Market 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 demand for its vessels and services [436]. - The COVID-19 outbreak has significantly reduced global demand for oil, with forecasts indicating a decrease of 5 million barrels per day in 2020 compared to the previous year [551]. - The company faces potential operational disruptions due to health risks and new regulations arising from the COVID-19 pandemic, which could affect its financial condition [436]. Revenue Generation and Financial Performance - The company’s revenue is primarily generated from voyage charters, with revenue recognized ratably over the estimated length of each voyage under IFRS 15 [439]. - 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 [488]. - Voyage charter and pool revenues rose by 60%, or $317.3 million, to $842.1 million in 2019, driven by an increase in vessel operating days following the merger with Gener8 [488]. - Time charter revenues increased by 20%, or $15.1 million, to $90.3 million for the year ended December 31, 2019 [489]. - 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 [490]. - 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 [492]. - Share of results from equity accounted investees increased by 2% to $16.46 million in 2019 from $16.08 million in 2018 [511]. Vessel Valuation and Fleet Management - 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 [443]. - The carrying values of the company’s vessels may not represent their fair market values, as market prices tend to fluctuate with changes in charter rates and the cost of constructing new vessels [446]. - The carrying value of the company's vessels as of December 31, 2019, was $3,189.97 million, down from $3,562.07 million in 2018, reflecting a decrease of approximately 10.5% [462]. - As of December 31, 2019, 6 VLCC vessels had carrying values exceeding their market values by approximately $44.8 million, compared to $132.0 million for 17 vessels in 2018 [462]. - The total fleet size decreased from 73 vessels at the end of 2018 to 71 vessels at the end of 2019, with 1 vessel acquired and 3 vessels disposed of during the year [467]. - The company’s fleet development included a significant acquisition of 29 tankers through a merger with Gener8 in June 2018, enhancing its operational capacity [472]. - The estimated market values for vessels are based on independent ship brokers' assessments and are subject to high volatility, making future price realizations uncertain [461]. Operational Costs and Expenses - Total vessel operating expenses rose by 14%, or $26.0 million, to $211.8 million during the year ended December 31, 2019 [495]. - Depreciation and amortization expenses increased by 25%, or $67.0 million, to $337.7 million for the year ended December 31, 2019 [504]. - Finance expenses increased by 34%, or $30.4 million, to $119.8 million for the year ended December 31, 2019 [506]. - Time charter-in expenses increased by 10,167%, or $0.6 million, to $0.6 million during the year ended December 31, 2019 [499]. - Income tax expense rose by 153% to $0.6 million in 2019, compared to $0.2 million in 2018, primarily due to taxes on non-tax exempt dividends [513]. Debt and Financial Position - The company’s overall debt level and interest expenses are critical factors affecting its financial position and operational results [433]. - Total indebtedness decreased slightly to $1,853.0 million as of December 31, 2019, from $1,866.8 million in 2018 [520]. - The company expects continued volatility in market rates for vessels, impacting short- and medium-term liquidity [514]. - The company has $60.0 million in available syndicated credit lines as of December 31, 2019, unchanged from 2018 [517]. - The outstanding balance of the $750.0 million senior secured credit facility decreased to $130.0 million in 2019 from $165.0 million in 2018 [525]. - The company entered into a sale and leaseback agreement for three VLCCs, recognizing a financial liability of $124.4 million [539]. - Financial covenants require the company to maintain a minimum cash balance of at least $30.0 million and a stockholders' equity to total assets ratio of at least 30% [542]. - The company was in compliance with all covenants contained in its debt agreements as of December 31, 2019 [546]. Market Trends and Future Outlook - The company’s assumptions regarding time charter equivalent rates are influenced by factors such as customer business loss, demand changes, and regulatory shifts in the tanker industry [459]. - The average TCE rates for VLCCs and Suezmax tankers increased to $35,678 and $26,542 per day, respectively, in 2019 [488]. - A $1,000 increase in spot tanker freight rates would have increased profit by $22.6 million in 2019 [793]. - The VLCC orderbook is 8% of the fleet, while the Suezmax orderbook is 9% of the current fleet, indicating a measured tanker orderbook [554]. - The tanker market remains influenced by the increase in crude exports from the Atlantic basin, particularly to Far Eastern customers [553]. - The company has no additional funding requirements going forward, supported by strict capital discipline and an established dividend distribution policy [555]. - In 2019, only 13 VLCCs and 6 Suezmaxes were removed from the trading fleet, showing a slowdown in vessel exits [554]. Joint Ventures and Strategic Initiatives - The company entered into joint venture agreements in November 2019, resulting in the incorporation of two 50% joint venture companies, Bari Shipholding Limited and Bastia Shipholding Limited [476]. - Euronav assumed a $633.0 million Senior Secured Loan facility from Gener8, which was initially for shipbuilding contracts for 15 VLCC newbuildings [531]. - The facility provided for term loans up to approximately $963.7 million, including various tranches guaranteed by KEXIM and K-Sure [531]. - As of December 31, 2019, the company had outstanding joint venture loans of $139.2 million, with guarantees amounting to $69.6 million [545]. Risk Management - The company is exposed to credit risk from operating activities, including loans and guarantees extended to joint ventures [792]. - Approximately 12.5% of total operating expenses were incurred in euros, with a potential $10.0 million impact on profit from a 10% strengthening of the euro against the dollar [791].
Euronav NV(CMBT) - 2019 Q4 - Annual Report