Euronav NV
Euronav NV
09/28/2022 | Press release | Distributed by Public on 09/28/2022 14:39
1 Financial Report - Form 6-K
1 Financial Report
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
•Cautionary statement regarding forward-looking statements;
•Condensed consolidated interim financial statements for the six-month period ended June 30, 2022:
◦Condensed consolidated statement of financial position;
◦Condensed consolidated statement of profit or loss;
◦Condensed consolidated statement of comprehensive income;
◦Condensed consolidated statement of changes in equity;
◦Condensed Statement of Cash Flows; and
•Notes to the condensed consolidated interim financial statements;
•Subsequent events since June 30, 2022;
•Statutory Auditor's report; and
•Signatures.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection therewith. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this document, the words "believe," "expect," "anticipate," "estimate," "intend," "seek", "plan," "target," "project," "potential", "continue", "contemplate", "possible", "likely," "may," "might", "will," "would," "could" and similar expressions, terms, or phrases may identify forward-looking statements.
These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about the business and our future financial results and readers should not place undue reliance on them. The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to important factors and matters discussed elsewhere in this report, and in the documents incorporated by reference herein, important factors that, in our view, could cause our actual results and developments to differ materially from those discussed in the forward-looking statements include:
•The strength of world economies and currencies;
•General market conditions, including the market for crude oil and for our vessels, fluctuations in charter rates and vessel values;
•The supply of and demand for vessels comparable to ours, including against the background of possibly accelerated climate change transition worldwide which would have an accelerated negative effect on the demand for oil and thus transportation;
•The length and severity of the ongoing coronavirus (COVID-19) outbreak and governmental response thereto, including its impacts across our business on demand for our vessels, our global operations, counterparty risk as well as its disruption to the global economy;
•International sanctions, embargoes, import and export restrictions, nationalizations, piracy, terrorist attacks and armed conflicts, including the recent conflict between Russia and Ukraine;
•Availability of financing and refinancing, as well as the Company's ability to obtain such financing or refinancing in the future at acceptable rates as well as to comply with the restrictive and other covenants in our financing arrangements;
•Our ability to secure available and future grants and subsidies;
•Our business strategy and other plans and objectives for growth and future operations, including planned and unplanned capital expenditures;
•Possible acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys, upgrades and insurance costs;
•Our ability to generate cash to meet our debt service obligations;
•Our levels of operating and maintenance costs, including bunker prices, drydocking and insurance costs;
•Potential liability from pending or future litigations;
•Significant decrease in spot charter rates that could impact our profitability;
•Environmental, Social and Governance (ESG) expectations of investors, banks and other stakeholders and related costs related to compliance with ESG measures;
•Availability of skilled workers and the related labor costs;
•Increased fuel costs or bunker prices;
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•The failure to protect our information systems against security breaches, or the failure or unavailability of these systems for a significant period of time;
•Potential cyber-attacks which may disrupt our business operations;
•The state of the global financial markets may adversely impact our ability to obtain additional financing;
•The market value of our vessels are volatile and may decline;
•The rising threat of a Chinese financial crisis and trade tensions between China and the United States;
•The shift from oil towards other energy sources such as electricity, natural gas, liquefied natural gas or hydrogen;
•Technology risk associated with energy transition and fleet/systems rejuvenation to alternative propulsion;
•The imposition of sanctions by the United Nations, U.S., EU, UK and/or other relevant authorities;
•Any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 or FCPA, or other applicable regulations relating to bribery;
•Fluctuations in currencies, interest rates and foreign exchange rates and the impact of the discontinuance of the London Interbank Offered Rate, or LIBOR, after June 30, 2023 on any of our debt that reference LIBOR;
•General domestic and international political conditions, including trade wars and disagreements between oil producing countries, including illicit crude oil trades;
•Potential disruption of shipping routes due to accidents, environmental factors, political events, public health threats, international hostilities including the ongoing developments in the Ukraine region, acts by terrorists or acts of piracy on ocean-going vessels;
•Vessel breakdowns and instances of off-hire;
•Reputational risks, including related to climate change;
•Compliance with governmental, tax (including carbon related), environmental and safety regulations and related costs;
•Potential liability from future litigations related to claims raised by public-interest organizations or activism with regard to failure to adapt to or mitigate climate impact;
•Increased cost of capital or limiting access to funding due to EU Taxonomy or relevant territorial taxonomy regulations;
•Any non-compliance with the amendments by the International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels, or IMO, (the amendments hereinafter referred to as IMO 2020), to Annex VI to the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as MARPOL, which will reduce the maximum amount of sulfur that vessels may emit into the air and applies to us as of January 1, 2020;
•Any non-compliance with the International Convention for the Control and Management of Ships' Ballast Water and Sediments or BWM which applies to us as of September 2019;
•Any non-compliance with the upcoming EC Fit-for-55 regulation and specifically with EU Emission Trading Schemes Maritime and FuelEU Maritime;
•Any non-compliance with the European Ship Recycling regulation for large commercial seagoing vessels flying the flag of a European Union or EU, Member State which forces shipowners to recycle their vessels only in safe and sound vessel recycling facilities included in the European List of ship recycling facilities which is applicable as of January 1, 2019;
•New environmental regulations and restrictions, whether at a global level stipulated by the International Maritime Organization, and/or imposed by regional or national authorities such as the European Union or individual countries;
•Our incorporation under the laws of Belgium and the different rights to relief that may be available compared to other counties, including the United States;
•Treatment of the Company as a "passive foreign investment company" by U.S. tax authorities;
•Being required to pay taxes on U.S. source income;
•Effects of new products and new technology in our industry;
•The failure of counterparties to fully perform their contracts with us;
•Our dependence on key personnel;
•Adequacy of insurance coverage;
•Our ability to obtain indemnities from customers;
•Changes in laws, treaties or regulations;
•The inability of our subsidiaries to declare or pay dividends;
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•The losses from derivative instruments; and
•The interest rate risks under our debt facilities.
These factors and the other risk factors described in this annual report and other reports that we furnish or file with the U.S. Securities and Exchange Commission or the SEC, are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. These forward looking statements are made only as of the date of this annual report. These forward looking statements are not guarantees of our future performance, and actual results and developments may vary materially from those projected in the forward looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
5 Financial Report
CONDENSED INTERIM FINANCIAL STATEMENTS AND PREPARATION BASE
This document contains the condensed consolidated interim financial statements for the six-month period ended June 30, 2022. The financial report has been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and as adopted by the European Union, collectively "IFRS".
Throughout this report, all references to "Euronav," the "Company," "we," "our," and "us" refer to Euronav NV and its subsidiaries. Unless otherwise indicated, all references to "U.S. dollars," "USD," "dollars," "US$" and "$" in this annual report are to the lawful currency of the United States of America and references to "Euro," "EUR," and "€" are to the lawful currency of Belgium.
