Euronav(US:EURN)2022-04-13 16:00COVID-19 Impact - The company reported a significant impact from COVID-19, resulting in additional costs of $1.2 million for crew changes and a revenue loss of $0.9 million due to off-hire days[571]. Market Conditions - The tanker market experienced a weak start in 2022, with ongoing oil supply issues and disruptions affecting overall demand[572]. - Current forecasts indicate that overall tanker demand is expected to rise above pre-pandemic levels in the following year[573]. - The company experienced a challenging financial performance in 2021, with VLCC and Suezmax freight rates trading at depressed levels compared to 2020[658]. - The oil market was in backwardation in 2021, reducing the need for storage and further impacting earnings due to high oil and bunker prices[659]. - The total shipping revenues and voyage expenses for 2021 were significantly affected by the economic slowdown and reduced oil transportation demand[656]. - The global demand for oil transportation is expected to increase by 4.6 million barrels per day in 2022 compared to 2021, with a return to pre-COVID levels anticipated[759]. - The tanker orderbook is measured, with VLCC and Suezmax orderbooks at 8% and 6% of the fleet, respectively[761]. Financial Performance - The company has maintained a positive EBITDA for 2021 and expects similar results for 2022 based on forecasted Time Charter Equivalent (TCE) rates[574]. - Total shipping revenues decreased by 65%, or $790.4 million, to $430.0 million for the year ended December 31, 2021, compared to $1,220.5 million for 2020[662]. - Voyage charter and pool revenues decreased by 68%, or $749.2 million, to $348.4 million for the year ended December 31, 2021, compared to $1,097.6 million for 2020[663]. - Time charter revenues decreased by 37%, or $41.4 million, to $71.3 million for the year ended December 31, 2021, compared to $112.7 million for 2020[663]. - Net gain on sale of assets decreased by 34%, or $7.7 million, to a net gain of $15.1 million for the year ended December 31, 2021, compared to a net gain of $22.7 million for 2020[669]. - Total vessel operating expenses slightly increased by 1%, or $2.3 million, to $220.7 million during the year ended December 31, 2021, compared to $218.4 million for 2020[672]. - Finance expenses increased by 4%, or $4.0 million, to $95.5 million for the year ended December 31, 2021, compared to $91.6 million for 2020[689]. - General and administrative expenses decreased by 13%, or $4.9 million, to $32.4 million for the year ended December 31, 2021, compared to $37.3 million for 2020[680]. - Depreciation and amortization expenses increased by 8%, or $25.2 million, to $345.0 million for the year ended December 31, 2021, compared to $319.8 million for 2020[686]. - Share of results of equity accounted investees increased by 110%, or $12.1 million, to $23.0 million for the year ended December 31, 2021, compared to a result of $10.9 million for 2020[692]. - Income tax benefit increased by 122%, or $2.4 million, to a tax benefit of $0.4 million for the year ended December 31, 2021, compared to an expense of $1.9 million for 2020[697]. - As of December 31, 2021, the company had $152.5 million in cash and cash equivalents, down from $161.5 million as of December 31, 2020[700]. - Net cash from operating activities for the year ended December 31, 2021 was $(25.3) million, a significant decrease compared to $969.8 million for the year ended December 31, 2020[704]. - Total indebtedness increased to $1,807.9 million as of December 31, 2021, compared to $1,375.5 million as of December 31, 2020[706]. - The company’s reliance on the spot market contributes to fluctuations in cash flows from operating activities due to exposure to cyclical tanker rates[704]. Asset Management - The estimated residual value of vessels has increased, leading to a projected $100 million reduction in depreciation expenses for the year ending December 31, 2022[590]. - The company has not recognized any impairment losses as of December 31, 2021, as the recoverable amount of each Cash Generating Unit (CGU) exceeds carrying amounts[574]. - The carrying values of vessels are subject to fluctuation based on market conditions, with no impairment required as of the last reporting date[595]. - The useful economic life of vessels is estimated at 20 years, with specific vessels in FSO service having an estimated life of 30 years[584]. - The carrying value of VLCCs as of December 31, 2021, is $2,347.5 