CMB.TECH NV (CMBT) 2015 Q1 法說會逐字稿

Hello, and welcome to the Q1 2015 Euronav earnings call. (Operator Instructions). Please note, this event is being recorded.

I would now like to turn the conference over to Paddy Rodgers, CEO of Euronav. Please go ahead, sir.

Thank you. Good morning and afternoon to everybody, and thanks for joining Euronav's Q1 2015 earnings call. Before I start, I would like to say a few words.

The information discussed on this call is based on information as of today, April 30, 2015, and may contain forward-looking statements that involve risks and uncertainties. Forward-looking statements reflect current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events, performance, underlying assumptions and other statements which are not statements of historical fact.

All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by reference to the risks, uncertainties and other factors discussed in the Company's filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov, and on our own Company website at www.euronav.com.

You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of a particular statement and the Company undertakes no obligation to publicly update or revise any forward-looking statements. Actual results may differ materially from these forward-looking statements.

Please take a moment to read our Safe Harbor Statement on page 2 of the slide presentation.

Turning to the agenda on slide 2, I would like to take you to the key highlights of our Q1 earnings before handing over to CFO, Hugo De Stoop, who will present a full review of our financial metrics before handing back to me to take you through the latest market developments and themes as we see them at Euronav. We will then turn you to the operator for a Q&A session.

So let's start by turning to slide 4. This shows the key rate highlights for Euronav during Q1.

As we have highlighted in our press release earlier today, this has been the best quarter for Euronav since the third quarter of 2008. Rates have been strong throughout Q1, with our VLCC fleet within the TI pool registering over $50,000 per day. This reflects the conviction and discipline being shown in this marketplace by owners.

Suezmax rate strength has been consistent during the quarter at around $40,000 per day.

In terms of time charter out activity, we have put four vessels out on time charter: One VLCC, the Sandra; and three Suezmaxes, the Cap Romuald, the Cap Georges and the Cap Jean. These are all at good rates with a share of sub-charter profits, and also maintaining a strong relationship with longstanding customers. We have also had one Suezmax, the Cap Diamant, redelivered from charter.

It is most important to stress the level of the freight rates delivered during Q1 by Euronav, as the tanker market has gone through the Chinese New Year and well into Q2 with the same market strength.

I will now pass you over to Euronav's CFO, Hugo De Stoop, to run you through the first part of the financial presentation on slide 6.

Thank you, Paddy, and good morning or afternoon wherever you are, and thanks for joining our first-quarter 2015 earnings call.

So on slide 6, looking at the first-quarter highlights, you can see that Euronav enjoyed its best quarter performance in over six years. I would like to highlight the following areas of our first-quarter P&L. All figures have been prepared under IFRS.

EBITDA during the first quarter came in at $131.3 million. The freight rate improvement was sustained through the first quarter, but was largely front-end loaded in the VLCC fleet, whilst it was more consistent in the Suezmax segment throughout the quarter.

In terms of depreciation charge on an equity method basis, the charge was $49 million for the first quarter. The VLCC Hirado and Hakata have a limited impact on depreciation as they were delivered just before and after the end of the quarter respectively.

Full-year depreciation on the equity method basis is likely to be around $210 million.

Net financial expenses were just under $17 million. This includes some non-recurring financial, non-cash expenses of $4.1 million related to the early repayment during the quarter of the $235 million bond issued in January 2014. This instrument had a relatively high coupon rate. Therefore, we are guiding for the full financial year of 2015 for interest charge line to be around $50 million, but this will obviously depend on LIBOR rates until the end of the year.

Net profit was $80 million, the best quarterly performance from the Group since the third quarter of 2008.

As we announced on April 1, just after the end of the quarter, we have a clear and transparent dividend policy whereby we will be distributing at least 80% of net profit on a P&L basis for each financial year.

As far as the year 2015 is concerned, the dividend will exceptionally come in three payments. In May 2015, we will pay $0.25, as we declared on April 1. There will be two further payments related to the financial year 2015, one in September 2015 and one in May 2016, where the balance will be paid.

Ordinarily, dividends will be paid in September for the first half of the financial year and in May of the following year after having been approved at the general meeting of shareholders.

The reason for the accelerated payment for May 2015 is a clear reflection of the Board's and management confidence in the structural improvement we are experiencing in the crude tanker freight market. Paddy will expand on this in greater detail later on in this conference call.

