2014 is the big year for Scorpio Tankers and it is certainly the big year for its CEO, Robert Bugbee. After what seemed an endless line of announcements, the previous two years, of orders for new buildings with Asian ship yards, time has come to deliver. Contracts. Results. And dividends.
“It is all about execution this year. We took the VLCC-trade off the balance sheet, we needed to get visibility of the potential of the Dorian share holding which is in the process of an IPO and we need to take delivery of the fleet we have which is an operational execution,” states Robert Bugbee when ShippingWatch meets the icon of modern shipping at the HQ on 59th Street, Manhattan.
Colorful, flamboyant and “high performance” are words often used to describe Bugbee who possesses more than 30 years of experience from the global maritime community.
Fortune and timing
But ask himself. To Bugbee, the stunning breakthrough of Scorpio Tankers before the fleet is even operational has a lot to do with the edge one can obtain from fortune and the right timing. Or, to order 65 product tankers and thus close the gap to competitors before they get the same idea:
“The most important part is to take safe delivery of the vessels and maintain operational quality. I wouldn’t say that we have an execution of operation of quality that is better than the top competitors. There are excellent competitors out there, like Norden, AP Møller, d´Amico and also Torm. Torm, however, is in an area where it is difficult to maintain operational strength because of its financial difficulties. But all of them provide as best as they can to the regulatory environment and protect their cargo and seafarers. It is difficult to compare because no-one has ever done what Scorpio Tankers is doing now. Unlike our competitors, we have had a lot of time to discuss this, to plan this, plan with the oil majors and other very serious top-quality companies,” explains Robert Bugbee and continues:
“The fact that we could start from scratch makes the difference combined with the fact that we enter the market in the midst of a technological revolution which our fleet will benefit from.”
12 major shareholders
It could be a matter of style, but certainly a question about experience and track record which have made Bugbee the icon of post-crisis shipping. A group of 12 major shareholders form the core of the equity base which has supported the Scorpio project. Some of them know Robert Bugbee very well and some even all the way back from his time with Gotaas-Larsen and OMI. Gotaas-Larsen was one of the first companies back in the in 80’s to order motor tanker and get rid of the old turbine tanker. And OMI was among the first carriers to introduce double hull vessels in its fleet.
“You can see that I am fashionable dresser, being in forefront of fashion is ultimately beneficial,” Bugbee says with an self-deprecating but also convincing smile.
Conviction has not been hard for the top people at Scorpio Tankers when it came to obtaining access to funds and investors´ support for the overwhelmingly huge order book that has been built up. Apart from the product tankers to be delivered, the yet to come VLGC-fleet now lies with Dorian and instead Scorpio owns almost one third of the company. And the yet to be built VLCC fleet not even turned three months before Scorpio Tankers sold the seven vessel contracts. With a profit of 50 million USD.
Looking ahead, it is the day-to-day operation of the product tanker fleet that will make the difference in the market, and at the end of the day make shareholders happy. Bugbee is confident that market fundamentals are moving in the right direction for the tanker segment.
Demand will increase
“We don’t have a fine enough ability to really project the demand. We are confident that the trend of the demand is increasing because of an increasing macro economy trend and the changing flow of the product market in the world, refinery changes, expanding ton/mile etcetera. We do feel confident that the fundamentals in demand are in place for some time to absorb the strong supply of tonnage and the overhang from 2007 and 2008. Looking forward we have the smallest supply growth in the market for years. En estimate would be an increase in demand for tonnage of between seven and 12 percent,” says Bugbee and points to what in his mind is probably the best reason going into the tanker segment right now:
“Our customers do it!”
“What gives me confidence in this is that there are people in the room who are much smarter than us who have much more knowledge of this than us, our customers. When we see Shell, Valero, Vito, Total, people with primary information of supply demand growth over time not only increase length of chartered vessels but also own significantly more tonnage that indicates to us that it is better to follow them than not.”