Exhibit 99.2
Condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
(in thousands of USD)
Note | September 30, 2017 | December 31, 2016 | ||||||||
ASSETS | ||||||||||
Non-current assets | ||||||||||
Vessels | 8 | 2,364,003 | 2,383,163 | |||||||
Assets under construction | 8 | 50,634 | 86,136 | |||||||
Other tangible assets | 8 | 676 | 777 | |||||||
Intangible assets | – | 86 | 156 | |||||||
Receivables | – | 173,916 | 183,914 | |||||||
Investments in equity accounted investees | 17 | 29,221 | 18,413 | |||||||
Deferred tax assets | – | 2,414 | 964 | |||||||
Total non-current assets | 2,620,950 | 2,673,523 | ||||||||
Current assets | ||||||||||
Trade and other receivables | 15 | 142,489 | 166,342 | |||||||
Current tax assets | – | 136 | 357 | |||||||
Cash and cash equivalents | – | 97,199 | 206,689 | |||||||
Total current assets | 239,824 | 373,388 | ||||||||
TOTAL ASSETS | 2,860,774 | 3,046,911 | ||||||||
EQUITY and LIABILITIES | ||||||||||
Equity | ||||||||||
Share capital | – | 173,046 | 173,046 | |||||||
Share premium | – | 1,215,227 | 1,215,227 | |||||||
Translation reserve | – | 528 | 120 | |||||||
Treasury shares | 9 | (16,102 | ) | (16,102 | ) | |||||
Retained earnings | – | 454,064 | 515,665 | |||||||
Equity attributable to owners of the Company | 1,826,763 | 1,887,956 | ||||||||
Non-current liabilities | ||||||||||
Bank loans | 11 | 697,375 | 966,443 | |||||||
Other notes | 11 | 147,482 | – | |||||||
Other payables | 12 | 553 | 533 | |||||||
Employee benefits | – | 3,314 | 2,846 | |||||||
Provisions | – | – | 38 | |||||||
Total non-current liabilities | 848,724 | 969,860 | ||||||||
Current liabilities | ||||||||||
Trade and other payables | 12 | 78,778 | 69,859 | |||||||
Current tax liabilities | – | 39 | – | |||||||
Bank loans | 11 | 47,361 | 119,119 | |||||||
Other borrowings | 11 | 59,030 | – | |||||||
Provisions | – | 79 | 117 | |||||||
Total current liabilities | 185,287 | 189,095 | ||||||||
TOTAL EQUITY and LIABILITIES | 2,860,774 | 3,046,911 |
The accompanying notes on pages 7 to 27 are an integral part of these condensed consolidated interim financial statements.
1
Condensed consolidated statement of profit or loss
(in thousands of USD except per share amounts)
2017 | 2016 | |||||||||
Note | Jan. 1 - Sep. 30, 2017 | Jan. 1 - Sep. 30, 2016 | ||||||||
Shipping income | ||||||||||
Revenue | 6 | 395,390 | 537,984 | |||||||
Gains on disposal of vessels/other tangible assets | 8 | 20 | 13,821 | |||||||
Other operating income | – | 3,882 | 5,533 | |||||||
Total shipping income | 399,292 | 557,338 | ||||||||
Operating expenses | ||||||||||
Voyage expenses and commissions | 7 | (47,778 | ) | (43,077 | ) | |||||
Vessel operating expenses | 7 | (116,475 | ) | (122,838 | ) | |||||
Charter hire expenses | 7 | (23,329 | ) | (14,794 | ) | |||||
Loss on disposal of vessels/other tangible assets | 8 | (21,027 | ) | (2 | ) | |||||
Loss on disposal of investments in equity accounted investees | – | – | (24,150 | ) | ||||||
Depreciation tangible assets | 8 | (173,373 | ) | (168,510 | ) | |||||
Depreciation intangible assets | – | (72 | ) | (75 | ) | |||||
General and administrative expenses | – | (33,132 | ) | (32,634 | ) | |||||
Total operating expenses | (415,186 | ) | (406,080 | ) | ||||||
RESULT FROM OPERATING ACTIVITIES | (15,894 | ) | 151,258 | |||||||
Finance income | – | 5,258 | 3,465 | |||||||
Finance expenses | – | (36,662 | ) | (32,218 | ) | |||||
Net finance expenses | (31,404 | ) | (28,753 | ) | ||||||
Share of profit (loss) of equity accounted investees (net of income tax) | 17 | 28,029 | 31,558 | |||||||
PROFIT (LOSS) BEFORE INCOME TAX | (19,269 | ) | 154,063 | |||||||
Income tax benefit (expense) | – | 1,297 | (301 | ) | ||||||
PROFIT (LOSS) FOR THE PERIOD | (17,972 | ) | 153,762 | |||||||
Attributable to: | ||||||||||
Owners of the company | – | (17,972 | ) | 153,762 | ||||||
Basic earnings per share | 10 | (0.11 | ) | 0.97 | ||||||
Diluted earnings per share | 10 | (0.11 | ) | 0.97 | ||||||
Weighted average number of shares (basic) | 10 | 158,166,534 | 158,294,412 | |||||||
Weighted average number of shares (diluted) | 10 | 158,295,721 | 158,491,433 |
The accompanying notes on pages 7 to 27 are an integral part of these condensed consolidated interim financial statements.
2
Condensed consolidated statement of comprehensive income
(in thousands of USD)
2017 | 2016 | |||||||||
Note | Jan. 1 - Sep. 30, 2017 | Jan. 1 - Sep. 30, 2016 | ||||||||
Profit/(loss) for the period | (17,972 | ) | 153,762 | |||||||
Other comprehensive income, net of tax | ||||||||||
Items that will never be reclassified to profit or loss: | ||||||||||
Remeasurements of the defined benefit liability (asset) | – | – | – | |||||||
Items that are or may be reclassified to profit or loss: | ||||||||||
Foreign currency translation differences | – | 408 | 350 | |||||||
Equity-accounted investees - share of other comprehensive income | 17 | 483 | 925 | |||||||
Other comprehensive income, net of tax | 891 | 1,275 | ||||||||
Total comprehensive income for the period | (17,081 | ) | 155,037 | |||||||
Attributable to: | ||||||||||
Owners of the company | (17,081 | ) | 155,037 |
The accompanying notes on pages 7 to 27 are an integral part of these condensed consolidated interim financial statements.
