New York-listed International Seaways has scored a $140m windfall by selling its 50% share in two FSOs to longtime partner Euronav.
The Manhattan-based owner wasted no time in doubling its quarterly cash dividend to $0.12 according to an announcement at the close of trading on Tuesday in New York.
The long-speculated deal was concluded at $300m, with $140m being Seaways take net of working capital and expenses.
Seaways has been questioned about a possible sale for years, particularly since it unloaded a half share in four non-core LNG vessels for a $123m take in October 2019.
Chief executive Lois Zabrocky consistently has said that Seaways would evaluate both a sale and an outright purchase of the interests, although the latter had been viewed as a long shot.
Fearnley Securities has a buy rating on both Seaways and Euronav.
The investment bank had estimated a value of $340m for both FSOs.
Both units have been operating at the Al-Shaheen field off Qatar since 2010 and will commence a new contract in the third quarter of 2022.
The continuation will be a lower rate that carries through most of 2032.
Fearnleys values the cash flow from the contract at about $130m on a 50% basis, leaving limited residual value risk for Euronav.
“Worth noting here is that the operational life of these units (2002-built) should extend at least to 2040, leaving upside risk to our numbers,” the investment bank said.
Poison pill
Tuesday’s announcement is likely also to be viewed through the lens of recent disclosures that John Fredriksen’s private interests have bought up a 16.6% stake in Seaways.
That led Seaways to place a “poison pill” in its bylaws and the Fredriksen camp to lash out at Seaways management in an open letter.
The Fredriksen entity had offered to advise Seaways’ management and board on key topics including achieving better shareholder value, an approach that was met by Seaways management defending its track record in building the company.
While the FSO deal may have been many months in the making, some will no doubt view the timing as a further act to assuage shareholders in the shadow of the Fredriksen approach.
Euronav of course has its own relationship with Fredriksen, as the Norwegian tycoon is attempting to close an all-stock combination with the Belgian company that will create the largest-ever tanker owner with market capitalisation of more than $5bn.
Euronav’s full ownership in the FSOs, on 10-year charters to North Oil Co of Qatar, could potentially affect terms of that combination as well.
“Our participation in the FSO joint venture with Euronav has provided stable cash flows for more than 11 years for International Seaways and its predecessor,” Zabrocky said in Tuesday’s statement.
"We thank Euronav for their partnership, and we are confident that they will continue to operate these vessels with the highest standards."
Euronav chief executive Hugo De Stoop said Euronav had long maintained operational control of the units and was pleased to take full economic control.
"International Seaways has been a strong and reliable partner since 2008 and we are grateful for their support," De Stoop said.
"These operational units have already provided substantial value to our customer since 2010 and the long-term contracts reflect Euronav’s operational capability in diversifying activities beyond the traditional crude oil transportation sector and generating superior returns on capital."
