Cmb.tech Nv · EURONEXT:CMBT
Cmb.tech Nv — Euronav — Capital Link/Fearnley London (September 2019)
49 slides from Cmb.tech Nv's conference presentation, September 2019
Slide 1: Investor Presentation September 2019
INVESTOR PRESENTATION SEPTEMBER 2019 CAPITAL LINK/FEARNLEY LONDON
Slide 2: Euronav – Who We Are
EURONAV EURONAV – WHO – WHO WE ARE WE ARE The world’s largest, independent quoted crude tanker platform 42 VLCC 25 SUEZMAX International company – internationally connected ) ) 20% 16% 28% Av Age Av Age 44% 20% Headquarters in Antwerp 6.7 Yrs 10.5 Yrs 44% 28% 0 - 5 yrs 6-10 yrs 11-14 yrs 15+ yrs 0 -
Slide 3: Euronav – Capital Discipline
EURONAV STRATEGY EURONAV – CAPITAL – CAPITAL DISCIPLINE DISCIPLINE MAINTAIN STRONG BALANCE SHEET 1 LT TARGET LEVERAGE AROUND 50% & LIQUIDITY RUNWAY FOR TWO YEARS MAINTENANCE CAPEX DIVIDEND DISCRETIONARY NON- $30M MAINTENANCE CAPEX FIXED DIVIDEND USD 12c PER YEAR 2 ON DRY DOCK & REGULATORY CAPEX PAID
Slide 4: Euronav Strategy – Liquidity Focus
Actively managed high quality fleet… EURONAV STRATEGY – LIQUIDITY FOCUS Repayment schedule and RCF reductions Balance sheet liquidity June 2019 $848m 1000 600 644 20 900 Millions 800 500 700 + no 600 outstanding capex $m 500 400 400 848 300 204 200 300 100 0 Cash Undrawn Undrawn Total 200 Secured Un
Slide 5: Euronav Strategy – Shareholder Focus
Actively managed high quality fleet… EURONAV STRATEGY – SHAREHOLDER FOCUS Shareholder returns since 2014 Commitment to highest governance standards net income Dividend share buy back 400 • USD 2.82 DPS 300 270 since 2015 $m net income, dividend and share buy back • Average annual 200 dividend yield
Slide 6: Large Tanker Market Share
LARGE TANKER MARKET SHARE CONSOLIDATION IN PAST 4 YEARS BUT TAIL REMAINS China Merchants 50 Euronav 45 Bahri 45 China Cosco 43 NITC (Iran) Angelicoussis 38 38 Top 12 VLCC owners Mistui DHT 27 31 = 50% market share SK Shipping 18 Ocean 17 Nippon 17 Fredriksen 17 Owns 5-9 VLCC 122 Owns 10-16 VLCC 106
Slide 7: Tanker Market Structure
TANKER MARKET STRUCTURE Seasonal Few customers, lots of suppliers Source: Euronav 46 Quarterly average Thousands 44 VLCC rate 1990-2018 Traders 42 40 38 36 34 32 Oil Refiners 30 Companies Q1 Q2 Q3 Q4 Cyclical Ship Source: Clarksons Broker 100 Thousands 90 Monthly average 1 Year 80 TCE rate 1990-2018
Slide 8: Euronav - Operationally Geared + Contract Income
EURONAV - OPERATIONALLY FSO 5 year contract to 2022 GEARED + CONTRACT INCOME 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 per day per day per day per da
Slide 9: Operational Leverage into Earnings
OPERATIONAL LEVERAGE INTO EARNINGS – VLCC RATES $40K/SUEZMAX $30K = $1.32 EPS 9
Slide 10: Industry and Market Overview
INDUSTRY AND MARKET OVERVIEW 10
Slide 11: Outlook
OUTLOOK RESILIENT Q1 – HEADWINDS TO TAILWINDS FOR 2H Demand for Supply Ton miles & Vessel Euronav Oil IMO 2020 Supply Balance of Oil sheet Robust US v Saudi Positive IMO to help Flexibility 11
Slide 12: Demand for Oil – Robust and Steady
