Cmb.tech Nv · EURONEXT:CMBT
Cmb.tech Nv — Euronav — Fearnley Shipping Conference 2019
67 slides from Cmb.tech Nv's conference presentation, January 2019
Slide 1: Fearnley Shipping Conference
FEARNLEY SHIPPING CONFERENCE JANUARY 2019
Slide 2: Agenda
AGENDA Euronav – our strategic approach to shipping & capital markets 2019 – reasons to be fearful 2019 – reasons to be cheerful 2020 – our positioning on scrubbers and all things IMO Summary 2
Slide 3: Euronav – Our Strategy
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Slide 4: 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 5: Counter Cyclical Investing
COUNTER CYCLICAL INVESTING 120,000 109 100,000 104 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 5
Slide 6: Counter Cyclical Investing
COUNTER CYCLICAL INVESTING 120,000 109 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 6
Slide 7: 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 7
Slide 8: Euronav Strategy – Liquidity Focus
Actively managed high quality fleet… EURONAV STRATEGY – LIQUIDITY FOCUS Liquidity in the Euronav share Balance sheet liquidity end Sept 2018 $677m 800 2000 10 $525m 700 1800 9 600 + no Daily Value traded $m per day last 12 months 500 outstanding 1600 8 capex $m 400 $677m Free Float $ Market Cap (000
Slide 9: Euronav – Disciplined Capital Management
EURONAV – DISCLIPLINED CAPITAL MANAGEMENT MAINTAIN STRONG BALANCE SHEET 1 LEVERAGE AROUND 50% & LIQUIDITY RUNWAY FOR TWO YEARS MAINTENANCE CAPEX DIVIDEND DISCRETIONARY NON- $30M MAINTENANCE CAPEX FIXED DIVIDEND USD 12c PER 2 ON DRY DOCK + REGULATORY YEAR COVERED BY FIXED INCOME CAPEX eg ballast wate
Slide 10: Reasons to be Fearful for 2019
REASONS TO BE FEARFUL FOR 2019
Slide 11: Reasons to be Fearful - OPEC Narrative
VLCC rates 0 10,000 20,000 30,000 40,000 50,000 60,000 01/09/2016 01/10/2016 01/11/2016 01/12/2016 01/01/2017 01/02/2017 NARRATIVE 01/03/2017 01/04/2017 01/05/2017 01/06/2017 01/07/2017 01/08/2017 01/09/2017 01/10/2017 01/11/2017 01/12/2017 OPEC production 01/01/2018 01/02/2018 01/03/2018 01/04/2018
Slide 12: Reasons to be Fearful - OPEC Narrative
VLCC rates 0 10,000 20,000 30,000 40,000 50,000 60,000 01/09/2016 01/10/2016 01/11/2016 01/12/2016 01/01/2017 01/02/2017 NARRATIVE 01/03/2017 01/04/2017 01/05/2017 01/06/2017 01/07/2017 01/08/2017 01/09/2017 01/10/2017 01/11/2017 01/12/2017 OPEC production 01/01/2018 01/02/2018 01/03/2018 01/04/2018
Slide 13: OPEC Narrative – Gap is Key
VLCC rates 0 10,000 20,000 30,000 40,000 50,000 60,000 01/09/2016 01/10/2016 01/11/2016 01/12/2016 01/01/2017 01/02/2017 01/03/2017 01/04/2017 01/05/2017 01/06/2017 01/07/2017 01/08/2017 01/09/2017 01/10/2017 01/11/2017 01/12/2017 OPEC production 01/01/2018 01/02/2018 01/03/2018 NARRATIVE – GAP IS K
Slide 14: OPEC Narrative – Gap is Key
VLCC rates 0 10,000 20,000 30,000 40,000 50,000 60,000 01/09/2016 01/10/2016 01/11/2016 01/12/2016 01/01/2017 01/02/2017 01/03/2017 01/04/2017 01/05/2017 01/06/2017 01/07/2017 01/08/2017 01/09/2017 01/10/2017 01/11/2017 01/12/2017 OPEC production 01/01/2018 01/02/2018 01/03/2018 NARRATIVE – GAP IS K
Slide 15: Fearful – US China Trade Tensions
REASONS TO BE FEARFUL – US CHINA TRADE TENSIONS US $ value crude exports to China US $ value crude exports to China 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 15
Slide 16: US China Trade Replaced by US to J-KIT
REASONS TO BE FEARFUL – US CHINA TRADE REPLACED BY US TO “J-KIT”* US $ value crude exports to China US $ value crude exports to TIJK 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 16
Slide 17: US China Trade Replaced by US to J-KIT
