Good day and welcome to Euronav’s Fourth Quarter 2021 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Brian Gallagher, Head of Investor Relations. Please go ahead.

Thank you. Good morning and afternoon to everyone, and thanks for joining Euronav’s Q4 2021 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, Thursday, the 3rd of February 2022, 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 historical statements or facts. 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 and on our own company website. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the 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. I will now pass on to Chief Executive, Hugo De Stoop, to start with the agenda slide on Slide 3. Over to you, Hugo. Thank you.

Thank you, Brian. Welcome to our call today, wherever you are. In terms of the agenda, I will firstly run through the Q4 highlights and some comments on what it was in the end another challenging quarter after an encouraging start. I will then turn over to Brian Gallagher, our Head of IR, run through some market slides before Lieve Logghe, our CFO, highlights some important accounting changes we are announcing today. I will then return to outline how the Euronav platform is positioned for the coming cycle, not only on a standalone basis but how we compare with our peers before finishing off with our traffic lights and a Q&A session. So turning on to the next slides, the highlight slides. We stressed in our Q3 call that we felt we had reached a trough in the cycle during the late summer month of 2021. We stand by that view. The recovery we saw from late August into when we reported in early November was tangible and reflected in better freight rates. However, with the rapid spread of the Omicron variants from late November, the associated rapid restrictions in economic activity and the lack of confidence in the business cycle, we saw this recovery stalled in what is seasonally the most important period of the year. This was very frustrating, and overall tanker activity has yet to really recover. However, freight rates, whilst under pressure, have not revisited the low levels of late summer and we remain with the conviction that recovery has only been deferred. Unlike the situation 12 months ago, we face the coming year with strong oil supply growth forecasted by the leading agencies, a further rebound in demand, and a pressing requirement to address low crude inventories at some point in the future. Our low cash breakevens coupled with our strong balance sheet enable us to manage through the current market and we are positioning for the next structural phase of the cycle. As we recently took delivery of two new super eco Suezmaxes, the Cedar and the Cypress, at the same time as redelivering four non-eco older VLCCs. Don’t get me wrong, we, along with all our stakeholders, remain extremely frustrated with the pause the tanker market has taken on our recovery journey, but we continue to expect the freight market to improve to healthy levels, even though this is no more likely focused on the second half of 2022. I will return to this later and now I’ll pass it on to Brian. Thank you.

Thank you, Hugo. The demand background remains very important for our markets and the setup for 2022 looks far more encouraging than it did last year with different and more numerous factors at play, and largely in our favor. Firstly, it does appear that demand is finally expected to revisit or even exceed 2019 levels this year. The IEA, for instance, is forecasting a further demand snapback of 3.3 million barrels per day in 2022 implying over 100 million barrels per day of consumption for the first time since 2019. Top right, we show the growth, which is leveraged for all tanker companies and ourselves in particular, as every 1 million barrels per day of annualized expansion of demand historically requires between 30 and 40 VLCCs, and we believe this correlation will hold going forward. The bottom left chart looks at demand, which may also be further increased with a requirement to restock. If we remember that the story in 2021, which is seen in bottom right, was that demand rebounded very, very strongly, but most of this demand was satisfied with inventory and drawdowns from local supplies so therefore there was no need for shipping. The picture for 2022 looks very different. Inventories are currently at levels globally that we have not seen since 2011. So, at some point, and commentators such as the EIA advocate strongly that we’ll see a big snapback in inventory rebuilds, will move from the stocking phase to a restocking phase sometime this year. This should be a further boost to tankers over and above the underlying demand snapback that we anticipate. We now turn to Slide 8. We look at vessel supply. Vessel supply remains an issue and will clearly provide some headwinds, especially in the first half of this year. The top right slide illustrates how suppliers largely don’t want to step ahead of the recovering demand ever since we went into COVID-related restrictions early in 2020. The fleet has grown by around 50 VLCCs in that time, and there are another 40 expected to hit the waters this year. Most of this will happen before September. Recovering demand will absorb some of this tonnage increase, but clearly not all. However, there are two factors that could redress this balance during the rest of this year. Slide 9 top left shows that 2022 is a big year for special surveys. Nearly 10% of a sector will go into the yard this year, aged between 17.5 years and 22.5 years. Now clearly, not all of these ships will exit the market, but it illustrates the soft underbelly of the tanker market with 25% of the fleet already aged over 15 years and an average fleet age at 20 year highs. The catalysts for taking the decision whether to exit or not is twofold: the steel price which is the driver of scrap metals and the cost of a survey, which at that age is considerable and somewhere between $3 million and $4 million for each survey. In other words, owners are faced with a choice of either spending a lot of dollars to remain in the market today to keep an old ship which will only survey and have low utilization for the following 30 months or receive a hefty capital injection in exchange for recycling that ship. This decision was skewed last year because a lot of these older ships were sold to perform the so-called illicit trade, a murky business allowing those involved in it to pay a premium over recycling values. We don’t believe this will play a very big role going forward as this illicit trade has stabilized in size, as shown by the slide on the bottom left, which will make it difficult for new entrants to enter this illegal trade. This illicit trade, it must be stated, remains a wildcard for the tanker markets but there is a pressing need for the IMO and others to apply the sanctions that are in place, as this trade represents a huge risk for human life, and also the environment because of the way this trade is operated and the age of the vessels that are engaged in this trade. The bottom right chart illustrates how dynamic tanker markets can be. If one assumes the 20 and 22.5 year old vessels after survey this year were to exit the trading fleet, then the fleet would actually shrink in terms of overall size. Whilst it is very unlikely, it does illustrate the age profile of the VLCC at the current state, and how dynamic this would be if recycling were to maintain the trend that was started in Q3 2021. With that, I will now pass over to our CFO Lieve Logghe on some important changes in our accounting approach. Lieve, over to you.

