Euronav: Seismic events impacting wider crude & tanker markets


Euronav NV reported its non-audited financial results for the first quarter of 2020 ended 31 March 2020.

Hugo De Stoop, CEO of Euronav said: “The past few months have seen a number of disruptive and seismic events simultaneously impacting on the wider crude and tanker markets. Most importantly our primary focus has been on the wellbeing, protection and safety of our staff, seafarers and their families in the face of the threat from Covid-19. So far, the gyrations in the crude market have largely had positive implications for the crude tanker market”.


Euronav entered into two separate agreements during the first quarter of 2020 for the acquisition through resale of four modern eco-VLCCs. The four ships are currently under construction at the DSME shipyard in South Korea. Each vessel will be fitted with Exhaust Gas Scrubber technology and Ballast Water Treatment System. One delivery is anticipated during the final quarter of 2020 with rest being delivered during Q1 2021.

Euronav will meet the financing of this acquisition with existing borrowing facilities and debt capacity. The payment profile for this transaction means that the largest portion of the instalments will be made on ship delivery. Balance sheet debt leverage will continue to remain appropriate in order to allow the Company to retain its strength and flexibility.

On 21 February 2020, the Company sold the Suezmax Finesse (2003 – 149,994 dwt) for USD 21.8 million with a capital gain on the sale of approximately USD 8.3 million recorded during Q1 2020.

Subsequent to the quarter end, Euronav also announced the sale of the Suezmax Cap Diamant (2001 – 160,044 dwt) which was sold for USD 20.8 million on April 9, 2020. A capital gain on the sale of approximately USD 13 million will be recorded in the second quarter 2020 when the ship is delivered.


During 2019, Euronav purchased 420,000 metric tonnes of compliant fuel and stored it on its vessel, the Oceania (2003 – 441,561 dwt). By March 31, Euronav had consumed approximately 200.000 tonnes of compliant fuel. In view of the significant drop in oil and fuel oil price in Q1, the Company stopped using its stored compliant fuel and purchased what was needed on the open market.

The company also assessed if a write down should be accounted for the remaining compliant fuel inventory as the market value of the fuel that was not yet consumed was USD 56 million lower than its book value. The Company concluded that no write down was required at this time in view of the robust freight market for Q2 and possibly the rest of 2020, which will offset the higher weighted average consumption costs of the bunker oil consumed from that inventory. This assessment will be performed each quarter.


In view of the strong quarterly results, the strength of our balance sheet, our overall liquidity position and the robust outlook of the second quarter, the Supervisory Board decided to pay a dividend related to the first quarter results of USD 0.81 per share which represent 80% of our quarterly net income results (excluding capital gains).


Euronav is transitioning to a quarterly dividend distribution policy (previously a semi-annual distribution) which means that there will be two dividends distributed in the second quarter. One dividend is related to 2019 and requires the approval of the shareholders at the AGM (see below) and one dividend is related to our first quarter results.

Annual General Meeting & Special General Meeting May 2020

Euronav has invited its shareholders to participate to the Ordinary General Meeting to be held on Wednesday 20 May 2020 at 10.30 a.m. (Belgian time) in 2000 Antwerp, Schaliënstraat 5. Since the attendance quorum for the Special General Meeting held on 9 April 2020 was not reached, Euronav has also re-invited its shareholders for a second Special General Meeting with the same agenda to be held on the same date and place at 11.00 a.m. (Belgian time). This second Special General Meeting will validly deliberate and decide on the agenda items irrespective the portion of the capital represented by the shareholders participating to the meeting.

The Company strongly encourages the shareholders to participate to the mentioned meetings. Management is available for engagement ahead of these meetings with shareholders.

In view of the Covid-19 confinement measures the shareholders’ meetings are exceptionally held without physical attendance of shareholders or their representatives. Shareholders may participate and vote solely (i) upfront by distant voting using the form for voting by letter, or (ii) upfront by written proxy to the persons indicated in the proxy form.


Future financing of large crude tanker businesses such as Euronav remains a critical factor for such a capital intensive industrial sector. Euronav’s bond is a key component of the diverse spectrum of financing alternatives the company has access to. During the initial stages of capital market reaction to Covid-19, our bond price fell to record low levels during which the company repurchased USD one million worth of bonds (face value) before the price quickly recovered to a premium.


Euronav has always looked to maintain a strong financial base and excellent relationships with our capital providers: commercial banks, equity and debt investors. At the end of March 2020, the company had liquidity of USD 1.05 billion comprising USD 312 million cash and USD 734 million undrawn committed credit facilities.


The wellbeing and health of our staff, seafarers, their families and the broader community is Euronav’s priority. We have applied a number of precautionary measures across our offices and fleet in order to protect our employees and seafarers in response to Covid-19. To date, Euronav’s operations have not been materially impacted much thanks to the flexibility of our workforce. Active measures we have taken included a restricted access to our offices around the world and most of the staff working from home and restricted access to our ships when they call terminals. Unfortunately, the lock down in several places around the world where our ships call for operations has prevented us from doing our regular crew rotation but we hope that the situation will normalize soon and we are working hard to allow our crew onboard to return safely to their home as well as allowing new crew to come onboard safely.

Whilst a number of shore employees have seen their workload significantly decreased as a result of not being able to access the office, Euronav has decided not to put any of its employees under temporary or permanent unemployment benefits as we believe that every single employee at Euronav plays a critical role in our operations in the short and the long term.

