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Wave of oil tanker deals predicted |
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Friday, 05 March 2010 |
 Consolidation among oil tanker owners will accelerate as a result of tough shipping and financial market conditions, one of the sector’s key figures has predicted.
The comments by Morten Arntzen, chief executive of New York-listed
Overseas Shipholding Group, come amid a glut of sharp profit falls for
the large tanker operators.
Mr Arntzen said that banks’ reluctance to lend would force weaker owners
to sell out to stronger ones. OSG has the world’s second-largest tanker
fleet by ship numbers.
The process would favour listed companies that could raise capital on
public markets, Mr Arntzen went on. His views contradict traditional
shipping market wisdom, which values the benefits of the secrecy enjoyed
by the sector’s hundreds of private owners.
“Finally, being a public company has value,” Mr Arntzen told the
Financial Times. “The advantage is the access to an additional source of
finance other than the traditional ship mortgage.”
Declining demand for oil and oil products and an oversupply of ships
have hit large tanker operators’ profitability.
OSG itself on Monday revealed net profit down 78 per cent to $70.2m on
turnover down 36 per cent to $1.09bn.
Frontline, the market leader, announced net profit down 85 per cent to
$103m on Friday, and AP Moller-Maersk is likely to announce either
severe profit falls or losses at its tanker division on Thursday because
of its heavy exposure to the troubled market for oil product tankers.
However, Mr Arntzen insisted large, publicly-owned companies such as his
would have significant advantages in the next few years over the
hundreds of small, privately-held companies – many Greek – that still
form the bulk of the world tanker fleet.
Large operators have gradually been buying up rival companies or their
ships in recent years as growing environmental concerns have pushed
major oil companies to prefer bigger, safer operators. However, Mr
Arntzen said that process would speed up as small operators found the
shipping banks on whom they relied for finance were no longer willing to
lend.
“The companies that can tap the bond market, the equity market – they
have an advantage,” Mr Arntzen said. “That will lead to an acceleration
in consolidation.”
OSG was exploiting its relatively stronger financial position by
watching out for problems with the payments on ships ordered by
financially fragile competitors, Mr Arntzen told the Marine Money
Hamburg ship finance forum last week. The company bought a pair of
completed oil product tankers from one shipyard after their intended
owner was unable to finance its final pre-delivery payment.
Growing regulatory pressure on banks would only increase their tendency
to prioritise lending to the biggest, best-capitalised companies, Mr
Arntzen told the FT.
“The regulatory thing is going our way,” he said.
Shortage of capital remained a far bigger problem for most tanker
operators than the market downturn, Mr Arntzen insisted. Many owners are
struggling to finance instalments on orders placed with shipyards
during shipping’s 2001-08 boom.
“The tanker market is just poor,” Mr Arntzen said. “The real crisis is
in the banks.”
Source: Financial Times
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