Teekay Tankers (NYSE:TNK) announced today a $188 million order for four new 113,000 DWT Long Range 2 (LR2) product tankers from South Korea’s STX Offshore & Shipbuilding Co. This order includes an option for a dozen more which may be exercised over the next 18 months at a unit cost per ship of $47 million.
“The shift in global refining capacity east of the Suez Canal, development of new long-haul product tanker trading patterns, including the potential for increased U.S. exports, and a relatively modest orderbook, make the LR2 segment a particularly attractive growth area for Teekay Tankers,” commented Bruce Chan, Teekay Tankers’ Chief Executive Officer. “With their fuel-efficient design, which is estimated to result in 20 to 30 percent fuel savings compared to current vessels in the existing LR2 fleet, we believe these newbuildings will be very attractive to our customers. Furthermore, we believe the vessel deliveries are well-timed to benefit from expected improvements in refined product and global crude oil tanker market fundamentals.”
Mr. Chan added, “We are pleased to be working with STX, a high quality Korean yard with a strong track record for successful newbuilding deliveries. Working closely over the past two years with STX, our customers and our sponsor, Teekay Corporation, we evaluated several vessel configuration options before proceeding with a design we believe will provide an optimal combination of function and efficiency. In addition, we have been able to benefit from our sponsor’s strong shipyard relationship to achieve favorable pricing and an option stream that supports Teekay Tankers’ future growth and fleet renewal objectives.”
STX has agreed to defer the majority of the purchase price of the vessels until delivery and Teekay will finance the installments with their existing liquidity, which as of the end of last year, was $327 million. Teekay expects to secure long-term debt financing for the four vessels prior to their scheduled deliveries in late-2015 and early-2016.
Upon delivery, it is expected that the vessels will operate in Teekay Corporation’s Taurus Tankers LR2 Pool (the Taurus LR2 Pool), which is one of the world’s largest LR2 pools with approximately 20 LR2 product tankers.