REASONS TO BE FEARFUL – US CHINA TRADE REPLACED BY US TO “J-KIT”* US $ value crude exports to China US $ value crude exports to TIJK 2,500,000,000 2,000,000,000 J-KIT = Japan, Korea, India, Taiwan 1,500,000,000 1,000,000,000 500,000,000 0 17
Slide 18: Oil Market Volatility Tends to be Bad for Tankers
REASONS TO BE FEARFUL - OIL MARKET VOLATILITY TENDS TO BE BAD FOR TANKERS capital link tanker index oil price volatility index 18
Slide 19: Oil Market Volatility Tends to be Bad for Tankers
REASONS TO BE FEARFUL - OIL MARKET VOLATILITY TENDS TO BE BAD FOR TANKERS LOW Volatility in oil price HIGH capital link tanker index oil price volatility index 19
Slide 20: Fearful – 2019 Delivery Schedule
REASONS TO BE FEARFUL – 2019 DELIVERY SCHEDULE 30 79 VLCC equivalents 25 Suezmax due for delivery* VLCC due for delivery VLCC equivalent delivery schedule 20 15 10 5 0 Q1 2019 Q2 2019 Q3 2019 Q4 2019 * Expressed as VLCC equivalent Source Clarksons 20
Slide 21: Reasons to be Cheerful
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Slide 22: Cheerful - Oil Price Impact on Demand is Positive
REASONS TO BE CHEERFUL - OIL PRICE IMPACT ON DEMAND IS POSITIVE Oil price outlook 110 100 90 Price is too high/demand is impacted Demand < 1.1m Destructive bpd USD per barrel crude 80 70 Neutral = 1.1m bpd 60 Demand > 1.1m Stimulating bpd 50 40 Demand Price is too low/long-term supply impacted/CAPEX
Slide 23: Cheerful – IMO Brings More Crude Runs & Trading Routes
REASONS TO BE CHEERFUL – IMO BRINGS MORE CRUDE RUNS & TRADING ROUTES More throughput to make compliant fuel Crude throughput with IMO Without IMO 90 88.8 89 88.5 88.0 88 87.4 88.5 86.6 87.8 87 87.1 85.8 86 86.4 M bpd 85 84.6 85.7 85.1 84 83.2 84.3 83 82.0 83.2 82 82.0 Potential additional VLCC requi
Slide 24: Cheerful – IMO Brings More Crude Runs & Trading Routes
REASONS TO BE CHEERFUL – IMO BRINGS MORE CRUDE RUNS & TRADING ROUTES New trading routes driven by sulphur content 0.2 0.2 0.2 Potential additional trade mbpd Source Braemar, Euronav 24
Slide 25: Cheerful – IMO Brings More Crude Runs & Trading Routes
REASONS TO BE CHEERFUL – IMO BRINGS MORE CRUDE RUNS & TRADING ROUTES More throughput to make compliant fuel New trading routes driven by sulphur content Crude throughput with IMO Without IMO 90 88.8 89 88.5 88.0 88 87.4 88.5 86.6 87.8 87 87.1 85.8 86 86.4 M bpd 85 84.6 85.7 85.1 84 83.2 84.3 83 82.0
Slide 26: Cheerful - Storage Opportunities & Logistics
REASONS TO BE CHEERFUL - STORAGE OPPORTUNITIES & LOGISTICS Estimate of “stranded” HSFO volumes per day (m bpd) 0.5 Source: Wells Fargo, IMO, UNCTAD, Company Filings Estimated Global HSFO storage capacity m barrels 94.0 Current HSFO Inventory m barrels 64.0 Remaining Land based HSFO Storage m barrels
Slide 27: Cheerful - Asset Prices Are Showing the Way
REASONS TO BE CHEERFUL - ASSET PRICES ARE SHOWING THE WAY EURN Share price EURN NAV (Fearnley estimate) New build VLCC NAV 16 100 15 95 14 New build VLCC asset price $m 13 EURN share price $ 90 12 11 85 10 9 80 8 7 75 27
Slide 28: Cheerful – Operational Leverage
FSO 5 year contract to 2022 REASONS TO BE CHEERFUL – OPERATIONAL LEVERAGE 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 d
Slide 29: Cheerful... Remember the Earnings Power Converts into Cash
REASONS TO BE CHEERFUL...REMEMBER THE EARNINGS POWER CONVERTS INTO CASH 2019 EPS $1.32 IN 2015 = $16 SHARE PRICE $1.40 EPS 2019 2019VLCC - - -40k -- $16 $1.20 If Euronav Suez 30k did= $1.25 40k EPS VLCCEuronav & $1.00 30k Suez in 2019 Share price EPS Euronav $8 $0.00 ($0.20) 29
