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Euronav expecting upturn after tough third quarter

Euronav NV reported its non-audited financial results for the third quarter ended 30 September 2021.

Hugo De Stoop, CEO of Euronav said: ”We have every reason to be confident that we have now come through the trough of this particular cycle, after a third quarter that was among the most challenging for our market in recent memory. Alongside a seasonal uplift ahead of winter, several catalysts have driven a sustained upward movement in freight rates during the current quarter. The demand for oil transportation is recovering thanks to an improved crude demand as part of post-COVID global economic recovery, additional demand for fuel oil as energy producers are switching to a cheaper solution, and an OPEC+ production growth translating into exports. Whilst this has come from a low base level, we believe this trajectory will be maintained as oil demand continues to recover toward pre- COVID levels of consumption, and the robust medium term tanker market fundamentals gains traction going forward.”

For the third quarter of 2021, the Company realized a net loss of USD 105.9 million or USD (0.53) per share (third quarter 2020: a net profit of 46.2 USD million or USD 0.22 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 9.1 million (third quarter 2020: USD 151.8 million).

TCE

The average daily time charter equivalent rates (TCE, a non IFRS-measure) can be summarized as follows:

EURONAV TANKER FLEET

Updated delivery schedule

Delivery of the first two of our eight vessels currently under construction will be made in late January, with two Daehan constructed Suezmax joining our fleet toward the end of the month.

Outstanding capital expenditure for the eight vessels at the end of Q3 2021 was USD 467 million split USD 48 million in Q4 2021, USD 119 million in 2022, USD 234 million in 2023
and USD 66 million in 2024.

Maintenance

On our existing fleet, we will continue to take advantage of the current challenging freight rate background to accelerate a number of scheduled dry dockings. 27 dry dockings are scheduled to take place in 2021 (18 VLCCs and 9 Suezmaxes) of which 23 have been completed already (18 VLCCs and 5 Suezmaxes).

Cash dividend related to Q3 2021

Euronav will distribute a dividend of USD 3 cents for the third quarter.

Q3-2021 dividend (coupon 27):

Ex dividend 22 November 2021
Record date 23 November 2021
Payment date 30 November 2021

In view of the record date of Tuesday 23 November 2021, shareholders may not reposition shares between the Belgian Register and the U.S. Register during the period from Monday

22 November 2021 at 9.00 a.m. (Belgian time) until Tuesday 23 November at 9.00 a.m. (Belgian time).

FINANCING AT EURONAV

Liquidity

Euronav continues to maintain a strong financial base and excellent relationships with its capital providers: commercial banks, equity, and debt investors. At the end of September 2021, the Company had liquidity of USD 791 million, comprising USD 162 million cash and USD 629 million undrawn committed credit facilities.

$200m corporate bond launched in August in Oslo

On 2 September 2021, Euronav Luxembourg S.A. announced a successful placement of USD 200 million senior unsecured bonds. The bonds are guaranteed by Euronav NV, mature in September 2026, and carry a coupon of 6.25%. An application will be made for the bonds to be listed on Oslo Stock Exchange.

The offering attracted strong global investor demand and was significantly oversubscribed. The net proceeds from the bond issue will be used for general corporate purposes and/or refinancing of the existing USD 200 million bond (ISIN: NO0010793888) maturing in May 2022. As part of this transaction Euronav bought back USD 132 million of the USD 200 million senior bonds issued in 2017 and due to mature in May 2022. DNB Markets, Nordea, SEB and Arctic Securities AS acted as joint bookrunners in connection with the placement of the bond issue.

COVID-19 UPDATE

We recognize that many seafarers have endured intense hardship while working to keep trade flowing, and we are grateful to them for their service. Crew changes have remained a challenging operation throughout the third quarter as the restrictions on crew changes due to COVID-19 remain active in various regions and nations. It seems that returning to a normal crew change regime is still an anticipation without a clear timeline. Our crews have demonstrated resilience throughout this period to keep moving crude, despite numerous difficulties in relation to crew changes and repatriation.

We strive through our participation and cooperation with international shipping associations to sensitize more countries to recognize the “key worker” status that seafarers deserve and facilitate crew travel possibilities.

Vaccination schemes for international seafarers continue to gain traction in many countries, including USA, Canada, Belgium, France, UK, Spain, Norway, Netherlands, Italy, Germany, Denmark, Croatia, Singapore, India, Indonesia, South Africa, etc. which is a very positive evolution. Euronav continues to actively encourage and support our seafarers to avail vaccination opportunities as they are presented onboard, at a Port of embarkation or disembarkation, as well as their home countries.

