Earnings call transcript: Ocean Yield Q2 2025 highlights strong fleet performance

Ocean Yield reported its financial results for the second quarter of 2025, showcasing robust growth in its fleet operations and strategic investments. The company’s total revenues rose to $62.7 million, an increase from $56.6 million in the previous quarter. According to InvestingPro data, the company has demonstrated impressive revenue growth of 137.76% over the last twelve months. The stock remained stable at $41.12, reflecting a steady investor sentiment despite its beta of 1.81, indicating higher volatility compared to the market.

Key Takeaways

• Ocean Yield’s total revenues increased to $62.7 million, up from $56.6 million in Q1.
• The company enhanced its LNG shipping stake and completed key newbuild programs.
• Ocean Yield’s fleet, comprising 65 vessels, is fully chartered on long-term contracts.

Company Performance

Ocean Yield demonstrated solid performance in Q2 2025, driven by strategic investments and a diversified fleet portfolio. The company increased its ownership in France LNG shipping and completed several newbuild programs, positioning itself strongly in the maritime sector. The fleet’s average age is 5.2 years, with all vessels on long-term charters, contributing to an EBITDA backlog of $4.3 billion.

Financial Highlights

• Total Revenues: $62.7 million (up from $56.6 million in Q1)
• EBITDA: $101.1 million (adjusted)
• Net Profit: $22.9 million
• Total Assets: $2.7 billion (up from $2.4 billion in Q1)
• Available Liquidity: $98.7 million
• Equity Ratio: 29.1%

Outlook & Guidance

Looking ahead, Ocean Yield plans to maintain its growth trajectory with a $30 million equity injection from KKR and a potential new bond issue. The company aims to buy back the OCY08 bond maturing in 2027 and focus on accretive growth while maintaining a strong balance sheet.

Executive Commentary

CEO Andreas emphasized the company’s commitment to a strong balance sheet and accretive growth, stating, "We continue to maintain a strong balance sheet with ample available liquidity and room for further growth." He also highlighted the strategic importance of long-term charters, noting, "All our vessels are on long-term charters to investment-grade rated companies."

Risks and Challenges

• Fluctuations in global energy demand could impact charter rates.
• Potential delays in the delivery of new vessels may affect growth plans.
• Economic uncertainties and interest rate changes could influence financing costs.

Ocean Yield’s strategic initiatives and robust financial position underscore its resilience and adaptability in the maritime sector, positioning it well for future growth.

Full transcript - Ocean Yield (OCY) Q2 2025:

Andreas, CEO or Senior Executive, Ocean Yield: Good morning, everyone, and welcome to Ocean Yield’s second quarter earnings presentation. As usual, I will start today’s presentation with the highlights of the quarter and go through the changes to the portfolio. Then our CFO, Erik Eide will take us through the financials and the financing activity of the quarter. The presentation will be concluded with opening up for questions. Starting off on Page two.

Q2 has again been an active quarter for Ocean Yield and we are reporting another quarter with strong and stable financial performance. We report an EBITDA adjusted for finance lease effects of $101,100,000 and a net profit of $22,900,000 We ended the second quarter with $98,700,000 in cash, following prepayments of $80,000,000 made in connection with the Geogas closing that took place on July 1. The balance sheet remains strong and the equity ratio was 29.1%. At quarter end, the EBITDA backlog was $4,300,000,000 and the average remaining contract duration was nine point nine years. Q2 and the following period has also been an active period on the transaction side.

We have agreed to amend and extend the lease for three vessels with Nordic American tankers. We have increased our ownership stake in France LNG shipping from 34% to 45%. And we have acquired Cape Omega together with funds controlled by KKR. I will come back to this in greater detail. But first, let us move to Page three for a summary of the portfolio at the end of the quarter.

Including the 12 LNG vessels in the France LNG fleet, the fleet now accounts 65 vessels at quarter end with an average age of five point two years. The EBITDA backlog at the end of the quarter was $4,300,000,000 and 100% of the fleet remains employed on long term charters. The investments made into the LNG segments have significantly increased the diversification of the backlog with LNG and gas carriers now making up 32% of the backlog. So let’s move to Page four for more details on the Cape Omega transaction. Post quarter end Ocean Yield together with funds controlled by KKR have agreed to purchase Cape Omega from Partners Group.

