Seatrade Maritime is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Ardmore Shipping enjoys tanker market revenge

Photo: Ardmore Shipping Ardmore-tanker.jpeg
The strength in the product and handy tanker sector can be seen in the now reported Q1 results from Ardmore Tankers (ASC).

The analyst report titles speak volumes, with Stifel’s “Ardmore is living their best life” and Evercore ISI’s “The revenge tour rolls on”. These accolades come as the company reported better than expected earnings of $0.92 per share and a dividend $0.31 per share.

Following the earnings call, investors ratcheted the stock price up to a 52 week high at a price above $20 per share. For much of 2023, its price had languished in the low teens, hovering between $12 and $14, before beginning its push upward around year end into January, 2024.

In the conference call presenting the Q1 results and outlook, CFO Bart Kelleher highlighted a robust set of demand factors, telling listeners that: “The Russia-Ukraine conflict and the EU refined products embargo has led to a persistent reordering of global product trades, boosting overall ton miles. Concurrently, the energy transition is being tempered by energy reality and market projections continue to show year-on-year growth in oil demands. Meanwhile, the long-term trend in refinery dislocation between East and West, supported by forecast for increasing consumption, will continue to drive incremental ton miles.”

Analysts were stressing a continued positive outlook; Evercore ISI’s Jon Chappell wrote that: “ASC

reported 2Q-to-date spot rates that are tracking well ahead of forecasts, resulting in an uplift to our 2Q24 Earnings/share projection…while the extension of time-charter-in contracts for three vessels at pre-cycle-upturn rates adds materially to the earnings outlook for the following 12 months.”

In a trend noted throughout the sector, ASC is lowering its daily breakeven costs by adroit management of debt, with Chappell writing that Ardmore: “continues to meaningfully lower its cash breakeven levels for its fleet, with management noting a path to sub-$11,500/day (from $15,200/day in 2022).”

Jefferies’ analyst Omar Nokta, in his report, minus splashy title, broke out details on the vessel transactions, writing that: “Ardmore took delivery of the previously-announced acquisition of the Ardmore Gibraltar, a 2017-built MR costing $42.8 million total. It exercised purchase options for the Ardmore Seawolf and Ardmore Seahawk (currently leaseback financed) for $41 million, expected to close in June. In April the company delivered the oldest vessel in its fleet, the 2010-built Ardmore Seafarer, to its new buyer. It previously agreed to sell the vessel for $27.1 million, well above its original purchase price of $16.7 million in 2020.”

ASC does have a stake in shipping’s energy transition going beyond its own consumption; in 2021 it invested in Element 1, the developer of “e1”- a technology to provide hydrogen fueling for smaller vessels.

In response to an analyst question CFO Kelleher said: “And so now today, Element 1, like other industrial companies when you have this proprietary technology and you’re looking to monetize it, they’re expanding their global scale in terms of license agreements across geographies and across verticals. So marine included, but really other verticals, off-highway, on-highway charging stations, aerospace. So significant momentum with licensing revenue. And I think just also important to note though, like for us, that’s a $10 million investment. So, a small portion of our overall asset base and the one that’s outside of our own fleet of actual vessels, but certainly part of our energy transition plan and team today.”

Not mentioned on the call, ASC is also preparing for carbon capture aboard vessels, with installation of equipment to enable CO2 to be collected onboard.

In early May, e1 received a boost, in a “thumbs up” from the US Coast Guard (USCG). Financier Maritime Partners, owners of the tug Hydrogen One, under construction at Intracoastal Iron Works in Louisiana, said that they had received a Design Basis Agreement (DBA) from the USCG concerning the towboat. Hydrogen One will be use e1 technology, converting methanol fuel into hydrogen for powering the boat. The DBA is a recently implemented framework for moving through the rule setting and approvals process (and ultimately to USCG certification of the vessel) for technologies not previously deployed in the maritime realm.