Oil Commodities: Crude Oil Shipping Companies
The companies responsible for transporting crude oil and petroleum products are an essential link in the global energy supply chain and provide a way to gain exposure to commodities without investing in futures. These companies are extremely varied in their locations and fleet styles.
With so many options to choose from, trying to identify which company to invest in can be confusing. Here is an introduction to all major publically-traded companies:
Frontline Ltd. (NYSE: FRO): Founded in 1948, Frontline is one of the oldest shipping companies in the world. It also operates one of the world’s largest fleets of very large crude carrier (VLCC) vessels, with more than 44 VLCCs. Frontline also owns more than 35 Suezmax vessels (1 million barrel capacity), making it one of the largest tanker companies in the world in terms of transportation capacity.
Cumulatively, Frontline has the capacity of 18 million DWT. In addition to its tanker fleet, Frontline offers shareholders one of the highest dividend payouts: an eye-popping $6 per share. At current market prices, that’s a yield of more than 18 percent!
General Maritime Corp. (NYSE: GMR): General Maritime focuses on the small and midsize segment of the tanker market. It operates a fleet of Suezmax and Aframax vessels, with operations primarily focused in the Atlantic basin.
General Maritime links producers and consumers from Western Africa, the North Sea, the Caribbean, the United States, and Europe. If you’re looking for exposure to the trans-Atlantic oil seaborne trade, GMR is a good bet. The fact that GMR offers a $5 dividend per share also makes this an attractive tanker stock.
Overseas Shipholding Group, Inc. (NYSE: OSG): Although OSG has an international presence, it’s the only company with a large presence in the American shipping market. Its U.S. vessels are mainly engaged in transporting crude oil from Alaska to the continental United States, and products from the Gulf of Mexico to the East Coast.
Additionally, OSG has one of the highest profit margins in the industry: a whopping 45 percent profit margin (2006 figures). If you’re interested in the domestic crude oil transportation market, take the plunge with OSG.
Teekay Shipping Corp. (NYSE: TK): Teekay Shipping operates a fleet of more than 130 vessels, including one VLCC that transports crude from the Persian Gulf and West Africa to Europe, the United States, and Asia and about 15 Suezmax vessels that connect producers in North Africa (Algeria) and West Africa to consumers in Europe and the United States.
In addition to conventional tankers, Teekay operates a fleet of offshore tankers that are constructed to transport crude from offshore locations to onshore facilities.
If you decide to invest in the global oil-shipping business, you should dig deeper into a target company’s operations. You can find most of the information you need in a company’s annual report (Form 10K) or quarterly report (Form 10Q). You can obtain additional information through third parties, such as analyst reports.
One of the best-kept secrets in this industry is the high dividend payout these companies issue. Dividends are great because they provide you with certainty in an uncertain investment world. And oil tanker stocks offer some of the highest dividend payouts out there.
|Knightsbridge Tankers||NASDAQ: NVLCCF||9%|
|Nordic American Tankers||NYSE: NAT||9%|
Calculating dividend payouts can be tricky because a company isn’t obligated to give back money to shareholders in the form of dividends. Some companies pay out high dividends one year but not the next; for others, paying dividends may be only a one-time event.
One way to determine future dividend payouts is to examine the company’s dividend payout history. The Yahoo! Finance website does a good job.