January 28, 2010 / 12:33 PM / 10 years ago

UPDATE 2-K-SEA posts surprise loss; shares tumble

* Q2 loss/LPU $0.22 vs est EPS $0.03

* Revenue down 22 pct

* Vessel utilization, lowest in 10 years

* Suspend distribution for Q2 (Adds analyst comments, recasts lead)

By Arundhati Ramanathan

BANGALORE, Jan 28 (Reuters) - K-SEA Transportation Partners LP KSP.N, whose tank barges transport refined petroleum products, swung to a surprise second-quarter loss, hurt by lower vessel utilization, and suspended its distribution for the period.

Shares of the company fell as much as 29 percent to $10.50 Thursday on the New York Stock Exchange.

“The results were underwhelming and show that demand for tanker rates continues to fall,” Raymond James analyst Kevin Smith said.

The company said it was not declaring a distribution in the second quarter as it was looking to use its cash flow to reduce debt. It plans to reinstate the distribution when it regains visibility in its future results.

Analyst Smith said although they have been warning unit holders for a while that the distribution was in jeopardy, management’s announcement still surprised many in the investing community.

The company said its second quarter vessel utilization fell to 80 percent, the lowest it has experienced in the last ten years, from 88 percent a year ago.

“Right now we really need to see a strong pickup in petroleum demand. The tanker market is oversupplied based on current demand levels,” analyst Smith said. “We may need to see some consolidation in the market place and a reduction of the supply of tankers.”

Net loss for the quarter was $4.2 million, or 22 cents per limited partner unit, compared with net income of $3.6 million, or 16 cents per limited partner unit, a year ago.

Total revenue fell 22 percent to $68.6 million.

Analysts on average were expecting earnings of 3 cents a share, before special items, on revenue of $71.5 million, according to Thomson Reuters I/B/E/S. (Additional reporting by Arup Roychoudhury in Bangalore; Editing by Vinu Pilakkott and Anil D’Silva)

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