Euronav inks suezmax newbuild contracts for Valero Energy charters

The Ice Class 1C vessels are expected to be delivered in the second half of 2018. The suezmax pair have been ordered to fulfill seven-year long time charter contracts to Valero Energy from late 2018. The contracts add to two existing seven-year suezmax time charter contracts with Valero Energy.

Euronav said the orders underscored its belief that asset prices were reaching a low point.

“By extending our strong partnership with a key customer, Euronav is also providing high quality and long duration earnings visibility for our stakeholders. Such fixed income capability provides Euronav with enhanced financial optionality as we move forward,” said Paddy Rodgers, ceo of Euronav.

Financial details of the newbuild orders and the charters were not revealed.

The company said that the order has been prompted by the signing of an additional two long-term time charter contracts of seven years each with Valero Energy Inc. for two Suezmax vessels with specialised Ice Class 1C capability starting in late 2018.

The latest deal is the fourth Euronav’s long-term (seven years) Suezmax time charter contract, the company added.

Delivery of these vessels is expected in the second half of 2018 when each of the time charter contracts will begin.

“Euronav believes it has secured an excellent price for two high specification vessels in line with its policy of not adding speculative new capacity to the global tanker fleet. Euronav anticipates the new vessels on order will replace its older Suezmax vessels hence this order will not add net tonnage to the global Suezmax tanker fleet,” Euronav said.

The fleet renewal is in line with Euronav’s expectations that asset values are approaching a low point supported by reduced immediate newbuilding berths at the yards and fewer speculative buyers.

Furthermore, the company pointed out that the addition of the further two seven-year contracts greatly increases its fixed income contribution to EBITDA in 2018 and onwards.

“By extending our strong partnership with a key customer, Euronav is also providing high quality and long duration earnings visibility for our stakeholders. Such fixed income capability provides Euronav with enhanced financial optionality as we move forward,” Euronav’s CEO, Paddy Rodgers noted.

In terms of its newbuilding fleet, the company recently acquired two VLCCs under construction which were acquired as resales of existing newbuilding contracts and four Suezmaxes under construction. The latest order brings Euronav’s owned and operated fleet to 57 ships, including also 1 V-Plus vessel, 31 VLCCs, 19 Suezmaxes and two FSO vessels (both owned in 50%-50% joint venture).

The arms race that led to the First World War started in 1897 at the Spithead Naval Review, when Kaiser Wilhelm saw the might of Britain's Navy. He wanted to equal or better the fleet of Britain, and set about a huge building programme of warships. By 1914, tensions in Europe were at a breaking point and, in August, erupted into what would become the first truly global conflict. From almost the first day of the war, as merchant ships scuttled to safe havens, the war at sea saw ship against ship and submarine against ship. Hastily converted merchantmen became auxiliary cruisers, fitted with guns and ready for action.

August saw the loss of the Kaiser Wilhelm der Grosse, one of Germany s crack ocean liners, off the coast of Africa; October, the loss of Britain s dreadnought battleship HMS Audacious to a mine; and December saw the Battle of the Falklands and a German attack on the coastal towns of Scarborough, Whitby and Hartlepool. Submarines quickly became a menace in the Mediterranean, English Channel and North Sea, slowly beginning to starve Britain into submission. In August, it was thought the war would be over by Christmas; by December everyone knew they were in for a long, hard slog.

The naval war would be one of attrition and one that would ultimately lead to the surrender of Germany s navy in 1918.

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