The sale of 1996-built, 302,800-dwt VLCC Olympic Legacy for a reported US$20M has raised some eyebrows as VLCCs of this age are generally valued at scrap value, which in the case of Olympic Legacy was US$17.36M, according to VesselsValue.
The VLCC is reported to have been purchased by Nigerian interests, which indicates the vessel could be earmarked for storage duties or conversion rather than further trading.
The sale, if confirmed, indicates there is “hidden” value among older vessels in the VLCC fleet.
An indicator of value in an older vessel is the time remaining before the next drydocking special survey, the largest single expense for vessels over 20 years old.
An analysis based on VesselsValue’s data reveals there are currently 24 VLCCs over the age of 20 years that have a reasonable tradeable period of time left before the next special survey.
The above chart shows the value of this subset of elderly VLCCs versus the next special survey date, and includes Olympic Legacy.
As can be seen, there are VLCCs whose next special survey is not due until 2023.
While these older VLCCs probably fall outside the chartering parameters defined by the oil majors, there are a range of smaller traders that might charter a below market average freight rate VLCC for a particular trade or arbitrage opportunity.
The relatively low price of these VLCCs is an arbitrage opportunity in itself, for it would only take a few loaded voyages to pay down the capital costs, and the money from subsequent profit voyages plus the funds realised from scrap could produce a yield in double figures.
Do you have the appetite for a short-term, high-risk VLCC asset play? How would you finance the venture? Let me know your thoughts. Contact firstname.lastname@example.org