3
Condensed consolidated statement of changes in equity
(in thousands of USD)
Note | Share capital | Share premium | Translation reserve | Treasury shares | Retained earnings | Capital and reserves | Total equity | |||||||||||||||||||||||
Balance at January 1, 2016 | 173,046 | 1,215,227 | (50 | ) | (12,283 | ) | 529,808 | 1,905,748 | 1,905,748 | |||||||||||||||||||||
Profit (loss) for the period | – | – | – | – | – | 153,762 | 153,762 | 153,762 | ||||||||||||||||||||||
Total other comprehensive income | – | – | – | 350 | – | 925 | 1,275 | 1,275 | ||||||||||||||||||||||
Total comprehensive income | – | – | 350 | – | 154,687 | 155,037 | 155,037 | |||||||||||||||||||||||
Transactions with owners of the company | ||||||||||||||||||||||||||||||
Dividends to equity holders | – | – | – | – | – | (217,412 | ) | (217,412 | ) | (217,412 | ) | |||||||||||||||||||
Treasury shares sold | – | – | – | – | (3,819 | ) | (2,338 | ) | (6,157 | ) | (6,157 | ) | ||||||||||||||||||
Equity-settled share-based payment | – | – | – | – | – | 308 | 308 | 308 | ||||||||||||||||||||||
Total transactions with owners | – | – | – | (3,819 | ) | (219,442 | ) | (223,261 | ) | (223,261 | ) | |||||||||||||||||||
Balance at September 30, 2016 | 173,046 | 1,215,227 | 300 | (16,102 | ) | 465,053 | 1,837,524 | 1,837,524 | ||||||||||||||||||||||
Note | Share capital | Share premium | Translation reserve | Treasury shares | Retained earnings | Capital and reserves | Total equity | |||||||||||||||||||||||
Balance at January 1, 2017 | 173,046 | 1,215,227 | 120 | (16,102 | ) | 515,665 | 1,887,956 | 1,887,956 | ||||||||||||||||||||||
Profit (loss) for the period | – | – | – | – | – | (17,972 | ) | (17,972 | ) | (17,972 | ) | |||||||||||||||||||
Total other comprehensive income | – | – | – | 408 | – | 483 | 891 | 891 | ||||||||||||||||||||||
Total comprehensive income | – | – | 408 | – | (17,489 | ) | (17,081 | ) | (17,081 | ) | ||||||||||||||||||||
Transactions with owners of the company | ||||||||||||||||||||||||||||||
Dividends to equity holders | 9 | – | – | – | – | (44,349 | ) | (44,349 | ) | (44,349 | ) | |||||||||||||||||||
Equity-settled share-based payment | 9 | – | – | – | – | 237 | 237 | 237 | ||||||||||||||||||||||
Total transactions with owners | – | – | – | – | (44,112 | ) | (44,112 | ) | (44,112 | ) | ||||||||||||||||||||
Balance at September 30, 2017 | 173,046 | 1,215,227 | 528 | (16,102 | ) | 454,064 | 1,826,763 | 1,826,763 |
The accompanying notes on pages 7 to 27 are an integral part of these condensed consolidated interim financial statements.
4
Condensed consolidated statement of cash flows
(in thousands of USD)
2017 | 2016 | |||||||||
Note | Jan. 1 - Sep. 30, 2017 | Jan. 1 - Sep. 30, 2016 | ||||||||
Cash flows from operating activities | ||||||||||
Profit (loss) for the period | (17,972 | ) | 153,762 | |||||||
Adjustments for: | 195,923 | 176,136 | ||||||||
Depreciation of tangible assets | 8 | 173,373 | 168,510 | |||||||
Depreciation of intangible assets | – | 72 | 75 | |||||||
Loss (gain) on disposal of investments in equity accounted investees | – | – | 24,150 | |||||||
Provisions | – | (86 | ) | (584 | ) | |||||
Tax (benefits)/expenses | – | (1,297 | ) | 301 | ||||||
Share of profit of equity-accounted investees, net of tax | 17 | (28,029 | ) | (31,558 | ) | |||||
Net finance expense | – | 31,404 | 28,753 | |||||||
(Gain)/loss on disposal of assets | 8 | 21,007 | (13,819 | ) | ||||||
Equity-settled share-based payment transactions | – | 237 | 308 | |||||||
Amortization of deferred capital gain | – | (758 | ) | – | ||||||
Changes in working capital requirements | 20,655 | 59,031 | ||||||||
Change in cash guarantees | – | (47 | ) | 79 | ||||||
Change in trade receivables | – | 12,767 | 1,958 | |||||||
Change in accrued income | – | (381 | ) | 14,896 | ||||||
Change in deferred charges | – | (6,128 | ) | (3,880 | ) | |||||
Change in other receivables | – | 17,604 | 55,836 | |||||||
Change in trade payables | – | 342 | (1,177 | ) | ||||||
Change in accrued payroll | – | (294 | ) | (337 | ) | |||||
Change in accrued expenses | – | 109 | (2,425 | ) | ||||||
Change in deferred income | – | (3,806 | ) | (5,931 | ) | |||||
Change in other payables | – | 50 | (118 | ) | ||||||
Change in provisions for employee benefits | – | 439 | 130 | |||||||
Income taxes paid during the period | – | 107 | (17 | ) | ||||||
Interest paid | – | (25,777 | ) | (25,010 | ) | |||||
Interest received | – | 483 | 144 | |||||||
Dividends received from equity-accounted investees | 17 | 1,250 | 1,778 | |||||||
Net cash from (used in) operating activities | 174,669 | 365,824 | ||||||||
Acquisition of vessels | 8 | (160,297 | ) | (281,691 | ) | |||||
Proceeds from the sale of vessels | 8 | 20,790 | 38,016 | |||||||
Acquisition of other tangible assets | 8 | (103 | ) | (154 | ) | |||||
Acquisition of intangible assets | – | (1 | ) | (18 | ) | |||||
Proceeds from the sale of other (in)tangible assets | – | 28 | – | |||||||
Loans from (to) related parties | 17 | 26,500 | 22,047 | |||||||
Proceeds from capital decreases in joint ventures | 17 | – | 3,737 | |||||||
Acquisition of subsidiaries, net of cash acquired | – | – | (6,755 | ) | ||||||
Net cash from (used in) investing activities | (113,083 | ) | (224,818 | ) | ||||||
(Purchase of) Proceeds from sale of treasury shares | 9 | – | (6,157 | ) | ||||||
Proceeds from new borrowings | 11 | 550,044 | 387,300 | |||||||
Repayment of borrowings | 11 | (681,438 | ) | (367,960 | ) | |||||
Transaction costs related to issue of loans and borrowings | 11 | (5,874 | ) | – | ||||||
Dividends paid | 9 | (34,645 | ) | (194,764 | ) | |||||
Net cash from (used in) financing activities | (171,913 | ) | (181,581 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (110,327 | ) | (40,575 | ) | ||||||
Net cash and cash equivalents at the beginning of the period | – | 206,689 | 131,663 | |||||||
Effect of changes in exchange rates | – | 837 | (404 | ) | ||||||
Net cash and cash equivalents at the end of the period | – | 97,199 | 90,684 |
The accompanying notes on pages 7 to 27 are an integral part of these condensed consolidated interim financial statements.
5
Notes to the consolidated financial statements
for the nine-month period ended September 30, 2017
Note 1 - Basis of preparation
Note 2 - Changes in significant accounting policies
Note 3 - Changes in consolidation scope
Note 4 - Significant events
Note 5 - Segment reporting
Note 6 - Revenue
Note 7 - Expenses for shipping activities
Note 8 - Property, plant and equipment
Note 9 - Equity
Note 10 - Earnings per share
Note 11 - Interest-bearing loans and borrowings
Note 12 - Trade and other payables
Note 13 - Financial instruments
Note 14 - Deferred tax assets and liabilities
Note 15 - Trade and other receivables
Note 16 - Contingencies
Note 17 - Equity-accounted investees
Note 18 - Subsequent events
Note 19 - Standards issued but not yet effective
6
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Euronav NV (the “Company”) is a company domiciled in Belgium. The address of the Company’s registered office is De Gerlachekaai 20, 2000 Antwerpen, Belgium. The condensed consolidated interim financial statements of the Company comprise the Company and its subsidiaries (together referred to as Euronav or the “Group”) and the Group’s interest in associates and joint ventures.
Note 1 - Basis of preparation
These condensed consolidated interim financial statements for the nine-month period ended September 30, 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS annual financial statements and should therefore be read in conjunction with the consolidated financial statements for the year ended December 31, 2016 that have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”), collectively “IFRS”.
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2016.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on February 14, 2018.
Note 2 - Changes in significant accounting policies
A summary of the Company's significant accounting policies can be found in the Company's consolidated financial statements for the year ended December 31, 2016.
