Ocean Yield hungry for more as Chinese lessors pull in horns

Lars Solbakken says better markets and less aggressive Chinese lessors contributing to higher deal flow.

Kjell Inge Rokke’s Ocean Yield is expecting a significant upturn in transactions in 2018 following a fast start to the year and a pull back in the aggressive stance of rival leasing companies in China.

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Oslo-listed Ocean Yield also struck an optimistic note on the employment of two offshore assets, which are the volatile moving parts in its stable earnings story.

Ocean Yield has struck debut deals in the VLCC sector and the dry cargo market via transactions with Kyklades Maritime and Louis Dreyfus in the past couple of weeks.

“We see 2018 as a very good entry point,” chief executive Lars Solbakken said during Ocean Yield’s fourth quarter presentation on Friday.

“We have a clear goal to do substantially higher volumes of transactions in 2018 than in 2017.”

Spreading the net

Solbakken says the improvement in dry bulk rates opened up a new sector for the company and further deals are expected in this space.

“We clearly have increased focus on tankers and dry bulk,” Solbakken said. “Timing is always difficult. It depends if it is secondhand vessels or newbuildings and I think we are open to both.

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“Of course, we see volumes also in LNG. It has been a very competitive market, so that is the reason we have not done anything. We have looked at transactions and found the equity return has been too low for us.”

Solbakken also pointed to an improving container market as another area for transactions.

“The Chinese have been very aggressive,” Solbakken said. “We see now some signs they may get full on some names. That may open up opportunities for us to do deals at higher return levels.”

Solbakken has previously spoken of an upturn in both the volume and quality of the deals available to Ocean Yield.

He says this is due to the reduced availability and increased cost of bank financing to shipowners and a strengthening of the company’s own marketing team.

“It may also be that the Chinese, who were very aggressive for a period, are less aggressive now,” Solbakken said. “They are still doing volumes, but maybe slightly less aggressive than they were earlier in 2017.”

Offshore expectations

Analysts have pointed to the new additions to the Ocean Yield fleet helping to plug the expected loss in revenue from the Dhirubhai-1. Its charter with Reliance is due to finish in September, but extension options are also included.

“With respect to the Dhirubhai-1, we are working hard to secure expended employment,” Solbakken said.

He says the company is also well positioned to bid for a tender on an adjacent field due to be awarded in the third quarter. Reliance also has a purchase option on the unit.

“Then over the last two years we have also explored other options than the employment in India,” Solbakken said. “Of course there are other options but we see the most likely outcome that the unit will stay in India.”

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Ocean Yield is equally positive on the employment prospects for the construction vessel Connector (built 2011), which is on a short term deal through until July 2018, with further options.

“We think it’s better now to employ it short to medium term and then wait for a stronger market,” Solbakken said.

“We have clear expectations to see a stronger market when you come into 2019. We would then start to focus on more long term employment.”