Must-know: Scorpio Tankers Ltd



Scorpio Tankers Ltd.

Formed in July, 2009, Scorpio Tankers (STNG) provides seaborne transportation of refined petroleum products and crude oil worldwide. The company’s vessels range from 37,000–120,000 deadweight tons (or dwt). They’re used to distribute and trade vegetable oils, petroleum based feedstocks, and refining outputs such as gasoline, diesel, jet, and naphtha. The vessels are technically managed by Scorpio Commercial Management S.A.M. (or SCM) and Scorpio Ship Management S.A.M. (or SSM).

The Scorpio Group has four divisions—Scorpio ship management, Scorpio commercial management, STNG, and Scorpio Bulkers (SALT).

Article continues below advertisement

The main objective of STNG is to profitably grow and emerge as a major operator of product tanker vessels because it believes the fundamentals are attractive in this sector. Increasing demand for refined products, increasing ton miles, and reduced order book are some of the factors. It intends to acquire modern, high-quality tankers through timely and selective acquisitions.

Trading at a market cap of $1.84 billion, the company records a dividend yield of 3.71% and a beta of 1.79. In the past year, the company recorded a decrease of 3.3% as compared to 11.7% recorded by the Dow Jones. Meanwhile, its peers—Navios Maritime Acquisition (NNA), Capital Product Tankers LP (CPLP), and Tsakos Energy Navigation Ltd. (TNP) recorded gains of 3.9%, 11.1%, and 47%, respectively. The Guggenheim Shipping ETF (SEA) has recorded gains of 13.8% in the past year.

Fleet size

At the end of the 1Q14, STNG owns 19 tankers—two LR1 tankers, one Handymax tanker, 15 MR tankers, and one post-Panamax tanker—with an average age of 2.9 years. Collectively called the operating fleet, STNG has time charters in for 28 product tankers—eight LR2, six LR1, six MR, and eight Handymax tankers.

In its Newbuilding program, STNG has contracts for the construction of 55 newbuilding product tankers—29 MRtankers, 14 Handymax ice class 1-A tankers, and 12 LR2 tankers. Of the total vessels in the program, 42 are expected to be delivered throughout 2014 and 13 in 2015.

We’ll discuss the Dorian investment and STNG transformation to ECO fleet in the next section in this series.


More From Market Realist