"During the first 4 months of 2012, ~31 oil tankers have been sold for scrap… same # scrapped in 2009" Peter Evensen, Teekay's President and Chief Executive Officer

(Dow Jones) Teekay Corp. (TK) swung to a first-quarter profit, due primarily to derivative gains, as the tanker-ship company’s revenue grew more than expected.

Teekay, which provides marine services to the petroleum industry, has posted mixed results in recent quarters as derivatives affect its bottom line and a glut of tanker space pressures spot market rates.

Teekay has spun off several operations in past years and holds stakes in Teekay LNG Partners LP (TGP), Teekay Tankers Ltd. (TNK) and Teekay Offshore Partners LP (TOO).

Teekay reported a profit of $1.07 million, or 2 cents a share, compared with a loss of $29.7 million, or 41 cents, a year earlier. The most-recent quarter included a net gain of 32 cents a share, while the year-earlier quarter included net charges of 2 cents. Excluding items such as asset impairments, stock-based compensation, unrealized gains from derivative instruments and realized gains from settlement of embedded derivative, the adjusted loss narrowed to 30 cents from 39 cents. Revenue rose 1.5% to $495.6 million. Net revenue, which excludes voyage expenses, grew 3.2% to $456.9 million.

Analysts polled by Thomson Reuters had most recently forecast a loss of 35 cents a share on revenue of $470 million.

Operating margin fell to 15.7% from 19.1%.

Meanwhile, double-hull tankers operator Teekay Tankers reported its profit fell to $4.14 million, or 6 cents a share, from a profit of $7.09 million, or 12 cents, a year earlier. Revenue edged up 0.4% to $31.9 million. Analysts were expecting per-share earnings of 4 cents on $32 million in revenue.

Teekay Offshore–whose fleet of shuttle tankers transport oil from offshore fields to onshore processing facilities–saw its profit rise 24% to $52.6 million from $23.4 million as revenue increased 4.6% to $244.6 million.

And Teekay LNG–which transports liquefied natural gas, liquefied petroleum gas and crude oil–reported its profit slipped 0.9% to $24.7 million from 25 million, though voyage revenue jumped 6.4% to $99.2 million.

-By Melodie Warner, Dow Jones Newswires

Due to the restrictions, the company is faced with the choice of either making up for any loss in coverage or reducing its dealings with Iran, as it may incur huge losses if its vessels aren’t insured and meet with an accident.

In February, SCI cancelled loading one of its tankers fixed for carrying crude from Iran for Indian Oil Corp. (530965.BY), raising concerns that supplies from the Islamic republic may drop sharply.

India is the world’s fourth-largest oil importer and one of Iran’s biggest customers for crude.

“There was a delay in providing clarification regarding availability of insurance cover from the Protection and Indemnity Club,” and the vessel was also running late beyond the time in which it should be ready at the loading port, so the shipment couldn’t be carried, Hajara told Dow Jones Newswires in an interview.

Around 90% of the world’s tanker insurers are based in the West.

Although shipments have declined, oil companies in India haven’t stopped importing crude from Iran, and SCI’s shipments are still covered on a voyage to voyage basis. Therefore, there wouldn’t be any significant impact on its revenue, he said.

SCI logged revenue of about INR20.2 billion ($375 million) in the first six months of the fiscal year ended Sept. 30.

SCI’s main concern has been about the insurance cover, Hajara said.

Tightening sanctions by the West on Iran to curb its nuclear program include a ban on many E.U. insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world from July.

Indian state insurers have agreed to provide cover of as much as $50 million to Indian flag carriers per Iranian voyage, according to some reports.

Hajara said he was hopeful that Indian state insurers would do more to offset the loss of insurance cover from European P&I clubs. The issue is still being deliberated with insurers in the country, he added.

Meanwhile, SCI, which has been expanding rapidly through acquisitions, isn’t planning to place any new ship construction orders this fiscal year, said Hajara. This decision was taken in light of the uncertainty prevailing in the shipping market as well as the weakening global economic outlook, he said.

SCI has 25 vessels on order which are scheduled to be delivered in phases from 2012 to 2014, he said.

SCI has a fleet of 77 vessels with a total capacity of 5.58 million deadweight tons.

-By Surabhi Sahu, Dow Jones Newswires

Jag Pradip, image courtesy Great Eastern Shipping

The Great Eastern Shipping Co Ltd. (G E Shipping) has signed a contract to sell “Jag Pradip”, a Medium Range (MR) product carrier. The 1996 built vessel of about 45,600 WWT will be delivered to the buyers in Q1 FY2013.

G E Shipping is India’s largest private sector shipping company with a fleet 34 vessels, including 24 tankers (9 crude carriers, 14 product tankers, 1 LPG carrier) and 10 dry bulk carriers (1 Capesize, 3 Kamsarmax, 1 Panamax, 4 Supramax, 1 Handymax) with an average age of 8.9 years aggregating 2.62 million DWT.

Neither the value of the deal, nor the buyer, were disclosed.

