Investor Presentation Pareto Conference. September 2016

Transcription

1 Investor Presentation Pareto Conference September 6

2 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 995. Forward-looking statements reflect the Company s current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, including, without limitation, the delivery of vessels, the outlook for tanker shipping rates, general industry conditions future operating results of the Company s vessels, capital expenditures, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this presentation are based on reasonable assumptions, actual results may differ from those projected in the forward-looking statements. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their obligations to us, the strength of the world economies and currencies, general market conditions, including changes in tanker vessel charter hire rates and vessel values, changes in demand for tankers, changes in our vessel operating expenses, including dry-docking, crewing and insurance costs, or actions taken by regulatory authorities, ability of customers of our pools to perform their obligations under charter contracts on a timely basis, potential liability from future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. We undertake no obligation to publicly update or revise any forward looking statement contained in this presentation, whether as a result of new information, future events or otherwise, except as required by law. In light of the risks, uncertainties and assumptions, the forward looking events discussed in this presentation might not occur, and our actual results could differ materially from those anticipated in these forward-looking statements.

3 Section Euronav at a Glance 3

4 Euronav Largest Tanker Company in the World CURRENT FLEET TOTAL 55 VESSELS 3.7 MM DWT WHO WE ARE SUEZMAX 5, 65, DWT 3 VLCC (+ TBD) Up to 33, DWT V PLUS () Over 44, DWT Only 4 in world fleet FSO 38k barrels Stripped water capacity Leading pure-play tanker company with best-in-class operating platform Strong balance sheet MM barrels MM barrels 3 MM barrels.8 MM barrels Committed to shareholder long-term value creation Avg. age years Avg. age 6 years Avg. age 3 years Avg. age 4 years with significant direct return to shareholders Notes:. Only 4 V-Plus vessels in world fleet Most liquid big tanker player in the world WELL POSITIONED FOR STRONG CASH FLOW GENERATION Breakeven (including debt service)(): ~ USD 7,3 / day for VLCC OpEx / day USD 8,65 ~ USD 4, / day for Suezmax OpEx / day USD 7,5 3 Spot Income - High Leverage to Upside Each USD 5, uplift (above break-even) in both VLCC and Suezmax rates improves net revenue and EBITDA by USD 7 million Fixed Income > USD million of EBITDA () generated annually from fixed income contracts (FSO + TC contracts) 4 Yield or Growth Why not both? 5 VLCC acquired in last 3 months 8% of annualized P&L returned to shareholders since January 5 (3). Before TC-in/fixed income. Proportionate consolidation method & FSO contribution current contract runs to Q Details of Company distribution policy at 4

5 % growth YOY VLCC fleet Shipping access to finance is key in the new normal Tanker sector remain CYCLICAL but Financing becoming STRUCTURALLY restricted 4% Mid to long term outlook positive % 95 % 8% 6% 9 85 m barrels consumed per day 8 4% % 75 New Normal financing restricts amount of newbuilding orders less cyclical extremes Oil demand NOT cyclical.m average demand growth last years % 7 Industrial players (more disciplined) will retain capital access leading to higher & more sustainable returns Source IEA, BLoomberg 5

6 Oil Tankers Five Key Drivers 5 All Green Long Term All Green 6-7 Mixed Demand for Oil ROBUST Oil demand growing last 5 years with Yearly average. mbpd IEA forecast.4mbpd for 6 and.mbpd EVERY year to Only negative years of growth since 99 for global crude demand Supply of Oil BALANCED OPEC supply growth = Non OPEC reduction USA production shale New Swing Producer very resilient & responsive Iran increase to pre sanction output forecast late 6 Ton Miles REDUCED Atlantic sourced barrels been replaced by primarily Middle East supply reducing ton miles USA crude exports to increase ton miles from 7 Supply of Vessels S/TERM HEADWINDS L/TERM MANAGEABLE Seasonal trends impacted by factors increasing tonnage Contracting rate fallen substantially & shipyards under reform pressure Financing NEW BARRIER TO ENTRY New regulations (Basel 3 & 4) restricting lending Distress in shipping loans has reduced risk appetite Equity in retreat PE & ship owners 6

