vlcc tanker stocks: Oil tankers face choppy seas as wave of new ships weighs on rates

Other https://1investing.in/ like Shipping Corporation of India trades with a P/E of 11.25 and is expensive while Mercator Lines trades at 7.9 times. However, on a YoY basis, the current spot freight rates in the tanker segment are still sharply lower, as global demand for vessels in this segment is still to fully recover to those that prevailed a year earlier, point out analysts. Meanwhile, in tanker segments such as VLCC , spot freight rates are currently at $9,150 per day levels, compared to the average spot freight rate of $4,514 per day in the September ’09 quarter, according to shipping industry officials.

• Taking into account vessel hire and other expenses including bunker fuel and insurance, overall monthly costs are estimated anywhere in the region of $1.5 million per tanker.
• Company has a total of 11 crude carriers,17 product carriers, 5 gas carriers and 13 dry bulk carriers.
• «Every vessel that is removed from trading and tied up in floating storage would be positive for the crude tanker market balance – supporting earnings over the next months,» said Arctic Securities analyst Erik Nikolai Stavseth.

In the dry bulk segment, which consists of transporting merchandise like iron ore, steel etc. the Baltic Dry index averaged 1,348 in November 2022 vis-à-vis 2,780 a year earlier. “The biggest of the ULCS are proving less popular with carriers seeing the 15-16,000 TEU ships as a better option. This is because they still offer solid savings from economies of scale while not putting the same limits on flexibility as the 20,000+ TEU ships have in terms of trading patterns,” says Sand.

VLCC forays into Africa, floats 70:30 joint venture with Kenya’s Sameer Group

Despite the much poorer market conditions in the first five months of this year compared with the start of 2020, ordering of VLCCs has risen 125% to a total of 8.2m DWT, up from 12 ships to 27. After just five months, VLCC ordering is now only 4 ships (1.1m DWT) shy of total ordering in 2020. The rise in VLCC contracting has been enough to make up for the fall in contracting of smaller crude oil tankers. Ordering of Aframax and Suezmax tankers has fallen 44.5% to 1.5m DWT between January and May 2021 compared to 2020. Taking into account the fact that demand for vessels to transport and import crude oil has been rising steadily, it appears that this company has tremendous potential to grow. Furthermore, key metrics such as revenue and margins in relation to this company is expected to grow.

To be sure, Intelligent Investor`s Sodhi notes that the entire oil sector isn`t an investor playground. Amid a glut of oil inventory, tanker prices and lease rates have doubled over the past 18 months, he noted. At least 11 very large crude carriers have been reported as booked with storage options, rising from around five vessels at the end of last week.

However, prior to this recent surge, the GE Shipping stock had sharply under-performed the broader Sensex from mid-May till end-October. Given this renewed interest, the GE Shipping stock has risen close to 8% since the start of November, to close at Rs 259.3 on Friday. Other stocks such as Shipping Corporation of India had gained 11.7% during this period, while Mercator Lines had risen 17%. IOC bought 1.9 million barrels of US crude in its second import tender seeking oil from the Americas, company Director A K Sharma told here.

«I don’t see the Indian SPR having much movement on crude prices, mainly being that there is so much crude available,» said Matt Stanley of brokerage Freight Investor Services in Dubai. «Should this widening contango trend continue, we expect more charterer interest for hiring VLCCs as floating storage,» said analyst Omar Nokta of Clarkson Capital Markets. Old ships are being scrapped and new ones are being built continuously. As you can see in the above snapshot of 2020 AR, the CFI includes items such deposits/withdrawal of deposits/etc, while net capex is to the tune of 100Cr. Hence, CFI smudges the true cash flow towards operational investment. Your CFO matches closely but other items and net cash is way off from that data.

LATEST NEWS

The company was founded on April 30, 2018 and is headquartered in Piraeus, Greece. I was expecting muted revenue for the remaining year once the oil contango was over. The bounce back of baltic dry index came in as a pleasant surprise. The levels were last touched in Dec’19 before the covid crisis.The growth in crude oil prices also is expected to support the E&P activities of the company.

• Jefferies raised its price targets on tankers in a note on Tuesday, stating the sector’s earnings power has strengthened materially.
• However, Refinery will have the design flexibility to process up to maximum of 2.5 MMTPA of Rajasthan Crude at any time, if the same is made available.
• The vessels will add to an existing 1,173 VLCC and Suezmax tankers in service, including 23 delivered in the first half, while another 47 are due next year.
• Instead, they might come from new production, meaning that they would not tighten the global oil market.

With the wave of time charter bookings in recent days, rates are likely to rise further, market sources say. Average daily earnings for VLCCs have risen to over $84,000 a day, from around $63,000 at the beginning of the year – not far off levels of over $100,000 a day seen before the tanker market slump in 2008. Big shipping groups like Frontline, Tsakos Energy Navigation and DHT Holdings have seen their share prices surge this month, helped by the overall positive market momentum.

Indian Oil Corp buys first shale oil from US

Khosla’s mandate will be overseeing the firm’s wellness centres, personal care products and its institute of beauty and nutrition, across Middle East, Africa and CIS countries. Every five years a vessel has to undergo a special survey that costs millions of dollars, money that’s hard to find when vessels are making a loss. Dodla Dairy is an integrated South India-based dairy company, primarily deriving all of its revenue from milk and dairy-based value-added products. Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day.

