Cmb.tech Nv · EURONEXT:CMBT
Cmb.tech Nv — Euronav — Investor Presentation (March 2019)
58 slides from Cmb.tech Nv's investor presentation, March 2019
Slide 1: Investor Presentation Brussels March 2019
INVESTOR PRESENTATION BRUSSELS MARCH 2019
Slide 2: Euronav – Who We Are
EURONAV – WHO WE ARE The world’s largest, independent quoted crude tanker platform TOTAL 72 VESSELS Fleet summary 43 VLCC 25 SUEZMAX Fixed 12% 19% 15% 15% Av Age 47% Av Age 6.1 Yrs 9.7 Yrs 35% 35% 35% 0-5 6-10 11-14 0-5 6-10 11-14 15+ 2 FSO 2 ULCC Spot 88% 2
Slide 3: Maintain Strong Balance Sheet
i, FURON A “ah EURONEXT MAINTAIN STRONG BALANCE SHEET CO) LEVERAGE AROUND 50% & LIQUIDITY RUNWAY FOR TWO YEARS $30M MAINTENANCE CAPEX FIXED DIVIDEND USD 12c PER ©) ON DRY DOCK + REGULATORY YEAR COVERED BY FIXED INCOME CAPEX eg ballast water systems PAID 50% IN MAY & SEPT > GROWTH CAPEX ACQUISITIONS
Slide 4: Euronav Strategy – Liquidity Focus
Actively managed high quality fleet… EURONAV STRATEGY – LIQUIDITY FOCUS Liquidity in the Euronav share Balance sheet liquidity end Dec 2018 $674m 800 674 2000 10 439 700 60 1800 9 600 + no 500 Daily Value traded $m per day last 12 months 1600 8 outstanding capex $m 400 Free Float $ Market Cap (000)
Slide 5: Tanker Market Structure
TANKER MARKET STRUCTURE Seasonal Cyclical Few customers, lots of suppliers 53,000 100,000 Monthly average 1 Year Monthly average TCE rate 1990-2018 Traders 90,000 VLCC rate 1990-2018 48,000 80,000 70,000 Oil Refiners Companies 43,000 60,000 50,000 Ship Broker 38,000 40,000 30,000 P&L breakeven 33,00
Slide 6: Operationally Geared
FSO 5 year contract to 2022 OPERATIONALLY GEARED Each $5,000 uplift in both VLCC and Suezmax rates improves net revenue and EBITDA by $112mm $1,232 Long term TC 7 year contract to 2024 $336 $560 + $112 BASE +$5,000 +$15,000 +$25,000 +$55,000 Commercial TC relationships per day per day per day per da
Slide 7: Operational Leverage in Practice
OPERATIONAL LEVERAGE IN PRACTICE 2019 EPS $1.32 IN 2015 = $16 SHARE PRICE ..If Euronav did VLCC $40k per day $30k Suez per day = $1.32 EPS…same as in 2015 $1.40 2019 VLCC 40k $16 $1.20 Suez 30k = $1.25 EPS Euronav $1.00 Share price EPS Euronav $8 $0.00 ($0.20) Source: Bloomberg 7
Slide 8: Strong Pro Forma Financials
STRONG PRO FORMA FINANCIALS Leverage Repayment schedule and RCF reductions Highlights 600 o Credit margins between 1.225% and 2.25% (Bond Millions 7.5%) 500 o Most of the secured bank debt is revolving o Strong relationships with the leading international shipping banks 400 o No material debt maturi
Slide 9: Industry and Market Overview
INDUSTRY AND MARKET OVERVIEW
Slide 10: Outlook for 2019
OUTLOOK FOR 2019 GAME OF TWO HALVES 1H HEADWINDS, 2H TAILWINDS Demand Supply IMO Vessel Ton Supply Euronav for Oil of Oil 2020 Miles Balance sheet US vs Peak Robust Positive Growing Flexibility Saudi in 19 10
Slide 11: Demand for Oil – Robust and Steady