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Condensed consolidated statement of financial position
(in thousands of USD)
| Note | June 30, 2022 | December 31, 2021 | |
| ASSETS | |||
| Non-current assets | |||
| Vessels | 12 | 3,219,186 | 2,967,787 |
| Assets under construction | 12 | 137,027 | 181,293 |
| Right-of-use assets | 12 | 31,922 | 29,001 |
| Other tangible assets | 12 | 997 | 1,218 |
| Intangible assets | 13 | 16,571 | 186 |
| Receivables | 20 | 40,296 | 55,639 |
| Investments in equity accounted investees | 24 | 2,126 | 72,446 |
| Deferred tax assets | - | 1,519 | 1,546 |
| Total non-current assets | 3,449,644 | 3,309,116 | |
| Current assets | |||
| Bunker inventory | 21 | 47,648 | 69,035 |
| Non-current assets held for sale | 8 | 50,345 | - |
| Trade and other receivables | 22 | 263,433 | 237,745 |
| Current tax assets | - | 57 | 99 |
| Cash and cash equivalents | - | 277,220 | 152,528 |
| Total current assets | 638,703 | 459,407 | |
| TOTAL ASSETS | 4,088,347 | 3,768,523 | |
| EQUITY and LIABILITIES | |||
| Equity | |||
| Share capital | - | 239,148 | 239,148 |
| Share premium | - | 1,690,443 | 1,702,549 |
| Translation reserve | 14 | (175) | 453 |
| Hedging reserve | 14 | 21,594 | 2,396 |
| Treasury shares | 14 | (163,024) | (164,104) |
| Retained earnings | - | 132,023 | 180,140 |
| Equity attributable to owners of the Company | 1,920,009 | 1,960,582 | |
| Non-current liabilities | |||
| Bank loans | 16 | 1,560,284 | 1,175,835 |
| Other notes | 16 | 197,223 | 196,895 |
| Other borrowings | 16 | 78,872 | 86,198 |
| Lease liabilities | 16 | 15,589 | 16,759 |
| Other payables | 17 | 451 | 3,490 |
| Employee benefits | - | 10,276 | 6,839 |
| Provisions | 23 | 743 | 892 |
| Total non-current liabilities | 1,863,438 | 1,486,908 | |
| Current liabilities | |||
| Trade and other payables | 17 | 120,430 | 83,912 |
| Current tax liabilities | - | 4,154 | 366 |
| Bank loans | 16 | 112,086 | 29,313 |
| Other notes | 16 | - | 67,025 |
| Other borrowings | 16 | 43,189 | 117,863 |
| Lease liabilities | 16 | 24,763 | 22,292 |
| Provisions | 23 | 278 | 262 |
| Total current liabilities | 304,900 | 321,033 | |
| TOTAL EQUITY and LIABILITIES | 4,088,347 | 3,768,523 | |
| The accompanying notes on pages 12 to 53 are an integral part of these condensed interim financial statements |
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Condensed consolidated statement of profit or loss
(in thousands of USD except per share amounts)
| Note | 2022 | 2021* | |
| Jan. 1 - Jun. 30, 2022 | Jan. 1 - Jun. 30, 2021 | ||
| Shipping income | |||
| Revenue | 9 | 263,062 | 208,134 |
| Gains on disposal of vessels/other tangible assets | 12 | 33,591 | 10,568 |
| Other operating income | 9 | 7,636 | 4,673 |
| Total shipping income | 304,289 | 223,375 | |
| Operating expenses | |||
| Voyage expenses and commissions | 10 | (74,452) | (50,761) |
| Vessel operating expenses | 10 | (101,521) | (116,097) |
| Charter hire expenses | 10 | (4,456) | (4,283) |
| Loss on disposal of vessels/other tangible assets | 12 | (347) | - |
| Depreciation tangible assets | 12 | (106,068) | (171,181) |
| Depreciation intangible assets | - | (183) | (44) |
| General and administrative expenses | 10 | (23,171) | (16,582) |
| Total operating expenses | (310,198) | (358,948) | |
| RESULT FROM OPERATING ACTIVITIES | (5,909) | (135,573) | |
| Finance income | 11 | 11,211 | 8,631 |
| Finance expenses | 11 | (73,075) | (46,443) |
| Net finance expenses | (61,864) | (37,812) | |
| Share of profit (loss) of equity accounted investees (net of income tax) | 24 | 14,574 | 11,177 |
| PROFIT (LOSS) BEFORE INCOME TAX | (53,199) | (162,208) | |
| Income tax benefit (expense) | - | 4,923 | 1,518 |
| PROFIT (LOSS) FOR THE PERIOD | (48,276) | (160,690) | |
| Attributable to: | |||
| Owners of the company | 15 | (48,276) | (160,690) |
| Basic earnings per share | 15 | (0.24) | (0.80) |
| Diluted earnings per share | 15 | (0.24) | (0.80) |
| Weighted average number of shares (basic) | 15 | 201,745,255 | 201,677,981 |
| Weighted average number of shares (diluted) | 15 | 201,991,509 | 201,773,240 |
| The accompanying notes on pages 12 to 53 are an integral part of these condensed interim financial statements |
*In order to improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost elements without impact on profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. They have been applied retrospectively and comparative information has been revised.
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Condensed consolidated statement of comprehensive income
(in thousands of USD)
| Note | 2022 | 2021 | |
| Jan. 1 - Jun. 30, 2022 | Jan. 1 - Jun. 30, 2021 | ||
| Profit/(loss) for the period | (48,276) | (160,690) | |
| Other comprehensive income (expense), net of tax | |||
| Items that are or may be reclassified to profit or loss: | |||
| Foreign currency translation differences | - | (628) | (170) |
| Cash flow hedges - effective portion of changes in fair value | 13 | 19,198 | 4,532 |
| Equity-accounted investees - share of other comprehensive income | 24 | 159 | 539 |
| Other comprehensive income (expense), net of tax | 18,729 | 4,901 | |
| Total comprehensive income (expense) for the period | (29,547) | (155,789) | |
| Attributable to: | |||
| Owners of the company | (29,547) | (155,789) | |
| The accompanying notes on pages 12 to 53 are an integral part of these condensed interim financial statements | |||
9 Financial Report
Condensed consolidated statement of changes in equity
(in thousands of USD)
| Note | Share capital | Share premium | Translation reserve | Hedging reserve | Treasury shares | Retained earnings | Total equity | |
| Balance at January 1, 2021 | 239,148 | 1,702,549 | 936 | (7,456) | (164,104) | 540,714 | 2,311,787 | |
| Profit (loss) for the period | - | - | - | - | - | - | (160,690) | (160,690) |
| Total other comprehensive income (expense) | - | - | - | (170) | 4,532 | - | 539 | 4,901 |
| Total comprehensive income (expense) | - | - | (170) | 4,532 | - | (160,151) | (155,789) | |
| Transactions with owners of the company | ||||||||
| Dividends to equity holders | - | - | - | - | - | - | (12,100) | (12,100) |
| Total transactions with owners | - | - | - | - | - | (12,100) | (12,100) | |
| Balance at June 30, 2021 | 239,148 | 1,702,549 | 766 | (2,924) | (164,104) | 368,463 | 2,143,898 | |
| Note | Share capital | Share premium | Translation reserve | Hedging reserve | Treasury shares | Retained earnings | Total equity | |
| Balance at January 1, 2022 | 239,148 | 1,702,549 | 453 | 2,396 | (164,104) | 180,140 | 1,960,582 | |
| Profit (loss) for the period | - | - | - | - | - | - | (48,276) | (48,276) |
| Total other comprehensive income (expense) | 14 | - | - | (628) | 19,198 | - | 159 | 18,729 |
| Total comprehensive income (expense) | - | - | (628) | 19,198 | - | (48,117) | (29,547) | |
| Transactions with owners of the company | ||||||||
| Dividends to equity holders | 14 | - | (12,106) | - | - | - | - | (12,106) |
|
Treasury shares delivered in respect of share-based payment plans
|
14 | - | - | - | - | 1,080 | - | 1,080 |
| Total transactions with owners | - | (12,106) | - | - | 1,080 | - | (11,026) | |
| Balance at June 30, 2022 | 239,148 | 1,690,443 | (175) | 21,594 | (163,024) | 132,023 | 1,920,009 | |
| The accompanying notes on pages 12 to 53 are an integral part of these condensed interim financial statements |
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Condensed consolidated statement of cash flows
(in thousands of USD)
| Note | 2022 | 2021 | |
| Jan. 1 - Jun. 30, 2022 | Jan. 1 - Jun. 30, 2021 | ||
| Cash flows from operating activities | |||
| Profit (loss) for the period | (48,276) | (160,690) | |
| Adjustments for: | 115,242 | 185,659 | |
| Depreciation of tangible assets | 12 | 106,068 | 171,181 |
| Depreciation of intangible assets | - | 183 | 44 |
| Provisions | - | (133) | (115) |
| Income tax (benefits)/expenses | - | (4,923) | (1,518) |