Slide 30: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 120 22 100 20 No of VLCC equivalent for 2019 37 80 20 14 79 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling delivered 2019 PLUS
Slide 31: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 120 22 100 20 No of VLCC equivalent for 2019 37 80 20 GDP 60 79 growth 14 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling delivered
Slide 32: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 120 22 100 20 No of VLCC equivalent for 2019 37 80 Iran 20 14 79 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling delivered 2019
Slide 33: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 120 22 100 US Export 20 No of VLCC equivalent for 2019 37 Growth 80 20 14 79 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling del
Slide 34: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 120 IMO 2020 Disruption 22 100 20 No of VLCC equivalent for 2019 37 80 20 14 79 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling
Slide 35: Cheerful - Absorb Vessel Supply and OPEC Cuts?
REASONS TO BE CHEERFUL - ABSORB VESSEL SUPPLY AND OPEC CUTS?.. POTENTIALLY YES 140 Scrapping 120 22 100 20 No of VLCC equivalent for 2019 37 80 20 14 79 60 43 99 40 20 0 VLCC equivalent to be Demand from 1.4m bpd Iranian VLCC taken out US exports additional IMO 2020 Retrofitting Recycling delivered
Slide 36: IMO 2020 & Scrubber Positioning
IMO 2020 & SCRUBBER POSITIONING
Slide 37: Key Concern - Upfront Capital Outlay
framework Scrubber KEY CONCERN - UPFRONT CAPITAL OUTLAY WITH LIMITED VISIBILITY OF RETURN 37
Slide 38: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Port ban uncertainty growing Port of Singapore Chinese ports Norwegian Fjords Others 38
Slide 39: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Port ban uncertainty growing Port of Singapore Chinese ports Norwegian Fjords Others 39
Slide 40: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Port ban uncertainty growing Port of Singapore Chinese ports Norwegian Fjords Others 40
Slide 41: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Port ban uncertainty growing Port of Singapore Chinese ports Norwegian Fjords Others ? 41
Slide 42: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Full capture of fuel spread challenging #20 Traders, Oil Co, Refiners #100+ Tanker owners 42
Slide 43: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Fuel spread Sulphur content Angola MGO 0.1% Libya WTI Compliant fuel Uncertainty over fuel price spread North Sea 0.5% Compliant Mexico fuel pool Brazil Saudi HFO 3.5% Kuwait High sulphur fuel Venezuela pool>3.5% post 2020 43
Slide 44: Economics for Scrubbers – Not Certain at This Stage
framework Scrubber ECONOMICS FOR SCRUBBERS – NOT CERTAIN AT THIS STAGE Port ban uncertainty growing Fuel spread Port of Singapore Sulphur content Angola MGO 0.1% Chinese ports Libya WTI Norwegian Fjords Compliant fuel Uncertainty over fuel price spread ? North Sea Others 0.5% Compliant Mexico Full c
Slide 45: Analysis Been Very One Dimensional
framework Scrubber ANALYSIS BEEN VERY ONE DIMENSIONAL Conventional thinking on scrubber maths focuses on one chart ONLY Source: Citi, Bernstein 45
Slide 46: Analysis Been Very One Dimensional
framework Scrubber ANALYSIS BEEN VERY ONE DIMENSIONAL Analysis ignores refinery incentive to reduce HSFO Source: Citi, Bernstein 46
Slide 47: Analysis Been Very One Dimensional
framework Scrubber ANALYSIS BEEN VERY ONE DIMENSIONAL Conventional thinking on scrubber maths Analysis ignores refinery incentive to focuses on one chart ONLY reduce HSFO Source: Citi, Bernstein 47
Slide 48: Environmental, Technical & Regulatory Risks from Scrubbers