DEMAND FOR OIL – ROBUST AND STEADY Annual demand growth VLCC Equivalents Y/Y Change in global demand for oil – consistently growing (mbpd) 1.6 49 1.5 46 1.4 2019 IEA 43 1.3 40 3.5 1.2 37 3.1 3.1 1.1 33 3.0 Average 1.1 million barrels per day 1 30 0.9 27 2.5 0.8 24 0.7 21 2.0 2.0 1.9 IEA m bpd global
Slide 12: Oil Price Impact on Demand – Lower Price Is Positive
OIL PRICE IMPACT ON DEMAND – LOWER PRICE IS POSITIVE Oil price outlook driven by Sheik v Shale/Trump tweets 110 100 90 Price is too high/demand is impacted Demand < 1.1m USD per barrel brent crude price Destructive bpd 80 = 1.1m 70 Neutral bpd 60 Demand > 1.1m 50 Stimulating bpd 40 Demand 30 Price i
Slide 13: Oil Supply – OPEC Cuts Already In
US & OPEC crude production 39,000 40,000 42,000 43,000 44,000 45,000 46,000 41,000 Jul-2016 Aug-2016 Sep-2016 Oct-2016 Source: Clarksons, Bloomberg Nov-2016 Dec-2016 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 Oct-2017 Nov-2017 US & OPEC crude output Dec-2017 Jan
Slide 14: Rise of US Shale Means OPEC Cuts Less Effective
US crude production 10,000 12,000 2,000 4,000 6,000 8,000 14,000 0 Jul-2016 Source: Bloomberg Aug-2016 Sep-2016 Oct-2016 Nov-2016 Dec-2016 Jan-2017 Feb-2017 Mar-2017 Apr-2017 LESS EFFECTIVE May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 US output Oct-2017 Nov-2017 Dec-2017 Jan-2018 Feb-2018 Mar-2018 O
Slide 15: Oil Supply – OPEC Cuts Are In But Supply Background Constructive
OIL SUPPLY – OPEC CUTS ARE IN..BUT SUPPLY BACKGROUND CONSTRUCTIVE US Saudi Russia Total global oil supply 13.0 103.0 102.5 12.5 US, Saudi & Russia oil production m bpd 102.0 Total oil supply m bbls per day 12.0 101.5 11.5 101.0 100.5 11.0 100.0 10.5 99.5 10.0 99.0 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Slide 16: Ton Miles - Increasing
TON MILES - INCREASING Demand growth all from Far East – key for tankers is where supply is sourced from Atlantic Basin – Far East route Middle East - Asia Pacific route 1.4 mbpd x 365 days = 511m barrels 1.4 mbpd x 365 days = 511m barrels Annual VLCC 511m barrels / 2m capacity per VLCC = 256 cargoe
Slide 17: Vessel Supply – Balance Improving
VESSEL SUPPLY – BALANCE IMPROVING Korea dominating tanker orders CONTRACTING NEW Shipyard Consolidation VESSELS VLCC OB/Fleet = 13.5% Suezmax OB/Fleet = 10.4% ORDER BOOK Below historic averages OPERATIONAL FLEET More Iranian vessels to exit IMO prep will reduce capacity Global fleet age will require
Slide 18: Vessel Supply – Contracting Driven by Industrial Replacement
No of VLCC contracted 10 0 1 2 3 4 5 6 7 8 9 Sep-2016 Oct-2016 Source: Clarksons Nov-2016 Dec-2016 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 VLCC below $80m attracted buyers Aug-2017 No of VLCC orders Expansion Sep-2017 Oct-2017 No of VLCC orders Speculative/Scrubber Nov-2017 De
Slide 19: Vessel Supply – Changes in Shipbuilding Structure