Vela's Capricorn Star VLCC. Photo: Vela

LONDON (Dow Jones)–Saudi Arabia’s state shipping company, Vela, will transport large volumes of oil to the U.S. again this month, repeating a trend that began in March, but prior to that was very unusual, shipbrokers told Dow Jones Newswires Friday.

Vela has chartered at least 10 supertankers, capable of carrying around 20 million barrels of oil, to ship crude to the U.S. this month, though some brokers say it could be as high as 13. This is a large increase from the normal traffic, which experts say amounts to around one tanker every other month.

-By Sarah Kent, Dow Jones Newswires

The units were recently trading 5.2% lower at $15.56, compared with the offering’s price of $15.68 per unit.

The owner and operator of dry cargo vessels said it plans to use the proceeds to expand its fleet and for general partnership purposes.

-By Melodie Warner, Dow Jones Newswires

Gas tanker Grand Aniva carries the 500th delivery of LNG for Sakhalin-2 project, image (c) Sakhalin Energy

In a rather bold statement during a meeting between Sovcomflot’s (SCF) Board of Directors last week, the Board’s Chairman, Ilya Klebanov noted:

“Sovcomflot is the only major tanker company in the world which finished 2011 in profit, despite the crisis year which was the worst for more than a decade. The level of freight rates in the tanker market reached a historic minimum.”

During this time period, SCF’s fleet also grew by 1 million tons deadweight with the addition of 6, ice-class Aframax tankers to service the Sakhalin-1 and Sakhalin-2 offshore oil and gas projects.

SCF’s strategy going forward, as stated by Mr. Klebanov, is closely aligned with the expansion of their LNG carrier and offshore hydrocarbon production services in Russian and elsewhere around the world.

With their profit gained in 2011, SCF’s Chairman remarked that SCF plans “to proceed with the implementation of an investment programme aimed at increasing the fleet’s effectiveness, retaining high navigational safety standards, reducing our environmental impact, and developing the potential of our people.”

Sergey Frank, Sovcomflot’s President and CEO, states:

“Last year was the third year of tanker market stagnation. ClarkSea Tanker Index of profitability fell by 20 per cent as compared to 2010. For all the tanker owners, without any exception, it was not an easy period. However, even in such a situation Sovcomflot has demonstrated the stability of its business model and continued to develop in accordance with the strategy approved by the Board of Directors.

The Group’s fleet grew by more than one million tonnes deadweight and remained one of the youngest in the world. We have concluded a number of new contracts with first-class contactors, forming part of long-term projects, we have also entered the offshore geological exploration market segment. Sovcomflot’s stable position is confirmed by the growth of contracted revenues for future periods, which amounted to USD 5.5 billion dollars by the end of 2011.”

2011 Highlights 

The level of freight rates has reached a historic minimum over the last ten years. The Stock Market Index of public tanker companies fell by 47 percent while the ClarkSea Tanker Index of profitability in 2011 decreased by 20 percent as compared to 2010.

• 2011 gross revenue grew by 9.6 per cent to USD 1,438.9 million (2010: USD 1,312.9 million)
• Net profit amounted to USD 53.7 million (2010: USD 164.3 million);
• Contracted future revenues amounted to USD 5.5 billion (2010: USD 4.9 billion);
• As at 31 December the Group’s fleet comprised 155 owned and chartered vessels (2010: 147 vessels) representing 11.5 million tonnes dwt in total, average vessel age – 7 years;
• SCF Group has strengthened its position in the segment of shuttle-tanker transportation for hydrocarbons; the acquisition of six ice-class Aframax tankers allowed the company to consolidate the transportation component of the Sakhalin-1 and Sakhalin-2 offshore oil and gas projects;
• Substantial growth of revenues was achieved in market segment for servicing offshore oil and gas production – TCE revenues increased by 49.7 per cent amounting to USD 181.0 million (2010: USD 121.0 million);
• Suezmax tanker Vladimir Tikhonov (160,000 dwt) became the largest ship in the history to transit the Northern Sea Route (NSR) from the Atlantic Ocean to the Pacific Ocean; she transported a full cargo of gas condensate
• Long-term contracts were signed with Gazprom Global LNG (GGLNG), a subsidiary of Gazprom, for the chartering of two new generation LNG gas tankers of 170,000 cubic metres capacity each;
• The Aframax tanker Adygea started the transportation of oil to serve offshore oil production at the Peregrino oil field in Brazil (project operator – Statoil) – strengthening SCF Group’s position in the offshore oil and gas projects segment;
• SCF entered the offshore geological exploration market segment: a new high-tech scientific and research offshore exploration vessel Vyacheslav Tikhonov (X-bow 3D, built in 2011) managed by SCF Group and Sevmorneftegeofizika started seismic exploration of the Black Sea continental shelf ;
• SCF opened a new office in the South-East Asia – SCF Unicom Singapore, part of the Group’s expansion in the markets of the Asia-Pacific Region.

