Yesterday, after market, (4,46 EUR, -7,85%) reported 4Q11/preliminary FY11 results. During the final quarter, Euronav’s VLCC fleet operated spot in the TI pool earned on average a Time Charter Equivalent of $ 14.2k/day, in-line with expectations. The Suezmax fleet operated on Time Charter, with profit split if and when applicable, earned on average $ 25.5k/day while the Suezmaxes operated spot (7 vessels, 5.5x 100% equivalent) earned on average $ 15.8k/day. Last week, average VLCC earnings firmed by 18% to $ 31,093/day on Friday. So far, has covered 40% of itsavailable spot VLCC revenue days for the first quarter at an average of $ 22,250/day.
Euronav’s newbuild program has been reduced by one Suezmax to one VLCC and three Suezmaxes, of which two ordered in joint-venture. The total value of the newbuild program amounts to $ 337.8m with advanced payments at the end of 2011 of $ 136.5m and $ 201.3m of newbuild commitments ($ 146m in 2012 and $ 55.3m in 2013). Advance payments on the cancelled Suezmax ($ 25.5m) are lost and impaired in 4Q11.
Fourth quarter results are impacted by several exceptional items including the $ 25.5m advance payments lost on the cancelled Suezmax, mark-to-market revaluation of interest rate swaps ($ 5.6m) and unrealised exchange rate differences ($ -1m). reported revenues and EBITDA for the quarter of $ 92.9m and $ 5.9m vs. our forecast for $ 91.1m and $ 23.9m. On an underlying basis, EBITDA exceeds expectations by $ 7.5m. EBIT and net result for the quarter are reported at $ -36.5m and $ -50.7m respectively.
has granted a purchase option on the VLCCs Antarctica(2009) and Olympia(2008) for delivery not later than 1H15. received an undisclosed option fee, which is non-refundable but deductible from the purchase price. The purchase price will be slightly under or above the book value of the ships, depending upon when the option is exercised. Taken into account both vessels have been ordered for about $ 123m and assuming full depreciation over 20 years, this would suggest a trigger in excess of $ 90m for a 5-year-old vessel. This is significantly above the current secondhand value for a 5-year-old VLCC (currently estimated at $ 63m).
In 2011, has participated to four FSO tenders and has been shortlisted in 2 of these tenders. The company is hopeful to be awarded a new FSO contract in the near future.
Conclusion:
Euronav’s results exceed expectations on an underlying basis. We regard the decision to cancel one Suezmax order as relatively neutral on valuation (advance payments lost on the Suezmax cover the difference between cost price and current newbuild prices) while offering some relief.
At current exchange rates and asset values, Euronav’s NAV is estimated at € 6.60 per share. The current share price of € 4.84 implies a 26.7% discount to NAV, which corresponds to an average decline in asset prices of 7.0%.