As far as the income statement is concerned, I also would like to highlight some of the exceptional non-recurring elements that have an impact on our first-quarter results.

We delivered the VLCC Antarctica in January to its new owner. The vessel was sold in 2014, but a profit of $2.1 million was only booked at the time of delivery.

We also booked a $1.5 million deferred tax asset benefit. This will be used before the end of the year.

The second quarter is looking good, and we have booked roughly 52% of the available VLCC spot days at more than $50,000 a day and more than 50% of the available Suezmax spot days at an average of more than $40,000 a day.

Looking forward for the rest of 2015 as at March 31, 2015, and taking into account those newly-signed TC contracts, our employment mix remains largely spot-oriented, with more than 80% of our available days exposed to the spot market directly or indirectly via profit sharing. This continues to reflect our belief that this year should be a very positive year for the large tanker sector.

This leads us to slide 7 and our balance sheet highlights.

On the corporate front, we completed our listing on the New York Stock Exchange with a 3 times over-subscribed offer raising $229 million in gross proceeds.

In terms of the balance sheet, number of corporate actions have essentially cleaned up the balance sheet.

In February, we repaid the $235 million bond issued in January 2014 to finance the acquisition of 15 VLCCs. We repaid the convertible bond issued in 2009. We forced a conversion of the outstanding preferred convertible perpetual equity instrument into 9.5 million common shares. Finally, we repaid $40 million of seller's credit granted to us in 2012 by a shipyard.

On the S&P side, we delivered the Antarctica two months ahead of schedule to her new owners, with the accelerated delivery being rewarded in the form of payment of $2.1 million. The VLCC Antarctica will now be converted into an FPSO by her new owners.

We also took delivery of the Hirado during the first quarter, and just after the quarter ended, of the Hakata. This completes the fleet delivery for our July 2014 acquisitions, and means that since April, Euronav is up to 53 vessels on the water and has no more capital commitments.

The strength and simplicity of our balance sheet is reflected on slide 8.

Our leverage position on book values at March 31 is very conservative after all the change made during the first quarter. We now have over $3 billion in high-quality assets funded by a supportive consortium of banks at attractive margins, currently around 250 bps over LIBOR, excluding the mezzanine bond which was repaid in February.

Let's turn to slide 9, looking at our operating days schedule.

It is clear to see the breakdown of the Euronav fleet. Management strategy remains committed to keep exposure high to spot rate given our conviction that the market rate should remain healthy for the foreseeable future.

No dry docks were taken during Q1 and management is taking an opportunistic view on this subject given the age profile of our fleet and the current strong rate environment.

With that, I shall pass it back to Paddy to run through the industry section. To you, Paddy.

This is our standard slide showing the VLCC fleet development. The data is supplied by Clarkson's.

There continues to be a supportive, constructive background for the crude tanker sector driven by three factors: Limited vessel supply, increasing demand for oil and therefore more cargoes, and rising ton-miles as the cargo is being moved over greater distances and ships repositioning over longer distances.

Fleet growth in the VLCC sector has grown slightly since our last update two months ago. 13 net new VLCC orders for 2015 and 2016 have been recorded since February 12, around 2% of the global fleet. There has been some commentary on the number of new VLCCs on order, but we would like to make the following points.

Vessel supply is largely backend loaded towards the end of 2016, with most deliveries in Q4 of 2016 and potentially into 2017.

Around 10% to 15% of the order book as reported by brokers has no owner disclosed as ordering the vessels. This puts the orders under some question.

If the order book is really set up for 100 new VLCCs, it must be remembered that this is for a period to the end of 2018, so nearly three years. The projected natural run rate of demand for VLCCs based on projected oil demand is around 40 VLCCs for each year.

Euronav's thesis, which underpins our positive view on the crude tanker sector, is very simple. We don't need a huge rush of demand. We simply need demand to keep ahead of supply as it is now to maintain a positive rate environment and prospects for earning growth.

In addition to this, some market speculation suggests order conversion from other vessel types into VLCCs that could significantly add to supply. We don't believe that this will be the case in a way that is meaningful, and can only see five to 10 vessel orders being converted from other usage to VLCC or Suezmax in the next three years. The costs of conversion and the difficulty of negotiation with the shipyards make it complex, time-consuming and a costly and uncertain process.

