EURN Euronav NV

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EURONAV ANNOUNCES SECOND QUARTER AND HALF YEAR RESULTS 2017

HIGHLIGHTS

·	Freight rates challenging given seasonal patterns and concentration of deliveries of newbuildings

·	FSO contracts extension provides further fixed income until 2022

·	Two additional seven-year Suezmax time charters signed during quarter adding to the fixed income until 2025

·	Return to shareholders policy upgraded with  a minimum fixed annual dividend of USD 0.12 per share

·	Return to shareholders policy retains capability for additional dividend and share buy back

·	USD 150 million unsecured bond raised diversifying and boosting balance sheet strength

·	USD 110 million ECA (KSure) financing for the 2 VLCCs delivered in January

ANTWERP, Belgium, 10 August 2017 – Euronav NV (NYSE: EURN & Euronext: EURN) ("Euronav" or the "Company") today reported its non-audited financial results for the second quarter and for the first half of 2017.

Paddy Rodgers, CEO said: "Euronav made considerable progress during Q2. The confirmation of the extension of our five-year FSO contracts combined with an additional two seven-year time charters provide us with a robust and visible fixed income profile. Our balance sheet was further enhanced with a USD 150 million unsecured bond offering during May. The board of directors and management believe these strengths should be reflected in our return to shareholders policy which has now been upgraded to a minimum fixed annual dividend of USD 0.12 per share.

The tanker cycle is positioned at an interesting intersection. Demand for oil saw upgrades during Q2 for both 2017 and 2018 (IEA), supply of oil remains abundant despite OPEC production cuts and modern asset prices appear to have stabilized. Ton-miles were further boosted by U.S. exports since the start of the year and sources of finance, primarily banks, continue to reduce. However, the key challenge for the tanker market is the concentration of deliveries of newbuildings in both the VLCC and Suezmax sectors over the next 18 months which is putting pressure on the freight rate market.

If the illness is low freight rates then the cure is low freight rates as that should drive scrapping activity. Until this inflection point is reached, 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. The duration of the challenging freight rate environment will be entirely dependent on the number of additional orders to build new ships that are not needed by the market."

For the first half of 2017 the Company had a net profit of USD 10.1 million or USD 0.06 per share (first half 2016: USD 153.7 million and USD 0.97 per share). The result includes  a deferred tax benefit of USD 0.6 million and also reflects a deferred tax benefit of USD 2.5 million through equity accounted investees. Proportionate EBITDA (a non-IFRS measure) for the same period was USD 151.8 million (first half 2016: USD 298.6 million).

 

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

 

*Excluding technical offhire days

** Including profit share where applicable

UPGRADE TO EURONAV'S RETURN TO SHAREHOLDERS POLICY

Please read the complete new policy here .

Since Euronav announced its distribution policy in early 2015, the Company has paid out USD 391 million in cash dividends (USD 2.46 per share) and USD 7 million (USD 0.04 per share) in share buy backs. This is one of the highest pay-out of any tanker company over this period.

As a result of substantial changes in tanker market outlook and in view of the Company's strong balance sheet and visible fixed income from the FSOs and time charter contracts, the Board of Directors of Euronav believes that it could improve its return to shareholders policy.

In the near future the tanker freight market may indeed be more challenging than in the last ten quarters and as a result the Company may not generate semi-annual positive results.  As a consequence, under the current return to shareholders policy, the Company may not distribute significant interim or final dividends, or any dividends at all. At the same time, there are now numerous opportunities available which would better serve shareholders so as to generate improved and sustained value over the longer term.

Under its new return to shareholders policy Euronav intends to (1) pay a fixed minimum dividend of USD 0.12 per share every year (equivalent of USD 0.06 for each half year) and; (2) if the results per share are positive and exceed the amount of the fixed dividend, that additional income will be allocated to additional dividends or buying back shares or, of course, accretive vessel or fleet acquisitions, as the board at that time deems most valuable for the shareholders in the long term.

 

INTERIM DIVIDEND 2017

Accordingly, Euronav will pay an interim dividend of USD 0.06 per share for the first half of 2017. This will be the first payment under this new policy announced today. It is anticipated that the ex-dividend date shall be 25 September 2017 with a record date of 26 September 2017 and a payment date of 5 October 2017.

The interim dividend for the first half of 2017 of USD 0.06 per share should be compared to the previous policy which was to pay 80% of net income over the full year with the interim payment a reflection of first half performance and outlook for the second half. A challenging second half freight market consensus for 2017 for the large tanker market would have implied a zero dividend for both the interim and full year 2017 under strict application of the former policy.

