20-F 1 asc-20201231x20f.htm 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report           

Commission file number: 001-36028

ARDMORE SHIPPING CORPORATION

(Exact name of Registrant as specified in its charter)

Republic of the Marshall Islands

(Jurisdiction of incorporation or organization)

Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda

(Address of principal executive offices)

Mr. Anthony Gurnee

Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda

+ 1 441 405-7800

info@ardmoreshipping.com

(Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person)

Securities registered or to be registered pursuant to section 12(b) of the Act.

Title of each class

    

Ticker Symbol

    

Name of each exchange on which registered

Common stock, par value $0.01 per share

ASC

New York Stock Exchange

Securities registered or to be registered pursuant to section 12(g) of the Act.

NONE

(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE

(Title of class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2020, there were 33,186,603 shares of common stock outstanding, par value $0.01 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes      No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes      No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See the definitions of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging Growth Company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

   U.S. GAAP

   International Financial Reporting Standards as issued by the international Accounting Standards Board

   Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17           Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No


TABLE OF CONTENTS

PART I

4

Item 1. Identity of Directors, Senior Management and Advisors

4

Item 2. Offer Statistics and Expected Timetable

4

Item 3. Key Information

4

Item 4. Information on the Company

31

Item 4.A. Unresolved Staff Comments

64

Item 5. Operating and Financial Review and Prospects

64

Item 6. Directors, Senior Management and Employees

78

Item 7. Major Shareholders and Related Party Transactions

83

Item 8. Financial Information

85

Item 9. The Offer and Listing

85

Item 10. Additional Information

86

Item 11. Quantitative and Qualitative Disclosures about Market Risks

95

Item 12. Description of Securities Other than Equity Securities

96

PART II

96

Item 13. Defaults, Dividend Arrearages and Delinquencies

96

Item 14. Material Modifications to the Rights of Shareholders and Use of Proceeds

96

Item 15. Controls and Procedures

96

Item 16. Reserved

97

Item 16.A. Audit Committee Financial Expert

97

Item 16.B. Code of Ethics

97

Item 16.C. Principal Accountant Fees and Services

98

Item 16.D. Exemptions from the Listing Standards for Audit Committees

98

Item 16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

98

Item 16.F. Change in Registrant’s Certifying Accountant

98

Item 16.G. Corporate Governance

99

Item 16.H. Mine Safety Disclosures

99

Item 17. Financial Statements

99

Item 18. Financial Statements

99

Item 19. Exhibits

100

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF ARDMORE SHIPPING CORPORATION

F-1

2


FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with such safe harbor legislation.

This Annual Report and any other written or oral statements made by us or on our behalf may include forward-looking statements which reflect our current views and assumptions with respect to future events and financial performance and are subject to risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, expectations, projections, strategies, beliefs about future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. In some cases, words such as “believe”, “anticipate”, “intends”, “estimate”, “forecast”, “project”, “plan”, “potential”, “will”, “may”, “should”, “expect” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements in this Annual Report include, among others, such matters as

our future operating or financial results;
global and regional economic and political conditions;
the strength of national economies and currencies;
general market conditions;
our business and growth strategies and our Energy Transition Plan (“ETP”) and other plans, and related potential benefits and opportunities;
fleet expansion and acquisitions, vessels and upgrades and expected capital spending or operating expenses, including bunker prices, drydocking and insurance costs;
competition in the tanker industry;
shipping market trends and general market conditions, including fluctuations in charter rates and vessel values and changes in demand for and the supply of tanker vessel capacity;
business disruptions due to natural disasters or other disasters or events outside of our control;
the effect of the novel coronavirus pandemic on, among others: oil demand; our business; our financial condition and results of operations, including our cash flows and liquidity; our vessel values and any related impairments; and our ability to satisfy covenants in our credit facilities and financing lease obligations;
charter counterparty performance;
changes in governmental rules and regulations or actions taken by regulatory authorities;
our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions, refinancing of existing indebtedness and other general corporate activities;
our ability to comply with covenants in financing arrangements;
our capital structure and how it supports our spot employment strategy and enhances financial and strategic flexibility to pursue acquisition opportunities;
our exposure to inflation;
vessel breakdowns and instances of off hire;
future dividends;
our ability to enter into fixed-rate charters in the future and our ability to earn income in the spot market;
our ability to comply with, and the effects of, regulatory requirements or maritime self-regulatory organizations’ requirements and the cost of such compliance; and
our expectations of the availability of vessels to purchase, the time it may take to construct new vessels, and vessels’ useful lives.

3


Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully under the “Risk Factors” section of this Annual Report. Any of these factors or a combination of these factors could materially affect our business, results of operations and financial condition and the ultimate accuracy of the forward-looking statements. Factors that might cause future results to differ include, among others, the following:

changes in demand for and the supply of tanker vessel capacity;
fluctuations in oil prices;
changes in the markets in which we operate;
availability of financing and refinancing;
changes in general domestic and international political and trade conditions, including tariffs;
changes in governmental or maritime self-regulatory organizations’ rules and regulations or actions taken by regulatory authorities;
changes in economic and competitive conditions affecting our business, including market fluctuations in charter rates;
potential disruption of shipping routes due to accidents, piracy or political events;
potential liability from future litigation and potential costs due to environmental damage and vessel collisions;
the length and number of off-hire periods and dependence on third-party managers; and
other factors discussed under the “Risk Factors” section of this Annual Report.

You should not place undue reliance on forward-looking statements contained in this Annual Report, because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this Annual Report are qualified in their entirety by the cautionary statements contained in this Annual Report. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.

Except to the extent required by applicable law or regulation, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Unless the context otherwise requires, when used in this Annual Report, the terms “Ardmore”, “Ardmore Shipping”, the “Company”, “we”, “our”, and “us” refer to Ardmore Shipping Corporation and our consolidated subsidiaries, except that those terms, when used in this Annual Report in connection with our common shares, shall mean specifically Ardmore Shipping Corporation. The financial information included in this Annual Report represents our financial information and the operations of our vessel-owning subsidiaries and wholly owned management company. Unless otherwise indicated, all references to “dollars”, “U.S. dollars” and “$” in this annual report are to the lawful currency of the United States. Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of tankers.

4


A. Selected Financial Data

The following table sets forth our selected consolidated financial data and other operating data. The selected financial data as at December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 are derived from our audited consolidated financial statements, which are included elsewhere in this Annual Report. The selected consolidated financial data set forth below as at December 31, 2018, 2017 and 2016 and for the years ended December 31, 2017 and 2016 have been derived from our audited consolidated financial statements, which are not included in this Annual Report. The financial statements have been prepared in accordance with U.S. GAAP. The data set forth below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects.”

STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME DATA

For the years ended December 31

    

2020

    

2019

    

2018

    

2017

    

2016

$

$

$

$

$

Revenue, net

$

220,057,606

 

230,042,240

 

210,179,181

 

195,935,392

 

164,403,938

Voyage expenses(1)

 

(81,253,212)

 

(96,056,391)

 

(98,142,454)

 

(72,737,902)

 

(37,121,398)

Vessel operating expenses

 

(62,546,733)

 

(62,546,606)

 

(67,017,632)

 

(62,890,401)

 

(56,399,979)

Charter hire costs

(1,367,528)

 

 

 

 

Depreciation

 

(32,187,324)

 

(32,322,695)

 

(35,137,880)

 

(34,271,091)

 

(30,091,237)

Amortization of deferred drydock expenditures

 

(6,198,245)

 

(4,803,069)

 

(3,637,276)

 

(2,924,031)

 

(2,715,109)

General and administrative expenses:

 

 

  

 

  

 

  

Corporate

 

(15,122,906)

 

(14,951,996)

 

(12,626,373)

 

(11,979,017)

 

(12,055,725)

Commercial and chartering(2)

 

(2,780,970)

 

(3,194,218)

 

(3,233,888)

 

(2,619,748)

 

(2,021,487)

Loss on sale of vessels

 

 

(13,162,192)

 

 

 

(2,601,148)

Loss on vessel held for sale

 

(6,447,309)

 

 

(6,360,813)

 

 

Unrealized losses on derivatives

(113,591)

 

 

 

 

Interest expense and finance costs

 

(18,168,155)

 

(26,759,754)

 

(27,405,608)

 

(21,380,165)

 

(17,754,118)

Interest income

 

281,618

 

952,190

 

606,665

 

436,195

 

164,629

(Loss)/income before taxes

 

(5,846,749)

 

(22,802,491)

 

(42,776,078)

 

(12,430,768)

 

3,808,366

Income tax

 

(199,446)

 

(58,766)

 

(162,923)

 

(59,567)

 

(60,434)

Net (loss)/income and comprehensive (loss)/income

$

(6,046,195)

 

(22,861,257)

 

(42,939,001)

 

(12,490,335)

 

3,747,932

(Loss) / Earnings per share, basic

$

(0.18)

 

(0.69)

 

(1.31)

 

(0.37)

 

0.12

(Loss) / Earnings per share, diluted

 

(0.18)

 

(0.69)

 

(1.31)

(0.37)

0.12

Weighted average number of shares outstanding,
basic

33,241,936

33,097,831

32,837,866

 

33,441,879

 

30,141,891

Weighted average number of shares outstanding,
diluted

33,241,936

33,097,831

32,837,866

 

33,441,879

 

30,141,891

BALANCE SHEET DATA

As at December 31

    

2020

    

2019

    

2018

    

2017

    

2016

Cash and cash equivalents

$

58,365,330

 

51,723,107

 

56,903,038

 

39,457,407

 

55,952,873

Vessels and vessel equipment, net of accumulated depreciation

631,458,305

 

660,823,330

 

721,492,473

 

751,816,840

 

785,461,415

Deferred drydock expenditures, net of accumulated amortization

10,216,090

 

7,668,711

 

7,127,364

 

4,118,168

 

3,232,293

Advances for ballast water treatment systems

2,568,874

 

384,408

 

528,774

 

 

Total assets

$

752,007,855

 

772,438,430

 

844,759,801

 

845,539,989

 

883,642,723

Debt obligations

$

210,510,964

 

207,283,013

 

228,354,248

 

404,423,570

 

453,213,106

Finance lease obligations

$

197,704,384

 

215,679,694

 

241,476,098

 

42,494,019

 

9,130,650

Total stockholders’ equity

$

320,334,946

 

326,055,768

 

346,583,934

 

380,973,760

 

404,269,799

Paid in capital (3)

$

402,897,285

 

401,842,777

 

399,509,686

 

390,541,689

 

401,347,393

Accumulated other comprehensive loss

$

(729,135)

Accumulated (deficit)/surplus

$

(81,833,204)

 

(75,787,009)

 

(52,925,752)

 

(9,567,929)

 

2,922,406

5


CASHFLOW DATA

For the years ended December 31

    

2020

    

2019

    

2018

    

2017

    

2016

Net cash provided by operating activities

$

46,094,449

 

20,471,260

 

9,426,377

 

18,416,228

 

42,634,500

Net cash (used in)/provided by investing activities

$

(20,993,433)

 

23,894,165

 

(17,556,879)

 

(2,282,251)

 

(122,311,231)

Net cash (used in)/provided by financing activities

$

(18,458,793)

 

(49,545,356)

 

25,576,133

 

(32,629,443)

 

95,520,221

FLEET OPERATING DATA

    

For the years ended December 31

 

2020

2019

2018

2017

2016

 

Time Charter Equivalent(4)

 

  

 

  

 

  

 

  

 

  

MR Tankers “Eco-design”

$

15,993

 

15,781

 

11,406

 

12,902

 

15,098

MR Tankers “Eco-mod”

$

14,284

 

14,062

 

11,916

 

12,975

 

14,318

Chemical Tankers “Eco-design”

$

14,332

 

12,420

 

11,406

 

11,949

 

15,395

Chemical Tankers “Eco-mod”

$

 

 

 

 

11,839

Fleet weighted average TCE(5)

$

15,355

 

14,686

 

11,529

 

12,709

 

14,785

Operating expenditure

 

  

 

  

 

  

 

  

 

  

Fleet operating expenses per day (6)

$

6,070

 

6,112

 

6,042

 

5,914

 

6,017

Technical management fees per day (7)

$

439

 

450

 

414

 

384

 

388

Total fleet operating costs per day

$

6,509

 

6,562

 

6,456

 

6,298

 

6,405

Expenditures for drydock(8)

$

7,003,305

 

5,387,875

 

6,599,085

 

3,809,906

 

3,099,805

On-hire utilization(9)

 

98.80

%  

99.66

%  

99.30

%  

99.61

%  

99.52

%


(1)Voyage expenses are all expenses related to a particular voyage, which include, among other things, bunkers and port/canal costs.
(2)Commercial and chartering general and administrative expenses are the expenses attributable to our chartering and commercial operations department in connection with our spot trading activities.
(3)Paid in capital includes common stock, additional paid in capital and treasury stock.
(4)Time Charter Equivalent (“TCE”) rate, a non-GAAP measure, represents net revenue (revenue less voyage expenses) divided by revenue days. Revenue days are the total number of calendar days the vessels are in our possession less off-hire days generally associated with drydocking or repairs, and idle days associated with repositioning of vessels held for sale. Net revenue, a non-GAAP measure, utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP. Under discharge to discharge, revenue is recognized beginning from the discharge of cargo from the prior voyage to the anticipated discharge of cargo in the current voyage, and voyage expenses are recognized as incurred.
(5)Fleet weighted average TCE represents net revenue for the fleet (revenue less voyage expenses) divided by the number of revenue days. Voyage expenses are all expenses related to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls and agency fees.
(6)Fleet operating expenses per day are routine operating expenses and include crewing, repairs and maintenance, insurance, stores, lube oils and communication costs.
(7)Technical management fees are paid to third-party technical managers as well as to our 50%-owned joint venture entity, Anglo Ardmore Ship Management Limited, which provides technical management services to most of our vessels.
(8)Drydock expenditures include, among other things, costs for in-water surveys, direct costs that are incurred as part of vessel drydocking to meet regulatory requirements. Direct expenditures that are deferred include the shipyard costs, parts, inspection fees, steel, blasting and painting.
(9)On-hire utilization represents revenue days divided by net operating days (i.e. operating days less scheduled off-hire days).