The funds controlled by KKR will fund the majority of the transaction and Ocean Yield will own approximately 10% of Cape Omega. Ocean Yield will manage the investment for KKR. Cape Omega owns 50% of the equity and 100% of the preferred equity instruments in 10 LNG vessels with long term charters to the investment grade rated counterparties Shell, Engie and Qatar Gas. The remaining 50% equity in the 10 vessels is owned by Knudsen Wires Shipping. They also manage the ships.

Knudsen have 40 LNG ships in their fleet. Seven vessels are delivered and the remaining three vessels are expected to be delivered during 2025 and 2026 from the shipyard in Korea. The average remaining contract duration is approximately nine years or sixteen years if you include the extension options. LNG’s infrastructure like characteristics fit well with our portfolio and the transaction underpin our long term strategy of partnering with industry leaders and securing long term cash flows to strong and reputable counterparties. Ocean Yield’s share of the firm backlog equate to approximately $120,000,000 The transaction is expected to close during the third quarter and will be funded with available liquidity.

Also as part of transaction and to ensure ample firepower for further growth, KKR will inject $30,000,000 of equity capital into Ocean Yield. This is a tangible evidence of KKR’s long term commitment to Ocean Yield’s continued growth. So let’s move to Page five for other changes to the portfolio during the quarter. During the quarter, Nordic Galaxy and Nordic Moon were delivered and commenced the bareboat charters to Nordic American tankers. Following the delivery of Mineral Sumi, Mineral Svarij, Mineral Pulska and Mineral Cesko, the new Castlemax newbuild program with CMB Tech has now been concluded.

Also following the delivery of Brave Future in July, the LEG newbuild series with Braskem is concluded. Remaining newbuilds, excluding LNG, are four LR1 newbuilds under construction at GSI in China. These vessels are expected to be delivered during 2026 and will, upon delivery, commence fifteen year bareboat leases to Braskem. During and post quarter end, purchase options for the six VLCCs on charter to International Seaways and the three LR2 tankers to Scorpio tankers have been declared. With the exception of the STI Symphony, which will be delivered in Q1 ’twenty six, the remaining vessels will be delivered to their new owners during the fourth quarter.

Finally, during the quarter, Hafne Adonaldo was delivered to its new owners. I would now like to hand the word over to Erik, who will take us through the financials and the financing activity of the quarter.

Erik Eide, CFO, Ocean Yield: Thank you, Andreas. So as usual, let me start with taking a look at a financial snapshot of the company as of the second quarter. We have recorded EBITDA of $57,500,000 and adjusted EBITDA of $101,100,000 Net profit for the quarter was $22,900,000 and the Board of Directors has not declared a dividend this quarter as we are using cash towards new investments. We had available liquidity of $98,700,000 and the equity ratio stood at 29.1 at the end of the quarter. So let us take a look at the headline figures of the income statement.

Overall, we have recorded total revenues of $62,700,000 which is up from $56,600,000 in Q1. More specifically, operating lease revenue was $19,400,000 compared to $19,200,000 in Q1. So this was in line with the first quarter. Finance lease revenue however was $34,400,000 compared to $30,700,000 in Q1. And the increase here is related to delivery of two Suezmax vessels and four Newcastle Max newbuildings during the quarter.

Income from our joint ventures was $5,900,000 compared to $5,700,000 in Q1. Then we had other income of $3,100,000 and this is mainly related to one off gains on lease modification effects for eight tankers where purchase options have been exercised and the lease extension of three Suezmax tankers. And that brings us to an operating profit of $51,700,000 in the quarter compared to $45,600,000 in Q1. Net financial items were negative $28,300,000 compared to $26,900,000 in Q1. The increase here is mainly driven by higher interest rate expenses as a result of vessel deliveries.

So the quarter ended overall with a net profit of $22,900,000 compared to $18,300,000 in Q1. So let us move on and take a look at the historical adjusted EBITDA. And this is the cash EBITDA that we received under our lease agreements. And this was $101,100,000 in Q2 compared to $91,600,000 in Q1. So very pleased to see that we are above the $100,000,000 mark on adjusted EBITDA.

And as we have mentioned in previous quarters, in order to fully reflect the investment in Geogas LNG, we have included also interest on shareholder loans in that investment in this figure, since this is partly invested as equity and partly as shareholder loans. So as you can see here on this slide, this is how the development has been on adjusted EBITDA back to 2022. Then if we turn to the balance sheet, we had total assets at the end of Q2 of $2,700,000,000 which is up from $2,400,000,000 in Q1. And this is mainly due to delivery of vessels and drawdown on debt related to these during the quarter. Available liquidity was $98,700,000 or 99,000,000 as we have rounded it off here compared to $2.00 $1,000,000 last quarter.

