|This company has recently filed for protection under Chapter 11 of the U.S. Bankruptcy Code.|
General Maritime Corporation (NYSE: GMR) is a tanker company that ships crude oil and petroleum products. The company has fewer ships than many of its competitors, but attempts to offset this disadvantage by focusing exclusively on the mid-size (80,000-200,000 deadweight tonnes) tanker market. Its singular focus on one market segment allows it to compete more effectively with larger companies-- most of which operate in several markets-- in terms of scale. For instance, GMR had 31 mid-size tankers in its operating fleet at the end of February, 2010. Although Overseas Shipholding Group, the company's primary competitor, has 4 times as many ships, it only fewer midsized tankers.
The number of tankers and the overall tonnage available to transport crude oil has grown faster than world oil demand. Rates for an Aframax tanker, a common type of mid-sized tanker, decline significantly when there is an oversupply of ships. GMR, which generates approximately 75% of its revenues from short-term or spot contracts, is significantly affected when this occurs.
The company has been able to modernize its fleet since 2005 by aggressively selling its non-double-hull vessels. Single-hulled tankers are not as safe and will be phased out by 2026, in accordance with the 1973 International Convention for the Prevention of Pollution from Ships. Since then, the company's safety record has been a strong selling point to potential charterers.
GMR's fleet of double hulled ships is well suited to do business in the Atlantic Basin because of the stricter environmental regulations. As a result, the company transports a lot of oil to the United States, the world's leading importer of crude oil. .
In 2009, total revenues for GMR were $350 million, an increase from the previous year's revenues of $326 million. However, its net income actually declined between 2008 and 2009. In 2009, GMR posted a net loss of $12 million, compared to its net income of $30 million in 2008. This loss was largely due to an impairment charge on its goodwill of $40 million in 2009.
Because the functional currency of the international tanker industry is the U.S. Dollar, the depreciation of the dollar means less real revenue for GMR. Moreover, GMR's revenues and operating costs are in U.S. Dollars, while some operating expenses and overhead costs are in other currencies like the British Pound, Japanese Yen, Singapore Dollar, Australian Dollar, and Norwegian Kroners. To combat the weakening dollar, the company has in the past entered into forward contracts to acquire Euros for Dollars, but this practice has proven unsustainable in the face of a consistently changing rates.
Too many tankers mean that GMR will have to lower its charter rates. While GMR hedges against such risks by employing many of its ships on long-term, fixed-rate charters, it nevertheless earns most of its revenues from spot market charters whose rates have historically been tied to the supply and demand balance for carrying capacity.
On the other hand, GMR may also be poised to take advantage of a shift in the supply-demand balance for tankers. The company has many fewer ships than its competitors and also has one of the lowest fleet carrying capacities among the large tanker companies (see below). Since tanker values drop in periods of oversupply, GMR could benefit from the opportunity to buy tankers cheaply.
Some of GMR's major competitors include:
General Maritime Corporation pursues a strategy of utilizing only mid-size Aframax and Suezmax vessels while other competitors focus on larger carriers (like FRO) or a mixture of carriers (like OSG or TNP). While they are a smaller tanker company, they thrive on the relationships they've built with their customers.