Euronav Company presentation. May 2017

Transcription

1 Euronav Company presentation May

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 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. 2

3 Agenda I Introduction to Euronav II Financials III Industry and Market Overview IV Supplementary slides 3

4 Key credit highlights 1 Largest publicly listed tanker company in the world High quality fleet of Very Large Crude Carriers ( VLCCs ) and Suezmax tankers, in addition to two 50% owned FSOs on long-term contracts Best-in class operations with a fully integrated operating platform 2 Strong financial position Value adjusted equity ratio of 64% and liquidity of USD~620m (Q1-17) Conservative financial strategy with target to keep normalized leverage at or below 50% and a minimum 2 year operational liquidity-runway Listed on NYSE with USD 1.29bn market cap and strong access to capital markets 3 Mix of spot and fixed rate charters Tanker fleet commercially operated through the leading VLCC Chartering and Suezmax Chartering platforms USD 155m of contracted fixed rate EBITDA in 2016 Recently awarded new 5 year contracts for the two FSOs (Qatar Petroleum and Total) and four Suezmax 7 year time charter contracts (Valero Energy) 4 Long-term positive tanker market fundamentals Softer market outlook short-term due to high number of newbuildings coming to market in 2017 Stronger long-term market fundamentals with robust and steady increase in demand for oil, increasing tanker ton-mile, lower newbuild ordering and financing becoming more restrictive 5 Strong and Reputable Platform Management and Board of Directors with strong experience in shipping and through the shipping cycles Corporate governance important factor for Euronav Strong historical track record 4

5 Introduction to Euronav 5 2

6 Euronav is the largest tanker company in the world INTRODUCTION FINANCIAL SUMMARY (USDm) Leading provider of transportation and storage of crude oil Net interest bearing debt Adj. EBITDA (1) The largest listed tanker ship owner in the world with a fleet of modern high quality tankers 1 1,235 Best-in-class fully-integrated operating platform Strong relationships to oil majors and leading energy companies Conservative financing strategy with a strong balance sheet and high liquidity 239 Head quartered in Antwerp with ca 180 employees shore side and globally 3,000 seafarers Listed on NYSE (TICKER: EURN) with a market capitalization of USD ~1.29 billion (as of 9 May 2017) Purchased 2 VLCCs 4 Suezmax on 7 year TCE Purchased 19 VLCCs IPO NYSE (2 in in 2017) CURRENT FLEET TOTAL 57 VESSELS 14.3 MM DWT 19 SUEZMAX (+4 NBs) 150, ,000 DWT 31 VLCC Up to 330,000 DWT 1 V PLUS (2) Over 441,000 DWT Only 4 in world fleet 2 FSO 380k barrels Stripped water capacity 1MM barrels 2MM barrels 3 MM barrels 2.8 MM barrels 1. Adjusted EBITDA (a non-ifrs measure) represents operating earnings including the share of EBITDA of equity accounted investees before interest expense, income taxes and depreciation expense attributable to Euronav 2. Only 4 V-Plus vessels in world fleet 6

7 28 years of tanker history Euronav Luxembourg created as a JV between CNN and CMB Lists on Euronext Brussels January 2014 Acquisition of 15 VLCCs from Maersk October 2016 Acquisition of 2 Suezmaxes Started doing business under the name Euronav as a subsidiary of CNN TANKERS INTERNATIONAL Pool founded March 2005 Acquisition of 16 Suezmaxes and 2 Aframaxes from Tanklog (Livanos Group) TI Asia and TI Africa conversion into FSO Asia and FSO Africa January 2015 IPO on the NYSE Acquisition of 4 ULCCs in JV Added 5 Suezmaxes and 3 VLCCs newbuilds July 2014 Acquisition of 4 VLCCs August 2016 Acquisition of 2 VLCCs Initiated focus on larger sized and modern vessels: 6 VLCCs (double hull) ordered March 2005 Acquired 4 VLCCs August 2015 Acquisition of 4 VLCCs 7

