TANKER stocks have come out the gate strong in 2024, implying investor confidence in future returns.

Uncertainty over interest rate cuts is weighing broader US equity pricing this year. The Dow Jones Industrial Average was up only 2% year to date through to Thursday (April 12). By contrast, most tanker stocks were up by the mid-teens or even more.

The fallout from the epic struggle for control of tanker giant Euronav is centre stage in the rankings. Purely from a short-term stock perspective, there is one clear winner and one clear loser.

John Fredriksen’s Frontline tops the performance list of larger-cap US-listed tanker names. Its adjusted closing price (adjusted for dividends) was up 23% year to date through Thursday. Its stock price reached its highest level in a decade come Friday.

Euronav is at the bottom of the list. Its adjusted close was down 6% year to date.

Most tanker stocks boosted by strong rates

Frontline acquired 24 of the youngest of Euronav’s very large crude carriers as part of the “divorce settlement” with the Saverys family, whose company Compagnie Maritime Belge acquired the controlling stake in Euronav.

Frontline’s share price is moving roughly in line with tanker rates, which are mirrored by Breakwave Tanker Shipping ETF (BWET), a NYSE-listed exchange-traded fund that buys near-dated forward freight agreements (heavily skewed to very large crude carrier FFAs). BWET was up 21% year to date as of Thursday.

In fact, most tanker names are fairly tightly bunched at the top of stock performance list. VLCC owners lead the pack. Behind Frontline, DHT is up 18% and International Seaways 17%. Euronav is the exception.

Product tanker owners are a notch below VLCC owners. Ardmore Shipping and Scorpio Tankers are both up 15%, with Torm up 14%.

Stocks of midsize crude tankers are in line with product tanker stocks. Teekay Tankers is up 15% year to date, Tsakos Energy Navigation 14%. Nordic American Tankers is the outlier, down 4%.

Two high-profile stocks lag behind

The high-profile stragglers — Euronav and NAT — each face special circumstances.

Suezmax owner NAT is highly popular among retail investors focused on dividends. NAT has a credit facility from Texas’ Beal Bank maturing in 2025 that is currently limiting dividends.

“Dividends for 2024 are expected to be restrained by the cash sweep mechanism of the Beal Bank facility,” said Clarksons Securities analyst Frode Morkedal in his latest research note on NAT. He expects the cash sweep to limit NAT to an 8.8% dividend yield this year, rising to up to 24.5% yield once the limit is removed in 2025.

Meanwhile, Eurnoav’s share price was artificially frozen at around the level of CMB’s mandatory offer of $17.86 per share for the first two and a half months of this year. Its share price has declined since the offer's conclusion.

The portion of Euronav shares owned by outside investors continues to dwindle. Three-quarters of outside shareholders opted to take CMB up on its mandatory purchase offer, which closed March 15. As a result, only 11.4% of shares were owned by non-insiders.

Euronav then bought back 7.8m shares since the closing of the offer, bringing the non-insider stake to a mere 7.9%.

Furthermore, Euronav’s business is no longer predominated by VLCCs — or tankers — so its stock is not going to follow spot rates like a plain-vanilla tanker name.

As a result of the related-party CMB.Tech acquisition, it owns a diversified fleet that also includes bulkers, chemical tankers, containerships and offshore support vessels. It is also a technology company, focused on being a first mover in the decarbonisation of shipping and the transition to ammonia fuel.

“We believe that a diversified shipping group with a strong focus on decarbonisation will create more value in the long run than a pure tanker or dry bulk owner,” argued Euronav CEO Alexander Saverys at a Capital Link forum in New York last month.

“We believe that the pure play shipping story is a thing of the past, and we believe that shipping companies who do not embrace the energy transition will disappear.”

At the same event, Scorpio Tankers president Robert Bugbee offered a reason why Euronav’s fuel-transition focus might not play out so well for its stock (he was speaking about technology in general, not Euronav specifically).

“The hardest challenge on the capital market side is that virtually all innovation, by definition, requires a capital cost that you do not get a return on immediately,” said Bugbee.

“There is quite a cost in being a first mover and Wall Street investors do not really like to pay for tomorrow’s benefits today. One of the biggest challenges of building a new vessel or a new engine is that you are trying to convince someone to put their equity down today even if they are not going to see a single dollar of returns for years.”