Presentation

ADS Crude Carriers was established in 2018 to take advantage of a distressed tanker market and capitalize on a well-timed entry into the cycle. The company acquired three (now scrubber-fitted), 2002-built VLCCs in Q3’18 for USD 22.5m per vessel. ADS is listed on Merkur Market and currently has a market capitalization of USD ~40m with net debt of USD 14m as of Q2’20. The company is closely affiliated with the Fredriksen Group of companies, and the largest shareholders are Ship Finance (17.2%) and manager Arendals Dampskibsselskab (10.4%).

ADS is fully invested and now targets the period to YE’22 for cash generation and dividend payouts. The company’s strategy is to utilize its low cash breakeven of USD ~15,000/day to operate in the spot market, commercially and technically managed by Frontline and OSM Maritime Group, respectively. ADS has secured attractive financing of USD 12.5m per vessel which matures in 2022, at which point the ships will be 20 years old and likely scrapped. All surplus cash generated before this will be returned to shareholders.

ADS entered at the bottom of the cycle and the short remaining lifespan of the vessels significantly derisks the investment case. We estimate that the company will generate more than its entire market capitalization in cash (USD 47m) from Q3’20e to YE’22e at 10y average rates of USD 30,000/day.