VESSEL SUPPLY – CHANGES IN SHIPBUILDING STRUCTURE Korea dominates crude tanker orderbook Consolidation in Shipbuilding sector VLCC Suezmax Global Market share in shipbuilding 70 60 Number of VLCC & Suezmax ordered since 2017 Hyundai Heavy Industries 14% Samsung Heavy 50 DSME 4% 6% 40 30 20 Other 76%
Slide 20: VLCC Delivery Schedule
VLCC DELIVERY SCHEDULE Delivered To be Delivered Recycled To be Recycled 80 48 60 50 47 39 39 40 30 Number of VLCCs per year 24 20 20 11 17 0 -1 2013 2014 2015 2016 2017 2018 2019 2020 2021 -4 -2 -20 -14 -14 -22 -21 -31 -31 -40 -39 -60 Source: Clarksons 20
Slide 21: Suezmax Delivery Schedule
SUEZMAX DELIVERY SCHEDULE Delivered To be Delivered Recycled To be Recycled 70 57 60 50 40 16 32 Number of Suezmax per year 27 27 30 20 17 10 17 8 10 2 0 -1 2013 2014 2015 2016 2017 2018 2019 2020 2021 -10 -7 -1 -7 -13 -20 -15 -22 -23 -30 -26 -40 Source: Clarksons 21
Slide 22: Concentration of Vessel Supply 2019 Is a Headwind for VLCC
CONCENTRATION OF VESSEL SUPPLY 2019 IS A HEADWIND FOR VLCC 65 39 25 2019 2020 21 20 18 No of VLCC deliveries per quarter 15 15 15 14 14 13 13 13 12 12 12 12 12 11 11 11 11 10 10 10 9 9 9 8 8 8 8 7 7 6 5 5 5 4 4 4 2 0 Source Clarksons 22
Slide 23: Vessel Supply – Iranian Sanctions Reducing Supply
VESSEL SUPPLY – IRANIAN SANCTIONS REDUCING SUPPLY WITH MORE TO COME Long term storage Iranian storage Market storage 70 14 more Iranian 60 tankers to add? 50 Number of VLCC 40 30 27 26 24 24 23 25 25 25 23 20 22 18 19 21 21 21 21 23 21 22 22 19 20 17 20 16 13 12 8 4 5 6 3 4 4 6 2 1 0 0 2 0 1 1 0 0 1
Slide 24: Recycling Reflects Steel Price and Regulatory Pressure
RECYCLING REFLECTS STEEL PRICE AND REGULATORY PRESSURE Older tonnage comes under increasing pressure Owners dilemma Increased opex from IMO2020 Volatile steel/scrap price Lower cash earnings for older vessels Ballast water capex $1.5m from Sept 19 Source Euronav 24
Slide 25: Recycling – Reflects More Mature VLCC Fleet
RECYCLING – REFLECTS MORE MATURE VLCC FLEET Average age recycling at 20.6 years of age Recycling driven by steel prices in the main av age demolition average average age vlcc fleet Recycled VLCC VLCC Scrap Value 15 year old VLCC value 26 9.50 50 10 45 9 24 9.00 40 8 Average Age of VLCC in global fle
Slide 26: Pipeline for More Recycling Is Building
PIPELINE FOR MORE RECYCLING IS BUILDING Average fleet age suggests 2-3% recycling rate Recycling pipeline for 2019 corroborates rate VLCC Fleet - Average Age % of VLCC fleet recycled SS at 22.5yrs SS at 20yrs SS at 17.5yrs 14.5 9.0% 45 30% = 7 VLCC No of VLCC facing survey > 17.5 years per year 8.0%
Slide 27: Vessel Supply Can Be Absorbed – But With 2H Bias
VESSEL SUPPLY CAN BE ABSORBED – BUT WITH 2H BIAS …Potentially yes given Iran, US export growth and impact IMO 140 120 22 No of VLCC equivalent for 2019 100 37 20 80 20 82 14 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Rec
Slide 28: Financials & Regulation – Structural Change
