Euronav narrows loss

Euronav turned in a fourth-quarter loss Tuesday but the red ink does not appear to have derailed its appetite for further expansion.
Euronav is led by chief executive Paddy Rodgers.

Euronav is led by chief executive Paddy Rodgers.

The Belgian tanker operator reported a net deficit of $21.9m for the three months to 31 December, versus a loss of $64m in the comparable period a year prior.

Earnings before interest, taxes, depreciation and amortization rose to $35.4m from negative $6.5m year-on-year due in large part to the spike in freight rates during the period.

Tonnage tied to the Tankers International VLCC pool reported a daily time charter equivalent rate (TCE) average of $24,000 in the fourth, which is nearly twice as high as the figure reported 12 months prior.

Some of Euronav’s suezmaxes achieved averages of around $23,400 when employed on period deals while others saw daily rates of around $14,500 when trading spot during the same period.

By comparison, the NYSE Euronext-listed operator’s suezmax fleet reported a daily TCE average of $20,200 and $8,500 in the spot and time charter markets, respectively, in the fourth quarter of 2012.

In like a lamb, out like a lion

Euronav attributed the gains in the VLCC segment to growing demand for tonnage in the Far East and a vessel shortage that started to take shape in the second half of the quarter as “charterers who were more experienced started to fix off dates further and further out”.

On the suezmax front management noted the ownership structure of the sector remained fragmented in the fourth quarter, which is why the market remained weak until ships began picking up long-haul business on the back of the shortage of VLCCs in the Atlantic.

“The market is currently stronger than at any time since the first quarter of 2010 and looks likely to last for the rest of this quarter,” it continued.

“Owners are finally showing willingness to make up for the lost time of the last three years and there is a very different mood on the back of stronger fundamentals.”

Buyer beware

While rates are on the rise Euronav warned that the recovery of the tanker market “remains fragile” and was quick to point out that the “supply and demand balance for crude oil transportation is at best very thin”, which is why it continues to be opposed to speculative orders.

“Furthermore, as the company demonstrated in the past the so-called ‘eco-ships’ do not exist in the large tanker sector as most ‘eco gains’ can be replicated through retrofitting fuel saving devices which can be done to existing ships at a fraction of the cost of a newbuilding,” it added.

Going forward the operator said it expects the acquisition of 15 VLCCs from Maersk Tankers to be completed “rapidly” and believes, when the deal is sealed and all the ships are delivered, the expanded fleet will “further enhance” its “prospects”.

“Euronav continues to look at opportunities in the large tanker sector as it wants to play a significant role in a wider consolidation of the world tanker fleet,” it told investors.

“The Euronav platform is ready for it and management believes that with the concurrent benefits of synergy and logistical enhancement this will benefit all of the company’s stakeholders.”

At the start of the first quarter of 2014, Euronav said VLCCs operating in the Tankers International pool were seeing daily earnings of around $38,500 on average while suezmaxes were fetching approximately $30,150.

Euronav, which is typically the first publicly-traded tanker owner to report earnings, turned in a full-year loss of $88.3m or $1.76 per share, which was slightly worse than the consensus forecast but far better than the $118.9m deficit reported in 2012.

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Paddy Rodgers

Patrick Rodgers has served as CEO of Euronav since 2000...

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