B. Capitalization and Indebtedness

Not applicable.

6


C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Some of the risks summarized below and discussed in greater detail in the following pages relate principally to the industry in which we operate and to our business in general. Other risks relate principally to the securities market and to ownership of our securities. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results and ability to pay dividends on our shares, or the trading price of our shares.

Risk Factor Summary

The tanker industry is cyclical and volatile in terms of charter rates and profitability.
Weak spot charter markets may adversely affect our results of operations.
The novel coronavirus (COVID-19) pandemic is dynamic and may directly or indirectly harm our business.
Declines in oil prices may adversely affect our growth prospects and results of operations.
Volatility in the markets in which our vessels trade may result in us having limited liquidity.
Declines in charter rates and other market deterioration could cause us to incur impairment charges.
Any vessel market value decreases could result in breaches of credit or lease facility covenants or impairment charges, and we may incur a loss if we sell vessels following a decline in their market value.
An over-supply of tanker capacity may lead to reductions in charter rates, vessel values, and profitability.
The state of global financial markets and economic conditions may adversely impact our ability to obtain additional financing or to refinance existing financing or otherwise negatively impact our business.
Changes in fuel, or bunkers, prices may adversely affect our results of operations.
Changes in the oil, oil products and chemical markets could result in decreased demand for our services.
Our vessels may suffer damage due to the inherent operational risks of the shipping industry, we may experience unexpected drydocking costs and delays or total loss of our vessels.
We operate our vessels worldwide and, as a result, our vessels are exposed to international risks.
Acts of piracy on ocean-going vessels could adversely affect our business.
Political instability, terrorist or other attacks, war or international hostilities can affect the tanker industry.
If our vessels call on ports subject to U.S. restrictions, the market for our securities could be adversely affected.
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
Maritime claimants could arrest our vessels, which would have a negative effect on our business.
Governments could requisition our vessels during a period of war or emergency.
Increased demand for and supply of vessels fitted with exhaust gas scrubbers could reduce demand for our existing vessels.
Technological innovation could reduce our charter hire income and the value of our vessels.
Failure to protect our information systems against security breaches or system failure could adversely affect our business and results of operations.
If labor or other interruptions are not resolved, they could have a material adverse effect on our business.
We will be required to make substantial capital expenditures to expand and maintain our fleet, which will depend on our ability to obtain additional financing.

7


We will not be able to take advantage of favorable opportunities in the spot market with respect to vessels employed on medium to long-term time charters.
If we do not acquire suitable vessels or shipping companies or successfully integrate any acquired vessels or shipping companies, we may not be able to effectively grow.
Delays in vessel deliveries, cancellations of vessel orders or the inability to complete vessel acquisitions could harm our results of operations.
If we purchase and operate second-hand vessels, we will be exposed to increased operating costs and these vessels could adversely affect our ability to obtain profitable charters.
An increase in operating or voyage expenses would decrease our earnings and cash flows.
We may be unsuccessful in competing in the international tanker market.
The loss of any key customers could result in a significant loss of revenues and cash flow.
Charterers may terminate or default on their charters.
Our ability to obtain additional debt financing may depend on the performance of charters and the creditworthiness of our charterers.
Debt and other obligations may limit our ability to obtain financing and pursue other opportunities.
Servicing our current or future indebtedness and lease obligations limits available funds and if we cannot service our debt, we may lose our vessels.
We are a holding company and depend on the ability of our subsidiaries to distribute funds to us.
Our credit facilities and lease arrangements contain restrictive covenants.
Any interest rate increases would increase our debt service costs on variable-rate debt and lease obligations.
LIBOR’s continued use is uncertain.
Failure to maintain an effective system of internal control over financial reporting could affect our ability to accurately report our results and prevent fraud.
We are subject to certain risks with respect to our counterparties on contracts.
Our insurance may not be adequate to cover our losses that may result from our operations.
We may be required to make additional insurance premium payments.
We are subject to complex laws and regulations which can adversely affect our business.
Climate change and greenhouse gas restrictions may adversely affect our operating results.
Increasing scrutiny and changing expectations about Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.
Ballast water discharge regulations may adversely affect our results of operation and financial condition.
If we fail to comply with international safety regulations, we may be subject to increased liability and may result in a denial of access to, or detention in, certain ports.
Failure to comply with data privacy laws could harm customer relationships and expose us to claims and fines.
Because we are incorporated in the Marshall Islands, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
It may be difficult to serve process on or enforce a U.S. judgment against us, our officers and our directors.
Our ability to pay any dividends in the future may be limited by the amount of cash we generate from operations and priorities ascribed by the board of directors for allocation of capital.
Anti-takeover provisions in our articles of incorporation and bylaws documents could adversely affect the market price of our common shares.

8


U.S. tax authorities could treat us as a “passive foreign investment company”, which could have adverse U.S. federal income tax consequences to U.S. holders.
We may have to pay tax on U.S. source shipping income, which would reduce our earnings.
We may be subject to additional taxes, which could adversely impact our business and financial results.
Our business depends upon key members of our senior management team.
Future sales of our common shares could cause the market price of our common shares to decline.
Exposure to currency exchange rate fluctuations could result in fluctuations in our operating results.

RISKS RELATED TO OUR INDUSTRY

The tanker industry is cyclical and volatile in terms of charter rates and profitability, which may affect our results of operations.

The tanker industry is both cyclical and volatile in terms of charter rates and profitability. A prolonged downturn in the tanker industry could adversely affect our ability to charter our vessels or to sell them on the expiration or termination of any charters we may enter into. In addition, the rates payable in respect of any of our vessels operating in a commercial pool, or any renewal or replacement charters that we enter into, may not be sufficient for us to operate our vessels profitably. Fluctuations in charter rates and tanker values result from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil, oil products and chemicals. The factors affecting the supply and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

Factors that influence demand for tanker capacity include:

supply of and demand for oil, oil products and chemicals;
regional availability of refining capacity;
global and regional economic and political conditions;
the distance oil, oil products and chemicals are to be moved by sea;
changes in seaborne and other transportation patterns;
environmental and other legal and regulatory developments;
weather and natural disasters;
competition from alternative sources of energy; and
international sanctions, embargoes, import and export restrictions, nationalizations and wars.

Factors that influence the supply of tanker capacity include:

the number of newbuilding deliveries;
the scrapping rate of older vessels;
conversion of tankers to other uses;
the price of steel and other raw materials;
the number of vessels that are out of service; and
environmental concerns and regulations.

Historically, the tanker markets have been volatile as a result of a variety of conditions and factors that can affect the price, supply and demand for tanker capacity. Demand for transportation of oil products and chemicals over longer distances was significantly reduced during the last economic downturn. More recently, since 2015 high refined product inventory levels, continued supply of new vessels, and low oil price volatility and trading levels contributed to low charter rates in the tanker industry. As at February 15, 2021, three of our vessels were on time charter, and 23 vessels operating in the spot market directly. If charter rates decline, we may be unable to achieve a level of charter hire sufficient for us to operate our vessels profitably or we may have to operate our vessels at a loss.

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Any decrease in spot charter rates in the future or a return of weak spot charter markets may adversely affect our results of operations.

As at February 15, 2021, 23 vessels operating directly in the spot market. The earnings of these vessels are based on the spot market charter rates of the particular voyage charters.

We may employ in the spot charter market additional vessels that we may acquire in the future. When we employ a vessel in the spot charter market, we generally intend to employ the vessel in the spot market directly. Although spot chartering is common in the tanker industry, the spot charter market may fluctuate significantly based upon tanker and oil product/chemical supply and demand, and there have been periods when spot rates have declined below the operating cost of vessels. The successful operation of our vessels in the competitive spot charter market, including within commercial pools, depends upon, among other things, spot-charter rates and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. If spot charter rates decline, we may be unable to operate our vessels trading in the spot market profitably or meet our obligations, including payments on indebtedness and finance lease obligations. In addition, as charter rates for spot charters are fixed for a single voyage that may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing the benefits from such increases.

Our ability to enter into any charters in the future on existing vessels or vessels we may acquire, the charter rates payable under any such charters and for employment of our vessels in the spot market and vessel values will depend upon, among other things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for the seaborne transportation of oil and chemical products.

The novel coronavirus (COVID-19) pandemic is dynamic.  The continuation of the pandemic, and the emergence of other epidemic or pandemic crises could have, material adverse effects on our business, results of operations, or financial condition.

The novel coronavirus pandemic is dynamic, including the developments of variants of the virus, and its ultimate scope, duration and effects are uncertain. The pandemic and any future epidemic or pandemic crises could result in direct and indirect adverse effects on the product and chemical tanker industry. Effects of the current pandemic include, or may include, among others:

deterioration of worldwide, regional or national economic conditions and activity, which could further reduce or prolong the recent significant declines in oil prices, or continue to adversely affect global demand for crude oil and petroleum products, demand for product and chemical tankers, and charter and spot rates;
disruptions to operations of industry participants as a result of the potential health impact on workforces, including crew;
business disruptions from, or additional costs related to, new regulations, directives or practices implemented in response to the pandemic, such as travel restrictions for individuals and vessels, hygiene measures (such as quarantining and social distancing) or implementation of remote working arrangements;
potential delays in (a) the loading and discharging of cargo on or from our vessels, (b) vessel inspections and related certifications by class societies, oil majors or government agencies and (c) maintenance and any repairs or upgrades to, or drydocking of, vessels, due to quarantine, worker health, regulations or a shortage of required spares;
reduced cash flow and financial condition, including potential liquidity constraints;
reduced access to capital as a result of any credit tightening generally or due to declines in global financial markets;
potential decreases in the market values of vessels and related impairment charges;
potential noncompliance with covenants in our credit facilities and financing lease obligations; and
potential deterioration in the financial condition and prospects of industry participants.

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Although disruption and effects from the novel coronavirus pandemic may be temporary or moderated by expanding vaccine accessibility, given the dynamic nature of these circumstances, the duration of business disruption and the related financial impact on the product and chemical tanker industry and its participants cannot be reasonably estimated at this time. In addition, public health threats and other highly communicable disease outbreaks, such as the COVID-19 pandemic, could adversely affect the business, results of operations or financial condition of us or our customers, suppliers and other business partners.

Declines in oil prices may adversely affect our growth prospects and results of operations.

Global crude oil prices fluctuate significantly over time and in response to various events. Any meaningful decrease in oil prices may adversely affect our business, results of operations and financial condition and our ability to service our indebtedness and finance lease obligations and to pay dividends, as a result of, among other things:

a possible reduction in exploration for or development of new oil fields or energy projects, or the delay or cancelation of existing projects as energy companies lower their capital expenditures budgets, which may reduce our growth opportunities;
potential lower demand for tankers, which may reduce available charter rates and revenue to us upon chartering or rechartering of our vessels;
customers failing to extend or renew contracts upon expiration;
the inability or refusal of customers to make charter payments to us due to financial constraints or otherwise; or
declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings.

Volatility in the markets in which our vessels trade may result in us having limited liquidity.