The accounting policies and calculation methods adopted in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2016, that have been prepared in accordance with IFRS.
No new standards, amendments to standards or interpretations became effective for annual periods beginning on or after January 1, 2017.
Note 3 - Changes in consolidation scope
In comparison to the consolidation scope for the year ended December 31, 2016, no new subsidiaries were established or acquired, nor were there any sales or liquidations of subsidiaries.
7
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 4 - Significant events
On January 12, 2017, and January 20, 2017, Euronav took delivery of the VLCCsArdeche (2017 – 298,642 dwt) andAquitaine (2017 – 298,768 dwt) respectively.
On January 30, 2017, the Group signed a loan agreement with DNB Bank for a nominal amount of USD 110.0 million with the purpose of financing the two VLCCs, as mentioned above. On April 25, 2017, following a successful syndication with DNB Bank ASA, as Agent and Security Trustee, the loan was replaced with a new Korean Export Credit facility for a nominal amount of USD 108.5 million with Korea Trade Insurance Corporation or “K-sure” as insurer, and ING and ABN Amro as co-bookrunners. The new facility is comprised of (i) a USD 27.1 million commercial tranche, which bears interest at LIBOR plus a margin of 1.95% per annum and (ii) a USD 81.4 million insured tranche by K-sure which bears interest at LIBOR plus a margin of 1.50% per annum. The facility is repayable over a term of 12 years, in 24 installments at successive six month intervals, each in the amount of USD 3.6 million together with a balloon installment of USD 21.7 million payable with the 24th installment on January 12, 2029.
On April 20, 2017, the Group signed an additional two long-term time charter contracts of seven years each with Valero Energy Inc., for Suezmax vessels with specialized Ice Class 1C starting in the second half of 2018. In order to fulfil these contracts, the Group has ordered an additional two high specification Ice Class Suezmax vessels from Hyundai Heavy Industries shipyard in South Korea. Additional specifications for these vessels include substantially increased steel structure, specific emissions controls and other bespoke operational capabilities. Delivery of these vessels is expected in the second half of 2018 when each of the time charter contracts will begin.
On May 14, 2017, the joint ventures between the Group and International Seaways, signed a contract for five years for the FSO Africa and FSO Asia in direct continuation of the current contractual service. The contract was signed with North Oil Company, the new operator of the Al-Shaheen oil field, whose shareholders are Qatar Petroleum Oil & gas Limited and Total E&P Golfe Limited.
On May 23, 2017, the Group sold the VLCCTI Topaz (2002 – 319,430 dwt), one of its two oldest VLCC vessels, for USD 21.0 million. The loss on that sale of USD 21.0 million was recorded in the second quarter. Following the sale, the availability of the revolver under the USD 750 million facility was reduced by USD 19.5 million. The vessel was delivered to its new owner on June 9, 2017.
On May 31, 2017, the Group successfully completed a new senior unsecured bond issue of USD 150 million with a fixed coupon of 7.50% and maturity in May 2022. The net proceeds from the bond issue will be used for general corporate purposes. DNB Markets, Nordea and Arctic Securities AS acted as joint lead managers in connection with the placement of the bond issue.
On June 6, 2017, the Group signed an agreement with BNP to act as dealer for a Treasury Notes Program with a maximum outstanding amount of 50 million Euro. The Treasury Note is issued on an as needed basis with different durations and initial pricing is set to 60bps over Euribor.
8
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 5 - Segment reporting
The Group distinguishes two operating segments: the operation of crude oil tankers on the international markets (Tankers) and the floating production, storage and offloading operations (FSO/FpSO). These two divisions operate in completely different markets, where in the latter the assets are tailor made or converted for specific long term projects. The tanker market requires a different marketing strategy as this is considered a very volatile market, contract duration is often less than two years and the assets are to a large extent standardized. The segment profit or loss figures and key assets as set out below are presented to the executive committee on at least a quarterly basis to help the key decision makers in evaluating the respective segments. The Chief Operating Decision Maker (CODM) also receives the information per segment based on proportionate consolidation for the joint ventures and not by applying equity accounting. The reconciliation between the figures of all segments combined with the consolidated statements of financial position and profit or loss is presented in a separate column Equity-accounted investees.
The Group did not identify any relevant geographic areas.
(in thousands of USD) | For the nine month period ended | For the nine month period ended | ||||||||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||||||||||
Tankers | FSO | Less: Equity- accounted investees | Total | Tankers | FSO | Less: Equity- accounted investees | Total | |||||||||||||||||||||||||
Revenue | 395,419 | 47,152 | (47,181 | ) | 395,390 | 557,792 | 48,755 | (68,563 | ) | 537,984 | ||||||||||||||||||||||
Profit (loss) before income tax | (47,281 | ) | 26,135 | 1,877 | (19,269 | ) | 127,995 | 26,183 | (115 | ) | 154,063 | |||||||||||||||||||||
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Tankers | FSO | Less: Equity- accounted investees | Total | Tankers | FSO | Less: Equity- accounted investees | Total | |||||||||||||||||||||||||
Non-current assets | 2,596,985 | 185,300 | (161,335 | ) | 2,620,950 | 2,676,821 | 195,584 | (198,882 | ) | 2,673,523 | ||||||||||||||||||||||
Current assets | 240,221 | 16,038 | (16,435 | ) | 239,824 | 375,037 | 43,048 | (44,697 | ) | 373,388 | ||||||||||||||||||||||
TOTAL ASSETS | 2,837,206 | 201,338 | (177,770 | ) | 2,860,774 | 3,051,858 | 238,632 | (243,579 | ) | 3,046,911 | ||||||||||||||||||||||
Equity | 1,803,147 | 23,617 | (1 | ) | 1,826,763 | 1,892,836 | (4,879 | ) | (1 | ) | 1,887,956 | |||||||||||||||||||||
Non-current liabilities | 848,724 | 177,261 | (177,261 | ) | 848,724 | 969,860 | 204,630 | (204,630 | ) | 969,860 | ||||||||||||||||||||||
Current liabilities | 185,335 | 460 | (508 | ) | 185,287 | 189,162 | 38,881 | (38,948 | ) | 189,095 | ||||||||||||||||||||||
TOTAL LIABILITIES | 2,837,206 | 201,338 | (177,770 | ) | 2,860,774 | 3,051,858 | 238,632 | (243,579 | ) | 3,046,911 |
9
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 6 - Revenue
For the nine month period ended | ||||||||
(in thousands of USD) | September 30, 2017 | September 30, 2016 | ||||||
Pool Revenue | 189,891 | 271,418 | ||||||
Spot Voyages | 112,280 | 162,584 | ||||||
Time Charters | 93,219 | 103,982 | ||||||
Total revenue | 395,390 | 537,984 |
The decrease in revenue is mostly related to the decrease in pool and spot voyage revenue which is due to lower freight market conditions.
10
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 7 - Expenses for shipping activities
Voyage expenses and commissions
For the nine month period ended | ||||||||
(in thousands of USD) | September 30, 2017 | September 30, 2016 | ||||||
Voyage related expenses | (43,923 | ) | (37,736 | ) | ||||
Commissions paid | (3,855 | ) | (5,341 | ) | ||||
Total voyage expenses and commissions | (47,778 | ) | (43,077 | ) |
The majority of voyage expenses are bunkers, port costs and agent fees paid to operate the vessels on the spot market. These expenses increased in the first nine months of 2017 compared to the same period in 2016 because a lower proportion of vessels were on time charter contract in the first nine months of 2017, compared to the same period in 2016. For vessels under a time charter contract, voyage expenses are paid by the charterer and for vessels operated on the spot market, voyage expenses are paid by the ship owner.
