Wednesday, May 25, 2011

Scorpio successfully pulls off a second public offer for US$ 68,4 mio

Investors snapped up all the 6 million shares of Scorpio common stock on offer at $10,50 each and underwriters grabbed 900,000 over allotments at the same price.  Since the first IPO last year,  Scorpio has been trading in a fairly tight range between US$ 9.80 - 11,90.  It started out at the high level but fell hard to the lower range in later December 2010.   The New York-listed owner is on the brink of booking five medium-range (MR) products tankers in South Korea.

Scorpio has a multi-step plan that includes the above MR new building order with delivery of the five ships in late 2012 with the options to follow a year later if taken, opportunistic second-hand vessel purchases and chartered-in tonnage for its contract book needs.

The company is a pure play product tanker listing. Scorpio is an old company with roots in New York from the Lollighetti family, who moved their operations to Monte Carlo. Scorpio CEO Emanuele Lauro is third generation. During the boom years, he concentrated on building a tanker pool with a strong team of brokerage professionals rather than leveraging up and acquiring tonnage at top of the market prices. He took on ex-OMI management, making Robert Bugbee President of his US operation and bringing to capital markets last year. Bugbee warned investors last year that recovery for the tanker market might come later than expected.

Scorpio lost money in 2010, closing the year with a US$ 2,8 mio loss.   The company reported a loss of US$ 1,4 mio in 1st quarter 2011, reversing a US$ 1,2 mio profit posted a year ago. The result, which amounted to a deficit of $0.06 in basic and diluted earnings per share, was three cents ahead of the consensus forecast. Scorpio said the addition of new ships helped vessel revenue increase by US$ 10,9 mio to US$ 17 mio in the first quarter, but admitted the gain was offset by a decrease in time charter equivalent rates which slipped to US$ 14.997 per day on average from US$ 22.798.  

The product tanker market has been struggling to absorb the large inflow of tonnage seen in 2008 and 2009. This may continue well into 2012. Rates and values remain low as demand fell short of supply in the product tanker fleet. For 2011, distance-adjusted demand is expected to advance 6% and the product tanker fleet is expected to grow by 5%. This might support rates and values, but this all depends whether demand will large enough finally to surpass the growth in fleet capacity, the persistent problem that has been plaguing the product tanker sector for years.

If Scorpio’s newbuilding plan pans out, the company will control a fleet to 22 products tankers in addition to options for the three MRs and a pair of 2008-built panamaxes.

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