Euronav: The Analyst View

By Barry Parker (gCaptain) –

While the take-over battle surrounding tanker behemoth Euronav (NYSE: “EURN”) has dominated reports on the company, the company’s market prospects, which many observers have given a “thumbs up”,  have escaped notice.

Following its Q4 2022 earnings call, the top equity analysts have weighed in. In late 2022, before the pullback in hires for VLCC’s and Suzemaxes (and before Frontline’s early Jan 2023 decision to walk away from its take-over efforts), EURN shares were trading at highs reaching $20/share. By end January, 2023, EURN was trading between $15-$16/share. 

The market’s fundamentals remain strong. In the words of the Belgian company’s CEO, Hugo de Stoop: 

“Constrained vessel supply conditions within all segments of the large crude tanker market were supplemented further by two key factors during Q4 2022. Firstly, seasonal demand for crude gained traction as consumption rose into the 22/23 winter. Secondly, the EU embargo on Russian oil, effective 5 December 2022, created additional shipping demand as crude trading patterns required longer voyages and therefore captured more shipping capacity.” 

Jefferies equity watcher Omar Nokta (with a “Buy” on EURN shares), in a daily write-up, said: “Lost in all the drama has been the fact that the company is performing well in a tanker market that is fundamentally stronger than in years past. Euronav reported its strongest results since 2Q 2020, and earnings are expected to remain elevated in the coming quarters.”

Stifel analyst Ben Nolan, who has a “Hold” rating on EURN, in a report penned shortly after the Q4 earnings release, did note that: “the company reported 1Q23 bookings that came in much better than we were expecting.”

EURN, with 40 VLCCs  and two dozen Suezmaxes on the water now,  reported average Q4 spot timecharter earnings of $57,800/day for its VLCCs in the Tankers International pool, and $57,400/day on spot Suezmaxes. When vessels fixed out on  timecharters (with longer durations frequently) are considered, daily per diem timecharter numbers were reported at $34,400/day, and $30,400, respectively. In its report, the company estimated daily breakevens on VLCCs at $24,335/day and $20,215/day. 

A hoped for demand recovery in China looms large in the positive forecasts (certainly for tankers but also in the other market sectors). Deutsche Bank analyst team of Amit Mehrotra and Chris Robertson, who also have a “Buy” on EURN,  opined that: “tanker rates have been trending lower off of peak highs seen in November…. There were several seasonal or temporary factors at play here, including weather disruptions in the Black Sea, some softening of tanker demand in the Middle East, and a slowdown into Chinese Lunar New Year. We believe rates should stabilize and begin to increase in the coming weeks and months, especially as a result of the China reopening trend, which should drive more crude import demand for Chinese refineries.”

In the coming week, arbitrators will weigh on the decision by Frontline (NYSE: “FRO”) to terminate its take-over offer of EURN. The analysts, like everyone else, are watching and waiting. 

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