FINANCIALS & REGULATION – STRUCTURAL CHANGE Global end of the year loan shipping portfolio o Banks under increasing 400 commercial & regulatory pressure 374 350 361 Around USD 104bn withdrawn from 300 317 shipping sector since 2010 o Regulations starting to bite – $m lending to shipping by banks 292
Slide 29: Current Themes
Fs Laded = Laded —_ — — = Laded [=-— c= — Ww
Slide 30: Issue #1 US – China Trade Issues Had Little Impact on Crude Tankers
ISSUE #1 US – CHINA TRADE ISSUES HAD LITTLE IMPACT ON CRUDE TANKERS US $ value crude exports to China US $ value crude exports to JKIT US crude exports 3.5 3 J-KIT = Japan, Korea, India, Taiwan 3.0 US $ value of crude exports ($bn) per month 2 2.5 US crude exports m bpd 2 2.0 1.5 1 1.0 1 0.5 0.0 0 S
Slide 31: Issue #2 Venezuela – More Impactful on Oil Price Structure Than Tankers
ISSUE #2 VENEZUELA – MORE IMPACTFUL ON OIL PRICE STRUCTURE THAN TANKERS Assuming lost Vz 500k bpd = 3 VLCC net units Impact on crude grades and differentials 3.5 3.0 500kbpd loss Vz to USA 2.5 Brent - Dubai spread crude $ per barrel 500,000 mbpd x 365 days = 182m barrels 182m barrels / 2m capacity p
Slide 32: Issue #3 US Exports Gaining Critical Traction for Tankers
ISSUE #3 US EXPORTS GAINING CRITICAL TRACTION FOR TANKERS US crude export capacity growing US is driving the barrel further and further CC Brownsville Greater Houston St James NO exports distance imports distance LOOP Nederland 8 10,000 Average distance import/export (nautical miles) 9,000 7 8,000 U
Slide 33: Issue #4 Asset Prices Signalling an Improvement
ISSUE #4 ASSET PRICES SIGNALLING AN IMPROVEMENT Euronav NAV $ per share Euronav share price $ New build VLCC $m 16 100 15 95 14 VLCC new build price $m 13 Euronav share price $ 90 12 11 85 10 9 80 8 7 75 Source: Clarksons, Fearnley 33
Slide 34: Issue #4 Asset Values Appear Key
Value of new build VLCC 70 80 90 100 110 120 130 140 150 160 170 Dec-2004 May-2005 Source: Clarksons Oct-2005 Mar-2006 Aug-2006 Jan-2007 Jun-2007 Nov-2007 Apr-2008 Sep-2008 Feb-2009 Jul-2009 Dec-2009 May-2010 Oct-2010 Mar-2011 New Build VLCC Aug-2011 Jan-2012 Jun-2012 Nov-2012 Apr-2013 Sep-2013 Feb-
Slide 35: Issue #4 Freight Rates Less So
VLCC freight rates 100,000 150,000 200,000 250,000 0 50,000 Dec-2004 May-2005 Source: Clarksons Oct-2005 Mar-2006 Aug-2006 Jan-2007 Jun-2007 Nov-2007 Apr-2008 Sep-2008 Feb-2009 Jul-2009 Dec-2009 May-2010 VLCC Oct-2010 Mar-2011 Aug-2011 Jan-2012 Jun-2012 Nov-2012 Apr-2013 EURN share price $ Sep-2013
Slide 36: Conclusion
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Slide 37: What Does It Mean? Two Tier Market and Stretched Tanker Fleet
WHAT DOES IT MEAN? TWO TIER MARKET AND “STRETCHED” TANKER FLEET Bifurcated freight market - Atlantic versus AG Global tanker fleet ballast legs increasing 12 empty VLCCs heading for US @ 21 February 2019 “Twelve Empty Supertankers Reveal Truths About Today’s Oil Market – Bloomberg 21 February 2019”