Turning to the same dynamics within the Suezmax fleet, we can see slide 12. The Suezmax order book has barely changed since our last update. Net fleet growth is now expected to be 17 new Suezmaxes over 2015 and 2016 compared to 15 two months ago.

Moving on to time charter rates on slide 13, we can highlight a key current feature of the tanker sector. Slide 13 shows the time charter rate progression for both VLCCs and Suezmax fleets in the one-year, three-year and five-year charter market.

The upward and more importantly sustained progression in freight rates for such charters is very encouraging. However, whilst we have some reservations over the actual availability of such charters to owners, the longer the spot market remains strong, then the more optionality and real liquidity will come into the time charter space over time.

A curious feature of the current cycle is highlighted on slide 14, which has been the limited correlation thus far between the buoyant rate environment over the past six months and vessel values.

Vessel value progression on slide 14 has largely been focused on five-year-old vessels with new buildings acting as a cap on values. Values have changed little since our last report, apart from some specific pockets, such as the five year old Suezmaxes.

Moving on to the current themes as we see them on slide 15.

Freight rate sustainability. We are often asked for a longer freight rate outlook. With our annual report, we issued a note, highlighted on the next slide, on how the market functions. And, in short, much depends on the behavior of owners. We are very encouraged by the progression of Q1, especially in the period since Chinese New Year, and the new discipline being shown by owners.

Geopolitical fragility. There have been a number of hotspots during Q1 which we see as issues in some investors' minds. We are not seeing -- and we have not seen any disruption to our routes from the recent escalation of fighting in the Yemen.

The recent Iranian nuclear discussions and apparent agreement have not had any impact on our business either. Any program to unwind sanctions will take time to be applied and should result in both oil and possibly vessels being released into the market.

As announced on April 28, shares trading on the New York Stock Exchange and Euronext are now identical, and can be repositioned on either exchange provided we are outside a corporate event period.

Finally, on contango. This opened wide enough in January to encourage storage on ships, but closed again as prompt oil price backed up to increase -- due to increased demand as a consequence of the stimulus of lower prices. This narrowed the spread, and with higher TC cost, made a contango trade unprofitable. This, of course, can change and become reestablished if demand (technical difficulty) continues.

That brings me to our report which we highlighted on slide 16.

Every year in our annual report and accounts, we write a thought or industry piece outlining Euronav's views on a specific subject. Given this is a Q1 earnings call, I will not run through this year's paper, but slide 16 highlights the key points made on the complexities and volatilities within our business sector.

I would encourage investors and industry participants alike to read our thoughts. There is a link on this paper in today's presentation.

That concludes the short commercial break and I will now turn it back to Hugo to summarize Euronav's outlook on slide 18 for Q2, before returning with some concluding remarks on the market outlook for Q2 and beyond.

Hugo?

Thank you, Paddy. From a stock market perspective, Euronav has substantially improved its liquidity following the New York Stock Exchange listing, and also taking the opportunity with new investment to simplify and strengthen our balance sheet.

Recent daily volumes on both Euronext and NYSE have totaled 18 million per day. Liquidity in Euronav shares is around 5 times larger than a year ago. This provides optionality for the Group should it wish to expand, but this shall only be done on a disciplined basis. This discipline has been underlined since the quarter end with a firm and simple commitment to return at least 80% of net income to shareholders for each full year.

We have all of our vessels on the water and nearly all exposed to the spot market directly or indirectly. And as Paddy will sum up in a moment, we believe we are at the start of a sustained rate cycle in freight rates.

Q1 2015 saw Euronav simplify and strengthen its balance sheet, successfully gain access to a wider investment audience with a NYSE listing, and finally deploy all of its fleet on the water. We look forward to reaping the benefits of our strategy in the coming quarters in what is a constructive market for crude oil tankers.

Paddy, over to you for a final summary.

To sum up Q1, it's been very positive for Euronav. Thanks, Hugo. Just to sum up, the two current themes that we see as being important.

Demand for crude is real and is growing. We have seen real and sustained evidence of this during the past three to four months. All of the agencies around oil demand and supply have started to upgrade their oil demand forecasts, and we expect to see this being sustained in 2015.

