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Hunter Group ASA

Third quarter 2021 results

25 November 2021

Hunter Group ASA - Third quarter and 3Q YTD 2021 results	2

Highlights

Financial highlights

• Total revenues of USD 7.32m
• • Spot pool revenues of USD 1.11m
  • Time charter revenues of USD 6.21m
• Total operating expenses of USD 8.78m
• • Vessel opex incl. insurance of USD 2.33m
  • Voyage exp. and commissions of USD 0.60
  • G&A expenses of 0.32m
  • • USD 0.31m administrative expenses
    • USD 0.1m legal expenses
• Net currency loss of USD 1.1m
• EBITDA of USD 4.07m
• Net loss of USD 1.71m
• Average daily earnings of USD 21,000
• • Avg. daily spot earnings of USD 12,1001
  • Avg. daily time charter earnings of USD 24,150
• Opex incl. insurance of USD 6,340 per day per vessel

Key events in 3Q 2021

• Distributed USD 31.9m to shareholders (0.50 NOK per share) in July as a reduction of the Company's share premium
• Extended TC coverage for two of our vessels for short terms at premium rates compared to spot market

Subsequent events

• As of the date of this report, 94% of days in the fourth quarter of 2021 have been booked at an average est. dayrate of USD 26.600
• • 77% of spot days booked at an avg. est. dayrate of USD 18,5001
  • Average Q4 TC dayrates of USD 28,700

• 368 available earnings days and 368 opex days
• • 92 pool spot days
  • 258 time charter days
  • 18 repositioning days
• Current pro forma cash flow breakeven of approx. USD 21,500 per day

1) Discharge to discharge basis

Hunter Group ASA - Third quarter and 3Q YTD 2021 results	3

Management update

For the third quarter, the Company achieved an average day rate of approx. USD 21,000 per day through a combination of spot and time charters. Achieved spot rates were USD 12,100 per day, while average time charter rates came in at USD 24.150 per day. Clearly the recovery of the tanker market has taken longer than we anticipated, but we have managed to extend/fix our vessels on shorter TCs at premium rates and with attractive redelivery locations. We believe our fleet is well positioned going forward.

Global oil inventories are now at critically low levels, demand remains strong and oil prices are moving higher. Day rates have increased from the low levels seen this summer and recent spot fixtures for scrubber fitted vessels are now at around USD 22,000, which is enough to put us back in the black. If these trends continue it should be only a matter of time before oil production, seaborne exports and consequently tanker rates and asset values materially pick up from current levels.

During the third quarter we continued to execute on our capital allocation policy and returned in excess of USD 31m (NOK 0.50 per share) to our shareholders through dividends. Since our final vessel delivery of Hunter Frigg in August 2020 we have paid total dividends of 1.50 NOK per share, or close to USD 100m.

Current charter coverage

Charter coverage	Q3 '21	Q4 '21	Q1 '22	Q2 '22
Hunter Freya			Spot
Hunter Disen		TC	Spot
Hunter Idun		TC		Spot
Hunter Frigg		TC		Spot
% days covered	100%	94%	36%	0%
Avg dayrate covered ($k/d)	21,000	26,600	29,000	-

Hunter Group ASA - Third quarter and 3Q YTD 2021 results	4

Third quarter market review

Benchmark VLCC rates averaged around $3,5001 for the third quarter of 2021, continuing one of the most challenging periods in recent history for tanker owners. For modern scrubber fitted VLCCs, however, the quarter resulted in average rates of USD $11,0001 per day. The slight increase compared with the previous quarter reflects continued improvements in tanker market fundamentals. Although the recovery has been slower than previously anticipated, the fundamentals continue to move in the right direction.

Global oil demand increased by almost 2mbd from 96.7mbd on avg. during the second quarter to 98.6mbd during the third. September demand reached 99.2mbd, which is the highest figure seen since December 2019. The recovery in global oil demand continues to outpace expectations and is quickly approaching the 100mbd mark. For reference, monthly all time high global oil demand occurred in July 2019 at 102.5mbd. Global oil production averaged almost 2mbd lower than consumption at 96.8mbd during the quarter, still held back by OPEC+ cuts and over-compliance, leading to inventory draws of around 164 million barrels, or 1.8mbd. Inventories around the world are now well below their 5-year averages and pre- covid levels and declining, which warrants increased production and seaborne oil exports in the near future.

Positive signs emerged from the supply side of the equation towards the end of the quarter, with 4 VLCCs sent to the scrap yards in September alone. Compared with 6 VLCCs scrapped during the first six months of the year, this represents a significant uptick and bodes well going forward.