As at December 31, 2020, we had total cash and cash equivalents of $58.4 million. Our short-term liquidity requirements include the payment of operating expenses, drydocking expenditures, debt servicing costs, lease payments, any dividends on our shares of common stock, scheduled repayments of long-term debt and finance lease obligations, as well as funding our other working capital requirements. Our spot charters, including our participation in spot charter pooling arrangements, contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. We expect to manage our near-term liquidity needs from our working capital, together with expected cash flows from operations and availability under credit facilities. Our existing long-term debt facilities and certain of our finance leases require, among other things, that we maintain minimum cash and cash equivalents based on the greater of a set amount per number of vessels owned and 5% of outstanding debt. The required minimum cash balance as of December 31, 2020, was $20.5 million. Should we not meet this financial covenant or other covenants in our debt facilities, whether due to market volatility that reduces our liquidity or other factors, the lenders may declare our obligations under the applicable agreements immediately due and payable, and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. A default under financing arrangements could also result in foreclosure on any of our vessels and other assets securing the related loans or a loss of our rights as a lessee under our finance leases.

Declines in charter rates and other market deterioration could cause us to incur impairment charges.

We evaluate the carrying amounts of our vessels to determine if events have occurred that would require an impairment of their carrying amounts. The recoverable amount of vessels is reviewed based on events and changes in circumstances that would indicate that the carrying amount of the assets might not be recovered. The review for potential impairment indicators and projection of future cash flows related to our vessels is complex and requires us to make various estimates, including future charter rates, operating expenses and drydock costs. Historically, each of these items has been volatile. An impairment charge is recognized if the carrying value is in excess of the estimated undiscounted future cash flows. The impairment loss is measured based on the excess of the carrying amount over the fair market value of the asset. An impairment loss could adversely affect our results of operations.

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The market values of our vessels may decrease, which could cause us to breach covenants in our credit facilities and lease arrangements or result in impairment charges, and we may incur a loss if we sell vessels following a decline in their market value.

The market values of tankers have historically experienced high volatility. The market value of our vessels will fluctuate depending on general economic and market conditions affecting the shipping industry and prevailing charter hire rates, competition from other shipping companies and other modes of transportation, the types, sizes and ages of vessels, applicable governmental regulations and the cost of newbuildings. If the market value of our fleet declines, we may not be able to obtain other financing or to incur debt on terms that are acceptable to us or at all. A decrease in vessel values could also cause us to breach certain loan-to-value covenants that are contained in our financing arrangements that we may enter into from time to time. If we breach such covenants due to decreased vessel values and we are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on vessels in our fleet, which would adversely affect our business, results of operations and financial condition.

In addition, if we sell one or more of our vessels at a time when vessel prices have fallen, the sale price may be less than the vessel’s carrying value on our consolidated financial statements, resulting in a loss on sale or an impairment loss being recognized, leading to a reduction in earnings. Also, if vessel values fall significantly, this could indicate a decrease in the estimated undiscounted future cash flows for the vessel, which may result in an impairment adjustment in our financial statements, which could adversely affect our results of operations and financial condition.

An over-supply of tanker capacity may lead to reductions in charter rates, vessel values, and profitability.

The market supply of tankers is affected by a number of factors, such as demand for energy resources, oil, petroleum and chemical products, as well as the level of global and regional economic growth. If the capacity of new ships delivered exceeds the capacity of tankers being scrapped and lost, tanker capacity will increase. The global newbuilding orderbook for product tankers equaled approximately 6% of the global product tanker fleet as of February 15, 2021. If the supply of product or chemical tanker capacity increases and if the demand for such respective tanker capacity does not increase correspondingly, charter rates and vessel values could materially decline. A reduction in charter rates and the value of our vessels may have a material adverse effect on our business, results of operations and financial condition.

In addition, product tankers currently used to transport crude oil and other “dirty” products may be “cleaned up” and reintroduced into the product tanker market, which would increase the available product tanker Tonnage, which may affect the supply and demand balance for product tankers. This could have an adverse effect on our business, results of operations and financial position.

The state of global financial markets and economic conditions may adversely impact our ability to obtain additional financing or refinance our existing obligations on acceptable terms, if at all, and otherwise negatively impact our business.

Global financial markets and economic conditions have been, and continue to be, volatile. In the last economic downturn, operating businesses in the global economy faced tightening credit, weakening demand for goods and services, deteriorating international liquidity conditions and declining markets. There was a general decline in the willingness of banks and other financial institutions to extend credit, particularly in the shipping industry due to the historically volatile asset values of vessels. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it was negatively affected by this decline.

Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of borrowing funds during the last economic downturn increased as many lenders increased interest rates, enacted tighter lending standards, refused to refinance existing debt on similar terms and, in some cases, ceased to provide funding to borrowers. Due to these factors, additional financing may not be available if needed by us on acceptable terms or at all. If additional financing is not available when needed or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete additional acquisitions or otherwise take advantage of business opportunities as they arise.

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Changes in fuel, or bunkers, prices may adversely affect our results of operations.

Fuel, or bunkers, is a significant expense for our vessels employed in the spot market and can have a significant impact on earnings. For any vessels which may be employed on time charters, the charterer is generally responsible for the cost and supply of fuel; however, such cost may affect the time charter rates we may be able to negotiate for such vessels. Changes in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including, among other factors, geopolitical developments, supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries (“OPEC”) and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. In addition, fuel price increases may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.

Changes in the oil, oil products and chemical markets could result in decreased demand for our vessels and services.

Demand for our vessels and services in transporting oil, oil products and chemicals depends upon world and regional oil markets. Any decrease in shipments of oil, oil products and chemicals in those markets could have a material adverse effect on our business, financial condition and results of operations. Historically, those markets have been volatile as a result of the many conditions and events that affect the price, production and transport of oil, oil products and chemicals, including competition from alternative energy sources. Past slowdowns of world economies, including the U.S., have resulted in reduced consumption of oil and oil products and decreased demand for our vessels and services, which reduced vessel earnings. Additional slowdowns could have similar effects on our results of operations and may limit our ability to expand our fleet.

If our vessels suffer damage due to the inherent operational risks of the shipping industry, we may experience unexpected drydocking costs and delays or total loss of our vessels, which may adversely affect our business and financial condition.

The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes will be at risk of being damaged or lost because of events, such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding, fire, explosions, collisions, human error, war, terrorism, piracy, cyber-attack, latent defects, acts of God, climate change and other circumstances or events. Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, market disruptions, delays or rerouting. In addition, the operation of tankers has unique operational risks associated with the transportation of oil and chemical products. An oil or chemical spill may cause significant environmental damage and the associated costs could exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision or other causes, due to the high flammability and high volume of the oil or chemicals transported in tankers.

If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be substantial. We may have to pay drydocking costs if our insurance does not cover them in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business, results of operations and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located to our vessels’ positions. The loss of earnings while such vessels wait for space or travel or are towed to more distant drydocking facilities may be significant. The total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs or loss which could negatively impact our business, results of operations and financial condition.

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We operate our vessels worldwide and, as a result, our vessels are exposed to international risks which may reduce revenue or increase expenses.

Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These sorts of events, as well as the emergence of epidemics or pandemics, such as the on-going novel coronavirus outbreak, could interfere with shipping routes and result in market disruptions, which may reduce our revenue and increase our expenses. Our worldwide operations also expose us to the risk that an increase in restrictions on global trade will harm our business. The rise of populist or nationalist political parties and leaders in the United States, Europe and elsewhere may lead to increased trade barriers, trade protectionism and restrictions on trade. The adoption of trade barriers and imposition of tariffs by governments may reduce global shipping demand and reduce our revenue.

In addition, international shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and transshipment points. Inspection procedures can result in the seizure of the cargo or vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against vessel owners. It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. In addition, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations and financial condition.

Acts of piracy on ocean-going vessels could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden. Sea piracy incidents continue to occur, particularly in the South China Sea, the Strait of Malacca, the Indian Ocean, the Arabian Sea, off the coast of West Africa, the Red Sea, the Gulf of Aden, the Gulf of Guinea, Venezuela, and in certain areas of the Middle East, with tankers particularly vulnerable to such attacks. If piracy attacks result in the characterization of regions in which our vessels are deployed as “war risk” zones or Joint War Committee “war and strikes” listed areas by insurers, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention or hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, results of operations, cash flows and financial condition and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.

Political instability, terrorist or other attacks, war or international hostilities can affect the tanker industry, which may adversely affect our business.

We conduct most of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and available cash may be adversely affected by the effects of political instability, terrorist or other attacks, war or international hostilities. Continuing conflicts in the Middle East, and the presence of the United States and other armed forces in regions of conflict, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further world economic instability and uncertainty in global financial markets. As a result of these factors, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. Future terrorist attacks could result in increased volatility of the financial markets and negatively impact the United States and global economy. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the West of Africa, South China Sea, South-East Asia, the Gulf of Guinea and the Gulf of Aden, including off the coast of Somalia. There also has been an increase in risks associated with the Straits of Hormuz due to Iranian activity. Any of these occurrences could have a material adverse impact on our business, results of operations and financial condition.

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If our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. government, our reputation and the market for our securities could be adversely affected.

Although no vessels owned or operated by us have, during the effect of such sanctions or embargoes, called on ports located in countries subject to country-wide or territory-wide sanctions and embargoes imposed by the U.S. government (such as Iran, North Korea, Syria, the Crimea region, or Cuba, and other authorities or countries identified by the U.S. government or other authorities as state sponsors of terrorism, such as Iran, Syria and North Korea), in the future our vessels may call on ports in these countries from time to time on charters’ instructions in violation of contractual provisions that prohibit them from doing so. Use of our vessels by charterers in a manner that violates U.S. sanctions may result in fines, penalties or other sanctions imposed against us. Sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time.

Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact the market for our common shares, our ability to access U.S. capital markets and conduct our business and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us.

Our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels and those violations could in turn negatively affect our reputation or the ability of our charterers to meet their obligations to us or result in fines, penalties or sanctions.

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

We expect that our vessels will call on ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on our business, results of operations and financial condition.

Maritime claimants could arrest our vessels, which would have a negative effect on our business and results of operations.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our business or require us to pay significant amounts to have the arrest lifted.

In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our vessels.

Governments could requisition our vessels during a period of war or emergency, which may adversely affect our business and results of operations.

A government could requisition for title or seize our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels could adversely affect our business, results of operations and financial condition.

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A number of third-party vessel owners have installed exhaust gas scrubbers for their vessels to comply with IMO 2020 requirements to reduce the amount of sulfur in fuel globally. Increased demand for and supply of vessels fitted with scrubbers could reduce demand for our existing vessels and expose us to lower vessel utilization and decreased charter rates.

As of February 2021, owners of approximately 40% of the worldwide fleet of tankers with capacity over 10,000 dwt had fitted or planned to fit scrubbers on their vessels. Fitting scrubbers allows a ship to consume high sulfur fuel oil, which is expected to be less expensive than the low sulfur fuel oil that ships without scrubbers must consume to comply with the IMO 2020 low sulfur emission requirements. Generally, owners of vessels with higher operating fuel requirements--generally larger ships--are more inclined to install scrubbers to comply with IMO 2020. Fuel expense reductions from operating scrubber-fitted ships could result in a substantial reduction of bunker cost for charterers compared to vessels in our fleet which do not have scrubbers. If (a) the supply of scrubber-fitted vessels increases, (b) the differential between the cost of high sulfur fuel oil and low sulfur fuel oil is high and (c) charterers prefer such vessels over our vessels, demand for our vessels may be reduced and our ability to re-charter our vessels at competitive rates may be impaired, which may have a material adverse effect on our business, operating results and financial condition.

Technological innovation could reduce our charter hire income and the value of our vessels.

The charter hire rates and the value and operational life of a vessel are determined by a number of factors, including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter various harbors and ports, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new tankers are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charter hire payments, if any, we receive for our vessels and the resale value of our vessels could significantly decrease. As a result, our business, results of operations and financial condition could be adversely affected.

We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

The efficient operation of our business, including processing, transmitting and storing electronic and financial information, is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business, results of operations and financial condition.

If labor or other interruptions are not resolved in a timely manner, they could have a material adverse effect on our business.

We, indirectly through our technical managers, employ masters, officers and crews to operate our vessels, exposing us to the risk that industrial actions or other labor unrest may occur. A significant portion of the seafarers that crew our vessels are employed under collective bargaining agreements. We may suffer labor disruptions if relationships deteriorate with the seafarers or the unions that represent them. The collective bargaining agreements may not prevent labor disruptions, particularly when the agreements are being renegotiated. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out as we expect and could have a material adverse effect on our business, results of operations and financial condition.

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RISKS RELATED TO OUR BUSINESS

We will be required to make substantial capital expenditures to expand the number of vessels in our fleet and to maintain all our vessels, which will depend on our ability to obtain additional financing.

Our business strategy is based in part upon the expansion of our fleet through the purchase and ordering of additional vessels. We will be required to make substantial capital expenditures to expand the size of our fleet. We also have incurred significant capital expenditures in previous years to upgrade secondhand vessels we have acquired to Eco-Mod standards and may be required to make additional capital expenditures in order to comply with existing and future regulatory obligations.