Slide 38: Beginning to Stir – VLCC Reflect Better Market Balance
10,000 30,000 40,000 50,000 60,000 20,000 0 Week 1 Week 2 Week 3 Week 4 Source: Clarksons Week 5 Week 6 Week 7 Rate Week 8 Week 9 17 & 18 Week 10 Week 11 recovery still above stalled but Week 12 Week 13 Week 14 Week 15 Week 16 Week 17 Week 18 Week 19 Week 20 Week 21 2017 Week 22 Week 23 Week 24 Week
Slide 39: It's a Game of Two Halves, Brian
IT’S A GAME OF TWO HALVES, BRIAN VLCC equivalents due to be delivered VLCC equivalents in DD for IMO 2020 Iranian VLCC post US waivers Recycling Oil supply change 40 1.5 30 1 Quarterly change in global oil supply (citi) 20 0.5 Number of VLCC equivalents 10 0 0 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 -0.5 -10
Slide 40: 2019 - A Year of Many Moving Parts But Could See Inflection Point
2019 - A YEAR OF MANY MOVING PARTS BUT COULD SEE INFLECTION POINT 2016 2017 2018 2019 2020 Annual VLCC to be delivered 47 50 39 65 39 VLCC demand equivalents SUPPLY Suezmax to be delivered 27 57 32 33 17 growth VLCC Equivalent 61 79 55 82 48 (mbpd) VLCC equivalent recycling* -2 -15 -46 -30 -44 1.6 4
Slide 41: Euronav IMO 2020 Framework
EURONAV IMO 2020 FRAMEWORK as Se A ae
Slide 42: IMO 2020 – A Positive - More Crude Runs
IMO 2020 – A POSITIVE - MORE CRUDE RUNS… More throughput to make compliant fuel Crude throughput with IMO Without IMO 90 88.8 88.5 88.0 87.4 88 86.6 88.5 87.8 85.8 87.1 86 86.4 84.6 85.7 m bpd 83.2 85.1 84 84.3 82.0 83.2 82 82.0 Potential additional VLCC required 80 9 21 27 30 27 21 9 78 2017 2018 2
Slide 43: IMO 2020 A Positive – More Trading Routes
…IMO 2020 A POSITIVE – MORE TRADING ROUTES New trading routes driven by sulphur content Source Braemar, Euronav 0.2 0.2 0.2 Potential additional trade mbpd Source: Braemar, Euronav 43
Slide 44: IMO 2020 – Potential for Storage Opportunities & Logistics
IMO 2020 – POTENTIAL FOR STORAGE OPPORTUNITIES & LOGISTICS Volumes Bear Case Bull Case MARKET SIZE IMO 2020 HSFO Conversion Volumes 3.3 3.3 MITIGATING FACTORS Estimated Non Compliance/Scrubber Penetration -1.0 -0.5 HSFO Volumes to be replaced 2.3 2.8 HSFO REPLACEMENT Higher coking capacity, higher l
Slide 45: Euronav on Scrubbers – Sceptical Stance
framework Scrubber EURONAV ON SCRUBBERS – SCEPTICAL STANCE Upfront capital investment without visibility Full capture of savings likely to be challenging “Cart before the horse” 45
Slide 46: Euronav on Scrubbers – Sceptical Stance
framework Scrubber EURONAV ON SCRUBBERS – SCEPTICAL STANCE Much flexibility in refinery system to produce LSFO Applicability of scrubber technology reducing 46
Slide 47: Scrubbers - Regulatory & Operational Risks Require Clarity
framework Scrubber SCRUBBERS - REGULATORY & OPERATIONAL RISKS REQUIRE CLARITY Environment Regulatory & Operational Risk Enforcement Risk - Scrubber = more - Investor arena - Risk of future - Unknown safety power = more increasingly ESG / port/flag state risks but known CO2 emissions CSR focused acti
