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Kirby in US$244M tug and barge fleet acquisition

Fri 01 Feb 2019 by Martyn Wingrove

Kirby in US$244M tug and barge fleet acquisition
Cenac operates tugs and tank barges with capacity of 30,000 barrels

Two large North American tug and barge fleets will be merged in an acquisition that will form one of the biggest transporters of oil products along US inland waterways.

Kirby Corp has signed a definitive agreement to acquire the marine transportation fleet of Cenac Marine Services for around US$244M in cash. This purchase agreement comes as the inland transportation sector is encountering rising demand and barge utilisation levels and when Kirby is retiring older units.

Cenac’s fleet includes 34 inland towboats and 2 offshore tugboats, plus 63 inland tank barges, each with capacity of around 30,000 barrels. In total, this fleet can transport approximately 1.9M barrels of oil on the lower Mississippi River, its tributaries, and Gulf Intracoastal Waterway.

These tank barges are designed to transport petrochemicals, refined products, and black oil, including crude oil, residual fuels, feedstocks and lubricants for major oil companies and refineries in the US.

Kirby president and chief executive David Grzebinski said the acquisition will be financed through additional loans, however, it will reduce the need for fleet renewal expenditure. “The acquisition is an ideal complement to Kirby’s operations,” he said. “The addition of these vessels to Kirby’s fleet will not only further reduce our average age profile, but will also further enable us to avoid significant capital outlays for new vessels in the future.”

Cenac’s fleet of modern inland towboats and offshore tugboats has an average age of six years, while the barges have an average age of four years. Around 80% of the 63 barges transport clean products and 20% are heated black oil vessels.

Kirby expects to complete the Cenac acquisition, subject to certain closing adjustments and regulatory approvals under the Hart-Scott-Rodino Act, in Q1 2019.

This deal comes as spot market rates for inland transportation tugs and barges is rising due to favourable market conditions and delays improving utilisation. Mr Grzebinski said Kirby “experienced a 28% increase in delay days as a result of seasonal weather patterns along the Gulf Coast and lock delays, which reduced operating efficiencies” in Q4 2018.

“Despite those challenges, inland marine delivered a slight increase in sequential revenue with operating margins similar to Q3 2018,” he said.

Kirby announced revenues of US$721.5M in Q4 2018, compared with US$708M in the same period in 2017. It reported revenues for the whole of 2018 were US$2.97Bn compared with US$2.21Bn in 2017 due to more favourable inland transportation and coastal trade.

Kirby has been in expansive mood with acquisitions and tug-barge additions. In February 2018, Kirby acquired Higman Marine for US$419M in cash to take control of 75 inland towboats and 159 inland tank barges. In December 2017, Kirby took delivery of an articulated tug barge unit from Fincantieri Bay Shipbuilding – tug Ronnie Murph and 158-m long barge, Kirby 155-03.

Kirby is already one of the largest domestic tank barge operators transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, coastwise along all three US coasts, and in Alaska and Hawaii.  Kirby transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge.

 

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