In addition, we will incur significant maintenance and capital costs for our current fleet and any additional vessels we acquire. A newbuilding vessel must be drydocked within five years of its delivery from a shipyard and vessels are typically drydocked every 30 to 60 months thereafter depending on the vessel, not including any unexpected repairs. We estimate the cost to drydock a vessel is between $0.75 million and $1.5 million, depending on the size and condition of the vessel and the location of drydocking relative to the location of the vessel.

We may be required to incur additional debt or raise capital through the sale of equity securities to fund the purchasing of vessels or for drydocking costs from time to time. However, we may be unable to access the required financing if conditions change and we may be unsuccessful in obtaining financing for future fleet growth. Use of cash from operations will reduce available cash. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. If we finance our expenditures by incurring additional debt, our financial leverage could increase. If we finance our expenditures by issuing equity securities, our shareholders’ ownership interest in us could be diluted.

We will not be able to take advantage of favorable opportunities in the spot market with respect to vessels employed on medium to long-term time charters, if any.

As at February 15, 2021, three of our vessels were employed under fixed rate time charter agreements. Vessels committed to medium and long-term time charters may not be available for spot charters during periods of increasing charter hire rates, when spot charters might be more profitable.

If we do not identify suitable assets or companies for acquisition or successfully integrate any acquired assets or companies, we may not be able to grow or effectively manage our growth.

One of our principal strategies is to continue expanding our operations and our fleet. Our future growth will depend upon a number of factors, some of which may not be within our control. These factors include our ability to:

identify suitable assets and/or companies for acquisitions at attractive prices;
identify suitable businesses for acquisitions or joint ventures;
integrate any acquired assets or businesses successfully with our existing operations;
hire, train and retain qualified personnel and crew to manage and operate our growing business and fleet;
identify and successfully enter additional new markets;
improve or expand our operating, financial and accounting systems and controls; and
obtain required financing for our existing and new assets, businesses and operations.

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Our failure to effectively identify, purchase, develop and integrate any assets or businesses could adversely affect our business, financial condition and results of operations. The number of employees that perform services for us and our current operating and financial systems and expertise may not be adequate as we implement our plan to expand the size of our fleet or enter new markets and we may not be able to effectively hire more employees, adequately improve those systems or develop that expertise. In addition, acquisitions may require additional equity issuances (which may dilute our shareholders' ownership interest in us) or the incurrence of additional debt (which may increase our financial leverage and debt service costs or impose more restrictive covenants). If we are unable to successfully accommodate any growth, our business, results of operations and financial condition may be adversely affected.

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired assets and operations into existing infrastructures. The expansion of our fleet and business may impose significant additional responsibilities on our management and staff, and the management and staff of our technical managers, and may necessitate that we, and they, increase the number of personnel to support such expansion. We may not be successful in executing our growth plans and we may incur significant expenses and losses in connection with such growth plans.

Delays in deliveries of vessels we may purchase or order, our decision to cancel an order for purchase of a vessel or our inability to otherwise complete the acquisitions of additional vessels for our fleet, could harm our results of operations.

Although we currently have no vessels on order, under construction or subject to purchase agreements, we expect to purchase and order additional vessels from time to time. The delivery of any such vessels could be delayed, not completed or cancelled, which would delay or eliminate our expected receipt of revenues from the employment of these vessels. The seller could fail to deliver these vessels to us as agreed, or we could cancel a purchase contract because the seller has not met its obligations. The delivery of any vessels we may propose to acquire could be delayed because of, among other things, hostilities or political disturbances, non-performance of the purchase agreement with respect to the vessels by the seller, our inability to obtain requisite permits, approvals or financings or damage to or destruction of vessels while being operated by the seller prior to the delivery date.

If the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter under which we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, our business, financial condition and results of operations could be adversely affected.

The delivery of vessels we may purchase or sell could be delayed because of, among other things, as applicable:

work stoppages or other labor disturbances or other events that disrupt the operations of the shipyard building the vessels;
quality or other engineering problems;
changes in governmental regulations or maritime self-regulatory organization standards;
lack of raw materials;
bankruptcy or other financial crisis of the shipyard building the vessels;
our inability to obtain requisite financing or make timely payments;
a backlog of orders at the shipyard building the vessels;
hostilities or political or economic disturbances in or affecting the countries where the vessels are being built, or the imposition of sanctions on such countries or applicable parties;
weather interference or catastrophic event, such as a major earthquake or fire;
our requests for changes to the original vessel specifications;
shortages or delays in the receipt of necessary construction materials, such as steel;
our inability to obtain requisite permits or approvals; or
a dispute with the shipyard building the vessels.

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If we purchase and operate second-hand vessels, we will be exposed to increased operating costs that could adversely affect our earnings and, as our fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters.

Our business strategy includes additional growth through the acquisition of new and second-hand vessels. While we typically inspect second-hand vessels prior to purchase, this does not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us. Generally, we do not receive the benefit of warranties from the builders of the second-hand vessels that we acquire. These factors could increase the ultimate cost of any second-hand vessel acquisitions by us.

In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

An increase in operating or voyage expenses would decrease our earnings and cash flows.

As at February 15, 2021, three of our vessels were employed under fixed rate time charter agreements. For all vessels operating under time charters, the charterer is primarily responsible for voyage expenses and we are responsible for the vessel operating expenses. Under spot chartering arrangements, we will be responsible for all costs associated with operating the vessel, including operating expenses, voyage expenses, bunkers, port and canal costs.

Our vessel operating expenses, which includes the costs of crew, provisions, deck and engine stores, insurance and maintenance, repairs and spares, and our voyage expenses, which include, among other things, the costs of bunkers port and canal costs, depend on a variety of factors, many of which are beyond our control. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydocking repairs are unpredictable and can be substantial. Increases in any of these expenses would decrease earnings and cash flow.

We may be unsuccessful in competing in the highly competitive international tanker market, which would negatively affect our results of operations and financial condition and our ability to expand our business.

The operation of tanker vessels and transportation of petroleum and chemical products is extremely competitive, and our industry is capital intensive and highly fragmented. Competition arises primarily from other tanker owners, including major oil companies as well as independent tanker companies, some of which have substantially greater resources than we do. Competition for the transportation of oil products and chemicals can be intense and depends on price, location, size, age, condition and the acceptability of the tanker and its operators to the charterers. We may be unable to compete effectively with other tanker owners, including major oil companies and independent tanker companies.

Our market share may decrease in the future. We may not be able to compete profitably to the extent we seek to expand our business into new geographic regions or provide new services. New markets may require different skills, knowledge or strategies than those we use in our current markets, and the competitors in those new markets may have greater financial strength and capital resources than we do.

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The loss of any key customer could result in a significant loss of revenues and cash flow.

We have derived, and we may continue to derive, a significant portion of our revenues and cash flow from a limited number of customers. Vitol Group accounted for 10% or more of our consolidated revenue for the years ended December 31, 2020 and 2018. No customer accounted for 10% or more of our consolidated revenue for the year ended December 31, 2019. No other customer accounted for 10% or more of our consolidated revenue during any of these periods. The identity of customers which may account for 10% or more of revenue may vary from time to time.

If we lose a key customer or if a customer exercises its right under some charters to terminate the charter, we may be unable to enter into an adequate replacement charter for the applicable vessel or vessels. The loss of any of our significant customers or a reduction in revenues from them could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Charterers may terminate or default on their charters, which could adversely affect our business, results of operations and cash flow.

Any charters may terminate earlier than their scheduled expirations. The terms of any existing or future charters may vary as to which events or occurrences will cause a charter to terminate or give the charterer the option to terminate the charter, but these may include: a total or constructive loss of the relevant vessel; or the failure of the relevant vessel to meet specified performance criteria. In addition, the ability of each of our charterers to perform its obligations under a charter will depend on a number of factors that are beyond our control. These factors may include general economic conditions, the condition of the tanker industry, the charter rates received for specific types of vessels and various operating expenses. The costs and delays associated with the default by a charterer under a charter of a vessel may be considerable and may adversely affect our business, results of operations, cash flows and financial condition and our available cash.

To the extent we may enter into time charters in the future for our vessels, we cannot predict whether any charterers may, upon the expiration of their charters, re-charter our vessels on favorable terms or at all. If our charterers are unable or decide not to re-charter our vessels, we may not be able to re-charter them on terms similar to our current charters or at all. In addition, the ability and willingness of each of our counterparties to perform its obligations under a time charter agreement with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the tanker shipping industry and the overall financial condition of the counterparties. Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities. In depressed market conditions, there have been reports of charterers renegotiating their charters or defaulting on their obligations under charters. Our customers may fail to pay charter hire or attempt to renegotiate charter rates. If a counterparty fails to honor its obligations under agreements with us, it may be difficult for us to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates. Any failure by our charterers to meet their obligations to us or any renegotiation of our charter agreements could have a material adverse effect on our business, financial condition and results of operations.

Our ability to obtain additional debt financing may be dependent on the performance of any then-existing charters and the creditworthiness of our charterers.

The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at all or at a higher than anticipated cost may materially affect our results of operations and our ability to implement our business strategy.

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Our debt levels and lease obligations may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.

As of December 31, 2020, we had $408.2 million in aggregate principal amount of outstanding indebtedness and finance lease obligations. In addition, in the future we may enter into new debt arrangements, issue debt securities or incur additional finance lease obligations or assume debt as part of acquisitions. Our level of debt and lease obligations could have important consequences to us, including the following:

our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;
we may need to use a substantial portion of our cash from operations to make principal and interest payments relating to our debt obligations, reducing the funds that would otherwise be available for operations and future business opportunities;
we may be more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and
our flexibility in responding to changing business and economic conditions may be limited.

Servicing our current or future indebtedness and lease obligations limits funds available for other purposes and if we cannot service our debt, we may lose our vessels.

Borrowing under our existing credit facilities and obligations under our lease arrangements require us to dedicate a significant part of our cash flow from operations to paying principal and interest on our indebtedness under such facilities or obligations under our finance lease arrangements, and we intend to incur additional debt in the future. These payments limit funds available for working capital, capital expenditures and other purposes.

Amounts borrowed under our finance facilities bear interest at variable rates. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. Currently, we do not have any hedge arrangements in place to reduce our exposure to interest rate variability on variable rate debt and lease obligations.

Our ability to service our debt and lease obligations will depend upon, among other things, our financial and operating performance, which will be affected by prevailing economic and industry conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our results of operations and cash reserves are not sufficient to service our current or future indebtedness and lease obligations, we may be forced to:

seek to raise additional capital;
seek to refinance or restructure our debt;
sell tankers;
reduce or delay our business activities, capital expenditures, investments or acquisitions;
reduce any dividends; or
seek bankruptcy protection.

We may be unable to effect any of these remedies, if necessary, on satisfactory terms, and these remedies may not be sufficient to allow us to meet our debt or lease obligations. If we are unable to meet our debt or lease obligations or if some other default occurs under our credit facilities or lease arrangements, our lenders could elect to declare our debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt or our lessors could terminate our rights under our finance leases.

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We are a holding company and depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments.

We are a holding company and our subsidiaries, which are all directly and indirectly wholly owned by us, conduct our operations and own all of our operating assets. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depends on the ability of our subsidiaries to generate profits available for distribution to us and, to the extent that they are unable to generate profits, we will be unable to pay our creditors or dividends to our shareholders.

Our credit facilities and lease arrangements contain restrictive covenants, which among other things, limit the amount of cash we may use for other corporate activities, which could negatively affect our growth and cause our financial performance to suffer.

Our credit facilities and lease arrangements impose operating and financial restrictions on us. These restrictions may limit our ability, or the ability of our subsidiaries to, among other things:

make capital expenditures if we do not repay amounts drawn under our credit facilities or if there is another default under our credit facilities;
incur additional indebtedness, including the issuance of guarantees;
incur additional lease obligations;
create liens on our assets;
change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel;
sell our vessels;
pay dividends or distributions;
merge or consolidate with, or transfer all or substantially all our assets to, another person; or
enter into a new line of business.

Certain of our credit facilities and lease obligations require us to maintain specified financial ratios and satisfy financial covenants. These financial ratios and covenants require us, among other things, to maintain minimum solvency, cash and cash equivalents, corporate net worth, working capital, loan-to-value levels and to avoid exceeding corporate leverage maximum.

As a result of these restrictions, we may need to seek consent from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain consent when needed. This may limit our ability to finance our future operations or capital requirements, make acquisitions or pursue business opportunities. Our ability to comply with covenants and restrictions contained in debt instruments and lease arrangements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, we may fail to comply with these covenants. If we breach any of the restrictions, covenants, ratios or tests in our financing agreements, our obligations may become immediately due and payable, we could be subject to increased rates or fees, and the lenders’ commitment under our credit facilities, if any, to make further loans may terminate. A default under financing agreements or lease arrangements could also result in foreclosure on any of our vessels and other assets securing related loans or a loss of our rights as a lessee under our finance leases.

