Cmb.tech Nv · EURONEXT:CMBT
Cmb.tech Nv — Euronav — Q1 2021 Earnings Presentation
48 slides from Cmb.tech Nv's earnings presentation, May 2021
Slide 1: Update Q1 Earnings Call
UPDATE Q1 EARNINGS CALL | @euranav:
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: Operationally Geared + Contract Income
EURONAV OPERATIONALLY GEARED+ CONTRACT INCOME Each $5,000 uplift in both VLCC and Suezmax rates improves net FSO 5 year contract to 2022 revenue and EBITDA by $112mm + 10 year Extension to 2032 $1,232 Commercial TC relationships Long term TC 7 year contract to 2024 $560 $336 Euronav Spot focused $11
Slide 4: Euronav Fleet at a Glance
EURONAV FLEET AT A GLANCE Average Age VLCC 6.3. years Average Age Suezmax 11.8 years 12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 VLCC owned Forward sold VLCC Suezmax owned 4
Slide 5: Euronav Fleet at a Glance
EURONAV FLEET AT A GLANCE Delivery schedule Other owned assets + 2 ULCC + 2 Suezmax Strategic 2022 storage + 2 VLCC + 2 FSO + 1 option TC to 2032 2022/3 5
Slide 6: Capital Allocation
CAPITAL ALLOCATION MEETING FINANCIAL, EMISSION & STRATEGIC GOALS RECYCLE OLDER TONNAGE INTO NEW BUILDS Sell Buy 6x VLCC 6x VLCC + 1 option Financing 3x Suezmax 2x Suezmax Dry docking Av Age 13.7 yrs Newbuilds Increase Reduce Retain Balance Earnings Power Emissions Sheet strength Source: Euronav 6
Slide 7: Tanker Market Dynamics: Short Term Challenges
TANKER MARKET DYNAMICS SHORT TERM CHALLENGES 7
Slide 8: Outlook
OUTLOOK TANKER MARKET AWAITING RECOVERY Demand for Supply Euronav Oil Ton miles Vessel Supply of Oil Balance sheet 2nd wave restrictions OPEC+ scheduled Far East ton miles Fleet Age & Leverage remains lowering demand tapering of growing up Orderbook to fleet below target but vaccine to get productio
Slide 9: Crude Recovery Has a Demand Problem
CRUDE RECOVERY HAS A DEMAND PROBLEM….SAME AS EVERYONE ELSE IEA DEMAND HISTORY & FORECAST 105 100,6 100,6 100 98,9 99,1 98,7 97,9 94,7 94,9 95 93,7 93,7 92,6 90 85 82,8 80 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 9
Slide 10: Crude Recovery Has a Demand Problem
CRUDE RECOVERY HAS A DEMAND PROBLEM ….SAME AS EVERYONE ELSE COVID OUTBREAKS DEFERRED RECOVERY Source: The New York Times. Coronavirus World Map: Tracking the Global Outbreak 10
Slide 11: Demand Recovery – Difficult to Extrapolate
DEMAND RECOVERY – DIFFICULT TO EXTRAPOLATE IEA DEMAND HISTORY & FORECAST WITH GLOBAL VLCC COUNT & 1 YEAR TIME CHARTER RATE 290 80.000 VLCC CARGO COUNT VLCC 1 year TC 70.000 270 252 60.000 250 50.000 230 40.000 210 207 30.000 190 20.000 170 10.000 150 0 Mar-19 Mar-20 Mar-21 Jul-19 Jul-20 Jul-21 Sep-1
Slide 12: Oil Demand Pre-Covid
OIL DEMAND PRE-COVID RESILIENT = WORLD GDP X 0.5 BUT TRANSPORT HEAVY CRUDE USAGE IS TRANSPORT HEAVY 45 40 Oil demand m bpd by sector 2018 35 30 25 20 15 10 5 0 Road transport Aviation & Shipping Industry & Petrochemicals Buildings & Power Other sectors Source: Kepler Chevereaus, WEO 2019 12
Slide 13: Supply Problem #1: Too Many Tankers
SUPPLY PROBLEM #1 TOO MANY TANKERS 13
