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Scorpio Tankers adopts a shift in charter mix

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Time charter-in update

In September 2014, Scorpio Tankers Inc. (STNG) chartered-in a Long Range 2 tanker that is currently under construction in South Korea, with delivery expected in January 2015. Upon delivery from the shipyard, the vessel will be chartered-in for one year at $21,050 per day. The company also has an option to extend the charter for one year at $22,600 per day.

TCE Chart

For the third quarter of 2014, the charter hire expense increased $1.1 million to $32.9 million, from $31.9 million in the year ago quarter. Charter hire indicates the hiring of a vessel and crew for a voyage between a load port and discharge port. The charterer pays the vessel owner on a per-ton or lump-sum basis. The increase is a result of a shift in the mix of time chartered-in vessels to larger vessel classes (LR1 and LR2) offset by a reduction in exposure toward smaller vessel classes (Handymax and MR).

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Extensions of time charters

In September 2014, Scorpio Tankers (STNG) extended the contract of a time chartered-in LR1 vessel with a one-year rate of $15,000 per day beginning in November 2014. In the same month, a currently time chartered-in Handymax tanker was extended for an additional year at $13,500 per day beginning in March 2015.

In August 2014, Scorpio Tankers extended a chartered-in LR2 tanker for another six months from November 2014 at $15,500. The term of the agreement is for six months at $15,500 per day, effective November 2014. Another time charter on an LR2 tanker was extended for six months at $17,500 per day beginning in September 2014, compared to $16,500 recorded during the second quarter 2014.

In July 2014, the company extended the time charter on an LR2 tanker that is currently time chartered-in for one year at $17,550 per day beginning in September 2014, compared to $16,500 recorded during the second quarter of 2014.

Unlike its industry peers (SEA), Navios Maritime Acquisition Corporation (NNA), Capital Product Partners L.P.(CPLP), Teekay Corporation (TK), and Tsakos Energy Navigation Ltd. (TNP), Scorpio Tankers (STNG) is now focusing on extensions of charter-in contracts, which will thereby benefit the company’s top line.

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