EURONAV TANKER FLEET

In June Euronav sold the VLCC TI Topaz (2002 – 319,430 dwt) for USD 21 million recording a capital loss of USD 21 million. The TI Topaz joined the Euronav fleet in the first quarter of 2005 and has contributed positively over the years to the results of Euronav, especially during strong freight rate years such as 2005, 2006, 2008, 2010, 2015 and 2016. The book loss relates to the value of the ship in our books where assets follow straight line depreciation over 20 years.

In May Euronav and its joint venture partner, International Seaways, signed a contract for five years for the FSO Africa and FSO Asia in direct continuation of the current contractual service. The contract was signed with North Oil Company ("NOC"), the future operator of the Al Shaheen oil field, whose shareholders are Qatar Petroleum Oil & Gas Limited and Total E&P Golfe Limited.

The new contracts for these custom-made 3 million barrels capacity units that have been serving the Al Shaheen field without interruption since 2010 will have a duration of five years starting at the expiry of the existing contracts. The new contracts are expected over their full duration to generate EBITDA (earnings before interest, taxes, depreciation and amortization) in excess of USD 360 million for the joint ventures. Based on Euronav's 50% ownership in the joint ventures the five year contracts are expected to generate in excess of USD 180 million of EBITDA for the Company.

FINANCING

In May the Company successfully launched a USD 150 million unsecured bond with a coupon of 7.50% and maturity in May 2022. This was Euronav's first entry into debt capital markets and represents a significant development for the Company in diversifying its funding structure. Indeed, traditional sources of capital, especially bank lending, available to tanker shipping are coming under increasing regulatory and competitive pressure within the banking sector.

 

In June, the company started a treasury note program (Commercial Paper) and placed approximately EUR 50 million in the market for various short term maturities at a pricing of 60 bps over Euribor. This is not additional debt but rather an opportunity to decrease the cost of borrowing by systematically using the proceeds to repay part of the company's revolving loan facilities.

Euronav also signed a 12-year USD 110 million Export Credit Agency (ECA) financing with commercial banks and Ksure for the financing of the two VLCC newbuildings (the Aquitaine and the Ardeche ) the Company took delivery of in January.

TANKER MARKET

We believe that the recent deferral of the required implementation of installing new ballast water treatment systems on all large crude tankers from September 2017 until 2019 will have a negligible impact. Many operators had already de-harmonised their surveying cycle arrangements in anticipation of this legislation so that the original implementation date of 8 September 2017 would, in our view, not have been a specific catalyst for scrapping. However, a significant portion of both the VLCC and Suezmax global fleet is reaching maturity (20 years old or more) between the end of 2017 and end of 2020 during which time both the ballast water treatment directive and reduced sulphur emissions directive will have to be implemented. Within this "regulatory window" (2018-2020) increasing commercial pressures which are driving charterers away from vessels aged 15 years or more will be applied to the 106 VLCC (15% of global fleet) and 72 Suezmax (also 15%) vessels that will turn 20 years old between now and the end of 2020.

The delivery schedule of the current order book is likely to continue to pressure the freight market downward with 28 VLCCs and 23 Suezmaxes due for delivery in the second half of 2017. However, the order book to fleet ratio of 13% for both VLCC and Suezmax sectors versus an average since 1996 of 22% (VLCC) and 24% (Suezmax) (source: Clarksons) looks manageable in the mid-term if no new orders are placed, especially when looking at recent scrapping activity with 3 VLCCs and 5 Suezmaxes scrapped so far this year (Source: Clarksons). However, the concentration of the delivery of newbuildings is the key driver to current and future freight rates. With 28 VLCCs and 23 Suezmaxes due for delivery in the second half of 2017, without scrapping, this downward pressure will remain.

The picture for oil demand remains constructive with the IEA upgrading both 2017 and 2018 forecasts during Q2 fueled by Far East demand and an oil price in a pricing range conducive for economic expansion. With U.S. exports reaching 780,000 bpd during Q2, this should translate into a requirement of an additional 35-45 VLCCs for both this year and next.

The extension of the OPEC production cut to March 2018 was clearly a negative development during May. However, the supply of crude oil remains largely constructive: U.S. shale oil production continues to expand; Nigeria/Libya production (exempt from OPEC cuts) is recovering; general supply outage levels remain low and new supply sources are coming online (e.g. Kashagan). It remains to be seen whether the OPEC production cuts delivered since Q4 2016 translate into something more restrictive for exports and therefore tankers in the second half.

OUTLOOK

Euronav has taken affirmative action in response to a weaker tanker background. The Company has a strong balance sheet with low leverage and access to over USD 800 million of liquidity following its entry into the debt capital markets during Q2. High quality fixed income (the FSO vessels and 4 x 7 year Suezmax time charters) secured via strong relationships and with visibility to 2025 provides Euronav's stakeholders with additional security which will now be reflected in our upgraded return to shareholders policy. Euronav takes its responsibility as steward of capital seriously and management believes that possessing a strong yet flexible capital structure will be critical in the next 18-24 months.

