Heidmar Tanker Pools Trading insights from the front line: Strategies for maximizing returns in shifting markets

Transcription

1 Heidmar Tanker Pools Trading insights from the front line: Strategies for maximizing returns in shifting markets June 2013

2 2 About Heidmar Heidmar is the world s leading independent tanker pool manager Heidmar manages a fleet of over 140 vessels that include VLCC, Suezmax, Aframax, LR2, Panamax, LR1, MR and Handy size tanker vessels, as well as Small tankers (via our Singapore joint venture, WOMAR) From offices in the U.S., U.K., and Singapore our staff provides around-the-clock service to major oil companies and oil traders on a world-wide basis We have collectively managed over 450 tankers Heidmar contracts over $1.5 billion in gross freight annually We buy over 1.0 million MTs of fuel oil (bunkers for our fleet)

3 3 Heidmar Trading: Skin in the Game Heidmar participates in our own pools from proprietary time charter positions Heidmar is one of the most active FFA traders in the world for the purpose of commercial risk mitigation Heidmar time charters vessels for its own account directly and by way of joint ventures The vessels then trade in Heidmar s pool along with the tonnage of the other pool members We have skin in the game and our interests our aligned with our partners Our in-house market research and market information gives us our trading edge This puts us firmly on the front line of the tanker trade globally Lets dive into that perspective!

4 US Domestic Oil Production US Field Production of Crude Oil (in mb/day) USA : Back in the Oil Business!! Source: EIA P R I V A T E A N D C O N F I D E N T I A L 4

5 US Refining and Crude Spreads Source: Valero Energy Investor Presentation P R I V A T E A N D C O N F I D E N T I A L 5

6 Source: Oil & Gas Journal, Platts P R I V A T E A N D C O N F I D E N T I A L 6 US Refining and Crude Spreads Bakken WTI spread -$10 to -$15/bbl WTI LLS spread -$15 to -$25/bbl PADD I CDU Capacity: 1.4mb/day Access to Bakken Crude by Rail & Barge Refinery Complexity: 8.7 (similar to US midcontinent and Europe) PADD III CDU Capacity: 9.1mb/day 10% of global CDU capacity 34% of global coking capacity 20% of global cat cracking capacity Refining Complexity: 10.9 (highest in world)

7 US Refining Run Rates and Exports Trailing 12-month average utilization rate (in % of total capacity) PADD I PADD II PADD III PADD IV PADD V Trailing 12-month average US Exports (in mb/day) 3,500 3,000 2,500 2,000 1, , /1/2010 1/1/2011 1/1/2012 1/1/2013 Source: EIA Strong margins earned by US refiners are leading to high utilization rates. More of the resulting production is being exported. Over 2012, the annual average exports increased 200kb/day exports still represent only 1/3 of CDU capacity in PADD III P R I V A T E A N D C O N F I D E N T I A L 7

8 US Gulf Exports Gulf Coast (PADD 3) Exports of Finished Petroleum Products Daily Exports (mb/day) Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 MR Cargoes per Month Daily Products Exports No of MR Cargoes Translating the export volume into MR cargo quantities, the trade could employ 130 MRs for one year if all cargoes were to be exported on MRs Source: EIA; Heidmar estimates P R I V A T E A N D C O N F I D E N T I A L 8

9 Short Refined Product Down Under Australian Refineries Caltex Kurnell Refinery (135 kbpd) expected to close 2H 2014 Shell Clyde Refinery (85 kbpd) closed in Q42012 The lost capacity must be replaced by waterborne barrels Bullish clean tankers Total Refinery Closure Effect = 220 Kbpd Source: Australian Institute of Petroleum

10 10 Dorado Tankers : MR Triangulation Gasoline UKC/USAC Diesel USG/UKC Super Efficient Trades Achieve LADEN to BALLAST = 80%/20%

11 11 LR1 Market Trends LR1 markets have followed MR rates to counter-seasonal highs, however the MR market balance has been tighter Traders still prefer MRs due to their trading flexibility MR vs LR1 Earnings Comparison ($/day) TC2 TC5 30,000 25,000 20,000 15,000 10,000 For a trader, there are additional costs of fixing larger vessel classes Infrastructure constraints Multiple parcels 5,000 -

