Scorpio Tankers has taken an $89m stake in New York-listed VLCC specialist DHT Holdings in a power statement of faith in a resurgent market for the largest crude tankers.

The investment in 4.9% of DHT’s outstanding shares was described as “passive” by Scorpio on Tuesday as it announced earnings for the third quarter.

It is Scorpio Tankers’ first direct investment outside of product tankers in more than a decade, when it put money into a series of newbuilding LPG carriers that later were sold to Dorian LPG, and VLCCs that were ultimately sold to Peter Georgiopoulos’ General Maritime.

Scorpio’s surprise DHT investment was the highlight of a report that saw it beat consensus analyst expectations for its earnings.

Scorpio reported adjusted net income of $87.7m, which amounts to $1.83 basic of $1.75 diluted earnings per share. The result topped the $1.66 diluted figure expected in a Bloomberg average of stock researchers.

However, the result was down from the third quarter of last year, when Scorpio reported net income of $99.2m, which translated to $1.99 basic or $1.91 diluted earnings per share.

Adjusted Ebitda of $166m beat analyst estimates of $153m, according to a research note from Jefferies’ Omar Nokta.

Vessel revenues of $268m fell from $291.2m in the year-ago quarter. Time-charter equivalent revenue decreased to $258.2m from $289.2m, mainly due to fewer vessels in operation.

That drop was almost fully offset by Scorpio’s deleveraging efforts, as interest costs fell by $29m, Nokta told clients.

Scorpio also guided to fourth-quarter earnings that to date have been sequentially lower than it earned across its three vessel classes in the quarter past. Scorpio operates 102 product tankers with an average age of 8.5 years.

LR2s earned spot rates of $31,600 per day, down from 38,011, while MRs earned $20,800 from $25,146, both with 35% of available days booked.

Handysizes have returned $13,000, from $19,605, with 34% of days fixed.

“Spot rates currently are below these figures though we expect higher refining activity in the coming weeks to support rates at higher levels,” Nokta said of the Scorpio guidance.

Scorpio said it has maintained its fixed $0.40 quarterly dividend.

The Emanuele Lauro-led owner also revealed it had spent $246.6m on share buybacks in the quarter, repurchasing 3.36m units at an average price of $73.34 per share.

That leaves $208.9m available under a $400m repurchase authorisation that was replenished and increased during the quarter.

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Going into the earnings report, analyst questions were expected to focus on fourth-quarter fixtures and any signs that the owner is seeing the start of benefits from the traditional winter heating season.

While that remains an area to watch, Scorpio’s DHT investment is likely to steal much of the thunder.

Analysts have said dynamics are in place for the large crude tankers to roar back from numbers that have been profitable but unexciting for much of 2024, especially as the Opec+ cartel relaxes production curbs.

While Scorpio looks to be betting on the same trend, it is also likely to portray the DHT investment as an expression of faith in its LR2s, which would be likely to see a knock-on benefit from VLCC strength.

DHT owns and operates a fleet of 28 VLCCs and is listed on the New York Stock Exchange. Its current market capitalisation is just over $1.7bn.

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