Tanker trouble

The Dahlman Rose analyst team is slashing price targets for three tanker shares and downgrading two more.

The outlook is especially grim for Nasdaq-listed Omega Navigation.

Crude oil inventories in developed countries are shaping up to be even more glutted by year’s than previously feared. As a result, projected tanker demand will no longer support a spot-rate rebound in the fourth quarter.

Despite production cutbacks by the Organisation of Petroleum Exporting Countries (Opec), inventories in OECD countries are on the rise. That makes it unlikely that crude stocks will fall below the magic 55-day figure by the beginning of the fourth quarter, as previous projections had implied. That is the figure at which oil markets historically seen stronger support.

The average 2009 VLCC rate will thus probably come in under $32,000 per day, according to analysts Omar Nokta and Sam Margolin, who previously operated with a figure of $40,000 per day.

They are cutting share price targets but keeping a buy rating for Ship Finance International (expected to fall from $20 to $15 per share), Teekay Tankers (from $14 to $12) and General Maritime (from $13 to $10).

The news is even worse for DHT Maritime and Omega Navigation.

Dahlman Rose doubts cash flows will support DHT’s present dividend in the second quarter and is cutting it from buy to hold. Revenues from Overseas Shipholding Group (OSG) are expected to shrink on lower spot rates.

Omega Navigation goes from hold to sell, not least because of loan covenant issues and because four of the nine products carriers in its fleet come off charter at midyear and will have to dance to the sorry music of the spot market. Omega’s share recently traded at $4.01 but Dahlman Rose now pegs it to fall to its projected year-end net-asset value level of $2 per share.

“The recent fall in asset values has pushed the market valyue of [Omega’s] products tanker fleet much closer to its outstanding debt and accordingly we believe it is near breach of its loan covenants,” wrote Nokta and Margolin.