12 LR2 Market Trends Substantial improvements in MR trading dynamic has translated into only modest improvement in the LR2 trading landscape Trading flexibility for traders is core to this dichotomy Cost to Traders of Freight on Different Product Tankers (in $/ 000 ton per mile: one-way) MR LR1 LR2 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- $7.63 $4.99 $ A volume discount of 34% is material to the arbitrage trade but there are additional costs: - Multiple load ports - STS - Infrastructure issues - Term structure Source: Baltic TC2, TC5, TC1 spot assessments P R I V A T E A N D C O N F I D E N T I A L 12

13 The Traders are Hedging Against Rising Freight NOS TC5 Open Interest ( ) (in kmt) 4,000 3,500 3,000 2,500 2,000 1,500 1, Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 TC5USD DEC14 TC5USD NOV14 TC5USD OCT14 TC5USD SEP14 TC5USD AUG14 TC5USD JUL14 TC5USD JUN14 TC5USD MAY14 TC5USD APR14 TC5USD MAR14 TC5USD FEB14 TC5USD JAN14 TC5USD DEC13 TC5USD NOV13 TC5USD OCT13 TC5USD SEP13 TC5USD AUG13 TC5USD JUL13 TC5USD JUN13 TC5USD MAY13 TC5USD APR13 TC5USD MAR13 TC5USD FEB13 TC5USD JAN13 TC5USD DEC12 Source: NOS Clearing P R I V A T E A N D C O N F I D E N T I A L 13

14 The Traders are Hedging Against Rising Freight NOS TC2-TC14 Open Interest ( ) (in kmt) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 TC2-TC14 DEC14 TC2-TC14 NOV14 TC2-TC14 OCT14 TC2-TC14 SEP14 TC2-TC14 AUG14 TC2-TC14 JUL14 TC2-TC14 JUN14 TC2-TC14 MAY14 TC2-TC14 APR14 TC2-TC14 MAR14 TC2-TC14 FEB14 TC2-TC14 JAN14 TC2-TC14 DEC13 TC2-TC14 NOV13 TC2-TC14 OCT13 TC2-TC14 SEP13 TC2-TC14 AUG13 TC2-TC14 JUL13 TC2-TC14 JUN13 TC2-TC14 MAY13 TC2-TC14 APR13 TC2-TC14 MAR13 TC2-TC14 FEB13 TC2-TC14 JAN13 TC2-TC14 DEC12 Source: NOS Clearing P R I V A T E A N D C O N F I D E N T I A L 14

15 15 Product Tanker Highlights Healthy US Refining Pipelines are de-bottlenecking the US midstream US Export Growth Better margins will lead to higher run rates and more product available for export Rising MR Spot Market Increasing export volumes have translated into spot market tightness starting in Q and 2013 YTD Freight Futures Rising Freight futures markets point to continued strength for MRs and LR1s

16 16 The Crude Oil Tanker Market of the Past AG-WEST : Longer Haul AG-EAST: Shorter Haul Crude Flows Were Balanced: from Middle East and Africa to Consumption Regions East and West Efficiency Gains Were Easily Achieved: Laden Ballast Ratios >50%

17 17 The VLCC Market Today Trade Routes Crude Flows West to East: Less Efficient Fleet Average LADEN BALLAST Ratios Closer to 50-50%

18 18 Seawolf Tankers : VLCC Triangulation Super Efficient Trades Achieve LADEN to BALLAST = 75%/25%

19 19 Crude Tanker Highlights Declining US Imports US refiners are actively backing out seaborne inputs Koch : Corpus Christi Valero: Corpus Christi, Three Rivers, Houston, Port Arthur, Meraux, St.Charles, Memphis Phillips 66: Sweeny, Lake Charles, Alliance Marathon: Galveston Bay Crude Flows to East Longer ballast legs, less efficient employment of the large crude carrier fleet (VLCC and Suezmaxes) US Crude Exports? Politically charged, but economically feasible

20 MR vs VLCC Tanker Returns Spot Market Comparison (in $/day) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 ($5,000) MRs in the Atlantic Basin earn more than VLCCs! ($10,000) May, 2013 Apr, 2013 Mar, 2013 Feb, 2013 Jan, 2013 Dec, 2012 Nov, 2012 Oct, 2012 Sep, 2012 Aug, 2012 Jul, 2012 Jun, 2012 May, 2012 Apr, 2012 MR Atlantic Basin Roundtrip Baltic TD3-TCE Source: Baltic Exchange; Heidmar estimates P R I V A T E A N D C O N F I D E N T I A L 20

