Scorpio Tankers Inc. (STNG) Is Bullish on the Tanker Market, But Is it Right?

Page 1 of 2

Scorpio Tankers Inc. (NYSE:STNG), led by shipping veteran Robert Bugee, is looking to become the biggest force in the tanker market after buying much of the global capacity for tanker production for the next few years.

Scorpio Tankers Inc. (NYSE:STNG)

The company currently owns 15 vessels and operates an additional 25, which are chartered. Scorpio Tankers Inc. (NYSE:STNG) also has 54 new vessels on order and holds about 60% of the worldwide contracts to build LR2 longer range tankers and 25% of worldwide contracts to build medium range tankers. The company believes that by ordering a fleet of similar, longer range vessels, it will be able to achieve better economies of scale.

The global tanker market has been suffering from chronic oversupply problems during the past few years, and although the market is starting to pick up again, part of the reason for its pick up is a reduction in the number of ships being produced. Scorpio Tankers Inc. (NYSE:STNG)’s management believes that demand for oil and refined product transportation will pick up rapidly over the next few years as demand in Asia and Latin America grows.

However, the rest of the industry is not so sure and the CEO of Nordic American Tanker Ltd (NYSE:NAT) has clearly stated that a rise in shipping rates will only happen if there is a significant reduction in ship capacity. Some orders left over from 2007/2008, when the market was at its peak, are only just starting to be delivered and ship production was in-line to begin tapering off next year, but with Scorpio Tankers Inc. (NYSE:STNG)’s extra bullish bet, this could be about to change.

Can Scorpio support the extra ships?

It would appear that Scorpio can afford to take on the extra debt that it needs to be able to fund the ships. The company increased its borrowing by 23% from Q4 2012 to Q1 2013, but still managed to reduce its debt to equity level while increasing its net cash position (this was done by issuing additional equity).

Scorpio Tankers Inc. (NYSE:STNG) is also in one of the best positions financially out of all the tanker companies on the market. Unlike Nordic American Tanker Ltd (NYSE:NAT), which has a negative view on the tanker market in the short-term, Scorpio made a small Q1 2013 profit, the first time since 2009! Meanwhile, Nordic American Tanker Ltd (NYSE:NAT) incurred a huge $32 million loss on revenue of only $17.3 million.

Company Cash Debt Debt to Equity Q1 2013 Debt to Equity Q4 2012
Scorpio $400 $175 20% 34%
Nordic American $23.6 $250 32% 31%
Teekay $172 $1,873 290% 270%

Figures in $U.S. millions

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!