Thank you, Brian. Today, we are announcing a number of important changes in our accounting policies and the way we report our figures in our P&L. We are reviewing on a regular basis, our judgment and assessments made with the objective to continue to present a fair, exhaustive and thorough view next to the fact that it’s equally important for Euronav to be directly compatible to its peers. The key change is the adjustments we are making to our residual value accounting. After a thorough internal review and with our auditors, we believe now is an appropriate time to update our assessments and to transparently share this with our stakeholders. Historically, our approach has been very simple; 20 years straight line depreciation to zero. However, there have been significant changes in shipping and steel markets in the past five years, which we believe necessitate a change in policy. Steel is one of the most recoverable commodities in recycling and in a sustainable circular economy hence the recycling of ships will become more important. With this in mind, we have decided to move to the following approach. We keep our depreciation policy over 20 years, but to a residual value basis, as opposed to what we had until now, which was zero residual value. The residual value we will adopt will be an average of the key recycling market prices, which presently is around $500 per ton. So, going forward, this will reduce our depreciation charge annually by around $100 million from the current run rate of around $380 million and places ourselves more in line with our quoted peer group. On this slide, you can also look at how recycled steel prices have performed in the past decades and the reasoning behind choosing $390 per ton, which is equivalent to the four years moving average. Other important changes in our P&L are some reclassifications we are making between revenues and costs lines in order to make us more market conform. The TI Pool administration fee has been reclassified out of G&A to revenues, whereas flat compensation is now directly integrated in our costs as an offset. Ship management overhead is now part of OpEx, as we recognize that the majority of market takes the ship management fees, especially when this is outsourced directly into the OpEx. While those changes have no impact on EBITDA or the bottom line, it clearly shows that our system platform enables us to deliver top quality service at a very reasonable cost, which can only be achieved with scale. We illustrate this point by showing how we compare to one of the most reputable benchmarks produced by BCG and the tanker shipping industry. Another important feature worthwhile mentioning is that Euronav’s portion of debt hedged against interest rate hikes is now 60%. In an inflationary environment, we cannot just do nothing about it. I will now pass back to Hugo for the rest of the presentation and its conclusions.

Thank you, Lieve. I would like to finish up on a few slides outlining exactly where Euronav is positioned. Slide 15 illustrates a comprehensive platform we offer investors. Firstly, our operational performance is at the leading edge in our market, all fixed performance compared with the best in class and is backed by a strong balance sheet where we have the highest liquidity both in absolute and relative terms accompanied by one of the lower leverage ratios amongst the peer group. Finally, in terms of capital markets, investors looking to gain exposure to the tanker market at this stage should focus on two elements, the robustness of the company they invest in, as well as the operational leverage they acquire for when the cycle will turn. It should be clear to investors that Euronav offers the lowest entry point and therefore the highest upside. In summary, we have a clear focus and strong platform at Euronav. Our operational structure is extremely competitive in cost terms and is fully integrated. Our large fleet is appropriately aged and we have a balance sheet that retains two years liquidity runway, all of this supported by increasing sustainability credentials and proven record in terms of return to shareholders. Do we wish the freight market was more encouraging and in better health? Yes, of course. But as no one can accurately predict the markets, we’re always prepared for challenging market, even when we expect the cycle to improve, which is clearly the case for 2022. Let’s move on to our traffic lights and other upgrades. We’ve upgraded our old supply outlook driven by three factors. OPEC continues to deliver on its monthly production increase, as confirmed yesterday. Non-OECD is beginning to show signs of life with pockets of exports increased easing from areas like EMEA, Brazil or even the US, which are long-term buys. And finally, inventory at are level where people will look more into replenishment than further drawdown. Elsewhere, the key traffic lights remain the same. So in conclusion, Euronav remains constructive on the prospects for our market and its recovery. The setback that we saw in the second half of Q4 is just that, a setback. It will take time, but we remain confident for the recovery. That concludes our remark. Thank you for your attention and I now pass it back to the operator and look forward to your questions.