7 Section Current trading 7 5

8 $ USD / Day Million barrels per day REMEMBER Tankers remains a Seasonal Business TANKER RATES SEASONAL BY NATURE VLCC EARNINGS 9-6 SEASONALITY BUILT IN EVERY Q DEMAND RETREATS AS REFINERY MAINTENANCE & NORTHERN HEMISPHERE INTO SUMMER, 97 96, 95 8, , , 9 6, 9 Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Minimum 9-4 Maximum Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source Clarksons 8 Source IEA

9 Ton Mile Dislocation DISLOCATION IN VLCC EQUIVALENT TERMS = LOSS OF APPROX VLCCS (ANNUALISED) Arabian Gulf to China 5,5 miles days mbpd x 365 days = 365m barrels 365m barrels / m capacity per VLCC = 83 cargoes 83 cargoes / 9 annual journeys for VLCC MEG F East = VLCCs West Africa to China 9,65 miles LatAm to China,5 miles 33 days 44 days Middle East Asia Pacific China West Africa 9 3 VLCCs LatAm / Caribs mbpd x 365 days = 365m barrels 365m barrels / m capacity per VLCC = 83 cargoes 83 cargoes / 4.5 annual journeys for VLCC Atlantic F East = 4 VLCCs 5 54 VLCCs Source Euronav, Morgan Stanley 9

10 Q3 IMPACTS Q4 BEYOND AND RESPONSE CONGESTION Reduction of delays in key ports Q Q3 Weather impact less prevalent than previous summers (Mid East / Caribs) One time negative impact on supply SEASONALITY Seasonality built into tanker sector Cargo count all times high during 6 Q4 rates +7% on average in 4 out of last 6 years SUBSTITUTION LOSS TON MILES Loss of Atlantic barrels - Nigeria (6-8k bpd) & Venezuela (k) has dislocated ton miles Nigeria force majeure ending; Far East retains focus on diversifying crude sourcing INCREASED CAPACITY/VESSELS WITHOUT VETTINGS 9 VLCC & Suezmax delivered to global fleet April August 6 v 4 in same 5 period New vessels not vetted so first voyage at discount Tanker delivery rate peaks mid 7 SPEED Speeds important as can alter tonnage capacity Operational flexibility affirmative action taken by ship owners reducing average VLCC speeds by c % since weaker rates

11 Section 3 Industry Dynamics 5

12 USD per barrel Oil Price Impact on Demand Demand for Oil OIL PRICE OUTLOOK 9 8 Lack of disruption/market share game Iran and other supply remain high Shale - as swing producer increases output Demand Destructive 9-4 proved in this oil price range that demand was destroyed 7 Neutral Demand Stimulating proven over time that the cheaper the commodity price the greater it is used 3 Capex cuts in E&P Potential coordinated cuts in production QE returns/$ loss of value/oil as financial asset Demand Disruptive Current structure of global markets mean energy/capex/sovereign wealth effects > consumer stimulus from lower oil prices

13 Millions metric tonnes Million barrels per day Demand steady, robust and diversified Demand for Oil GLOBAL OIL DEMAND 99-6 (MB/D) CHINA CRUDE OIL IMPORT DIVERSIFICATION CONTINUES Average oil demand growth 99-5 =. mbpd Other % Russia 4% Source IEA Libya % Kzakhstan % Brazil 3% Kuwait 4% Venezuela 6% Iran 6% Iraq 9% Est. Angola % Est. Saudi Arabia 4% Oman % -.5 Source Bloomberg - CHINA CRUDE DEMAND ROBUST INDIA CRUDE DEMAND INCREASING IN IMPORTANCE Q Q Q Q Q 3 FORECAST Q Source Bloomberg energy 3 Source Bloomberg Energy

14 No of Vessels VLCC fleet age profile 4 Supply of Vessels VLCC TRADING FLEET AGE PROFILE 7 Idle/On storage Fleet <= Sept Fleet Sept -6 On Order % 34 6% % Total <= Sept Sept -6 On Order No % % % 8% 6% Idle/On storage 7% 37 3 N/A Source Clarksons 4

