New York-listed Ardmore Shipping is enjoying its best quarter ever, with spot earnings of MR product tankers reaching their all-time peaks.
With port congestion and floating-storage demand, MR earnings reached nearly $77,000 per day in late April before falling back to a still healthy level of $50,000 per day this week, according to brokers.
“We have to describe our recent chartering activity," said Ardmore chief executive Anthony Gurnee, whose company has 19 MR and six chemical tankers.
"Last week we fixed a 55-day voyage at $72,000 per day, equivalent to a VLCC at $200,000+ per day.
“Our MR voyages in progress, representing roughly the last three weeks' fixtures, now stands at $28,200 per day; lower than brokerage reports or the above fixture, but higher than anything we achieved before.”
Strong market fundamentals
Ardmore assessed global MR earnings at between $35,000 and $40,000 per day currently — lower than what brokers reported.
“The rates shipbrokers are throwing around tend to be somewhat detached from reality,” Gurnee said. “I don’t think MRs are at $50,000 per day.”
Still, Ardmore estimated it would achieve annual earnings of $110m based on an average time-charter equivalent (TCE) rate of $28,200 per day.
“We are not forecasting any future results, but rather just contextualising what is happening,” Gurnee said.
“The fact the tanker market is soaring at a time when virtually every other industry is suffering is not illogical. Shipping rates typically strengthen with volatility and disruption.”
Gurnee noted that attention has focused on crude tankers amid crude oversupply and floating storage talk, lifting spot rates.
“More recently, those conditions have arrived for the product tanker market and we believe they may be more persistent, potentially for many months,” Gurnee said.
He provided the update as Ardmore reported a $6.5m profit for the first quarter. That marked a return to the black after the company booked net losses of $9.15m in the same period of 2019, when it recorded a $6.6m loss on the sale of the 45,800-dwt Ardmore Seamaster (built 2004).
Revenue increased to $65.2m during the period, a jump from $62.3m in the first quarter of last year.
Mixed reactions
Looking to the second quarter, Ardmore had fixed 55% of its total MR tanker revenue days at an average TCE rate of $24,000 per day and 45% of chemical tanker days at $16,000 per day.
“Those [chemical] ships tend to do extremely long-haul voyages ... [their] return on capital is good but they tend not to catch the spikes as the bigger ships do,” Gurnee said.
Some analysts were not satisfied with Ardmore’s latest performance, with spot indices at sky-high levels.
Arctic Securities said Ardmore’s earnings this quarter had been well below its estimates of $30,000 per day for MRs and $24,000 per day for chemical tankers.
The investment bank said the company would need to fix the remainder of second-quarter open days at $38,000 per day for MRs and $30,000 per day for its chemical tankers to meet its estimates.
Fearnleys Securities said: “With rates coming off significantly on the crude side recently, we could see MR rates correct throughout the course of May as well. Overall, we believe these bookings are a poor read-across to the clean space.”
In mid-day trading on Tuesday, the share price of Ardmore was down nearly 12% at $6.03 per share.
In an earnings call, Gurnee stressed that Ardmore’s second-quarter figures reflected earnings from fixtures in February and March rather than the current market.
“It’s not forward booking,” Gurnee said. "It’s historical. People are misconstruing a little bit."
Some analysts preferred to look at the bright side.
“The company provided second-quarter guidance that points to record upcoming earnings, despite our view that these figures appear to be below market index averages,” Clarksons Platou Securities said.
“Overall, Ardmore remains well positioned to benefit from current market dynamics, with the majority of its ships trading in the spot market.”
