Jefferies Cuts Price Target & Estimates on 8 Tanker Companies, Earnings Are in the Hands of IEA and OPEC

Jefferies is currently forecasting that the tanker markets conditions will improve by the end of 2011, as long as the IEA does not release any additional oil inventories.

The firm is reducing its Q2 crude tanker charter rate and EPS estimates for a large portion of the companies under their coverage due to a bigger impact than expected from the Japanese earthquake on global oil demand. The earthquake prompted the OPEC to reduce production levels to less than 29 MMbd on average in Q2.

Jefferies is also reducing its second half 2011 and 2012 charter rate and EPS estimates for the majority of tanker companies under coverage due to the IEA's recent decision to release 60 MMbbls of oil from "emergency" stockpiles.

Here is a list of companies and the firms estimate changes on them:

• Crude Carriers Corp. (NYSE: CRU), the firm is cutting its FY11 and FY12 EPS estimates from $1.07 and $1.84 to ($0.56) and $0.73.
• DHT Holdings (NYSE: DHT), Jefferies reiterated its Buy rating but cut its price target from $8 to $5. It also lowered its FY11 and FY12 EPS estimates from $0.62 and $0.75 to $0.27 and $0.46.
• Frontline (NYSE: FRO), the firm maintained its Buy rating, while decreasing its price target from $35 to $20. Jefferies slashed its FY11 and FY12 EPS estimates from $1.17 and $1.83 to ($1.66) and ($0.18).
  
• Nordic American Tankers (NYSE: NAT), Jefferies maintained its Hold rating while lowering its price target from $26 to $22 and its FY11 and FY12 EPS estimates from $1.03 and $1.79 to ($1.05) and $0.34.
  
• Overseas Shipholding Group (NYSE: OSG), the firm is reiterating its Buy rating but is cutting its price target from $40 to $31. Jefferies slashed its FY11 and FY12 EPS estimates from $0.08 and $1.66 to ($5.15) and ($2.20).
• Ship Finance International (NYSE: SFL), Jefferies is maintaining its Hold rating and $19 price target, but is reducing its FY11 and FY12 EPS estimates from $1.94 and $2.00 to $1.65 and $1.98.
• Teekay Corp. (NYSE: TK), the firm is reiterating its Buy rating and $41 price target, but is reducing its FY11 and FY12 EPS estimates from ($0.27) and $1.35 to ($1.48) and $0.65.
• Tsakos Energy Navigation (NYSE: TNP), Jefferies maintains its Buy rating while lowering its price target from $16 to $13. Its FY11 and FY12 EPS estimates were cut from $1.28 and $1.89 to ($0.59) and $0.51.

Global oil demand is expected to increase 1.9 MMbp between the second and third quarters, and by 2.2 MMbd over the second half.

An analyst at Jefferies comments, "Although global crude oil demand has now nearly sufficiently destocked commercial crude oil inventories to the point requiring an OPEC production increase, and although tanker fleet growth continues to remain well below expectations, the near-term health of the tanker market is now more dependent on the politics of the OPEC vs. IEA battle than free market dynamics given the recent unprecedented release of IEA "emergency" stockpiles and potential for further releases in the ongoing battle."

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