surfer44
4 years ago
Just bought in based on this article...Thanks!
Euronav Is a Winner of the Oil Crash
The company's earnings will grow exponentially in the coming quarters
April 24, 2020 | About: EURN +0% XOM +0% RDS.A +0% COP +0%
The word "crash" is often associated with catastrophic outcomes, whether we are talking about an airplane, stock markets or commodity prices. However, when it comes to capital markets, a severe decline in prices might present lucrative opportunities for prudent investors. Some companies, on the other hand, benefit from these events due to the very nature of their business operations. Euronav EV (NYSE:EURN) is one such company that is looking at eye-popping earnings growth numbers in the next few quarters thanks to the oil crash. An investment in the stock will likely provide stellar returns within the next year.
A top-down view of the opportunity
The oil price war between Saudi Arabia and Russia led to a massive influx of oil from both these producers to the global market. To make things worse, the demand for oil declined sharply as a result of the global lockdown. The combination of these two developments has resulted in an oil glut, and storage space is running out at alarming rates. For instance, Bloomberg reported on April 21 that more than 40 ships carrying oil are stranded in waters from Long Beach to San Francisco Bay as onshore storage facilities have run out of room. This is generally bad news for energy investors as oil prices tend to decline when there are no storage facilities available. But for tanker companies engaged in the ocean transportation of oil, this is a great opportunity to grow earnings as the ships become the obvious choice to store oil.
Euronav is poised to benefit from two fronts
Headquartered in Belgium, Euronav operates in many important regions, including the United States, Singapore, South Africa and Mexico, and is the largest independent tanker company in the world. According to company filings, Euronav owns 70 ships, including 42 supertankers that can carry 2 million barrels of oil each. In addition to managing its own fleet, the company cooperates with other established ship management organizations as well to cater to the demand in the energy market. According to company filings, Euronav serves the storage and transportation requirements of all the leading oil companies such as Exxon Mobil Corp. (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.A) and ConocoPhillips (NYSE:COP). These partnerships have been at the center of Euronav’s success.
The company, undoubtedly, is poised to benefit from the recent developments in the energy market. As long as the imbalances between supply and demand persist, Euronav will be able to charge unusually high rates from energy companies for using its vessels for storage purposes. The decline in manufacturing activities resulting from the global lockdown will likely be a factor for at least another couple months as well, which paints a very positive picture for Euronav.
Most of the ships owned by Euronav operate on a spot price basis, meaning the company negotiates the prices on a case-by-case basis. According to The New York Times, the cost per day to store oil at tankers operated by the company has risen to as much as $300,000, a massive increase from the $25,000 a day charged by Euronav in February. Both VLCC (very large crude carriers) and Suezmax vessels operated by the company charge a base rate of $25,000 per day. According to the latest data published by Euronav, an increase of $5,000 per day in the rent will lead to an increase of $112 million in net revenue and earnings before interest, taxes, depreciation and amortization.
Source: Company presentation
The unprecedented growth in rates charged by Euronav means the company is poised to report eye-popping revenue growth in the coming quarters. This is just one half of the story.
For now, the company is happily charging higher rates from energy companies. In the coming months, Euronav will see growth from another front as well. When business activities return to normal, industrial giants such as China and India will order large shipments of oil, and Euronav, as the largest tanker company, will be busy transporting stored oil to every corner of the world. As countries attempt to restore manufacturing activities, demand for oil will remain at elevated levels for a few months, leading to growth opportunities for the company.
Shares of Euronav have weathered the market crash better than some of the largest companies in the world. According to data from GuruFocus, the stock has appreciated 18% in the last 30 days, which coincides with the spike in rates charged by the company for the use of its ships to store oil. However, shares were still trading at a forward earnings multiple of just 4.5 on April 24, which is below the sector median of 9.17, according to data from Eikon. This suggests massive leeway for capital gains in the coming months. The dividend yield, on the other hand, is above 5%, which is an attractive return in this ultra-low interest-rate environment.
