Hunter Group ASA – Management update ahead of subsequent offerings

Oslo, 5 February 2024

Hunter Group ASA (the “Company”), a publicly listed maritime focused investment company, today published information about two upcoming subsequent equity offerings expected to commence on or about 16 February 2024 and 19 February 2024, respectively (the “Offerings”). For detailed information on each Offering, please refer to the separate stock exchange notices released on 30 November 2023, 10 January 2024 and today. Please also refer to the stock exchange release regarding the minutes from the Extraordinary General Meeting (“EGM”) of the Company that was held on Friday 2 February 2024. Further information about the Company will be made available in the prospectus, which will be published prior to the subsequent offerings, following approval from the Financial Supervisory Authority of Norway (Finanstilsynet). This update is intended to serve as a summary of the rationale behind recent key Company events and as an information supplement ahead of the Offerings.

VLCC for it…

Tanker rates in most segments are currently at or near all-time high. The exception is the Very Large Crude Carrier (“VLCC”) segment, which has not yet experienced the same increase in rates as other vessel segments. We believe it is only a matter of time before VLCC rates will advance as well, initiating what we believe to be a multiyear bull-cycle.

Supply: A VLCC orderbook at its lowest level since the 1980s combined with little or no available yard capacity should lead to very limited fleet growth. Globally, the VLCC fleet consists of more than 850 vessels. On average 39 new vessels have been delivered annually over the past 20 years. However, in 2024, only one more vessel is scheduled for delivery. For 2025 and 2026, the numbers are just five and eleven, respectively. With shipyards fully booked, and focusing on higher margin segments, new VLCC orders are unlikely to be delivered before 2027. The fact that more than 80 vessels will turn twenty years old or more in 2024, which is historically the average retirement age for VLCCs, is further strengthening the case for a more limited supply side going forward.

Demand: Demand for VLCCs is expected to grow as global oil demand is increasing. This is further magnified by increasing geographical distances between oil production and consumption growth. Leading forecasters anticipate global oil demand to rise by 1-2 million barrels per day annually for the next few years, primarily driven by Asia. The majority of oil production growth is expected in regions far away from Asian markets, notably the U.S., Brazil and Guyana. With more ships tied up on longer voyages, the crude tanker fleet will effectively be reduced.

In conclusion, a significant imbalance between demand for and supply of crude oil tankers looks increasingly likely. This has led analysts to predict that scrubber-fitted eco VLCCs could earn an average of around USD 85,000 per day over the next three years, more than 50% above the 20-year average. Share prices and asset values have reflected this supply/demand imbalance for some time, making it challenging for investors and shipowners to obtain reasonably priced exposure to the crude tanker market. Currently, a newbuild scrubber-fitted VLCC is priced at around USD 130 million, 26% above the historical average. To achieve a 10% return on invested capital, this newbuild would require dayrates of around USD 56,000 per day on average for the lifetime of the vessel (20 years). By comparison, Hunter Group invested in similar vessels in 2018 at an average cost of approx. USD 85 million per ship. However, the three-year time-charter (“TC”) market has not experienced a similar price increase and is currently 11% below the 20-year historical spot average. We believe this combination represents a unique opportunity, with a risk/reward profile rarely seen in the shipping markets.

To capitalize on this opportunity, the Company has recently secured two three-year back-to-back TC contracts for scrubber-fitted eco VLCCs. These vessels are chartered in at an average fixed rate of USD 51,750 per day, compared to the 20-year average rate of USD 58,240, and analyst expectations of around USD 85,000 per day for the next three years.

The vessels are chartered out for the same period on a floating spot index-linked TC. This structure, based on the recognized VLCC benchmark TD3C, enables the Company to capture every daily VLCC spot market movement with maximum utilization.

1. The first vessel, chartered in at USD 52,500 per day, became effective on 1 December 2023 and has so far earned approx. USD 54,200 per day and USD 48,260 per day for December 2023 and January 2024, respectively.
2. The second vessel will be chartered in at USD 51,000 per day from March/April 2024.

We believe these transactions, and potential upcoming transactions like this, will provide significant cashflow and value creation for the Company and its shareholders over the coming years.

Despite our confidence in a robust tanker market in the coming years, we acknowledge the inherent volatility of the VLCC market, which may include periods of relative softness. To withstand these potential periods, we have strengthened the Company’s balance sheet by raising approximately USD 14 million through two equity issues, totaling 85,190,476 new shares. Following these equity issues, but prior to the upcoming Offerings, the Company has approximately USD 18m in cash and working capital, and 113,958,577 shares outstanding.

To facilitate swift and effective capital raises in connection with the TCs, these equity issues were conducted as private placements. To ensure equal treatment of eligible shareholders who were not allocated shares in the private placements, the Company plans to conduct two subsequent offerings.

1. The first subsequent offering will be available to shareholders as of 30 November 2023, offering up to 6,666,666 shares at NOK 1.50 per share. The subscription period is expected to commence on 16 February 2024.
2. The second subsequent offering will be available to shareholders as of 10 January 2024, offering up to 14,200,000 shares at NOK 1.75 per share, with the subscription period expected to begin on 19 February 2024.

Both subscription periods will last for two weeks. Oversubscription is permitted, and subscribing shareholders are guaranteed a minimum allocation of their pro-rata shareholding and will also be allocated any oversubscription on a pro-rata basis. Current shareholders that did not own any shares on the aforementioned dates will not be eligible to participate in the respective subsequent offerings. For more information on the two subsequent offerings, please refer to the separate stock exchange releases today.

Contact:

Erik A.S. Frydendal, CEO, [email protected], Ph.: +47 957 72 947

Lars M. Brynildsrud, CFO, [email protected], Ph.: +47 932 60 882

This information is considered to be inside information pursuant to the EU Market Abuse Regulation and subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.   

Forward looking statements: This announcement includes forward-looking statements, relating to the TCs, VLCC rates, prices, and values, the Issues, the use of proceeds from the Issues, and other non-historical statements. These forward-looking statements are subject to numerous risks, uncertainties and assumptions, changes in market conditions and other risks. Forward-looking statements reflect knowledge and information available at, and speak only as of, the date they are made. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on such forward-looking statements.