| Share of profit of equity-accounted investees, net of tax | 24 | (14,574) | (11,177) |
| Net finance expense | 11 | 61,865 | 37,812 |
| (Gain)/loss on disposal of assets | 12 | (33,244) | (10,568) |
| Changes in working capital requirements | 35,215 | (4,421) | |
| Change in cash guarantees | - | 59 | (8) |
| Change in inventory | 21 | 21,386 | 2,602 |
| Change in receivables from contracts with customers | 22 | (14,690) | (5,884) |
| Change in accrued income | 22 | (5,223) | 303 |
| Change in deferred charges | 22 | (5,150) | (8,486) |
| Change in other receivables | 22 | (663) | (658) |
| Change in trade payables | 17 | 14,774 | 6,342 |
| Change in accrued payroll | 17 | (86) | (3,034) |
| Change in accrued expenses | 17 | 23,068 | 2,672 |
| Change in deferred income | 17 | (126) | (365) |
| Change in other payables | - | (1,589) | 733 |
| Change in provisions for employee benefits | - | 3,455 | 1,362 |
| Income taxes paid during the period | - | 8,780 | 723 |
| Interest paid | - | (51,996) | (29,825) |
| Interest received | - | 1,414 | 2,815 |
| Dividends received from equity-accounted investees | 24 | 1,000 | 1,375 |
| Net cash from (used in) operating activities | 61,379 | (4,364) | |
| Acquisition of vessels and vessels under construction | 12 | (427,951) | (264,917) |
| Proceeds from the sale of vessels | 12 | 198,011 | 51,344 |
| Acquisition of other tangible assets | 12 | (95) | (79) |
| Acquisition of intangible assets | - | (16,569) | (42) |
| Payments received from loans to related parties | 24 | 32,794 | 796 |
| Repayment of loans from related parties | - | (10,215) | - |
| Lease payments received from finance leases | - | 1,015 | 975 |
| Net cash from (used in) investing activities | (223,010) | (211,923) | |
| (Purchase of) Proceeds from sale of treasury shares | 14 | 1,080 | - |
| Proceeds from new borrowings | 16 | 898,391 | 543,274 |
| Repayment of borrowings | 16 | (349,161) | (190,271) |
| Repayment of lease liabilities | 16 | (12,522) | (27,309) |
| Repayment of commercial paper | 16 | (221,196) | (62,391) |
| Repayment of sale and leaseback | 16 | (11,240) | (11,240) |
| Transaction costs related to issue of loans and borrowings | 16 | (1,725) | (608) |
| Dividends paid | 14 | (12,117) | (12,105) |
| Net cash from (used in) financing activities | 291,510 | 239,350 | |
| Net increase (decrease) in cash and cash equivalents | 129,879 | 23,063 | |
| Net cash and cash equivalents at the beginning of the period | - | 152,528 | 161,478 |
| Effect of changes in exchange rates | - | (5,187) | (1,863) |
| Net cash and cash equivalents at the end of the period | - | 277,220 | 182,678 |
| of which restricted cash | - | - | - |
| The accompanying notes on pages 12 to 53 are an integral part of these condensed interim financial statements |
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Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
| Note 1 - Reporting entity |
| Note 2 - Basis of preparation |
| Note 3 - Use of judgements and estimates |
| Note 4 - Changes in significant accounting policies |
| Note 5 - Changes in consolidation scope |
| Note 6 - Significant events |
| Note 7 - Segment reporting |
| Note 8 - Assets held for sale and discontinued operations |
| Note 9 - Revenue and other operating income |
| Note 10 - Expenses for shipping activities |
| Note 11 - Net finance expenses |
| Note 12 - Property, plant and equipment |
| Note 13 - Intangible assets |
| Note 14 - Equity |
| Note 15 - Earnings per share |
| Note 16 - Interest-bearing loans and borrowings |
| Note 17 - Trade and other payables |
| Note 18 - Financial instruments |
| Note 19 - Deferred tax assets and liabilities |
| Note 20 - Non-current receivables |
| Note 21 - Bunker inventory |
| Note 22 - Trade and other receivables |
| Note 23 - Provisions and contingencies |
| Note 24 - Equity-accounted investees |
| Note 25 - Subsequent events |
| Note 26 - Standards issued but not yet effective |
| Note 27 - Statement on the true and fair view of the consolidated financial statements and the fair overview of the management report |
12 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 1 - Reporting entity
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 ("interim financial statements") as at and for the six months ended June 30, 2022 comprise the Company and its subsidiaries (together referred to as Euronav or the "Group") and the Group's interest in associates and joint ventures.
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Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 2 - Basis of preparation
These condensed consolidated interim financial statements have been prepared in accordance with lAS 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, 2021 that have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and as adopted by the European Union, collectively "IFRS".
Changes to significant accounting policies are described in Note 4.
These condensed consolidated interim financial statements were authorized for issue by the Supervisory Board on August 8, 2022.
14 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 3 - Use of judgements and estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the 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 described in the last annual financial statements.
More specifically, the Group needed to make an assessment about the accounting treatment of the acquisition of the remaining 50% in TI Asia Ltd. and TI Africa Ltd. Euronav already had 50% in these 2 joint ventures and signed on June 7, 2022 a Share Sale and Purchase Agreement with the JV partner International Seaways, Inc. to take control over these 2 joint ventures by purchasing the remaining 50% of the shares.
The acquisition of the remaining 50% in the 2 joint ventures has been treated as an asset acquisition as the asset concentration test was met under IFRS 3, given that substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset (i.e. the FSO and related lease component in the customer contract). Therefore, the consideration paid is allocated over the assets acquired (see Note 5 and 6) and the transaction is not accounted for as a business combination.
Measurement of fair values
A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Group Audit and Risk Committee.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in Note 18.
15 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 4 - Changes in significant accounting policies
The accounting policies adopted in the preparation of these condensed consolidated interim financial statements are consistent with those applied in the Group's consolidated financial statements as at and for the year ended December 31, 2021, that have been prepared in accordance with IFRS.
16 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 5 - Changes in consolidation scope
In comparison to the consolidation scope for the year ended December 31, 2021, Euronav has acquired the remaining 50% in TI Asia Ltd. ("TI Asia") and TI Africa Ltd. ("TI Africa"). Euronav already had 50% in these 2 joint ventures which were then recorded as equity investees, and signed on June 7, 2022 a Share Sale and Purchase Agreement with the JV partner International Seaways, Inc. to take control over these 2 joint ventures by purchasing the remaining 50% of the shares. FSOs are floating storage and offloading units for areas where the offshore production platforms have no or insufficient storage capabilities. Each joint venture contains one FSO, which are currently both working at the Al Shaheen oilfield in Qatar for the customer North Oil Company. The FSOs are contracted to NOC till Q3 2032. The 2 former joint ventures are fully consolidated as of June 7, 2022.
17 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 6 - Significant events
In January 2022, Euronav took delivery of two newbuilding Suezmaxes, Cedar (2022 - 157,310 dwt) and Cyprus(2022 - 157,310 dwt), which have been purchased in February 2021.
