This is the third paper I've written covering the Tanker Industry results from Q4 2015 and the companies that make up the Industry:
I've started this comparison as a way to compare how the various companies are able to utilize their assets to maximize value for shareholders. All the companies have a different strategy for entering their ships into the spot market, time charter, or voyage charter. Some of the strategies are more profitable than others right now and some will be more profitable as the market attempts to recover.
The intent of this article is to compare the health of the companies using a common reference on a per ship and per DWT basis. By breaking down the debt, cash on hand, and assets it helps to compare like units (even though some will argue there are qualitative aspects not taken into account) it helps to level the playing field.
The companies looked at are Ardmore Shipping (NYSE:ASC), DHT Holdings (NYSE:DHT), EuroNav (NYSE:EURN), Frontline Ltd (NYSE:FRO), Navios Maritime Acquisition (NYSE:NNA), Nordic American Tankers (NYSE:NAT), Teekay Tankers (NYSE:TNK), and Taskos Energy Navigation (NYSE:TNP).
(Source: data compiled from Nasdaq.com and company websites on 31 March 2016)
Cash on Hand
Cash on hand has helps to serve as a buffer when the market turns down. With the industry coming out of a multiple year down turn, cash levels have been drawn down and then replenished with secondary offerings in many cases. Currently, for the size of the fleets, DHT, FRO, and TNP all have the most cash on hand per ship while ASC, DHT, and TNP all have the most cash on hand when compared on a per DWT basis. This was identical compared to last quarter's results.
Again, all of the companies are working to refill the coffers after the long shipping rates drought. Since the end of last year, DHT, FRO, and TNP have increased the cash levels. FRO just completed the merger with Frontline 2012 which helped to increase its bottom line. TNP has been steadily replenishing its cash levels over the past few years.
While Total Assets includes cash on hand, the value of the ships is the biggest asset the companies have. On a per ship basis, DHT, NAT, and TNP have the highest asset values. When compared on a per DWT basis, ASC, NNA, and TNP come out above average. Both of these were also identical compared to last quarter
The main factor in a higher DWT value is the ownership of Product Tankers over Crude Tankers. ASC has a fleet of pure Product Tankers while NNA and TNP have a mix in their fleets.
Liabilities balance out the other side of the company books. When looking at the companies, NAT, ASC, and EURN have the lowest liabilities on a per ship basis while DHT, NNA, and TNP all have liabilities at over $30M per ship. When the liabilities are compared on a per DWT basis, ASC, NNA, and TNP all have the highest levels. Again, the product tankers employed by these companies come at a higher cost for the smaller ships compared to the crude tankers. These results are again the same as the last quarter.
Looking specifically at Long Term Debt shows similar results. ASC, EURN, and FRO have the lowest amount financed over the long term on a per ship basis. When compared on a per DWT basis, ASC, NNA, and TNP again have the highest levels.
When the liabilities are subtracted from assets, investors are left with the equity that has built up in the company.
On a per ship basis, DHT, NAT, and TNP all have the highest equity on a per ship basis. On a per DWT basis, to account for some of the smaller ships, ASC, NAT, and TNP have the highest equity.
Over the quarter, both FRO and DHT were the best performers. The merger with FRO and Frontline 2012 attracted the attention of investors and helped contribute to its success. On the lower end, NNA was the worst performer over the quarter.
Just like turning the big ships these companies employ, repairing balance sheets are long term projects and most of this quarter's results were similar to last quarter. Balance sheet strength is reflected in the equity built up in the company. Absolute numbers can mask the strength or weakness based on fleet size. NAT and TNP have the strong balance sheets based on both a per Ship and per DWT basis.
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.