Euronav announces fourth quarter 2017 results

Thursday, 25. January 2018 08:01

HIGHLIGHTS

  • Freight market remains challenging - lowest rates in Q4 since 2012
  • Key seasonal positive winter market trends offset by new tonnage & OPEC export cuts
  • Three vessel sales generating USD 36.5 million capital gains
  • Announcement of merger with Gener8 Maritime

ANTWERP, Belgium, 25 January 2018 - Euronav NV (NYSE: EURN & Euronext: EURN) ("Euronav" or the "Company") today reported its non-audited financial results for the three months ended 31 December 2017.

Paddy Rodgers, CEO of Euronav said: "Whilst freight rates improved sequentially over the third quarter, the typical seasonal rate pattern for the fourth quarter was not observed. Excess tonnage in key markets combined with a short-term change to OPEC export trading patterns kept the freight market under pressure. Euronav retains both now and going forward substantial balance sheet capacity and fixed income visibility to navigate through such periods and remains confident on the medium-term trends for the crude tanker market."

                             
  The most important key figures (unaudited) are:                      
                             
  (in thousands of USD)     Fourth Quarter 2017     Fourth Quarter 2016     Full Year 2017     Full Year 2016  
                             
  Revenue     117,978     146,280     513,368     684,265  
  Other operating income     1,020     1,463     4,902     6,996  
                             
  Voyage expenses and commissions     (14,257)     (16,480)     (62,035)     (59,560)  
  Vessel operating expenses     (33,952)     (37,361)     (150,427)     (160,199)  
  Charter hire expenses     (7,844)     (2,920)     (31,173)     (17,713)  
  General and administrative expenses     (13,736)     (11,418)     (46,868)     (44,051)  
  Net gain (loss) on disposal of tangible assets     36,518     36,576     15,511     50,395  
  Net gain (loss) on disposal of investments in equity accounted investees                       (24,150)  
  Depreciation     (56,428)     (59,180)     (229,872)     (227,763)  
                             
  Net finance expenses     (11,974)     (16,086)     (43,378)     (44,840)  
  Share of profit (loss) of equity accounted investees     1,904     8,938     29,932     40,495  
  Result before taxation     19,229     49,812     (40)     203,875  
                             
  Tax benefit (expense)     (13)     475     1,284     174  
  Profit (loss) for the period     19,216     50,287     1,244     204,049  
                             
  Attributable to:  Owners of the company     19,216     50,287     1,244     204,049  
                             
                             
                             
                             
  The contribution to the result is as follows:                          
                             
  (in thousands of USD)     Fourth Quarter 2017     Fourth Quarter 2016     Full Year 2017     Full Year 2016  
                             
  Tankers     17,360     41,920     (28,624)     169,614  
  FSO     1,856     8,367     29,868     34,435  
  Result after taxation     19,216     50,287     1,244     204,049  
                             
                             
                             
                             
  Information per share:                          
                             
  (in USD per share)     Fourth Quarter 2017     Fourth Quarter 2016     Full Year 2017     Full Year 2016  
                             
  Weighted average number of shares (basic) *     158,166,534     158,166,534     158,166,534     158,262,268  
  Result after taxation     0.12     0.32     0.01     1.29  
                             
                             
                             
* The number of shares issued on 31 December 2017 is 159,208,949.              


                               
  EBITDA reconciliation (unaudited):                        
                               
  (in thousands of USD)     Fourth Quarter 2017     Fourth Quarter 2016     Full Year 2017     Full Year 2016    
                               
  Profit (loss) for the period     19,216     50,287     1,244     204,049    
  + Depreciation     56,428     59,180     229,872     227,763    
  + Net finance expenses     11,974     16,086     43,378     44,840    
  + Tax expense (benefit)     13     (475)     (1,284)     (174)    
                               
  EBITDA     87,631     125,078     273,210     476,478    
                               
  + Depreciation equity accounted investees     4,555     4,776     18,071     23,774    
  + Net finance expenses equity accounted investees     (14)     521     829     3,212    
  + Tax expense (benefit) equity accounted investees     3,365     99     1,488     215    
                               
  Proportionate EBITDA     95,537     130,474     293,598     503,679    
                               
                               
                               
                               
  Proportionate EBITDA per share:                            
                               
  (in USD per share)     Fourth Quarter 2017     Fourth Quarter 2016     Full Year 2017     Full Year 2016    
                               
  Weighted average number of shares (basic)     158,166,534     158,166,534     158,166,534     158,262,268    
  Proportionate EBITDA     0.60     0.82     1.86     3.18    
                               
                               
                               
All figures have been prepared under IFRS as adopted by the EU (International Financial Reporting Standards) and have not been audited or reviewed by the statutory auditor.  
 