The first question is from Randy Giveans of Jefferies, please go ahead.

Hi. How are you, team Euronav? How’s it going?

Hi, Randy. How are you?

Doing well. Doing well. I guess first on the accounting changes, knowing you’re now going to a scrap value residual value depreciation makes sense. Any impact to the potential payout ratio, if and when we get back to some pretty meaningful profitability here?

At the moment, we keep our policies very clearly set out on the website, very similar to what we had in the past. You know that we are very shareholder-focused and we have tended to be very generous towards our dividend or in buyback. We continue to be frustrated with the share price; it continues to trade below NAV. So clearly, we will need to make a choice between dividend buyback when we get to positive territory, and we have something to return to shareholders.

Got it. Okay. And then, in terms of your comments on inventories, I think Brian, going back to 2011 levels, clearly with brand around $88 today, there continues to be some downward pressure on inventories. Do you see any kind of inflection point in the near term for that restocking that you mentioned or is it all just kind of supply driven?

It’s a good question, Randy. I think what we would say is it would be the business cycle getting confidence. We were beginning to see that confidence return before Omicron began to bite in November, and we’re just not getting longevity in these recovery periods over the last two years. So I think it’s a question of when the business cycle is getting back to some form of normalization, and therefore having the confidence to order, but also the price structure of oil itself. Clearly, it’s in very deep backwardation at the moment, which works against that inventory rebuild. But look, I think it’s just a question of time getting through, and then as we get through better improved confidence, then we would expect that rebuild to start. But we are talking about very low levels, and that’s the reason we wanted to highlight that we take the EIA, you know, they’re forecasting rebuild to start as soon as this quarter. So let’s wait and see, but I think it’s more a question of the business confidence in the cycle returning to some form of normalization. And then we will expect a restocking to happen.

I just would like to add maybe one color on this, which is oil stability. We all know why those inventories exist and it’s because there is always a risk that the supply of oil is being disrupted by one event or another, which is clearly the case at the moment. So it’s very good to be able to draw on your inventories, but there is a limit to what you can do and that limit is reached when you’re confident that your supply chain is not going to be interrupted.

Yes, and it is fair. And then, if you don’t mind, I’m going to sneak in one last question here. Obviously, you’re frustrated with spot rates, I think those sentiments are shared pretty widely. In terms of time charter rates, those have held in decently relative. So any appetite for just locking in some cash flows there, while we continue to wait for the uplift in spot rates?

As long as we’re concerned, we haven’t seen anything short-term that was really attractive. Yes, you can lock in sort of the low 20s for a year. Whenever you are crossing, sort of the 30s, then you’re talking about three years and usually one or two years option on the back of that at maybe $1,000 more, so we’ve seen structures like $33,000 for three years and $34,000 for the fourth one, $35,000 for the fifth one. And when you read our thesis, which is obviously shared by a lot of people, we believe that when the market returns to positive territory, it’s going to be probably a longer cycle than what we have seen recently. It’s probably going to be like a 2004 to 2008 type of cycle, relatively high rates and relatively pronounced. So I think that we should be prudent when we are looking at those rates, which today look attractive, but quite frankly, at the back end of those five years, you may be a little bit regretful to have done it.

Yeah, that makes sense. So with your balance sheet liquidity, you have the ability to wait, so all good. Thank you again.

Thank you, Randy.

Thanks, Randy.

Thank you. The next question is from Jon Chappell of Evercore. Please go ahead.

Thank you. Good afternoon, everybody. Brian, if I could start with you, you know, I’ve found that there’s been a pretty strong consensus from the public companies and most of the analysts looking for recovery just any day now. But some of the brokers maybe don’t have any skin in the public game are quite more bearish. It feels like a lot of their negativity is focused on the supply side, so I can go to Page 8 and look at that upper right hand graph where you say it implies 60 to 80 excess VLCCs based on ‘19 demand. So, what gets us confidence that that 60 to 80 spread closes? I know, there’s some hope for scrapping, but scrapping is always a bit of a wildcard. Is that a demand-driven reversion? You know, anything you can point to that would maybe debunk that bearish thesis?