Vessel operating expenses
For the nine month period ended | ||||||||
(in thousands of USD) | September 30, 2017 | September 30, 2016 | ||||||
Operating expenses | (108,317 | ) | (113,672 | ) | ||||
Insurance | (8,158 | ) | (9,166 | ) | ||||
Total vessel operating expenses | (116,475 | ) | (122,838 | ) |
The operating expenses relate mainly to the crewing, technical and other costs to operate tankers. In the first nine months of 2017 these expenses were lower compared to the same period in 2016 because technical operating expenses were lower thanks to cost optimization strategies applied in 2017.
Charter hire expenses
For the nine month period ended | ||||||||
(in thousands of USD) | September 30, 2017 | September 30, 2016 | ||||||
Charter hire | (63 | ) | (14,794 | ) | ||||
Bare boat hire | (23,266 | ) | – | |||||
Total charter hire expenses | (23,329 | ) | (14,794 | ) |
The decrease in charter hire is mainly due to the redelivery of the two previously chartered-in vessels, the VLCCKHK Visionand the SuezmaxSuez Hans, to their owners on October 27, 2016 and November 27, 2016 respectively.
The bareboat charter-hire expenses in the first nine months of 2017 are entirely attributable to the sale and leaseback agreement of four VLCCs (Nautilus, Navarin, NeptunandNucleus), under a five year bareboat contract agreed on December 16, 2016.
11
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 8 - Property, plant and equipment
(in thousands of USD) | Vessels | Vessels under construction | Other tangible assets | Total PPE | ||||||||||||
At January 1, 2017 | ||||||||||||||||
Cost | 3,748,135 | 86,136 | 2,373 | 3,836,644 | ||||||||||||
Depreciation & impairment losses | (1,364,972 | ) | – | (1,596 | ) | (1,366,568 | ) | |||||||||
Net carrying amount | 2,383,163 | 86,136 | 777 | 2,470,076 | ||||||||||||
Acquisitions | 122,131 | 38,166 | 103 | 160,400 | ||||||||||||
Disposals and cancellations | (41,817 | ) | – | (8 | ) | (41,825 | ) | |||||||||
Depreciation charges | (173,142 | ) | – | (231 | ) | (173,373 | ) | |||||||||
Transfers | 73,668 | (73,668 | ) | – | – | |||||||||||
Translation differences | – | – | 35 | 35 | ||||||||||||
Balance at September 30, 2017 | 2,364,003 | 50,634 | 676 | 2,415,313 | ||||||||||||
At September 30, 2017 | ||||||||||||||||
Cost | 3,813,489 | 50,634 | 2,439 | 3,866,562 | ||||||||||||
Depreciation & impairment losses | (1,449,486 | ) | – | (1,763 | ) | (1,451,249 | ) | |||||||||
Net carrying amount | 2,364,003 | 50,634 | 676 | 2,415,313 |
On January 12 and January 20, 2017, Euronav took delivery of the VLCCsArdeche (2017 – 298,642 dwt) and the VLCCAquitaine (2017 - 298,768 dwt).
In 2017, theCap Lara, Captain Michael, Alsace, Iris, Navarin, Simone, Ilma, Nucleus, Neptun, Sonia, Filikon and TI Europehave been dry-docked. The cost of planned repairs and maintenance is capitalized and included under the heading Acquisitions and is depreciated over their estimated useful life (3-5 years).
Disposal of assets – Gains/losses
(in thousands of USD) | Acquisitions | Sale price | Book Value | Gain | Deferred Gain | Loss | ||||||||||||||||||
Famenne - Sale | – | 38,016 | (24,195 | ) | 13,821 | – | – | |||||||||||||||||
Other | – | – | – | – | – | (2 | ) | |||||||||||||||||
At September 30, 2016 | 38,016 | (24,195 | ) | 13,821 | – | (2 | ) | |||||||||||||||||
Acquisitions | Sale price | Book Value | Gain | Deferred Gain | Loss | |||||||||||||||||||
TI Topaz - Sale | – | 20,790 | 41,817 | – | – | (21,027 | ) | |||||||||||||||||
Other | – | 28 | 8 | 20 | – | – | ||||||||||||||||||
At September 30, 2017 | 20,818 | 41,825 | 20 | – | (21,027 | ) |
On May 23, 2017, the Company sold the VLCCTI Topaz (2002 – 319,430 dwt), for a net sale price of USD 20.8 million. The loss on that sale of USD 21.0 million was recorded upon delivery of the vessel to its new owner in the second quarter of 2017.
12
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 8 - Property, plant and equipment (Continued)
Impairment
Tankers
Euronav defines its cash generating unit as a single vessel, unless such vessel is operated in a pool, in which case such vessel, together with the other vessels in the pool, are collectively treated as a cash generating unit.
The Group has performed an impairment test for tankers whereby the carrying amount of an asset or CGU is compared to its recoverable amount, which is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the following assumptions were used:
– | 10 year historical average spot freight rates are used as forecast charter rates |
– | Weighted Average Cost of Capital ('WACC') of 7.50% (2016: 6.43%) |
– | 20 year useful life with residual value equal to zero |
Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are subject to judgement. The impairment test did not result in a requirement to record an impairment loss as at September 30, 2017. Even with an increase of the WACC of 300 bps to 10.5%, there was no need to record an impairment loss as at September 30, 2017.
Recognizing that the transportation of crude oil and petroleum products is cyclical and subject to significant volatility based on factors beyond Euronav's control, Euronav believes the use of estimates based on the 10-year historical average rates calculated as of the reporting date to be reasonable as historically it is, and continues to be, the most appropriate reflection of a typical shipping cycle. When using 5-year historical charter rates in this impairment analysis, the impairment analysis, as at September 30, 2017, indicates an impairment in a total amount of USD 0.6 million for the tanker fleet (December 31, 2016: no impairment), and when using 1-year historical charter rates in this impairment analysis, the impairment analysis, as at September 30, 2017, indicates an impairment in a total amount of USD 633.5 million for the tanker fleet (December 31, 2016: no impairment).
FSO
For FSOs the impairment assessment has been based on a value in use calculation to estimate the recoverable amount from the vessel. This method is chosen as there is no efficient market for transactions of FSO vessels as each vessel is often purposely built for specific circumstances. In assessing value in use, the following assumptions were used:
– | Weighted Average Cost of Capital ('WACC') of 7.50% (2016: 6.43%) |
– | 25 year useful life with residual value equal to zero |
This assessment did not result in a requirement to record an impairment loss as at September 30, 2017. Even with an increase of the WACC of 300 bps to 10.5%, there was no need to record an impairment loss as at September 30, 2017. The value in use calculation for FSOs is based on the remaining useful life of the vessels as of the reporting date, and is based on fixed daily rates as well as management's best estimate of daily rates for future periods.
The FSO Asia and the FSO Africa were on a timecharter contract to Maersk Oil Qatar until July 22, 2017 and September 22, 2017, respectively. On May 14, 2017, the joint ventures between the Group and International Seaways, signed a contract for five years for the FSO Africa and FSO Asia in direct continuation of the current contractual service. The contract was signed with North Oil Company, the new operator of the Al-Shaheen oil field, whose shareholders are Qatar Petroleum Oil & gas Limited and Total E&P Golfe Limited.
13
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 8 - Property, plant and equipment (Continued)
Security
All tankers financed with bank loans are subject to a mortgage to secure bank loans.