Interest rate increases will affect the interest rates under our credit facilities and finance lease facilities, which could affect our results of operations.

Amounts borrowed under our existing credit facilities bear interest at an annual variable rate ranging from 2.25% to 3.50% above LIBOR. Certain of our finance lease arrangements bear interest at an annual variable rate ranging from 3.00% to 4.50% above LIBOR. Interest rates have recently been at relatively low levels and any increase in interest rates would lead to an increase in LIBOR, which would affect the amount of interest payable on amounts that we borrow under our credit facilities and the amount of our obligations under certain of our finance leases, which in turn could have an adverse effect on our results of operations.

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From time to time we hedge a portion of the interest rate risk of our variable debt and finance leasing obligations. However, our financial condition could be materially adversely affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our variable-rate debt facilities, financing leases and any other financing arrangements we may enter into in the future.  We cannot provide assurances that any hedging activities that we enter into will fully mitigate our interest rate risk from variable-rate obligations.

There is uncertainty as to the continued use of LIBOR in the future, and the interest rates on our LIBOR-based obligations may increase in the future.

LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. This guidance indicates that the continuation of LIBOR on the current basis cannot be guaranteed after 2021, and there is substantial risk that LIBOR will be discontinued or modified during 2021. Global regulators are working with the financial sector to transition away from the use of LIBOR and towards the adoption of alternative reference rates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities (“SOFR”). SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Whether or not SOFR attains market acceptance as a LIBOR replacement tool remains in question. As such, the future of LIBOR at this time is uncertain.

If LIBOR ceases to exist, we may need to renegotiate any credit agreements or interest rate derivatives agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate or hedge rate, which could adversely impact our cost of debt.

The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness and obligations, which could adversely affect our results of operations and ability to service our applicable indebtedness and financial lease obligations. As of December 31, 2020, we had $408.2 million in aggregate principal amount of outstanding indebtedness and finance lease obligations with interest obligations based on LIBOR plus applicable margins.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing we conduct in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any testing conducted by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, limit our ability to access capital markets or require us to incur additional costs to improve our internal control and disclosure control systems and procedures, which could harm our business and have a negative effect on the trading price of our securities.

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We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our results of operations.

We have entered into spot and time charter contracts, commercial pool agreements, ship management agreements, credit facilities and finance lease arrangements and other commercial arrangements. Such agreements and arrangements subject us to counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. In addition, in depressed market conditions, our charterers and customers may no longer need a vessel that is currently under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses, which could have a material adverse effect on our business, financial condition and results of operations.

Our insurance may not be adequate to cover our losses that may result from our operations due to the inherent risks of the tanker industry.

We carry insurance to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, which includes pollution risks, crew insurance and war risk insurance. However, we may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on us. Additionally, our insurers may refuse to pay particular claims and our insurance may be voidable by the insurers if we take, or fail to take, certain action, such as failing to maintain certification of our vessels with applicable maritime regulatory organizations. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to obtain adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions. Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult for us to obtain due to increased premiums or reduced or restricted coverage for losses caused by terrorist acts generally.

Because we obtain some of our insurance through protection and indemnity associations, we may be required to make additional premium payments.

We receive insurance coverage for tort liability, including pollution-related liability, from protection and indemnity associations. We may be subject to increased premium payments, or calls, in amounts based on our claim records, the claim records of our managers, as well as the claim records of other members of the protection and indemnity associations. This year, the shipping industry is experiencing significant increases in premiums for coverage by protection and indemnity associations. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations and financial condition.

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LEGAL AND REGULATORY RISKS

We are subject to complex laws and regulations, including environmental laws and regulations, which can adversely affect our business, results of operations and financial condition.

Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. Cost of compliance with such laws and regulations may be significant and, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. Compliance with existing and future regulatory obligations may include costs relating to, among other things: air emissions including greenhouse gases; the management of ballast and bilge waters; maintenance and inspection; elimination of tin-based paint; development and implementation of emergency procedures, Eco-Mod upgrades of secondhand vessels and insurance coverage or other financial assurance of our ability to address pollution incidents. Environmental or other incidents may result in additional regulatory initiatives or statutes or changes to existing laws that may affect our operations or require us to incur additional expenses to comply with such regulatory initiatives, statutes or laws. These costs could have a material adverse effect on our business, results of operations and financial condition.

A failure to comply with applicable laws and regulations may, among other things, result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often impose strict, joint and several liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under the U.S. Oil Pollution Act of 1990, for example, owners, operators and bareboat charterers are jointly, severally and strictly liable for the discharge of oil in U.S. waters, including the 200-nautical mile exclusive economic zone around the United States. An oil spill could also result in significant liability, including fines, penalties, criminal liability, remediation costs and natural resource damages under international and U.S. federal, state and local laws, as well as third-party damages, and could harm our reputation with current or potential charterers of our tankers. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations and financial condition.

Climate change and greenhouse gas restrictions may adversely affect our operating results.

An increasing concern for, and focus on climate change, has promoted extensive existing and proposed international, national and local regulations intended to reduce greenhouse gas emissions. Compliance with such regulations and our efforts to participate in reducing greenhouse gas emissions will likely increase our compliance costs, require significant capital expenditures to reduce vessel emissions and require changes to our business.

Our business includes transporting refined petroleum products. Regulatory changes and growing public concern about the environmental impact of climate change may lead to reduced demand for petroleum products and decreased demand for our services, while increasing or creating greater incentives for use of alternative energy sources. We expect regulatory and consumer efforts aimed at combating climate change to intensify and accelerate. Although we do not expect demand for oil to decline dramatically over the short-term, in the long-term climate change likely will significantly affect demand for oil and for alternatives. Any such change could adversely affect our ability to compete in a changing market and our business, financial condition and results of operations.

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Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and, in recent years, have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Diminished access to capital could hinder our growth. Companies that do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and their business, financial condition and stock price may be adversely affected.

We may face increasing pressures from investors, lenders and other market participants, which are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us, especially given our business of transporting refined petroleum products.  In addition, it is likely we will incur additional costs and require additional resources to monitor, report and comply with wide-ranging ESG requirements.  The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Regulations relating to ballast water discharge which came into effect during September 2019 may adversely affect our results of operation and financial condition.

The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the “IMO”) has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of the International Oil Pollution Prevention renewal survey, existing vessels constructed before September 8, 2017 were required to comply with the updated D-2 standard on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are required to comply with the D-2 standards on or after September 8, 2017. All of our vessels currently comply with the updated guidelines of compliance. The cost of compliance with these regulations may be substantial and may adversely affect our results of operation and financial condition.

Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit (“VGP”) program and U.S. National Invasive Species Act are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act, which was signed into law on December 4, 2018, requires that the U.S. Environmental Protection Agency develop national standards of performance for approximately 30 discharges, similar to those found in the VGP, within two years. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the installation of new equipment, which may cause us to incur substantial costs.

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If we fail to comply with international safety regulations, we may be subject to increased liability, which may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.

The operation of our vessels is affected by the requirements set forth in the IMO’s International Management Code for the Safe Operation of Ships and Pollution Prevention (“ISM Code”). The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of safety and environmental protection policies setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. If we fail to comply with the ISM Code or similar regulations, we may be subject to increased liability or our existing insurance coverage may be invalidated or decreased for our affected vessels. Such failure may also result in a denial of access to, or detention of our vessels in, certain ports. The United States Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and EU ports, which could have an adverse effect on our business, results of operations and financial condition.

Our failure to comply with data privacy laws could damage our customer relationships and expose us to litigation risks and potential fines.

Data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services and continue to develop in ways which we cannot predict, including with respect to evolving technologies such as cloud computing. The EU adopted the General Data Privacy Regulation (“GDPR”), a comprehensive legal framework to govern data collection, use and sharing and related consumer privacy rights which took effect in May 2018. The GDPR includes significant penalties for non-compliance. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate case law or bankruptcy law and, as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.

Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act (the “BCA”). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. In addition, the Republic of the Marshall Islands does not have a well-developed body of bankruptcy law. As such, in the case of a bankruptcy involving us, there may be a delay of bankruptcy proceedings and the ability of securityholders and creditors to receive recovery after a bankruptcy proceeding, and any such recovery may be less predictable.

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It may be difficult to serve process on or enforce a U.S. judgment against us, our officers and our directors.

We are a Marshall Islands corporation and all of our executive offices are located outside of the United States. Most of our directors and officers reside outside the United States. In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the United States. As a result, you may have difficulty serving legal process upon us or any of these persons within the United States. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or any of these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws. In addition, there is substantial doubt that the courts of the Republic of the Marshall Islands or of non-U.S. jurisdictions in which our offices are located would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.

We changed our dividend policy as part of a new capital allocation policy. Our ability to pay any dividends in the future may be limited by the amount of cash we generate from operations and priorities ascribed by the board of directors for allocation of capital.

On March 9, 2020, we announced a new capital allocation policy which sets out our priorities among fleet maintenance, financial strength, accretive growth and, once the other priorities are achieved, returning capital to shareholders. Commencing with the quarter ended March 31, 2020, we transitioned to the new policy.

The amount of any dividends we may pay in the future will depend in part upon the amount of cash we generate from our operations and priorities for capital determined by the board of directors. We may not, however, have sufficient cash available to pay dividends, as a result of insufficient levels of profit, restrictions on the payment of dividends contained in our financing arrangements or under applicable law and the decisions of our management and directors.

The amount of cash we have available for dividends will also depend upon, among other things:

the rates we obtain from our charters, as well as the rates obtained following expiration of our existing charters;
the level of our operating costs;
the number of unscheduled off-hire days and the timing of, and number of days required for, scheduled drydocking of our vessels;
asset acquisitions and related financings, such as restrictions in our credit facilities, lease arrangements and in any future financing arrangements;
prevailing global and regional economic and political conditions;
the effect of governmental regulations and maritime self-regulatory organization standards, including with respect to environmental and safety matters, on the conduct of our business;
changes in the bases of taxation of our activities in various jurisdictions;
the actual amount of cash we will have available for dividends will also depend on many factors, including: changes in our operating cash flows, capital expenditure requirements, working capital requirements and other cash needs;
our fleet expansion strategy and associated uses of our cash and our financing requirements;
the amount of any cash reserves established by our board of directors; and
restrictions under our financing agreements and Marshall Islands law.

Anti-takeover provisions in our articles of incorporation and bylaws documents could make it difficult for our shareholders to replace or remove our current board of directors or could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common shares.

Several provisions of our articles of incorporation and bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. These provisions include:

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authorizing the board of directors to issue “blank check” preferred stock without shareholder approval;
providing for a classified board of directors with staggered, three-year terms;
prohibiting cumulative voting in the election of directors;
authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of two-thirds of the outstanding shares of our common stock entitled to vote for the directors;
limiting the persons who may call special meetings of shareholders; and
establishing advance notice requirements for nominating candidates for election to our board of directors or for proposing matters that can be acted on by shareholders at shareholder meetings.

These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.

Tax Risks

U.S. tax authorities could treat us as a “passive foreign investment company”, which could have adverse U.S. federal income tax consequences to U.S. holders.

A foreign corporation will be treated as a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of “passive income”. For purposes of these tests, “passive income” generally includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services generally does not constitute “passive income”. U.S. shareholders of a PFIC are subject to an adverse U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

Based upon our operations as described herein, we do not believe that our income from time charters should be treated as “passive income” for purposes of determining whether we are a PFIC, and, consequently, the assets that we own and operate in connection with the production of that income should not constitute passive assets. Accordingly, based on our current operations, we do not believe we will be treated as a PFIC with respect to any taxable year.

There is substantial legal authority supporting this position consisting of case law and U.S. Internal Revenue Service (“IRS”), pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes.

Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations change.

29


If the IRS were successful in asserting that we are or have been a PFIC for any taxable year, U.S. shareholders would face adverse U.S. federal income tax consequences. Under the PFIC rules, unless a shareholder makes an election available under the U.S. Internal Revenue Code of 1986, as amended, (the “Code”), which election could itself have adverse consequences for such shareholders, as discussed below under Item 10.E (“Taxation of Holders — U.S. Federal Income Tax Considerations — U.S. Federal Income Taxation of United States Holders”), excess distributions and any gain from the disposition of such shareholder’s common shares would be allocated ratably over the shareholder’s holding period of the common shares and the amounts allocated to the taxable year of the excess distribution or sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed with respect to such tax. See Item 10.E (“Taxation of Holders — U.S. Federal Income Tax Considerations — U.S. Federal Income Taxation of United States Holders”) for a more comprehensive discussion of the U.S. federal income tax consequences to United States shareholders if we are treated as a PFIC.

We may have to pay tax on U.S. source shipping income, which would reduce our earnings.