TANKER MARKET & OUTLOOK

We are now seeing a strong recovery in freight rates and activity, albeit from a low base. The third quarter was a challenging freight environment but does in our view represent the trough in this cycle. A number of positive catalysts have been emerging since early September to drive a strong rebound. Since our business tends to work on a forward 6- to 8-week basis (average voyage duration), this improvement will become more visible during Q4 and onwards.

Among the catalysts driving the freight market recovery, the seasonal uplift in demand for crude ahead of winter has kicked in earlier than usual, with colder weather patterns occurring (South Korea, for instance, last month issued its first cold wave alert in 17 years). This effect has been enhanced by a second contributory factor, fuel switching, as extreme and sudden price rises for fuels such as gas and LNG have increased the relative attractiveness of crude and prompted some substitution. While estimates vary, this growth over the winter is expected to boost oil consumption by between 0.5-1.0 million bpd, driven by both economics and security of supply.

Thirdly, OPEC+ production growth has finally translated into sustained export expansion. Persian Gulf exports alone for instance, grew by 550,000 barrels in September (source Bloomberg). This has helped reduce the oversupply of tonnage, as has improving underlying demand for crude as the global economy continues to recover post-COVID. In October the IEA upgraded their demand forecasts for 2021 (by 170,000 bpd) and 2022 (210,000 bpd), with an expected record growth of 3.3 million bpd to 99.6 million bpd in 2022.

A fourth set of supportive data comes from the sector itself. A total of 8 large tankers (4 VLCC, 4 Suezmax) went to the recycling yards in September – the highest monthly number since March 2018. This is encouraging, as the high steel price is attracting attention to a global fleet with a long tail of older tonnage. Asset prices continue to grow with new build VLCCs now quoted at USD 107.5 million (11% rise during Q3) and Suezmax new build prices rising with 14% over the quarter. This reflects a very constrained supply background with Korean yards now quoting availability only in late 2024 as other shipping segments (containers, LNG and dry bulk) have placed multiple orders this year. This visibility on new supply provides a very supportive fundamental.

The two caveats to this positive background are (a) a return to restrictions based on further or new strains of COVID-19 and (b) an oil price at a seven year high already over USD 85 per barrel which, if it were rise further, could affect consumption if other energy sources would become relatively cheaper.

The medium-term outlook for the tanker sector remains constructive. We believe that core fundamentals – orderbook/fleet ratio that are at 25-year lows, a quarter of the global VLCC/Suezmax fleet that is already aged over 15 years and incoming emissions regulations
– will begin to gain traction starting next year. These will contribute to further recovery in crude consumption as factors such as international travel and economic activity return to pre-COVID levels of 100 million barrels per day.

SUSTAINABILITY ACTIVITY

M/T Statia – Successful B30 Biofuel Trial
As one of the first in the oil tanker industry Euronav tested a B30 biofuel on a Suezmax, the Statia (2006- 150,205 dwt). The trial with the biofuel blend from energy supplier BP was successful. Lower carbon fuels will play an important role on the journey towards shipping decarbonization. Euronav is committed to accelerate the transition to lower carbon alternatives by testing the operational readiness and emission reduction potential of biofuels in a context of strategic partnerships.

The Suezmax Statia tested approximately 360 MT of the B30 biofuel blend during a two- week trial in September, while the vessel was in commercial operations on its way to Angola. The trial of the blend was successful and showed no significant differences in operations or any malfunctions that could lead to a breakdown. Nor showed any indications of adverse impact to the main engine and auxiliary diesel generators. There was a total emissions reduction of 25.8% during the voyage that the fuel was burned. As a result, and after departure in Chili, the remaining B30 biofuel blend on the vessel is now the only fuel in operational use, both for the main engine and the auxiliary engines, on its way to Brazil.

Euronav becomes signatory of the Call to Action for Shipping Decarbonization
Euronav has become a signatory of the Call to Action for Shipping Decarbonization in September. Together with already more than 150 members from the entire maritime ecosystem the Company urges governments and global shipping industry leaders to commit to decarbonizing international shipping by 2050. In conjunction with the UN General Assembly and ahead of critical climate negotiations at COP26 in Glasgow this November, they call on governments and international organizations to take decisive actions in support of shipping decarbonization.

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