Oil Traders Seeking Tankers Bullish For Aegean Marine

• The Company: Aegean Marine Petroleum Network, the largest double-hull bunkering delivery fleet operator in the world.
• The Filing: FORM 6-K filed with the SEC on November 12, 2008.
• The Finding: Given a ban of a significant portion of single hull bunkering tankers, Aegean Marine Petroleum Network believes that the number of bunkering tankers worldwide will decline significantly. In addition to filling a portion of the market currently serviced by single hull vessels, Aegean will likely be able to leverage its earning power by capitalizing on the growing demand for marine fuel deliveries to traders storing oil in tankers at sea, too.

The Upshot: Aegean provides fueling services to oil tankers, container ships, drybulk carriers, cruise ships and ferries in thirteen markets. For the nine-months ended September 30, 2008, Aegean increased year-on-year sales volumes by 50.6% to 3.6 million metric tons, as sales volumes improved significantly in Greece and Singapore. In addition, the company increased its bunkering delivery presence in new markets, including Northern Europe, Vancouver, and West Africa. Having recently taken delivery of its third bunkering tanker since the start of 2009, the company currently operates a fleet of 33, with plans to expand its capacity with an additional 20 new builds over the next two years (at a total cost of about $282.6 million).

One issue of concern is that the company extends trade credit to most of its customers. The balance sheet is less than transparent on the definition of what qualifies as an allowance for doubtful accounts. At September 30, trade receivables surged 58.6% to $303.9 million, yet the allowance for doubtful accounts remained flat at $1.6 million.

The Question: If tanker charter rates do not improve, will end-user demand for bunkering services decline?