"Crude Carriers Bets Big on Oil Tankers, and It May Be Right on Time" (CRU; OSG)

From bNet:

Crude Carriers (CRU) intends to use the proceeds from its recent initial public offering (IPO) to acquire oil tankers. With charter-hire rates at an eight-year low, but showing signs of firming, now may be a great time for a new oil tanker venture to set sail.

Crude Carriers is using all of its approximately $254 million in proceeds to immediately purchase one 2006-built Suezmax vessel, the Miltiadis M II, at a price of $71.25 million. This is to be followed by the acquisition of two new-built, very-large crude carriers (VLCCs) for $96.5 million each, with expected delivery dates in late March and June 2010.

Suezmax is a large crude oil tanker of approximately 120,000 to 200,000 deadweight tons and can hold up to one million barrels of crude oil. A modern VLCC has the capacity to transport about 2 million barrels of oil and is mainly used on the longest (long haul) routes from the Arabian Gulf to North America, Europe, and Asia, and from West Africa to the U.S. and Far Eastern destinations.

Crude Carriers Investment, the investment vehicle of its management team, will help with initial tanker purchases, too, by kicking in $40 million in exchange for Class B Stock (10 votes per share of common stock). Looking forward, funding for fleet expansion will depend on liquidity — as determined by internally generated cash flow from operations and secondary (dilutive) stock offerings, supplanted by a signed commitment with Nordea Bank Finland for a $100 million revolving credit line.

Notwithstanding a year-on-year increase in shipping activity in the fourth-quarter 2009, visibility for growth opportunities in the crude oil tanker shipping market remains cloudy in first-half 2010. The last official year of single hull tanker phase-out, the slowdown in exodus of older vessel retirements combined with — as still — unsteady turnaround in economic activity and related energy consumption, higher net-fleet additions by long-haul operators and the release of floating storage — all are hampering sustainable demand for new VLCC tonnage.

Nonetheless, the International Energy Agency (IEA) believes the combined effects of renewed oil-demand growth led by China — forecasts are for daily demand worldwide to stabilize at 2008 levels of 86.3 million barrels per day — and stable oil prices of between $70 and $80 will lead to a more profitable shifting in the seaborne transportation landscape....MORE