The VLCCs Nucleus, Neptunand Navarinhave been redelivered in the first quarter of 2022. Under the leaseback agreement there was a seller's credit of USD 4.5 million per vessel (see Note 12). A capital gain related to the seller's credits of USD 13.5 million has been recorded in the first quarter of 2022.
On March 18, 2022, the Financial Supervisory Authority of Norway has approved the base prospectus with appendices prepared by Euronav Luxembourg S.A. ("Euronav Luxembourg") in connection with the listing on the Oslo Stock Exchange of Euronav Luxembourg's USD 200 million senior unsecured bonds, due September 2026. The USD 200 million senior unsecured bonds, issued by Euronav Luxembourg and guaranteed by the Company, are listed on the Oslo Stock Exchange as of March 22, 2022.
On April 7, 2022 the Company announced that Euronav and Frontline Ltd. ("Frontline") have signed a term sheet that has been unanimously approved by their Supervisory Board and Board of Directors, respectively, on a potential stock-for-stock combination between the two companies, based on an exchange ratio of 1.45 Frontline ("FRO") shares for every Euronav ("EURN") share resulting in Euronav and Frontline shareholders owning approximately 59% and 41%, respectively, of the combined group. The combination remains subject to agreement on a transaction structure, confirmatory due diligence, agreement on the terms and conditions of the potential combination agreement, applicable board, shareholder, customer, lender and/or regulatory approvals, employee consultations and other customary completion conditions.
On April 26, 2022, Euronav announced that it has sold the Suezmax Bari(2005 - 159,186 dwt) for USD 21.5 million. A capital gain on the sale of approximately USD 6.6 million has been recorded in the second quarter in the joint venture company. The vessel has been delivered to her new owners on April 21, 2022.
On April 29, 2022, Euronav announced that it has purchased two eco-VLCCs, the Chelsea (renamedDalis) (2020 - 299,995 dwt) and the Ghillie (renamedDerius) (2019 - 297,750 dwt), for USD 179 million in total in cash. They are sisters of our D-class vessels (Delos, (2021 - 300,200 dwt),Diodorus(2021 - 300,200 dwt),Doris(2021 - 300,200 dwt) and Dickens(2021 - 299,550 dwt)). These vessels were all built in Korea at DSME, are fitted with scrubbers and are the latest generation of ecotype VLCC.
In parallel to this transaction, Euronav has sold four older S-class VLCCs for an en-bloc price of USD 198 million. The four vessels are the Sandra(2011 - 323,527 dwt), Sara(2011 - 322,000 dwt), Simone(2012 - 315,988 dwt) and the Sonia(2012 - 314,000 dwt). All four vessels are non-eco VLCCs with significant higher consumptions and carbon footprint than modern eco-VLCCs. A net capital gain of approximately USD 1.4 million has been recorded in the second quarter of 2022. The VLCCs Sandra, Sara and Sonia have been delivered to their new owners in the second quarter of 2022. The VLCC Simone will be delivered in the course of the second half year 2022.
On June 7, 2022, Euronav announced that it has become the full owner of the FSO platform as previously held in its 50-50 joint venture with International Seaways, Inc. ("INSW"). The two converted ULCCs, theFSO Asia andFSO Africa, were purchased based on a valuation of USD 300 million in total (i.e. USD 150 million for 50%). Net of adjustments for working capital and debt, Euronav paid approximately USD 140 million in cash for the purchase (see Note 5). The existing 50% in TI Africa Ltd. and TI Asia Ltd. is removed from the balance sheet at its carrying amount (USD 80.6 million) at June 7, 2022 (see Note 24). This amount was equal to 50% of the net assets acquired. Euronav assumed 50% of the total shareholder loan in TI Africa Ltd. and repaid it to INSW for an amount of USD 10.2 million. For the additional acquired 50%, more was paid (USD 49.1 million). Part of this additional price paid relates to an intangible asset which is the customer contract with NOC for the service part, i.e. recharge of opex, maintenance and crew (see Note 13). All remaining current and non-current assets and liabilities of TI Africa Ltd. and TI Asia Ltd. were integrated on a 100% basis.
On June 13, 2022, Euronav announced that it has sold its two oldest Suezmax vessels: the Cap Pierre(2004 - 159,048 dwt) and the Cap Leon(2003 - 159,048 dwt). The combined capital gain realized on these sales amounts to USD 18.4 million and has been recorded in the second quarter. The vessels have been delivered to their new owners on April 28, 2022 and June 30, 2022 respectively.
The invasion and subsequent war between Russia and Ukraine is impacting our business in the following areas:
a.Freight rates - due to the self-sanctioning being performed by oil traders, refiners, and shippers of Russian petroleum products, the market evolved towards longer tonnage and shorter cargoes. Short terms this has put pressure on freight rates in the VLCC and Suezmax segments as there were more ships than cargoes available in the market. However we notice that ton miles are increasing due to the adjustment of trade flows to compensate refineries and markets for the lack of Russian oil flows. There has also been an increase in a sanction fleet tonnage to move the required Russian oil cargoes from the west to markets in the east. The Company has suspended its operations with Russian customers, which represents an insignificant portion of the Company's turnover (below 5%).
18 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
b.Bunker Fuel Cost - due to the risk within the market, and the self-sanctioning of Russian oil flows, the price of marine fuels has increased and was high during the second quarter. This is due to Russia supplying bunker markets with 20% of the global fuel demand in HSFO, VLSFO and MGO markets. These price increases have negatively impacted the cost structure of the vessels, making it more expensive to ship freight on long haul voyages. The spread between HSFO and VLSFO was at a high level pre-invasion, but has begun to correct as the removal of Russian origin HSFO from the market has begun to tighten up supplies in Europe and in the Mediterranean.
c.Cybersecurity risks have increased and the Company took additional measures.
d.Crew issues - as we do have more or less 200 officers and crew that are from Russia (1/3) and Ukraine (2/3) , the Company has supported the respective crew and their families as much as possible. We have no mixed teams on board of our fleet.
e.Going forward, it remains difficult to estimate the future impact of this war situation in the economies where we are active, and hence difficult to quantify the impact these factors might have on our financial results.
19 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 7 - 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 management board on at least a quarterly basis to help the key decision makers in evaluating the respective segments. Prior to the acquisition on June 7, 2022, the Chief Operating Decision Maker (CODM) also received 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 on the one hand, with the consolidated statements of financial position and profit or loss on the other hand is presented in a separate column Equity-accounted investees.
The Group's internal organizational and management structure does not distinguish any geographical segments.
| (in thousands of USD) | For the six month period ended | For the six month period ended | ||||||
| June 30, 2022 | June 30, 2021* | |||||||
| Tankers | FSO | Less: Equity-accounted investees | Total | Tankers | FSO | Less: Equity-accounted investees | Total | |
| Revenue | 255,239 | 29,166 | (21,343) | 263,062 | 208,996 | 24,786 | (25,648) | 208,134 |
| Profit (loss) before income tax | (69,876) | 17,661 | (984) | (53,199) | (174,774) | 13,877 | (1,311) | (162,208) |
| (in thousands of USD) | June 30, 2022 | December 31, 2021 | ||||||
| Tankers | FSO | Less: Equity-accounted investees | Total | Tankers | FSO | Less: Equity-accounted investees | Total | |
| Non-current assets | 3,212,047 | 238,222 | (625) | 3,449,644 | 3,239,540 | 105,350 | (35,774) | 3,309,116 |
| Current assets | 504,279 | 135,410 | (986) | 638,703 | 459,864 | 10,478 | (10,935) | 459,407 |
| TOTAL ASSETS | 3,716,326 | 373,632 | (1,611) | 4,088,347 | 3,699,404 | 115,828 | (46,709) | 3,768,523 |
| Equity | 1,700,216 | 219,793 | - | 1,920,009 | 1,891,483 | 69,099 | - | 1,960,582 |
| Non-current liabilities | 1,732,262 | 131,626 | (450) | 1,863,438 | 1,486,908 | 22,000 | (22,000) | 1,486,908 |
| Current liabilities | 283,848 | 22,213 | (1,161) | 304,900 | 321,013 | 24,729 | (24,709) | 321,033 |
| TOTAL LIABILITIES | 3,716,326 | 373,632 | (1,611) | 4,088,347 | 3,699,404 | 115,828 | (46,709) | 3,768,523 |
20 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
* To improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost & revenue elements without impact on the profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. They have been applied retrospectively and comparative information has been revised.
