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Scorpio Tankers Inc. (NYSE: STNG) has announced a strategic investment in DHT Holdings Inc. (NYSE: DHT), a leading player in the crude tanker market.
During the third quarter of 2024, Scorpio Tankers acquired a 4.9% stake in DHT, purchasing 7,982,480 common shares at an average price of $11.17 per share, for a total investment of $89.1 million.
This move represents a notable shift in Scorpio Tankers’ strategy, as the company, primarily known for its product tanker fleet, expands its exposure to the crude tanker sector, with DHT Holdings’ fleet comprising of 28 Very Large Crude Carriers (VLCCs).
“This investment reflects the Company’s constructive outlook in this sector,” Scorpio Tankers said in a statement.
At Capital Link’s Maritime Forum in New York this month, panelists discussed the recent “clean ups of crude tankers”—a phenomenon where tankers that typically carry crude oil switched to long-haul product trades, attracted by higher rates due to Red Sea disruptions. However, that trend seems to be abating.
“We’ve been tracking the Suezmaxes and VLCCs that had been taking clean products—the majority of them are now returning to the dirty trades,” said James Doyle, Head of Investor Relations at Scorpio Tankers (NYSE: STNG). He continued, “That’s likely the first step, along with seasonality, where we’ll see an improvement in rates. We expect refinery maintenance to end and the cannibalization of LR2s (larger product tankers) by crude tankers to cease.”
News of the investment comes as Scorpio Tankers reported a net income of $158.7 million for the three months ended September 30, 2024, translating to $3.31 basic and $3.16 diluted earnings per share. The company’s adjusted net income, which excludes certain gains and losses, stood at $87.7 million, or $1.83 basic and $1.75 diluted earnings per share.
The performance is a significant improvement over the same period in 2023, when the company reported a net income of $100.4 million.
The company’s board of directors has also declared a quarterly cash dividend of $0.40 per share, payable on December 13, 2024, to shareholders of record as of November 22, 2024.
Scorpio Tankers has also been active in optimizing its fleet. During the third quarter, the company entered into agreements to sell several vessels, including the 2019-built LR2 product tanker STI Lily for $73.5 million, and two 2014-built MR product tankers for $42.5 million each. The sales are expected to close in the fourth quarter of 2024, potentially providing additional liquidity for future investments or debt reduction.
The company’s share repurchase program also remains robust, with $208.9 million available as of October 28, 2024. Between July 1 and October 28, 2024, Scorpio Tankers repurchased 3,362,410 of its common shares at an average price of $73.34 per share.
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