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Scrapping Old Tonnage Good for Shippers

Gregg Greenberg

12/12/12 - 01:01 PM EST
NEW YORK ( TheStreet) -- Nick Tavlarios, it's been a volatile year for the stock of Aegean Marine Petroleum. That said, it's up about 24 percent year to date. So what's driving it?

Nick Tavlorios:

Well, the stock itself has been trading not like what we would like for it to but the company itself has been doing a very, very good job. Our operations are quite strong. We've actually reduced our expense structure and we've generated new profits and we've been exceeding the expectations of The Street for about seven straight quarters. I can't really understand why. I think we're probably affected more so by the perception that we're either impacted by Greece or that we're impacted by the marine space. As you can see, the company's done well.

Gregg Greenberg:

Are you being impacted by lower oil prices? How does that affect you?

Nick Tavlorios:

Well, the impact of the oil prices actually reduces our expense structure. That's good for us, it also relieves us from some of our expense that we have on our working capital, so we borrow less and we make a little bit more because we spend less on our own consumption. So, it's been beneficial to us. It's also good for our customer base because it doesn't strain their own capital requirements and they're able to buy more fuel.

Gregg Greenberg:

Speaking of your balance sheet, recently you decided to buy back stock. You're also paying a dividend. I think it's a little bit below one percent. What are your plans for the dividend in 2013? And tell me about the stock buyback.

Nick Tavlorios:

Well, the stock buyback is there because we believe we should support our stock, for one. Our stock is cheap, it's a great investment to ourselves. We think it's a very intelligent move for the company to be able to buy stock when we can. At the same time, we have new profits that are going to come online from some of our new service centers and also our storage facility that we're constructing in Fujairah. As that business unfolds or comes into our stream, we'll be generating a lot more cash and we expect to in 2013 than we do in 2012. With that cash, sure, the dividend is something that's been contemplated on the board level and we even mentioned it in our last earnings call.

Gregg Greenberg:

In terms of operations, you added a facility in Barcelona in 2012. Any plans for new facilities in 2013?

Nick Tavlorios:

Yeah. The Barcelona facility we commissioned in the first quarter of 2013, so we'll have that new income stream. It's actually something we're excited about. It'll be good profits that'll come out of there. With respect to other new locations, we're looking at least one or two more.

Gregg Greenberg:

All right. Putting it all together, what's your outlook for sea-based in 2013? What can we expect next year?

Nick Tavlorios:

Well, there's been a strong trend of scrapping old tonnage in the shipping industry. That's a good thing because that will actually help these shipping companies get better day rates. You're seeing a strong demand now in the dry bulk field and there's an improving BDI (Baltic Dry Index) rate going for the dry bulk ships. On the tanker side, we've actually seen oil move into a contango and come out of a backwardated market, which it's been for the past two years. If that goes into a contango, you can see more ships go into storage business, which will then take capacity out of the mainstream and allow day rates to go up again on the tanker side. I think 2013 is going to be a better year than 2012. We expect a stronger year in 2014.


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