21 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 8 - Assets and liabilities held for sale and discontinued operations
Assets held for sale
On February 28, 2022, the Company sold the VLCC Simone (2021 - 315,988 dwt) as part of an en-bloc transaction of four S-class VLCCs (see Note 6). The fair value less cost of disposal amounted to USD 50.5 million. The vessel was accounted for as a non-current asset held for sale as at June 30, 2022 and had a carrying value of USD 50.3 million. The net gain on the vessel amounts to USD 0.2 million and will be booked upon delivery which is expected to be delivered to its new owners in the course of the second half year 2022.
As of December 31, 2021, the Group had no assets held for sale.
Discontinued operations
As of June 30, 2022 and as of December 31, 2021 the Group had no operations that met the criteria of a discontinued operations.
22 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 9 - Revenue and other operating income
In the following table, revenue is disaggregated by type of contract.
| For the six month period ended | ||||||||
| (in thousands of USD) | June 30, 2022 | June 30, 2021* | ||||||
| Tankers | FSO | Less: Equity-accounted investees | Total | Tankers | FSO | Less: Equity-accounted investees | Total | |
| Pool Revenue | 83,580 | - | (6) | 83,574 | 65,615 | - | 11 | 65,626 |
| Spot Voyages | 139,815 | - | (540) | 139,275 | 105,424 | - | (873) | 104,551 |
| Revenue from contracts with customers | 223,395 | - | (546) | 222,849 | 171,039 | - | (862) | 170,177 |
| Time Charters | 31,844 | 29,166 | (20,797) | 40,213 | 37,957 | 24,786 | (24,786) | 37,957 |
| Lease income | 31,844 | 29,166 | (20,797) | 40,213 | 37,957 | 24,786 | (24,786) | 37,957 |
| Total revenue | 255,239 | 29,166 | (21,343) | 263,062 | 208,996 | 24,786 | (25,648) | 208,134 |
| Other operating income | - | - | - | 7,636 | - | - | - | 4,673 |
* To improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost & revenue elements without impact on the profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. They have been applied retrospectively and comparative information has been revised.
The increase in revenue is mostly related to the increase in pool and spot voyage revenue which is due to higher rates compared to the first six months of 2021 when market conditions were very unfavorable. Pool results difference can be explained by comparing the respective TCE rates for VLCCs of 15,000 USD/day compared to 13,000 USD/day when considering an average of 6,600 on hire days for both periods. For Suezmax spot voyages: respectively 17,600 USD/day compared to 11,750 USD/day, based on an average of 3,680 on hire days. The decrease in revenue from time charters of tankers is due to a lower number of vessels on time charter.
The Group is beginning to see the recovery in the tanker cycle being reflected in freight markets. Demand for oil is once again rising and the demand for the shipping of crude oil has consequently improved. In the first half of this year, the Group has identified cargo numbers are returning to levels similar to before Covid restrictions were imposed across the world. The conflict between Russia and Ukraine has impacted the global flow of crude oil, and while European customers are now receiving close to zero oil from Russia, this oil has been displaced to other customers, mainly in the region east of Suez. The initial uncertainty around the impact of the war on oil markets saw the freight market for smaller tankers soar, but this was relatively short lived. In the more medium term the Group observed a shift in tanker trade patterns whereby Europe is receiving more oil from Atlantic-based producers, and the usual long-haul trade flows from the Atlantic basin to the Far East have stalled.
Other operating income includes revenues related to the daily standard business operation of the fleet and that are not directly attributable to an individual voyage. The increase in other operating income is mainly due to received liquidated damages in line with the sale of the S-class vessels as well as claim settlements.
23 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 10 - Expenses for shipping activities
Voyage expenses and commissions
| For the six month period ended | ||
| (in thousands of USD) | June 30, 2022 | June 30, 2021 |
| Commissions paid | (4,959) | (3,899) |
| Bunkers | (54,843) | (33,263) |
| Other voyage related expenses | (14,650) | (13,599) |
| Total voyage expenses and commissions | (74,452) | (50,761) |
The voyage expenses and commissions increased in the first six months of 2022 compared to the same period in 2021 mainly due to an increase in bunker costs.
The increase in commissions paid is due to slightly higher market rates compared to the first six months of 2021.
The increase in bunker cost in the first semester of 2022 follows the increase in crude oil prices since the beginning of the year due to the war between Russia and Ukraine and the economic sanctions that have been imposed. The majority of the bunkers consumed by Euronav vessels are procured through the Company's IMO 2020 fuel compliance program (see Note 21). For vessels operated on the spot market, voyage expenses are paid by the shipowner while voyage expenses for vessels under a time charter contract, are paid by the charterer. Voyage expenses for vessels operated in a Pool, are paid by the Pool.
The majority of other voyage expenses are port costs and agency fees which are owner's expenses on voyage charters. Port costs vary depending on the number of spot voyages performed and the number and type of ports. The increase in other voyage related expenses in the first six months of 2022 compared to the same period in 2021 is due to changed trading patterns.
Vessel operating expenses
| For the six month period ended | ||
| (in thousands of USD) | June 30, 2022 | June 30, 2021* |
| Operating expenses | (95,014) | (108,590) |
| Insurance | (6,507) | (7,507) |
| Total vessel operating expenses | (101,521) | (116,097) |
* To improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost & revenue elements without impact on the profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. They have been applied retrospectively and comparative information has been revised.
The operating expenses relate mainly to the crewing, technical and other costs to operate tankers. The decrease in operating expenses is due to a reduction of vessels in the fleet and due to specific saving initiatives initiated in the 2nd half of 2021 and continuing into 2022. Furthermore the weakening of the Euro against the US dollar has a saving effect on the Euro based crew expenses.
Charter hire expenses
| For the six month period ended | ||
| (in thousands of USD) | June 30, 2022 | June 30, 2021 |
| Charter hire | (2,599) | (4,283) |
| Bare boat hire | (1,857) | - |
| Total charter hire expenses | (4,456) | (4,283) |
The charter-hire expenses in the first six months of 2022 are mainly attributable to the internal short term time charter agreement with our joint venture Bari Shipholding Ltd. and the hire expenses for the barge (Cougar Satu) in relation to the Company's IMO 2020 fuel compliance program (see Note 21). The decrease in charter hire expenses is due to lower market rates compared to the first six months of 2021. The Group elected to apply the short-term lease exemption and accordingly, the lease payments were recognized as an expense and right-of-use assets and lease liabilities were not recognized.
The bare boat contract ended on December 15, 2021 with one vessel (VLCC Nautilus) redelivered to the owners before December 31, 2021. The expenses for the bare boat hire days upon redelivery of the three remaining vessels (VLCCs Navarin,
24 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Neptun and Nucleus) were recorded as bare boat hire instead of accounting for a lease modification. All vessels were redelivered during the first quarter of 2022.
