Euronav NV (EURN), Belgium’s sole publicly traded oil-tanker owner, canceled an order for a suezmax tanker to preserve cash following six quarters of unprofitable rates for its biggest vessels hauling 2 million-barrel cargoes.
The fourth-quarter net loss widened to $50.7 million from $17.6 million a year earlier, the Antwerp, Belgium-based company said today in a statement. The results included a charge of $25.5 million related to advance payments made to Samsung Heavy Industries Co. (010140) for a suezmax on order that has now been canceled. Suezmaxes haul 1 million barrels of crude oil and are about half the size of a supertanker.
Ship owners are contending with a tanker fleet that’s expanding faster than cargo growth and all six companies in the Bloomberg Tanker Index (TANKER) will lose money this year, analyst estimates compiled by Bloomberg show. General Maritime Corp. (GMRRQ), based in New York, filed for bankruptcy protection Nov. 17 and Hamilton, Bermuda-based Frontline Ltd. (FRO), the world’s biggest operator of the largest crude carriers, sold vessels, pared commitments for new ships and eliminated its bank debt to avoid running out of cash.
“The industry is gradually moving toward measures to limit overcapacity,” Quirijn Mulder, an analyst at ING Groep NV in Amsterdam whose recommendations on Euronav have returned 65 percent in the past year, wrote in a note today. “The macro story is not supportive for the demand for VLCC transport and the entrance of new capacity is too high to absorb a low demand increase.”
Euronav, which operates half of its fleet in the single- voyage market, said its very large crude carriers, or VLCCs, earned an average $22,250 a day for a single voyage so far this quarter, compared with $14,200 in the fourth quarter and less than the $34,700 it says it needs to break even. The Belgian tanker owner has reported VLCC earnings below the break-even rate for six straight quarters.
The company had previously responded to the slump in rates by converting tankers into floating storage and offloading vessels for deepwater oil drilling, sailing slower to reduce fuel costs and postponing the scheduled delivery of three tankers to preserve cash. The tanker owner is “hopeful” to obtain an additional contract for floating storage and offloading services after being shortlisted in two undisclosed projects, according to today’s statement.
Euronav will take delivery of two jointly owned suezmaxes and one VLCC in the current quarter and said it has the funds available to pay for those three vessels. It said it still needs $16 million for planned capital spending this year and an additional $40 million of funds for the delivery of a final suezmax, at a cost of $55.3 million, in the first quarter of 2013.
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