DEMAND FOR OIL – ROBUST AND STEADY Annual demand growth VLCC Equivalents (mbpd) 1.6 49 1.5 46 Y/Y Change in global demand for oil – consistently growing 1.4 43 1.3 40 1.2 2019 IEA 37 3.5 Average 1.1 million barrels per day 1.1 33 3.1 3.1 1 30 3.0 0.9 27 0.8 24 2.5 0.7 21 2.0 1.9 Change in Demand mbp
Slide 13: Oil Price Impact on Demand
OIL PRICE IMPACT ON DEMAND LOWER PRICE IS POSITIVE Oil price outlook driven by Sheik v Shale/Trump tweets 140.0 120.0 Price is too high/demand is impacted Demand < 1.1m 100.0 Destructive bpd 80.0 = 1.1m Neutral bpd 60.0 Demand > 1.1m Stimulating bpd 40.0 20.0 Demand Price is too low/long-term supply
Slide 14: 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 15: Ton Miles - US Crude Export Outlook
TON MILES - US CRUDE EXPORT OUTLOOK POTENTIAL FOR GROWTH TO 2022 Total pipeline capacity Terminal planned export capacity 9 8 7 Million bpd US crude exports 6 5 4 3 2 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1h 2h 1h 2h 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2022 2022 Source: Pareto 15
Slide 16: Ton Miles – US-China Crude Exports
TON MILES – US-CHINA CRUDE EXPORTS ….BUT JAPAN, KOREA, INDIA & SINGAPORE MORE THAN OFFSET REDUCTION 900 800 700 000 bpd US export to selected nations 600 500 400 300 200 100 0 2016 2017 2018 2019 China JKIS Source: EIA 16
Slide 17: Vessel Supply – Balance Improving
VESSEL SUPPLY – BALANCE IMPROVING Korea dominating tanker orders Shipyard Consolidation CONTRACTING NEW VESSELS VLCC OB/Fleet = 11% Suezmax OB/Fleet = 8% ORDER BOOK Below historic averages More Iranian vessels to exit OPERATIONAL FLEET IMO prep will reduce capacity Global fleet age will require RECY
Slide 18: Vessel Supply - Contracting
10 20 40 50 60 70 80 30 0 Jul-14 Aug-14 Source: Clarksons Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-
Slide 19: Vessel Supply - Contracting
VESSEL SUPPLY - CONTRACTING DRIVEN BY INDUSTRIAL REPLACEMENT/ “CHEAP” PRICES VLCC below $80m attracted buyers 16 Speculative Expansion Replacement VLCC Newbuild Price 95 Year VLCC orders 14 2016 12 2017 60 90 12 2018 37 2019 18 10 85 8 80 6 4 75 2 0 70 2016 2017 2018 2019 Source: Euronav, Clarksons
Slide 20: Vessel Supply – Order Books Falling
Orderbook as % of fleet 10 20 30 40 60 50 0 Jan-1996 Sep-1996 Source: Clarksons May-1997 Jan-1998 Sep-1998 May-1999 Jan-2000 Sep-2000 May-2001 Jan-2002 Sep-2002 May-2003 Jan-2004 Sep-2004 May-2005 Jan-2006 VLCC Orderbook % Fleet Sep-2006 May-2007 Jan-2008 Sep-2008 May-2009 Jan-2010 Sep-2010 May-2011
Slide 21: Delivery Schedule – Improving
DELIVERY SCHEDULE – IMPROVING 80 Projected Exit/20 years old Scrapped Orderbook Delivered 60 Projected Exit/20 years old Scrapped Orderbook Delivered 50 60 25 40 40 30 10 50 51 47 47 20 39 40 20 Vessels Vessels 20 31 10 26 23 - 10 -5 17 -6 -5 -15 9 2 -9 -21 -27 - -2 -3 -4 -33 -36 -20 -12 -7 -14 -10
Slide 22: Recycling Reflects Pressure on Owners
RECYCLING REFLECTS PRESSURE ON OWNERS 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 S
Slide 23: Vessel Delivery Schedule Has Peaked
VESSEL DELIVERY SCHEDULE HAS PEAKED 2019 A HEADWIND FOR VLCC BUT RUN RATE EASES FROM NOW Delivered Orderbook 25 20 20 19 18 15 16 15 14 13 13 13 13 12 12 12 12 10 11 11 11 11 10 9 9 8 8 8 8 8 8 7 5 6 6 5 4 4 4 3 2 - - - - - - - - 1Q20 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 Source Clarksons 23
