Wells Fargo cuts tanker earnings outlook

Wells Fargo cut rate estimates for dirty and clean tankers due to the seasonal slowdown, ongoing Opec cuts, high oil inventories and looming refinery maintenance season. 

Analyst Michael Webber also lowered earnings estimates for several tanker owners for this year and next, joining others who have reined in their outlook for the sector. 

Dirty tankers earnings are expected to between 5% and 7% lower than Webber's previous estimates. 

He sees average VLCC earnings coming in at $25,000 per day this year, compared to a previous outlook of $26,500 per day. Suezmaxes could earn an average pf $19,500 per day, compared to a previous forecast of $20,800 per day. Aframaxes are estimated to earn $15,500 per day this year, down from an earlier estimate of $16,700 per day. 

Clean tankers came in for a 10% to 12% haircut on their rate outlook. Panamax ships are expected to earn $12,500 per day, down from a $14,200 per day previous estimate. Medium-range (MR) tankers are expected to earn an average of $11,700 per day, compared to a previous estimate $13,000 per day.

The equities of many tanker owners do appear more compelling as they continue to trade at sharp discounts to their historic net asset values. But Webber cautions that tanker owners are still facing multiple headwinds.

Tanker equities "long-term value proposition looks interesting, but it’s just too early in our view," Webber said.

Revenge of the Orderbook

Webber says the 27 VLCCs that were ordered this year will push off a sustained rate recovery until 2019.

Opec's decision to extend production cuts to March 2018 and Saudi Arabia explicitly cutting one million barrels per day from exports make it "tough to get positive on near-term tanker demand." 

Seasonality is also kicking with third-quarter VLCC rates dropping 38% from last year.

Webber cut 2017 earnings estimates for a host of tanker companies, including Euronav, Tsakos Energy Navigation, Navios Maritime Acquisition, Frontline, Teekay Tankers, Ardmore Shipping and Nordic American Tankers. 

Wells Fargo estimates for tanker companies ($ per share)