So it’s a very fair point, Jon. And I think what we tried to do maybe, with the first slide before that, was trying to show that there are multiple elements to this. And I think we have three pushbacks on that. One would be on the supply side; yes, supply has been patchy, we have to recognize that, we haven’t seen the supply growth that we would have anticipated. But if we take again the forecast, which independent commentators are giving, Platts, for instance, are talking about a 1.5 million barrels per day increase from the US, although that is second half weighted. We’re also looking at 0.7 million barrels per day from Brazil, Canada doing the North Sea, again, second half weighted. But also I think we have things like the standstill agreement that will come into place with the OPEC plus nations, which could see – which will potentially see Russia, Saudi, the UAE and Kuwait have 1.5 million barrels per day between them that they can increase their production. Now, that’s important, because obviously those nations have been the key drivers of the production growth that we’ve seen. We’ve seen other, in particular, West African nations struggle to even grow their production. So I think there’s some really good grounds, albeit second half weighted for the supply side. The second answer would be, as Hugo said in his prepared remarks, the demand we do believe is going to again, continue to gain traction. There’s some seasonality to that, so we shouldn’t be surprised, again, that’s going to be more second quarter onwards based. And then lastly, would just be the fact that we have started to see some of that recycling. I think it was 11 VLCCs in the second half of last year and I think, a similar number of Suezmax. And we’ve got a very big survey cycle year. I’d love to give you a magic bullet, Jon, and everyone else’s, but again, as Hugo said in his call, we’re not happy with where we are but we do believe we’ve seen the worst in the rearview mirror. All we can point to is some of these factors that we see in front of us. We wish they were gaining traction more quickly than they are. We’re going to have to be patient. I think that’s the message we try to give in the commentary and the press release. But we do see, it’s not just one factor that we’re sort of hoping that will come through. We see multiple factors which will be supported. And we believe those will combine to get traction as this year progresses. But it’s certainly probably going to be more in the Q2, Q3 when we start to see that getting traction moving into that key winter period.

No, I think you summed it up. There are many factors at play, and obviously, Jon, I understand that predicting the recycling side is quite challenging. However, we aimed to highlight the opportunities in the presentation. If there weren't special surveys necessary at 17.5, 20, or 22.5 years, then the expectation for increased scrapping would likely decrease. This year is particularly intriguing in that regard. If faced with a $3 million or $4 million expense and finding nothing in return upon returning to the market, especially for this age group where returns are currently zero, it raises questions about what actions people will take. Last year, vessels were sold to the illicit market, but that segment seems to be stable, and we haven't observed any ships entering that troubling trade recently, so there's no clear reason to think that will change. There is an existing fleet that services this market segment.

I think Brian’s point about just making sure you’re aligned with the best balance sheets and liquidity is a very important one. If we can look just a bit past the short-termism, I know we have a tendency to focus only here and now, if we get past ‘22, the order book drops precipitously. And I know that ship owners have a long history of saying, oh, you can’t get a ship for three years and then magically you find 30 slots in 18 months. But it does seem that given the strength of the container ship ordering, the LNG ordering, even the LPG, that there is less availability in kind of a ‘23, ‘24 timeline. Can you just speak to in a very realistic manner at a commercial scale, when would you realistically get like a 10 plus four order of VLCCs or Suezmaxes? Do you have a great relationship with the Korean yard, where you can sneak one in first half of ‘24, or even the best place ship owners, you’re looking at late ‘24, maybe into ‘25 and beyond?

If you’re talking about one slot or two, I think that you can reasonably expect to squeeze maybe one or two slots, as I said, at the back end of ‘24. But it’s certainly not a six, eight or ten ship slots in that in Korea. In China, it’s a little bit more opaque and so one never knows. But quite frankly, if you look at what has been ordered in the past, it’s very much as much for Chinese owners. And then Japan seems to be completely out of the picture for VLCCs at the moment, and quite frankly, if and when they return, it’s also probably going to be for Japanese owners who are not typically spot operators. That’s probably what we are looking at when we see new orders. So quite frankly, I think that a lot of the characteristics of the market that we see now are very much the same as what we were seeing in 2003 and 2004. And it’s simply because every bit of shipping and, well, these are around not us, but every bit of shipping is doing very, very well and has placed an enormous amount of orders. And I think people don’t realize that those ships are being built in the same docks, I mean, literally in the same dock. So if the dock is busy building a container ship or a gas carrier or any other type that has been ordered, the slot is busy. And yes, you can gain some efficiencies, but the Koreans they are pretty efficient people, so already efficient, what you can gain is maybe 5%, maybe 10%. And then of course, in the other segments, certainly in the container, we don’t expect the end of this comment that this sector will abate and the cycle will turn anytime soon. So you continue to see orders, which means that even if there was willingness of some tanker owners to place orders in those yards, they would be competing with those ships. And given that those yards are earning better margins on the container and certainly on the gas carrier, we don’t believe that the price they would be offering us would be attractive for owners to place a large quantity of order.

