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World prices on Aframas in October approached $40 thousand — the same as last year. Ruble devaluation and circumvention of sanctions help Sovcomflot!
In October, the world price of Aframax reached $40,000, as in the previous year. The devaluation of the ruble and the circumvention of sanctions help Sovcomflot!
⚡️Sovcomflot's business depends on cargo prices and the dollar exchange rate. It is known that SCF transports Russian oil at prices 30-40% higher than world prices, so the current price of cargo for the Russian fleet is ~50-54 dollars per day, prices are now at the 2023 level for the same period, otherwise there would be Nothing special. If this does not happen, it will play out in the 4th quarter. A sharp increase in prices is expected (the rise in prices for winter cargo is not new, since SCF uses a sufficient number of icebreakers). The recently published issuer's report for the first quarter of 2024 indicates the second quarter. The third quarter turned out to be a failure. There was also pressure (the devaluation of the ruble will partly help), but this was the fourth quarter. Everything started positively for the company (overcoming sanctions, shadow fleet, recovery of freight prices and devaluation of the ruble). Let's look at today's SCF.
➖ According to the OPEC+ report, Russia reduced oil production in September by 28,000 barrels per day, or 90.01 million barrels per day, but exceeded the plan by 23,000 barrels per day under the OPEC+ trade agreement (from the second to the third quarter, a decrease of 471,000 bpd). Production will decrease in the coming months, since Russia must compensate for the decrease in oil production under previously exceeded quotas.
➖ As the situation in the Middle East calms down, commodity prices are also suffering and are showing a downward trend. If OPEC+ starts increasing production in December, Urals prices could fall below $60 again. After this break, the Greek fleet will join in and take over some of the SCF vessels.
➖The most dangerous thing is the US sanctions in February. Then we were introduced to SCF and 14 tankers associated with the company (the vessels were idle, there were no surcharges or discounts to the freight price for the approved vessels). As a result, the operation. Work, since costs increased in the first half of 2024. Profit fell significantly to $366.8 million (-44.6% y/y).
➕ The Russian Federation (and therefore SKF) is evading sanctions, and almost a third of the ships blacklisted have returned to service (the list includes 72 ships). In addition, 50 ships have changed names since the sanctions were imposed, many of which have also changed flags or are sailing without a flag. The Russian shadow fleet numbers 700 ships.
➕ The company increased its cash reserves to $1.48 billion in the first quarter of 2024 ($1.25 billion at the end of 2023). The issuer's debt currently stands at $1.46 billion ($1.51 billion at the end of 2023). As you know, net debt is in negative territory. Thus, the difference in financial costs/income is quite positive and amounts to $12.3 million (-$21.9 million last year), foreign currency debt is low, and deposits, on the contrary, are ₽, and the company earns at this base interest rate. With its own money.
➕ Taking into account adjustments, the issuer earned RUB 6.6 per share in dividends in the first half of 2024 (adjusted net profit: RUB 31.5 billion, -26% compared to last year), which is under sanctions pressure. I am confident that if we solve this problem (this is already happening), operating expenses will decrease, profit will increase, and the company will be able to conditionally pay RUB 12-14 per year (business yield of 12-14%, but we know that the company's position is very stable and its free cash flow is sufficient to increase payments.
➕ Two ice-class tankers are expected to be commissioned in 2025 (planned to transport LNG for Arctic LNG-2). If successful, this will be additional profit.
➕ ₽ ($ – 97₽) Constant devaluation of the main intermediary SKF, income $. In addition, if you raise the interest rate to 20%, the company will start making more money.
😀 The risks for the company are known, including reduced supplies due to sanctions, reduced oil production and lower prices for raw materials. But there is something to counteract this. Freight prices are recovering, the ruble is weakening, money brings significant interest, and sanctions are still being bypassed. The idea of shares, of course, has not gone away, but it is still necessary to stay on top of the flow (monitor the data).