Norway's ADS Crude Carriers is eyeing future shipping investments despite selling its fleet and handing over all the profits to shareholders.
The Oslo-listed company has now delivered the last of three 2002-built VLCCs it offloaded for $25.5m each over the last two months.
The name will now be changed to ADS Maritime Holding to reflect the possibility of new investments beyond the crude tanker sector.
ADS will hand over $51m to shareholders, the net proceeds from the disposals, as well as a regular dividend of $4m for the third quarter.
Cash generated
Chairman Bjorn Tore Larsen said each VLCC was sold at a premium to the price that they were bought for in 2018 from John Fredriksen's SFL Corp.
Since the announcement of the first vessel sale, the share price has increased more than 60%.
The company continues to "evaluate further investment opportunities in the maritime sector, anchored by the principles that have helped it to be successful in creating shareholder value to date", ADS said.
These include being highly disciplined with regards to vessel entry price, implementing an aggressive capital return policy and ensuring low-cost operations with a balanced capital structure
In a letter to shareholders, Larsen said the vessels were sold to lock in profit for investors, rather than risk losing it all in a "double or nothing" bet.
"We had the opportunity to sell at what we considered to be good prices – tomorrow that opportunity may have gone," he added.
Chips cashed in
The VLCCs had between 17 and 22 months left of economic life, ADS said.
Rates would have needed to be historically high to generate the same profit as the sales over that period, Larsen added. But levels are "very low" now, he said.
"We know that the tanker market is very volatile and always has the potential to skyrocket again next week or next month. Even so, we didn’t consider the risk-reward balance to be in our favour and we decided to cash out our chips," Larsen told investors.
The chairman added that ADS is a very lean company, "which will enable us to keep the lights on whilst scanning the horizon for new opportunities".
The operation is looking for countercyclical investments, with quality ships bought at low prices.
Larsen said he prefers "liquid" assets like tankers and bulkers, and larger ships which have greater upside.
Partnerships possible
The company could also identify long-term projects with guaranteed cash flow, possibly through partnerships.
"Such opportunities are rare, but they happen," Larsen said. "Our cardinal rule is simple: don’t lose money."
As the bank accounts will now be all but emptied, ADS will need to return to the market for new funds when an investment has been identified, the chairman said.
In the third quarter, net profit was $500,000, against a $2.9m loss in 2019, while revenue grew to $11.4m from $6.9m the year before.
The VLCCs averaged $37,344 per day.
