Qatari gas carrier Nakilat has bought out partner International Seaways' 49.9% stake in an LNG joint venture for $123m in cash.
The joint venture owns four 216,200-cbm Q-Flex LNG carriers: Al Hamla, Al Gharrafa (both built 2008), Al Gattara and Tembek (both built 2007).
The vessels' combined book value was $116m as of 30 June, according to International Seaways' (INSW) second-quarter results this year.
VesselsValue estimates the quartet's current market value at $489.31m en bloc.
Speaking as a panelist at TradeWinds International Shipping Forum in Bermuda, International Seaways chef executive Lois Zabrocky said the move was well timed to monetise the position and direct resources to the company’s core focus on crude and product tankers.
“We also have found that investors were not giving us proper credit for the holding in our share price, so this enables us to unlock the full value,” Zabrocky said.
The move also comes as Seaways prepares for the looming IMO 2020 deadline and the expense of equipping 10 of its VLCC’s with exhaust gas cleaning systems, or scrubbers.
Zabrocky said the owner wants to pay for the retrofits from cash on its balance sheet.
However, the extra cash from the Qatar sale is earmarked for use in refinancing debt and distribution to shareholders, Zabrocky said.
Zabrocky also said in a prepared statement that the transaction demonstrated the "high level" of teamwork the companies have shared for over 15 years.
"By monetising our interest in the joint venture, we unlocked significant value for shareholders and further strengthened our balance sheet," she said on Monday.
Jeff Pribor, chief financial officer of INSW, said divestment would allow the company to further its capital allocation strategy.
"Following our success growing and renewing our fleet, deleveraging and returning cash to shareholders remain our top priorities," he said.
The four LNG carriers have been on 25-year time charters to Qatar Liquefied Gas Company (Qatargas) since their delivery in late 2007 and early 2008.
New focus
News of INSW's sell-off is something of a turnaround since March, when Zabrocky said the company was looking to potentially expand its LNG fleet.
“Our existing [LNG] vessels are operating fully utilised. And if we see an opportunity in the future, we're definitely open to that,” she said during the company's first-quarter earnings call.
“Right now, we still feel like we have some work to do on strengthening our conventional tanker fleet base, but LNG is something which obviously will be growing a lot in the future and we watch it very closely.”
Since then, the company has adjusted its focus to paying down debt and potentially paying off shareholders.
INSW posted a $16.5m loss during the second quarter but remains cash-rich.
The company had $150m in cash and $200m in liquidity at the end of the second quarter, including a $50m undrawn revolver and no debt coming due until 2022 at the earliest.
It made a $10m payment on its 2017 credit facility on 31 July.
Analyst reaction
J Mintzmyer, lead researcher at Value Investor's Edge, was among the first to react to news of the JV sell-off, calling the transaction "excellent".
"They sold the JV for $123m versus last reported book of $116m and our more conservative estimate of $100m in our NAV [net asset value] models," Mintzmeyer told TradeWinds by email on Mondya.
"As a result of this excellent sale, INSW now has an additional cash of more than $4.00 per share.
"With tanker rates surging and this sale further opening optionality and simplifying the company, I believe they are worth at least $30 per share."