Recent comments by insiders confirm the thesis for Euronav
Many institutional investors have already identified this opportunity, and the New York Times contacted Euronav CEO Hugo de Stoop for his comments about the surge in demand for tankers. Summarizing the situation, Hugo said:
“We are one of the few industries making money in this period. The current market for vessels is totally and completely unusual. At some point, you are going to have to work through the hangover. In the meantime, we will enjoy this extraordinary period of time from an earnings point of view.”
The message is loud and clear. The absurd conditions in the energy markets have transformed into a massive opportunity for tankers to make record amounts of money.
Takeaway: Euronav is poised to deliver attractive returns in the next 12 months
These are unprecedented times, and some of the trends that we experience today might not prove to be long-term in nature. This is true for the spike in costs for storing oil for later deliveries. For investors, however, the best course of action is to identify and act on these types of contrarian opportunities.
Euronav is set to benefit from two fronts. First, the shortage limitations for crude oil will lead to robust demand for the company’s ships as these become an obvious choice for oil majors to store inventoru. Second, the eventual revival of economic growth will lead to a surge in demand for oil, and the company will be transporting stored oil to all parts of the world. These two positive developments will help Euronav beat the earnings estimates by handsome margins in the coming quarters, and year-over-year growth numbers will look very attractive once corporate earnings are released. This should help boost the share price of the company, delivering stellar returns to investors who act on this opportunity.
Disclosure: I do not own shares of any companies mentioned in this article.
About the author:
Dilantha De Silva
I am an investment professional with 5-years of experience in financial markets. I specialize in U.S. equities and incorporate a top-down approach to identify developing macro-level trends and the companies that would benefit from such trends. I am a strong believer that the best investment opportunities could be found in under-covered equities.
I currently work with leading financial publications including Refinitiv, Seeking Alpha, ValueWalk, GuruFocus, and TradeGrill to produce investment-related content.
I'm a CFA level 2 candidate and an Associate Member of the Chartered Institute for Securities and Investment (CISI, UK). During my free time, I enjoy reading.
Visit Dilantha De Silva's Website
gerard1
9 years ago
Aframaxes led another day of surging crude tanker rates Monday, which saw time-charter equivalent (TCE) earnings jump by more than $1,000 per day for each of the three major segments.
VLCCs posted significant improvements both westbound and eastbound from the Middle East, in addition to the ex-West Africa trade, according to Baltic Exchange data.
Seemingly insatiable Indian Oil Corp (IOC) picked up Dynacom Tankers Management’s 300,000-dwt Marina (built 2009) for a ride from the Middle East to India’s West Coast for WorldScale WS 115, or $107,000 per day with idle days excluded, according to Tankers International (TI).
The rate marks a sizeable rise from the WS 83.5 earned last week for a similar journey.
Suezmax TCEs increased by $1,190 to reach $57,400 per day, according to the Baltic Exchange’s daily assessment.
The 159,000-dwt Maran Penelope (built 2009) earned WS 91.3 for a journey from the Middle East to Thailand on PTT’s account, according to Pareto JGO Shipbrokers. That is an unchanged from a similar journey last week.
In the Caribbean, a trip from Covenas, Colombia, to Chiriqui, Panama, on the 165,000-dwt Ridgebury John Zipser (built 2009) was worth WS 128 to Unipec, far above the WS 95 for two similar journeys on Tuesday.
Baltic Exchange data showed significant gains for cross-Mediterranean and northern Europe journeys.
But SOCAR paid WS 95 for a journey from Ceyhan, Turkey, to the Mediterranean with the 106,000-dwt Maratha (built 2003), which is unchanged from Friday’s fixtures, according to Pareto JGO.