The tanker cycle is evolving and developing in the way that we've been highlighting since the second half of 2013. Firstly, the cycle is getting stronger, with higher rates and increased discipline amongst owners to seek proper rates of return for their capital at risk. Rates are currently firmer than one would expect for the season, which is another encouraging sign.

We firmly believe at Euronav that we are in the early stages of a multiyear cycle of improving freight rates which will drive sustained shareholder returns through both our share price and dividends. This does not mean the cycle will lose its volatility or seasonality. As our recent paper makes clear, the industry structure will always provide this challenging background.

However, this environment coupled with the change in how the sector will have to finance itself going forward, will provide Euronav with an exceptional opportunity to drive further shareholder value, having established ourselves as the largest, most transparent and most liquid crude tanker platform available for direct investment.

Thank you for listening to the Euronav Q1 2015 earnings call presentation. I will now hand you over to the operator.

(Operator Instructions). Amit Mehrotra, Deutsche Bank Research.

Congrats on the very strong results. My first question is just on the sustainability of the performance. The Company is obviously benefiting from the strength in the spot market, but given the cyclicality of the business, is there a willingness and also an ability to increase the visibility by moving a little bit away from the spot market?

And how do you think about that balance? And I know you mentioned the liquidity or the lack of liquidity, but setting that aside for a minute in the time charter market, what levels would you need to see in the time charter market for the Company to make a bigger move towards that direction?

Thank you, Amit. I'll take that point.

What I would say is that, as you heard from the call, we've already looked at some what I might call natural time charter for us, which we never go completely spot, we always maintain some good relationships with key customers, and we pretty much service them through the cycle regardless of rates. And we've been able to do some deals recently which extends some reasonable term.

And I think the key thing that we always talk about with time charter, indeed it's the only two things they say in the shipping industry that matter, and that is the rate and the length. So I think that as we saw in the early part of Q1, some very good one-year deals have been done in terms of rate but the issue is the length.

So I don't want to give a discount to the spot market in order to fix time charter and then not to get the benefit of having income protection in later years.

So I think classically for us, the periods that we would be looking at would be the three to five-year range. And I think it's fair to say that in 2008, if you've seen some of our presentations, when the market was at a peak in 2008, we had over 50%, nearly 60% of our days fixed at an average period of over three years.

So all I would say to you is these rates are good. If someone offered them on a long-term basis, we would be seriously looking at them. And if there was an unlimited set of offers, then we might take them all if we thought it locked in sufficient profitability for the shareholders.

Okay. That's helpful. I just have a couple more quick ones.

With respect to the cash deployment strategy -- the dividend strategy is very clear, but there will be an increasing delta between the net income and the free cash flow of the Company. So just wondering what the agenda was for the balance of the cash flow; whether it's going to go towards further deleveraging from where you are today, maybe some additional acquisitions or even additional return to shareholders.

Thank you, Amit. This is Hugo speaking. Well, basically, what we said is that we would be distributing at least 80% and so there is a little bit of a level of discretion.

I don't think that we need to de-lever further the Company and our balance sheet is already very conservative. We have always said that we wanted to maintain something around 50% of book values. And we are nearly there if you add the Hakata that we have just acquired and the amount of data we have taken on it; and if you take into account the fact that we're going to distribute $40 million in the month of May in the form of a dividend.

So that's a very small element of discretion and it might be that we distribute that as a dividend, the remaining 20%, or we do something else with it. I think it's too early to tell you what we are going to do with it. We have always been very opportunistic, but we have always been very disciplined.

Right. Okay. I'll leave it there, guys. Thank you very much.

Thank you.

Herman Hildan, RS Platou.

It's a follow-up question of what you just discussed. I believe you've guided on debt repayment being about $210 million a year going forwards, similar to depreciation, which means that within the next 18 months, if you do that, your debt level will be equal to the [scrap value] of the fleet.

So could you commit to a debt level so that we know that either you will grow the fleet or you will ramp up your dividends beyond the level that you have indicated? Or call it a [bond] EPS, which is clearly possible due to the low leverage.

I'm not going to change [anything] I just give. I think all of what you've just said is possible, and I think that we'll have to look at that when we reach that time.

By the end of Q2, we're going to be back at 50% leverage, which is where we want to be and we have said that for some time now. I agree with you that if we don't do anything, if we are not more generous in dividends or don't acquire further assets, then we're going to end up in a position where we shouldn't be.