Under the Code, 50% of the gross shipping income of a corporation that owns or charters vessels, as we and our subsidiaries do, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will be subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder or that corporation is entitled to an exemption from such tax under an applicable U.S. income tax treaty.

We expect to take the position that we qualify for this statutory exemption for U.S. federal income tax return reporting purposes for our 2020 taxable year and we intend to so qualify for future taxable years. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby cause us to become subject to U.S. federal income tax on our U.S. source shipping income. For example, there is a risk that we could no longer qualify for exemption under Section 883 of the Code for a particular taxable year if “non-qualified” shareholders with a 5% or greater interest in our stock were, in combination with each other, to own 50% or more of the outstanding shares of our stock on more than half the days during the taxable year. Due to the factual nature of the issues involved, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.

If we or our subsidiaries were not entitled to exemption under Section 883 of the Code for any taxable year, we or our subsidiaries would be subject for such year to a 4% U.S. federal income tax on 50% of the shipping income we or our subsidiaries derive during the year which is attributable to the transport of cargoes to or from the United States. The imposition of this taxation would have a negative effect on our business and would decrease our earnings available for distribution to our shareholders. For a discussion of the U.S. federal income tax treatment of our operating income, please read “Additional Information—Taxation of Holders—U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of Operating Income: In General.”

We may be subject to additional taxes, which could adversely impact our business and financial results.

We and our subsidiaries are subject to tax in certain jurisdictions in which we or our subsidiaries are organized, own assets or have operations. In computing our tax obligations in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that, upon review of these positions, the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, which could adversely impact our business and financial results.

30


GENERAL RISKS

Our business depends upon key members of our senior management team who may not necessarily continue to work for us.

Our future success depends to a significant extent upon certain members of our senior management team. Our management team includes members who have substantial experience in the product tanker and chemical shipping industries and have worked with us since inception. Our management team is crucial to the execution of our business strategies and to the growth and development of our business. If the individuals were no longer affiliated with us, we may be unable to recruit other employees with equivalent talent and experience, and our business and financial condition may suffer as a result.

Future sales of our common shares could cause the market price of our common shares to decline.

The market price for our common shares could decline as a result of sales by existing shareholders of large numbers of our common shares, or as a result of the perception that such sales may occur. Sales of our common shares by these shareholders also might make it more difficult for us to sell equity or equity-related securities in the future at a time and at the prices that we deem appropriate.

Exposure to currency exchange rate fluctuations could result in fluctuations in our operating results.

We operate within the international shipping market, which utilizes the U.S. Dollar as its functional currency. As a consequence, the majority of our revenues and the majority of our expenses are in U.S. Dollars.

However, we incur certain general and operating expenses, including vessel operating expenses and general and administrative expenses, in foreign currencies, the most significant of which are the Euro, Singapore Dollar, and British Pound Sterling. This partial mismatch in revenues and expenses could lead to fluctuations in net income due to changes in the value of the U.S. Dollar relative to other currencies.

Item 4. Information on the Company

A. History and Development of the Company

We are Ardmore Shipping. We provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our modern, fuel-efficient fleet of mid-size product and chemical tankers. As at February 15, 2021, our fleet consists of 25 owned vessels, all of which are in operation.

Ardmore Shipping Corporation was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2013. We commenced business operations through our predecessor company, Ardmore Shipping LLC, on April 15, 2010. On August 6, 2013, we completed our initial public offering (“IPO”) of 10,000,000 shares of our common stock.

We have 76 wholly owned subsidiaries and a 50%-owned joint venture entity, Anglo Ardmore Ship Management Limited (“AASML”), which provides technical management services to the majority of our fleet. A list of our subsidiaries is included as Exhibit 8.1 to this Annual Report.

We maintain our principal executive and management offices at Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda. Our telephone number at these offices is +1 441 405 7800. Ardmore Shipping (Bermuda) Limited (“ASBL”), a wholly owned subsidiary incorporated in Bermuda, carries out our management services and associated functions. Ardmore Shipping Services (Ireland) Limited (“ASSIL”), a wholly owned subsidiary incorporated in Ireland, provides our corporate, accounting, fleet administration and operations services. Ardmore Shipping (Asia) Pte. Limited (“ASA”), a wholly owned subsidiary incorporated in Singapore, and Ardmore Shipping (Americas) LLC (“ASUSA”), a wholly owned subsidiary incorporated in Delaware, each perform commercial management and chartering services for us.

31


The SEC’s website at www.sec.gov contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website address is www.ardmoreshipping.com. The information contained on our website is not part of this annual report.

B. Business Overview

We commenced business operations in April 2010 with the goal of building an enduring product and chemical tanker company that emphasizes disciplined capital allocation, service excellence, innovation, and operational efficiency through our focus on high quality, fuel-efficient vessels. We are led by a team of experienced senior managers who have previously held senior management positions with highly regarded public shipping companies and financial institutions.

We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (“CPP”) and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers.

Our fuel-efficient operations are designed to enhance our operating performance and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy includes to continue to build our fleet with Eco-design newbuildings or Eco-design second-hand vessels and with modern second-hand vessels that can be upgraded to Eco-mod.

We believe that the global energy transition will have a profound impact on the shipping industry, including the product and chemical tanker segments.  While this transition will unfold over years, the impact is already being felt through anticipated Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations and constraints on newbuilding ordering activity.  We view energy transition as less of a compliance challenge and more of an opportunity, which we have set out in our Energy Transition Plan (“ETP”), which is posted on our website.

We are an integrated shipping company. The majority of our fleet is technically managed by a combination of ASSIL and our 50% owned joint venture AASML and we also retain a third-party technical manager for some of our vessels. We have a resolute focus on both high-quality service and efficient operations, and we believe that our corporate overhead and operating expenses are among the lowest of our peers.

We are commercially independent, as we have no blanket employment arrangements with third-party or related-party commercial managers. Through our in-house chartering and commercial team, we market our services directly to a broad range of customers, including oil majors, national oil companies, oil and chemical traders, chemical companies, and pooling service providers. We monitor the tanker markets to understand how to best utilize our vessels and may change our chartering strategy to take advantage of changing market conditions.

Other than technical management services provided to us by our 50% joint venture AASML we have no related-party transactions concerning our vessel operations or vessel sale and purchase activities. Certain of our wholly owned subsidiaries carry out our management and administrative services, with ASBL providing us with corporate and executive management services and associated functions, ASSIL providing corporate and accounting administrative services, as well as technical operations services and fleet administration, and ASA and ASUSA providing our commercial management and chartering services.

In terms of our industry, we expect continued challenging market conditions until a full economic recovery is underway, largely dependent on the effectiveness and timing of the COVID-19 vaccine rollout.  Thereafter, we expect a rebound in charter rates and financial performance in a recovering market with above-trend demand growth, led by refined product draws and disruption and trading activity creating longer voyages getting refined products to markets where needed. We expect continued product tanker demand growth to 2030, with global economic growth and refinery activity away from points of consumption offsetting the initial impact of energy transition.

32


When the market does recover, we believe that we are well positioned to benefit from it with our modern, fuel-efficient fleet, access to capital for growth, a diverse and high-quality customer base, an emphasis on service excellence in an increasingly demanding regulatory environment and a relative cost advantage in assets, operations and corporate overhead.

Please see Item 5 “Operating and Financial Review and Prospects – Recent Developments” for a description of certain of our recent transactions and developments.

Fleet List

As at February 15, 2021, our current fleet consists of 25 owned vessels, including 21 Eco-design and four Eco-mod vessels, all of which are in operation. The average age of our vessels at February 15, 2021, was 7.8 years.

Vessel Name

    

Type

    

Dwt Tonnes

    

IMO

    

Built

    

Country

    

Flag

    

Specification

Ardmore Seavaliant

 

Product/Chemical

 

49,998

 

2/3

 

Feb-13

 

Korea

 

MI

 

Eco-design

Ardmore Seaventure

 

Product/Chemical

 

49,998

 

2/3

 

Jun-13

 

Korea

 

MI

 

Eco-design

Ardmore Seavantage

 

Product/Chemical

 

49,997

 

2/3

 

Jan-14

 

Korea

 

MI

 

Eco-design

Ardmore Seavanguard

 

Product/Chemical

 

49,998

 

2/3

 

Feb-14

 

Korea

 

MI

 

Eco-design

Ardmore Sealion

 

Product/Chemical

 

49,999

 

2/3

 

May-15

 

Korea

 

MI

 

Eco-design

Ardmore Seafox

 

Product/Chemical

 

49,999

 

2/3

 

Jun-15

 

Korea

 

MI

 

Eco-design

Ardmore Seawolf

 

Product/Chemical

 

49,999

 

2/3

 

Aug-15

 

Korea

 

MI

 

Eco-design

Ardmore Seahawk

 

Product/Chemical

 

49,999

 

2/3

 

Nov-15

 

Korea

 

MI

 

Eco-design

Ardmore Endeavour

 

Product/Chemical

 

49,997

 

2/3

 

Jul-13

 

Korea

 

MI

 

Eco-design

Ardmore Enterprise

 

Product/Chemical

 

49,453

 

2/3

 

Sep-13

 

Korea

 

MI

 

Eco-design

Ardmore Endurance

 

Product/Chemical

 

49,466

 

2/3

 

Dec-13

 

Korea

 

MI

 

Eco-design

Ardmore Encounter

 

Product/Chemical

 

49,478

 

2/3

 

Jan-14

 

Korea

 

MI

 

Eco-design

Ardmore Explorer

 

Product/Chemical

 

49,494

 

2/3

 

Jan-14

 

Korea

 

MI

 

Eco-design

Ardmore Exporter

 

Product/Chemical

 

49,466

 

2/3

 

Feb-14

 

Korea

 

MI

 

Eco-design

Ardmore Engineer

 

Product/Chemical

 

49,420

 

2/3

 

Mar-14

 

Korea

 

MI

 

Eco-design

Ardmore Sealancer

 

Product

 

47,451

 

 

Jun-08

 

Japan

 

MI

 

Eco-mod

Ardmore Sealeader

 

Product

 

47,463

 

 

Aug-08

 

Japan

 

MI

 

Eco-mod

Ardmore Sealifter

 

Product

 

47,472

 

 

Jun-08

 

Japan

 

MI

 

Eco-mod

Ardmore Seafarer

Product

49,999

Jun-10

 

Japan

 

MI

 

Eco-mod

Ardmore Dauntless

 

Product/Chemical

 

37,764

 

2

 

Feb-15

 

Japan

 

MI

 

Eco-design

Ardmore Defender

 

Product/Chemical

 

37,791

 

2

 

Feb-15

 

Japan

 

MI

 

Eco-design

Ardmore Cherokee

 

Product/Chemical

 

25,215

 

2

 

Jan-15

 

Japan

 

MI

 

Eco-design

Ardmore Cheyenne

 

Product/Chemical

 

25,217

 

2

 

Mar-15

 

Japan

 

MI

 

Eco-design

Ardmore Chinook

 

Product/Chemical

 

25,217

 

2

 

Jul-15

 

Japan

 

MI

 

Eco-design

Ardmore Chippewa

 

Product/Chemical

 

25,217

 

2

 

Nov-15

 

Japan

 

MI

 

Eco-design

Total

 

25

 

1,115,567

 

  

 

  

 

  

 

  

 

  

Business Strategy

Our primary objective is to solidify our position as a market leader in modern, fuel-efficient, mid-size product and chemical tankers by engaging in well-timed growth and utilizing our operational expertise and quality-focused approach to provide value-added services to our customers. Key elements of our business strategy include:

Disciplined capital allocation and well-timed growth. We have a diligent and patient approach to capital allocation and expanding our fleet and we are selective as to the quality of vessels we seek to acquire. We believe that our commitment and selectivity in growing our fleet has been instrumental in building our reputation for quality and service excellence. We also believe that financial flexibility and well-timed quality fleet growth is key to delivering superior returns.

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Focus on modern high quality, mid-size product and chemical tankers. We maintain a very modern fleet, with all vessels built in high-quality yards in South Korea or Japan. The average sizes of our product and chemical tankers are substantially similar to the median sizes of the global fleets for product tankers and chemical tankers. We have developed our strategic focus around mainstream tanker sizes that are readily employed and actively traded worldwide in broad and deep markets.

As a result of the overlap between the product and chemical sectors, we believe that our fleet composition enables us to take advantage of opportunities, both operationally and strategically, while also providing investment diversification.

Optimizing fuel efficiency. The shipping industry is experiencing a steady increase in fuel efficiency, and we intend to remain at the forefront of this development. Our Eco-design vessels incorporate many of the latest technological improvements, such as electronically controlled engines, more efficient hull forms matched with energy efficient propellers, and decreased water resistance. Our Eco-mod vessels have improved propulsion efficiency and decreased water resistance. In addition, we achieve further improvements through engine diagnostics and operational performance monitoring.