Market outlook

The positive developments seen during the latter part of the third quarter have continued into the fourth and we see numerous positive drivers for the tanker market going forward. We believe that the market trough is behind us, and that we are at the beginning of what may be a very interesting and lucrative period for owners of large modern eco design tankers.

First, the demand recovery continues at a strong pace and is expected reach 100mbd during the first quarter of 2022. EIA even expects oil demand of 102.4mbd in December next year.

Secondly, OPEC+ is steadily increasing production according to their stated schedule, and this is beginning to translate into meaningful increases in seaborne crude oil. According to FGE, seaborne crude oil increased by 1.1mbd to 37mbd during October, compared with pre-covid levels of around 41-42mbd. OPEC alone produced around 29.3mbd of oil in October, which is approx. 5mbd below their 2019 average. Political pressure on OPEC to increase production beyond the stated schedule, due to low inventories and high oil prices, has increased dramatically during the past month. Especially from the US and China. Although OPEC has stood their ground so far, this could mean increased production beyond the stated monthly 0.4mbd increase further down the line.

Thirdly, scrapping has picked up materially on the back of high steel prices and renewed talks between Iran and the west. So far in 2021, 14 VLCCs has been sent to the demolition yards, compared with only 4 each year for 2019 and 2020. We expect this trend to continue as the fleet is aging (avg. fleet age over 10 years) and 80-90 VLCCs, which are at or above the historical average scrapping age of 20 years, are clear scrapping candidates. Should talks between Iran and the west come to fruition, this should significantly increase scrapping which would more than offset the return of the Iranian tanker fleet.

Fourthly, the extraordinary natural gas prices experienced lately have prompted several power producers to shift from gas to oil. Estimates vary greatly, but many expect additional demand for oil of 0.5-1.5mbd for as long as gas prices stay elevated. Should the winter prove to be colder than usual, there could be additional upside to these estimates.

Finally, there are very few orders for new tankers, but plenty of orders for container and bulk vessels taking up yard capacity, and we expect this trend to continue until there is increased clarity in terms of future propulsion technologies. Coupled with very high steel prices and low rates, fleet growth should be limited for several years.

"We can not direct the wind, but we can adjust the sails."

Source: EIA, FGE, Company

1) Approx. ten year old VLCC without scrubber

Hunter Group ASA - Third quarter and 3Q YTD 2021 results	5

Condensed consolidated financial statements for 3Q 2021

Consolidated income statement

	Quarters		Year to date	Year
(Unaudited figures in USD 1 000)	3Q 2021	3Q 2020	Note	30.09.2021 30.09.2020	31.12.2020
Revenues
Pool revenues	1 114	8 669		5 747	43 379	48 567
Time charter revenues	6 208	26 498		22 716	42 189	60 037
Other income	0	640		280	640	0
Net gain on sale of assets	0	0	5	2 567	0	2 492
Total Revenues	7 322	35 806		31 310	86 208	111 096
Operating expenses
Vessel operating expenses	2 334	4 084		7 446	8 467	12 404
Voyage expenses and commissions	596	703	1	1 360	1 619	2 912
Depreciation and amortisation expense	3 246	5 292	6	10 506	11 141	16 325
General and administrative expenses	320	456	4	1 131	1 093	1 649
Total operating expenses	6 495	10 535		20 442	22 319	33 291
Operating profit (loss)	827	25 271		10 868	63 888	77 806
Net financial income (loss)1	-2 539	-3 581		-7 611	-11 592	-14 723
Profit (loss) before taxes	-1 712	21 690		3 257	52 296	63 083
Tax on ordinary result	0	0		0	0	0
Net profit (loss)	-1 712	21 690		3 257	52 296	63 083
Earning per share	0,00	0,04		0,01	0,09	0,11
Earnings per share diluted	0,00	0,04		0,01	0,09	0,11
	Quarters
(Unaudited figures in USD 1 000)	3Q 2021	3Q 2020		30.09.2021 30.09.2020	31.12.2020
Net profit (loss)	-1 712	21 690		3 257	52 296	63 083
Other comprehensive income, items to be reclassified to profit & loss
Translation differences	0	0		0	0	0
Comprehensive income for the period	-1 712	21 690		3 257	52 296	63 083
Total comprehensive income attributable to:
Equity holders of the parent	-1 712	21 690		3 257	52 296	63 083
Total comprehensive income	-1 712	21 690		3 257	52 296	63 083

1) Includes USD 1.7m interest expense