8 Fleet managed in pool structure provides benefits VLCC POOL SUEZMAX POOL SUEZMAX CHARTERING (+4 NB) Other VLCC Tanker Pools (Ships on the Water) Main Tanker Clients Heidmar VLCC Seawolf 13 Navig8 VL8 37 China VLCC 32 Source: Company reports 17 February 2017 Size is critical to improve market knowledge and achieve the best commercial terms 8

9 Actively managed high quality fleet EMPLOYMENT PER VESSEL HIGH QUALITY SHIPYARDS Euronav employs its fleet based on assessment of where it can create the most value Service Contract Storage 2 1 Time Charter 11 TI Pool Korea Japan China Fleet of 51 vessels including 4 TBD excluding 2 FSOs excluding 4 S&L Spot VESSEL ACQUISITION AND SALE TRACK RECORD Vessel acquisition Profitable vessel sale Loss-making vessel sale Purchased of 4 VLCCs ($477.5M) & 16 Suezmax + 2 Aframax from Tanklog ( $1,083M) VLCC 5 Year Old Secondhand Prices +4 Suezmax 5 Year Old Secondhand Prices Purchased 15 VLCCs from Maersk for $980M

10 Number of VLCC/Suezmax % of VLCC/Suezmax fleet Euronav focused on prudent consolidation Value Adjusted Equity ratio* (%) DYNAMICS IN THE SHIPPING INDUSTRY Crude tanker business slowly industrialising Low rate environment enables market consolidation Euronav plays a key role in the consolidation of the tanker market Tanker companies have 3 main counterparties Oil majors, Refinery majors and Oil traders All 3 have excellent credit risk and exposure However freight rates likely to retain some volatility as each cargo carriage price is set on an auction basis Strong ship owners utilize downturns pro actively TANKER MARKET CONSOLIDATION * Post BW acquisition DHT* TNK GNRT EURN NAT FRO BAHRI % of fleet % 20% 15% 10% 5% 0% FRAGMENTED VLCC MARKET OPEN FOR CONSOLIDATION Differentiate spot players vs industrial players Green indicates Captive or Sovereign fleet Blue indicates fleet in stock listed companies Small owners are data deficient (275 VLCCs) China Merchants 41 NIOC 40 Bahri 37 China COSCO 33 Euronav NV 32 MOL 31 Top 10 owners control 43% of global VLCC fleet Angelicoussis Group 31 DHT 25 Gener8 Maritime 24 Nippon Yusen Ship Owner Ship Owner Ship Owner 27 2 Ship Owner 34 1 Ship Owner 29 Source Clarkson s Total 715 VLCC 3 May

11 achieved with a strategy of strong capital allocation Leverage STRONG BALANCE SHEET HEDGE TOWARDS CYLICALITY Tanker business is cyclical, towards which the only cure is to have a strong balance sheet and liquidity pool Euronav currently has a very strong liquidity pool that creates a three year runway through the cycles Policy to retain at least two years of operational liquidity at all times and maintain strong banking relationships LIQUIDITY END MARCH 2017 (USDm) As evidenced by Cash and cash equiv. Undrawn secured revolving facility Undrawn unsecured credit line Total liquidity pool CAPITAL ALLOCATION KEY TO GROWTH STRATEGY ACQUISITION CRITERIAS Since KEEP STRONG BALANCE SHEET 2. RIGHT MIX OF EQUITY & DEBT 3. KEEP OR LOWER AVERAGE BREAK-EVEN 2 25 VESSELS ACQUISITION + HIGH DIVIDEND YIELD MAINTAIN STRONG BALANCE SHEET 50% (Leverage) 11

