New VLCC vehicle ready for Oslo Stock Exchange

ADS Crude Carriers, a company founded by Arendals Dampskibselskab (ADS) in 2015, is heading for Merkur Market.

Merkur Market is a marketplace owned by Oslo Stock Exchange, offering the fastest admission process in Europe.

According to Tradewinds, Oslo Stock Exchange has approved the listing and first trading day will be today, Tuesday.

ADS Crude was earlier reported taking over the Ship Finance owned Front Stratus and Front Page. Further, they will take delivery of a third VLCC from the same owner, Front Serenade next month. The vessels were all built in 2002 and are chartered to Frontline at above market rates.

Earlier this summer Ship Finance announced the sale of the vessels for $77,6 million including a 17% stake in the newly established venture. It is believed that ADS Crude will invest in modern equipment, known as scrubbers, to take advantage of cheaper heavy fuel oil after the implementation of the IMO 2020 regulations. Compliant fuels are expected to be priced significantly higher. However, there are uncertainties around the actual effects the regulations might have on the tanker economics.

ADS Crude is a play on the effect from the IMO 2020 regulations and intends to pay out 100% of net cash flow.

“For Ship Finance, participation in the new venture is an opportunistic financial investment where a portion of the sales proceeds from the vessels has been reinvested in ADS. We believe we are close to a low point in the tanker cycle, with limited downside to current recycling values, and our investment as a minority shareholder in ADS could, therefore, give significant upside potential with very low-risk exposure at the tail end of these vessels’ commercial life” – Ole B. Hjertaker, CEO of Ship Finance.

Ship Finance and Frontline are both controlled by Norwegian/Cypriot John Fredriksen. He has a history of timing the shipping cycles, with multiple examples in recent years. Nevertheless, this deal appears to be a safe bet from his point of view, and if he strongly believed that the impact of IMO 2020 would offer a great opportunity for older vessels with scrubbers installed, he would probably have kept the vessels and paid the upgrade himself.

Published by SIPA Maritime

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