Euronav NV reported its non-audited financial results for the third quarter ended 30 September 2020. Hugo De Stoop, CEO of Euronav said: “A growing divide between rising short-term fleet supply and limited cargo availability, restricted by OPEC+ production cuts and a slower demand recovery for crude, has impacted the sector negatively and is likely to continue throughout the seasonal winter period. With our sector low leverage, supported by over USD 1 billion liquidity, Euronav is well positioned to navigate these challenges and potentially seize value creative opportunities should they arise.”
For the third quarter of 2020, the Company had a net gain of USD 46.2 million or USD 0.22 per share (third quarter of 2019: a net loss of USD 22.9 million or USD 0.11 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 151.8 million (third quarter of 2019: USD 96.8 million).
EURONAV TANKER FLEET
On 30 September 2020, the Suezmax Bastia (2005 – 159,155 dwt), owned in joint venture, was delivered to her new owners. The vessel was sold for USD 20.5 million. A capital gain of approximately USD 0.7 million was recorded in the same quarter in the joint venture company. The vessel was acquired in November 2019 in a 50/50 joint venture with affiliates of Ridgebury Tankers and clients of Tufton Oceanic. Whilst the holding period was relatively short, the strong tanker market over the past 11 months helped drive an exceptional return, in excess of 50% on this investment.
During Q1 2020, Euronav announced it had entered into an agreement for the acquisition, through resale, of four VLCC newbuilding contracts from the DSME shipyard in South Korea. These modern Eco-type VLCC vessels are identical sister ships that will be fitted with Exhaust Gas Scrubber technology and Ballast Water Treatment systems. All four vessels are now scheduled for delivery during Q1 2021. The payment profile for these vessels requires the largest portion of instalments to be made during Q1 2021. Euronav will meet the financing of these deliveries via existing borrowing facilities and debt capacity.
On 11 September, the Company concluded a new loan facility for 713 million USD which will be partially used for the payment of these vessels. After the quarter end, the Company time chartered-in two modern Eco-type Suezmax vessels for two years. This additional capacity allows Euronav to enhance existing strategic relationships. The economies of scale that Euronav can extract from this transaction provide conviction that this will be value accretive. In order to counter the challenging freight rate market in the short term, Euronav has brought forward nine required dry dockings. This flexibility allows 15% of Euronav’s fleet to execute its regulatory dry dock requirement during a depressed market whilst also providing the potential benefit of an improved freight rate market in the future.
FUEL PROCUREMENT STATUS (UPDATE) D
uring 2019, Euronav purchased 420,000 metric tonnes of compliant fuel and stored it on one of its vessels, the Oceania (2003 – 441,561 dwt) ahead of the new IMO 2020 fuel regulation applicable from 1 January 2020. In view of the significant drop in oil and fuel oil prices owing primarily to COVID-19, the Company has actively managed its fuel position by procuring its fuel requirement from both the open market and its stored compliant fuel.
The quantity onboard the Oceania on 30 September was approximately 200,000 metric tonnes of compliant fuel and the marked-to-market value was USD minus 14 million, another quarterly sequential improvement in our position from the last two quarters (Q2: – USD 32 million and Q1: – USD 56 million). The Company continues to conclude that no write down is required at this time. Euronav will continue to assess its position each quarter, in full compliance with the relevant accounting policy.
CAPITAL ALLOCATION STRATEGY IN ACTION
Euronav remains committed to its target return to shareholders of 80% of quarterly net income. It is important to stress that this return to shareholders is from net income generated quarterly. The 20% of net income that is retained is used to temporarily or permanently reduce its borrowings by mostly repaying revolving credit facilities. In case the Company does not make a profit over a quarter, a quarterly fixed dividend of USD 3 cent will be paid to shareholders.