Thanks to a strong tanker market with high freight rates, the Antwerp shipping group closed the second quarter with a net profit of $ 259.6 million. That is slightly more than what analysts expected, according to Bloomberg ($ 253.5 million). Moreover, this result surpasses the already fantastic first quarter when $ 226.6 million came in late. Euronav amassed over the first half of the year
so almost half a billion dollars profit, 485.2 million to be exact or $ 2.26 per share.
The excellent result is due to the high average freight rates. With its VLCCs (super tankers of 200,000-320,000 tons), which are offered on the spot market, Euronav achieved an average rate of $ 81,500 per day. The break-even point for a VLCC is around $ 28,000. The Suezmax tankers (120,000-200,000 tons) raised an average of $ 60,570 per day.
The profit in the second quarter was slightly thickened by the sale of two older ships. Euronav realized a capital gain of $ 13 million on the Suezmax tanker Cap Diamant, and $ 1.6 million on the VLCC TI Hellas.
Even more share buyback
The Antwerp shipping group has its shareholders benefiting from the strong results. In early July, Euronav announced that it would repurchase its own shares in order to create more value for its shareholders. The tanker operator did so because, according to him, the price of its share did not reflect fair value. Euronav is now expanding its share buyback – $ 75 million so far – by an additional $ 25 million. The purchases will take place before the end of September, the end of the current quarter.
In addition, shareholders receive a quarterly dividend of 47 cents per share.
The third quarter will be a bit more challenging than the first and second. Oil overproduction has declined rapidly from mid-May, reducing demand for floating storage, which kept freight rates high.
However, OPEC + is expected to boost production from September onwards and China may purchase more oil as part of the trade deal with the US. This will depend on the political relations between the two superpowers and also on the outcome of the US presidential election.
However, the impact of the corona crisis on oil demand will continue for a long time to come, so that the tanker market and freight rates will “face a challenging period.” However, Euronav says it is well placed to navigate this ‘transition tanker market to lower dynamics’ – in terms of oil supply and demand – press release. Financially, the shipping company is strong and has more than $ 1 billion in liquidity “to handle a period of freight rates under pressure.”
Moreover, almost half of the available fleet capacity for the third quarter is already fixed at attractive profitable rates. Both VLCCs and Suezmax tankers have already booked 48 percent at freight rates of $ 60,250 and $ 36,500 respectively.