Scorpio Buying More Ships... With Shares
Four months after Scorpio Tankers called a halt to its tanker ship-building program, saying it had "no plans for further newbuilding contracts," and about six weeks after turning 180 degrees and building some new tankers anyway, the Monaco-based tanker operator is -- what else? -- buying more ships.
On Thursday, Scorpio Tankers announced an agreement to buy four new medium-range "MR" product tankers, currently under construction in South Korea, from the unaffiliated third parties who had ordered them. In exchange for transferring ownership of the "newbuildings," Scorpio will issue shares of its own common stock equal to 30% of the value of the ships, paying the balance in cash.
Scorpio puts the price of the four vessels at $151 million total, which works out to approximately $37.75 million per ship -- or about 14% more than similar ships cost, and Scorpio was ordering them directly from the builders back in February. Scorpio may earn part of that difference back, however. As part of its purchase agreement, the company is agreeing to "charter-out" the ships it is buying to one of the companies it is buying them from -- Valero -- for periods of from one to two years.
Scorpio says it expects to receive these new MR tankers over the course of the first and second quarters of 2014.
The article Scorpio Buying More Ships... With Shares originally appeared on Fool.com.Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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