Ardmore charts conservative course as tanker values soar

"It was a very strong year in the market, but we focused on running Ardmore as if it were essential to maintain costs and reduce breakeven levels. This approach positions Ardmore to be in excellent financial shape throughout the cycles," says Mr Kelleher, who has achieved what he describes as "pristine credit standing" by reducing debt to 9% while driving cash break-even costs down to US$11,500 per day.

The company’s 26-vessel controlled fleet, valued at more than US$700M, comprises a mix of owned and time-chartered MR tankers ranging from 45,000 to 49,999 dwt, product/chemical tankers (37,800 dwt), and small chemical/product tankers (25,000 to 25,217 dwt). All were built between 2013 and 2017, with the youngest vessel, 50,000-dwt Ardmore Gibraltar, now approaching seven years old. The company says it has "shifted from an Asian leasing structure, exercising purchase options on vessels and integrating them back into our fleet."

Speaking four months into his expanded role as president, following founder Anthony Gurnee’s retirement after 14 years, Mr Kelleher takes a cautious stance on fleet expansion despite robust charter rates. This perspective is informed by his extensive operational and financial experience, having served as a deck officer on US-flagged crude carriers and later as chief executive at Chembulk Tankers during volatile market cycles. "From a longer-term standpoint, it looks like we have a good long runway," he notes, while emphasising the importance of maintaining financial flexibility through market cycles.

The Cork, Ireland-headquartered firm’s strategic restraint reflects deeper concerns about asset prices. "When evaluating potential acquisitions, we felt values were quite high, and we continued to return capital to shareholders, paying one-third of our earnings as a dividend."

Reflecting on ADNOC Logistics’ acquisition of Navig8, Mr Kelleher remarks, "Well done to them," while asserting Ardmore "packs a punch above our weight given our current scale." He suggests the company could "continue strong performance as a larger entity as well," hinting at potential future growth.

In terms of daily operations, Mr Kelleher likens vessel deployment to portfolio management, "You have this group of assets; where do you want to position them to optimise cash flow? It’s not just about the current voyage but rather a series of voyages for each vessel." This strategy has driven operational efficiency across the company’s fleet, which maintains an average age of 10 years — significantly below the industry’s average of 14 years.

He says the current medium-range (MR) tanker orderbook, standing at 15% of the existing fleet, requires careful analysis. "When you have these additional regulatory complexities that vary across different geographies, it creates more friction," he explains, noting this situation "usually supports a tanker market because there are potentially fewer vessels available."

Technological innovation undergoes an equally rigorous evaluation process. "Since 2021, our energy transition plan team has examined approximately 250 different technologies," Mr Kelleher says. "We focus on making our existing fleet as efficient as possible while acknowledging uncertainty regarding future fuel availability and engine technology regulations."

The company’s commitment to practical innovation extends to its scrubber programme. Mr Kelleher highlights its shift to "scrubber 2.0 technology, which is very modular in design. It resembles a container positioned upright that you attach to the back of the stack." This advance represents a significant improvement over earlier systems that required extensive modifications in the engineroom. "We’ve been pleased with our partnership with Value Maritime and the installation of its scrubbers on our vessels. This collaboration has proven fruitful, especially as Value Maritime has successfully raised capital from Shell Ventures to further expand its business," Mr Kelleher states.

The company’s technological investment strategy extends beyond vessels to shore-based operations. "We’re mirroring our shoreside efforts to enhance team efficiency using the latest available tools," Mr Kelleher explains, noting it has "always utilised AI-based software for our fleet in various capacities."

Market dynamics have been fundamentally altered by the Russia-Ukraine conflict, though Mr Kelleher suggests the impact varies by vessel class and geography. "Only about 5% of MR traffic actually transited the Suez. The shift in the product tanker trade was much more pronounced in the LR and LR2 segments, where those levels were closer to 20%," he explains, while discussing recent disruptions in the Red Sea.

The emerging biofuels trade presents fresh opportunities. "We have the same team trading shoreside from a chartering desk perspective, with vessels fulfilling the voyages," Mr Kelleher says, explaining how its integrated approach supports fleet optimisation. "Incorporating biofuel flows helps us travel between regions more regularly, which tends to promote TCE."

Looking ahead to the FuelEU Maritime regulation, Mr Kelleher drew parallels with previous transitions, "We have the advantage of reflecting on IMO 2020 and the EU ETS. There’s greater complexity now, but conceptually it is very similar in that your voyage costs are changing." He adds, "This additional complexity allows for unique routeing strategies and decisions on which vessels to send into Europe, including whether to use a biofuel blend."

Concluding, Mr Kelleher stresses while Ardmore’s operating philosophy emphasises caution, this should not be confused with a lack of dynamism. The interplay between regulatory compliance and need for ever greater operational efficiency means "you must change. You have to keep evolving and modernising."