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General Maritime (GMR) |
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WIKI ANALYSIS| 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.[1] 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.
Company Overview
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.[2]
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. .[3]
Business Financials
In 2009, total revenues for GMR were $350 million, an increase from the previous year's revenues of $326 million.[4] 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.[4] This loss was largely due to an impairment charge on its goodwill of $40 million in 2009.
Trends and Forces
Exchange rates mean higher expenses and lower real revenue
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[5], but this practice has proven unsustainable in the face of a consistently changing rates.
World tanker supply is growing faster than tanker demand
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.[6]
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[7] 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.
Competitors
Some of GMR's major competitors include:
- Frontline, a crude oil shipping company that operates 83 vessels worldwide and has a total tonnage of approximately 19.35 million dwt.[8][9].
- Overseas Shipholding Group, a U.S. based tanker company that transports crude oil, petroleum product, and liquefied natural gas internationally. Domestically, they also operate a U.S. Flagged fleet[10][11].
- Teekay Corporation provides international transportation for crude oil and petroleum products, and operates approximately evenly in the charter and spot markets. They have a total capacity of 4.2 million dwt[12][13].
- Tsakos Energy Navigation is a Bermuda-based tanker company that maintains a fleet that is diverse and largely capable of traveling through icy waters.[14]
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.
- ↑ GMR 10-K 2009 Item 1 Pg. 2
- ↑ GMR Business Strategy
- ↑ GMR Tanker Industry Overview
- ↑ 4.0 4.1 GMR 10-K 2009 Item 6 Pg. 35
- ↑ GMR 2006 Annual Report, Page 38
- ↑ MarketWatch article on Oil-Tanker stocks
- ↑ Google Finance: GMR Overview
- ↑ FRO 2006 10-K, page 26
- ↑ Frontline website
- ↑ OSG 2006 10-K, Page 9
- ↑ Overseas Shipholding Group Inc
- ↑ TK 2006 10-K, Page 17
- ↑ Teekay Corporation
- ↑ Tsakos Energy Navigation Ltd
- ↑ Tidewater Inc website
- ↑ Horizon Lines Inc website
- ↑ Aegean Marine Petroleum Network Inc website
- ↑ Alexander & Baldwin Inc website
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