Proportionate EBITDA (a non-IFRS measure) for the same period was $95.5 mill, compared with $130.5 mill in 4Q16. Revenue was $118 mill in 4Q17, compared with $146.3 mill for the same period of 2016.
The average daily TCE for 4Q17 for the Tankers International (TI) pool VLCCs operating in the spot market was $25,889, compared to $33,161 for $Q16. The average VLCC timecharter rate was $35,399 per day for 4Q17, compared with $43,833 for 4Q16.
As for the Suezmaxes, the average spot rate was $15,891 per day, compared with $21,243 per day for 4Q16. The timecharter rate averaged $21,417 per day, compared with $24,662 per day in 4Q16.
CEO Paddy Rodgers said: “Whilst freight rates improved sequentially over the third quarter, the typical seasonal rate pattern for the fourth quarter was not observed. Excess tonnage in key markets combined with a short-term change to OPEC export trading patterns kept the freight market under pressure.
“Euronav retains both now and going forward substantial balance sheet capacity and fixed income visibility to navigate through such periods and remains confident on the medium-term trends for the crude tanker market,” he said.
Instalments totalling $63.7 mill were paid in relation to the construction of four Suezmaxes at HHI and due for delivery this year. The remaining capex for these vessels is $185.9 mill against which $173.5 mill will be borrowed under a new facility. The vessels were ordered on the back of seven-year timecharter contracts.
The company retained around $754.4 mill of liquidity as at the end of December, 2017.
As for the proposed merger with Gener8 Maritime, Euronav said that work on this transaction was proceeding as planned and investors will be updated with the filing of a proxy statement/prospectus in February.
As for the outlook, the company said that conflicting signals remained in the tanker market. Demand for crude stayed above recent trend growth rates at 1.4 mill barrels per day with a positive outlook and scrap prices continued to rise, providing an exit route for older tonnage whose owners are pressurised by approaching regulatory requirements.
Asset values (both new-build and secondhand) have remained largely stable over the past 12 months and there has even been some tonnage removed for offshore projects, for instance Euronav’s 2004-built VLCC ‘Flandre’.
Euronav said that whilst these building blocks will deliver a positive tanker market structure, confirmation of the extension of OPEC production cuts in November combined with a change in export patterns from such producers will provide a sustained headwind for 2018.
Contracting of new VLCCs and Suezmaxes has continued but at a far slower pace than seen earlier in 2017 and the majority of new tonnage orders continue to come from industrial participants focused on fleet renewal. Indeed the average age of the global VLCC fleet is the highest it has been since January, 2003.
The duration of a challenging freight rate environment will remain dependent on the number of additional newbuilding orders that are not needed by the market. Scrapping and other type of fleet removal trends have been encouraging with the second half of 2017 seeing the highest number of VLCCs and Suezmaxes removed from the fleet during a half year period since 2003.
A scrap value rise for typical VLCC to $18 mill provides owners with an option given the uncertainty over freight rates, the cost of compliance with impending regulations and the scheduled new fleet supply for the next 12-18 months. Already in the first quarter of this year, there have been two vessels (1999 & 2000 built) removed from the fleet. However these trends need to be sustained before an inflection point will be observed.
Over the past 15 months Euronav has undertaken a number of proactive measures to bolster its capital structure to retain the capability to navigate the tanker cycle. The structure of the proposed merger transaction with Gener8 maintains robust capital ratios. This structure should allow the combined entity to continue to have some resilience to a challenging freight rate market yet retain strategic optionality but with exposure to any potential upside when the freight rate environment improves.
So far in 1Q18, the Euronav VLCC fleet operated in the TI pool has earned about $22,252 per day and 35.6% of the available days have been fixed. Euronav’s Suezmax fleet trading on the spot market has earned about $14,347 per day on average with 45.4% of the available days fixed, the company said.