Slide 14: Supply Problem #2: OPEC Restraining Cargoes
SUPPLY PROBLEM #2: OPEC RESTRAINING CARGOES 34000 32000 30000 k bpd OPEC production 28000 26000 24000 22000 20000 14
Slide 15: Floating Storage
FLOATING STORAGE MORE OR LESS OVER AS AN ISSUE Mar ’20 Apr ‘21 300 VLCC 43 53 250 Suezmax 19 16 Aframax 6 16 No of vessels floating storage 200 150 100 50 0 Suezmax Aframax VLCC Source: Clarksons 15
Slide 16: Tanker Markets & Inventory Draw
100.000 120.000 140.000 160.000 180.000 20.000 40.000 60.000 80.000 0 Jan-2013 Apr-2013 Jul-2013 Source: Clarksons Oct-2013 Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015 Apr-2015 Jul-2015 Oct-2015 Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 Apr-2017 EIA global crude inventory Jul-2017 Oct-2017 Jan-2
Slide 17: Despite Very Tough Freight Market Asset Prices Rising Strongly
DESPITE VERY TOUGH FREIGHT MARKET ASSET PRICES RISING STRONGLY +10% +5% +10% +9% 100 93 90 85 80 69 70 62 63 $m value vessels 60 56 50 45 43 40 30 20 10 0 Newbuild Suezmax 5 year old Suezmax 5 year old VLCC Newbuild VLCC End October 2020 April 26 2021 Source: Clarksons 17
Slide 18: OPEC Barrels Returning
OPEC BARRELS RETURNING OPEC+ PRODUCTION TO RISE BUT WILL EXPORTS? 28,0 27,5 27,0 26,5 OPEC production core 26,0 25,5 25,0 24,5 24,0 23,5 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 OPEC production Saudi repeal of cuts Source: Bloomberg 18
Slide 19: "Illicit" Trade Needs to Unwind
“ILLICIT” TRADE NEEDS TO UNWIND “ILLICIT” TRADE LIKELY PREVENTING RECYCLING 70 8% of fleet 60 50 No of illicit vessels 40 54 5 % of fleet 30 20 20 10 12 9 0 VLCC Suezmax Venezuela Iran Source: Gibsons 19
Slide 20: Tanker Market Dynamics: Medium Term Upside
TANKER MARKET DYNAMICS MEDIUM TERM UPSIDE 20
Slide 21: Oil Supply Will Return and Will Favour VLCC
OIL SUPPLY WILL RETURN AND WILL FAVOUR VLCC 104.2 1.6 93.9 Source: IEA 21
Slide 22: Global Refinery Capacity Changes
GLOBAL REFINERY CAPACITY CHANGES SUPPORTIVE OF TON MILE DEVELOPMENT REFINERY PLANNED DEVELOPMENTS 2020-2023 2000 1500 k bpd refinery capacity 1000 500 0 -500 -1000 North Europe China India Japan SE Asia Australasia Middle East Latin America Africa America 2020 2021 2022 2023 Source: Braemar 22
Slide 23: Medium Term Ton Miles Drivers Intact
MEDIUM TERM TON MILES DRIVERS INTACT RECYCLE OLDER TONNAGE INTO NEW BUILDS RECYCLE OLDER TONNAGE INTO NEW BUILDS 55 28 26 50 24 22 6.75m bpd 45 20 18 40 16 35 14 12 30 10 Atlantic Basin Crude Output Atlantic Basin Refining Asian Crude Import Requirement Middle East Exports (mbpd) Source: IEA 23
Slide 24: Ton Miles Impact
TON MILES IMPACT FOR RETURNING BARRELS 1m bpd of transit = requirement for 30 VLCC - long term tanker market dynamics ATLANTIC BASIN – FAR EAST ROUTE MIDDLE EAST - ASIA PACIFIC ROUTE Annual 1 mbpd x 365 days = 365m barrels 1.4 mbpd x 365 days = 365m barrels VLCC 365m barrels / 2m capacity per VLCC =
Slide 25: Asset Prices Tend to Lead Freight Rate Trajectory