So don't worry, this is something that we will monitor on a quarterly basis and we will do what is right for the shareholders.

So just to be clear, there is no restrictions on [call it] ---? You are willing to pay more than 100% of the EPS if you don't find any [growth] alternatives and you [deleverage quickly].

Well, sorry. Just to reiterate what Hugo is saying, I think that we've never put a cap on what might be distributed to shareholders, whether it's through dividends or whether it's through buying shares. There's absolutely no cap on what we might distribute.

What we've given you is good guidance on what we will commit to so that you can actually say that's definitely going to happen. And as long as you're comfortable with knowing what the earning per share is, you can make your own calculations.

We would think there could be some real advantage in growing the fleet, and we have a lot of discussion about the value of consolidation, and we look at every opportunity to acquire that we see. But you can be absolutely rest assured that the people who are in our minds first and foremost when we look at consolidation will be the shareholders of Euronav at the time.

Thank you. That's very clear. I appreciate that.

Just finally on the consolidation comment, there's lots of fleets out there for sale now. How come we haven't seen further growth? As we know, there are fleets out there and you have the capacity to add growth.

Well, I think first of all, Herman, I really do believe in an active and busy management, so it's not through want of study or review. But I think you will agree, we've done an awful lot in the last 18 months, and we too, like you, have been watching what's going on in terms of the market. And I would say that, quite frankly, we did a little guestimate earlier on today. I think there's nearly 10% of the world's fleet available for sale, as the brokers indicate to us anyway, and most of that actually is in the zero to five-year age group.

So it's a very, very interesting time, and I know that, as you heard in the slide show, we were emphasizing that it is an anomaly that we should see such strong earnings growth and, actually, so many apparent willing sellers unable to find a willing buyer.

So I don't have an easy answer to it, but it's certainly a feature of the market.

Okay. Well, it's very good at least that we know that money won't go to the bank. You will keep deleverage and then you will pay out dividends to grow the Company. So thank you for that.

Christian Wetherbee, Citi Research.

This is Prashant in for Chris. Great quarter. My question focuses more on the Suezmax side of the fleet. Obviously nice positive surprise in those rates holding up. I was wondering if you could talk a little bit more about the strength in the Suezmax market in terms of rates and how you see that playing out in the back half of the year.

And related to that, do we see the opportunity for perhaps putting some more vessels in the fleet on time charter? And maybe an indication of what kind of rates relative to the spot market [or pool] you guys were getting for the three vessels that were placed on charter.

Well, yes. So first of all, can I just say that I don't wish to give the rates at the moment? This is relatively fresh business and I wouldn't want to cause any issue with our customers who have asked us to keep these things confidential. But, of course, we will give further guidance on that as time goes by.

I think that it always comes down to this critical thing that when you're looking at time charter, you're looking at security, and normally you end up taking a discount from what you might earn in the more volatile spot market in order to get the value of those later years' fixed income. And at the moment, to us the balance really isn't there for us to say wholesale that this is the time to do something.

I've seen some short-term time charter stuff done around [$30,000] a day. And as we're earning [$40,000], I think the discount is too great to consider it because we're not getting any term on the back end. Very similar as for the VLCCs.

So all I can tell you is another area where we're watching, waiting, looking. If we think the numbers are right, we won't hesitate to take them to ensure that we're able to give greater assurance to our shareholders.

Okay. Excellent. And then maybe turning to the dividend. In terms of how we should be thinking about the breakdown of the distribution of the remaining percentage, with the remaining two payments, is there any color or guidance on how we should be thinking about what percentages go in payment 1 versus payment 2 in May, or too early to tell right now?

It's not really too early. I think that when we issued our dividend policy on April 1, we mentioned that we would be more conservative in the first payment and then obviously meet at least the 80% that we mentioned.

When it comes to May, the year's been closed, the accounts have been audited, and obviously, we put the final dividend up to a vote in the shareholders' meeting.

So if you had to divide, and if the year was -- if the four quarters were equal, you would probably look at 35% to 40% of that dividend in September and then the remaining in May.

Okay. Excellent. Thanks, guys. I'll turn it over.

Omar Nokta, [Clarkson's].

