Euronav NV reported its non-audited financial results for the three months ended 30 September 2017.
Paddy Rodgers, CEO of Euronav said: “Freight rates remained under sustained pressure in both the VLCC and Suezmax sectors during Q3 – particularly in August as seasonally low levels of cargo and new tonnage entering the market combined to drive rates to lowest levels since 2013. Whilst there has been an encouraging recent uptick in scrapping activity and crude demand growth continued to see upgrades during the quarter, the delivery schedule of new vessels remains elevated into late 2018. Euronav retains substantial balance sheet capacity and fixed income visibility to navigate through such a period of lower freight rates and/or to take advantage of expansion opportunities.”
For the third quarter of 2017, the Company had a net loss of USD (28.1) million (third quarter 2016: net profit of USD 0.1 million) or USD (0.18) per share (third quarter 2016: USD 0.0 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 46.2 million (third quarter 2016: USD 74.6 million).
The average daily time charter equivalent rates (TCE, a non IFRS-measure) can be summarized as follows:
|In USD per day
|Third quarter 2017||Third quarter 2016|
|Average spot rate (in TI pool)||18,875||27,100|
|Average time charter rate*||39,875||41,480|
|Average spot rate**||15,670||19,045|
|Average time charter rate*||21,210||21,575|
*Including profit share where applicable
** Excluding technical offhire days
During the third quarter, the Company repaid all outstanding debt and associated liabilities (USD 30.2 million) on the FSO joint ventures at the conclusion of the original contract. The FSOs are now debt-free.
Also, there were stage payments (USD 12.5 million) associated with the construction of four Suezmax vessels at the Hyundai shipyards in South Korea and due for delivery during 2018. These vessel orders were accompanied by four seven-year time charter contracts.
The Company retained around USD 735 million of liquidity as at the end of September 2017.
The USD 150 million unsecured bond launched earlier this year in May was listed on the Oslo Stock Exchange on 23 October 2017. This initial entry into debt capital markets reflects a desire to diversify our funding structure. The issuer of the bonds has chosen Norway as its home state for the purposes of the EU Transparency Directive as incorporated into the EEA Agreement.
GLOBAL MARITIME FORUM
Last September the Global Maritime Forum was launched with Euronav as one of the fourteen founding partners. Global Maritime Forum is a new platform that strives to shape the future of global seaborne trade. The platform consists of high-level leaders from the entire maritime spectrum and aims to effect positive long-term change for the industry and for society.
The challenging freight market during the third quarter came despite some encouraging signs with active scrapping of vessels returning (nine VLCCs scrapped plus one removed from fleet for FPSO project; six Suezmax scrapped during the third quarter) incentivized by a steel price at near three-year highs. This was supported by continued upgrades to crude oil demand with the IEA raising its forecast for 2017 from 1.2 mbpd to 1.6 mbpd over the course of the third quarter and U.S. crude exports again making further progress to record on average 933k bpd for the third quarter.
However, the VLCC order book continued to expand with thirteen new orders placed during the third quarter largely outpacing this re-emergence of sector discipline in scrapping. The expected seasonal low level of cargoes during the third quarter combined with thirteen new VLCC and fifteen new Suezmax deliveries during the quarter drove freight rates to low levels not seen since the third quarter of 2013 and approaching operating cost break-even levels.
OPEC production cuts have recently been accompanied by more assertive and selective crude export reductions. Combining potential extension of production cuts to the end of 2018 and the recent rise in geopolitical concerns in specific oil producing regions (Kurdistan, Nigeria and Libya), could provide negative headwinds to ongoing crude oil supply.
The outlook remains mixed. In August we stated that the sector is now entering a new phase of the cycle with stabilized prices for modern assets but uncertainty over, and pressure upon, freight rates. This remains the case. The duration of a challenging freight rate environment will remain dependent on the number of additional new build orders that are not needed by the market. Scrapping/fleet removal trends need to be extrapolated further before an inflection point can be reached.
Euronav has taken progressive action in recent quarters via sale & leaseback, corporate bond and bank financing activity to ensure it is well positioned to navigate the next stage of the tanker cycle – to be strategically opportunistic whilst remaining exposed to any potential upside from an improved freight rate environment.
So far in the fourth quarter of 2017, the Euronav VLCC fleet operated in the Tankers International Pool has earned about 26,000 USD and 45% of the available days have been fixed. Euronav’s Suezmax fleet trading on the spot market has earned about 16,000 USD per day on average with 56% of the available days fixed.
Source: EuronavPrevious Next
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