And the 116,000-dwt Seaqueen (built 2004) earned WS 78.8 from Point Energy for a ride from the Baltic to the UK or continental Europe, which marked a downtick for a similar journey on Friday that cost WS 80.
gerard1
9 years ago
Home / Shipping News / Hellenic Shipping News / VLCC fixtures during first quarter increase to 542 vessels
VLCC fixtures during first quarter increase to 542 vessels
in Hellenic Shipping News 25/04/2015
The VLCC tanker market has enjoyed yet another positive first quarter, with Mcquilling Services recently observing in a relative analysis that the number of first quarter global VLCC fixtures has been increasing for more than five years and 2015 is no exception. According to the US-based consultants, “our proprietary fixture data showed approximately 542 vessels (530 in 1Q 2014) were chartered in the first three months of the year, 63% of which originated from the Arabian Gulf. West Africa continues to be a region of focus as light sweet crude that was once headed to the US is finding its way to China and India more frequently. Fixtures from West Africa to China are up roughly 18% year-on-year, while fixtures to India totaled nearly 70?.
Mcquilling added that “Latin America is another growing crude export hub, with Brazil leading the pack. The heavy crude produced in this region is increasingly being consumed by China as the Asian country continues to find ways to diversity its crude sources and its refining capacity complexity grows. According to Bloomberg, Asia-Pacific refiners are forecast to add 5.4 million b/d of capacity over the next five years and many of these plants are being built to process cheaper oils, which may spur demand for heavier crudes from Latin America. This is certainly an optimistic indicator for the VLCC segment going forward as the long-haul trip will likely have a positive impact on ton-miles”, it said.
The report also noted that “in the VLCC sector, the AG/Japan trade has averaged WS 60 or roughly US $58,000/day in the first three months of the year, while AG/USG averaged WS 33 or US $25,000/day. Meanwhile, WAFR/China averaged WS 59 or about US $56,500/day.
Looking at supply, there has been no net fleet growth in the VLCC segment so far this year as four ships have delivered to the fleet and four ships have been sold for demolition or conversion. We anticipate that the VLCC fleet will see a net fleet growth of 16 vessels in 2015?.
Meanwhile, in the Suezmax sector, Mcquilling noted that “global fixture activity increased in the first quarter by 5% year-on-year, with the bulk of the activity coming out of West Africa. There’s been an uptick in fixtures out of the Caribbean by 48%, most of which headed to the US Gulf and East Coast Panama, and out of the East Mediterranean by about 43% in 1Q 15 versus 1Q 14. Suezmaxes also found a lot of additional employment from the Black Sea to the Mediterranean by about 20 fixtures and West Africa to the Mediterranean by roughly 13 shipments. India’s continued thirst for crude oil has been evidenced by a 45% rise in fixtures from the AG to West Coast India in 1Q 15 versus 1Q 2014. Like China, India is also slowly beginning to diversify its imports from non-traditional sources like Latin America in order to begin easing dependence on traditional markets. We recorded two fixtures from South Brazil to West Coast India fixed in the first quarter and it will be interesting to see how this develops throughout the year. Spot rates on the WAFR/UKC trade have averaged WS 90 or US $43,300/day, while WAFR/USAC averaged WS 88 (US $43,400/day). The Black Sea/Med benchmark has averaged WS 98 or US $50,500/day. These rates, as shown in Figure 1 below, are trending much higher than year ago levels”, said Mcquilling.
It added that “with regard to Suezmax supply, there has been a net fleet growth of four vessels so far this year. We anticipate that the Suezmax fleet will expand by just five vessels in 2015.
In a turn of events, the Aframax sector has experienced a 19% decline in global activity in 1Q 15, driven by a decrease in fixtures out of the Black Sea, Caribbean and Arabian Gulf. The biggest decline out of the AG stemmed from fixtures to Singapore as they fell 81% in 1Q 2015 versus 1Q 2014. Fixtures to India declined 39% due to increased competition from the Suezmax segment. Despite the slowdown in activity, spot rates on the Caribbean/US Gulf benchmark have averaged WS 158 (US $46,700/day), up 8 WS points from the same time frame last year. Ullage and weather delays have been the main supporting factors behind the strong rates early in the year. The Cross-Med market averaged WS 119 or US $37,000/day.
The dirty Aframax fleet has grown by six vessels through the first quarter as eight additions were recorded and just two demolitions. We anticipate that this segment will see a net fleet growth of 16 vessels in 2015?, the company noted.
