Norwegian shipowner Bjorn Tore Larsen has a model for investing in the shipping industry that is both simple and colourful.
“I like to say we are like a lion that sleeps with one eye open, looking for something,” he says during an interview at his waterfront office in Lysaker near Oslo.
While Larsen admits he does not always catch his prey as “the zebra can sometimes outrun you”, he believes one quality is important for investing in the industry.
“One of the things I have learned over the years — and I have done some stupid things as well — is one has to be patient,” he says.
On the radar
“When we think there are good-quality ships at attractive prices, then we would look at it. The radar is always on.”
Last summer, Larsen’s patient approach paid off with ADS Crude Carriers pouncing on three veteran VLCCs from John Fredriksen.
The deal was backed by cash from a private placement, which marked the first use of the capital markets in shipping for the Arendal-based owner, which traces its industry roots back to 1857.
ADS Crude, of which Larsen is chairman, was set up in 2015 with a view to invest in shipping projects. He says he had fixed his sights on the VLCC sector for some time while asset prices were low.
“They were fairly low last year, so that’s why we bought the ships,” he says pragmatically.
While ADS Crude shocked some in the market by opting to place scrubbers on its three vintage vessels, Larsen says the company is a tanker play and not, as is widely perceived, a scrubber play.
“I did not think of it [installing scrubbers] at first either,” he admits, noting he viewed scrubbers as equipment for new ships.
That changed after running the numbers.
“The more fuel you burn, the more sense it makes,” he says.
“An old VLCC is actually a very good asset to put scrubbers onboard. I think it will be a good investment, provided there will be a spread and right now it looks like there will be.”
We have no opinion about [whether] the tanker market, or the bulker market, will be good tomorrow. There are a lot of experts and a lot of analysts, and they are far brighter than I am
Bjorn Tore Larsen
Oslo-listed ADS Crude announced last Friday that it had secured financing to put its tankers through intermediate surveys and potentially fund further investments.
While Larsen says the company remains open to opportunities, he suggests further purchases are off the menu for now.
“Prices have gone up a bit since we bought the ships,” he says. “We are very focused on downside protection. I don’t think we would buy ships at the current prices.”
Larsen says the group has two strategies when it comes to shipowning investments. The value approach, as seen at ADS Crude, is made without trying to second-guess future freight rates.
“We have no opinion about [whether] the tanker market, or the bulker market, will be good tomorrow,” he says. “I have no idea. There are a lot of experts and a lot of analysts, and they are far brighter than I am. Sometimes they get it right and sometimes they get it wrong.”
The group also has two panamax bulkers and an aframax tanker, plus a shuttle tanker joint-venture with AET, where its other strategy comes into play.
Competency is key
AET Sea Shuttle has two trading ships in the fleet on long-term charters to Equinor. It also has two newbuildings on order.
Here Larsen says the group is “investing in ships with long-term contracts and in markets where competency is one of the main ingredients of success”.