For the fourth quarter of 2017, the Company had a net profit of USD 19.2 million (fourth quarter 2016: net profit of USD 50.3 million) or USD 0.12 per share (fourth quarter 2016: USD 0.32 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 95.5 million (fourth quarter 2016: USD 130.5 million).

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

In USD per day

 
Fourth quarter 2017 Fourth quarter
2016
Full year 2017 Full year 2016
VLCC    
Average spot rate (in TI pool) 25,889 33,161 28,119 41,863
Average time charter rate* 35,399 43,833 39,629 42,618
SUEZMAX    
Average spot rate** 15,891 21,243 18,085 27,498
Average time charter rate* 21,417 24,662 22,131 26,269

*Including profit share where applicable
** Excluding technical offhire days

EURONAV TANKER FLEET

During November the Company sold the VLCC Artois (2001 - 298,330 dwt) for USD 22 million. The Artois was wholly owned by Euronav and at the time of sale was the oldest vessel in the Company's VLCC fleet. The Company recorded a capital gain of approximately USD 7.7 million on the sale which was recorded at the time of delivery in December.

The Suezmax vessel, the Cap Georges (1998 - 146,652 dwt) was sold for USD 9.3 million also in November. The Company recorded a capital gain of approximately USD 8.5 million in the fourth quarter. The sale of the Cap Georges comes in anticipation of the delivery of the first of four Suezmax vessels early in 2018 currently under construction at the Hyundai Heavy Industries Co Ltd yard of South Korea ("HHI"). These vessels are part of a seven year contract for four vessels with a leading global refinery player. Euronav anticipates a delivery schedule for these vessels between February and August of this year.

In December Euronav sold the VLCC Flandre (2004 - 305,688 dwt) for USD 45 million to a global supplier and operator of offshore floating platforms. A capital gain of approximately USD 20.3 million was recorded.

All of these sales will reduce the average age of our fleet.

FINANCING

Instalments for a total of USD 63.7 million have been paid in relation to the construction of four Suezmax vessels at HHI and due for delivery during 2018. The remaining capex for these vessels is USD 185.9 million against which USD 173.5 million will be borrowed under a new facility. These vessel orders are accompanied by four seven-year time charter contracts.

 The Company retained around USD 754.4 million of liquidity as at the end of December 2017.

PROPOSED MERGER BETWEEN EURONAV AND GENER8 MARITIME

On 21 December 2017the boards of Euronav and Gener8 Maritime announced agreement on a stock-for-stock merger for the entire issued and outstanding share capital of Gener8 pursuant to which Gener8 would become a wholly-owned subsidiary of Euronav (the "Combined Entity"). The merger will create the leading independent large crude tanker operator with 75 crude tankers, of which 44 VLCCs and 28 Suezmax crude tankers representing over 18 million dwt in the aggregate. The Combined Entity balance sheet assets of over USD 4 billion will have marked-to-market leverage of less than 50% and a liquidity position estimated at more than USD 750 million, including cash on hand and undrawn amounts available under existing credit facilities.

Work on the transaction is proceeding as planned and we look forward to updating investors with the filing of a proxy statement/prospectus in February. Full details on the proposed transaction can be found on our website: www.euronav.com.

TANKER MARKET

The freight market for both VLCC and Suezmax segments recovered from very low levels observed in the third quarter as part of a typical seasonal trajectory into the first half of the fourth quarter but this recovery was not continued into the latter half of the quarter. Sustained supply increase of new vessels (fifty VLCCs and fifty Suezmaxes were delivered globally during 2017) along with some slower fixing programs on certain routes as OPEC attempts to gain more "bite" from their production cuts, largely drove this unusual late fourth quarter trading pattern.   

 As commented upon in our third quarter statement, OPEC production cuts have recently been accompanied by more assertive and selective crude export reductions. These operational changes were accompanied by an agreed extension of production cuts during the fourth quarter by OPEC and non OPEC nations to the end of 2018. This was combined with a recent spike in production outages (North Sea pipelines, Nigeria and Libya). Both factors could provide negative headwinds to ongoing crude oil supply. However the recent rise in the oil price toward USD 70 (Brent; WTI USD 63) is largely the result of strong oil demand.

