Moderated by Jefferies investment banker Jeff Pribor, the panel of Oracles covered the entire waterfront: drybulk, tankers, offshore oil, containers, insurance and banking.
Bob Burke, the ceo of Ridgebury Tankers, was looking ahead to clear sailing in both the crude and product tanker sectors, which he described as “inter-related”, “unless the orderbook is overheating.” He talked about the entire oil distribution system being clogged, noting that 1.5m barrels per day (bpd) of crude oil production in excess of demand must be stored, including on tankers. Burke also opined on the newly allowed US crude oil exports, saying that with they would bring no benefit to the tanker market right now- with the price of US oil (West Texas Intermediate) at parity with the worldwide market (Brent oil).
Burke continues to look for a low oil price throughout 2016; he was at the low end of the range in a poll of the Oracles on the likely oil price at end 2016; guesses ranged from $25 per barrel to $60 per barrel.
Kevin Kennedy, a classmate of Burke’s from the US Merchant Marine Academy (USMMA), who is now managing director of container shipping fund packager MC Seamax, described a grim outlook for the container sector, which he described as “driven by oversupply”. Kennedy waxed enthusiastic on shipowners who charter vessels out… “the liners generally pay”, and noted a bifurcation among listed companies, with dividends to shareholders being sustained at Costamare and Seaspan.
Another USMMA classmate, maritime lawyer Peter McLauchlan, partner in the Houston office of Gardere Wynne & Sewell LLP, talked about “$70bn of active bankruptcy filings” as participants in the offshore energy space restructure. The panel also included insurance representative Joe Hughes, from the American Club, who described the insurance side of the business, where average increases have been low in recent years, as “a bright spot for shipowners”.
Hamish Norton, president of Star Bulk Carriers summarized dry bulk with a Monty Python video clip with funereal overtones from the film the Holy Grail with the classic line “I’m not dead yet”, which was rather fitting for the current state of the market. He added that the market is as bad as Petros Pappas, the chairman at Star Bulk, can remember.
The Oracles also delved into ship finance, since NYMAR ‘s membership is heavily involved in finance and capital raising. Lambros Papaeconomou, an analyst and journalist, implored companies to recognize their problems, and then suggested that: “Chapter 11 is not the worst thing” for companies that are restructuring their debt.
Banker Martin Lunder, from Nordea, emphasized his bank’s participation in a large tanker financing, but acknowledged that “we’ll be busy with amendments and waivers” when it comes to dry bulk. Lunder said that Export Credit Agencies (ECAs) have filled part of the funding vacuum as shipping banks have pulled back; he said that the industry has been taking $100bn of new debt each year. The panelists then discussed the impact of professional investors owning ships; Kennedy noted much more liquid markets for trading debt, while moderator Pribor postulated what might happen in the realm of asset sales, where non-emotional private equity investors might not be positioning for the next cycle - unlike family owned companies which will wait out bad markets.
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