12 Highly experienced management Patrick Rodgers - CEO Chief Executive Officer since 2000 Chief Financial Officer between 1998 and 2000 Board of Directors since June 2003 Member of the Executive Committee since 2004 Director and Chairman of the International Tanker Owners Pollution Federation Fund since 2011 Trained as a Lawyer CFO since 2008 Hugo De Stoop - CFO Joined Euronav in September 2004 and appointed Deputy CFO and Head of Investor Relations Private Equity and Investment Banking background with UBS Started career at Mustad International Group Founder of First Tuesday International Trained as an Engineer and MBA from INSEAD Capt. Alex Staring - COO Chief Operating Officer of Euronav since July 2005 Spent majority of his time at sea on Shell and CMB tankers Came ashore in 1997 and headed up SGS training and gas centre Former COO of Tankers International LLC Trained in Maritime Sciences Brian Gallagher Head of IR Head of Investor Relations since March 2014 Experience from the British Coal Pension fund unit, CIN Management, before moving to Aberdeen Asset Management in 1996 Worked as Investment Manager at Gartmore for 7 years In 2007 set up a retail fund at UBS Global Asset Management before switching into Investor Relations as IR Director at APR Energy in 2011 Trained as Economist 12

13 Professional and Experienced Board of Directors INDEPENDENT DIRECTORS Name Age Background Carl Steen (Chairman) Alice Wingfield Digby Daniel R. Bradshaw Anne-Hélène Monsellato Grace Reksten Skaugen William Thomson Strong background in finance, shipping, offshore and oil services (Nordea) Strong background in shipping (former Chartering Manager), ship owner in smaller tanker segment 69 Strong background in shipping and offshore NON-INDEPENDENT DIRECTORS Name Age Background Ludovic Saverys 33 EXECUTIVE DIRECTORS Name Age Background Paddy Rodgers (CEO) Former Partner/ Auditor (EY), strong background in cross-border listing transactions, Audit Committee financial expert (SEC) Strong background in corporate finance, venture capital and shipping, former board member of Statoil Strong background in shipping, former ship owner, shipbroker, director of P&I club Strong background in finance and shipping (CFO of CMB), ship owner (BOCIMAR (Dry bulk), Delphis (Container)) 57 CEO Euronav since 2000 SHAREHOLDERS Shareholder Shares % Saverco - Marc Saverys 17,026, % Victrix Virginie Saverys 9,245, % Total Family 26,272, % Huber Capital 4,253, % Argonaut 4,223, % Dimensional Fund 3,823, % Avenue Capital 2,593, % Vanguard 2,582, % Fidelity 2,565, % Mellon Capital 2,459, % Wisdomtree 2,330, % SEB Investment Man 2,182, % Norges Bank 2,177, % Deutsche Bank Trust 1,913, % Alyeska 1,800, % Donald Smith 1,785, % 13

14 Clean structure with most assets held directly at Euronav NV SERVICE Euronav NV Belgium 47 Vessels* HOLDING 100% 100% 100% 100% 100% 100% Euronav Ship Management SAS France Euronav SAS France Euronav UK Ltd United Kingdom Euronav Shipping NV Belgium Euronav Tankers NV Belgium Euronav Hong Kong Ltd Hong Kong 3 vessels * 100% 100% 100% 100% 100% 100% 50% 50% 100% Euronav Ship Management (Antwerp) Branch Office Belgium Euronav Ship Management (Hellas) Ltd Liberia Euronav Singapore Pte. Ltd. Singapore E.S.M.C. Euro-Ocean Ship Management Ltd Cyprus Euronav Luxembourg SA Luxembourg Larvotto Shipholding Ltd Hong Kong Fiorano Shipholding Ltd Hong Kong TI Africa Ltd Hong Kong TI Asia Ltd Hong Kong 100% 1 vessel 1 vessel * 1 vessel * 1 FSO 1 FSO Euronav Ship Management (Hellas) Branch Office Greece *Vessel to be repatriated under main balance sheet *All of our daughters are funded through shareholders loans. The excess of cash is repatriated through the repayment of these shareholders loans. 14

15 Financials 15 16

16 Strong credit profile VALUE ADJUSTED EQUITY RATIO (1) (%) LIQUIDITY (USDm) 63% 62% 64% % 48% Q Q1-17 NET DEBT (USDm) EBITDA FROM FIXED RATE CONTRACTS (2) (USDm) 1,059 1, Q LTM Q1-17 1) Book equity value adjusted for broker valuations 2) On proportionate basis covering all joint ventures 16