And the reduction in cash is due to the fact that we had pre positioned about $80,000,000 in cash in preparation for the closing of the GEO Gas LNG transaction, which means that the real cash position was about $177,000,000 at the end of the quarter. This amount is now reflected on the trade and other current assets on the balance sheet since the closing took place on July 1. Book equity was $789,200,000 compared to $771,000,000 in Q1. So overall, we ended the quarter with an equity ratio of 29.1% compared to 31.7% in Q1. Then we move on to financing initiatives.

This quarter and post quarter end, we have signed loan agreements for the refinancing of the final LR1 product tankers on charter to Braskem. We are pleased to see the completion of this financing project and all new buildings are now fully financed on attractive terms. Further, we also put in place long term financing for the three Suezmax vessel on charter to NAT, where we have amended and upsized the existing financing agreements and extended the maturity until 02/1930. As a general comment, we continue to see attractive terms in the market with continued downward pressure on margins. And as a final comment on the funding side, in connection with the announced LNG transaction, KKR is expected to inject about $30,000,000 of additional equity into Ocean Yield in order to facilitate further growth going forward.

We expect that this will happen during the third quarter. And as you may have seen also this morning, we will conduct some investor meetings this week to see if we can complete a new bond issue to also facilitate further growth. And in connection with this, we expect to buy back the bond OCY08, which has maturity in 2027. So that completes my part of the presentation and I give the word back to you, Andreas.

Andreas, CEO or Senior Executive, Ocean Yield: Thank you, Erik. Let me summarize the quarter on Page 10. So the start of the year has been active and as we continue to grow and diversify the Ocean Yield portfolio through M and A. I’m very pleased with our collaboration and partnerships with industry leading ship owners in the respective segments, and we remain optimistic to growing on these further. The portfolio of long term leases to leading counterparties continue to perform well.

As Erik mentioned, we continue to maintain a strong balance sheet with ample available liquidity and room for further growth. Our access to capital in both the bond and banking markets remain strong, increasing our competitive position. So with that, I would like to thank you all for watching the Ocean Yield Q2 earnings presentation. And I would now like to open up for questions.

Erik Eide, CFO, Ocean Yield: So Andreas, we have received a couple of questions also this morning. The first is on LNG. You are increasing your exposure to the LNG segment. Are you concerned about the big order book in this segment?

Andreas, CEO or Senior Executive, Ocean Yield: Well, let me start off by saying that we’re always concerned about the order book. But I think in this case, it’s important to mention that we’re not in the spot market. All our vessels are on long term charters to investment grade rated companies. And in addition to that, we also see a couple of factors that gives us comfort. I think one, we do see an increasing amount of vessels being scrapped, particularly the older vessels.

And secondly, we do see that there is increasing demand. So demand is definitely growing. So there’s more volume flowing. So I think that to underpin that, we do see higher degree of tendering activity at the moment where energy majors are actually out looking for long term charters. Thank you.

Erik Eide, CFO, Ocean Yield: Second question is, you are guiding for 30,000,000 equity issue from KKR. So the question is, can you elaborate on KKR’s rationale for this and how the owner is managing the Ocean Yield balance sheet?

Andreas, CEO or Senior Executive, Ocean Yield: I think when it comes to capital allocation, there are a couple of important factors to bear in mind. For us, we always start with maintaining a strong balance sheet. Then following that, we look at accretive growth. Then thirdly, we look at paying a dividend if the two other criteria are sort of successfully met. So those are sort of the way that we run the balance sheet.

Erik Eide, CFO, Ocean Yield: Thank you. The last question is related to the bond issue that we sent the press release on this morning. And what is the use of proceeds for this bond? Is it growth or dividends, etcetera? So I think maybe I can start answering that.

Definitely, proceeds will be used first of all to buy back OCY08, which is a bond that we have outstanding today, has maturity in 2027. And then of course, following that, it will be for to facilitate further growth and new investments. So that seems to be all the questions we have received this morning.

Andreas, CEO or Senior Executive, Ocean Yield: Okay. I think if there are no further questions, that concludes today’s presentation. So with that, I thank you all for watching the Ocean Yield Q2 earnings presentation.

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