General and administrative expenses
| For the six month period ended | ||
| (in thousands of USD) | June 30, 2022 | June 30, 2021* |
| Wages and salaries | (4,382) | (3,971) |
| Social security costs | (668) | (709) |
| Cash-settled share-based payments | (2,872) | (602) |
| Equity-settled share-based payments | (584) | (761) |
| Other employee benefits | (453) | (473) |
| Employee benefits | (8,959) | (6,516) |
| Administrative expenses | (12,613) | (8,790) |
| Tonnage Tax | (1,732) | (1,391) |
| Claims | - | - |
| Provisions | 133 | 115 |
| Total general and administrative expenses | (23,171) | (16,582) |
* To improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost & revenue elements without impact on the profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. They have been applied retrospectively and comparative information has been revised.
The general and administrative expenses which include amongst others: shore staff wages, director fees, consulting and audit fees and tonnage tax, increased in the first six months of 2022 compared to the same period in 2021.
The increase compared to 2021 was mainly related to an increase in administrative expenses as well as an increase in employee benefits.
The increase in employee benefits is related to an increase in cash-settled share-based remunerations. This is related to the provision for the transaction based incentive plan (TBIP) implemented in 2019 for which the Management Board is granted phantom stock units. The provision to be recorded is higher due to an increased share price at June 30, 2022, compared to June 30, 2021.
The increase in administrative expenses is mainly due to the legal fees incurred related to the planned combination with Frontline (see Note 25).
25 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 11 - Net finance expenses
| For the six month period ended | ||
| (in thousands of USD) | June 30, 2022 | June 30, 2021 |
| Interest income | 1,155 | 955 |
| Change in fair value of fuel derivatives recognized in P&L | 344 | 1,688 |
| Foreign exchange gains | 9,712 | 5,988 |
| Finance income | 11,211 | 8,631 |
| Interest expense on financial liabilities measured at amortized cost | (34,070) | (27,759) |
| Interest leasing | (578) | (1,465) |
| Change in fair value of fuel derivatives recognized in P&L | (23,231) | (6,424) |
| Fair value adjustment on interest rate swaps | (290) | 309 |
| Other financial charges | (4,637) | (4,652) |
| Foreign exchange losses | (10,269) | (6,452) |
| Finance expense | (73,075) | (46,443) |
| Net finance expense recognized in profit or loss | (61,864) | (37,812) |
Interest expense on financial liabilities measured at amortized cost increased significantly in the first six months of 2022 compared to the same period in 2021. This increase was related to an increase in interest expenses on bank loans due to an increasing interest rate environment and a higher average outstanding debt in the first semester of 2022 compared to the same period last year.
Change in fair value of fuel derivatives recognized in P&L is attributable to an increase in expenses related to swaps, mainly on the commodity swaps or futures in connection with the Company's low sulfur fuel oil program for which hedge accounting could not be applied, resulting in a net impact of USD 22.9 million. These fuel derivatives are used to hedge the purchased fuel on board of the ULCC Oceania against a price decrease.
Interest leasing is the interest on lease liabilities.
26 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 12 - Property, plant and equipment
| (in thousands of USD) | Note | Vessels | Vessels under construction | Right-of-use assets | Other tangible assets | Total PPE |
| At January 1, 2022 | ||||||
| Cost | - | 4,875,811 | 181,293 | 53,226 | 5,244 | 5,115,574 |
| Depreciation & impairment losses | - | (1,908,024) | - | (24,225) | (4,026) | (1,936,275) |
| Net carrying amount | 2,967,787 | 181,293 | 29,001 | 1,218 | 3,179,299 | |
| Acquisitions | - | 444,744 | 72,866 | 13,384 | 95 | 531,089 |
| Disposals and cancellations | - | (164,768) | - | - | - | (164,768) |
| Depreciation charges | - | (95,364) | - | (10,398) | (306) | (106,068) |
| Transfer to assets held for sale | 8 | (50,345) | - | - | - | (50,345) |
| Transfers | - | 117,132 | (117,132) | - | - | - |
| Translation differences | - | - | - | (65) | (10) | (75) |
| Balance at June 30, 2022 | 3,219,186 | 137,027 | 31,922 | 997 | 3,389,132 | |
| At June 30, 2022 | ||||||
| Cost | - | 5,375,264 | 137,027 | 66,545 | 5,207 | 5,584,043 |
| Depreciation & impairment losses | - | (2,156,078) | - | (34,623) | (4,210) | (2,194,911) |
| Net carrying amount | 3,219,186 | 137,027 | 31,922 | 997 | 3,389,132 | |
In the first six months of 2022, the Maria, Cap Pierre, Amundsen, Captain Michael, Sonia, Iris, Ingrid, Cap Lara, Alsace, Dalma, Daishan and Hatteras have been dry-docked. The cost of planned repairs and maintenance is capitalized and included under the heading Acquisitions.
In January, two newbuilding Suezmaxes joined our fleet. Cedar (2022 - 157,310 dwt) was delivered on January 7, 2022 and Cypress (2022 - 157,310 dwt) on January 20, 2022. Both were constructed at Daehan Shipbuilding (DHSC) in South Korea. These two vessels were previously reported as vessels under construction as at December 31, 2021.
On April 29, 2022, Euronav announced the purchase of two eco-VLCCs, the Chelsea (2020 - 299,995 dwt) and the Ghillie (2019 - 297,750 dwt), for USD 179 million in total. They are sisters of our D-class vessels (Delos, (2021 - 300,200 dwt), Diodorus (2021 - 300,200 dwt), Doris (2021 - 300,200 dwt) and Dickens (2021 - 299,550 dwt). These vessels were all built in Korea at DSME, are fitted with scrubbers and are the latest generation of ecotype VLCC's. The vessels entered the fleet under their new names Dalis (previously Chelsea) and Derius (previously Ghillie).
As of June 7, 2022, the Group recognized the FSOs Asia and Africa fully in property, plant and equipment due to the acquisition of the remaining 50% in TI Asia and TI Africa for an amount of USD 224.6 million (see Note 5 and 6). The price paid, which amounts to USD 129.9 million can be identified under 'Acquisitions of vessels' in the cash flow statement. The transaction was booked as an asset acquisition as the asset concentration test was met under IFRS 3, given that substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset (i.e. the FSO and related lease component in the customer contract). The intangible asset related to the service component in the customer contract (see Note 13) has been separately recorded on the balance sheet as this could not be included in the single identifiable asset related to the FSO. The intangible asset was valued at USD 16.6 million which did not alter the "substantially all" criterium.
The Group had six vessels under construction at June 30, 2022 for an aggregate amount of USD 137 million. The amounts presented within "vessels under construction" relate to three eco-type VLCCs and three eco-type Suezmaxes.
On June 24, 2022, Euronav has declared the options to extend the time charter agreement for the two Suezmaxes Marlin Sardinia and Marlin Somerset with an additional 12 months. This resulted in the recognition of a right-of-use asset of USD 13.4 million.
27 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Disposal of assets - Gains/losses
| (in thousands of USD) | Note | Sale price | Book Value | Gain | Loss |
| Newton - Sale | - | 35,370 | 32,953 | 1,163 | - |
| Filikon - Sale | - | 15,974 | 6,570 | 9,404 | - |
| At June 30, 2021 | 51,344 | 39,523 | 10,567 | - | |
| Sale price | Book Value | Gain | Loss | ||
| Sandra - Sale | - | 47,520 | 47,299 | 221 | - |
| Sara - Sale | - | 47,520 | 46,013 | 1,507 | - |
| Sonia - Sale | - | 50,490 | 50,837 | - | (347) |
| Cap Leon - Sale | - | 19,924 | 9,081 | 10,843 | - |
| Cap Pierre - Sale | - | 19,058 | 11,537 | 7,521 | - |
| Other | - | - | - | 13,500 | - |
| At June 30, 2022 | 184,512 | 164,767 | 33,592 | (347) | |
On January 26, 2022, Euronav announced that the Company booked a USD 18 million capital gain on disposal of assets upon the redelivery of 4 VLCCs, which occurred at the maturity of a five-year sale and leaseback agreement. The four VLCCs are: the Nautilus (2006; 307,284 dwt), Navarin (2007; 307,284 dwt), Neptun (2007; 307,284 dwt) and the Nucleus (2007; 307,284 dwt). As the first ship was redelivered on December 15, 2021, USD 4.5 million was booked in the fourth quarter of 2021, whereas the remaining USD 13.5 million was booked in the first quarter of 2022.
