The average fleet age is calculated by taking the average age of each vessel in the fleet. When a company adds newbuilds to its fleet, it reduces the average age of its fleet. It is important for investors to know the average fleet age, as this impacts the vessel operating costs, capital expenditure plans, and capital structure of a crude tanker company.
Nordic American Tanker (NAT) has the oldest fleet, with an average age of 13.2 years. Also Frontline (FRO) and DHT Holdings (DHT) have an average fleet age of 11.04 years and 9.7 years, respectively. These three companies’ average fleet age is more than the world average fleet age of 9.5 years. Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP) have a comparatively younger fleet with average ages of 8.8 and 8.16 years, respectively.
Crude tankers that transport crude oil (DBO) normally have a life of 25 years. All the above companies’ vessels are under 20 years, except Frontline (FRO), which has two vessels that are ~22 years old. Also, 37% of Frontline’s fleet is above 15 years of age. 45% of Nordic American Tanker’s (NAT) fleet is above 15 years. Euronav, DHT Holdings (DHT), and Tsakos Energy Navigation (TNP) have 8%, 11%, and 2%, respectively, of its fleet above 15 years. Companies who have older vessels will need to replace them in order to maintain fleet size.
Frontline (FRO) and Teekay Tankers (TNK) do not have any newbuild vessels in the pipeline. Nordic American Tanker (NAT), Euronav, and DHT Holdings (DHT) have two, three, and four newbuilds to be delivered in the coming three years. This will lower the average fleet age of these companies.
Impact of older vessels
Generally speaking, older vessels are less fuel efficient and more costly to maintain. Insurance rates also increase with the age of the vessel, which increases the vessel operating cost for the company. Old vessels need to be refitted, scrapped, and replaced to maintain the fleet size. Replacing a ship requires a huge amount of debt or equity financing. Raising more debt may hamper the capital structure of the company and thus the leverage ratios.