Slide 1: Euronav – IMO 2020 Preparation Webinar Revisited
EURONAV – IMO 2020 P R E PA R AT I O N W E B I N A R R E V I S I T E D 30 JANUARY 2020 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Matters discussed in this presentation may constitute forward-looking statements under U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the Company’s current views with respect to future events
Slide 3: Glossary
GLOSSARY HFO Also known as bunker fuel or residual fuel oil, HFO is the result or remnant from the distillation Heavy Fuel oil and cracking process of crude oil and is predominantly used as a fuel source for marine vessel propulsion. HSFO Designated fuel oils which have a maximum sulphur content of
Slide 4: Original Outlook in 2018 vs Today
ORIGINAL OUTLOOK IN 2018 VS TODAY 4
Slide 5: 1. Euronav VLCC Fleet – Already Efficient
Age of Vessel in Years 10.0 12.0 14.0 16.0 0.0 2.0 4.0 6.0 8.0 Hatteras Amundsen Aquitaine Ardeche Heron Source: Euronav Andaman Aegean Arafura Aral Anne Alboran Alex Drenec Donoussa Desirade Alice Dia Dominica Antigone Hojo Sonia Ilma Simone Alsace Iris Ingrid Sandra Sara Hirado Hakone Hakata Non E
Slide 6: 2. Fuel Oil Availability
2. FUEL OIL AVAILABILITY UPDATED – PLAYED OUT AS FORECAST 2018 3rd Quarter 2019 Bunker market size: 60,000 ships Bunker Market Size: 60,000 ships Bunker Global Volume: 3.5 mmbbls Bunker Global Volume: 3.5 mmbbls HSFO Volume (post 2020): 0.6 mmbbls (17%) HSFO Volume (post 2020): 1.0 mmbbls (~30%) 450
Slide 7: 2. LSFO Availability – Sufficient
2. LSFO AVAILABILITY – SUFFICIENT CHINA WILDCARD - PLAYED JANUARY 2020 Oil Majors LSFO (0.5% S) Bunker Ports • All majors announced plans for availability across world • For example Exxon patented their compliant fuel Refiners • Most major refiners producing 0.5% fuel already • Expectation plans wil
Slide 8: Chinese Policy Move
CHINESE POLICY MOVE COULD CHANGE FUEL OIL DYNAMIC What was position of China had a levy of a $175 p/tonne consumption tax China on LSFO AND 13% VAT on fuel oil production production? China lifted these restrictions early in January What has changed? However fuel oil only for use by Chinese shipping
Slide 9: 3. Retrofit & Scrubber Manufacturers
3. RETROFIT & SCRUBBER MANUFACTURERS UPDATED – PLAYED OUT AS FORECAST 2018 3rd Quarter 2019 Anticipation: Actual: o 3 majors manufacturers o 3 major manufacturers o A few others o 20+ manufacturers in total o Fear of not enough scrubber manufacturing o Plenty of capacity in 2020 and some in 2019 cap
Slide 10: 3. Scrubber Investment
3. SCRUBBER INVESTMENT AWAITING IMPACT LATER IN 2020 2018 3rd Quarter 2019 Anticipated cost: Actual cost: o Scrubber equipment & Installation: USD 3.5 o Scrubber equipment & Installation: million for a VLCC up to USD 6.5 million for a VLCC Retrofit o Loss of hire: will dependent on your natural o Lo
Slide 11: 4. Bunker Price Spread – LSFO vs. HSFO
4. BUNKER PRICE SPREAD – LSFO VS. HSFO UPDATED – SPREAD HIGHER THAN EXPECTED 2018 3rd Quarter 2019 HSFO will be available at a very large discount The price spread for January 2020 has in January 2020 narrowed to $200 / MT Bunker Price Forward Curve May 2018 Bunker Price Forward Curve August 2019 11
Slide 12: Fuel Spreads
FUEL SPREADS REDUCING MATERIALLY & EURONAV WITH BUILT IN PROTECTION HSFO/VLSFO Spread and forward curve 350 300 Rotterdam Singapore 250 200 150 100 Euronav purchase price of compliant fuel in 2019 @$47spread 50 0 May 19 Aug 19 Dec 19 Mar 20 Jun 20 Sep 20 Jan 21 Apr 21 Jul 21 Oct 21 Feb 22
Slide 13: 5. Regulations Changes
5. REGULATIONS CHANGES UPDATED 2018 3rd Quarter 2019 Very few areas where OPLS would be banned More than 85 locations where OPLS are banned; more monitoring compliance Source: GARD 29 August 2019 1. GARD note final decision in September 2019 13
Slide 14: What Are the Residual Risks Today
WHAT ARE THE RESIDUAL RISKS TODAY UPDATED – REMAIN VALID JANUARY 2020 LSFO PRICE ROCKETS HSFO PRICE PLUMMETS DURATION OF SPREAD Demand for HSFO will reduce Lack of general availability sharply post 1 Jan 2020 and Scale of spread between or in specific locations may price may need to fall LSFO and HS
Slide 15: What Have We Done to Prepare?
