Koninklijke Vereniging - Société Royale



Euronav suffers loss

Illustrating the parlous state of the crude tanker sector, Belgian-based tanker owner Euronav suffered a loss of $39.1 mill in the first quarter of this year, against a profit of $34.3 mill recorded for 1Q17. During the quarter, EBITDA fell to $25.7 mill from $101.3 mill for 1Q17.

Euronav’s revenue was slashed to $98.1 mill, down from $164.2 mill reported during the same period last year. Euronav’s VLCCs averaged only $18,725 per day in the TI Pool spot market, compared with $40,525 for the year before. The average timecharter rate was $34,000 per day in 1Q18 as against $41,150 for 1Q17. The Suezmaxes averaged $14,000 per day on the spot market and $23,850 for timecharters, compared with $24,000 and $23,875 per day, respectively, for 1Q17. Thus far in 2Q18, the Euronav VLCC fleet operating in the TI Pool has earned about $13,187 per day and 42% of the available days have been fixed.

Euronav's Suezmaxes trading on the spot market earned about $12,300 per day on average with 46% of the available days fixed. Paddy Rodgers, Euronav CEO said: "Oil demand has been consistently upgraded over the past six months, which along with increased levels of recycling (21 VLCCs year-to-date) are encouraging developments for all tanker operators. However, the rebalancing of the tanker market requires further affirmative action in reducing primarily older tonnage, restraint from contracting and a supportive oil price structure. “Freight rates will remain under pressure until this process of rebalancing is much further advanced.

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," he said.

In March, the Suezmax ‘CAP QUEBEC’ was delivered. This vessel is the first of four Ice Class Suezmaxes, which are progressively starting seven-year contracts with a leading global refinery player, believed to be Valero, from this year. Upon taking delivery of the ‘CAP QUEBEC’, the company paid $45.5 mill (including the final instalment). In addition, the company paid a total of $12.4 mill in instalments towards the construction of the three remaining Suezmaxes at Hyundai Heavy Industries, which are due for delivery between now and September of this year.

The remaining capex for these vessels is $130 mill, which will be borrowed under a new facility. On 22nd March, 2018, Euronav signed a senior secured credit facility for $173.6 mill with Kexim, BNP and Credit Agricole Corporate and Investment bank, which acted also as agent and security trustee. The purpose of the loan is to finance up to 70% of the aggregate contract price of the four newbuilding Suezmaxes.

On 29th March, 2018, TI Asia Ltd and TI Africa Ltd concluded a $220 mill senior secured credit facility. The facility consists of a term loan of $110 mill and a revolving loan of $110 mill to refinance the two FSOs, as well as for general corporate purposes. The company provided a guarantee for the revolving credit facility tranche Euronav said that it retained around $817 mill of liquidity as at the end of March, 2018. Work on the merger with Gener8 is proceeding as planned with an anticipated closing in the second quarter of this year.

Demand for crude overall and expansion of tonne/miles remain positive for the tanker sector, Euronav said. The prospect for oil supply also remains supportive with a higher (and relatively stable) oil price driving new supply from Brazil, Russia and most notably US shale. However, the concentrated nature of the orderbook combined with a current oversupply of tonnage, is likely to provide a challenging backdrop for tanker operators until the world fleet can sufficiently rebalance. Since the second half of 2016 Euronav said that it had 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 those robust capital ratios. This structure should allow the combined entity post-merger to continue to have some resilience to a challenging freight rate market yet retain exposure to any potential upside when the freight rate environment improves.

Source : Tankeroperator



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