If only it wasn’t a ship…

For those who want a little clarity re: my comments on Standard Drilling yesterday it really comes down to this paragraph in their most recent financial results:

Looking at the performance of the vessels there is a positive EBITDA (adj.) excluding start-up cost, dry dock, special survey and maintenance in Q2 18 of USD 0,4 million (Q2 1.7 negative USD 1,1 million) from chartering out the 5 large –sized PSV’s. Including the ownership in PSV Opportunity AS (25.53%) and in Northern PSV AS (25.53%) the group netted a positive EBITDA (adj.) excluding start-up cost, dry dock, special survey and maintenance of USD 0,2 million (Q2 17 negative USD 1,5 million).

To put this in laymans terms: the company has calculated an adjusted cash flow and said “hey, if the costs of dry docks, survey, and maintenance were excluded from the running of these assets we would have made 0.x million”…Excluding maintenance????!…But then it wouldn’t be a ship would it?  It would be like a property which you purchased in a property crash and then held onto paying only land tax until the value recovered? But the whole point of why buying a ship in a downturn is really risky is because it has running costs so excluding those is just an offence to common sense. EBITDA is a flawed metric at the best of times, adjusted EBITDA is close to meaningless.

Also, as can be seen from PSV Opportunity I, the start-up, dry dock, survey costs etc are material so excluding them is also deliberate obsfucation:

PSV OP I Structure.png

Source: PSV Opportunity I Information Memorandum

If only they hadn’t purchased ships … but they did…

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