15 No of Vessels Suezmax fleet age profile 4 Supply of Vessels SUEZMAX TRADING FLEET AGE PROFILE 6 Idle/On storage Fleet <= Sept Fleet Sept -6 On Order 7% % 5 9% Total <= Sept -6 On Order No % % 9% 8% 7% Idle/On storage % 8 N/A Source Clarksons 5

16 Special Survey # Special Survey # Special Survey #3 IS Dry #4 SS #5 Scrapping Decision Making Process: Driver=Time Catalyst=Rates 4 Supply of Vessels TANKER SHIPPING A HIGHLY REGULATED INDUSTRY Costs of surveys increase during tanker life leading to scrapping decision USD 4m % utilisation USD 3.5m Average cumulative survey cost (7.5 years) > USD 7.5 mm USD m USD.5m Median scrap age = years USD.5m EARNINGS POTENTIAL REDUCES POST 5 YEARS Constant vetting process throughout ship life 6

17 Equity requirement Source Evercore Asset price (in millions) Asset price background encouraging on several levels ADJUSTED FOR INFLATION ASSET VALUES CLOSE TO 3 YEAR LOWS REPLACEMENT RATIO FOR VLCC FLEET AT HISTORIC LOWS 6 5% Ratio of order book/vessel >5 years old 4 % 5% 8 6 % 4 5% % VLCC (5-Year) Inflation-Adjusted VLCC (5-Year) Source UBS, Clarksons COST OF AND ACCESS TO CAPITAL CHANGING IN SHIPPING UNLIKE PREVIOUS CYCLES VIRTUALLY NO SPECULATIVE ORDERS 4% 6 % Tier -.% 5 Orders since January 5 % Additional Tier -.5% 4 8% Anticyclical buffer - Tier -.% 3 6% Min. Req. - Tier - 4.% Capt. Main. buffer - Tier -.5% 4% % Min. Req. - Tier - 4.% Min. Req. - Tier - 4.5% Industrial players Quoted Companies Chinese Speculative orders % Source Arctic Basel II Basel III 7 Source Clarksons

18 million barrels China & Oil Tankers Four Reasons for Confidence Demand for Oil OPERATIONAL ECONOMY Chinese oil imports (6-6) BASE EFFECT China consumes.8 mbpd (source: IEA) so small % change means large no of barrels Passenger car sales +6% YoY July (Bernstein) Source China Customs STRATEGIC PETROLEUM RESERVE (SPR) Storage classification change June 6 China needs 55 days coverage =m x 55days = 66m bbls China confirmed SPR = 34m in early January 6 Source BP Annual report TEAPOT REFINERY EXPANSION Reforms have granted licences.3 mbpd (JP Morgan) Procurement JV indicates growing power Agreement to source crude via Unipec positive for tankers DOMESTIC CRUDE PRODUCTION China continue diversify sourcing of oil Domestic production falling (H6: 7.3%) 6% fall = k bpd = VLCC needed every days Source IEA, McQuilling, Bernstein, Barclays< Petrowin, Bloomberg 8

19 Oil supply high - shale the new swing producer Supply of Oil WHO IS GOING TO MATERIALLY CUT? NEED CO-ORDINATION BETWEEN THE TOP PRODUCERS = 6% WORLD SUPPLY MOST SHALE PRODUCTION KICKS IN AGAIN USD 5-6 UAE.9 FSU ex Kuwait.8 Russia.9 Iran.9 million barrels per day USA.8*.. U.S. shale crude and condensate production (MMB/D) USD - Iraq 4.3. USD - 9. China 4.4 Russia. 8. USD 9- Canada USD 8-9 Saudi Arabia. SHALE OIL SPEED TO PRODUCTION IS KEY Source Bloomberg Energy 6. USD 7-8 Average field development (approval to start up) time by resource [years, selected areas] USD USD USD Base to USD 4.. Base Source SBC Analysis, Rystad 9 Source Pira