Vessels on order or under construction
The group has 4 vessels under construction as at September 30, 2017 for an aggregate amount of USD 50.6 million. The amounts presented within "Vessels under construction" relate to four Ice Class Suezmax vessels from Hyundai Heavy Industries of which the first two vessels will be delivered in the first half of 2018 and the other two vessels in the second half of 2018.
Capital commitment
As at September 30, 2017 the Group's total capital commitments amount to USD 198.3 million (2016: USD 208.8 million).
(in thousands of USD) | As at December 31, 2016 payments scheduled for | |||||||||||||||
TOTAL | 2017 | 2018 | 2019 | |||||||||||||
Commitments in respect of VLCCs | 97,035 | 97,035 | – | – | ||||||||||||
Commitments in respect of Suezmaxes | 111,793 | 24,843 | 86,950 | – | ||||||||||||
Total | 208,828 | 121,878 | 86,950 | – | ||||||||||||
As at September 30, 2017 payments scheduled for | ||||||||||||||||
TOTAL | 2017 | 2018 | 2019 | |||||||||||||
Commitments in respect of VLCCs | – | – | – | – | ||||||||||||
Commitments in respect of Suezmaxes | 198,293 | 12,371 | 185,922 | – | ||||||||||||
Total | 198,293 | 12,371 | 185,922 | – |
These can be detailed as follows:
At December 31, 2016, Euronav held the option to purchase an additional two Ice Class Suezmax vessels from Hyundai Heavy Industries. Euronav exercised this option in the second quarter of 2017 which brings the number to four ordered Ice Class Suezmax vessels (see previous page).
14
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 9 - Equity
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
Treasury shares
As of September 30, 2017 Euronav owned 1,042,415 of its own shares. In the nine month period ended September 30, 2017 Euronav did not buy back or dispose of any own shares.
Dividends
On May 11, 2017, the Annual Shareholders' meeting approved a full year dividend of 0.77 per share. Taking into account the interim dividend approved in August 2016 in the amount of USD 0.55 per share, the dividend paid after the AGM was USD 0.22 per share. The dividend to holders of Euronav shares trading on Euronext Brussels was paid in EUR at the USD/EUR exchange rate of the record date. During its meeting of August 9, 2017, the Board of Directors of Euronav approved an interim dividend for the first semester 2017 of USD 0.06 per share. The interim dividend of USD 0.06 per share was payable as from October 5, 2017. The interim dividend to holders of Euronext shares was paid in EUR at the USD/EUR exchange rate of the record date. The total amount of dividends declared in the first nine months of 2017 was USD 44.3 million. The total amount of dividends paid in the first nine months of 2017 was USD 34.6 million.
Share-based payment arrangements
On December 16, 2013, the Group established a share option program that entitles key management personnel to purchase existing shares in the Company. Under the program, holders of vested options are entitled to purchase shares at the market price of the shares at the grant date. Currently this program is limited to key management personnel. In the nine month period ended September 30, 2017, the holders did not exercise any options. The key terms and conditions did not change after December 31, 2013. The compensation expense related to this share option program was recognized in prior periods and therefore, this program did not have any impact on the consolidated statement of profit or loss for the nine month period ended September 30, 2017.
Long term incentive plan 2015
The Group's Board of Directors implemented in 2015 a long term incentive plan ('LTIP') for key management personnel. Under the terms of this LTIP, the beneficiaries will obtain 40% of their respective LTIP in the form of Euronav stock options, with vesting over three years and 60% in the form of restricted stock units ('RSU's'), with cliff vesting on the third anniversary. In total 236,590 options and 65,433 RSU's were granted on February 12, 2015. Vested stock options may be exercised until 13 years after the grant date. The stock options have an exercise price of EUR 10.0475 and are equity-settled. All of the stock options and RSUs granted on February 12, 2015 remained outstanding as of September 30, 2017. The fair value of the stock options was measured using the Black Scholes formula. The fair value of the RSUs was measured with reference to the Euronav share price at the grant date. The total employee benefit expense recognized in the consolidated statement of profit or loss in the nine month period ended September 30, 2017 with respect to the LTIP 2015 was USD 0.2 million.
15
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 9 – Equity (Continued)
Long term incentive plan 2016
The Group's Board of Directors implemented in 2016 an additional long term incentive plan for key management personnel. Under the terms of this LTIP, key management personnel are eligible to receive phantom stock unit grants. Each phantom stock unit grants the holder a conditional right to receive an amount of cash equal to the fair market value of one share of the company on the settlement date. The phantom stock units will mature one-third each year on the second, third and fourth anniversary of the award. In total a number of 54,616 phantom stock units were granted on February 2, 2016 and all remain outstanding as of September 30, 2017. The LTIP 2016 qualifies as a cash-settled share-based payment transaction. The Company recognizes a liability in respect of its obligations under the LTIP 2016, measured based on the Company’s share price at the reporting date, and taking into account the extent to which the services have been rendered to date. The compensation expense recognized in the consolidated statement of profit or loss in the nine month period ended September 30, 2017 was USD 0.3 million.
Long term incentive plan 2017
The Group's Board of Directors implemented in 2017 an additional long term incentive plan for key management personnel. Under the terms of this LTIP, key management personnel are eligible to receive phantom stock unit grants. Each phantom stock unit grants the holder a conditional right to receive an amount of cash equal to the fair market value of one share of the company on the settlement date. The phantom stock units will mature one-third each year on the second, third and fourth anniversary of the award. In total a number of 66,449 phantom stock units were granted on February 9, 2017 and all remain outstanding as of September 30, 2017. The LTIP 2017 qualifies as a cash-settled share-based payment transaction. The Company recognizes a liability in respect of its obligations under the LTIP 2017, measured based on the Company’s share price at the reporting date, and taking into account the extent to which the services have been rendered to date. The compensation expense recognized in the consolidated statement of profit or loss in the nine month period ended September 30, 2017 was USD 0.2 million.
16
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 10 - Earnings per share
Basic earnings per share
The calculation of basic earnings per share at September 30, 2017 was based on a result attributable to ordinary shares of USD (17,972,293) (September 30, 2016: USD 153,762,030) and a weighted average number of ordinary shares outstanding during the nine month period ended September 30, 2017 of 158,166,534 (September 30, 2016: 158,294,412), calculated as follows:
Result attributable to ordinary shares
For the nine month period ended | ||||||||
(in thousands of USD except share and per share information) | September 30, 2017 | September 30, 2016 | ||||||
Result for the period | (17,972 | ) | 153,762 | |||||
Weighted average | 158,166,534 | 158,294,412 | ||||||
Basic earnings per share (in USD) | (0.11 | ) | 0.97 |
Weighted average number of ordinary shares
(in shares) | Shares issued | Treasury shares | Shares outstanding | Weighted number of shares | ||||||||||||
On issue at January 1, 2017 | 159,208,949 | 1,042,415 | 158,166,534 | 158,166,534 | ||||||||||||
Issuance of shares | – | – | – | – | ||||||||||||
Purchases of treasury shares | – | – | – | – | ||||||||||||
Withdrawal of treasury shares | – | – | – | – | ||||||||||||
Sales of treasury shares | – | – | – | – | ||||||||||||
On issue at September 30, 2017 | 159,208,949 | 1,042,415 | 158,166,534 | 158,166,534 |
Diluted earnings per share
For the nine months ended September 30, 2017, the diluted earnings per share (in USD) amount to (0.11) (2016: 0.97). At September 30, 2017, 236,590 outstanding options granted under the LTIP 2015 were excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive (September 30, 2016: 236,590 options).
