|
Its 100 Tugs And Barges Ply Coastal Waters, Delivering Petroleum |
 |
 |
 |
|
Wednesday, 11 July 2007 21:20 |
Jul. 11, 2007 (Investor's Business Daily) -- Oil and water don't mix. At least, they're not supposed to. Federal anti-pollution laws are forcing many single-hulled tankers and barges into retirement. In their place, operators are ordering more leak-resistant double-hulled ships. But demand for gasoline and other petroleum hasn't waned while that shift occurs. K-Sea Transportation Partners KSP has navigated that regulatory and supply chop. The transport company already has modernized most of its barges. It's adding capacity by buying smaller firms. Steady demand for petroleum and higher regulatory hurdles means K-Sea can charter its growing fleet out for longer terms at higher rates. 'These guys are doing the right things, making the right acquisitions and doing it at an attractive price,'said Darren Horowitz, an analyst with Raymond James & Associates
Barges And Tankers The East Brunswick, N.J.-based company operates a fleet of about 100 barges, tankers and tug boats that move mostly refined petroleum in the Northeast and Gulf of Mexico. Oil giants such as BP (NYSE:BP) (TSX:BP'U) BP, Chevron CVX, ConocoPhillips (NYSE:COP) COP and Exxon Mobil (NYSE:XOM) XOM are its customers. Now K-Sea is expanding west. In June, it announced it will pay $205million for Smith Maritime, of Hawaii, and Sirius Maritime, of Washington state. Those deals, slated to close this month or next, will add 11 barges -- most of which are double-hulled -- and 10 tugboats to push them. They will increase K-Sea's total capacity by 22% to 4.3 million barrels. The company also took possession last month of a new 28,000-barrel double-hulled tank barge and has 10 more set for delivery before the end of 2010. That will bring its capacity to 4.8million barrels, more than double the total at K-Sea's January 2004 initial public offering. Company officials did not respond to requests for comment. But CEO Timothy Casey said in an April analyst conference call that the demand is there. 'Both utilization and average daily rates are firm, and we believe this will continue into the foreseeable future,'he said. The Energy Information Administration forecasts demands for gasoline, heating oil and other petroleum fuels to grow more than 1% a year through 2030. Almost a third of U.S. refiners' output travels over water. Pipelines, trucks and railroads carry the rest. K-Sea isn't the only firm opting for double hulls. The entire U.S.-flagged fleet of tankers and barges is making the transition. Back in 1989, double hulls were rare. Then the Exxon Valdez ran aground off the coast of Alaska. Submerged rocks tore through its single hull, spilling millions of gallons of oil. In the wake of that disaster, Congress passed the Oil Pollution Act of 1990, requiring all tankers and oil barges calling in U.S. ports to have the safer double hulls by 2015. By 2001, 66% of the more than 4,000 oil barges along America's shores and inland waterways met that standard. By last year, 78% did, according to the Department of Transportation's Maritime Administration. The Jones Act of 1920 requires that only U.S.-built and flagged ships be used to move goods between U.S. ports. That keeps foreign competitors away. Both acts should keep vessel capacity restricted in the face of growing demand, notes KeyBanc Capital Markets analyst Todd Fowler in a June client note. K-Sea traces its roots to Eklof Marine, which formed in 1959. Senior managers bought it out in 1999. They took it public in 2004 as a master limited partnership. The company posted 39 cents per limited partner unit in its third quarter, which ended in March. That was up from 12 cents the year before. Revenue climbed 21% from a year ago, to $55.6 million. K-Sea had 87% of its fleet in use in the third quarter, up from 84% a year earlier. Customers paid more to charter them. Its average daily rate climbed to $10,226 in the quarter, up 15% from a year ago. Risks Consumers might heed the call of conservationists to drive less. That would slice demand for transporting fuels. More likely, though, is some sort of spill or environmental disaster. The 1989 Exxon spill shook oil company stocks. K-Sea's predecessor, Eklof, spent millions of dollars in cleanup and settlement costs after one of its barges spilled more than 800,000 gallons of home heating oil off the coast of Rhode Island in 1996. Today's double hulls are less vulnerable to such severe breaches. But they still can, and do, spill. In 2005, one of K-Sea's double-hulled barges capsized and spilled oil in the Gulf of Mexico after hitting submerged wreckage. But the company said the economic losses were minor. The industry could be hit with regulatory changes, too. If the Jones Act were amended to allow foreign competition, that might make waves for K-Sea. Any new spills might prompt calls for more stringent environmental restrictions. That could make some of K-Sea's vessels obsolete. But analysts don't see that happening anytime soon.
http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-18071068.htm
|
