The Tanker Industry: Q4 2015 Results Comparison

|
Includes: ASC, DHT, EURN, FRO, NAT, NNA, TNK, TNP
by: MTF Investing

Summary

The 4th quarter was flat to slightly down for the tanker industry.

So far in 2016, the tanker market has suffered due to seasonally low rates, likely presenting an opportunity for investors.

A review of 4Q15 (and previous quarters) helps to identify the strong performers.

ASC, DHT, EURN, and TNP consistently show strong returns; the recent merger in FRO is a speculative position for 1Q16 results.

I recently completed a series looking at the 4Q 2015 results in the tanker industry:

The Tanker Industry: Q4 2015 Comparison Of Revenues

The Tanker Industry: Q4 2015 Comparison Of Expenses

The Tanker Industry: Q4 2015 Comparison Of Assets And Debt

This article is a summary of those comparing Ardmore Shipping ( ASC), DHT Holdings ( DHT), EuroNav ( EURN), Frontline Ltd ( FRO), Navios Maritime Acquisition ( NNA), Nordic American Tankers ( NAT), Teekay Tankers ( TNK), and Taskos Energy Navigation ( TNP).

Click to enlarge

The 4th quarter was relatively flat for the tanker industry with FRO and DHT seeing a slight bump and the rest of the companies falling in the single digits. The one exception was NNA which saw a 17% fall over the quarter.

Click to enlarge

(Yahoo stock performance over 4Q15)

Over all of 2015, the field narrowed out. NAT was the best performer with a 52% surge followed by TNK with 31%. After that were FRO, TNP, and EURN with 10-20% growth in the stock price. Both ASC and DHT saw roughly 5% and NNA was down almost 20% for the year.

Click to enlarge

(Yahoo of 2015)

The intent here is to review the companies based on the recent quarter and highlight strengths and weaknesses in their strategy or balance sheet. The previous articles discussed these charts in more detail, but the final spread sheet it attached. There is one caveat for FRO. When computing both revenue and expenses, I used the pre-merger fleet size since I was looking back over the quarter. When computing balance sheet I used the post-merger fleet size since we are looking at the assets and debt the company is carrying forward. The merger was completed in December, and this will skew the results some, but investors should consider this when looking at the numbers.

For Revenue and Earnings, the following chart is used:

Click to enlarge

For expenses, the following chart is used:

Click to enlarge

For the balance sheet, the following chart is used:

Click to enlarge

During the 1 st Quarter there was a strong correlation between stock price appreciation and balance sheet strength. Since then those correlations have faded and appreciation appears to be tied stronger to rumors or future developments in the companies.

ASC operates a fleet of product tankers and saw a premium per DWT for revenue and EBITDA that surpassed its peers in the industry. It also came in on the high end of expenses per DWT. The company has a solid balance sheet with sufficient cash. The company took delivery of two ships over the quarter and sold two older ships, lowering the average age of the fleet. While Wall Street didn't appreciate the company over the year, operationally the company has been solid and has found its niche.

DHT operates a fleet of VLCCs (along with a Suezmax and two Aframax's). The larger ships were able to maximized both revenue and EBIDTA on a per ship basis and was near the top of the industry. Its operating expenses were high on a per Ship basis, but is operating 10 VLCCs on the spot market and responsible for those expenses. For equity, the company was at the top of the industry relative to the size of its fleet with an average of $40M in equity per ship including a cash average of almost $9M per ship.

EURN was on the low end of revenue per ship for the quarter but came in above average in EBITDA for the quarter with close to $2M per ship. The difference was the low expenses the company recorded, on both a per Ship and per DWT basis, driven by the chartering strategy. On the balance sheet, the company doesn't have a strong level of assets compared to its peers, but it does have low debt on both a per Ship and per DWT basis.

FRO completed the merge with Frontline 2012 to become one of the largest tanker companies. That development has helped the company lead the industry in stock appreciation. For revenue, the company was at the top based on each ship, but the number will likely get diluted the next quarter when the size of the fleet is increased. The company is opening up the fleet for more exposure to the spot market, and taking on the required Voyage Expenses, but was below average with Operating expenses and General and Admin expenses, along with Total Operating expenses. On the balance sheet the company is on the low end of Debt, but is also on the low end of Equity.

NAT saw revenue per ship and per DWT near the top of the industry, but EBITDA was well below average on both a per ship and per DWT basis. While total expenses were above average, this was mainly due to higher than average voyage expenses due to voyage chartering by the company. On the balance sheet, the company has low debt compared to its peers and the size of its fleet which has driven up the equity in the ships. The company received a lot of criticism for missing earnings in the 4 th quarter, but its strong balance sheet should help smooth out the waters.

NNA was below average in revenue and saw EBITDA below average on a per ship basis, but was above average on a per DWT basis. The company saw expenses below average in all categories except General and Admin which are always significantly above average. The company also has below average equity on a per ship and per DWT basis. Its Liabilities and Long Term Debt were all above industry average and Assets were below average on a per ship basis, but above average on a per DWT basis. NNA recently provided a $50M loan to its parent company due to the struggling Dry Bulk market. I don't intend to cover all of that here, but the market hasn't looked favorably on the whole Navios enterprise based on how the Dry Bulk depression is dragging down the market.

TNK also saw revenue and EBITDA below the industry average on a per ship and per DWT basis. For expenses, the company was below the industry average in all expenses except operating expenses on both a per ship and per DWT basis. TNK was also below the industry average on Debt, but also below average on Equity built in the company on a per ship and per DWT basis. While 2015 was good to investors in the company, so far into 2016 investors have seen the stock cut in half.

TNP owns and operates a mixture of Product and Crude tankers and saw revenue and EBITDA per DWT at the high end of the comparison, but on a per ship basis it was below the peer average. Expenses were mixed, with Vessel Operating expenses high, but overall Total expenses on a per Ship basis came in low. The company also has a very strong balance sheet with Equity averaging out close to $29M per Ship, including an average cash balance of over $6M per ship.

Conclusion

While 2015 was good for the Tanker Industry, so far 2016 has not been with all the companies down since the start of the year.

Click to enlarge

Quarterly earnings serve as an azimuth check for the tanker industry to make sure they are on track. 1Q16 earnings will likely be low due to a dip in tanker rates, but are still above the historic lows from the first part of the decade. All eyes will be on the new FRO as it records its first full quarter since the merger, and has fallen almost 50% since (post reverse split adjusted). For the rest of the companies, they all have their strengths and weaknesses. If past performances are indicative of future potential, then ASC, DHT, and EURN will all likely do well. TNP is another favorite that is well run and consistently posts respectable numbers.

Disclosure: I am/we are long FRO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.