Euronav NV reported its non-audited financial results today for the fourth quarter ended 31 December 2021.

Hugo De Stoop, CEO of Euronav said: “The encouraging tanker market recovery evidenced at the time of our Q3 results was unfortunately deferred by the spread of the omicron variant from mid-November and the associated swift restrictions on economic activity. We believe this is a temporary pause. Prospects for a strong rebound in oil supply, restocking requirements of global crude inventory, and consumption returning to 2019 levels are all on track for delivery during 2022. Euronav maintains a strong balance sheet and liquidity position and is using the downturn in the cycle to upgrade its fleet through an intense drydock program and rejuvenate it. We welcomed two new modern eco-ships in January, and we will add six more to our fleet over the next 18 months. We are redelivering 4 older non-eco VLCCs now. These elements make Euronav the ideal platform for exposure to crude tanker market recovery. We look forward to making further progress during 2022.”

Key figures
To improve the relevancy of the accounting information of the income statement, the Company has decided to reclassify certain cost elements without impact on the net income. This voluntary change has been adopted in 2021 to improve comparability within the sector. It has been applied retrospectively and comparative information has been restated and included in the table below

For the fourth quarter of 2021, the Company realized a net loss of USD 72.5 million or USD
0.36 per share (fourth quarter 2020: a net loss of 58.2 USD million or USD 0.29 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 38.5 million (fourth quarter 2020: USD 50.3 million).

TCE
The average daily time charter equivalent rates (TCE, a non IFRS-measure) can be summarized as follows:

EURONAV TANKER FLEET
Update – Newbuilding delivery schedule
In January, two newbuilding Suezmaxes, Cedar and Cypress, joined our fleet. Cedar was delivered on the 7th of January and Cypress on the 20th of January. Both were constructed at Daehan shipbuilding (DHSC) in South Korea. Six more vessels are currently under construction, of which three VLCCs that are scheduled for delivery in the first and second quarter of 2023 and three Suezmaxes, scheduled for delivery in (1) the third quarter of 2023, and (2) in the first quarter of 2024.

Outstanding capital expenditure for the eight vessels at the end of Q4 2021 was USD 414 million, split as follows: USD 114 million in 2022, USD 234 million in 2023 and USD 66 million in 2024.

Additional capital gain from historic sale and leaseback transaction
As announced on 26 January 2022, Euronav will book a capital gain of USD 18 million in total regarding the redelivery of four VLCCs that were originally sold as part of a sale and leaseback transaction in December 2016. The capital gain on final disposal of these assets refers to the following four VLCCs: the Nautilus (2006; 307,284 dwt), Navarin (2007; 307,284 dwt), Neptun (2007; 307,284 dwt) and the Nucleus (2007; 307,284 dwt). As the first ship was redelivered on 15 December 2021, USD 4.5 million has been booked in the fourth quarter of 2021, whereas the remaining USD 13.5 million will be booked in the first quarter of 2022.

Distribution to shareholders
Euronav maintains its stated policy of distributing USD 3 cents per share per quarter despite current market conditions.

Following the decision of the shareholders meeting of November 2021 to make the issue premium reserve account available for distribution, the fixed distribution of USD 3 cents related to Q4 2021 will be paid via a repayment from that issue premium reserve. This distribution approach will be optimal for shareholders as Euronav anticipates there will be zero withholding tax (WHT) associated with such a payment.

The mechanism for this distribution will require shareholder approval at the Annual General Meeting in May.

FINANCING AND ACCOUNTING AT EURONAV
Liquidity
Euronav continues to maintain a strong financial base and excellent relationships with its capital providers: commercial banks, equity, and debt investors. At the end of December 2021, the Company had liquidity of USD 708 million, comprising USD 152 million cash and USD 556 million undrawn committed credit facilities.

Change in depreciation policy: Re-assessment in residual value of vessels under IFRS Historically the depreciation policy at Euronav has been to depreciate on a straight-line basis to nil value over twenty years. Periodically Euronav assesses the merits of this policy with recognition that it is more conservative than our peers.

Sustainability is an important consideration for a major shipowner. Steel is an ideal material in the circular economy since it is easily recoverable and infinitely recyclable. All scenarios leading to carbon neutrality in 2050 will lead to increased consumption of scrap metals. More precisely, the emissions reduction due to reduced energy consumption is up to 70% in steel making using scrap steel, as compared to iron ore. This indicates there is and will be a continuous and ongoing need for scrap.

This, not only points to a promising future demand for scrap steel but also to a higher value for scrap steel upon disposal. We note that last year’s recycling rates have reached an unprecedented high value of over USD 600 per LDT 1. One of the considerations for management’s previous assessment of a nil residual value was the cyclicality of the nature of future demand for scrap steel, which was deemed likely to remain volatile and unpredictable. This no longer appears to be the case and has led to a re-assessment by management.

