Euronav(US:EURN)2020-04-29 20:27Market Demand and Economic Impact - The company anticipates a significant decline in global demand for crude oil and refined petroleum products due to the COVID-19 pandemic, which may adversely affect the demand for its vessels and services [599]. - The COVID-19 outbreak has significantly reduced global demand for oil, with Energy Aspects estimating a decrease of 5 million barrels per day in 2020 compared to the previous year [735]. - The outbreak of COVID-19 has caused extreme volatility in global financial markets, impacting the company's earnings and cash flow for 2020 [732]. - The company’s financial condition may be affected by various factors, including the spot rate and time charter market for VLCC and Suezmax tankers, and the number of vessels in its fleet [597]. - The company expects continued volatility in market rates for vessels, impacting short- and medium-term liquidity [688]. Revenue and Financial Performance - Total shipping revenues increased by 56%, or $337.7 million, to $942.5 million for the year ended December 31, 2019, compared to $604.8 million for 2018 [659]. - Voyage charter and pool revenues rose by 60%, or $317.3 million, to $842.1 million for the year ended December 31, 2019, driven by an increase in vessel operating days following the merger with Gener8 [659]. - Time charter revenues increased by 20%, or $15.1 million, to $90.3 million for the year ended December 31, 2019, due to new time charters at improved rates [660]. - Other income surged by 111%, or $5.3 million, to $10.1 million for the year ended December 31, 2019, attributed to improved marine insurance costs and a favorable arbitration claim settlement [661]. - The net gain on sale of assets decreased by 7%, or $1.1 million, to a net gain of $14.8 million for the year ended December 31, 2019, compared to $15.9 million for 2018 [663]. Vessel and Fleet Information - The useful economic life of the company’s vessels is estimated at 20 years, with FSO service vessels having an estimated useful life of 25 years [607]. - The carrying value of the fleet as of December 31, 2019, was $3,189,967,000, down from $3,562,067,000 in 2018, representing a decrease of approximately 10.5% [630]. - The total number of vessels decreased from 68 in 2018 to 65 in 2019, with VLCCs decreasing from 41 to 40 and Suezmaxes from 25 to 24 [630]. - The fleet development included 1 Suezmax acquisition in 2019, while 3 vessels were disposed of, resulting in a total fleet of 71 vessels at the end of 2019 [637]. - The company’s fleet includes advanced, fuel-saving technology vessels acquired through the merger with Gener8, which added 29 tankers to the fleet [642]. Expenses and Financial Charges - Total vessel operating expenses rose by 14%, or $26.0 million, to $211.8 million for the year ended December 31, 2019, compared to $185.8 million for 2018 [668]. - Depreciation and amortization expenses increased by 25%, or $67.0 million, to $337.7 million for the year ended December 31, 2019, primarily due to the acquisition of new vessels and the adoption of IFRS 16 [677]. - Finance expenses increased by 34%, or $30.4 million, to $119.8 million for the year ended December 31, 2019, compared to $89.4 million for 2018 [679]. - Interest expense on financial liabilities increased by 24%, or $16.4 million, for the year ended December 31, 2019, compared to 2018 [680]. - Other financial charges rose by 10%, or $0.7 million, to $7.5 million for the year ended December 31, 2019 [681]. Impairment and Asset Valuation - The company has determined that there were no indicators of impairment for its vessels as of December 31, 2019, and no impairment testing was necessary at that time [616]. - The company has not recorded any impairment for the years ended December 31, 2019, and 2018, despite market value declines [627]. - The carrying values of the company’s vessels may not represent their fair market values due to fluctuations in charter rates and the cost of constructing new vessels [622]. - The estimated market values for vessels are based on independent ship broker assessments, which are inherently uncertain due to market volatility [628]. - The recoverable amount of an asset is assessed as the greater of its fair value less cost of disposal and value in use, with future cash flows discounted to present value using a pre-tax discount rate [621]. Debt and Financing - Total indebtedness decreased to $1,853.0 million as of December 31, 2019, from $1,866.8 million as of December 31, 2018 [695]. - The company entered into a $173.5 million revolving credit facility, with an outstanding balance of $156.9 million as of December 31, 2019 [707]. - The company assumed a $633.0 million Senior Secured Loan facility from Gener8, which was initially for shipbuilding contracts for 15 VLCC newbuildings [708]. - The company repaid $561.6 million of the Senior Secured Loan facility using borrowings from a new $700.0 million Senior Secured Credit Facility [709]. - The company has outstanding joint venture loans of $139.2 million as of December 31, 2019, with guarantees amounting to $69.6 million [728]. Regulatory and Compliance Issues - The company expects that the European Ship Recycling regulation and IMO 2020 will impact its operations starting January 1, 2019, and January 1, 2020, respectively [597]. - The company maintains compliance with all covenants in its debt agreements as of December 31, 2019 [729]. - The company has provided guarantees to financial institutions for credit facilities to joint ventures, totaling $69.6 million [730]. Operational Challenges - The company’s operational disruptions may arise from worker health risks and new regulations due to the pandemic, potentially affecting loading and discharging of cargo [599]. - Approximately 12.5% of total operating expenses were incurred in euros in 2019, with a 10% strengthening of the euro against the dollar potentially decreasing profit by $10 million [999]. - A significant portion of the company's vessels are exposed to the spot market, where a $1,000 increase in daily freight rates would have increased profit by $22.6 million in 2019 [1001]. - The supply of tankers is influenced by new deliveries and removals, with 2019 seeing 13 VLCCs and 6 Suezmaxes removed from the trading fleet [738]. - The company employs a strategy of time charters for some vessels, providing fixed income for a pre-set period [739].