Just a couple of questions. One deals with Herman and his questions earlier just about vessel acquisitions. Just wondering, like you're saying 10% of the fleet potentially could be for sale, you had said previously that you would earmark a lot of the existing cash flow for dividends and that future growth would come from stock issuance if the stock was at a good price.

How do you think about that strategy going forward, especially where we are now where we haven't really seen asset prices pick up steam and yet charter rates continue to very strong. Is there a deviation maybe in that type of thinking where you would potentially look at picking off ships here and there just with existing -- or with operating cash flow?

Well, I think to my mind, it's always a rather different discussion. It's certainly possible that at some time we buy ships for cash and that we might go on a smaller scale than a big block deal.

But that's not really where we are today in the sense that we acquired 19 VLCCs last year. We've been through the IPO and we've reorganized the balance sheet, and I think we're in a pretty good condition for where we want to be. And we've also clarified to the markets what our dividend policy is going to be.

We're certainly all the time looking and evaluating different options, but whether we issue stock or whether we buy ships for cash will not ultimately be the answer because it won't be at the expense of the dividend policy.

Okay. That's very clear. Thank you. And then just a couple more financial-related questions. One on the JV debt. Do you have an update on what the outstanding debt is there? If I recall at the end of 2014, it was about $160 million. Do you have an update on what it was at the end of the quarter?

Yes. It was $148 million.

Okay. Thank you. And then just one more regarding the CapEx on the Hakata. Is that somewhere around $75 million that was paid earlier this month?

It was $72 million and we took $50 million of debt.

Okay. All right. Thank you. That's it from me.

Fotis Giannakoulis, Morgan Stanley.

Most of my questions have been answered, but I want to ask you a little bit again about your growth strategy. You have very clearly indicated that there is this discrepancy between rate and asset prices. And from what I understand, your outlook is quite strong for at least the foreseeable future.

In the past, you have mentioned that you are not willing ever to issue stock below NAV. Well, the stock is trading above your IPO price. Are there any thoughts of expanding right now through equity issuances?

I think you've picked up on a very important point about the not issuing stock below net asset value. I think that there are some hard and fast rules that we need to have in running and being good custodians of other people's capital. And one of them is not to do deals that are [dilutative]. So, yes, you can rule that out.

Secondly, the dividend policy of the Company is not a bolt on that is to be sacrificed at the first opportunity.

So I think within those two parameters that we set, of course, we're looking -- we're trying to take a position of maximum opportunity, maximum flexibility, and we would like to be able to do some -- if we could do a repeat of the Maersk deal one, of course we'll do it.

Especially if it's available at the same price.

Absolutely. That's what I mean. That's what I meant; at the same price (laughter).

And in all things, it's act in haste, repent at leisure. I think patience is a virtue in shipping, and there is a timing and a season for everything.

And when you look at an acquisition for this -- indeed, you can issue stock in order to raise the cash; you can use your stock and give it directly to the seller. You can play on the leverage. I think that what matters is to create value.

And, Hugo, I would like to pick up from your last comment. We all know that there are plenty of fleets out there owning both by strategic owners or financial owners. Your stock is attractive right now and I guess it's more liquid after the conversion, after April 28. Are there any discussions and are there any opportunities out there for expanding your fleet through issuing stock, particularly one of the private equity fleets?

Well, you can very well imagine that we're never going to comment on that. You will know when we are active because we would have done a deal and then we will announce to the entire market at the same time. Those things are very delicate and so there is no reason to comment before they are actually put to bed.

Okay; worth a try. And last question about the market and the potential concerns that some investors might have. First of all about the order book, you show something like 3.5% to 4% fleet expansion next year in Suezmax and VLCCs. We all know that the oil demand is below that. Can you give us your view about where this additional demand is going to come from? If it's not going to be from the volume, any ton-mile expansion that you have identified?

And also, in your positive outlook, what kind of oil prices and fuel prices are you taking into account in your base case? And what are the risks of the potential increase in banking prices?

Well, it might have been a last question, so to be speak, but you certainly got a lot in there. What I would say is that we'd probably have to break that down into two or three different pieces.

First of all, on the oil demand side, as you may have heard us say recently a couple of times in the public forum, all we talked about at the start of this year, everyone talked about, was Contango. Contango didn't arrive for a very simple reason that the front-end price of oil backed up as a result of increased demand from the USA, from Europe and from China; in fact, really from everywhere. And that was simply surprise, surprise, when a commodity price is down demand for the commodity goes up.

