Aegean: Positive 2015 Q1 Helped by "Tailwind" from ECA Regs

E. Nikolas Tavlarios, President of Aegan says operational efficiencies and "tailwind" from fuel content regulations helped create the strong Q1.

Aegean Marine Petroleum Network Inc. [NYSE: ANW] (Aegean) says its positive first quarter results for 2015 were due to operational efficiencies, infrastructure investment, and leveraging new fuel regulations.

"There is a positive driver out there still on the 0.10 percent sulfur; we definitely feel a tailwind coming from that," Aegan President E. Nikolas Tavlarios said at the bunker supplier's recent earnings call as transcripted by Seeking Alpha.

"With respect to changes in regulations in our industry specifically the changes in fuel content requirements, we continue to leverage our diversified approach to remain ahead of the pack.

"These new regulations have created slight market disruption particularly for the companies that are undercapitalized.

"Since we are one of the few among our competitors, that are well capitalized with strong flow limited debt and vessels that can support multiple fuel grades, we are facing no issues under the new regulations and believe we will be able to take advantage of the opportunities that open up as others exit the market," added Tavlarios.

New Operations

Positive Q1 results were also attributed to Aegan's operatinal efficiencies, its launch of operations in the Gulf of Mexico, the U.S. West Coast, and Germany, as well as its investment in infrastructure, specifically the company's Fujairah storage facility.

"We've made this heavy investment in infrastructure by having these storage facilities and, our strategy has become one more so taking advantage of using these facilities and blending whenever possible and that of course reduces our cost of goods sold and is a positive tailwind for our gross spread," explained Tavlarios.

Aegean's Q1 2015 bunker sales volume rose 7.8 percent to 2.9 million metric tonnes (mt) from 2.7 million mt in the same period last year, and Tavlarios said its new operations contributed a "very small amount" but that they were ramping up.

"I would say during Q1, the West Coast and the Gulf of Mexico were ramped up, okay and so they did contribute to their volume, Hamburg was not. I think we said that at the Q4 call that it was going through a licensing period and a commissioning period," he said.

"So they really contributed very small amount in Q4, in Q1 rather. I would say today they are almost entirely ramped up."

Aegean indicated it expects to continue with a strong 2015 Q2, having achieved a sales volume of over one million tonnes in April alone.

In March, Aegan reported the drop in oil prices have been a welcome development for its business, saying lower prices encourage customers to buy larger quantities of fuel.