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Tanker Opportunities in the Capital Dearth

March 22, 2016

Tanker executives are seeing a silver lining in the limited financing availability in the capital markets even for their booming sector.

The lack of financing could put pressure on forward time-charter rates for newbuildings as they come out of shipyards, Heidmar chief executive Ben Ognibene told the Connecticut Maritime Association’s Shipping 2016 conference.

That could create opportunities for operators to charter-in ships at attractively low levels.

Itching for a fixing

“You’re probably are going to get a lot of people who want to get some fixed-rate coverage on their newbuildings, or at least their banks may want to do that,” said Ognibene, whose Connecticut-based company is a major tanker pool operator.

But his outfit can be expected to tackle any such opportunity with caution.

The chief executive only minutes earlier said Heidmar had sworn off going long on a charter with forward delivery, explaining that a prior play that had gone wrong had been disastrous for the operator.

Speaking on the same panel, Diamond S Shipping chief executive Craig Stevenson said that with the capital markets shut for shipping and the banks facing problems of their own, making even a small tanker transaction is challenging.

Yet Stevenson said that his company has been analysing suezmax crude tankers and medium-range products tankers, and when the forward, one-year time-charter rate is compared to current tanker values, those values are about 25% below historical norms.

“If you actually do the math, on unlevered returns, you’re up in the teens, that’s fantastic money. That’s PE type money,” he said, referring to the acronym for private equity,

KNOT Offshore Partners board member Edward Waryas said the shuttle tanker owner faces a somewhat different capital markets challenge.

The New York-listed master limited partnership (MLP) has five tankers available to it for purchase from parent Knutsen NYK Offshore Tankers in a dropdown deal.

But KNOT Offshore won’t buy those ships at the current share price.

“The investment community thinks that because there is offshore in our title that we are tied to the price of oil, which we are not,” he said.

Staying still

Waryas said the company is going to hold fire and continue paying its dividend.

V.Group managing director Bob Bishop said a lack of money can be a positive for shipmanagers like his company.

“When there is no money and there is cost control, there are opportunities that come along,” he said.



March 22nd, 2016 02:03 GMT

by Eric Martin