Tuesday, after market, (4,17 EUR, 0,24%) will report its 3Q11 results.
During the quarter, the tanker market slid into a depression with spot rates even not covering operating expenses. Spot VLCC earnings ranged between $ 12 and $ 4k/day to average at $ 7,620/day. At the end of August, indicated that 73% of its available spot VLCC revenue days were covered at approximately $ 14.7k/day. Our scenario assumes the spot VLCC fleet to have earned an average of $ 11.5k/day during the third quarter.
Our scenario suggests to report revenues and EBITDA for the quarter of $ 90.8m and $ 19.8m. The operating loss and net loss is seen at $ 22.4m and $ 39.7m respectively.
With all tanker owners suffering a cash drain, the focus today is on newbuild commitments and balance sheet strength (i.e. loan-to-value ratio and cash balance).
Net financial debt end of June stood at $ 1,191.5m with cash and equivalents of $ 102.8m. still has one VLCC and four Suezmaxes (of which two ordered in joint-venture) on order for an estimated $ 421.2m. With advance payments at the end of June of $ 161.9m, remaining commitments are estimated at $ 259.3m. With today’s focus on cash preservation, we expect will do all possible to defer future commitments.
Last week, average VLCC earnings declined 34% to $ 7,330/day on Friday. Second hand values continued to decline, especially for tonnage aged 10 to 15 years. Recent transactions (resale of 1999- and 2000-built VLs for $ 28m and $ 29.4m respectively) have set new lows.
Conclusion:
At current exchange rates, we estimate Euronav’s net asset value at € 7.59 per share. The share price of € 4.16 implies a 45% discount to NAV, which corresponds to a further average decline in asset values of 13.9%.