17 Strong financial profile offsets cyclicality and seasonality 1 YEAR TC VLCC $ $ $ $ $ $ $ $ Year TC VLCC Cash breakeven COMMENTS Low opex and cheap financing lower breakeven rates P&L breakeven (including 2017 expected; interest, reduction and repayment of debt facilities) (1) : ~ USD 27,300 / day for VLCC (OpEx / day USD 8,165 and SG&A / day USD 1,600) ~ USD 24,000 / day for Suezmax (OpEx / day USD 7,520and SG&A / day USD 1,600) $ $ $0 Mar-00 Oct-01 May-03 Dec-04 Jul-06 Feb-08 Sep-09 Apr-11 Nov-12 Jun-14 Jan-16 Cash flow breakeven 2017 (2) : ~ USD 18,500 / day for VLCC ~ USD 15,750 / day for Suezmax SEASONALITY: AVERAGE MONTHLY VLCC RATE $ $ $ $ $ $ $ $ $ $ Average VLCC rate $ $ $ $ $ $ $ $ $ Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Source Clarkson Research Services Limited Before TC-in/fixed income 2. Before fixed rate contracts 17

18 Long-term bank financing on attractive terms REPAYMENT SCHEDULE AND RCF REDUCTIONS HIGHLIGHTS Reductions Repayments Balloon Leverage Credit margins between 1.225% and 2.25% Most of the secured bank debt is revolving Strong relationships with the leading international shipping banks No material debt maturities until 2020 Revolving credit facilities reduce by $138m/year Cash debt amortizations on term loans: $55m/year STRONG & SUPPORTING BANKING RELATIONS COVENANTS Liquidity (minimum USD 54.3 million): USD 620 million (Q1-17) Equity Ratio (minimum 30%): 63.8% (Q1-17) Working Capital (positive): USD million (Q1-17) 18

19 Financial Highlights Profit & Loss PROFIT AND LOSS (In millions of USD) Revenue Other operating income Total income Voyage expenses and commissions Vessel operating expenses Charter hire expenses General and administrative expenses Net gain (loss) on disposal EBITDA COMMENTS Fixed income strengthened: Long-term seven year charters secured with Valero Energy Inc. for four Suezmax vessels starting in 2018 which will be served by four Ice-class new buildings ordered during the year Award of further five years contracts for the FSOs on the Al-Shaheen field offshore Qatar, owned and operated by Qatar Petroleum (70%) and Total (30%) Company currently has > USD 100 million of EBITDA (1) generated annually from fixed income contracts (FSO + TC contracts) Revenues dropped from 2015 to 2016 due to lower freight rates of which FIXED EBITDA Depreciation Net finance expenses Share of profit (loss) of equity accounted investees Result before taxation Tax benefit (expense) Profit (loss) for the period Before TC-in/fixed income 2. Proportionate consolidation method & FSO contribution current contract runs to Q

20 Financial Highlights Balance Sheet BALANCE SHEET HIGHLIGHTS (In millions of USD) Cash Restricted cash Other current assets Long term assets: Newbuildings Vessels 2, ,383.2 Other long term assets Total assets 3, ,046.7 Current liabilities Long term debt Other long term liabilities Equity 1, ,887.7 Total liabilities and stockholders equity 3, ,046.7 LIQUIDITY POSITION (In millions of USD) 2016 Q1-17 Cash & cash equivalent (incl. share of JV) Undrawn secured revolving facility Undrawn unsecured credit line Total Liquidity Leverage remains within company imposed limits at 45% loan to value Liquidity position strengthened providing optionality for cycle Diversification of funding source Sale & Leaseback of 4 VLCCs opens new option on funding Bank Loans Refinancing of term loan facility Q now means Euronav credit facilities are mostly RCFs CAPEX and newbuild debt capacity (current) Newbuilding Capex (4 Suezmax w/ contracts) = USD 236m Total estimated lending capacity = USD 175m 20