20 Increasing Barriers to Entry 5 Financing HUGE REDUCTION IN SHIPPING BANK EXPOSURE Around USD bn withdrawn from shipping sector since 9 REGULATIONS FORCE LEVERAGE DOWN Banks lending flexibility severely curtailed due to Basel II & III Shipping & Energy loans in distress Quantum of available lending capital restricted for commercial reasons PRIVATE EQUITY IN RETREAT PE exiting shipping PE been surprised by the lack of liquidity implying a return to the sector difficult to realize SHIP OWNERS UNDER PRESSURE Other shipping segments under severe financial pressure Most tanker owners have mixed fleets so pressure felt within ownership structure SHIPYARD PRESSURE TO RESTRUCTURE & REDUCE CAPACITY Low order books in all shipping segments leading to ship yard distress Reforms being actively adopted by shipyards driven by governments Source: Tufton, Marine money london 5

21 Section 4 Our Strategy 6

22 Maximizing Value Through Information BARRIER TO ENTRY INFORMATION SIZE IS CRITICAL TO IMPROVE MARKET KNOWLEDGE Differentiate spot players vs industrial players Ship Owner, 37 Vessels 55 NIOC, 38 Ship Owner, 5 China Merchants Grp, 37 Bahri, 36 3 Ship Owner, COSCO Group, 3 MOL, 3 Euronav NV, 3 Angelicoussis Group, 3 DHT Group, 9 Top Owners Control 43% of Global VLCC Fleet 4 Ship Owner, 68 Tankers International = Only owner-led VLCC pool No value leakage; no commissions Cost center Leading spot market oriented VLCC pool in which ship owners with vessels of similar sizes and quality participate Spreading information (VL Database, TI Pool App) Other VLCC Tanker Pools (Ships on the Water) Nippon YK, 9 SK Holdings, 8 5 Ship Owner, 3 Heidmar VLCC Seawolf Navig8 VL8 China VLCC Small owners are data deficient (84 VLCCs) 39 3 Red indicates Captive or Sovereign fleet Blue indicates fleet in stock listed companies Source: Clarkson s Total 68 VLCC 6 Sept 6 Source: Company reports VLCC Chartering Undertaking Leadership Role

23 Capital allocation strategy CAPITAL ALLOCATION Strong balance sheet Maintain strong balance sheet through cycle Leverage Target 3% to 5% leverage according to where we are in the cycle Capex USD 69m for VLCC Approximately USD million maintenance capex (dry-docks) Liquidity reserve TWO years of operational liquidity at all times Maintain strong banking relationships M&A criteria balance sheet M&A operational Shareholder Focus 3 Will never issue non-accretive new equity Additional vessels must on pro-forma basis either match or reduce break even costs Yield or Growth why not both? 5 VLCC acquired in last 3 months 8% of annual P&L returned to shareholders since January 5* * See Distribution policy on Euronav website 3

24 Section 4 Supplemental Materials 4

25 Appendix MOST TANKER OWNERS HEAVILY EXPOSED TO OTHER SHIPPING ORDER BOOK AS % OF FLEET MANAGEABLE ++ VLCCs 5-9 VLCCs VLCC Suezmax LNG 35% Containers 3% Dry bulk 33% -4 VLCCs 5-9 VLCCs 3 7% 6% -5 VLCCs Source Clarksons Container Dry Bulk Product Aframax Suezmax Source Clarksons CURRENT IRANIAN VLCC FLEET USAGE NEUTRAL IMPACT OPEC QUOTAS? OPEC HAS NEVER COMPLIED WITH QUOTAS In Service Long Term Storage Repairs/ Laid up Total Total 5 Total 3 Source Clarksons 5 Source EIA, September 5

26 Source Clarksons Source Barclays Appendix Q4 SEASONAL PEAK CAN BE EXTREME AVERAGE VLCC RATE 99-6 GLOBAL REFINERY BUILD OUT UNDERPINS DEMAND GROWTH $55, $5,36 kbd 7, 658 $5, 6, $45, $43,37 $45,944 5, FSU $4, $4,48 $37,96 $35,65 $36,85 $35,887 $36,35 4, 3, Middle East Asia/Pacific Africa $35, $3, $3,65 $3,4 $9,567,, Latin America N Am + EU $5, Jan Feb Mrt Apr Mei Jun Jul Aug Sep Okt Nov Dec 6E 7E 8E 9++E CURRENT US OIL EXPORTS SMALL BASE BUT GROWING MEDIUM & LONG TERM EXPECT US EXPORTS TO GROW TO C M BPD (EIA) Crude export scenarios Low price, high oil resource Low oil price / ref case High oil resource Source US DoE Statistics 6 Source Morgan Stanley