So that's the sort of base case that we're looking at and there's, as said on the recording, the IEA is going to revise or has revised its expectations for demand.

So things all look -- whatever it looked like at Christmas, it looks better now on the demand side.

On ton-miles, a lot of analysts are constantly trying to work out what ton-miles are, and they always look at the cargo moved. But the important point that we want to reiterate in this presentation was: Just don't forget that the ships have to position, and if you start to change the patterns of trade and find that ships operate with more and more ballast days, then watch out, because the demand requirement is going up for transportation, not only on the cargo moved, but also on the ship repositioning, which makes a big difference. And so all in all, we felt that the balance is looking good and looking strong.

On the supply side, yes, there are always questions about the order book. But let's be under no mistake whatsoever. If you build enough ships, you can destroy any market.

So I just -- I almost say it in a cavalier way, but just to remind everybody that this is supply and demand, it's a commodity business; and I wonder why people would be buying when we've already discussed the fact that it looks like there's plenty of ships available to be purchased all the way from new buildings, [ex-yard], latest designs, through to five year old ships also relatively new and in good condition.

So there's no shortage of opportunities for people to find a way of investing in shipping, but if they invest that shipyard, then of course they're changing the dynamics of our marketplace.

Now on oil price and banking price, I would just -- if you want to, you can look back -- you can look in some of the presentations we've made where we just do a straight [boxing] relationship between what did the growth look like year on year compared to the price. And what we could see is that leading up to the middle of 2007, oil price is below $60 per barrel, and obviously at the start of that decade, considerably below $60 per barrel, and we saw that growth was somewhere around 1.5% to 2% per annum.

After that, during the over-inflated price of oil as a result of quantitative easing for the next four years, with oil at $100 per barrel, we saw that it impacted demand growth to less than 1%, and often less than 0.5%.

So our general feeling is that we're back to a proper normality on pricing, and it's also having the impact of stimulating demand. We don't run a base case because, of course, we run our own internal budgets and views. But we always look at the business on a [net back] basis, knowing that we sell as a commodity and net back to see what our profits are.

So what we tend to do is to do a full-scale model with variable rates and we test our thesis against the different possible rates. And we're always quite pessimistic on that because, of course, ours is a business which is not about how much money you can make, but about how certain you can be of managing your cash flow. It's a risky business, as you all well know, but it's one that has a great outlook at the moment.

Thank you very much, Paddy. Thank you, Hugo.

Wouter Vanderhaeghen, KBC Securities.

Most of my questions have been raised. One more question left. It concerns your activity, future activity on the sale and purchase market. You discussed potential for growth, but what about the older segment of your fleet? You have five vessels built 2001/2002, so heading to their 15 years of age. You also have four vessels built in 1998. Can you elaborate on this? Are you actively putting these vessels in a market as sale candidates?

Thank you.

I think the thing that I'd like to point out, which was in the slide show but it's very, very important to understand, Euronav, we really pride ourselves and focus on high-quality operations. And that includes not only making sure that you do your daily business well, but also that the crew who are direct employees of ours really focus on the maintenance and enhancement of the asset and keep the asset in good condition all the way through its working life.

And I think that's really been demonstrated by the time charters that we've been able to fix on our 1998-built Suezmaxes, which will take them up to their next intermediate survey. So that will bring them to 20 years of age. And I think that's a massive tribute to the management and operating teams are Euronav that customers can look at that tonnage, look past its age, see its quality and be prepared to fix it.

Whilst we're able to return value like that, then probably we won't be thinking about sale and purchase on the sales side for older tonnage. But as far as we're concerned, it's going to be business as usual. If we sell -- if we see the right prices for the asset we might sell it, but this is rather at the edges of our core business rather than at the center of it.

Okay. Thank you.

Charles Rupinski, Global Hunter.

Congratulations on the quarter. Most of my questions have been answered. I just had one follow-up on the idea of going longer-term charter in a stronger market for some of your vessels. Assuming that the market does continue improving and you see stronger rates, is there a way to think about how you would maybe mix these longer-term charters in terms of having some being perhaps have a profit-sharing component or indexed versus others that are straight day rates.

And also, how willing do you think some of your customers would be to enter into those arrangements for more of your vessels? How strong would the market have to be to be able to actually execute that?

