Business context and reporting period
OceanPal Inc. filed this Form 20-F for the fiscal year ended December 31, 2021. It is an annual report, not a standalone fourth-quarter report. Incorporated in April 2021, the company became independent through a spin-off from Diana Shipping on November 29, 2021; its vessels began operating under OceanPal on November 30. Accordingly, OceanPal’s financial statements cover its inception through year-end, while separate predecessor statements cover January 1 through November 29 and provide 2020 and 2019 comparisons. The periods are not directly comparable.
OceanPal owns three dry-bulk carriers—two Panamax and one Capesize—with combined capacity of 319,131 dwt and a weighted average age of about 17 years. Its common stock trades on Nasdaq under OP. Financial statements are prepared under U.S. GAAP.
Financial results and liquidity
| Metric | OceanPal, inception through Dec. 31, 2021 | Predecessors, Jan. 1–Nov. 29, 2021 | Predecessors, 2020 |
|---|---|---|---|
| Time-charter revenue | $1.334 million | $11.343 million | $9.411 million |
| Net income/(loss) | $0.134 million | $0.751 million | $(3.796) million |
| Net income attributable to common shareholders | $0.065 million | Not applicable in predecessor statements | Not applicable |
| Operating cash flow | $0.715 million | $3.181 million | $(2.723) million |
OceanPal’s post-spin-off results include 32 calendar days of vessel operations. Its reported expenses for that period were $0.054 million of voyage expenses, $0.360 million of vessel operating expenses, $0.354 million of depreciation, $0.358 million of general and administrative expenses, and $0.074 million of related-party management fees. Basic and diluted earnings per common share were each $0.01, after $0.069 million of Series C preferred dividends. The filing does not provide a meaningful standalone quarterly margin comparison.
For the predecessor operations, 2021 revenue increased $1.932 million versus 2020, chiefly due to higher average charter rates; reported predecessor net income was $0.751 million versus a $3.796 million loss in 2020. The filing says predecessor revenue for the 2021 predecessor period plus OceanPal’s post-spin-off period was $3.26 million above 2020. Predecessor 2020 revenue fell 24% versus 2019, while net losses narrowed from $1.863 million in 2019. These comparisons reflect different periods and predecessor accounting, not a like-for-like OceanPal annual comparison.
At December 31, 2021, OceanPal reported cash and cash equivalents of $1.673 million, working capital of $2.27 million, total current assets of $3.200 million, and current liabilities of $0.931 million. Total assets were $49.080 million, including vessels net of $45.728 million; stockholders’ equity was $48.149 million. The balance sheet lists no debt, and management stated the company had no debt as of the annual-report date. Net investing cash use was $0.042 million, for vessel improvements; $1.0 million of financing cash came from Diana Shipping’s spin-off contribution.
At December 31, fixed, non-cancellable charters were expected to generate $2.657 million in gross revenue through their expiration in 2022. For the brief post-spin-off period, OceanPal reported a TCE rate of $13,333 per available day and 100% fleet utilization, based on 96 ownership, available, and operating days.
Material changes, outlook, and risks
- Capital and dividends: In January 2022, OceanPal completed an offering that generated approximately $14.72 million in net proceeds to the company. The proceeds were committed substantially to general corporate purposes. As of April 5, 2022, 14.474 million Class A warrants remained outstanding, exercisable at $0.77 per share. The board declared a $0.05-per-share common dividend for Q4 2021, payable on or about April 11, 2022. Series C preferred shares carry cumulative dividends at 8% annually and rank ahead of common shares for dividends and liquidation.
- Management outlook: Management expected 2022 revenue, vessel operating expenses, and depreciation to rise compared with OceanPal’s short post-spin-off period, primarily because of more vessel operating days; further fleet expansion could also increase revenue and costs. Management expected available cash, charter revenue, and the January offering proceeds to cover working capital needs for at least 12 months. No quantified full-year revenue or earnings guidance was provided.
- Market and operating exposure: The company depends on volatile dry-bulk charter rates, short- to medium-term charters, and a small number of customers. Three charterers accounted for 93% of OceanPal’s post-spin-off revenue. The Baltic Dry Index peaked at 5,650 in October 2021, fell to 2,217 on December 24, 2021, and was 2,357 on April 1, 2022. Management noted that charter rates, vessel values, fuel costs, fleet supply, port congestion, and global trade could materially affect results.
- Other significant risks: The company disclosed the ongoing effects of COVID-19, environmental and ballast-water compliance costs, vessel age and maintenance exposure, counterparty and insurance risks, potential sanctions and geopolitical disruption, and conflicts of interest arising from shared officers and related-party service providers. The Russia-Ukraine conflict had not affected OceanPal’s charter contracts as of the report, but management warned of possible future impacts.
- Listing status: Nasdaq notified OceanPal on March 8, 2022 that its share price had been below the $1.00 minimum for 30 consecutive business days. The company had until September 5, 2022 to regain compliance.
- Controls and audit: The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective, but the filing includes no management assessment or auditor attestation of internal control over financial reporting, citing the company’s newly public status and emerging-growth-company exemptions.
Important facts for investors to verify
- Review the audited financial statements and distinguish OceanPal’s short post-spin-off reporting period from the predecessor carve-out results and any pro forma information.
- Confirm the current charter rates, redelivery dates, renewal assumptions, and post-expiration employment plans for each vessel; assess the sensitivity of cash flow to lower rates and off-hire days.
- Track cash use, preferred-dividend obligations, and the effect of exercise of the 14.474 million remaining warrants on share count and dilution.
- Check the company’s progress in meeting Nasdaq’s minimum bid-price requirement and the resulting implications if it does not regain compliance.
- Assess customer concentration, related-party management and brokerage fees, and Diana Shipping’s preferred-share voting influence and potential conflicts.
- Monitor required vessel upgrades, dry-docking needs, and compliance costs, including ballast-water and emissions rules, alongside any developments in the Russia-Ukraine conflict.