- Sustained pressure on freight rates driven by mix of reduced demand from COVID-19 restrictions, lower crude supply on OPEC cuts & over supply of available tonnage
- Extension to current FSO contracts for further 10 years to 2032
- Fixed cash dividend of USD 3 cents per share in line with distribution policy
- Up to an additional USD 50 million share repurchases
- Q1 2021: 46% VLCC spot booked at 16,396 USD per day, 54% of Suezmax booked at USD 9,207 per day
- Freight rate pressure to remain until crude demand recovery which is tied to COVID-19 vaccine implementation from Q2 onwards
Euronav NV reported its non-audited financial results for the fourth quarter ended 31 December 2020.
Hugo De Stoop, CEO of Euronav said: “The last quarter of 2020 and the present market conditions are amongst the most challenging in recent memory for crude tanker operators. COVID-19 restrictions continue to impact operations and more importantly the demand for crude oil. This has led OPEC+ to extend production cuts. As a result, the market remains unbalanced with too many ships chasing too few cargoes. Whilst some encouraging signs are emerging, like the price of scrap steel driving the ship recycling activity, traction with crude consumption returning to more normalized pre-COVID-19 levels is required to drive a return to stock and sector profitability. Despite these headwinds Euronav remains focused through cycle on long term value generation which validates additional buy back focus and vessel acquisitions whilst retaining balance sheet strength”.
For the fourth quarter of 2020, the Company had a net loss of USD 58.7 million or USD 0.29 per share (Q4 2019: a net gain of USD 154.2 million or USD 0.72 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 49.8 million (Q4 2019: USD 267.5 million).
With leverage at a level of 37%, the balance sheet at Euronav remains strong.
EURONAV TANKER FLEET
On 5 October 2020, the Suezmax Bastia (2005 – 159,155 dwt) was sold for USD 20.5 million. A capital gain on the sale of approximately USD 0.7 million was recorded in in the joint venture company. The vessel has been delivered to her new owners. The vessel was acquired in November 2019 in a 50/50 joint venture and whilst the holding period was relatively short, the strong tanker market helped driving an exceptional return in excess of 50% on this investment.
Acquisition - VLCC
Euronav is taking delivery from the yard of the four VLCC vessels, purchased last February 2020, during Q1 2021. The first two, Delos (2021 –300,200 dwt) and Diodorus (2021 – 300,200 dwt) have been delivered in January. The next two vessels are due to enter the fleet in March.
Acquisition - Suezmax
As announced on 3 February 2021, Euronav has entered into an agreement for the acquisition through resale of two eco-Suezmax newbuilding contracts. Currently completing construction at the Daehan shipyard in South Korea, these modern vessels are being acquired for an en-bloc price of USD 113 million. The vessels are both due for delivery in January 2022.
These vessels are the latest generation of Suezmax Eco-type tankers. They will also be fitted with Exhaust Gas Scrubber technology and Ballast Water Treatment systems. The vessels have the structural notation to be LNG Ready. Euronav is working closely with the shipyard to also have a structural notation to be Ammonia Ready. This provides the option to switch to other fuels at a later stage.
On our existing fleet, we will take advantage of the current challenging freight rate background to accelerate a number of scheduled dry dockings. Around 27 dry dockings have been scheduled to take place in 4Q20 and during 2021 of which a majority during this winter season.
Fuel procurement status (update)
During 2019, Euronav purchased 420,000 metric tonnes of compliant fuel and stored it on its vessel, the Oceania (2003 - 441,561 dwt), ahead of the new IMO 2020 fuel regulation. In view of the significant drop in oil and fuel oil price owing 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 31st of December was approximately 135,000 metric tonnes of compliant fuel with a positive marked-to-market value in the amount of USD 2 million at this date. Despite the challenges, the overall project has been profitable. Euronav will look to integrate key features from this project in our fuel procurement strategy going forward.
Contracts extension for 10 years to 2032
In November, Euronav announced that our joint venture with International Seaways signed a ten year contract extension for the FSO Asia and the FSO Africa. This is a direct continuation of their current contractual service, that now runs until 21 July 2032 and 21 September 2032 respectively. The additional ten years are expected to generate revenues for the joint venture in excess of USD 645 million as from the respective extension dates.
Euronav remains committed to its target return to shareholders of 80% of quarterly net profits. It is important to stress that this return to shareholders is from net profits generated quarterly and therefore does not impact the company’s liquidity which will be augmented by the 20% of net income that is retained.
Additional share buy back to create further shareholder value
Euronav announced today additional share repurchases up to USD 50 million as part of its return to shareholders policy. Further repurchases shall be deployed if, and when the company believes that there is value to be created for our shareholders in the long term, taking into account a variety of factors, including market conditions, share price disconnect with long term asset value, regulatory and legal requirements and other corporate considerations.
The Euronav share (at USD 8.10) trades at an equivalent price of a new build VLCC of USD 70 million (source: Clarksons). By repurchasing shares the company is investing at a highly discounted price of USD 70 million, compared to a latest quote for a modern VLCC of USD 88 million (source: Clarksons), into the assets it knows best in the world: our own fleet.
Euronav believes this approach has the flexibility to manage the Company through the cycle, retaining sufficient capital for fleet renewal whilst simultaneously rewarding our shareholders. Euronav has mandated Clarksons Securities to act as an independent broker to coordinate and execute share repurchases on the exchanges of Euronext Brussels and/or the NYSE.
Cash dividend related to Q4
Euronav remains committed to distribute quarterly dividends throughout the cycle independently of the net income results and will distribute a fixed dividend of USD 12 cents on an annual basis or USD 3 cents per quarter.