21 Financial Highlights Cash Flow CASH FLOW (In millions of USD) Net Income Depreciation and amortization COMMENTS Asset investments mainly in secondary market as part of active fleet management Debt facilities are revolving with no fixed cash amortizations, only fixed reductions of the facility sizes Other Change in working capital Net Cash from Operating Activities Dividend policy 80% of net profits, however, depreciating assets down to zero over 20 years (industry standard 25 years down to scrap value) Investment in fixed assets Proceeds from sale of fixed assets Net Cash for Investments Change in net debt Dividends Change in equity Other Net Cash from Financing Change in cash balance

22 Industry and Market Overview 22 5

23 Oil Tankers five key medium term drivers Demand for oil Supply of oil Shipping demand Ton miles Shipping Supply Vessel supply Financing & regulation ROBUST BALANCED CHANGEABLE S/T HEADWINDS L/T MANAGEABLE IF OWNERS ARE DISCIPLINED NEW BARRIER TO ENTRY Historical Oil demand growing last 25 years with yearly average 1.1 mbpd Only 2 negative years of growth since 1990 for global crude demand Present IEA forecast 1.4 mbpd pa growth 2017 OPEC Impact vs US Shale OPEC cuts impact on shipping Uncertainty around impact How long? OPEC cut = Non OPEC increased supply USA production shale: New Swing Producer very resilient & responsive USA crude exports to increase ton miles from 2017 OPEC cuts: difficult to predict if good or bad for Ton miles Seasonal Trends: increasing tonnage due to refinery maintenance and other factors Contracting rate for newbuildings fallen substantially & shipyards under reform pressure in the medium term Leverage down New regulations (Basel 3 & 4) restricting lending Total amount of loans reduced Distress in shipping loans has reduced risk appetite 23

24 USD per barrel Million barrels per day 1 Demand for oil robust and steady Y/Y CHANGE IN GLOBAL DEMAND FOR OIL THE IEA ESTIMATES FOR OIL 3,5 3 Average 1.1 million barrels per day 3,1 3,1 1,8 Demand growth (million bpd) 2,5 2 1,5 1 0,5 0 0,3 1,0 0,5 0,3 1,0 1,5 1,9 2,0 0,3 1,7 0,8 0,7 0,7 1,5 1,4 1,0 1,6 0,8 1,3 1,1 0,7 1,8 1,6 1,6 1,4 1,2 1,2 1,3 1,4 1,4 1,5 1,4 1,6 1,4-0,5-1 -0,7-0,9 1 OIL PRICE OUTLOOK Lack of disruption/market share game Demand Destructive Neutral Demand stimulating 0,8 0,6 0,4 0, Capex cuts in E&P Demand/supply Disruptive 0 Nov 16 Dec 16 Jan 17 Feb forecast for oil demand 2017 forecast for oil demand Source IEA, McQuilling, Bernstein, Barclay, Petrowin and Bloomberg 24

25 mbpd USD 2 Supply of oil driven by shale & new supplier dynamics SHALE OIL SPEED TO PRODUCTION IS KEY Average field development (approval to start up) time by resource [years, selected areas] 0,6 2,5 3,0 3,1 3,3 3,5 4,4 4,6 5,0 5,7 MOST SHALE PRODUCTION KICKS IN USD Source SBC Analysis, Rystad GLOBAL OIL SUPPLY IS GROWING Source CLSA OIL SUPPLY ELEVATED BUT PRICE CAPPED Source IEA Source Economist 25

26 3 Ton miles increasing DEMAND GROWTH ALL FROM FAR EAST FOR TANKERS IMPORTANT WHERE SUPPLY IS SOURCED FROM LatAm / Carbs - Asia Pacific route Middle East - Asia Pacific route Average oil demand growth =1.1 mbpd Arabian Gulf to China 5,500 miles 21 days West Africa to China 9,650 miles 33 days LatAm to China 11,500 miles 44 days 1.4 mbpd x 365 days = 511m barrels 511m barrels / 2m capacity per VLCC = 256 cargoes 256 cargoes / 4.5 annual journeys for VLCC Atlantic F East = 57 VLCCs 1.4 mbpd x 365 days = 511m barrels 511m barrels / 2m capacity per VLCC = 256 cargoes 256 cargoes / 9 annual journeys for VLCC MEG F East = 28 VLCCs Middle East China Asia Pacific Exporter Supply Demand LatAm / Caribs West Africa 28 VLCCs Importer Demand Supply Source Euronav, Morgan Stanley 57 VLCCs 26