Weighted average number of ordinary shares (diluted)
The table below shows the potential weighted number of shares that could be created if all stock options and restricted stock units were to be converted into ordinary shares.
(in shares) | September 30, 2017 | September 30, 2016 | ||||||
Weighted average of ordinary shares outstanding (basic) | 158,166,534 | 158,294,412 | ||||||
Effect of share-based payment arrangements | 129,187 | 197,021 | ||||||
Weighted average number of ordinary shares (diluted) | 158,295,721 | 158,491,433 |
The share-based payment arrangements can give rise to dilution at September 30, 2017.
17
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 11 - Interest-bearing loans and borrowings
Bank loans | Other notes | Other borrowings | Total | |||||||||||||
More than 5 years | 330,491 | – | – | 330,491 | ||||||||||||
Between 1 and 5 years | 635,952 | – | – | 635,952 | ||||||||||||
More than 1 year | 966,443 | – | – | 966,443 | ||||||||||||
Less than 1 year | 119,119 | – | – | 119,119 | ||||||||||||
At January 1, 2017 | 1,085,562 | – | – | 1,085,562 | ||||||||||||
New loans | 341,014 | 150,000 | 59,030 | 550,044 | ||||||||||||
Scheduled repayments | (41,688 | ) | – | – | (41,688 | ) | ||||||||||
Early repayments | (639,750 | ) | – | – | (639,750 | ) | ||||||||||
Other changes | (402 | ) | (2,518 | ) | – | (2,920 | ) | |||||||||
Balance at September 30, 2017 | 744,736 | 147,482 | 59,030 | 951,248 | ||||||||||||
More than 5 years | 162,585 | – | – | 162,585 | ||||||||||||
Between 1 and 5 years | 534,790 | 147,482 | – | 682,272 | ||||||||||||
More than 1 year | 697,375 | 147,482 | – | 844,857 | ||||||||||||
Less than 1 year | 47,361 | – | 59,030 | 106,391 | ||||||||||||
Balance at September 30, 2017 | 744,736 | 147,482 | 59,030 | 951,248 |
The amounts shown under “New loans” and “Early repayments” include drawdowns and repayments under revolving credit facilities.
Bank loans
Terms and debt repayment schedule
The terms and conditions of outstanding loans were as follows:
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||
Curr. | Nominal interest rate | Year of mat. | Facility size | Drawn | Carrying value | Facility size | Drawn | Carrying value | ||||||||||||||||||||||
Secured vessels loan 192M | USD | libor +2.25% | 2021 | 111,666 | 111,666 | 110,020 | 143,571 | 143,571 | 141,501 | |||||||||||||||||||||
Secured vessels Revolving loan 148M* | USD | libor +2.25% | 2021 | 147,559 | – | – | 147,559 | 63,700 | 63,700 | |||||||||||||||||||||
Secured vessels Revolving loan 750M* | USD | libor +1.95% | 2022 | 527,957 | 355,000 | 350,104 | 636,536 | 612,050 | 605,806 | |||||||||||||||||||||
Secured vessels Revolving loan 409.5M* | USD | libor +2.25% | 2023 | 386,140 | 120,500 | 116,883 | 409,500 | 222,036 | 217,600 | |||||||||||||||||||||
Secured vessels loan 76M | USD | libor +1.95% | 2020 | 24,625 | 24,625 | 24,625 | 27,813 | 27,813 | 27,813 | |||||||||||||||||||||
Secured vessels loan 67.5M | USD | libor +1.5% | 2020 | 26,165 | 26,165 | 26,165 | 29,143 | 29,143 | 29,143 | |||||||||||||||||||||
Secured vessels loan 27.1M | USD | libor +1.95% | 2029 | 27,138 | 26,911 | 24,801 | – | – | – | |||||||||||||||||||||
Secured vessels loan 81.4M | USD | libor +1.50% | 2029 | 81,413 | 78,020 | 77,139 | – | – | – | |||||||||||||||||||||
Unsecured bank facility 60M | USD | libor +2.25% | 2020 | 60,000 | 15,000 | 15,000 | 60,000 | – | – | |||||||||||||||||||||
Total interest-bearing bank loans | 1,392,662 | 757,888 | 744,736 | 1,454,121 | 1,098,312 | 1,085,562 |
The facility size of the vessel loans can be reduced if the value of the collateralized vessels falls under a certain percentage of the outstanding amount under that loan.
* The total amount available under the Revolving Credit Facility depends on the total value of the fleet of tankers securing the facility.
18
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 11 - Interest-bearing loans and borrowings (Continued)
On January 30, 2017, the Group signed a loan agreement with DNB Bank for a nominal amount of USD 110.0 million with the purpose of financing the two VLCCs, as mentioned above. On April 25, 2017, following a successful syndication with DNB Bank ASA, as Agent and Security Trustee, the loan was replaced with a new Korean Export Credit facility for a nominal amount of USD 108.5 million with Korea Trade Insurance Corporation or “K-sure” as insurer, and ING and ABN Amro as co-bookrunners. The new facility is comprised of (i) a USD 27.1 million commercial tranche, which bears interest at LIBOR plus a margin of 1.95% per annum and (ii) a USD 81.4 million insured tranche by K-sure which bears interest at LIBOR plus a margin of 1.50% per annum. The facility is repayable over a term of 12 years, in 24 installments at successive six month intervals, each in the amount of USD 3.6 million together with a balloon installment of USD 21.7 million payable with the 24th installment on January 12, 2029. The K-sure insurance premium and other related transaction costs for a total amount of USD 3.2 million are amortized over the lifetime of the instrument using the effective interest rate method.
The facility agreement contains a provision that entitles the lenders to require us to prepay to the lenders, on January 12, 2024, with 180 days’ notice, their respective portion of any advances granted to us under the facility. The facility agreement also contains provisions that allow the remaining lenders to assume an outgoing lender’s respective portion(s) of the advances made to us or to allow us to suggest a replacement lender to assume the respective portion of such advances.
Other notes
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||
Curr. | Nominal interest rate | Year of mat. | Facility size | Drawn | Carrying value | Facility size | Drawn | Carrying value | ||||||||||||||||||||||
Unsecured notes | USD | 7.50% | 2022 | 150,000 | 150,000 | 147,482 | – | – | – | |||||||||||||||||||||
Total other notes | 150,000 | 150,000 | 147,482 | – | – | – |
On May 31, 2017, the Group successfully completed a new senior unsecured bond issue of USD 150 million with a fixed coupon of 7.50% and maturity in May 2022. The net proceeds from the bond issue are being used for general corporate purposes. DNB Markets, Nordea and Arctic Securities AS acted as joint lead managers in connection with the placement of the bond issue. The related transaction costs for a total of USD 2.7 million are amortized over the lifetime of the instrument using the effective interest rate method.
Other borrowings
On June 6, 2017, the Group signed an agreement with BNP to act as dealer for a Treasury Notes Program with a maximum outstanding amount of 50 million Euro. The Treasury Notes are issued on an as needed basis with different durations not exceeding 1 year, and initial pricing is set to 60 bps over Euribor. The company enters into FX forward contracts to manage the transaction risks related to these instruments issued in Euro compared to the USD Group currency. The FX contracts have a same nominal amount and duration as the issued Treasury Notes and they are measured at fair value with changes in fair value recognized in the consolidated statement of profit or loss. On September 30, 2017, the fair value of these forward contracts amounted to USD 0.6 million.
