Performance Shipping enters sale-leaseback deal for tanker

ATHENS - Performance Shipping Inc. (NASDAQ:PSHG), a global shipping company, announced today that it has entered into a sale and leaseback agreement for a newbuild LR2 Aframax tanker vessel. The agreement, made with an unidentified Japanese third party, involves a financing amount of $44.25 million and includes an eight-year bareboat charter back at a rate of $7,132 per day.

The vessel, which is LNG-ready and scrubber-fitted, is expected to be delivered in the fourth quarter of 2025. Performance Shipping has the option to repurchase the vessel at predetermined rates after the second anniversary of the charter. The company has also secured a five-year charter for the vessel with Clearlake Shipping Pte Ltd. at a rate of $31,000 per day, with an option to extend for two additional years.

CEO Andreas Michalopoulos expressed satisfaction with the new financing opportunities the deal represents in Asian markets. He highlighted the attractive terms of the agreement, which provides a high advance rate and the option for repurchase. Michalopoulos also noted that the remaining capital expenditures for the vessel are $19 million prior to delivery, with a final payment of $34.8 million due upon delivery.

The daily cashflow breakeven for the vessel, including lease payments, is estimated at about $25,000, which is below the daily charter rate secured with Clearlake Shipping. Michalopoulos mentioned that the company is in advanced discussions with lessors for other newbuild LR2 Aframax tankers.

Performance Shipping operates a fleet of tanker vessels and engages them in spot voyages, pool arrangements, and time charters. This announcement is based on a press release statement and contains forward-looking statements that involve assumptions subject to significant uncertainties.

In other recent news, Performance Shipping Inc. has secured a series of significant charter contracts. The company has entered into a time charter contract with Trafigura Maritime Logistics Pte Ltd for one of its Aframax tankers, the M/T P. Aliki. This agreement stipulates a minimum duration of four and a half months and is expected to generate roughly $6.4 million in gross revenue for the minimum charter period.

Furthermore, Performance Shipping has inked a new $28.7 million charter agreement with Aramco (TADAWUL:2222) Trading Fujairah FZE for its Aframax tanker, the M/T Briolette. This deal follows a previous two-year charter with Aramco and is set to generate approximately $28.7 million in gross revenue for the minimum scheduled period.

In addition, the company has entered into time charter contracts for three newbuilding LR2 Aframax tanker vessels with Clearlake Shipping Pte Ltd, a subsidiary of Gunvor Group. These contracts are expected to yield a gross charter rate of $31,000 per day per vessel during the initial five-year period, contributing to an estimated gross revenue of approximately $169.8 million.

These developments have increased Performance Shipping's contract backlog to $228.1 million and its fixed revenue backlog to roughly $211.4 million.

InvestingPro Insights

Performance Shipping Inc. (NASDAQ:PSHG) has shown some notable financial metrics that could be of interest to investors following the company's recent sale and leaseback agreement announcement. With a strong balance sheet highlighted by the fact that the company holds more cash than debt, as indicated by one of the InvestingPro Tips, this positions PSHG in a favorable financial situation to handle its capital expenditures and operational costs effectively.

The company's impressive gross profit margins, which stand at 75.22% for the last twelve months as of Q1 2024, further underscore its ability to generate income efficiently from its operations. Additionally, PSHG is trading at a low Price / Book multiple of 0.1, suggesting that the stock may be undervalued relative to the company's net assets — a point of interest for value investors.

InvestingPro Data indicates that Performance Shipping has a market capitalization of $25.48 million, with a strikingly low P/E ratio of 0.54 for the last twelve months as of Q1 2024. This could imply that the company's earnings are not fully reflected in the current stock price, offering potential upside for investors. Moreover, the company has achieved a revenue growth of 5.88% for the last twelve months as of Q1 2024, which, despite a quarterly decline, shows an overall upward trajectory in earnings.

To gain further insights and access additional InvestingPro Tips for PSHG, which currently total 10, investors can explore the full suite of analytical tools and expert analysis available at InvestingPro. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which may offer valuable guidance in making informed investment decisions.

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