27 4 Vessel Supply Current order book ratio expected to drop significantly over the next 12 months SMALL PORTION OF ORDERS ARE SPECULATIVE ORDERBOOK AS % OF FLEET IMPROVING PICTURE Industrial players 50 Speculative 10 Captive fleet 10 % VLCC Orderbook % Fleet Suezmax Orderbook % Fleet Last 20 years order book ratio rarely been below 10% VLCC order book ratio falls to 5.9% over the next 12 months* 29 Chinese Source Clarksons 0 NEWBUILDING ORDERING ACTIVITY VLCC Suezmax Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May The VLCC and Suezmax orderbook in aggregate stands at 13.6% of the total fleet and is scheduled to be delivered over the next 2-3 years With a normal replacement rate of ~5% per annum, the order book is at healthy levels, although it has increased during 1Q 2017 due to historic low newbuilding prices from the yards Yards have recently filled up capacity, and are not likely to continue to offer the compelling prices Limited number of speculative orders within current order book is positive Source Clarkson 27

28 Special Survey #1 Special Survey #2 Special Survey #3 Special Survey #4 Special Survey #5 4 Vessel Supply Scrapping decision-making process TANKER SHIPPING A HIGHLY REGULATED INDUSTRY SCRAPPING MOTIVATION USD 4.0m 100% utilisation USD 3.5m Lower earnings potential Decreasing utilisation (vettings) Lower market freight rates USD 2.5m Increased costs due to vessel age USD 2.0m Dry-dock costs increasing after 15 years USD 1.5m Maintenance costs increasing Regulations costs ballast water management Sulphur emissions control Vessel age Process Driver=Time Catalyst=Rates 28

29 VLCC Equivalents 4 Large tanker market moving towards equilibrium DEMAND AND SUPPLY INTERACTION ON VLCC EQUIVALENTS SUPPLY DEMAND Total VLCC to be delivered Total Suezmax equivalent to be delivered* VLCC equivalents to be delivered* /- Gibsons Scrapping forecast Demand based on IEA forecast IEA demand forecast bpd m = Yearly Net Surplus/(Deficit) Cumulative Surplus/(Deficit) VLCC Equivalents to be delivered* Cumulative Surplus/(Deficit) WHAT IEA DEMAND TRANSLATES INTO VLCC EQUIVALENTS REQUIRED PA IEA demand forecast m bpd VLCC equivalent* Demand based on IEA forecast IEA demand forecast m bpd VLCC equivalent* Source Clarksons, Gibsons * VLCC equivalent = 1 VLCC = 2 Suezmax 29

30 4 Vessel Supply: Current order book VLCC ORDER BOOK Additions Must be scrapped (over 22.5 years old) -18 Forecast Additions Could be scrapped ( 20 years old) Scrapped SUEZMAX ORDER BOOK Additions Must be scrapped (over 22.5 years old) Forecast Additions Could be scrapped ( 20 years old) Scrapped Source Clarksons 30

31 5 Financing becoming more restrictive HUGE REDUCTION IN SHIPPING BANK EXPOSURE Around USD 100bn withdrawn from shipping sector since 2009 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

32 Summary 1 Largest tanker company in the world 2 Strong financial position 3 Mix of spot and fixed rate charters 4 Long-term positive tanker market fundamentals 5 Strong and Reputable Platform 32