On April 29, 2022, Euronav has sold four older S-class VLCCs for an en-bloc price of USD 198 million. The four vessels are the Sandra (2011 - 323,527 dwt), Sara (2011 - 322,000 dwt), Simone (2012 - 315,988 dwt) and the Sonia (2012 - 314,000 dwt). A net capital gain of USD 1.4 million was recorded on the sale of the three vessels delivered before June 30, 2022. The VLCC Simone was recorded as non-current asset held for sale as of June 30, 2022 and will be delivered to its new owners in the course of the second half year 2022 (see Note 8).
On June 13, 2022, Euronav announced that it has sold its two eldest Suezmax vessels Cap Pierre (2004 - 159,048 dwt) and Cap Leon (2003 - 159,048 dwt). The combined net capital gains realised on these sales amount to USD 18.4 million upon delivery to its new owners.
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 carrying amounts of Euronav's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
In accordance with IAS 36, Euronav has updated its review of various internal and external indicators performed as of December 31, 2021 to determine whether there were indications that vessels in the tanker segment were impaired as of June 30, 2022. As a result of this analysis, the Company concluded that the net operating losses reported for the period ended June 30, 2022 is considered the main indicator for impairment as well as the currently low market freight in the VLCC segment (2021: the low market rates and the net operating losses were the main indicators).
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 market value. In assessing value in use, the following assumptions were used:
•Weighted average of past and ongoing shipping cycles, including management judgement for the ongoing cycle and for the weighting factors applied, is used as forecast charter rates
•Weighted Average Cost of Capital ('WACC') of 5.19% (2021: 5.19%)
•20 year useful life with residual value equal to lightweight tonnage multiplied by 4 year average scrap steel value per ton
Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are subject to judgment. The Group uses a business cycle approach to forecast expected TCE rates. By defining a shipping cycle from peak to peak over the last 20 years and including management's expectation of the completion of the current cycle, management is better able to capture the full length of a business cycle while also giving more weight to recent and current market experience. The current cycle is forecasted based on management judgement, analyst reports and past experience.
28 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
The impairment test did not result in a requirement to record an impairment loss. With an increase of the WACC of 200bps to 7.19%, the analysis would also indicate that the carrying amount of the vessels as of June 30, 2022 is not impaired. The weighting and forecasting on the ongoing cycle are based on management judgement for the next two years (2023 - 2024). Using the peak-to-peak excluding forecast or the last completed cycle would not lead to an impairment. Using the ongoing cycle including forecast would lead to an impairment of USD 1.1 million (2021: USD 1.4 million).
When using the 10-year historical charter rates in this impairment analysis, the impairment analysis indicates that an impairment is required for the tanker fleet of USD 2.5 million (2021: USD 0.9 million). When using the 5-year historical charter rates in this impairment analysis, the impairment analysis indicates that an impairment is required for the tanker fleet of USD 5.6 million (2021: USD 7.1 million). When using the 3-year historical charter rates in this impairment analysis, the impairment analysis indicates that an impairment is required for the tanker fleet of USD 3.0 million (2021: USD 1.2 million), and when using 1-year historical charter rates in this impairment analysis, the impairment analysis indicates that an impairment is required for the tanker fleet of USD 17.6 million (2021: USD 28.8 million).
FSO
The Group also reviews internal and external indicators, similar to the ones used for tankers, to assess whether the FSO's might be impaired. The FSO Asia and FSO Africa are on a five years timecharter contract to North Oil Company, the operator of the Al-Shaheen oil field, whose shareholders are Qatar Petroleum Oil & Gas Limited and Total E&P Golfe Limited, until July 22, 2022 and September 22, 2022 respectively. In November 2020, the two joint ventures (TI Asia Ltd and TI Africa Ltd., see Note 5 and 6) signed an extension for ten years in direct continuation of their current contractual service, or until July 21, 2032 and September 21, 2032 respectively. The review of the indicators did not trigger the requirement to perform a more in-depth impairment analysis at June 30, 2022.
Security
All tankers financed with bank loans are subject to a mortgage to secure bank loans (see Note 16).
Vessels on order or under construction
The Group has six vessels under construction as at June 30, 2022. Prepayments during the year have been done for four vessels of which two have been delivered during the first quarter 2022. The aggregate amount of the prepayments for the first semester of 2022 was USD 71.1 million (December 31, 2021: USD 352.9 million). The amounts presented within "Vessels under construction" relate to three eco-Suezmax vessels and three eco-VLCC vessels from Hyundai Samho Shipyard.
The three Suezmax vessels have an expected delivery date in the third quarter of 2023 and the first quarter of 2024. Two VLCC vessels from Hyundai Samho Shipyard have an expected delivery in Q1 2023. Delivery for the lifted option VLCC will be the second quarter of 2023.
Capital commitment
As at June 30, 2022 the Group's total capital commitment amounts to USD 344.7 million (December 31, 2021: USD 414.3 million). These capital commitments relate to three VLCC newbuilding contracts and three Suezmax newbuilding contracts and can be detailed as follows:
| (in thousands of USD) | Total | 2022 | 2023 | 2024 | 2025 |
| Commitments in respect of VLCCs | 205,240 | 37,360 | 167,880 | - | - |
| Commitments in respect of Suezmaxes | 139,425 | 6,639 | 99,589 | 33,196 | - |
| Commitments in respect of FSOs | - | - | - | - | - |
| Total | 344,665 | 43,999 | 267,469 | 33,196 | - |
Note 13 - Intangible assets
In connection with the acquisition of the remaining 50% in TI Asia and TI Africa (see Note 5 and 6), a part of the price paid is related to an intangible asset (customer contracts with NOC for the service part, i.e. recharge of opex, maintenance and crew). Management estimated the fair value of the intangible asset related to the service component of the NOC contract, resulting in a value of USD 16.6 million at May 31, 2022. This amount will be depreciated till the end of the contractual service, or until July 21, 2032 and September 21, 2032 respectively.
29 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 14 - Equity
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
Hedging reserve
| June 30, 2022 | ||||
| (in thousands of USD) | Notional Value | Fair Value - Assets | Fair Value - Liabilities | Change recognized in OCI |
| Interest rate swaps | ||||
|
USD 173.6 millionfacility - Cap Quebec and Cap Pembroke
|
60,164 | 241 | - | 3,208 |
|
USD 173.6 millionfacility - Cap Corpus Christi and Cap Port Arthur
|
63,490 | 4,166 | - | 2,807 |
|
USD 713.0 millionfacility
|
230,444 | 14,611 | - | 9,593 |
|
USD 73.45 millionfacility
|
73,450 | 3,297 | 3,285 | |
| Forward cap contracts | ||||
| Cap options | 200,000 | - | - | 304 |
The Group, through two of its JV companies in connection to the USD 220.0 million facility raised in March 2018, entered on June 29, 2018 in several Interest Rate Swaps (IRSs) for a combined notional value of USD 208.8 million (Euronav's share amounts to 50%). These IRSs are used to hedge the risk related to the fluctuation of the Libor rate and qualify as hedging instruments in a cash flow hedge relationship under IFRS 9. These instruments have been measured at their fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. On June 28, 2022 these hedges have been unwound and have been recognized in profit and loss.
