Connecticut tanker owner Diamond S Shipping will repurchase up to $50m of its own shares after returning to profit in the fourth quarter.
The New York-listed suezmax and product carrier specialist said net earnings to 31 December were $26.8m, compared to a loss of $30.2m in the same period a year ago, as the fleet expanded and rates rose.
Revenue from the 64 vessel fleet jumped to $186m from $97.5m.
Seeking Alpha said the earnings per share of $0.65 missed consensus by $0.17, while revenue was only short by $1.55m.
The 2019 annual net loss was cut to $10.1m from $86.6m, during a year that saw the fleet expanded by the merger with Capital Product Partners.
The board has now approved the share buyback, to be carried out over a year.
Spot market focus pays off
Chief executive Craig Stevenson said the company's ability to capitalise on a strong rate environment was reflected in the profit, with the company's spot market focus offering upside exposure for investors.
"We believe that Diamond S’ conservative balance sheet, low cash break-evens and strong liquidity profile will enable us to appropriately manage the market volatility from the outbreak of the coronavirus, while keeping us ready to take advantage in any run-up in tanker rates from the current seasonal levels," he added.
"Accordingly, and given the disconnect between our long-term outlook and the company’s share price, we believe that share repurchases represent the most prudent use of our financial resources and the appropriate mechanism to return value to our shareholders at this time.”
Strong market carries over into 2020
Vessel expenses were $44.7m in the final three months, up from $30.1m a year ago, due to more ships being operated.
As of 28 February, the shipowner had fixed 73% of the crude fleet at $47,000 per day and 80% of the clean ships at $15,900 per day for the first quarter.
Debt stood at $811m, while there was $89.2m of cash in the bank.
Looking ahead, the company said the strong market conditions carried over into the first quarter of 2020, but rates were coming under pressure due to the lifting of sanctions on a subsidiary of Cosco and the emergence of the deadly Covid-19 strain of coronavirus.
"The coronavirus has had a significant impact on global commodity trade and specifically end-market demand from China. Notably, larger vessel classes have been disproportionately impacted by a decrease in long haul voyages," it added.
"The product market has also recently come under pressure as Chinese refinery throughput in February is set to fall by 1m to 2m barrels per day, reflecting the impact of the coronavirus on demand."
But it noted a thin balance between supply and demand that can result in heightened volatility and occasional rapid increases in daily vessel rates.
The company said it remains "constructive" in its long-term market outlook and strongly believes the current market price of its shares does not reflect the underlying value of its assets.
Last December, Diamond S secured a five-year, $525m credit facility that will pay down existing debt.