21 MR Vs VLCC Futures Forward Earnings Comparison (in $/day) $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 ($2,000) Jun, 2013 Jul, 2013 Aug, 2013 Sep, 2013 Oct, 2013 Nov, 2013 Dec, 2013 Jan, 2014 Feb, 2014 MR Atlantic Basin Roundtrip Mar, 2014 Apr, 2014 May, 2014 Jun, 2014 Jul, 2014 Baltic TD3-TCE Aug, 2014 Sep, 2014 Oct, 2014 Nov, 2014 Dec, 2014 Source: Baltic Exchange; Heidmar estimates P R I V A T E A N D C O N F I D E N T I A L 21

22 22 Oncoming Train or Optimism

23 23 Heidmar s Enduring Value Proposition Highest Quality Service to Shipowners Performance Through the cycle we outperform the spot markets, TC markets and our peers Transparency Delivered by our industry leading IT platform: efleetwatch.com, reported results audited Service We are available 24-7 to work to provide freight solutions Governance Every vessel gets a vote in our Pools! Scale Triangulation, quantity discounts, market presence and most importantly, access to cargo

24 24 Long Track Record of Performance Market Outperformance in All Pools Tankers Inc. Est. 2011; (VLCC) Est. 2007; (Suezmax) Est. 2004; (Aframax, LR2) Spot Market Historical Deltas* 1-year Time Charter 3-year Time Charter Seawolf +$4,800 N / A N / A Blue Fin +$2,600 +$800 +$700 Sigma +$2,800 +$3,600 +$5,200 Star +$2,900 +$2,500 +$3,200 Dorado +$1,900 +$1,000 +$1,900 Est. 1998; (Panamax, LR1) Est. 2001; (MR, Handy) Why a Pool is successful: Performance Transparency Relationships Rigid Admission Standards: Committed Principals Only Pre Vetting Program / Quality Only Approval by Members * Deltas are calculated as the daily pool earnings in excess of spot market time charter equivalent earnings or average time charter daily rates on a simple average basis. For spot market delta, spot TCE is calculated based on Baltic Assessments of BITR routes as defined by pool committees. Time charter rates are based on weekly averages of broker assessments (net of 2.5% comm) and deltas are calculated on pool earnings of the top 10 th percentile (modern) ship. Data through 3/1/2013 Seawolf does not have a TC delta due to limited operating history.

25 Strong Legacy as Pool Agents Vessels Under Commercial Management Heidmar Established in Blue Fin Tankers Pool Established 2007 (Suezmax) Seawolf Tankers Pool Established 2011 (VLCC) Number of Vessels Under Management Star Tankers Pool Established 1998 (Panamax / LR1) Dorado Tankers Pool Established 2001 (MR / Handymax) Sigma Tankers Pool Established 2004 (Aframax / LR2) WOMAR JV (Small Tankers) Star Dorado Sigma WOMAR Blue Fin Seawolf * In 2009, Marida vessels joined WOMAR, a JV partnership between Heidmar and W-O shipping Note: Ship counts are at end of period P R I V A T E A N D C O N F I D E N T I A L 25

26 26 Strong and Supportive Ownership Heidmar has strong financial backing from its owners, Morgan Stanley and George Economou Heidmar Inc. acts as commercial management agent for the 5 tanker pool companies Heidmar is headquartered in the US, in Norwalk CT, Offices in London and Singapore Transparency and compliance are cornerstones of our operation Shipping Pool Investors (George Economou)

27 27 Innovative Trade Finance Facility Heidmar s pool members benefit from an innovative $85M trade finance facility provided by Macquarie Bank Boosts financial returns by reducing the working capital burden of spot market trading via the Pool Companies $85M Pool Working Capital Facility

28 28 Heidmar s Customer Base: A Deep Bench Principal customers include oil majors and leading oil merchants: Oil Majors Major Refiners: Shell Nationals: Traders:

29 Thank you. Contact details: Per Heilmann Executive Vice President & Chief Risk Officer Heidmar Inc. 20 Glover Avenue Norwalk, CT Direct line: (203) Fax: (203) Mob: (203) yahoo: pfheilmann P R I V A T E A N D C O N F I D E N T I A L