19
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 12 - Trade and other payables
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||
Advances received on contracts in progress, between 1 and 5 years | 553 | 533 | ||||||
Total non-current other payables | 553 | 533 | ||||||
Trade payables | 18,449 | 18,107 | ||||||
Accrued payroll | 2,287 | 2,581 | ||||||
Dividends payable | 9,710 | 7 | ||||||
Accrued expenses | 29,354 | 29,245 | ||||||
Accrued interest | 4,742 | 1,150 | ||||||
Deferred income | 9,940 | 13,746 | ||||||
Other payables | 4,296 | 5,023 | ||||||
Total current trade and other payables | 78,778 | 69,859 |
The dividend payable of USD 9.7 million as of September 30, 2017 relates to the interim dividend for the first semester 2017 of USD 0.06 per share which was payable as from October 5, 2017.
Other payables are mainly related to the deferred gain of USD 5.0 million which was the difference between the fair value and the sale price of the four VLCCs of the sale and leaseback entered into on December 16, 2016. This excess was deferred and is being amortized over the duration of the lease, i.e. 5 years.
20
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 13 - Financial instruments
Carrying amounts and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value, such as trade and other receivables and payables.
Carrying amount | Fair value | |||||||||||||||||||||||||||||||||
(in thousands of USD) | Note | Hedging instruments | Loans and receivables | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||||||||||||||||
Non-current receivables | – | – | 183,914 | – | 183,914 | – | – | 178,216 | 178,216 | |||||||||||||||||||||||||
Trade and other receivables * | 15 | – | 145,193 | – | 145,193 | – | – | – | – | |||||||||||||||||||||||||
Cash and cash equivalents | – | – | 206,689 | – | 206,689 | – | – | – | – | |||||||||||||||||||||||||
– | 535,796 | – | 535,796 | |||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||
Secured bank loans | 11 | – | – | 1,085,562 | 1,085,562 | – | 1,092,023 | – | 1,092,023 | |||||||||||||||||||||||||
Trade and other payables * | 12 | – | – | 56,113 | 56,113 | – | – | – | – | |||||||||||||||||||||||||
Advances received on contracts | 12 | – | – | 533 | 533 | – | – | – | – | |||||||||||||||||||||||||
– | – | 1,142,208 | 1,142,208 | |||||||||||||||||||||||||||||||
Carrying amount | Fair value | |||||||||||||||||||||||||||||||||
(in thousands of USD) | Hedging instruments | Loans and receivables | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||||||||||||
Financial assets measured at fair value | – | |||||||||||||||||||||||||||||||||
Forward exchange contracts | 633 | – | – | 633 | – | 633 | – | 633 | ||||||||||||||||||||||||||
633 | – | – | 633 | |||||||||||||||||||||||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||||||||||||||||
Non-current receivables | – | – | 173,916 | – | 173,916 | – | – | 137,602 | 137,602 | |||||||||||||||||||||||||
Trade and other receivables * | 15 | – | 115,212 | – | 115,212 | – | – | – | – | |||||||||||||||||||||||||
Cash and cash equivalents | – | – | 97,199 | – | 97,199 | – | – | – | – | |||||||||||||||||||||||||
– | 386,327 | – | 386,327 | |||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||
Secured bank loans | 11 | – | – | 744,736 | 744,736 | – | 734,981 | – | 734,981 | |||||||||||||||||||||||||
Unsecured bank loans | 11 | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||
Unsecured notes ** | 11 | – | – | 147,482 | 147,482 | – | – | – | – | |||||||||||||||||||||||||
Unsecured other borrowings | 11 | – | – | 59,030 | 59,030 | – | – | – | – | |||||||||||||||||||||||||
Trade and other payables * | 12 | – | – | 68,838 | 68,838 | – | – | – | – | |||||||||||||||||||||||||
Advances received on contracts | 12 | – | – | 553 | 553 | – | – | – | – | |||||||||||||||||||||||||
– | – | 1,020,639 | 1,020,639 |
* Deferred charges (see Note 15) and deferred income (see Note 12), which are not financial assets (liabilities) are not included.
** The Group believes that the carrying amount of the instrument is a reasonable approximation of fair value.
21
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 13 - Financial instruments (Continued)
Measurement of fair values
Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
Financial instruments measured at fair value | ||||
Type | Valuation Techniques | Significant unobservable inputs | ||
Forward exchange contracts | Forward pricing: the fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on high credit quality yield curve in the respective currencies. | Not applicable | ||
Financial instruments not measured at fair value | ||||
Type | Valuation Techniques | Significant unobservable inputs | ||
Non-current receivables (consisting of shareholders' loans) | Discounted cash flow | Discount rate | ||
Other financial liabilities (consisting of secured and unsecured bank loans) | Discounted cash flow | Not applicable |
Transfers between Level 1, 2 and 3
There were no transfers between these levels in 2016 and for the nine-month period ended September 30, 2017.
Note 14 - Deferred tax assets and liabilities
Euronav NV and its subsidiaries had available combined cumulative tax losses and other tax credits carried forward of USD 360.7 million and USD 317.9 million as of September 30, 2017 and December 31, 2016, respectively. Under current local tax laws, these loss carry forwards have an indefinite life and may be used to offset future taxable income of Euronav NV and its subsidiaries. The increase is mainly due to movement in EUR/USD exchange rates.
The Company did not recognize deferred tax assets of USD 118.6 million and USD 106.0 million as of September 30, 2017 and December 31, 2016, respectively, that can be carried forward against future taxable income, because it is not considered more likely than not that these deferred tax assets will be utilized in the foreseeable future.
22
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 15 - Trade and other receivables
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||
Trade receivables | 25,929 | 38,695 | ||||||
Accrued income | 11,347 | 10,966 | ||||||
Accrued interest | 42 | 33 | ||||||
Deferred charges | 27,277 | 21,149 | ||||||
Other receivables | 77,894 | 95,499 | ||||||
Total trade and other receivables | 142,489 | 166,342 |
The decrease in other receivables relates to income to be received by the Group from the Tankers International Pool. These amounts were lower as at September 30, 2017 compared to December 31, 2016 due to overall declining freight market conditions.
Note 16 - Contingencies
The Group is involved in a number of disputes in connection with its day-to-day activities, both as claimant and defendant. Such disputes and the associated expenses of legal representation are covered by insurance. Moreover, they are not of a magnitude that lies outside the ordinary, and their scope is not of such a nature that they could jeopardize the Group's financial position.