27 Euronav - Most Liquid VLCC/Suezmax Player LIQUIDITY GIVES SHAREHOLDERS OPTIONALITY More Trading Hours Euronext Brussels: 9 a.m p.m. (CET) NYSE: 9.3 a.m. 4 p.m. (EST) Ticker Symbol: EURN TOTAL TRADED VALUE OF EURONAV US AND BB SHARES (SAME SHARE) - EURN US EQUITY & EURN BB EQUITY % 9% 8% Average daily volume shares =.4 m shares per day 7% 6% Average daily volume USD = USD 6 m per day TOTAL 5% 4% 3% Velocity = 34%* % % Free float = 85% % EURN US EURN BB *Calculation method = daily volume x trading days / free float Source Bloomberg based on average Exchange volumes over past months (EURN US 87k + EURN BB 54k per day) to Sept 9 6 7

28 Knots per hour Appendix Average Speeds VLCC & Suezmax (total voyage) VLCC Suezmax Source Bloomberg Energy 8

29 Appendix - China s Strategic Petroleum Reserve (SPR) some facts 9 - China stated objective to comply with IEA best practice on SPR IEA guidance SPR = 9 days of previous years net oil imports; SPR therefore not a static number nor a luxury Imports (mbpd)* Days (cover) SPR target (mbbls) Source Euronav *assume 6%pa growth 3 New acronym CPR (Commercial Petroleum Reserve) 6 Likely to have added c -6m bbls during 6 so approaching SPR capacity but legislation changes increased by 6m bbls 4 June 6 China Govt able to lease commercial capacity = 44m bbls with 4m bbls in use; so 6m capacity added 7 Total SPR capacity c 35m bbls + 6m CPR = 5m bbls total strategic capacity v c 4m bbls currently stored 5 Sept 6 Chinese Govt stated SPR in early 6 = 34m bbls 8 Further SPR & CPR capacity additions expected 7-9

30 Thousands Appendix - Commercial Crude Inventory an issue but manageable CRUDE INVENTORY GLOBAL EXCESS M BBLS PRIMARILY STORED IN USA & EUROPE AND NOT WHERE INCREMENTAL DEMAND GROWTH LOCATED IN FAR EAST.4. Euronav view m barrels excess of crude m barrels / m VLCC capacity = cargoes cargoes / 4-5 voyages* = -5 VLCC = WORST CASE = -5 VLCCs displaced as excess is drawn down = BEST CASE = Brent /WTI differential drives inventory exported requiring VLCC..8 Pacific Europe.6 U.S..4.. Source IEA * Average number of VLCC voyages per annum = 4.5 3

31 VLCC Order Book Dynamics 4 Supply of Vessels VLCC ADDITIONS, SCRAPPING, REMOVALS IMPLIED BUFFER Additions Forecast Additions Scrapped Scheduled deliveries Must be scrapped (over,5 years old) -6 Could be scrapped ( years old) depending on market levels BASE CASE Net:6 Net:37 Net:36 Net:8 Net:3 Net: Net:4 Net:37 Net:4 Net:-6 Source Clarksons 3 NET POTENTIAL Net: 4 Net: 9 Net: 3 Net: -3

32 Suezmax Order Book Dynamics 4 Supply of Vessels SUEZMAX ADDITIONS, SCRAPPING, REMOVALS IMPLIED BUFFER Q=3 Q=4 Q3= Q4= Scheduled deliveries Additions Forecast Additions Scrapped Must be scrapped (over.5 years old) -45 Could be scrapped ( years old) depending on market levels BASE CASE Net:9 Net:36 Net:5 Net: Net:- Net: Net:4 Net:39 Net: Net:- Source Clarksons NET POTENTIAL 3 Net: 9 Net: 3 Net: -6 Net: -6