Wells Fargo analyst Michael Webber took a half-empty, half-full approach to the tanker sector. Along with cutting 2016 earnings estimates for a number of companies, he also increased estimates of 2017 earnings for some of the same.
That adds to the list of analysts, including Doug Mavrinac at Jefferies, Magnus Fyhr at Seaport Global, Eirik Haavaldsen and Oystein Dalby at Pareto Securities, and Clarksons’ Herman Hildan and Frode Morkedal, who have cut rate and earnings estimates for tankers due to the “unexpected carnage” during the third quarter.
Webber cut his 2016 earnings outlook for Ardmore Shipping, DHT Holdings, Euronav, Navios Maritime Acquisition, and Teekay Tankers. Only Frontline and Tsakos Navigation Partners received a boost to their 2016 outlook.
But for 2017, Webber sees better earnings from DHT, Frontline, Navios, Teekay and Tsakos. He cut next year’s estimates on Ardmore and Euronav.
Webber also lopped his 2016 estimates for tanker rates, with VLCCs expected to earn $39,600 per day, compared to an earlier outlook of $41,500 per day; suezmaxes expected to earn $26,900 per day compared to $29,300 per day and medium-range (MR) tankers expected to earn $13,800 per day, from $15,200 per day.
The recent gains in tanker rates, which have come too late to help third-quarter earnings, are one of the positive signs in the market, Webber says. Those gains reflects better demand as Nigeria and Libya resume exports to Asia Pacific customers, and the ongoing strength of crude oil exports from the Middle East.
He also adds that with refiners drawing down their crude oil inventories, tankers will be in increasing demand to refill those inventories. That will be a critical factor for tanker equities to turn around, Webber says.
“We continue to believe for tanker equities turn the corner for a near-term trade we’ll need to see sustained inventory destocking,” Webber said.