Commercial independence, flexibility and customer service. Through our in-house chartering and commercial team and our ship management joint venture arrangement, we have an integrated operating platform resulting in leading commercial and operational performance. We maintain a broad range of existing and potential spot customers, as well as pooling alternatives and potential time-charter customers, to maximize commercial flexibility and customer diversification. Maintaining outstanding customer service is a cornerstone of our business and we seek customers that value our active approach to fuel efficiency and service delivery.

Low cost structure. We have established a solid foundation for growth while cost-effectively managing our operating expenses and corporate overhead. We intend to grow our staff as needed and to realize further economies of scale as our fleet expands. At the core of our business philosophy is the belief that well-run companies can deliver high quality service and achieve efficiency simultaneously, through hands-on management, effective communication with employees, and constant re-evaluation of budgets and operational performance.

In addition, our ETP is consistent with, and is an extension of, our business strategy; it builds on our core strengths, and we intend to play a leading role in moving toward true sustainability as a tanker company.  The basic framework of our ETP is as follows:

We are in the business of liquid bulk transportation, and over time our activity will migrate more toward non-fossil fuel cargoes for which demand will grow along with the global economy.  At this point, already 25% of our business is the transportation of non-fossil fuel cargo.

In keeping with our “eco mod” philosophy, we believe there is significant opportunity in our industry for continued improvement in fuel efficiency, as well as early adoption of transition and zero carbon fuels, and that we can play a role in assisting others through partnerships.

We believe that many of our customers have similar incentives to decarbonize their supply chains and will approach this through close collaboration with shipping companies possessing the mindset and expertise to assist them in achieving their aims.

As part of our growth strategy, we regularly monitor, evaluate and enter into discussions regarding potential expansion opportunities, including through vessel and business acquisitions and joint ventures.  We are selective in implementing our growth strategy and there is no assurance that existing or future evaluations, discussions or negotiations relating to these opportunities will result in competed or successful transactions.    

34


Corporate Officers, Staff and Seafarers

Biographical information with respect to each of our directors and executive officers is set forth in Item 6 (“Directors, Senior Management and Employees”) of this Annual Report.

As at December 31, 2020, we employed 47 full-time staff and eight part-time staff onshore. Through AASML, our 50%-owned joint venture ship manager, and Thome Ship Management, our third-party technical manager, approximately 1,046 seafarers, including 497 officers and cadets and 549 crew serve our fleet.

Commercial management is provided directly by our in-house chartering and commercial team, and by third-party commercial pool managers, in the case of vessels participating in pooling arrangements. Commercial pools can provide many benefits for vessels operating in the spot market, including the ability to generate higher returns due to the economies of scale derived by operating a larger fleet.

Customers

Our customers include national, regional, and international companies and our fleet is employed directly on the tanker spot market through our in-house chartering and commercial team. We may in the future seek to deploy our vessels on time charter arrangements or on the tanker spot market via third party commercial pool employment. We believe that developing strong relationships with the end users of our services allows us to better satisfy their needs with appropriate and capable vessels.

A prospective charterer’s financial condition, creditworthiness, and reliability track record are important factors in negotiating our vessels’ employment.

Competition

We operate in markets that are highly competitive and based primarily on supply and demand. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as our reputation. Ownership of tanker vessels is highly fragmented and is divided among publicly listed companies, state-controlled owners and private ship-owners.

The International Product and Chemical Tanker Industry

The information and data contained in this section relating to the international product and chemical tanker shipping industry have been provided by Drewry Maritime Research (“Drewry”) and is taken from Drewry’s database and other sources. Drewry has advised that: (i) some information in their database is derived from estimates or subjective judgments; and (ii) the information in the databases of other maritime data collection agencies may differ from the information in their database. We believe all third-party data provided in this section, “The International Product and Chemical Tanker Industry,” is reliable.

The world tanker fleet is generally divided into four main categories of vessels based on the main type of cargoes carried. These categories are crude oil, refined petroleum products (both clean and dirty products) – hereinafter referred to as products, chemicals (including vegetable oils and fats) and specialist products such as bitumen. There is some overlap between the main tanker types and the cargoes carried, which is explained in the table below.

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Principal Tanker Types and Main Cargoes Carried

Vessel Type

    

Ship Size - Dwt

    

Tank Type

    

IMO Status

    

Principal Cargo

    

Other Cargoes

ULCC/VLCC

 

200,000+

 

Uncoated

 

Non IMO

 

Crude Oil

 

  

Suezmax

 

120,000 - 199,999

 

Uncoated

 

Non IMO

 

Crude Oil

 

  

Aframax

 

80,000 - 119,999

 

Uncoated

 

Non IMO

 

Crude Oil

 

Refined Products - Dirty

Panamax

 

60,000 - 79,999

 

Uncoated

 

Non IMO

 

Crude Oil

 

Refined Products - Dirty

Large Range 3 (LR3)

 

120,000 - 199,999

 

Coated

 

Non IMO

 

Refined Products

 

Crude

Large Range 2 (LR2)

 

80,000 - 119,999

 

Coated

 

Non IMO

 

Refined Products

 

Crude

Large Range 1 (LR1)

 

60,000 - 79,999

 

Coated

 

Non IMO

 

Refined Products

 

Crude

Medium Range (MR)

 

25,000 - 59,999

 

Coated

 

IMO 2

 

Refined Products

 

Chemicals/Veg Oils

 

25,000 - 59,999

 

Coated

 

IMO 3

 

Refined Products

 

Chemicals/Veg Oils

 

25,000 - 59,999

 

Coated

 

Non IMO

 

Refined Products

 

25,000 - 59,999

 

Uncoated

 

Non IMO

 

Refined Products

Small Range (SR)

 

10,000 - 24,999

 

Coated

 

Non-IMO

 

Refined Products

 

  

 

10,000 - 24,999

 

Coated

 

IMO 2

 

Refined Products

 

Chemicals/Veg Oils

Stainless Steel Tankers

 

10,000 +

 

Stainless

 

IMO 2

 

Chemicals/Veg Oils

 

Refined Products

Specialist Tankers

 

10,000+

 

Uncoated/ Coated

 

Non IMO

 

Various e.g. Bitumen

 

  

Source: Drewry

In the product and chemical sectors, there are a number of vessels that can carry products as well as some chemicals, representing a ‘swing’ element in supply in both of these markets. However, in practice, many vessels will tend to trade in either refined products or chemicals/vegetable oils and fats.

The outbreak of COVID-19 severely affected demand of crude oil and refined petroleum products as several major economies enforced lockdowns to contain the spread of the virus and mitigate the damage caused by the pandemic. Accordingly, the world seaborne tanker trade, including crude oil, oil products and chemicals fell 8.8% to 3,113 million tons. The decline in trade from 3,415 million tons in 2019 was mainly led by a plunge of 9.1% and 9.9% in both crude oil and oil products trade to a total of 1,891 million tons and 934 million tons, respectively. Meanwhile, seaborne trade of chemicals declined at a slower pace of 3.6% to 289 million tons in 2020. Over the period 2010 to 2020, the seaborne trade in chemicals expanded at an average annual growth of 2.9%, surpassing oil products, which registered an average growth of 1.4%, whereas seaborne crude oil trade fell at an average rate of 0.5% per annum over the past decade primarily due to demand destruction in 2020 on account of mobility restrictions enforced by state authorities in several major economies. Oil demand and trade started a gradual recovery in 2H20 on the back of easing of lockdown restriction in major parts of the world. Moreover, several countries have authorized emergency use of various COVID-19 vaccines and a widespread availability of these vaccines would play a key role in containing the pandemic, which will support the seaborne trade and tanker demand.

Between 2015 and 2020, seaborne trade fell at an annual rate of 0.9% for crude oil and 0.6% for oil products, whereas it grew at an annual rate of 1.7% for chemicals. From 2010 to 2020, chemicals was the fastest growing sector in international tanker shipping followed by refined products. The sharp decline in seaborne trade in 2020 is primarily due to the lockdown measures adopted by most countries to contain the spread of the pandemic and can be seen as an outlier. Roll out of various vaccines and gradual easing of restrictions is expected to support the growth in demand and seaborne trade of crude oil, refined products and chemicals. Changes in the volume of world seaborne tanker trade from 2010 to 2020 are shown in the table below.

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World Seaborne Tanker Trade Volumes

Crude Oil

    

Oil Products

    

Chemicals

    

Total

    

 Global 
GDP 
(IMF)
   

 

Year

    

Million tons

    

% y-o-y

    

Million tons

    

% y-o-y

    

Million tons

    

% y-o-y

    

Million tons

    

% y-o-y

    

% y-o-y

 

2010

 

1,997

 

3.6%

810

 

4.3%

217

 

7.4%

3,024

 

4.0%

5.4%

2011

 

1,941

 

-2.8%

860

 

6.3%

228

 

5.1%

3,029

 

0.2%

4.3%

2012

 

1,988

 

2.4%

859

 

-0.2%

240

 

5.3%

3,087

 

1.9%

3.5%

2013

 

1,920

 

-3.4%

904

 

5.3%

252

 

5.1%

3,077

 

-0.3%

3.5%

2014

 

1,904

 

-0.9%

914

 

1.1%

252

 

0.1%

3,070

 

-0.2%

3.6%

2015

 

1,974

 

3.7%

963

 

5.3%

266

 

5.4%

3,202

 

4.3%

3.5%

2016

 

2,060

 

4.4%

999

 

3.8%

267

 

0.6%

3,327

 

3.9%

3.4%

2017

 

2,121

 

2.9%

1,043

 

4.3%

283

 

5.8%

3,447

 

3.6%

3.8%

2018

 

2,116

 

-0.2%

1,055

 

1.1%

293

 

3.4%

3,463

 

0.5%

3.6%

2019

 

2,080

 

-1.7%

1,036

 

-1.8%

300

 

2.4%

3,415

 

-1.4%

2.8%

2020*

 

1,891

 

-9.1%

934

 

-9.9%

289

 

-3.6%

3,113

 

-8.8%

-4.4%

CAGR (2014-2019)

 

1.8%

2.5%

3.5%

  

 

2.2%

CAGR (2009-2019)

 

0.8%

2.9%

4.0%

  

 

1.6%

CAGR (2015-2020)

 

-0.9%

-0.6%

1.7%

  

 

-0.6%

CAGR (2010-2020)

 

-0.5%

1.4%

2.9%

  

 

0.3%

* Provisional estimates

Note: Historical trade numbers have been revised based on changes in the number of reported countries; and change in trade estimates for some of the reported countries.

Source: Drewry, IMF

The Product Tanker Industry

While crude oil tankers transport crude oil from points of production to points of consumption (typically oil refineries in consuming countries), product tankers can carry both refined and unrefined petroleum products, including some crude oil, as well as fuel oil and vacuum gas oil (often referred to as ‘dirty products’) and gas oil, gasoline, jet fuel, kerosene and naphtha (often referred to as ‘clean products’). Tankers with no International Maritime Organization (IMO) certification, but with coated cargo tanks are designed to carry products, while tankers with IMO certification (normally IMO 2 or IMO 3) and coated cargo tanks are capable to carry both products and chemicals/vegetable oils and fats. Given the facts mentioned above, a tanker with IMO 2 certification and with an average tank size in excess of 3,000 cubic meters is normally classified as a product tanker, while a tanker with IMO 2 certification and an average tank size of less than 3,000 cubic meters is normally categorized as a chemical tanker.

In essence, products can be carried in coated non-IMO tankers and IMO rated coated tankers. By this definition, the product capable tanker fleet consists of nearly 45% of the total tanker fleet (above 10,000 dwt) in number terms, and therefore plays a key part in the global tanker market.

The demand for product tankers is determined by world oil demand and trade, which is influenced by various factors, including economic activity, geographic changes in oil production, consumption and refinery capacity, oil prices, the availability of transport alternatives (such as pipelines) and inventory policies of nations and oil trading companies. Tanker demand is a product of: (i) the volume of cargo transported in tankers, multiplied by (ii) the distance that cargo is transported.

Growth in oil demand and the changing location of oil supply have altered the structure of the tanker market in recent years. Between 2003 and 2008, more than half of new crude oil production was located in the Middle East and Africa. These two regions still produce around one third of global supply. However, in recent years, the U.S. and Canadian crude oil production have increased as a result of the development of shale oil deposits in the U.S. and oil sands in Canada. This has reduced the demand of U.S. seaborne crude imports, but is resulting in greater oil product volumes becoming available for export from the U.S. Gulf as refiners have access to ample supplies of competitively priced feedstock.

37


New technologies, such as horizontal drilling and hydraulic fracturing, triggered a shale oil revolution in the U.S., and in 2013, for the first time in the past two decades, the U.S. produced more oil than it imported. In view of the rising surplus in oil production, the U.S. Congress lifted a 40-year-old ban on crude oil exports in 2015, which was put in place after the Arab oil embargo in 1973. Thereby, this allowed U.S. oil producers access to international markets.