Mcquilling concluded that “like their larger counterpart, the Panamax segment also saw a decline in global fixture activity, but only by 4%. There was less loading activity out of Ecuador, the UKC and East Coast Mexico, while the Caribbean saw an increase of 46%. The Carib/USAC trade averaged WS 154 or US $29,300/day, while the Carib/USG route traded at a three-month average of WS 154 (US $31,000/day). Looking at supply, there has been a negative net fleet growth of two vessels and we don’t anticipate any dirty Panamax ships will deliver this year”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
gerard1
9 years ago
Euronav to Announce Q1 2015 Results on Thursday 30 April 2015
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EURONAV NV (NYSE:EURN)
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Today : Thursday 23 April 2015
Click Here for more EURONAV NV Charts.
ANTWERP, Belgium, April 23, 2015 /PRNewswire/ --
Euronav NV (NYSE:EURN & Euronext:EURN) ("Euronav" or the "Company") will release its first quarter 2015 earnings prior market opening on Thursday 30 April 2015 and will host a conference call at 9:30 a.m. EST / 3:30 p.m. CET on Thursday 30 April 2015 to discuss the results for the quarter
(Logo: http://photos.prnewswire.com/prnh/20150206/728388 )
The call will be a webcast with an accompanying slideshow. You can find details of this conference call below and on the "Investor Relations" page of Euronav's website at http://investors.euronav.com/.
Webcast Information
Event Type: Audio webcast with user-controlled slide presentation.
Event Date: 30 April 2015
Event Time: 9:30 a.m. EST / 3:30 p.m. CET
Event Title: "Euronav Q1 2015 Earnings Call"
Event Site/URL: http://services.choruscall.com/links/euronav150430.html
Telephone participants may avoid any delays by pre-registering for the call using the following link to receive a special dial-in number and PIN conference call registration link: http://dpregister.com/10063437. Pre-registration fields of information to be gathered: name, company, email.
Telephone participants who are unable to pre-register may dial in to 1-866-807-9684 on the day of the call. The international dial-in number is 1-412-317-5415.
A replay of the call will be available until 8 May 2015, beginning at 11:30 a.m. EST / 5:30 p.m. CET on 30 April 2015 by dialing 1-877-344-7529 or 1-412-317-0088 and referencing the conference number 10063437.
Extraordinary and Annual General Meetings of Shareholders 2015: Wednesday 13 May 2015
About Euronav
Euronav is an independent tanker company engaged in the ocean transportation and storage of crude oil. The company is headquartered in Antwerp, Belgium, and has offices throughout Europe and Asia. Euronav is listed on Euronext Brussels and on the NYSE under the symbol EURN. Euronav employs its fleet both on the spot and period market. VLCCs on the spot market are traded in the Tankers International pool of which Euronav is one of the major partners. Euronav's owned and operated fleet consists of 53 double hulled vessels being 1 V-Plus, 2 FSO vessels (both owned in 50%-50% joint venture), 27 VLCCs of which 1 in joint venture and 23 Suezmaxes (of which 4 in joint venture). The company's vessels mainly fly Belgian, Greek, French and Marshall Island flags.
Regulated information within the meaning of the Royal Decree of 14 November 2007.
SOURCE Euronav NV
gerard1
9 years ago
Tanker Market Could See A 100% Jump In VLCC Rates If This Happens
Summary
•A repeal of oil sanctions against Iran could drastically change the demand side equation for tankers.
•The result, according to a report from Morgan Stanley, suggests a 100% rate increase for VLCC's.
•DHT Holdings, Frontline Ltd. and Euronav NV appear to be well positioned to capitalize on these developments if they come to fruition.
A recent report by Morgan Stanley suggests that a repeal of oil sanctions against Iran could send tanker rates soaring. It notes that VLCCs, the second largest of the crude carriers, could see their rates skyrocket to $100,000/day if an accord is reached.
The continuation of negotiations beyond the latest March 31st deadline provided some hope that talks are proceeding in a constructive manner. Any political accords reached during these talks could lay the foundation for a final solution regarding the long running nuclear dispute before the next self imposed deadline by western nations of June 30th.
