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How Fleet Mix Will Affect Tanker Companies in 3Q15

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Sep. 30 2015, Published 10:44 p.m. ET

Oil tankers

Oil tankers are classified according to the capacity and the product they supply. Product tankers supply refined oil, whereas crude tankers supply unrefined oil. One type of crude (DBO) tanker is a VLCC (very large crude carrier), which has a capacity of 200,000 DWT (deadweight tonnage) to 320,000 DWT. Suezmax vessels have a capacity of 120,000 DWT to 200,000 DWT. Aframax vessels, the smallest of the three, have a capacity of 80,000 DWT to 120,000 DWT. The tanker mix of each company differs, which impacts the costs, profitability, and future prospects of a company.

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Pure play companies

Frontline (FRO), Nordic American Tanker (NAT), DHT Holdings (DHT), and Euronav (EURN) are pure play crude tanker companies. That is, they operate only in one industry. Frontline (FRO) operates 14 VLCCs and eight Suezmax while Euronav operates 27 VLCCs and 23 Suezmax. Nordic American Tanker (NAT) owns only Suezmax vessels, and has a total of 22. DHT Holdings (DHT) has a mixed fleet portfolio: 14 VLCCs, two Suezmax, and two Aframax.

Companies with product and crude tankers

Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP) operate in both the crude tanker and the product tanker segments. Along with crude tanker industry prospects, investors should also look at product tanker outlook while analyzing these companies. Teekay Tankers has a varied fleet of one VLCC, ten Suezmax, 12 Aframax, and 10 product tankers.

Tsakos Energy Navigation (TNP) operates one VLCC, 12 Suezmax, eight Aframax, and 28 product tankers. The product tanker range includes two Suezmax shuttles, three Aframax LR, nine Panamax, six Handymax MR, and eight Handysize MR.

Which tanker is performing better?

The Baltic Tanker Clean Index, which tracks the shipping rates for product tankers, has fallen since June 2015. Also, the current September 2015 level of the index is lower compared to last year. If this trend continues, Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP) will be negatively affected. However, crude tanker rates have rebounded from a fall in August. Currently, VLCC rates have shown a higher hike in rates as compared to Suezmax rates. If this trend continues, Frontline (FRO), DHT Holdings (DHT), and Euronav (EURN) will benefit more compared to other tanker companies.

Investors interested to know more about tanker rates can look at our latest article, VLCC Rates Continue Run.

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