The first shipments of U.S. crude were sent to Europe immediately after the lifting of the ban, and since then, other destinations have followed. The U.S. exported nearly 0.5 mbpd of crude oil in 2015 and 2016. However, 2017 marked a very important development for U.S. crude producers as the country exported crude to every major importer, including China, India, South Korea and several European countries. Consequently, U.S. crude oil exports averaged 1.2 mbpd and 2.1 mbpd in 2017 and 2018 respectively, with increasing production encouraging greater loadings in the Gulf of Mexico. U.S. crude exports averaged 3.0 mbpd in 2019, inching up further in first quarter of 2020 to 3.5 mbpd. However, the outbreak of COVID-19 and steep decline in crude oil prices in 2020 adversely affected oil production, reducing exports from March 2020 with the country exporting 2.7 mbpd in November 2020.

In addition, in 2014, the Energy Information Administration (EIA) in the U.S. began classifying exports of U.S. treated condensate as ‘kerosene and light gas oils’ in its Petroleum Supply Monthly report. This followed from a decision by the U.S. Bureau of Industry and Security (BIS) to allow the export of distilled condensate as a refined product. Field condensate, which can be fed into a refinery or used as a chemical plant feedstock, had been considered as an upstream product until 2014, and therefore, was restricted for export under U.S. law. However, the BIS ruling that field stabilization processing changes condensate enough that it becomes a new product, opened up further export opportunities. In short, changes in the U.S. oil market have had a very positive impact on the demand of product tankers because U.S. product exports have risen sharply over the past decade. Although exports of products nosedived in April-May 2020 due to lockdown restrictions, it recovered quickly in the following few months and exported 3.6 mbpd in November 2020.

U.S. Crude Oil Production and U.S. Product Exports

Graphic

*Source: JODI

Much of the increase in U.S. exports has helped fulfil the growing demand in South America and Africa for oil products, while other U.S. exports have been moving Transatlantic into Europe, where local refinery shutdowns have supported the rise in the import of products.

38


In terms of tonne-mile demand, a notable development in the patterns of world refining over the last five years has been the shift towards crude-oil-producing regions developing their own refinery capacity in addition to capacity expansion in China and India, while at the same time, poor refinery margins have led to the closure of refineries in the developed world, most notably in Europe. In this context, it is already apparent that the closure of refining capacity in the developed world is prompting long-haul imports to cater to product demand on routes such as West Coast India to Europe and the U.S. eastern seaboard. Refinery shutdowns close to consuming regions elsewhere in the world will also support the demand for product imports. For example, in Australia, the trade from Singapore has become increasingly important to compensate for the conversion of local refineries into storage depots. This is part of a general increase in the intra-Asian trade, which is already boosting the demand for product tankers.

The shift in the location of global oil production is also being accompanied by a shift in the location of global refinery capacity and throughput. In short, capacity and throughput are moving from the developed to the developing world. Between 2010 and 2019, refinery throughput in the OECD Americas and OECD Asia Oceania moved up 6.5% and 1.5% to 19.1 mbpd and 6.8 mbpd respectively, whereas refining throughput in OECD Europe declined 0.5% to 12.2 mbpd. Cumulatively, this has resulted in OECD’s refining throughput of 38.1 mbpd in 2019, totaling 46.4% of global refinery throughput. However, in 2020 refinery throughput of all OCED regions declined in double digits with the OECD refinery throughput falling 13.4% to 33 mbpd and accounting for 44.4% of the global refinery throughput. The demand destruction due to the pandemic led to a decline in refining activity in almost every region except China and Africa. While refinery throughput remained flat at 2 mbpd in Africa, it moved up by 3.1% to 13.4 mbpd in China as the country remained largely unaffected by the pandemic despite the initial outbreak in Wuhan.

.

Refinery Throughput(1) 2010-2020

(‘000 Barrels Per Day)

    

2010

    

2011

    

2012

    

2013

    

2014

    

2015

    

2016

    

2017

    

2018

    

2019

    

2020*

OECD Americas

 

17,931

 

17,898

 

18,190

 

18,492

 

18,934

 

18,850

 

18,960

 

19,290

 

19,400

 

19,100

 

16,500

OECD Europe

 

12,265

 

11,935

 

11,942

 

11,304

 

11,232

 

11,900

 

11,920

 

12,300

 

12,100

 

12,200

 

10,700

OECD Asia Oceania

 

6,697

 

6,586

 

6,609

 

6,720

 

6,652

 

6,700

 

6,890

 

7,200

 

7,000

 

6,800

 

5,800

FSU

 

6,401

 

6,592

 

6,683

 

6,831

 

7,069

 

6,850

 

6,880

 

6,880

 

7,000

 

6,800

 

6,400

Non-OECD Europe

 

658

 

627

 

587

 

559

 

557

 

500

 

500

 

570

 

600

 

600

 

400

China

 

8,630

 

9,041

 

9,749

 

10,427

 

10,864

 

10,400

 

10,790

 

11,830

 

12,000

 

13,000

 

13,400

Other Asia

 

8,598

 

8,637

 

8,792

 

8,588

 

8,541

 

10,000

 

10,380

 

10,440

 

10,600

 

10,300

 

9,300

Latin America

 

4,678

 

4,873

 

4,470

 

4,589

 

4,545

 

4,550

 

4,200

 

3,830

 

3,500

 

3,200

 

3,000

Middle East

 

6,164

 

6,324

 

6,257

 

6,202

 

6,501

 

6,450

 

6,810

 

7,520

 

8,000

 

7,700

 

6,800

Africa

 

2,451

 

2,168

 

2,202

 

2,182

 

2,255

 

2,250

 

2,090

 

1,920

 

2,100

 

2,000

 

2,000

Total

 

74,473

 

74,681

 

75,481

 

75,894

 

77,150

 

78,450

 

79,420

 

81,780

 

82,300

 

81,700

 

74,300


(1)The difference between oil consumption and refinery throughput is accounted for by condensates, output gains, direct burning of crude oil and other non-gas liquids.

*Provision estimates

Source: IEA

Asia and the Middle East have steadily increased their export-oriented refinery capacity in the last few years. As a result of these developments, countries such as India and Saudi Arabia have consolidated their positions as major exporters of products. Export-oriented refineries in India and the Middle East, coupled with the closure of refining capacity in the developed world, have promoted greater long-haul shipments to cater to product demand.

New refining capacity of 1.08 mbpd was scheduled to come online in 2020 whereas 60 kbpd of existing refining capacity was scheduled to be phased out in OCED America and non-OECD Europe. Additional new refinery capacity is currently scheduled for both the Middle East and Asia from 2021 to 2025. From 2021 to 2025, the anticipated additions to refinery capacity on a regional basis (illustrated in the chart below) is 5.36 mbpd, or 5.3% of the existing global refinery capacity.

39


Planned Additions to Global Refining Capacity(1)

(Million Barrels Per Day)

Graphic


(1)Assumes all announced plans go ahead as scheduled

Source: IEA

In developed economies, such as Europe, refinery capacity is on the decline – a trend that is likely to continue as refinery development plans are concentrated in areas such as Asia and the Middle East or close to oil-producing centers where the new capacities coming on stream are primarily for exports. These new refineries are more competitive as they can process sour crude oil and are technically more advanced as well as more environment-friendly compared with existing European refineries. It is also the case that a few new refineries or expansions are planned for in developed economies. By contrast, Chinese and Indian refinery capacity has grown at faster rates than any other global region in the last decade on the back of strong domestic oil consumption and the construction of export-oriented refineries. From 2010 to 2020, Chinese refining capacity increased 60.2%, while the growth for India was 38.5% (see chart below).

40


China and India – Refining Capacity(1)

(‘000 Barrels Per Day)

Graphic

(1)Capacity for 2021 to 2025 assumes all announced plans go ahead as scheduled

Source: BP, IEA

As a result of the growth in trade and changes in the location of refinery capacity, demand for product tankers expressed in tonne-miles grew at a CAGR of 2.8% between 2010 and 2019. However, the pace of growth reduced to 1.6% between 2010 and 2020 mainly due to an 8.8% plunge in tonne-mile demand in 2020 because of weak demand on account of restrictions imposed by several major economies to contain the spread of COVID-19. Generally, the growth in products trade and product tanker demand is more consistent and less volatile than in crude oil trade.

41


Seaborne Product Trade and Tonne-mile Demand

Graphic


* Provisional estimates

Source: Drewry

Product Tanker Supply

The global product tanker fleet is classified as any non-stainless steel/specialized tanker between 10,000 dwt and 60,000 dwt, as well as coated and other ‘product-capable’ vessels over 60,000 dwt. As of December 31, 2020, the world tanker fleet consisted of 7,075 vessels with a combined capacity of 637.4 million dwt. Within the total tanker fleet, MR vessels account for 32.3% of total ship numbers with a total capacity of 103.1 million dwt. MR vessels are considered the ‘workhorses’ of the fleet.

As of December 31, 2020, the MR product tanker orderbook was 149 vessels totaling 7.1 million dwt. The MR orderbook as a percentage of the existing MR fleet, in terms of dwt, was 6.9% compared with close to 50% at the last peak in 2008. Based on scheduled deliveries, 5.0 million dwt of MR product tankers are due for delivery in 2021 and a further 2.0 million dwt in 2022. Approximately 70% of the vessels on order in the MR category are scheduled to be delivered in 2021, which will increase the MR fleet by 4.8%, assuming no vessel is scrapped. Current estimates suggest that there is approximately 50% of vessel capacity across the entire tanker orderbook which is scheduled for delivery in 2021, adding 24.4 million dwt to the total fleet.

The other factor that will affect future supply is demolition activity. The volume of scrapping is a function primarily of the age profile of the fleet, scrap prices in relation to the current and prospective charter market conditions as well as operating, repair and survey costs. Low vessel earnings in a weak tanker market encouraged scrapping activity in 2018 when 154 tankers aggregating 19.8 million dwt were sold to scrapyards, of which 34 tankers aggregating 1.4 million dwt were MR tankers. In comparison, only 34 vessels totalling 2.7 million dwt were demolished in 2019, of which 20 tankers totalling 0.8 million dwt were MRs. Provisional data for 2020 suggests that 32 tankers with aggregate capacity of 2.3 million dwt were demolished, of which 10 vessels aggregating 0.5 million dwt were MRs.

42


World Tanker Fleet and Orderbook: December 31, 2020

    

    

    

    

    

    

    

    

    

    

    

Orderbook Delivery

Vessel Type/Class

Fleet

Orderbook

Schedule (M Dwt)

    

Number

    

M Dwt

    

Size dwt

    

Number

    

M Dwt

    

% Fleet Dwt

    

2021

    

2022

    

2023

    

2024+

ULCC/VLCC

 

832

 

256.5

 

200,000+

 

64

 

19.4

 

7.6%

7.4

 

9.6

 

2.4

 

0.0

Suezmax

 

590

 

92.2

 

120,000-199,999

 

59

 

9.2

 

10.0%

4.4

 

4.5

 

0.3

 

0.0

Aframax (Uncoated)

 

670

 

73.3

 

80,000-119,999

 

48

 

5.4

 

7.4%

3.4

 

2.0

 

0.1

 

0.0

Panamax (Uncoated)

 

83

 

5.8

 

60,000-79,999

 

1

 

0.1

 

1.2%

0.0

 

0.1

 

0.0

 

0.0

Crude Tankers

 

2,175

 

427.9

 

 

172

 

34.2

8.0%

15.2

 

16.2

 

2.8

 

0.0

Large Range 3 (LR3)

 

21

 

3.3

 

120,000-199,999

 

0

 

0.0

0.0%

0.0

 

0.0

 

0.0

 

0.0

Large Range 2 (LR2)

 

383

 

42.0

 

80,000-119,999

 

49

 

5.6

13.4%

3.1

 

1.4

 

1.2

 

0.0

Large Range 1 (LR1)

 

382

 

28.2

 

60,000-79,999

 

1

 

0.1

3.0%

0.1

 

0.0

 

0.0

 

0.0

LR Product Tankers

 

786

 

73.5

 

 

50

 

5.7

7.7%

3.1

 

1.4

 

1.2

 

0.0

Coated IMO 2

 

1,066

 

48.7

 

25,000-59,999

 

52

 

2.4

5.0%

1.5

 

0.8

 

0.1

 

0.0

Coated IMO 3 & Non IMO Coated/Uncoated

 

1,222

 

54.3

 

25,000-59,999

 

97

 

4.7

8.6%

3.4

 

1.2

 

0.1

 

0.0

Total MR

 

2,288

 

103.1

 

 

149

 

7.1

6.9%

5.0

 

2.0

 

0.2

 

0.0