framework Scrubber ENVIRONMENTAL, TECHNICAL & REGULATORY RISKS FROM SCRUBBERS - More shipping CO2 emissions from higher power required Impact on - Reduced buffering capacity of sea from increased sulphur Environment - Cumulative sulphur impact in sea unclear eg congested areas - Unknown safety risks
Slide 49: Environmental, Technical & Regulatory Risks from Scrubbers
framework Scrubber ENVIRONMENTAL, TECHNICAL & REGULATORY RISKS FROM SCRUBBERS - More shipping CO2 emissions from higher power required Impact on - Reduced buffering capacity of sea from increased sulphur Environment - Cumulative sulphur impact in sea unclear eg congested areas - Unknown safety risks
Slide 50: Environmental, Technical & Regulatory Risks from Scrubbers
framework Scrubber ENVIRONMENTAL, TECHNICAL & REGULATORY RISKS FROM SCRUBBERS - More shipping CO2 emissions from higher power required Impact on - Reduced buffering capacity of sea from increased sulphur Environment - Cumulative sulphur impact in sea unclear eg congested areas - Unknown safety risks
Slide 51: Environmental, Technical & Regulatory Risks from Scrubbers
framework Scrubber ENVIRONMENTAL, TECHNICAL & REGULATORY RISKS FROM SCRUBBERS - More shipping CO2 emissions from higher power required Impact on - Reduced buffering capacity of sea from increased sulphur Environment - Cumulative sulphur impact in sea unclear eg congested areas - Unknown safety risks
Slide 52: Environmental, Technical & Regulatory Risks from Scrubbers
framework Scrubber ENVIRONMENTAL, TECHNICAL & REGULATORY RISKS FROM SCRUBBERS - More shipping CO2 emissions from higher power required Impact on - Reduced buffering capacity of sea from increased sulphur Environment - Cumulative sulphur impact in sea unclear eg congested areas - Unknown safety risks
Slide 53: What If We Are Wrong?
framework Scrubber WHAT IF WE ARE WRONG? Balance Sheet strength Available Liquidity $677 @ 30 Sept 2018 Million No Outstanding Capex 53
Slide 54: What If We Are Wrong?
framework Scrubber WHAT IF WE ARE WRONG? Balance Sheet strength Available Liquidity $677 @ 30 Sept 2018 Million No Outstanding Capex Euronav has unrivalled operational capability 2x ULCC capacity 3 million barrels Over 441,000 dwt Only 2 in world fleet 54
Slide 55: Conclusion
CONCLUSION
Slide 56: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… 56
Slide 57: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… supported by 3 other drivers 57
Slide 58: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… supported by 3 other drivers US shale financial blanket needs $50 oil 58
Slide 59: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… supported by 3 other drivers 59
Slide 60: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… supported by 3 other drivers Sanctions until 2020 60
Slide 61: Reasons to be Happy…Contango and Storage Are Making a Return
REASONS TO BE HAPPY…CONTANGO AND STORAGE ARE MAKING A RETURN Contango has already returned to crude markets………… supported by 3 other drivers US shale financial blanket needs $50 oil Sanctions until 2020 61
Slide 62: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 62
Slide 63: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 63
Slide 64: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 64
Slide 65: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 65
Slide 66: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 66
Slide 67: Outlook for 2019
OUTLOOK FOR 2019 DON’T WORRY…BE HAPPY Demand Supply IMO Vessel Euronav for Oil of Oil 2020 Supply Balance sheet Robust US v Saudi Positive Challenging Flexibility 67