The pickings were even slimmer than expected in a weak third quarter, but the table is now being set for a feast.
That was the message from Scorpio Tankers' management, which touted a turn in the long-depressed clean products market that is coming well ahead of the 25 November Thanksgiving Day holiday in the US — often seen as a benchmark date for a seasonal tanker rally.
"For a number of years, the third quarter has been viewed as the trough and there's always some discussion about whether the market is going to pick up by Thanksgiving. Clearly it has done so way in advance of Thanksgiving," commercial director Lars Dencker Nielsen said.
Dencker Nielsen was moved to using words such as "boom" and "whoa" to describe a recent upsurge in key operating segments, particularly in LR2 tankers.
Scorpio president Robert Bugbee added: "It's difficult to make it come across when we're coming off such a very bad market, but this gapping of LR2 rates — they slowly crept up, taking weeks and weeks to get to $20,000 [per day] and then in a matter of two or three trading sessions went straight to $25,000 — that's a very important thing and it's amazingly encouraging."
The comments were prompted by Clarksons Platou Securities' Omar Nokta, who wondered not only about a seasonal turn but a cyclical one after a year of dire rates.
"It feels like we're getting the confluence of seasonality and cyclicality coming together," the veteran analyst said.
Better than it looks
As Nokta noted, Scorpio is just the latest tanker owner to report putrid numbers for the past quarter but brighter fixtures into the current one.
The Emanuele Lauro-led company reported an adjusted loss of $76.1m, or $1.39 per share, for the quarter ending 30 September — a bigger hit than the consensus analyst expectation of a $1.28-per-share deficit.
Scorpio lost $20.2m, or $0.37 per share, in the same period of 2020.
Revenue fell to $119m from $177m.
But as Nokta noted in a research note, the performance was actually better than Scorpio had suggested three months ago as it guided to partial bookings for the period.
And more importantly, it is reporting better fourth-quarter fixtures to date in almost every vessel category.
With more than half of operating days booked, Scorpio is earning $13,750 per day on LR2s against $10,871 last quarter. LR1s are at $12,500 versus $10,015. MRs are at $10,500 against $10,320, while handymaxes have earned $8,700 compared with $7,457.
Still, these numbers are below the $17,000-per-day fleet financial breakeven needed for a company that has lost $188.4m so far in 2021.
And so Scorpio continues to build liquidity despite its faith in the rising market. It raised $41.3m in the past quarter through refinancings of six tankers, helping it end the quarter with $192.4m in cash, updated to $228.9m as of Wednesday.
And while Scorpio has maintained its $0.10 quarterly dividend, Bugbee was not in the mood to discuss buying back shares when prompted by one analyst.
"We're not arrogant enough. Despite how strongly we believe in what is happening, we're not going to act like it's 100%," he said. "Until markets cross $17,000 per day, we're not going to buy back stock and we're going to focus on liquidity."