Euronav further believes 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.  Euronav 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 during the third quarter of 2017, the Euronav VLCC fleet operated in the Tankers International Pool has earned about 20,000 USD and 61% of the available days have been fixed. Euronav's Suezmax fleet trading on the spot market has earned about 14,700 USD per day on average with 60% of the available days fixed.

CONFERENCE CALL

Euronav will host a conference call on Thursday 10 August 2017 at 09.30 a.m. EST / 03.30 p.m. CET 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 .

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/10110784 . 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 001-877-328-5501 on the day of the call. Others may use the international dial-in number 001-412-317-5471.

A replay of the call will be available until 17 August 2017, beginning at 11:30 a.m. EST / 5:30 p.m. CET on 10 August 2017. Telephone participants located in the U.S. can dial 001-877-344-7529. Others can dial 001-412-317-0088. Please reference the conference number 10110784.

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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 third quarter results 2017: Thursday 31 October 2017

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

 

 

			June 30, 2017			December 31, 2016
ASSETS
Non-current assets
Vessels			2,416,203			2,383,163
Assets under construction			37,593			86,136
Other tangible assets			710			777
Intangible assets			110			156
Receivables			177,719			183,914
Investments in equity accounted investees			26,396			18,413
Deferred tax assets			1,614			964
Total non-current assets			2,660,345			2,673,523
Current assets
Trade and other receivables			157,241			166,342
Current tax assets			132			357
Cash and cash equivalents			235,699			206,689
Total current assets			393,072			373,388
TOTAL ASSETS			3,053,417			3,046,911
EQUITY and LIABILITIES
Equity
Share capital			173,046			173,046
Share premium			1,215,227			1,215,227
Translation reserve			416			120
Treasury shares			(16,102)			(16,102)
Retained earnings			491,601			515,665
Equity attributable to owners of the Company			1,864,188			1,887,956
Non-current liabilities
Bank loans			867,864			966,443
Other notes			147,345			−
Other payables			561			533
Employee benefits			3,176			2,846
Provisions			−			38
Total non-current liabilities			1,018,946			969,860
Current liabilities
Trade and other payables			65,690			69,859
Current tax liabilities			67			−
Bank loans			47,361			119,119
Other borrowings			57,060			−
Provisions			105			117
Total current liabilities			170,283			189,095
TOTAL EQUITY and LIABILITIES			3,053,417			3,046,911

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			2017			2016
			Jan. 1 - Jun. 30, 2017			Jan. 1 - Jun. 30, 2016
Shipping income
Revenue			290,591			404,450
Gains on disposal of vessels/other tangible assets			20			13,821
Other operating income			2,775			3,702
Total shipping income			293,386			421,973
Operating expenses
Voyage expenses and commissions			(32,283)			(24,855)
Vessel operating expenses			(78,488)			(80,091)
Charter hire expenses			(15,485)			(11,010)
Loss on disposal of vessels/other tangible assets			(21,027)			(2)
Loss on disposal of investments in equity accounted investees			−			(24,150)
Depreciation tangible assets			(115,525)			(109,447)
Depreciation intangible assets			(48)			(50)
General and administrative expenses			(22,351)			(21,721)
Total operating expenses			(285,207)			(271,326)
RESULT FROM OPERATING ACTIVITIES			8,179			150,647
Finance income			2,393			1,884
Finance expenses			(22,034)			(20,958)
Net finance expenses			(19,641)			(19,074)
Share of profit(loss) of equity accounted investees (net of income tax)			21,024			22,276
PROFIT (LOSS) BEFORE INCOME TAX			9,562			153,849
Income tax benefit (expense)			526			(159)
PROFIT (LOSS) FOR THE PERIOD			10,088			153,690
Attributable to:
Owners of the company			10,088			153,690
Basic earnings per share			0.06			0.97
Diluted earnings per share			0.06			0.97
Weighted average number of shares (basic)			158,166,534			158,359,054
Weighted average number of shares (diluted)			158,304,525			158,575,911

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			2017			2016
			Jan. 1 - Jun. 30, 2017			Jan. 1 - Jun. 30, 2016
Profit/(loss) for the period			10,088			153,690
Other comprehensive income, net of tax
Items that will never be reclassified to profit or loss:
Remeasurements of the defined benefit liability (asset)			−			−
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences			296			256
Equity-accounted investees - share of other comprehensive income			484			548
Other comprehensive income, net of tax			780			804
Total comprehensive income for the period			10,868			154,494
Attributable to:
Owners of the company			10,868			154,494

