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2014-05-08

Knightsbridge Tankers Limited : VLCCF - First Quarter 2014 Results

HIGHLIGHTS

* Knightsbridge reports net income of $10.7 million and earnings per share of
$0.35 for the first quarter of 2014.
* Knightsbridge reports EBITDA of $14.1 million and EBITDA per share of $0.46
for the first quarter of 2014.
* Knightsbridge receives $9.7 million as partial settlement for a claim for
damages and unpaid charter hire.
* Knightsbridge announces a cash distribution of $0.20 per share for the
first quarter of 2014.
* Knightsbridge expects to become the leading US listed Capesize company with
a fleet of 39 modern vessels following the acquisition of five fuel
efficient 180,000 DWT Capesize bulk carrier newbuildings from Frontline
2012 and one Cape size bulk carrier built in 2013 from Hemen in April 2014
and the subsequent combination of Frontline 2012's remaining fleet of 25
fuel efficient Capesize newbuildings with Knightsbridge's fleet.
* Knightsbridge issues 18.6 million new shares in April 2014 and has agreed
to issue a further 62 million shares to Frontline 2012 in two stages;
September 2014 and March 2015. Knightsbridge will then have 111.1 million
shares outstanding and will have a market capitalization of $1.3 billion
based on the current share price.

FIRST QUARTER 2014 RESULTS

The Company reports net income of $10.7 million and earnings per share of
$0.35 for the first quarter compared with net income of $3.5 million and
earnings per share of $0.12 for the preceding quarter. Net income in the
first quarter includes $9.7 million, which was received as partial settlement
for a claim for damages and unpaid charter hire. The average daily time
charter equivalent ("TCE") earned by the Capesize vessels in the first
quarter was $25,200 compared with $28,600 in the preceding quarter. In May
2014, the Company estimates an average cash cost breakeven rate for the
remainder of 2014 on a TCE basis for its Capesize vessels of $13,000 per
vessel per day.

Cash and cash equivalents increased by $9.2 million in the first quarter. The
Company generated cash from operating activities of $14.7 million, paid $0.2
million in respect of its newbuildings and paid $5.3 million to shareholders.

THE FLEET

The Company's sailing fleet consists of five Capesize bulk carriers. The
Battersea and KSL China are employed in the spot market. Golden Zhejiang and
Golden Future are employed on index related time charter contracts. The
Belgravia is on a time charter contract with estimated expiry in the third
quarter this year.

The Company's newbuilding program will consist of 34 Capesize bulk carriers
with estimated delivery in 2014-2016, of which 25 will be purchased from
Frontline 2012 (see below).
CORPORATE

On March 10, 2014 Knightsbridge announced it had agreed to acquire five fuel
efficient 180,000 DWT Capesize bulk carrier newbuildings from Frontline 2012
and one Capesize bulk carrier built in 2013 from Hemen for a total
consideration of $360 million whereof $186 million in shares of Knightsbridge
at $10 per share, $150 million in absorption of remaining newbuilding
instalments and $24 million in cash. On April 23, 2014 Knightsbridge issued
15.5 million shares to Frontline 2012 and 3.1 million shares to Hemen.
Knightsbridge also took delivery of the Capesize bulk carrier from Hemen. The
five newbuilding vessels are expected to be delivered between May and
September 2014.

On April 24, 2014 Knightsbridge announced it had agreed to combine Frontline
2012's remaining fleet of 25 fuel efficient vessels with Knightsbridge. Under
the agreement in principle, the exchange ratio for the acquisition and share
issuance will be based on NAV using March 31, 2014 broker values. The
Knightsbridge/Frontline 2012 exchange ratio will be 44%/56%. Accordingly,
Knightsbridge has agreed to issue 62.0 million shares to Frontline 2012 and
absorb $894 million in net remaining estimated Capex. The closing will be
executed in two stages, with 31.0 million shares expected to be issued around
September 15, 2014 and 31.0 million shares around March 15, 2015. The
transaction is subject to definitive documentation, normal closing conditions
and regulatory approvals. The transaction is also subject to consent from
Knightsbridge's shareholders to increase the Company's authorized share
capital to enable the issuance of the new shares to Frontline 2012.

30,521,550 ordinary shares were outstanding as of March 31, 2014, and the
weighted average number of shares outstanding for the quarter was 30,496,806.
The Company currently has 49.1 million shares outstanding and following the
expected issuance of shares in September 2014 and March 2015, the Company
will have 111.1 million shares outstanding and a market capitalization of
$1.3 billion based on current share price.

