By Barry Parker (gCaptain) –
Tanker companies reporting their Q3 2022 results are enjoying vast amounts of wealth and, importantly, they are sharing their bounty with their shareholders.
International Seaways (NYSE: INSW), which reported earnings that were slightly below analysts’ over-exuberant (in retrospect) consensus, was not only generating buckets of cash, but also dispersing it to equity holders. Within the company’s 75 vessels (59 owned, 16 chartered in), its 10 VLCCs were booking $26,400/day in Q3, its 13 Suezmaxes pulling in $33,600/day, and its 39 MRs, which benefited from a very strong spot market as Europe scrambled to load up on refined products before sanctions kick in, were getting $36,000/day.
Double Hull Holdings (NYSE: DHT), an owner of 23 VLCCs, was also benefitting from the market currents, with its reported $25,400/day for the ships reflecting a balance between those trading spot (earning around $22,000/day), and those chartered out for longer terms (earning north of $35,000/day).
As we are nearly half way through Q4, the prospects are rosy, indeed. At INSW, results through early November show VLCCs fixed for $57,100/day aggregate (with spot hires exceeding the TC levels). Its Suezmaxes were taking in $44,700/day and its treasure trove of product-hauling MR’s were bringing in $39,900/day. At DHT, CEO Svein Moxnes Harfjeld pointed to a Q4 time charter profile of $34,800/ day hire that covered a quarter of the period and 69% of available spot days bringing in $61,800/day.
At this high point in the cycle, savvy owners will not be ordering new vessels though they might purchase some second-hand ships, conceivably using “ships for shares” deals now possibly with equity prices now at or above Net Asset Value. At this point, they are in a position to send cash back to shareholders. INSW was using some of its windfall to do just that, repurchasing $20 million worth of shares, paying a regular quarterly dividend ($0.12/share) and, drum roll here… announcing a special dividend of $1.00/share.
Similarly, DHT announced a regular cash dividend ($0.04/share), a share buyback of $8.8 million, and, another drum roll… a new dividend policy, with 100% of net income being returned to shareholders in the form of quarterly cash payouts.
For now, Frontline’s (NYSE: FRO) interest in INSW is not a talking point. Indeed, the “C” word- consolidation, did not figure in the INSW presentation (nor did analysts bring this up during the Q and A session on its conference call). Whatever S and P talk that occurred during its conference call focused on sales of vessels (with one MR tentatively sold, but Aframaxes and LR2s not for sale). DHT took some money off the table, announcing a five-year time-charter contract for its vessel DHT Puma starting in Q1 2023 (after installation of a scrubber), at $38,000 per day, with two optional years (at $41,000/day and $45,000/day). DHT also said that it had sold a 2008 built non-scrubber fitted VLCC, DHT Edelweis, coming up against a special survey and ballast water treatment (BWT) installation, for $37 million (some of which went towards debt repayment).
INSW’s CEO, Lois Zabrocky neatly summed up the company’s strategy- “…. investing in fleet renewal at the bottom of the cycle and focus on returns to shareholders and new leveraging in the up part of the cycle. And we’ve done that over the last six years.” At DHT, the vision was expressed similarly, “We are well structured for cyclical markets, amongst others supported by a strong balance sheet and healthy liquidity. The freight market has most certainly recovered with strong freight rates and a promising outlook. We are tuned for this recovery with increasing spot exposure into an environment in which we are set to make significant profits,” said Svein Moxnes Harfjeld.
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