Hence, vlcc tanker stocks might consider subscribing to Seven Islands Shipping’s initial public offering. The shipping industry is inherently cyclical with Dalal Street remaining cautious on how long the current uptrend in spot freight rates in the tanker segment will last. The shipping sector was and continues to be one of the few sectors that benefits enormously from the current Russia-Ukraine war. Spot freight rates in the key tanker segments in November 2022 have risen nearly 8 to 9 times from a year ago.

For all the latest News updates, download our app Android and iOS. “If the crack propagates, and there is every likelihood of that, but cannot be predicted, then the ship’s stability could be affected. A ship at a standstill is still subjected to tremendous stresses and could break and capsize,” M. Kalayanaraman, Technical Editor, Riviera Maritime Media, had told IANS.

5,22,45,900 shares ie., 18.51% and with this disinvestment, Govt. Pick your 5 favourite companies, get a daily email with all news updates on them. Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.

Marinetime News

However, they may choose to apply through the physical Application Supported By Blocked Amount process via their bank. The listing date of Seven Islands’ initial public offering has not been announced yet. The initial public offering of Seven Islands is a book build issue. The promoters of this company are Thomas Wilfred Pinto, Leena Metylda Pinto and FIH Mauritius Investments Ltd.

A paragraph from “Capital Returns” explains the last shipping cycle. Only super-strong balance sheets will be able to ride out this prolonged recession in the industry. I see good numbers from GE Shipping, but they aren’t consistent quarter after quarter to give me confidence to invest. It makes sense to do position sizing, build a small position, just to see where it goes.

As the country’s premier shipping line, the SCI owns and operates around one-third of the Indian tonnage, and has operating interests in practically all areas of the shipping business; servicing both national and international trades. This rise in VLCC freight rates is attributed to some pick-up in demand for vessels in this segment, in the run-up to the winter season in the western hemisphere and the corresponding build-up in demand for petroleum products. In other tanker segments, like Suezmax, spot freight rates are currently at $10,590 per day, compared with the average spot freight rate of $3362 per day in the second quarter of FY10. Significant over-investment in capacity during the 2000s practically killed the industry.

Although not matching the staggering growth in container ship contracting, demand for new crude oil tankers has been strong, up 47.4% from the first five months in 2020, despite the freight market being much more profitable than currently. Oil product tankers on the other hand have seen a fall in contracting, whereas dry bulk contracting, despite the strong freight and S&P markets, is only slightly above last year’s level. The play is also driving up tanker hire rates, and shipping firms have seen their share prices surge in recent days. The Shipping Corporation of India was established on October 2nd, 1961, by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Starting out as a marginal Liner shipping Company with just 19 vessels, the SCI has today evolved into the largest Indian shipping Company.

Vessels are sold for conversion projects or long term storage,” said Robert Hvide Macleod, chief executive of Norway’s Frontline Management. Charter rates for a VLCC have averaged between $50,000 and $65,000 per day over the past year, the highest level since the peak of the commodities boom in 2008, when rates hit $92,511 a day, according to Clarkson figures. The sector stocks are also trading at reasonable valuations, with the enterprise value-to-Ebitda ratio coming in below the 10-year average, it said. Goldman Sachs has closed its underweight position in Asian energy stocks.

The surge in spot tanker freight rates has not gone unnoticed by Dalal Street. Okeanis Eco Tankers Corp. is a holding company, which engages in the ownership and operation of commercial shipping vessels. Its activities include the transportation of crude oil, refined oil products, and other liquid products. The firm’s portfolio includes Very Large Crude Carriers, Suezmax, and Aframax.

Many of the ships currently being deployed for floating storage are older and less fuel-efficient vessels, which oil companies are less keen on using to transport crude. By using older vessels, oil traders have been able to hire VLCCs for less than $40,000 a day. With onshore oil storage facilities being exhausted and companies resorting to floating storage, hiring rates for very large crude carriers have gone up about seven times since February.

Dividend distributions and buybacks from the company also looks good. Similarly, in tanker segments like Aframax, average daily freight rate in November 2022 was US$80,070 per day versus US$11,725 per day a year earlier. In contrast, in the oil product tanker market, the bigger Long-Range ships have proven less popular than MR tankers of which 28 have been ordered totalling 1.4m DWT, all with a capacity of 40-50,000 DWT. For LR2 tankers, only five orders have been placed so far this year, and none for LR1 tankers. Owners of very large crude carriers and Suezmax tankers, the workhorses of seaborne crude oil transportation, had their best year in 2015 since the boom times of 2008 and the trend has continued in the first half of 2016. Company has a total of 11 crude carriers,17 product carriers, 5 gas carriers and 13 dry bulk carriers.

If the production cuts are rolled back along with demand revival , tanker rates also may go up which will make the company an attractive cyclical bet. Seven Islands Shipping has a proven track record when it comes to delivering strong financial services. The company’s highly experienced and efficient management team has played a vital role in that regard. They have formed longstanding relationships with some of the leading oil and gas customers. It is represented by the renewal of the short-term (12-24 months) contracts on time.