They aren't the only one noting the potential behind an agreement that will allow Iran to begin crude shipments once again. A recent report from shipbroker Gibson noted "Iran is keen it resume crude oil exports as quickly as possible as the recent fall in oil price has impacted heavily on their already limited ability to export crude. The nation is desperate to get back to its pre-sanction market share. International pressure has forced several nations to cut their dependency on Iranian imports, significantly India which has not taken any NITC VLCC cargoes since November last year."
According to Gibson, an agreement "could immediately release millions of barrels of crude currently being stored on the NITC (National Iranian Tanker Company) floating VLCC flotilla anchored off the Iranian coast."
The Iranian Oil Minister believes that exports could rise from existing levels by 500,000 bbl/d within six months. However, the 37 VLCCs owned by the NITC aren't nearly enough to satisfy those potential exports.
While the prospect of more oil hitting the market is upsetting to OPEC it is exciting for crude tanker owners who will see increasing demand from another supplier looking to distribute their product, even at these depressed prices as Iran looks to recover years of lost revenue.
So what's the play?
Tanker companies already under charter contracts won't see much improvement in pricing until new charters are negotiated. Therefore we turn to companies with high spot rate exposure. Three companies immediately come to mind. DHT Holdings (NYSE:DHT), Frontline Ltd. (NYSE:FRO) and Euronav NV (NYSE:EURN).
DHT Holdings
It wasn't too long ago that tanker rates were sub-optimal to say the least. But that's when DHT made a big bet, and in September 2014 fully acquired Samco Shipholding. Samco owns and operates a fleet of seven VLCCs with an average age of 5 years. In one transaction DHT doubled its current VLCC fleet right when prices were at their lowest and just before a major upswing. Five of those ships are currently on long term charters and two are linked to the spot market. Here's how their current charter schedule breaks down according to their latest 20-F.
(click to enlarge)
Source: DHT Holdings
DHT increased spot exposure over the course of 2014, moving from 44.2% in Q1 to 62.4% in Q4. I would like to think that it was management purposely positioning themselves for a recovery in the tanker market. By shunning long term locked contracts at depressed prices DHT took a risk but it seems once again to be paying off as rates rise and they reap the rewards.
Frontline
Frontline Ltd. operates several VLCC and Suezmax vessels and the vast majority of them are tied to the spot rate. Their latest 20-F shows the high degree of spot exposure, but does not include new deliveries following December 31 of 2014.
(click to enlarge)
(click to enlarge)
(click to enlarge)
Source: Frontline
It is also worth noting that Frontline's Suezmax fleet has a similar amount of spot exposure.
Frontline lists their breakeven rates for the remainder of 2015 at $26,400/day for the VLCC class and $19,400/day for the Suezmax class. If Morgan Stanley's prediction comes to fruition this could dramatically impact the bottom line.
Source: Frontline
Good news for a company that has struggled with less than optimal rates over the past few years.
Euronav NV
Euronav is a Belgium based pure play tanker company. The majority of its fleet consists of 26 VLCCs with an average age of 6 years and 23 Suezmax vessels averaging 10 years of age.
Euronav has deliberately positioned itself toward more spot exposure at this stage of the cycle.
Source: Euronav
The result of increasing rates coupled with this high degree of spot exposure is summarized below.
(click to enlarge)
Source: Euronav
This is based on current breakeven rates (including debt service) of $29,500 and $22,000 for VLCCs and Suezmax vessels, respectively.
Their recent purchase of 15 VLCCs once again demonstrated managements savvy ability to time the market.
(click to enlarge)
Source: Euronav
Time and again they have proven successful when highly accretive opportunities arise. They appear well positioned to capture the upside if Morgan Stanley's predictions come true.
Conclusion:
There are many factors that could lead to increasing rates, the latest according to Morgan Stanley being an accord reached with Iran that would soften or even eliminate sanctions. Of course, one must understand that these are possibilities at this point. There are no guarantees that an agreement will be reached, and even if negotiations are successful there are no guarantees that VLCC rates will increase.
gerard1
9 years ago
Oil Sails From Russia to Asia Faster on Smaller Ships
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by Sharon Cho
10:01 PM CET
February 26, 2015
Oil Tanker at Kozmino Port
An oil tanker is docked at a pier at Kozmino port in the Russian Far East. Source: Kyodo via AP Images
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(Bloomberg) -- With supertankers booked solid carrying cheap crude, smaller vessels are taking advantage of the opportunity by hauling record volumes of Russian oil to Asia.
