Skip to main content
No. of Recommendations: 9
Dry bulk biggie Golden Ocean (GOGL) reported their Q3 2021 on 11/24/21, the day prior to Thanksgiving 2021. Q3 2021 results were good and shares good a very nice 14% bounce that day. GOGL is my largest shipping position, so that was a nice event for me going into the holiday. I will come back to the results later.

Golden Ocean (GOGL) is among the largest dry bulk shipping companies by tonnage (GOGL owns 48 Cape vessels in the Cape category and leases in another 8 Cape vessels). Being a large player in the market, it is always informative to hear their views. So, here are the Macro items
1. Since 1991, dry bulk shipping growth has tracked GDP growth and usually been higher. Only two times in that stretch has the growth been lower(Great Financial crisis (2008) and Covid pandemic (2020))
2. Usually the shipping market deals with oversupply. Next two years, this will definitely not be the case. Factors include preparing for Energy Efficiency Design Index (EEDI), uncertainty on future propulsion technology, existing yard capacity, vessel cost
3. Costs for managing Covid-19: GOGL said $350 per day for them. Quick check: $350 * 90 days = $31,500 seemed low. Okay, what about a multiplier. Since the size of fleet matters, my thinking is they excluded the "per ship". For GOGL, that's 81 - 91 vessels.
Then, the maths (English expression) works out as $350 * 90 * (81 - 91) = $2.55M - $2.87M per quarter.
FWIW, I have not seen any other company besides GOGL provide Covid-19 cost data other than saying Covid-19has impacted their operations.
4. Port congestion chart (Slide 14): Trending higher the last few years. Probably won't be as bad as the container port delays forthe remainder of 2021, or in 2022. EEDI coming into play in 2023 could change things.

GOGL Q3 2021 presentation:


Okay, for those interested, the GOGL operational side.
- Rev of $388.4M
- Net income of $195.3M
- Div for Q3 - 85c/sh (GOGL closed on 11/23/21 @ $7.99/sh, so the Q3 payout alone represented a > 10% yield)
Since Q3 2021 represented the quarter when the Baltic Dry Index (BDI) was hitting 13 year highs, I was already pretty sure GOGL would have good => great Q3 results. The BDI continued upward the first week of Oct 2021. From around mid-Oct 2021, the BDI tumble was quite dramatic. Would Q3 end up being a flash-in-the-pan quarter? Slide 4 says No.
GOGL took short term coverage sometime in Q3 and have
~ $41,900 daily for 83% of Cape days
~ $27,300 daily for 87% of Panamax days
for Q4 2021.
In addition, some coverage extends into Q1 2022 - typically, the slowest quarter on an annual basis.
GOGL mgmt did a great job on their planning and execution for Q4 2021 and Q1 2022. To put some added perspective on what GOGL accomplished, here is some charter coverage taken by Diana Shipping (DSX) recently--

Yes, DSX charters have longer terms. But, that means passing on the opportunity that 2022 plays out similar to 2021.

GOGL ex-div is Dec-8th-2021. If shares head a lot higher, I do have some higher priced shares I could trim. Otherwise, I will wait to collect the div.

Print the post Back To Top
No. of Recommendations: 0
Three additional comments:
1A. This one is a correction. I said
GOGL owns 48 Cape vessels in the Cape category and leases in another 8 Cape vessels
That first Cape should be removed. The sentence should read
GOGL owns 48 vessels in the Cape category and leases in another 8 Cape vessels.

It does change things. GOGL completed a major transaction at the start of 2021. The company acquired 18 vessels, including 10 Newcastlemax vessels. These vessels fall into the Cape category, but have 20-25% larger capacity than an avg Cape (170K DWT). GOGL now own a total of 13 Newcastlemax vessels.

2A. EEDI is the going forward standard for newbuilds in shipping. But shipowners still have to deal with meeting standards for their existing ships. That's Energy efficiency existing ship index (EEXI).
Dealing with their existing fleets is a separate issue. There will be some cost associated with meeting EEXI, and it will vary by ship. In that regard, GOGL appear to have less of a challenge than other shipping companies. Why? The majority of their owned vessels (75 of 81) delivered in 2011 or later.

3A. While the dry bulk shipping rates took a tumble in Oct-Nov 2021, second hand vessel prices held pretty steady. GOGL sold two vessels towards the end of Q3 2021. During the earnings call, GOGL mgmt indicated they would be open to selling additional older tonnage. In parallel with the vessel sales, GOGL ordered additional vessels.
Print the post Back To Top