OUTLOOK

Conflicting signals remain in the tanker market. Demand for crude remains above recent trend growth rates at 1.4m bpd with a positive outlook and scrap prices continue to rise, providing an exit route for older tonnage owners pressurized by approaching regulatory requirements. Asset values (both new-build and second hand) have remained largely stable over the past 12 months and there has even been some tonnage removed for offshore projects, for instance our vessel Flandre (2004 - 305,668 dwt).

Whilst these building blocks will in our view deliver a positive tanker market structure, confirmation of the extension of OPEC production cuts in November combined with a change in export patterns from such producers will provide a sustained headwind for 2018. Contracting of new VLCCs and Suezmaxes has continued but at a far slower pace than earlier in 2017 and the majority of new tonnage orders continue to come from industrial participants focused on fleet renewal. Indeed the average age of the global VLCC fleet is the highest it has been since January 2003.

Therefore there is a repeat of the message from the last quarter albeit with some recent positive developments. The duration of a challenging freight rate environment will remain dependent on the number of additional newbuilding orders that are not needed by the market. Scrapping and other type of fleet removal trends have been encouraging with the second half of 2017 seeing the highest number of VLCCs and Suezmaxes removed from the fleet during a half year period since 2003. The rise in the scrap value of a typical VLCC to USD 18m provides owners with optionality given the uncertainty over freight rates, the cost of compliance with impending regulations and the scheduled new fleet supply for the next 12-18 months. Already in the current quarter there have been two vessels (1999 & 2000 built) removed from the fleet. However these trends need to be sustained before an inflection point will be observed.  

Over the past 15 months Euronav has undertaken a number of proactive measures to bolster its capital structure to retain the capability to navigate the tanker cycle. The structure of the proposed merger transaction with Gener8 Maritime maintains robust capital ratios. This structure should allow the Combined Entity to continue to have some resilience to a challenging freight rate market yet retain strategic optionality but with exposure to any potential upside when the freight rate environment improves.

So far in the first quarter of 2018, the Euronav VLCC fleet operated in the Tankers International Pool has earned about USD 22,252 and 35.6% of the available days have been fixed. Euronav's Suezmax fleet trading on the spot market has earned about USD 14,347 per day on average with 45.4% of the available days fixed.  

CONFERENCE CALL

Euronav will host a conference call at 8 a.m. EST / 2 p.m. CET today to discuss the results for the quarter.

The call will be a webcast with an accompanying slideshow. You can find details of this conference call below and on the "Investor Relations" page of the Euronav website at http://investors.euronav.com.

Webcast Information  
Event Type:  Audio webcast with user-controlled slide presentation
Event Date: 25 January 2018
Event Time: 8 a.m. EST / 2 p.m. CET
Event Title:  "Q4 2017 Earnings Conference Call"
Event Site/URL:   https://services.choruscall.com/links/euronav180125J37dUXTm.html

Telephone participants may avoid any delays by pre-registering for the call using the following link to receive a special dial-in number and PIN conference call registration link http://dpregister.com/10115821. Pre-registration fields of information to be gathered: name, company, email. 

Telephone participants located in the U.S. who are unable to pre-register may dial in to +1-877-328-5501 on the day of the call. Others may use the international dial-in number +1-412-317-5471.

A replay of the call will be available until 1 February 2018, beginning at 9 a.m. EST / 3 p.m. CET on 25 January 2018. Telephone participants located in the U.S. can dial +1-877-344-7529. Others can dial +1-412-317-0088. Please reference the conference number 10115821.

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe", "anticipate", "intends", "estimate", "forecast", "project", "plan", "potential", "may", "should", "expect", "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the United States Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

*
*  *

Contact:
Mr. Brian Gallagher - Euronav Investor Relations
Tel: +44 20 7870 0436
Email: IR@euronav.com

Announcement of final year results 2017: Wednesday, 21 March 2018

About Euronav
Euronav is an independent tanker company engaged in the ocean transportation and storage of crude oil. The Company is headquartered in Antwerp, Belgium, and has offices throughout Europe and Asia. Euronav is listed on Euronext Brussels and on the NYSE under the symbol EURN. Euronav employs its fleet both on the spot and period market. VLCCs on the spot market are traded in the Tankers International pool of which Euronav is one of the major partners. Euronav's owned and operated fleet consists of 53 double hulled vessels being 1 V-Plus vessel, 28 VLCCs, 18 Suezmaxes, four Suezmaxes under construction and two FSO vessels (both owned in 50%-50% joint venture). The Company's vessels mainly fly Belgian, Greek, French and Marshall Island flags.

Regulated information within the meaning of the Royal Decree of 14 November 2007.

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