ASSET PRICES TEND TO LEAD FREIGHT RATE TRAJECTORY 80.000 110 70.000 105 60.000 100 50.000 1 year TC VLCC VLCC resale $m 95 40.000 90 30.000 85 20.000 80 10.000 0 75 1 year TC VLCC resale Source: Clarksons 25
Slide 26: Vessel Supply – Ripe for Re-sizing
VESSEL SUPPLY – RIPE FOR RE-SIZING VLCC GLOBAL FLEET AGE STRUCTURE 25% VLCC fleet > 15 years Average fleet age = 10 years Orderbook 9% Back to level not seen since 2002 80 11 70 10 10 60 Average age of VLCC fleet Few >20 year old trading 9 50 & sanction effected No of VLCC 9 40 8 30 8 20 7 10 7 0 6
Slide 27: Recycling Reflects Owner Pressure
RECYCLING REFLECTS OWNER PRESSURE STEEL PRICE AND REGULATORY PRESSURE OLDER TONNAGE COMES UNDER INCREASING PRESSURE OWNERS DILEMMA Older vessels = Increased opex from heavy consumers IMO2020 Volatile steel/scrap price Lower cash earnings for older vessels Ballast water capex $1.5m from Sept 19 Sourc
Slide 28: Older Tonnage Under Pressure
OLDER TONNAGE UNDER PRESSURE OLDER TONNAGE - POST 15 YEARS CHANGES 12.000 10.000 8.000 VLCC ton-miles per year 6.000 4.000 2.000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Age in years - VLCC Source: Braemar 28
Slide 29: Not All Tankers Are Equal
NOT ALL TANKERS ARE EQUAL… “Market” VLCC 15 Year Old VLCC “Eco” VLCC Fuel Fuel Freight Fuel Freight Freight TCE TCE TCE x80% Consumption 60 tonnes 70 tonnes 54 tonnes Utilisation 100 % 80 % 100 % Opex + DD $10,095 $11,740 $9,800 TCE rate $15,000 $9,600 $16,800 Costs OPEX +DD LSFO $300 p/ton 10 yr ol
Slide 30: Conducive Conditions for Recycling
CONDUCIVE CONDITIONS FOR RECYCLING WHICH ARE ALSO INTENSIFYING …WITH CATALYST OF 62 VLCCS REQUIRING SPECIAL SURVEYS DURING 2021 20 18 16 6 14 6 12 8 10 4 8 8 8 6 5 5 4 2 4 3 3 2 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 22.5 year survey 20 year survey 17.5 year survey Source: Clarksons * VLCC equivalents in
Slide 31: Recycling
RECYCLING WHEN VLCC RATES GO BELOW P&L BREAK EVEN = ON AVERAGE 5% FLEET DEPARTS 5% OF CURRENT FLEET = 41 VLCC 9% 30.000 8% 8% 8% 8% 7% 25.000 % of VLCC fleet recycled during year 7% VLCC freight rate for Year 6% 6% 20.000 5% 5% 5% 5% 5% 4% 15.000 4% 3% 3% 3% 10.000 2% 2% 5.000 1% 0% 0 1992 1993 1994
Slide 32: Recycling – Pricing Outlook
RECYCLING – PRICING OUTLOOK STEEL PRICES RISING - FORECAST TO REMAIN HIGHER 6000 22 5500 20 Steel price composite index CNY/tonne 5000 18 VLCC scrap price $m 4500 16 4000 14 3500 12 3000 2500 10 2000 8 Composite Steel price index & Future price VLCC scrap price Source: Clarksons 32
Slide 33: VLCC Contracting Has Risen
VLCC CONTRACTING HAS RISEN BUT ALL IN NEW TECHNOLOGY 14 12 10 8 6 4 2 0 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Conventional LNG or other 33
Slide 34: Tanker Order Book
TANKER ORDER BOOK STILL AT 25 YEAR LOWS 60 50 40 30 20 10 0 VLCC Orderbook % Fleet % Suezmax Orderbook % Fleet % 34
Slide 35: Fuel Spreads – Static Despite Oil Price Rising
FUEL SPREADS – STATIC DESPITE OIL PRICE RISING YEAR TO DATE Oil price Fuel Spread for 2021 Fuel Spread for 2022 35
Slide 36: Sustainability at Euronav
SUSTAINABILITY AT EURONAV 36
Slide 37: Sustainable Financing in Action