As part of the re-assessment, management reviewed the value for their respective vessels at the end of their useful lives. As such, based on the decarbonization objectives for the steel industry, the increased importance of recycled steel, the future demand for scrap steel, competitor benchmarking and the current scrap value, management considers it appropriate to change the residual value of vessels from nil to an amount equal to the lightweight tonnage of the vessel, multiplied by the market price of scrap per ton, less the asset retirement obligation costs such as repositioning the vessel, commissions and preparation fees.

The market scrap value per ton is estimated by taking into consideration the historical four-year scrap market rate average, which is updated annually.

As a conclusion, the Company will apply a residual value of USD/LDT 390 prospectively for the full year ending on 31 December 2022. This re-assessment will impact the depreciations by more than USD 100 Mio over 2022.

P&L reclassification
In order to improve the relevancy of the accounting information of the income statement, the Company has decided to reclass certain cost elements without impact on the EBITDA nor on net income. This voluntary change has been adopted to improve comparability within the sector. Taking into consideration the IFRS rules the following reclassifications have taken place:

– TI Pool administration fee has been reclassified out of G&A to revenues (full year impact 2021: USD 8.8 million)
– Flag compensation has been reclassified from other income to Opex (- USD 8.3 million)
– Ship management has been reclassified from G&A to Opex (USD 14.9 million)

These changes in classification have been applied retrospectively over the last three years on a quarterly basis.

COVID-19 UPDATE
Euronav recognizes that many seafarers have endured intense hardship while working to keep trade flowing, and we are grateful to them for their service. Crew changes have remained a challenging operation throughout the pandemic and whilst progress has been made since the peak of the crew crisis in Q3 2020, continued focus on this area is required. Our crews have demonstrated resilience throughout this period to keep moving crude, despite numerous difficulties in relation to crew changes and repatriation. We strive through our participation and cooperation with international shipping associations to sensitize more countries to recognize the “key worker” status that seafarers deserve and facilitate crew travel possibilities. Whilst we have had extremely limited number of cases onboard our vessels, we are facing a lot of challenges to make our crew changes because a lot of seafarers who are supposed to replace people onboard are testing positive to the Omicron variant and must cancel their travels.

SUSTAINABILITY ACTIVITY

CDP
Euronav has been awarded a B score for taking coordinated action on climate issues by the Carbon Disclosure Project (CDP). This is the same score as the Company obtained in 2020 with its first submission to the CDP platform. The CDP is a global non-profit organization that has run the world’s leading environmental disclosure platform for over
20 years. In 2021, more than 13,000 companies worldwide shared data on their environmental impact in relation to climate change, forests, and water with the CDP. The full CDP report can be found on the Company’s website: https://www.euronav.com/en/sustainability/publications/

The CDP score ranges from A to D-, with A being the best possible rating, and is based on independent assessment against the scoring criteria of the CDP. Just like last year, the B score obtained puts Euronav in the ‘Management band’. Companies in this band are undertaking further steps to effectively reduce emissions, indicating more advanced environmental stewardship. Euronav’s score is higher than the marine transport sector average of C.

Additional sustainability linked loan
In December Euronav secured an additional USD 73.5 million sustainability linked loan at LIBOR to finance two newbuilding Suezmaxes that came on the water in Q1 2022. The loan has been concluded with DNB and includes sustainability and emission reductions as a component of the margin pricing. The conclusion of this funding brings facilities with an integrated sustainability component to 41% of Euronav’s commercial bank financing.

The facility will have a duration of 6 years. A range of measurable sustainability features such as year-on-year reduction in carbon emissions starting from 2022 will be supported by compliance with the Poseidon Principles.

Euronav has been included in the annual Bloomberg Gender-Equality Index (GEI), for the fifth consecutive year. The GEI provides transparency in gender-based practices and policies at publicly listed companies, increasing the breadth of environmental, social, governance (ESG) data available to investors.

Euronav is one of 414 companies with a combined market capitalization of USD 1 trillion, headquartered in 45 countries and regions across 11 sectors, that are included in this year’s index. The Company’s score is 62.84%, which is higher than the average score of the Transportation and Logistics sector of 47.61%.

Euronav successfully concludes four-month trial of B50 biofuel blend on Suezmax
After a successful completion of a B30 biofuel blend test on the Suezmax Statia (2006 – 150,205 dwt), Euronav has successfully concluded a B50 biofuel blend trial on its Suezmax Marlin Sardinia (2019 – 156,607 dwt). The biofuel, by marine fuels supplier TFG Marine (the bunkering arm of Trafigura), was tested on its longevity and durability over a period of four months. This second trial confirms the potential of biofuel and the crucial role it plays in the decarbonization of shipping.

Source: Euronav