Slide 24: Vessel Supply
VESSEL SUPPLY VLCC GLOBAL FLEET AGE PROFILE = PIPELINE 70 Orderbook 10% Orderbook <20 yrs 20+ yrs 60 50 25% > 15 years 40 VLCCs 30 20 10 - Source: Clarksons 24
Slide 25: Vessel Supply – Suezmax
VESSEL SUPPLY – SUEZMAX SIMILAR DYNAMICS TO VLCC PROFILE 60 Orderbook <20 yrs 20+ yrs Orderbook 8% 50 40 26% > 15 years Suezmax 30 20 10 - Source: Clarksons 25
Slide 26: Vessel Supply – Iran/IMO Disruption
VESSEL SUPPLY – IRAN/IMO DISRUPTION ALREADY STARTED AND GAINING TRACTION 70 15 60 12 50 10 9 40 8 30 31 25 20 10 0 Logisitical & Long term storage Iranian storage Market storage Source: Clarksons 26
Slide 27: Vessel Supply – Storage v Rates
VLCC rates Source: Clarksons 100,000 120,000 20,000 40,000 60,000 80,000 0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 VLCC rates Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-
Slide 28: Asset Prices Continuing to Rise
ASSET PRICES CONTINUING TO RISE 140 135 Value of VLCC indexed by age category from Dec 2017 130 125 120 115 110 105 100 95 90 10 Year old VLCC 5 year old VLCC 15 year old VLCC New build VLCC Source: Clarksons 28
Slide 29: History Doesn't Repeat Itself, But It Does Rhyme
VLCC freight rates Source: Clarksons 100,000 120,000 40,000 60,000 80,000 0 20,000 wk 1 wk 5 wk 9 wk 13 wk 17 wk 21 wk 25 wk 29 wk 33 wk 37 wk 41 wk 45 wk 49 wk 53 wk 57 wk 61 wk 65 2013-15 market wk 69 Comparing 2013-15 cycle with the current one wk 73 wk 77 wk 81 wk 85 wk 89 wk 93 2018+ market wk
Slide 30: Current Issues
CURRENT ISSUES 30
Slide 31: 1. Oil Demand Concerns Demand
1. OIL DEMAND CONCERNS DEMAND OIL DEMAND IS RESILIENT = WORLD GDP X 0.5 Oil demand % growth Global GDP growth 6.00% 5.00% 4.00% % growth oil demand and GDP 3.00% 2.00% 1.00% 0.00% 1990 1995 2000 2005 2010 2015 2020 -1.00% -2.00% Source IEA 31
Slide 32: 1. Oil Demand Concerns
1. OIL DEMAND CONCERNS 2H HISTORICALLY STRONGER THAN 1H Global 2.0 oil demand averages 1.4m bpd in 2h since 2011 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016 H2 2017 H2 2018 H2 over H2 oil demand growth Average Source: IEA, DNB 32
Slide 33: 1. Oil Demand Concerns
1.OIL DEMAND CONCERNS 2019- 2022 TO SEE RECORD REFINERY EXPANSION & IMO IMPACTS SPECIFIC TO TANKER MARKETS 3000 2500 annual change global refinery capacity mbpd 2000 1500 1000 500 0 Source: IEA 33
Slide 34: 2. Freight Rates – Exports Volatile
2. FREIGHT RATES – EXPORTS VOLATILE OPEC EXPORTS REMAIN VOLATILE; US GROWTH CURBED BY PIPELINE EXPANSION WITH 1M BPD STARTING SEPT AG exports mom change US exports mom change Net 1,000 Thousamds of barrels exported month on month change 500 0 -500 -1,000 -1,500 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar
Slide 35: 2. Freight Rates – Refinery Driven
2. FREIGHT RATES – REFINERY DRIVEN REFINERY SHUTDOWNS – LARGER THAN USUAL AHEAD IMO 2020…BUT SHOULD MOVE TO POSITIVE IN 2H Increase in barrels YoY 8.0 Reduction in barrels YoY 140% 7.0 120% Refinery outages compared to yearly average % 6.0 100% m bpd refinery outages 5.0 80% 4.0 60% 3.0 40% 2.0 20%
