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What Are Crude Tanker Companies’ Fleet Expansion Plans?

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Company plans

A company’s acquisition plans for new vessels or businesses are significant drivers of a company’s future prospects. Recently, crude tanker companies have been aggressive in acquiring new vessels. Companies believe this is a good time for acquisitions, as tanker rates are rising and tanker prices are flat.

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Euronav’s VLCC acquisitions

Euronav (EURN) acquired four VLCCs (very large crude carriers). The company has paid option fees, giving it the option to acquire up to an additional four VLCCs at a purchase price of $98 million each. The company has been active in VLCC acquisitions, but not in the Suezmax sector. In an analyst call, Euronav management stated that it would look for the right opportunity to do some expansion in the Suezmax segment.

Nordic American Tanker’s Suezmax acquisitions

In July 2015, NAT announced the acquisition of two Suezmax vessels, which will join the fleet in September and October this year. Also, the company had entered into an agreement in December 2014 for construction of two Suezmax vessels for delivery in August 2016 and January 2017.

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Frontline merger

Frontline (FRO) announced a merger with Frontline 2012 (FRNT). The combined company’s fleet will have 89 vessels, as opposed to Frontline’s (FRO) 22 vessels currently. The fleet will include 22 newbuilds that are currently under construction with expected delivery dates between 2015 and 2017. The combined company will also have exposure to the product tanker business. Frontline (FRO) restructured its balance sheet by issuing equity, paying off a large amount of debt, and renegotiating its contract with Ship Finance.

The company may further need to resort to debt financing, as after the merger the combined company needs to finance the 16 newbuild vessels to be delivered between the second half of 2016 and the end of 2017. Frontline 2012 has already obtained debt financing for six newbuilds.

Teekay acquires Suezmax and ship-to-ship business

Teekay Tankers (TNK) acquired 12 Suezmax secondhand vessels. As the vessels will join the fleet in the fourth quarter, the company will reap benefits of the strong tanker rates immediately. The company has also entered the crude (DBO) tanker allied business by acquiring SPT.

DHT and TNP’s acquisitions

DHT Holdings (DHT) also has six newbuilds under construction. Tsakos Energy Navigation (TNP) also has newbuilds yet to be delivered, and the company is expanding into product tankers. In the rising tanker rate environment with fleet expansion, these companies will have a higher earnings potential.

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