Thank you.

I think it's always quite difficult to try and get into the mind of a customer and to wonder how much appetite they have. But really, the critical thing that develops that thesis is always going to be time, because the more time that they get it wrong on the spot side, then the more appetite they will have to try to get it right on the time charter side, so they'd like to reposition themselves across the market. And I think it really is something we just have to wait to mature.

I think it's really important to emphasize for any of you that are following Euronav that all of our time charters have a profit share element.

Thank you very much.

Junior Cuigniez, Petercam.

Congratulations on the great results. Quite a lot of questions have been taken which bring me to your [site] business. Could you maybe give us an update on your plans with the FSOs? The contracts are expiring in 2017. Do you still hope to get these contracts renewed or do you consider maybe selling them if you get a nice price for them?

My second question is on your JVs. You generate also some good cash flows there, but you keep them in the JVs probably for fiscal reasons, I assume. But how will you deploy the cash in the JVs?

Thanks.

Junior, thanks very much for the question. Well, the FSO question, I think, is a very straightforward one, and it's really going to be a question that we can start to negotiate when we have a counterparty. And at the moment, we understand that negotiations are still ongoing between Maersk Oil and the Qataris in order to establish the extension of the lease on the field. And I'm sure that once that's concluded, then we'll be one of the people that they will come to see pretty well straightaway to discuss the extension.

So I'm afraid I really can't give any more guidance than that, but of course, we're always willing to discuss because we're in the business of operating. But we'll just have to wait and see who the counterparty is and we'll take it from there. And of course, you'll be informed as soon as something's done.

Now on the other side, on the joint ventures, I'll hand you over to Hugo.

Junior, thanks for your question. I think when you look at our joint ventures, first of all, all of them have been done before the application of IFRS 10 and 11, and so the proportionate method meant that we had no problem having those joint ventures.

I think in today's market, we would think twice before doing a joint venture, because obviously, they don't show up except on the bottom line, but they don't show up on our balance sheet or on the P&L (technical difficulty).

Having said that, we've certainly changed our policy on the cash repatriation of the joint ventures because they don't show up. So at the moment, for instance, we only have $21 million at the joint venture level. You split that in seven joint ventures, and you see it's very, very reasonable and close to the minimum cash we need to hold just to operate those companies.

So from a cash perspective, and that's the most important part, there is absolutely no problem in holding those joint ventures, and so don't expect us to buy or sell, certainly sell part of those joint ventures, just for accounting purposes. I know it's less transparent at the moment, but what is most important for us is always the value.

Exactly. But the question was indeed you have -- the cash flow that you are reporting now is actually a bit lower than the actual cash you're generating because you also generate some cash under JV and it doesn't appear in the cash flow statement. It was more a question of the fact that you actually generate more cash flow than it appears.

Yes. But it's -- I consider it marginal, because as I say, if we are left with $21 million at the moment in the joint ventures account, that means that we have repatriated quite a lot of cash. And every time we repatriate cash, be it in the form of a repayment of shareholder's loan or a dividend, the dividend you see directly. It's very easy to see. The repayment of shareholder's loan is a little bit less visible, but it has the same effect; the cash is coming back to the main Company and then is available to be distributed.

Right. That's clear. Thanks and congratulations on the great results.

Sam Sekine, ALJ Capital.

Just a couple of questions. On the chartering strategy, I don't know if you guys mentioned, but did you guys discuss the rates that you saw on the Suezmaxes?

No, sorry. What I said on the Suezmaxes was that that's still hot off the press. I think the information will come through when you see our results. But at the moment, it's still subject to confidentiality.

Okay. And I know you guys put out that app, or that Tankers International where you can see fixtures. I was just curious if any charters like one year, or even any charter shows up on that, or it's just spot fixtures.

It's just spot fixtures.

Okay.

But most of the brokers will give you guidance on one, two, three and up to five years. It's obviously guidance and it's very different when you are with or without a profit split. But if you want some of what the brokers quote, just give Brian a call, myself a call, and we'll be happy to provide you what is being quoted at the moment.

That's it from me. Thanks.

Thank you. And as there are no more questions at the present time, I would like to turn the call back over to management for any closing comments.

No, that's all. But just thank you all for taking the time out of your busy days to speak with us and for giving us your attention. We look forward to your future support.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your phone lines.