Note 17 - Equity-accounted investees
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Interest in joint ventures | 27,675 | 16,867 | ||||||
Interest in associates | 1,546 | 1,546 | ||||||
TOTAL ASSETS | 29,221 | 18,413 |
Associates
(in thousands of USD) | September 30, 2017 | December 31, 2016 | ||||||
Carrying amount of interest at the beginning of the period | 1,546 | 1,212 | ||||||
Group's share of profit (loss) for the period | – | 334 | ||||||
Group's share of other comprehensive income | – | – | ||||||
Carrying amount of interest at the end of the period | 1,546 | 1,546 |
The Group distinguishes the following associates:
Associate | Segment | Description | ||
Tankers International LLC | Tankers | The manager of the Tankers International Pool who commercially manages the majority of the Group's VLCCs | ||
VLCC Chartering Ltd | Tankers | Chartering joint venture which provides customers with a unique access to the combined fleets of Frontline and Tankers International Pool |
23
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 17 - Equity-accounted investees (Continued)
Joint Ventures
The following table contains a roll forward of the balance sheet amounts with respect to the Group’s joint ventures:
ASSET | LIABILITY | |||||||||||||||
(in thousands of USD) | Investments in equity accounted investees | Shareholders loans | Investments in equity accounted investees | Shareholders loans | ||||||||||||
Gross balance | (38,095 | ) | 317,749 | – | – | |||||||||||
Offset investment with shareholders loan | 58,520 | (58,520 | ) | – | – | |||||||||||
Balance at January 1, 2016 | 20,425 | 259,229 | – | – | ||||||||||||
Group's share of profit (loss) for the period | 40,161 | – | – | – | ||||||||||||
Group's share of other comprehensive income | 1,224 | – | – | – | ||||||||||||
Group's share on upstream transactions | 4,646 | – | – | – | ||||||||||||
Capital increase/(decrease) in joint ventures | (3,737 | ) | – | – | – | |||||||||||
Dividends received from joint ventures | (23,478 | ) | – | – | – | |||||||||||
Movement shareholders loans to joint ventures | – | (18,499 | ) | – | – | |||||||||||
Business combinations | 15,981 | (95,738 | ) | – | – | |||||||||||
Gross balance | (3,298 | ) | 203,512 | – | – | |||||||||||
Offset investment with shareholders loan | 20,165 | (20,165 | ) | – | – | |||||||||||
Balance at December 31, 2016 | 16,867 | 183,348 | – | – | ||||||||||||
Group's share of profit (loss) for the period | 28,029 | – | – | – | ||||||||||||
Group's share of other comprehensive income | 483 | – | – | – | ||||||||||||
Capital increase/(decrease) in joint ventures | – | – | – | – | ||||||||||||
Dividends received from joint ventures | (1,250 | ) | – | – | – | |||||||||||
Movement shareholders loans to joint ventures | – | (26,500 | ) | – | – | |||||||||||
Gross balance | 23,965 | 177,012 | – | – | ||||||||||||
Offset investment with shareholders loan | 3,710 | (3,710 | ) | – | – | |||||||||||
Balance at September 30, 2017 | 27,675 | 173,302 | – | – |
24
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 18 - Subsequent events
On October 23, 2017, the Company announced that the 150.0 million USD senior unsecured bonds issued by Euronav Luxembourg S.A. and guaranteed by Euronav NV are listed on the Oslo Stock Exchange as of that date.
On November 10, 2017, the Company sold the VLCCFlandre(2004 – 305,688 dwt) for USD 45.0 million to a global supplier and operator of offshore floating platforms. The Company recorded a gain of USD 20.3 million on the sale which was recorded in the fourth quarter of 2017. The vessel was delivered to its new owner on December 20, 2017 and will be converted into an FSPO by her new owner and will therefore leave the worldwide VLCC trading fleet.
On November 16, 2017, the Company sold the SuezmaxCap Georges(1998 – 146,652 dwt) for USD 9.3 million. The Company recorded a gain of USD 8.5 million on the sale which was recorded in the fourth quarter of 2017. The vessel was delivered to its new owner on November 29, 2017.
On November 17, 2017, the Company sold the VLCCArtois(2001 – 298,330 dwt) for USD 21.8 million. TheArtoiswas the oldest vessel in the Company’s VLCC fleet. The Company recorded a gain of USD 7.7 million on the sale which was recorded in the fourth quarter of 2017. The vessel was delivered to its new owner on December 4, 2017.
On December 21, 2017, Euronav announced that the Company has reached an agreement on a stock-for-stock merger for the entire issued and outstanding share capital of Gener8 Maritime, Inc. (“Gener8“) pursuant to which Gener8 would become a wholly-owned subsidiary of Euronav. The “Exchange Ratio“ of 0.7272 Euronav shares for each share of Gener8 is expected to result in the issuance of approximately 60.9 million new Euronav shares to Gener8 shareholders. The Exchange Ratio implies a premium of 35% paid on Gener8 shares based on the closing share prices on 20 December 2017. The merger will result in Euronav shareholders owning approximately 72% of the issued share capital of the combined entity and Gener8 shareholders owning approximately 28% (based on the fully diluted share capital of Euronav and the fully diluted share capital of Gener8). The merger is subject to the approval of Gener8’s shareholders, the consent of certain of Gener8’s lenders to assign certain debt facilities to the combined entity, the effectiveness of a registration statement to be filed by Euronav with the U.S. Securities and Exchange Commission (the “SEC”) to register the Euronav shares to be issued in the merger (the “New Registration Statement”), the listing of such shares on the New York Stock Exchange (the “NYSE”) and other customary closing conditions. Certain of these closing conditions are substantive, and these conditions have not yet been met. The Gener8 shares will be contributed to Euronav in application of the Belgian Companies Code procedure of a capital increase through contribution in kind. The increase of the Euronav share capital will occur under the existing authorized capital of USD 150.0 million.
25
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 19 - Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and early application is permitted. However, the Group has not early adopted the following new or amended standards in preparing these condensed consolidated interim financial statements.
The Group has the following updates to information provided in the consolidated financial statements for the year ended December 31, 2016 about the standards issued but not yet effective that may have a significant impact on the Group’s consolidated financial statements.
IFRS 9 Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group will apply IFRS 9 initially on 1 January 2018. The new standard will require the Group to revise its accounting processes and internal controls related to reporting financial instruments and these changes are not yet complete. However, the Group has performed a preliminary assessment of the potential impact of the adoption of IFRS 9 based on its positions at 30 September 2017 and expects that the new standard will not have a material impact on the Group’s consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Barter Transactions Involving Advertising Services. IFRS 15 is effective for the annual periods beginning on or after January 1, 2018, with early adoption permitted. The standard establishes a five-step model that will apply to revenue earned from a contract with a customer. The standard’s requirements will also apply to the sale of some non-financial assets that are not part of the entity’s ordinary activities (e.g., sales of property or plant and equipment). Extensive disclosures will be required, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates.
26
Notes to the condensed consolidated interim financial statements
for the nine-month period ended September 30, 2017
Note 19 - Standards issued but not yet effective (Continued)
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Group will adopt the standard using the cumulative catchup transition method. The new standard will be effective for us beginning January 1, 2018. The Group has undertaken a comprehensive approach to assess the impact of the guidance on its business by reviewing the current accounting policies and practices to identify any potential differences that may result from applying the new requirements to the consolidated financial statements. Part of the Group’s revenue is generated from time charters, where revenue is recognized on an accrual basis and is recorded over the term of the charter as the service is provided. This new guidance will not have any impact on this aspect of the Group’s revenue. For spot charters, we recognize revenue on a discharge-to-discharge basis in determining the percentage of completion for all voyage charters. After consulting with other shipping companies on business assumptions, processes, systems and controls the Group decided to recognize revenue on a load-to-discharge basis as from January 1, 2018. An analysis of spot charter revenue from voyages over year-end indicated that the initial adoption of IFRS 15 on January 1, 2018 will result in a reduction of accrued revenue by USD 1.7 million, with a corresponding reduction of equity. Under this new standard the Group will also capitalize the voyage expenses incurred between the previous discharge port and the next load port if they qualify as fulfillment costs under IFRS 15 and if they are expected to be recovered.
IFRS 16 Leases
IFRS 16 Leases published on January 13, 2016 makes a distinction between a service contract and a lease based on whether the contract conveys the right to control the use of an identified asset and introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for shortterm leases and leases of low value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases. For lessors, there is little change to the existing accounting in IAS 17 Leases. IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. The Group will adopt IFRS 16 as of January 1, 2019. No quantitative or qualitative assessment of the impact of IFRS 16 has been made to date, but the Group expects that the most significant impact will be that the Group will recognize new assets and liabilities for its operating leases as lessee. In addition, the nature and recognition of expenses related to those leases will change as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.
27