DOSSIER

 

Tanker companies enjoy an earnings boom


by Craig Jallal


The HAFNIA KALLANG outbound from Amsterdam passing the IJmuiden breakwaters While Hafnia is not the first tanker company to have a dual listing - Euronav did the same under then chief financial officer (later CEO) Hugo de Stoop - it is an indication that tanker companies’ stock has risen to the extent that the more adventurous can consider a New York Stock Exchange (NYSE) listing.Euronav has had an interesting 2023, after a long-running takeover battle that resulted in a fleet of 40 tankers and eight on order, which it states is ‘the world’s second-largest independent quoted crude oil tanker company (dwt) engaged in the ocean transportation and storage of crude oil’. Its full year 2023 results yielded a turnover of US$1.23Bn (US$0.85Bn in 2022) and a result (pre-tax) of US$864M (US$206M in 2022).Already listed in New York is Frontline plc, which is also listed on the Oslo Stock Exchanges under the symbol “FRO”; it is part of the Fredriksen group which controls 78 tankers (as at end-March 2024), with another nine tankers on order.

Frontline plc unaudited financial results for 2023 included a revenue of US$1.80Bn, which after expenses, produced a timecharter equivalent of US$1.17Bn for the year. Commenting on the Frontline plc results, Frontline Management AS chief executive officer, Lars H. Barstad, said: “Frontline delivered its strongest full year result in 15 years, despite muted markets in the fourth quarter. The year has been exceptional for the tanker industry and the asset classes we deploy; however, it is the Suezmax, Aframax and product markets that have offered volatility. During the fourth quarter, Frontline started taking delivery of the 24 modern VLCCs acquired from Euronav, and it is a testament to Frontline’s scalable business platform that within a few months Frontline has doubled its exposure in the VLCC market, by increasing its overall earnings capacity by more than one-third, with minimal impact on its operational setup. The continuous disruption in the Red Sea has caused West/East trading lanes to widen, which we believe benefits the larger vessel classes, offering economies of scale as oil and products move around the Cape of Good Hope.”


“The year has been exceptional for the tanker industry”


Frontline Management AS’ chief financial officer, Inger M. Klemp, added: “When we entered into agreements with Euronav to acquire a high-quality ECO fleet of 24 VLCCs on 9 October 2023, we communicated that the Hemen shareholder loan may not be fully drawn as the company was exploring other alternatives to free up capital, including re-leveraging part of the existing Frontline fleet and/or sale of older non-eco vessels. In January and February 2024, we executed on this with the agreement to sell six, older non-eco vessels and the ongoing process of refinancing 24 vessels, on, what we believe are, attractive terms, expected to generate net cash proceeds of approximately US$646M. This will enable us to fully repay the Hemen shareholder loan and the amount drawn under the US$275M senior unsecured revolving credit facility with an affiliate of Hemen in relation to the acquisition and maintain our competitive cash breakeven rates. The Oslo Stock Exchange is well-known for attracting specialist shipping companies (source: Adobe StockAlso listed on the NYSE is DHT Holdings, which had a fleet of 24 VLCCs, with a total capacity of 7,479,177 dwt; it reported shipping revenues in 2023 of US$556.1M, compared to US$450.4M in 2022. The increase from the 2022 period to the 2023 period includes US$131.5M attributable to higher tanker rates, partially offset by US$25.9M attributable to decreased total revenue days.Speaking ahead of the release of the results, the president and CEO, Svein Moxnes Harfjeld, stated: “We have a constructive view of the market supported by growth in oil demand, expansion of transportation distances and very limited supply of new ships into a rapidly aging global fleet. We always seek to reward our shareholders, operate with high governance standards, and execute what we believe to be an appropriate strategy tailored to our market. The whole DHT team is focused on premium revenue generation, maintaining a competitive cost structure, a solid balance sheet and a clear capital allocation policy.”

Fellow US-listed crude oil tanker operator International Seaways’ net income for the full year of 2023 was US$556.4M, representing an increase of US$168.6M compared to the full year of 2022.

“2023 marked another record year for Seaways and our portfolio of tanker assets,” said International Seaways president and CEO, Lois K. Zabrocky. “During the year, drawing on our substantial cash flows, we continued to pull all the levers of our balanced capital allocation strategy. This included ordering LR1s to renew our fleet for our niche joint venture in the Panamax International pool, enhancing the balance sheet with substantial debt prepayments that lowered our cash break evens, doubling our revolving credit capacity and returning approximately 16% of our average market capitalisation during 2023 to shareholders through dividends and share repurchases. Looking ahead, we expect to continue executing this balanced approach and further building on our track record of opportunistically renewing the fleet, improving the balance sheet, and returning substantial cash to shareholders.”

Ms Zabrocky added: “Seaways has significant momentum that we expect to carry forward throughout the year, as positive market fundamentals remain intact. Strong tanker demand continues to be driven by growing oil demand and higher utilisation from the evolving global energy trade where energy security is prioritised. Combined with the lowest orderbook in more than 30 years and an aging global fleet, we remain confident that current tanker market dynamics will prove to be sustainable in the near term and drive strong earnings for the foreseeable future.”The company’s CFO, Jeff Pribor, stated: “We took important steps to enhance and diversify our capital structure in 2023 and believe Seaways’ balance sheet is the strongest it has ever been. This strength is evidenced by over US$600M on in total liquidity and the lowest net-loan-to-value ratio in company history at 17%. As part of our balanced capital allocation strategy, we proactively de-levered, exceeding our mandatory debt repayments by nearly US$300M in 2023, which reduced our break evens to below US$14,500 per day. As we continue to generate free cash, we expect to build on our track record of compelling shareholder returns.”In 2023, Scorpio Tankers Inc., generated a revenue of US$1.34Bn in 2023, a decrease from the previous year’s US$1.56Bn, marking a year-over-year change of -14.18%. The 2023 net income was US$570M, and the adjusted EBITDA for the year was reported as US$959M.

These figures highlight a significant performance for Scorpio Tankers in 2023, showing robust net income and EBITDA, despite a decrease in revenue. The company’s focus on deleveraging and returning value to shareholders is evident in its substantial net income and efforts to reduce debt.These latest results show the tanker sector is on a mini boom and that tanker companies feel confident their product is strong enough to interest US investors.

Source : Riviera Maritime media

 

 

 

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