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Norwegian Cruise Line (NCL) has confirmed that fuel expenses fell by $10.98 million, or 12.0 percent, to $80.6 million during the second quarter of 2016, down from $91.58 million during the corrresponding period last year. In 2014, the figure was lower than this year, at $77.83 million.

In the first six months of 2016, fuel costs declined by $16.68 million, or 9.3 percent, to $162.28 million, down from last year's figure of $178.96 million. In 2014, fuel expenses during the first half of the year were $156.87 million.

The average fuel price per metric tonne in the second quarter, net of hedges, decreased 15.9 percent to $469 from $558 in 2015.

Hedging:

A loss of $3.2 million was recorded in other expenses related to the ineffective portion of the company's fuel hedge portfolio due to market volatility.

As of June 30, 2016, the NCL had hedged approximately 88 percent, 82 percent, 55 percent and 50 percent of its total projected metric tonnes of fuel purchases in 2016, 2017, 2018 and 2019, respectively.

The following table provides amounts hedged and price per barrel of heavy fuel oil (HFO) and marine gas oil (MGO), which are hedged utilizing U.S. Gulf Coast 3% (USGC) and Brent, respectively.

H2 2016
% of HFO consumption hedged: 95%
Average USGC price/barrel: $68.73

% of MGO consumption hedged: 76%
Average Brent price/barrel: $34.99

2017
% of HFO consumption hedged: 81%
Average USGC price/barrel: $59.69

% of MGO consumption hedged: 85%
Average Brent price/barrel: $41.11

2018
% of HFO consumption hedged: 63%
Average USGC price/barrel: $56.41

% of MGO consumption hedged: 25%
Average Brent price/barrel: $46.50

2019
% of HFO consumption hedged: 57%
Average USGC price/barrel: $47.82

% of MGO consumption hedged: 25%
Average Brent price/barrel: $49.25

Forecasting

Please find below the company's expectations regarding fuel consumption and pricing in 2016.

Fuel consumption in metric tonnes:

Q3 2016: 170,000
FY 2016: 725,000

Fuel price per metric tonne, net of hedges:

Q3 2016: $510
FY 2016: $480

Effect on Adjusted EPS of a 10% change in fuel prices, net of hedges:

Q3 2016: $0.01
FY 2016: $0.02

Overall results

In its overall results, NCL posted a second-quarter net income of $145.2 million, or $0.64 per share, compared with $158.5 million, or $0.69 per share, in 2015.

Adjusted net income was $192.6 million, or $0.85 per share, compared with $171.6 million, or $0.75 per share, last year.

Revenue increased 9.3 percent to $1.2 billion compared with $1.1 billion in 2015. Adjusted net revenue in the period increased 10.3 percent to $917.8 million compared with $832.4 million in 2015.

Commenting on the results, Frank Del Rio, NCL president and chief executive officer, said: "While successive geopolitical events dampened North American consumer demand primarily for our Mediterranean itineraries, our management team worked diligently to identify cost saving opportunities to partially mitigate these impacts and generate solid Adjusted EPS growth of 13 percent.

"It was a challenging booking environment where we remained mindful of our go to market strategy to minimize discounting and maintain our hard-fought pricing gains, resulting in lower occupancy, which in turn lowered onboard revenue and overall Net Yield growth compared to our expectations earlier in the year."