HAFNIA, the product tanker owner, reported a surge in profit in the first quarter to $77.1m as the oil contango caused freight rates to soar.
The quarterly net profit was higher than Hafnia’s total for 2019 — $71.7m — and came as the oil price war sent rates in the Middle East above $200,000 per day for the largest tankers in the latter half of the quarter.
But the company warned that “the current downward pressure on global economic growth and volatility in oil prices could have a significant adverse impact on the group”.
In its earnings report, The company said coronavirus lockdowns had dampened demand for refined oil products, particularly jet fuel and gasoline. Clean tanker freight rates dropped off in February before March’s oil contango led to the boom in demand for floating storage on very large crude carriers.
Hafnia said the product tanker market had also benefited from floating-storage demand for clean products, with freight rates for long range ones carrying naphtha from the Middle East to Japan rising to more than $1000 per day at the start of the second quarter, the highest level seen since late 2008.
The company said rates had since fallen after 23-nation Organisation of the Petroleum Exporting Countries-plus alliance members agreed in April to cut production by 9.7m barrels per day, reducing oversupply.
“In a challenging and quickly changing world, Hafnia delivered a very satisfying net profit,” chief executive Mikael Skov said. “Our strong balance sheet, commercial performance and corporate culture provide a solid platform to deliver continued value to our shareholders.”
He said growth in seaborne product demand would be negative in 2020 but partly compensated by increased floating storage. He added there was an historically low orderbook before 2020 so “we’re still going to be in a very beneficial position as far as new tonnage and supply is concerned”.
Hafnia’s time charter equivalent earnings rose to $193.5m for the quarter, up from $132.6m in 2019, while earnings before interest, tax, depreciation and amortisation rose from $74.1m to $129.6m.
Hafnia owned 87 vessels and chartered 15 at the end of the quarter: six long range twos, 36 long range ones, 47 medium ranges and 13 handy vessels. It generated $5.9m from its pool business in the first quarter of the year.
It said it would pay a dividend of $38.5m, or 10.62c per share.