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		Share capital	Share premium	Translation reserve	Treasury shares	Retained earnings	Capital and reserves	Other equity interest	Total equity
Balance at January 1, 2016		173,046	1,215,227	(50)	(12,283)	529,808	1,905,748	−	1,905,748
Profit (loss) for the period		−	−	−	−	153,690	153,690	−	153,690
Total other comprehensive income		−	−	256	−	548	804	−	804
Total comprehensive income		−	−	256	−	154,238	154,494	−	154,494
Transactions with owners of the company
Dividends to equity holders		−	−	−	−	(129,846)	(129,846)	−	(129,846)
Treasury shares sold		−	−	−	(3,819)	(2,338)	(6,157)	−	(6,157)
Equity-settled share-based payment		−	−	−	−	212	212	−	212
Total transactions with owners		−	−	−	(3,819)	(131,972)	(135,791)	−	(135,791)
Balance at June 30, 2016		173,046	1,215,227	206	(16,102)	552,074	1,924,451	−	1,924,451
		Share capital	Share premium	Translation reserve	Treasury shares	Retained earnings	Capital and reserves	Other equity interest	Total equity
Balance at January 1, 2017		173,046	1,215,227	120	(16,102)	515,665	1,887,956	−	1,887,956
Profit (loss) for the period		−	−	−	−	10,088	10,088	−	10,088
Total other comprehensive income		−	−	296	−	484	780	−	780
Total comprehensive income		−	−	296	−	10,572	10,868	−	10,868
Transactions with owners of the company
Dividends to equity holders		−	−	−	−	(34,797)	(34,797)	−	(34,797)
Treasury shares sold		−	−	−	−	−	−	−	−
Equity-settled share-based payment		−	−	−	−	161	161	−	161
Total transactions with owners		−	−	−	−	(34,636)	(34,636)	−	(34,636)
Balance at June 30, 2017		173,046	1,215,227	416	(16,102)	491,601	1,864,188	−	1,864,188

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		2017				2016
		Jan. 1 - Jun. 30, 2017				Jan. 1 - Jun. 30, 2016
Cash flows from operating activities
Profit (loss) for the period			10,088			153,690
Adjustments for:			134,269			116,750
Depreciation of tangible assets			115,525			109,447
Depreciation of intangible assets			48			50
Loss (gain) on disposal of investments in equity      accounted investees			−			24,150
Provisions			(58)			(248)
Tax (benefits)/expenses			(526)			159
Share of profit of equity-accounted investees, net of tax			(21,024)			(22,276)
Net finance expense			19,641			19,075
(Gain)/loss on disposal of assets			21,007			(13,819)
Equity-settled share-based payment transactions			161			212
Amortization of deferred capital gain			(505)			−
Changes in working capital requirements			4,765			35,804
Change in cash guarantees			(29)			59
Change in trade receivables			2,467			(541)
Change in accrued income			5,518			10,441
Change in deferred charges			(1,412)			(7,457)
Change in other receivables			2,543			45,669
Change in trade payables			723			(800)
Change in accrued payroll			(838)			(915)
Change in accrued expenses			(2,260)			(5,174)
Change in deferred income			(2,300)			(5,393)
Change in other payables			43			(158)
Change in provisions for employee benefits			310			73
Income taxes paid during the period			167			73
Interest paid			(17,569)			(16,428)
Interest received			266			98
Dividends received from equity-accounted investees			1,250			778
Net cash from (used in) operating activities			133,236			290,765
Acquisition of vessels			(141,684)			(199,778)
Proceeds from the sale of vessels			20,790			38,016
Acquisition of other tangible assets			(73)			(43)
Acquisition of intangible assets			(1)			(15)
Proceeds from the sale of other (in)tangible assets			28			−
Loans from (to) related parties			18,500			22,047
Proceeds from capital decreases in joint ventures			−			3,737
Acquisition of subsidiaries, net of cash acquired			−			(6,755)
Net cash from (used in) investing activities			(102,440)			(142,791)
(Purchase of) Proceeds from sale of treasury shares			−			(6,157)
Proceeds from new borrowings			533,074			262,300
Repayment of borrowings			(495,012)			(304,952)
Transaction costs related to issue of loans and borrowings			(5,874)			−
Dividends paid			(34,651)			(129,847)
Net cash from (used in) financing activities			(2,463)			(178,656)
Net increase (decrease) in cash and cash equivalents			28,333			(30,682)
Net cash and cash equivalents at the beginning of the period			206,689			131,663
Effect of changes in exchange rates			677			(493)
Net cash and cash equivalents at the end of the period			235,699			100,488