SUSTAINABLE FINANCING IN ACTION Ship Financing – the past Ship Financing – the future Emission targets > IMO All banks to agree $469m revolver Euronav and its bank partners finalise the first $713m sustainable linked loan on sustainable September 10th, 2020 linked loan $244m term loan Independent me
Slide 38: Sustainability Matters at Euronav
SUSTAINABILITY MATTERS AT EURONAV Tanker sector leading ESG foundations established Next stage ACCOMPLISHMENTS TARGETS & DECARBONISATION Environmental Social Governance Architecture & framework to Emissions data since ‘17 Consistent survey top 10 be rolled out during 2021 “Good steward” of Independe
Slide 39: Framework in Place to Deliver 2030 Trajectory of 40% Emissions Cut
FRAMEWORK IN PLACE TO DELIVER 2030 TRAJECTORY OF 40% EMISSIONS CUT C02 TONNES PER DAY V C02 TONNES PER YEAR FOR DIFFERENT VLCCS AER – Annual Efficiency Ratio which 120,000 AER divides the annual carbon dioxide 2000 VLCC fleet 110,000 emissions of a ship distance sailed 100,000 5.43 2008 VLCC fleet C
Slide 40: Crude Core to Energy Transition & Peak Oil Long Way Off
CRUDE CORE TO ENERGY TRANSITION & “PEAK OIL” LONG WAY OFF CRUDE REMAINS CORE PART OF ENERGY MIX TRANSPORTATION STILL REQUIRED 4,3% 6,4% 5,0% 33,1% 27,0% 24,2% Oil Gas Coal Renewables Hydro Nuclear Source BP Statistical Review of World Energy 2020 - 69th edition Source Clarksons 40
Slide 41: Impact of Illicit Iranian Trade
IMPACT OF ILLICIT IRANIAN TRADE 41
Slide 42: Huge Volume of Older Vessel Sales to Private Owners Since 2019
HUGE VOLUME OF OLDER VESSEL SALES TO PRIVATE OWNERS SINCE 2019 40 38 35 2019 2020 2021 30 30 28 25 25 23 20 15 15 10 10 8 7 5 0 VLCC Suezmax Aframax Average 2002 2002 2003 2001 2002 2002 2003 2002 2004 Hi 1994 1997 2006 1998 1995 1998 1999 1994 1998 Lo 2006 2000 2007 2007 2007 2009 2007 2007 2009 42
Slide 43: Iranian Tanker Fleet
IRANIAN TANKER FLEET 80% CURRENTLY IN STORAGE CURRENT STRUCURE OF IRANIAN TANKER FLEET 9 9 6 AVERAGE AGE IRAN VLCC FLEET 14.4 YEARS & SUEZMAX FLEET 18.1 4 YEARS 3 3 3 3 3 2 20-25 15-19 10-14 8-9 age category of tanker VLCC In service VLCC Storage Suezmax In service Suezmax Storage 43
Slide 44: Iranian Tanker Fleet
IRANIAN TANKER FLEET 80% CURRENTLY IN STORAGE BUILD UP OF FLEET INTO STORAGE 44
Slide 45: Iran Illicit Trade: Benefit Tankers
IRAN ILLICIT TRADE: BENEFIT TANKERS BUT WILL LIKELY TAKE TIME FOR AGED IRAN FLEET TO RETURN IRANIAN CRUDE EXPORTS – NORMALISED IF IRAN LEGITIMIZED THEN SHOULD BE 2.5m BPD BENEFICIAL TO TANKER TRADE 3000 70 So could need 60 VLCC 60 30 VLCC for 1mbpd 2500 50 Iran crude exports k bpd 2000 40 1500 12 8-
Slide 46: Last Time Took a While for Iranian Shipping to Return
LAST TIME TOOK A WHILE FOR IRANIAN SHIPPING TO RETURN 46
Slide 47: Preventing Recycling Trade
% of fleet recycled past 12 months 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 VLCC Scrap Value Q4-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Suezmax Scrap Value Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q
Slide 48: Q&A
Q&A | @ euRONav. 48