Aframax ships that ply the route between the Russian port of Kozmino and North Asia in three days, compared with journeys of a month for supertankers from the Middle East, are carrying the most ever East Siberian Pacific Ocean Pipeline oil to China, South Korea and Japan. The demand has pushed ESPO’s price to the highest since July versus benchmark Dubai crude, according to industry consultant KBC Energy Economics.
Oil buyers are hiring 30 percent more Aframax tankers compared with last year’s average, potentially benefiting owners including Mitsubishi Corp., Hin Leong Trading Ltd. and Sinokor Merchant Marine Co. The glut that drove global prices down by about half lifted demand for stockpiling at sea in the biggest vessels, pushing their rates in December to the highest for any month since January 2010, and more than double those for the smaller ships.
“Russia is sending more and more crude to Asia at the expense of Europe, while interest in offshore storage has returned and freight rates have increased,” Ehsan Ul-Haq, a senior market consultant at KBC in Walton-on-Thames, England, said by phone.
ESPO Premium
Stronger demand for Russian crude helped ESPO fetch as much as $3.50 a barrel more than the benchmark Dubai grade for cargoes loading in March, according to data compiled by Bloomberg, up from a $2 premium in January.
A total of 26 cargoes of ESPO crude, or a record 615,000 barrels per day, are scheduled to be shipped in March, according to a loading schedule obtained by Bloomberg. That’s 30 percent more than a monthly average of 20 loadings last year, data show.
An Aframax sailing from Kozmino to Japan’s Chiba port was fixed at a rate of 90 cents a barrel this month, little changed from what it cost in October, according to Seatown Shipbroking Pte.
The price for hiring a supertanker from the Arabian Gulf to Japan surged to a five-year high of $2.38 a barrel in December, compared with $1.34 in June, before the collapse in oil prices began, data compiled by Bloomberg show. The rate has averaged $2.20 this year.
Front-month futures for Brent, the benchmark for more than half the world’s crude, averaged $5.56 a barrel below six-month contracts during January, compared with a $2.77 premium in June, data compiled by Bloomberg show. They were at a $3.89 discount at 12:54 p.m. London time. This market structure, known as contango, may make it worthwhile for traders to store oil and petroleum products to sell later.
Time Charters
Vitol Group, Koch Industries Inc., Royal Dutch Shell Plc and Trafigura Beheer BV have booked tankers that could be used to store crude at sea for one-year charters, according to reports from shipbrokers including Optima.
As many as 35 tankers were booked for time charters with capacity to store as much as 66 million barrels of oil, according to three shipping reports compiled by Bloomberg on Feb. 7. More than half of the vessels were fully fixed for periods of six months to two years.
Spokesmen at Sinokor Merchant Marine, Hin Leong and Mitsubishi, shipping and trading companies that operate vessels on the Kozmino-to-Northeast Asia route, declined to comment on the tanker market.
Siberian Pipe
Russia built the ESPO pipeline, a 3,000-mile link from the Siberian town of Taishet to Kozmino on its east coast to supply more crude to Asia as demand from traditional markets in Europe slowed. The port loaded its first cargo in 2009, while the pipe was completed in 2012.
“Asia is the only market that is witnessing any increases in oil demand,” said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul. “With Russia and OPEC producers both eyeing the Far East, the price war has begun for bigger market share and we’re likely to see more and more of it.”
Russia boosted sales of its crude to China, Japan and South Korea by 25 percent last year, increasing its portion of shipments to 8.7 percent from 7.2 percent in 2013, according to government data compiled by Bloomberg.
The proximity of the Kozmino port to Asia presents ESPO with a benefit versus Middle East crude, which takes about a month to arrive in the Far East.
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