According to CEO's Q3 cc, they had projected $25M in Q4 profit sharing from the VLCC contracts,with the assumption of VLCC rates (SFL owns 30 of the FRO tankers..) at $75,000/day.

Rates are way above that....

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Friday: Tanker Shortage?
By: iStockAnalyst Friday, December 05, 2008 4:38 PM
Sectors: Transportation
Symbols: FRO, NAT, SFL, TNK, TNP, VLCCF

(By Tim - iStockAnalyst Writer)
Last week the spot rate for Suezmax tankers was in the low $40k per day range. Yesterday, I check the rates and they have popped to over $90k this week! VLCC (very large crude carriers, i.e. supertankers) rates have not jumped as much but appear to be following the trend. So what is the deal here? Oil prices are falling and so is the apparent global demand for oil. Are not oil tankers just sitting around idle like the dry bulk carriers?

The answer is somewhat counter intuitive. The spike in spot tanker rates is actually the result of the low oil prices. Many tankers are being leased on the spot market as storage tanks. Oil producers, for whatever reason, do not want to significantly slow their oil production, but at the same time do not want to sell it for $45 a barrel. So they are leasing tankers to store oil in the hope or belief that oil prices will recover shortly. Two names in news articles that I have read doing this are Royal Dutch Shell and Iran. The majority of the planet's oil production is owned by national oil companies that have policy and employment as well as financial reasons to keep the oil flowing. So at least in the short term, the current low oil prices are a boon for tanker owners.

Oil tanker companies, like their dry cargo brethren, can sign their ships to either long term, multi-year leases or charter them on the spot market where they are leased for a single voyage at the current spot rate. The stocks of the companies leasing their ships in the spot rate market tend to be high but volatile dividend payers. These companies will pay out a large portion of their free cash flow each quarter to shareholders. The payouts change significantly, witness Frontline's, NYSE:FRO, recent 50¢ payout compared to the previous quarter's $3.00.

Here are some or most of the stocks that allow you to participate in the spot tanker market:

Frontline Ltd. (NYSE:FRO). The world's largest tanker company with over 70 VLCC and Suezmax tankers. Markets are worried about debt load and new ordered ships to pay for. Long time shareholders have earned several times their purchase price in dividends.
Ship Finance, Ltd. (NYSE:SFL). Owns over 30 of FRO's leased tankers for fixed lease payments. Also receive 20% of all revenues of leased FRO tankers in excess of base charter rates. SFL is a steady dividend payer currently yielding over 22%.
Knightsbridge Tankers, Ltd. (NASD:VLCCF). Owns 4 VLCC double-hull tankers chartered on the spot market.
Nordic American Tanker (NYSE:NAT). Own 12 Suezmax tankers, all but one in the spot market. Has paid shareholders at least a 10% dividend for 10 years.
Teekay Tankers Ltd. (NYSE:TNK). Owns 9 double-hull aframax tankers chartered on medium and short term contracts.
Tsaskos Energy Navigation, Ltd. (NYSE:TNP). Owns 50 double-hull tankers in a variety of sizes. Half of fleet is for crude, 1/2 for refined petroleum products. Leases in short, medium and long term charters.

The stock market often links tanker stocks to the Baltic Dry Index (wrong) and oil prices (not really correlated, see above). The spot tanker market is its own form of animal and no one can really forecast spot tanker rates for more than a few weeks. It looks like the 4th quarter is going to be a winner, dividend wise, for shareholders.

Note: I personally own shares in NAT and SFL.