33 Supplementary slides 33 22

34 Introduction to the tanker market DEMAND DRIVING FACTORS Large tankers play a vital link in the global energy supply chain Oil tanker shipping market primarily driven by daily freight rates Macro-economics Economic growth Industrial production Trade, Energy and environmental policies War & conflicts Energy sources Oil Coal Natural gas Nuclear power Oil market Refinery utilisation and locations Regional imbalances Stock performance Spot and forward prices Daily freight rates vary with the supply and demand for vessels and cargoes (need for movement of crude) Freight is paid for the movement of cargo between a load port and a discharge port Demand for oil traded by sea is primarily affected by global and regional economics Newbuildings Transport capacity Ship owners and logistics operations Shipyard capacity and labour costs Prices of input goods Vessel prices Interest rates Access to funding Size of global fleet Newbuilding rates Scrapping rate Age of fleets Environmental issues Service offer Geographic fleet concentration Ownership structures SUPPLY DRIVING FACTORS 34

35 Targeting an optimal mix of employment for revenue generation VLCC CHARTERING LTD. (TANKER POOL) TIME CHARTERS 2 All commercial decisions are handled by the Pool s independent agent (2) 1 Vessel owning companies pool their vessels together in order to gain economies of scale Pool of VLCCs 3 Vessels chartered, mainly in the spot market Responsible for the payment of all vessel operating expenses and capital costs Charterer Pays all voyage related costs Charterer Pays monthly charter hire on a per day basis 5 The pool distributes net revenues to the pool members in accordance with the allocated pool points(1) 4 All revenues and costs are pooled FSOs AND OFFSHORE SERVICE CONTRACTS As part of the overall offshore field development, most FSOs are leased on long-term (5-15years), fixed rate contracts These contracts are normally structured as either a time charter or a bareboat contract Both FSOs are deployed as floating storage units under service contracts with QP/Total Notes: 1. Established using a weighted average of the time charter equivalent (TCE) for each vessel on three selected voyages, which is then compared with an agreed reference vessel. Variable parameters affecting the calculations, such as fuel oil price and actual speed and consumption are reassed and reapplied every six months 2. With the exception of any specific trading restrictions which owners may stipulate 35

36 Complex factors have impact on the tanker business BEAR CASE BULL CASE CYCLICAL Tankers a highly cyclical sector always repeats past mistakes Large vessel supply to drive freight rates lower DEMAND Agencies continue to upgrade demand forecasts 2016 now seen as 1.6m bpd m bpd growth Asset values falling despite positive tanker earnings trend China oil demand by very diverse range of factors ASSET VALUES Lower NAV reduces valuation support CHINA GROWTH Base effect of economy consuming 12m bpd = key SHIPYARDS Speculation of increased contracting activity in response to discounting Korean political paralysis delaying necessary industry restructuring $ Financing being restricted new barrier to entry Restricted access reducing vessel supply growth INVENTORY Inventory at record highs will need to be cleared at some point thus reducing need for shipping Contango spread negligible since OPEC announced production cuts GLOBAL GROWTH World GDP: upgrades beginning Risk on approach with investors OTHER Trump impact uncertain Border adjustment tax OPEC output cut / M - East export cuts extended > 6 months SUPPLY OIL Supply of oil elevated despite OPEC cuts Increased supply = increased demand for shipping 36

37 Vessel Supply - Reduction in contracting run rate SHIPYARDS FAR EAST FOLLOWING NATURAL LIFE CYCLE UK Western-Europe Japan Korea China Pre s 1950s-1970s Cost leadership Restructuring and cost reduction Technology, specialization and domestic markets Gvt. subsidies and downsizing Nationalization Closure of industry 1970s-1990s 1990s-2000s 2000s-present Source CLSA 37

38 Corporate Governance matters ASC EURN NVGS KEX AVANCE DHT OSG GLNG MATX NAT Shipping Corporate Governance Scorecard Rankings SDLP NAP NMM CAI FRO GNRT NNA CMRE KNOP SSW Quartile 1 Quartile Merits of corporate governance are important to Euronav The reason it is important is the future funding of tanker shipping GLOG TGH TK LPG TNK BWLPG GLOP GMLP RIGP TGP TOO SBLK DSX DCIX ESEA CPLP Quartile 2 SB TNP STNG SALT GASS DRYS Quartile 4 3 = Tanker shipping MUST breakout from historical funding structures & embrace capital markets Euronav HAS a credible platform in capital markets Source Well Fargo Securities, LLC 38

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