Scorpio Tankers – Highlights From the Capital Link Company Presentation Series
Riding the Product Market Fundamentals
NEW YORK, Jan. 13, 2023 (GLOBE NEWSWIRE) -- Capital Link hosted a presentation by the senior management of Scorpio Tankers Inc. (NYSE: STNG) on Monday, January 9, 2023. During a 45-minute session, Robert Bugbee, President & Director, and James Doyle, Head of Corporate Development & Investor Relations, gave a slide presentation and responded to a series of questions regarding the company’s strategies for debt reduction, the outlook for the market, and the impact of Russian sanctions and China’s reopening.
A replay of the full session of the presentation and the extensive Q&A can be accessed at: https://youtu.be/05bEr0a6ojU
Highlights from Scorpio Tanker’s session at the Capital Link Presentation Series include the following:
Scorpio Tankers Has One of the Largest & Most Modern Product Tanker Fleets in the World
With a fleet of 113 vessels, Scorpio Tankers is the world’s largest product tanker owner. Its fully delivered fleet transports refined petroleum products, such as gasoline, diesel, jet fuel, and naphtha, to a large customer base including oil majors, national oil companies, and commodity traders.
The average fleet age is 7.0 years, significantly younger than the worldwide fleet. The fleet is composed entirely of eco vessels, all of which are fuel efficient. A total of 90% of the company’s vessels were built at leading Korean shipyards.
Outlook for the Industry is Quite Optimistic
Current product tanker rates are at record levels, export volumes and distances have increased, and demand for the company’s vessels is expected to grow, outpacing supply over the next two years. Exports of global refined products have reached record highs, while inventories have reached extremely low levels.
“Product tankers, now more than ever, are being used to supply more immediate demand from farther afield, and we expect that to continue, especially as jet fuel demand increases,” James Doyle, Head of Corporate Development & Investor Relations, stated.
Jet fuel demand is expected to increase significantly as China opens after years of strict Covid policy. “China opening up is going to increase international travel and jet fuel consumption, which is a major component that’s been missing to the modern product tanker market,” Doyle stated.
Although some analysts have speculated that the product tanker market, like the VLCC market, may be negatively impacted by Russian sanctions, Robert Bugbee, President and Director, dispelled any such fears. “The people drawing these conclusions are wrong,” he stressed. “I think people put too much expectation on the VLCC market with regard to sanctions. All along, it’s the product tanker market that will benefit more,” Bugbee said.
Very Low Ordering Despite High Rates
Traditionally, when spot rates are high, new ships are ordered. Now, however, there are very few orders for new ships. Shipyards are nearly full and construction rates are high, meaning that it could take years for new, large product tankers to be delivered. “If you really wanted to significantly impact the market and order 100 ships or something, you’d have to spread it out at various yards that are already full with other projects, so you’d be looking at 2026 and after,” Doyle stated.
“We have this extraordinary phenomenon where rates are high combined with an orderbook that is at a record low,” Bugbee remarked. “The supply side is not being recognized by investors or stressed enough by analysts, simply because we work in a world that is so focused on the here and now, so everybody is focused on rates here and now, as opposed to looking forward,” he continued.
Balance Sheet Transformation & Continued Debt Reduction
Scorpio Tankers has maintained a strong balance sheet and expects to reduce $1.3 billion of debt in 2022 and retains $491 million of liquidity as of October 28, 2022.
When asked about using the Company’s free cash flow to pay dividends instead of share buybacks, Bugbee stated the shares “are trading well below NAV,” and stressed that the company believes that the best use of its cash flow is to pay back debt.
The Company has also begun refinancing more expensive lease financing with new credit facilities from European financial institutions. Scorpio Tankers has no new buildings on order, providing the company with significant operating leverage
CAPITAL LINK – DISCLAIMER
Capital Link is hosting a series of online Corporate Presentations, whereby the Senior Management teams of leading listed maritime companies present their business development, strategy, growth prospects, and overall sector outlook. The presentations are approximately 45 minutes and consist of a company presentation followed by live Q&A between company management and webinar participants. All presentations in the series can be accessed at https://webinars.capitallink.com/2023/company_presentation/.
The webinars, including the ones mentioned above, are strictly for informational and educational purposes and should not be relied upon. They do not constitute an offer to buy or sell securities or investment advice or advice of any kind. The views expressed are not those of Capital Link which bears no responsibility for them.
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