A combination of rapidly increased crude supply and a buoyant market for crude storage is underpinning a very robust tanker freight market and strong cash generation presently. Management is however cognizant that as a consequence of policies to restrict the spread of Covid-19, the reduction in crude demand has led to a massive build-up in crude inventory and has impacted negatively the demand for seaborne crude oil transportation. So far, this severe decrease of demand for transportation is over-compensated by demand for storage of crude oil onboard vessels. At this stage it is still too early to quantify the longer term global macro-economic impact due to the Covid-19 outbreak and thus on our results and any forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks related to the current Covid-19 outbreak.


Euronav remains committed to applying the highest corporate governance standards possible. This was reflected during 2019 with gender equality being a key orientation, which is visible in all layers of the Company, including Board and Management level.

In addition Euronav has been included in the Bloomberg Gender-Equality Index 2020 (“GEI”). This is the third year Euronav has been included in this index. The 2020 Index is a reference index which measures gender representation across internal company statistics, employee policies, external community support and engagement, and gender- conscious product offerings. The 2020 GEI expands globally to represent 42 countries and a combined market capitalization of USD 12 trillion.


The past few months have seen a number of substantial events constricted into a short time period with the full impact of these factors likely to take several quarters to ascertain. The rebalancing of vessel supply and demand for crude and tanker shipping during 2018 and early 2019 was reflected in a robust freight rate market since the fourth quarter of 2019.

With an early Chinese new year (25 January) some early anticipated seasonal freight rate weakness gave way to the more serious implications of the Covid-19 virus and its potential risk to human health. The associated “lock-down” measures to contain the virus impacted on the crude tanker market with reduced volumes transportation requirements to the Far East. Freight rates during the latter part of Q1 consequently re-priced towards break-even levels in the face of this seasonal and rapid downturn in economic activity.

However, a change in strategy (which proved to be temporary) by OPEC+ significantly increased global oil supply in March. This OPEC+ strategy change coupled with decreased oil consumption following an acceleration in widespread global adoption of “lock-down” restrictions since mid-March have led to the largest oversupply of oil markets. This led to the development of a wide “contango” price structure in the price of oil*. This disconnect between oil production (c 100m bpd output) and consumption (estimates suggest fallen to 60-70m bpd) along with a contango price structure have driven a rapid and increasing requirement for storage capacity, including floating storage. The utilization of a growing number of tankers as short term storage units has driven freight rates to very elevated (and volatile) levels from mid-March onwards.
*contango – is where the future price of oil is higher than the current spot price of oil meaning traders can profit by forward selling the futures price and then buying the oil at the spot price; storing the oil in the interim period and thus making a profit.

Ton-mile development within large crude tankers is likely to remain under pressure in the short term and into next year specifically in terms of US crude exports. US production will indeed likely reduce as domestic shale producers find future financial support challenging and relatively high production costs (compared globally) make production uneconomic at lower oil prices thus driving reduced output but shutting off conventional wells is often costly and complicated.

The extraordinary sequence of events over the past few months should not overshadow some of the supportive trends that have built up in the large crude tanker market over previous quarters. Vessel supply had recalibrated during 2018 and early 2019 with 50 VLCC equivalents being recycled. This has left a global fleet in the VLCC and Suezmax sectors with an age profile that is at its most elderly since 2002. Indeed by 1 January 2021, over 26% of the VLCC fleet will be aged 15 years or more. With an orderbook to fleet ratio at a 23 year low of 7% and on average 27 VLCC/Suezmaxes aged over 15 years due for special survey in each of quarter until end 2021, a sustained freight rate weakness is likely to trigger a positive global fleet resizing.

A substantial increase of the orderbook seems unlikely in the near future as financing of the tanker market remains challenging with regulatory pressures on both providers of financing intensifying (Basel IV, bank aversion to lend to cyclical sectors) and tanker owners under pressure to comply with IMO emissions requirements by 2030 which is likely to be met with new lower-emission fuel types. These challenges are generating sustained pressure on the newbuilding orderbook.


Demand for tanker shipping is currently high and management believes will continue, albeit likely to remain volatile, throughout 2020. The disconnect between oil production and consumption combined with wide contango oil price structure following the steep oil price fall is driving both logistical and economically driven demand for floating storage in the short term.

Management believes this market structure should remain interesting for two reasons. Firstly, the shape and pace of economic re-opening is likely to be gradual and secondly the substantial recent oil price fall compares with the most significant ones over the past 35 years (1985, 1998, 2008 and 2014), all of which maintained a substantial oil contango market over the following 12 months. The longer these dynamics persist the longer and stronger the optionality for tanker owners will be to convert market dynamics into longer duration charters.

Tanker dynamics will be clearly driven by the shape and pace of global economic reopening and further potential supply adjustments driven by OPEC and its wider partners. Timing and visibility on these developments will remain difficult to predict. Markets will become more challenging when a transition away from the current advantageous tanker market structure occurs, but we believe should not impact negatively for a prolonged period given the current age profile of the world tanker fleet coupled with the lowest orderbook on record in the last 23 years.

So far in the second quarter of 2020, the Euronav VLCC fleet operated in the Tankers International Pool has earned about USD 95,000 per day and 71% of the available days have been fixed. Euronav’s Suezmax fleet trading on the spot market has earned about USD 65,400 per day on average with 57% of the available days fixed.



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