due to the change of management of certain vessels, from third party to in-house, as described above. Our daily net cash general and administrative expenses per vessel (including management fees and excluding share-based compensation and other non-cash charges) for the third quarters of 2023 and 2022 were $1,024 and $950, respectively.
Depreciation expense decreased to $34.5 million for the third quarter of 2023 compared to $39.6 million for the corresponding period in 2022. The decrease is primarily driven by the change in the estimated scrap rate per light weight ton from $300 to $400 effective January 1, 2023, which resulted in lower depreciation expense by $3.9 million in the third quarter of 2023, together with the decrease in the average number of vessels in our fleet.
Our results for the third quarters of 2023 and 2022 include a loss on write-down of inventories of $0.8 million and $14.9 million, respectively, in connection with the valuation of the bunkers remaining on board our vessels, as a result of their lower net realizable value compared to their historical cost.
Our results for the third quarter of 2023 include an aggregate net gain of $18.9 million which resulted from the completion of the sale of vessels Star Polaris, Star Centaurus, Star Columba, Star Aquila, Star Cepheus and Star Hercules.
Interest and finance costs for the third quarters of 2023 and 2022 were $18.1 million and $13.4 million, respectively. The driving factor for this increase is the significant increase in variable interest rates, which was partially offset by the positive effect from our interest rate swaps and the decrease in our weighted average outstanding indebtedness as well as the recent refinancings of older facilities with more favorable terms. Interest income and other income/(loss) for the third quarters of 2023 and 2022 amounted to $3.7 million and $0.2 million, respectively. The increase of interest income is attributable to both higher interest rates earned and higher cash balances maintained during the third quarter of 2023 compared to the corresponding period in 2022 as well as due to lower foreign exchange losses recognized in the current period compared to the corresponding period in 2022.
Loss on debt extinguishment for the third quarters of 2023 and 2022 were $4.3 million and $1.3 million, respectively and was primarily affected by increased write-offs of unamortized debt issuance costs and other expenses incurred in connection with the loan and lease prepayments in 2023 compared to the corresponding period in 2022.
Source: Star Bulk Carriers Corp.