Okay. I appreciate the thoughts. Thanks, Hugo. Thanks, Brian.

Thanks, Jon.

The next question is from Greg Lewis of BTIG. Please go ahead.

Yeah. Hi, thank you and good afternoon, everybody.

Hi, Greg.

Hugo or Brian, I was hoping to get a bit more insight. A common question we receive is regarding the headline rates and whether they reflect a negative trend. Clearly, your company has been able to generate profits and positive cash flow, providing a return over operating cash costs. What I think people are trying to understand is the impact of the vessels that have had scrubbers installed, creating a scrubber fleet and a non-scrubber fleet. As you assess the market, do you perceive a two-tiered structure where the utilization of the scrubber fleet is substantially higher than that of the non-scrubber fleet? If that's the case, what level of utilization increase in the non-scrubber fleet would be necessary for those vessels to influence the pricing and potentially drive an upward trend in rates?

That’s a great question, one we continuously consider. There is some visibility in the market since TI operates different types of vessels, including both scrubber and non-scrubber ships across various age categories. Typically, the most efficient vessels are deployed on the longest routes, as this maximizes their profitability, while older, non-eco, non-scrubber vessels are used for shorter journeys, minimizing their energy and fuel consumption during idle time at terminals. The current market dynamics reflect this strategy. Notably, older non-scrubber ships, particularly those over 11 or 12 years, face dire economics, using significantly more fuel compared to eco vessels. Additionally, there is a distinct utilization pattern for vessels involved in illicit trade, estimated at around 55 to 60 ships. These vessels often change registrations and flags frequently, which complicates the utilization picture since they engage in transshipments multiple times before delivering oil. This situation, while effective for those operators, obscures the real utilization rates. With 55 to 60 ships operating in a total market of about 830 vessels, the impact is substantial. Thus, it’s challenging to provide a clear answer regarding utilization. The market tends to adjust based on the available fleet, and every operator evaluates their ships before deciding on trades. When discussing excess vessels, the focus is primarily on the older ships in the fleet. If those older vessels were to be scrapped or repurposed, the market could rebalance fairly quickly. The current market is fragmented into several sub-segments, with many vessels capable of handling certain cargos which makes it difficult for smaller operators, who manage only a handful of ships, to compete effectively. They often feel overwhelmed by the competition, leading them to reduce rates significantly. Unfortunately, this can lead to scenarios where those who actually have the best capability to handle the business must also lower their rates to stay competitive. Furthermore, many private cargoes remain undisclosed until after completion, leading to misconceptions about cargo availability. In reality, we are not far from the cargo levels of 2019. There are numerous elements that need addressing, but this cycle is not unlike past ones.

Thank you for that. It was very helpful. When considering Iran, it seems that the US will significantly influence how the situation unfolds. If the shadow trade diminishes over time, how might that affect the market? Is this likely just a short-term event for 2022, which contributes to your optimism, or could it be more of a temporary boost in 2023, explaining your bullish outlook for the next few years?

We don’t have a crystal ball, and we’ve been near an agreement and then it disappeared. I think the last time was just before the withdrawal of Afghanistan and I guess that the US administration could not afford that kind of news right after that. So no clue when it’s going to happen; we are reading the same sort of headlines. So it’s a wildcard and that’s not part of the thesis, but when we are looking at it, if it happens, we believe that the story is then very, very simple; you have 1.3 million barrels that are being traded in those illicit trades. The capacity of Iran is probably around 2 million barrels, so even more than what is being traded today on illicit, and all of that would return to the regulated legal market, and the ships that are currently doing it would immediately become commercially obsolete because nobody would touch them. So you would have a double impact, which is more cargoes available for us to transport, for us and the rest of the regulated market and at the same time, all those ships, which by then would be very war in turn, because they are 20, 21, 22 years they are not being properly maintained, they don’t have certificates, and the scrap prices are pretty high. So they will tend to scrap yards in no time, in our opinion. So it’s a double whammy. Again, it’s a wildcard and certainly not part of this that we have shown to you today.

Okay. Perfect. Super helpful. Thank you, everybody. Have a great day.

Thank you. You too.

This concludes our question and answer session and today’s conference. Thank you for attending today’s presentation. You may now disconnect.