The SCF Group of companies (SCF) specializes in crude oil, petroleum products and liquefied gas transportation. Their fleet, as of 1 of April 2012, comprises 158 vessels with a total deadweight of almost 12.0 million tonnes.

Stolt Valor on Fire, Photo via saudinow.com

Stolt Tankers B.V., a subsidiary of Stolt-Nielsen Limited (Oslo Børs: SNI) and owner and operator of MT Stolt Valor, reported today that the fire on the ship has been contained.  One crew member is still missing.

The ship is under tow approximately 45 miles off the coast of Qatar.  There has been no spillage of fuel oil from the ship, nor any reported or visible spillage of cargo.  Stolt Tankers continues to work in close cooperation with the authorities, salvage experts and insurers to salvage the ship and its cargoes and to avoid any environmental impact.

Full investigations into the cause of the accident are being conducted by the flag state and the Company.

MT Stolt Valor is a 2004-built chemical tanker of 25,268 dwt.  The ship has been declared a constructive total loss for insurance purposes.  The Company has insurance coverage in place customary for the trade and is fully covered.

It was quite a day for shareholders of Frontline Tankers.  Their stock shot up nearly 29% on news of increased VLCC and Suezmax tanker day rates.

In a note dated 15 March by Wells Fargo Securities Senior Analyst, Michael Webber, VLCC and Suezmax spot day rates have jumped 87% and 82% respectively ($32,500/day and $37,700/day) from previous levels.

Microsupply/demand disruptions (and potentially elevated longhaul Chinese imports (West Africa) stemming from Iranian supply concerns) have driven VLCC and Suezmax rates to profitable levels, with the timing coming against the grain in terms of seasonality (and the general theme of tanker overcapacity).

According to our channels, the physical tanker market is still seeing upward pressure in the Atlantic Basic intraday, with relatively thin supply (VLCCs, Suezmaxes), which could continue putting some near term upward pressure on day rates and potentially tanker stocks. The Mediterranean market is also firming to a degree, which could keep some Suezmax vessels from ballasting to the Atlantic, which could keep tonnage (vessel supply) relatively constrained, potentially adding some modest length (days most likely) to the recent rally in rates.

In his statement, Mr. Webber makes a point by saying that Wells Fargo does not, however, feel this upward momentum is the start of an industry-wide recovery.  In addition, much of the profit gained by Frontline Tankers’ upswing will be handed over to Ship Finance International (SFL), as part of Frontline’s December 2011 restructuring agreement.

Overseas Shipholding Group (NYSE:OSG) was up 8.39% at the bell on Friday.

BP's British Laurel oil tanker. Photo (c) BP, PLC

LONDON (Dow Jones)–BP PLC (BP) said Thursday it is conducting an internal investigation into allegations of bribery at its tanker chartering division, after a letter detailing alleged corruption was sent to its chief executive last week.

The allegations, which center on the relationship between a senior BP employee and one of the company’s suppliers, are contained in a letter sent to CEO Bob Dudley and the Serious Fraud Office, a copy of which was seen by U.K. newspaper The Daily Telegraph and reported in its Thursday edition.

“We can confirm that the chief executive’s office did receive a letter–as described–last week,” said BP spokesman Robert Wine. “BP conducts its business to the highest ethical standards. We take all allegations of this sort extremely seriously and always investigate them.”

BP declined to give any further details of the allegations.

According to the newspaper report, the central claim concerns the alleged chartering of tankers at preferential terms for the supplier in return for cash payments to the senior BP employee.

The author of the letter, a self-described “BP employee,” offers to supply further evidence to back up the claims but only after the company launches an investigation.

A Serious Fraud Office spokesman declined to comment on whether the agency had received the letter or whether it had begun its own probe of the alleged corruption.

-By Alexis Flynn, Dow Jones Newswires

Copyright (c) 2012 Dow Jones & Company, Inc.

Credit: Frontline

Tanker operators are bracing themselves for headwinds from U.S. and European Union trade sanctions imposed on Iranian oil, adding to the many challenges the sector already faces, Standard & Poor’s Ratings Services said.

“The standoff between Iran and the E.U. and the U.S. only adds to the litany of problems tanker operators are facing, including prolonged weak shipping rates and sustained overcapacity, neither of which we believe will ebb before 2013,” S&P credit analyst Funmi Afonja said.

Last month, the European Union banned the International Group of P&I Clubs from underwriting insurance to shipping companies that transport crude oil and petroleum products from Iran. The ban could have wide-ranging effects on tanker operations in Iran, as International Group members insure 95% of tanker ships currently operating worldwide. Additionally, on July 1, new sanctions prohibiting importation of Iranian oil into Europe will go into effect.

Tankers will have fewer shipments to carry, forcing down tanker rates, as some or all of Iran’s crude oil will stay in the country, Afonja said. Iran typically provides 6% of global crude-oil exports.

S&P said it is maintaining its negative outlook on the tanker industry.

-By Ben Fox Rubin, Dow Jones Newswires