Slide 36: 2. Freight Rates
2. FREIGHT RATES SEASONAL RALLY STALLED BUT STARTED EARLIER & STRONGER THAN USUAL 36
Slide 37: 3. Potential from IMO 2020
3. POTENTIAL FROM IMO 2020 RETROFIT DISRUPTION AHEAD OF IMO 2020 IS REAL AND MEANINGFUL Number of lost VLCC fleet days in Q4 likely to increase as delays are increasing 35 32 30 No of VLCCs retrofitted per month 25 20 18 16 15 14 12 10 10 8 5 4 4 4 3 3 3 2 2 0 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-
Slide 38: 3. Potential from IMO 2020 – LSFO Arbitrage Trading
3. POTENTIAL FROM IMO 2020 LSFO ARBITRAGE TRADING Bunker Arbitrage Trade Flows Current HSFO VLCC trades Potential VLSFO Suezmax trades Source: Euronav 38
Slide 39: 3. Potential from IMO 2020 – Storage Opportunities
3. POTENTIAL FROM IMO 2020 STORAGE OPPORTUNITIES Potential impact on storage if HSFO oversupply Tank Farms swapped 50 7.0% to LSFO reducing 45 45 capacity 40 6.0% 35 34 5.0% Number of VLCCs % of VLCC fleet 30 4.0% Tank Farms also being 25 23 used for blending 20 3.0% 15 2.0% 11 10 1.0% 5 3.5% HSFO O
Slide 40: Euronav IMO 2020 Framework
EURONAV IMO 2020 FRAMEWORK 40
Slide 41: Compliant Fuel or Scrubber Technology and
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY AND 41
Slide 42: 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 Euronav Ardeche Heron Andaman Euronav Aegean Arafura Aral VLCC Source: Euronav Anne Alboran VLCC Alex Drenec Donoussa Fleet Desirade Alice Dia Dominica Antigone Hojo Sonia Ilma Simone Alsace Iris Non Eco VLCC
Slide 43: LSFO Availability – Sufficient
LSFO AVAILABILITY – SUFFICIENT 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 will accelerate into Q4 2019 Port Authoriti
Slide 44: Bunker Price Spread – Reducing
BUNKER PRICE SPREAD – REDUCING 2018 3rd Quarter 2019 HSFO will be available at a very large The price spread for January 2020 has discount in January 2020 narrowed to $200 / MT Bunker Price Forward Curve May 2018 Bunker Price Forward Curve August 2019 USD 400/mt USD 200/mt 44 Source: Argus
Slide 45: Dedicated Bunker Procurement Desk
DEDICATED 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 Thorough testing Build relations for LSFO Storage
Slide 46: Procurement
PROCUREMENT 420,000 MT Purchased Average Price Paid for Compliant Fuel Protection 100% 700 90% 0.1% Residual 606 Fuel Oil 600 566 80% 520 70% 500 447 $ per ton fuel cost 60% 400 50% 0.5% Fuel 300 40% 30% 200 20% 100 10% 0% 0 0.5% Fuel Oil Current HSFO 0.1% Resid & MGO price price Singapore Distillat
Slide 47: 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 ULCC Oceania o Mediterranean price $3
Slide 48: Benefits of Forward Buying Fuel
BENEFITS OF FORWARD BUYING FUEL Security of Safety & Quality Control Lower Supply Reliability Emissions Scale Provenance Compliance CO2 (compared with Avoid fuel price spikes Testing Compatibility using scrubber) Security Reliability Stability supply Safety Tested 48
Slide 49: Euronav Position - Embedded Optionality
EURONAV POSITION - 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 capabil
Euronav — Capital Link/Fearnley London (September 2019) on 6ix