The Board has decided to declare a cash distribution of $0.20 per share. The
record date is May 22, 2014, the ex dividend date is May 20, 2014 and the
cash distribution will be paid on or around June 5, 2014.

The Company has secured financing of $30 million per vessel for the 11 first
newbuildings bought from Frontline 2012 based on a 20 year loan profile. The
second hand vessel bought from Hemen will be financed by an existing facility
and will enjoy an installment holiday until May 2015.

THE DRY BULK MARKET

The second biggest economy in the world continued to make the headlines during
first quarter of 2014. China has become the favorite of concerns among many
observers analyzing the country. The importance for the dry bulk industry is
well known and China contributed 83 per cent of global dry bulk growth or 200
million tons in pure volume during 2013. Chinese GDP grew by 7.4 per cent
during the first quarter which was in line with expectations. In addition to
the positive development in the U.S., several of the European economies
showed signs of recovery and on the back of that EU increased its steel
production by 6.7 percent compared to same quarter in 2013. The global steel
industry and energy coal for utilities are accounting for about 70 percent of
seaborne dry bulk transportations and both coal and iron ore volumes
increased during first quarter.

China imported 240 million mt of iron ore during the first quarter which is 20
per cent more than the same quarter last year. Coal imports to China came in
at 71 million mt or 9.5 per cent more than the first quarter of 2013. Japan
imported 49.5 million mt of coal, which again represented an increase of
about 9 per cent. Preliminary data is indicating an overall volume growth in
seaborne dry bulk trade of 6 percent for the first three months of 2014
against a net fleet growth of about 5 per cent.

About 16 million dwt were delivered and 3.5 million dwt were scrapped during
first quarter. Delivery ratio, versus what should have been delivered
according to the official order book, is slightly higher this year compared
to the previous five years. The main reason is that the current order book
has a higher percentage of good quality yards. About 25 million dwt were
ordered during the first quarter, almost twice as much as the same quarter
last year, but still 10 million dwt less than the fourth quarter of 2013. The
order book represents 19 per cent of the total dry bulk fleet.

Capesize vessels earned on average $16,300 per day during the first quarter,
and experienced strong volatility ranging from $7,900 per day to $35,000 per
day. The market performed better than most forecasters predicted, given that
iron ore stockpiles in the major Chinese ports were high by the end of last
year. However de-stocking did not take place and stocks remained unchanged
during the quarter. We have witnessed some draw down of inventories in recent
weeks and the Capesize spot market has reacted accordingly.

Through most of the first quarter expectations for an upturn in earnings were
high. This was reflected in the Forward Freight Curve which was in contango,
in particular for the second half of 2014. Due to the fact that spot earnings
surprised on the upside in combination with a positive sentiment, asset
values continued to trend higher in the three first months of the year. The
value of a five year old Capesize was up 10 per cent for the quarter and
according to broker estimates was worth $48 million.

In April 2014, both spot and forward markets have been under pressure, but
most analysts remain confident that the fundamentals should cater for a
market upswing within the next few months.

OUTLOOK

The Frontline 2012 transaction is a transformative step for Knightsbridge and
is expected to make the Company the leading US listed Capesize owner. The
Board is excited about its portfolio of 34 fuel efficient newbuildings and
looks forward to taking delivery of the first two vessels later this month.
Based on sea trials of the first newbuilding vessel from SWS, with the
optimized hull form and "G type" main engine, the fuel consumption seems to
be significantly lower compared to similar sized vessels in service. This
should translate into higher time charter equivalent earnings.

With a unique fleet of 39 Capesize vessels and a targeted cash breakeven rate
below $15,000 per day, Knightsbridge is in a strong position to benefit from
an expected recovery in the dry bulk market.

The Board will seek to grow the Company's dividend per share as the dry bulk
market recovers and newbuildings commence operation.

FORWARD LOOKING STATEMENTS

Matters discussed in this report may constitute forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements, which 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.

Knightsbridge Tankers Limited and its subsidiaries, or 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. This report and any other
written or oral statements made by us or on our behalf may include
forward-looking statements, which reflect our current views with respect to
future events and financial performance. The words "believe," "anticipate,"
"intend," "estimate," "forecast," "project," "plan," "potential," "will,"
"may," "should," "expect" and similar expressions identify forward-looking
statements.

The forward-looking statements in this report are based upon various
assumptions, including, without limitation, management's examination of
historical operating trends, data contained in our records and data available
from third parties. Although we believe that these assumptions were
reasonable when made, because these assumptions are inherently subject to
sign...

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