million, an increase from $2,164.6 million in 2020[609]. - The total carrying value of the fleet increased to $2,967.8 million in 2021 from $2,865.3 million in 2020[609]. - As of December 31, 2021, six VLCCs had carrying values exceeding their market values by approximately $44.9 million[609]. - The estimated future cash flows for vessels with market value declines are expected to exceed their carrying values[608]. - The company has a total of 71.5 vessels in its fleet as of December 31, 2021, up from 69.5 in 2020[616]. - The company has four newbuilding VLCCs scheduled for delivery in 2021, with a total cost of $186 million[622]. - The company contracted three new Suezmax vessels for a total cost of $199.2 million, with deliveries expected in 2023 and 2024[623]. - The company has entered into agreements for eco-Suezmax newbuildings, with an en-bloc price of $113 million, due for delivery in January 2022[621]. - The company has not recorded any vessels as held for sale as of December 31, 2021[615]. - The company sold the VLCC V.K. Eddie for $38.0 million, resulting in a capital gain of $14.4 million after accounting for selling costs[625]. - The sale of the Suezmax Finesse generated a capital gain of $8.3 million from a net sale price of $21.0 million[626]. - In 2021, the company recorded a capital gain of $9.4 million from the sale of the Suezmax Filikon for $16.0 million[631]. - The VLCC Nautilus was redelivered as part of a sale and leaseback agreement, resulting in a capital gain of $4.5 million[632]. - A capital gain of $13.5 million was recognized in the first quarter of 2022 from the redelivery of three VLCCs under a leaseback agreement[745]. Sustainability and Regulatory Compliance - The company is focused on sustainability and the potential positive impact of increased demand for scrap steel on the residual value of its vessels[587]. - The company implemented advanced hull coatings on 35 vessels to improve fuel efficiency and reduce CO emissions[637]. - Variable Frequency Drives (VFDs) were retrofitted on 10 vessels to reduce electrical power consumption[639]. - The FAST platform has been implemented on 30 vessels, enhancing data-driven decision-making and performance monitoring[640]. - The Group entered into a $713.0 million sustainability linked loan with specific emission reduction targets, secured by 16 vessels, maturing on March 31, 2026, with an outstanding balance of $524.1 million as of December 31, 2021[720]. - A $73.45 million sustainability linked loan was secured on December 2, 2021, to finance two newbuilding Suezmaxes, with an outstanding balance of $0.0 million as of December 31, 2021[722]. - An €80 million ($100 million) unsecured revolving credit facility was established on April 7, 2021, with sustainability features, having an outstanding balance of $0.0 million as of December 31, 2021[723]. - The issuance of $200 million senior unsecured bonds was completed on September 2, 2021, with a coupon of 6.25% and maturing in September 2026, used for general corporate purposes and refinancing existing debt[726]. - As of December 31, 2021, the outstanding balance under the unsecured notes was $267.2 million, up from $199.0 million as of December 31, 2020[727]. Strategic Initiatives - The company is exploring a potential stock-for-stock combination with Frontline, with an exchange ratio of 1.45 FRO shares for every EURN share[756]. - The company has provided guarantees totaling $19.8 million to financial institutions for credit facilities related to joint ventures[742]. - As of December 31, 2021, the company was in compliance with all covenants contained in its debt agreements[741]. Geopolitical and Economic Factors - Recent geopolitical developments have contributed to economic instability, potentially affecting the shipping industry[748]. - The company has suspended operations with Russian customers, which represents less than 5% of its turnover[751]. - The price of marine fuels has increased due to self-sanctioning of Russian oil flows, negatively impacting the cost structure of vessels, with bunker fuel costs expected to remain high[752]. - The company anticipates an additional annual crew cost of approximately $500,000 due to difficulties in crew changes amid the conflict[754]. - Cybersecurity risks have increased, prompting the company to implement appropriate mitigating actions[753]. - The company acknowledges the difficulty in estimating the future impact of the Russia-Ukraine conflict on its financial results[755].