WHAT HAVE WE DONE TO PREPARE? 16
Slide 16: Dedicated and Focused Bunker Procurement Desk
DEDICATED AND FOCUSED BUNKER PROCUREMENT DESK Establish dedicated fuel & procurement team o Branch office set up in Geneva (fuel trading hub) o Financial and operational human resource added to team o Built experience in an changing fuel market Procure & source Storage & logistics Thorough testing o
Slide 17: What Did We Do in Terms of Fuel Oil?
WHAT DID WE DO IN TERMS OF FUEL OIL? 420,000 tons of compliant fuel oil (0.5 & 0.1) purchased o Covers substantial part of Euronav’s total fuel requirement 2020 Procurement o Average purchase price VLSFO: USD 447 p/t v USD 520 p/t for retail VLSFO o Mix of residual and distillate based materials Com
Slide 18: Procurement
PROCUREMENT 420,000 MT Purchased Average Price Paid for Compliant Fuel Protection 700 100% 90% 0.1% Residual 606 Fuel Oil 600 566 80% 500 $47 70% 447 per ton 400 Premium $ per ton fuel cost 60% 400 0.5% Paid so 50% Fuel far 300 40% 30% 200 20% 100 10% 0% 0 0.5% Fuel HSFO 0.1% Resid MGO price Oil Bun
Slide 19: Operational Management
OPERATIONAL MANAGEMENT o Euronav leveraging our assets and financial capacity to complement our business needs o We are using ULCC as supply platform for fleet o By procuring fuel ahead of 2020 been able to take advantage of emerging 0.5% Sulphur fuel oil market o Mediterranean price $35 per ton che
Slide 20: Benefits of Forward Buying Fuel
BENEFITS OF FORWARD BUYING FUEL UPDATED – LARGELY PROVEN BY OUR EXPERIENCE Security of Safety & Quality Lower Supply Reliability Control Emissions Scale Provenance Compliance CO2 Avoid fuel price spikes Testing Compatibility (compared with Security Reliability Stability using scrubber) supply Safety
Slide 21: LSFO Arbitrage Trading
LSFO ARBITRAGE TRADING UPDATED – VLSFO ARBS EAST ON SUEZMAX Bunker Arbitrage Trade Flows HSFO Suezmax trades VLSFO Suezmax trades 22
Slide 22: HSFO Oversupply to Create Floating Storage Opportunities
HSFO OVERSUPPLY TO CREATE FLOATING STORAGE OPPORTUNITIES UPDATED – HSFO PRICE HAS RISEN; THESIS VALID Tank Farms swapped to LSFO reducing capacity • In traditional storage hubs already switched • Move from HSFO to LSFO to meet new client demand Tank Farms also being used for blending • In order to f
Slide 23: Conclusion
CONCLUSION 24
Slide 24: Euronav Position Has Embedded Optionality
EURONAV POSITION HAS EMBEDDED OPTIONALITY “Second mover” advantage • Experience from first installation cycle • Reduced costs & time with increased availability Potentially procure HSFO & store ourselves • Would enable capture of HSFO at low price • Euronav has proven financial and operational capab
Slide 25: Conclusion
CONCLUSION UPDATED – STILL REMAIN VALID JAN 2020 Euronav fleet profile – fuel efficient Fuel Oil Availability – sufficient Scrubber technology – second mover advantage Bunker spreads – narrowed past 12 months Dedicated fuel procurement team established LSFO Quality, Quantity & Supply Security proven
Slide 26: Thank You!
THANK YOU! 27