Slide 48: Key – Scrubber Economics – Fully Costed Approach
framework Scrubber KEY – SCRUBBER ECONOMICS – WE WANT TO FOCUS ON FULLY COSTED APPROACH Fuel Spread $150-200 per ton RETURNS Consumption 50-65 tonnes per day CASH Scrubber $2.8m per unit/$5m “all in” All the focus been on above this line not below it Base assumption of fuel cost savings $10,000 per
Slide 49: Appendix
APPENDIX
Slide 50: VLCC Global Fleet Age Profile
VLCC GLOBAL FLEET AGE PROFILE 70 64 60 59 Orderbook 13% 25% > 15 years 52 50 52 49 50 47 39 39 39 40 No of VLCC 36 37 31 30 28 28 29 30 23 24 20 20 18 13 11 11 11 10 7 5 1 0 50
Slide 51: Suezmax Global Fleet Age Profile
SUEZMAX GLOBAL FLEET AGE PROFILE 60 50 50 44 43 44 Orderbook 10% 40 24% > 15 years 37 No of Suezmax 30 28 25 24 23 23 23 21 20 20 18 18 17 16 13 13 9 10 8 8 7 5 2 3 2 2 2 0 1 1 0 51
Slide 52: Orderbook – Manageable in Size Terms
ORDERBOOK – MANAGEABLE IN SIZE TERMS…. 60 50 40 Orderbook as % of fleet 30 20 13.5% 10 10.4% 0 VLCC Orderbook % Fleet Suezmax Orderbook % Fleet VLCC long term average Suezmax long term average Source Clarksons 52
Slide 53: Longer Term Asset and Earnings Correlations
VLCC new build, 5, 10 year old 20 40 60 80 100 120 140 160 180 Dec/04 May/05 Oct/05 Euronav Price Mar/06 Aug/06 Jan/07 Jun/07 Nov/07 Correlations from Dec 2004 Apr/08 Sep/08 Feb/09 CORRELATIONS Jul/09 New Build VLCC Dec/09 May/10 Oct/10 Mar/11 Aug/11 VLCC Earnings 66% Jan/12 5 year VLCC Jun/12 Nov/1
Slide 54: Primary Value of Euronav Is Its Stock of Fleet Days
PRIMARY VALUE OF EURONAV IS ITS STOCK OF THIS COMMODITY – FLEET DAYS Remaining fixing days at Euronav o Pre merger Euronav 300 300 had 735 shares per Thousands Thousands Pre merger Post merger fleet day 250 250 o Post merger it has 200 200 649 shares per fleet day 150 150 o Accretion of 100 50 100 5
Slide 55: Counter Cyclical Investing
COUNTER CYCLICAL INVESTING 120,000 109 Gener8 Maersk 100,000 104 80,000 99 VLCC rates $ per day New build VLCC $m 60,000 94 40,000 89 20,000 84 0 79 2010 2011 2012 2013 2014 2015 2016 2017 2018 VLCC rates New Build VLCC $m Source: Clarksons 55
Slide 56: Longer Term Freight Rates by Quarter
20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 0 Q1-2000 Q3-2000 Q1-2001 Q3-2001 Q1-2002 VLCC Q3-2002 QUARTER Q1-2003 Q3-2003 Q1-2004 Q3-2004 Q1-2005 Suezmax Q3-2005 Q1-2006 Q3-2006 Q1-2007 Q3-2007 Q1-2008 Q3-2008 Q1-2009 Q3-2009 Q1-2010 Q3-2010 VLCC average since 2000 Q1-2011 Q
Slide 57: Consolidation in Large Tankers
CONSOLIDATION IN LARGE TANKERS 300 25% 273 DHT TNK GNRT* EURN* NAT 254 250 41 227 20% 35 206 32 Number of VLCC/Suezmax % of VLCC/Suezmax fleet 200 31 44 46 15% 46 142 42 30 150 124 27 116 27 31 26 10% 17 17 51 100 22 73 49 37 46 32 24 30 22 5% 22 34 50 25 38 39 21 31 30 21 10 22 11 32 29 10 16 14 18
Slide 58: Fearnley on Scrubber Restrictions
FEARNLEY ON SCRUBBER RESTRICTIONS 58