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Frontline and Nordic Have Oldest Fleet Age among Peers

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Fleet age

Average fleet age is an important indicator of a company’s performance. Vessel age impacts the vessel operating costs, capital expenditure plans, and capital structure of a crude tanker company.

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The average fleet age

The above chart shows the average age of vessels for major crude (DBO) tanker companies. Frontline (FRO) and Nordic American Tanker have the oldest fleets with an average of 13.5 years and 13.2 years, respectively. Average fleet age for DHT Holdings (DHT) is 9.77 years. Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), and Euronav (EURN) have comparatively young fleets with average ages of 8.8, 8.7, and 8.0 years, respectively.

Change in average fleet age

When a company adds newbuilds or younger vessels to its fleet, it reduces the average age of its fleet. Teekay Tankers (TNK) has 12 vessels with an average age of 5.5 years, which will be delivered to the company in the fourth quarter. This will bring down the average age of the total fleet by 1.2 years. Similarly, going forward, the average fleet age of Tsakos Energy Navigation (TNP), Nordic American Tanker (NAT), and DHT Holdings (DHT) will be reduced, as these companies have 12, four, and six newbuild vessels in the pipeline to be delivered in the next two to three years. If Frontline’s (FRO) merger with Frontline 2012 takes place, Frontline’s (FRO) average fleet age will be substantially reduced, as the average age of Frontline 2012’s fleet is just three years.

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Possibilities of scrapping

Crude tankers normally have a life of 25 years. All the above-mentioned companies’ vessels are under 20 years, except Frontline (FRO), which has two vessels that are ~22 years old. Thus, none of the companies have an immediate risk of scrapping the vessels. But having older vessels will negatively affect the earnings potential of the company a few years down the road.

Impact on companies

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. These costs will be comparatively higher for Frontline (FRO) and Nordic American Tanker (NAT). Also, the vessel values of these companies will be comparatively lower, which lowers the asset value.

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