The Group, in connection with the long term charter parties with Valero for two Suezmaxes (Cap Quebecand Cap Pembroke), entered on March 28, 2018 and April 20, 2018, in two IRSs for a combined notional value of USD 86.8 million. These IRSs are used to hedge the risk related to the fluctuation of the Libor rate and qualify as hedging instruments in a cash flow hedge relationship under IFRS 9. These instruments have been measured at their fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. These IRSs have the same duration as the long term charter parties matching the repayment profile of the underlying USD 173.6 million facility and mature on March 28, 2025. The notional value of these instruments at June 30, 2022 amounted to USD 60.2 million. The fair value of these instruments at June 30, 2022 amounted to USD 0.2 million (see Note 20) and USD 3.2 million has been recognized in OCI in the first six months of 2022.
The Group entered on December 7, 2018 into two forward cap contracts (CAPs) with a strike at 3.25% starting on October 1, 2020, to hedge against future increase of interest rates with a notional value of USD 200.0 million and qualify as hedging instruments in a cash flow hedge relationship under IFRS 9. These instruments have been measured at their fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. These CAPs have a maturity date at October 3, 2022. The notional value of these instruments at June 30, 2022 amounted to USD 200.0 million. The fair value of these instruments at June 30, 2022 amounted zero (see Note 22) and USD 0.3 million has been recognized in OCI in the first six months of 2022.
As part of the fuel hedging program, the Group entered during 2022 and 2021 into several commodity swaps and futures in connection with its low sulfur fuel oil project for a combined notional value of USD 54.8 million and USD 140.1 million respectively. These swaps are used to hedge a potential increase in the index underlying the price of low sulfur fuel between the purchase date and the delivery date of the product, i.e. when title to the low sulfur fuel is actually transferred. These instruments do not qualify as hedging instruments in a cash flow hedge relationship under IFRS9. The changes in fair value are directly recognized in profit or loss.
The Group, in connection with the long term charter parties with Valero for two Suezmaxes (Cap Corpus ChristiandCap Port Arthur), entered on October 26, 2020 in two IRSs for a combined notional value of USD 70.1 million with effective date in 2021. These IRSs are used to hedge the risk related to the fluctuation of the Libor rate and qualify as hedging instruments in a cash flow hedge relationship under IFRS 9. These instruments have been measured at their fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. These IRSs have the same duration as the long term charter parties matching the repayment profile of the underlying USD 173.6 million facility and mature on September 28, 2025. The notional value of these instruments at June 30, 2022 amounted to USD 63.5 million. The fair value of these instruments at June 30, 2022 amounted to USD 4.1 million (see Note 20) and USD 2.8 million has been recognized in OCI in the first six months of 2022.
30 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
The Group entered in the second half of 2020 in six Interest Rate Swaps (IRSs) for a combined notional value of USD 237.2 million with effective date in 2021. These IRSs are used to hedge the risk related to the fluctuation of the Libor rate in connection with the new USD 713.0 million sustainability linked loan and qualify as hedging instruments in a cash flow hedge relationship under IFRS 9. These instruments have been measured at their fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. These IRSs mature on March 11, 2025. The notional value of these instruments at June 30, 2022 amounted to USD 230.4 million. The fair value of these instruments at June 30, 2022 amounted to USD 14.6 million (see Note 20) and USD 9.6 million has been recognized in OCI in the first six months of 2022.
The group entered on January 26, 2022 into an interest rate swap agreement, in relation to the USD 73.45 million term loan which had been concluded for the acquisition of the Suezmaxes Cedar and Cypress for a notional value of USD 73.45 million. This IRS is used to hedge the risk related to the fluctuation of the Libor rate and qualifies as hedging instrument in a cash flow hedge relationship under IFRS 9. This instrument has been measured at fair value; effective changes in fair value have been recognized in OCI and the ineffective portion has been recognized in profit or loss. This IRS is matching the repayment profile of the underlying USD 73.45 million facility and matures on January 20, 2027. The notional value of these instruments at June 30, 2022 amounted to USD 73.45 million. The fair value of these instruments at June 30, 2022 amounted to USD 3.3 million (see Note 20) and USD 3.3 million has been recognized in OCI in the first six months of 2022.
Treasury shares
As of June 30, 2022 Euronav owned 18,241,181 of its own shares, compared to 18,346,732 of shares owned on December 31, 2021. In the six months period ended June 30, 2022 Euronav transferred 105,551 shares to members of the Management Board in accordance with the Long Term Incentive Plan 2019.
Distributions
On May 19, 2022, the Annual Shareholders' meeting approved a full year dividend for 2021 of USD 0.09 per share and a distribution of USD 0.03 per share via the issue premium reserve. Taking into account the interim dividends paid based on the Group's policy to target a return of 80% of the net income to shareholders, no closing dividend was paid for 2021.
Following the decision of the shareholders meeting of November 2021 to make the issue premium reserve account available for distribution, the fixed distribution of USD 3 cents related to Q4 2021 and for Q1 2022 was paid via a repayment from that issue premium reserve. The distributions to shareholders in the amount of USD 0.06 was payable as from June 8, 2022. The distribution to shareholders was paid in EUR at the USD/EUR exchange rate of the record date.
The total amount of dividends paid in the first six months of 2022 was USD 12.1 million.
Long term incentive plan 2015
The Group's Board of Directors (as of February 2020 Supervisory Board) 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 the RSU's were exercised in the first quarter of 2018. As of June 30, 2022, all the stock options remained outstanding. The fair value of the stock options was measured using the Black Scholes formula. The total employee benefit expense recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 with respect to the LTIP 2015 was zero.
Long term incentive plan 2018
The Group's Board of Directors (as of February 2020 Supervisory Board) implemented in 2018 an additional long term incentive plan for key management personnel. Under the terms of this LTIP, key management personnel is 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 154,432 phantom stock units were granted on February 16, 2018 and one-third was vested on the second anniversary, one-third on the third anniversary and one-third on the fourth anniversary. Following the resignation of our former CEO Paddy Rodgers, his phantoms stocks were waived. As of June 30, 2022, no phantom stocks were outstanding. The LTIP 2018 qualifies as a cash-settled share-based payment transaction. The Company recognizes a liability in respect of its obligations under the LTIP 2018, 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 income recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 was USD (0.6) million.
Transaction Based Incentive Plan 2019
The Group's Board of Directors (as of February 2020 Supervisory Board) has implemented in 2019 a transaction based incentive plan for key management personnel. Under the terms of this TBIP, key management personnel is eligible to receive phantom stock unit grants. Each phantom stock unit grants the holder a conditional right to receive an amount of cash
31 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
equal to the fair market value of one share of the company multiplied by the number of phantom stock units that have vested prior to the settlement date. The vesting and settlement of the TBIP is spread over a timeframe of 5 years. The phantom stock awarded matures in four tranches: the first tranche of 12% vesting when Euronav's share price reaches USD 12, the second tranche of 19% vesting when the share price reaches USD 14, the third tranche of 25% vesting when the share price reaches USD 16 and the fourth tranche of 44% vesting when the share price reaches USD 18. In total a number of 1,200,000 phantom stock units were granted on January 31, 2019 and the first tranche of 12% was vested in the first quarter of 2020. Following the resignation of our former CEO Paddy Rodgers, his phantom stocks were waived.
As of June 30, 2022, 704,000 phantom stocks were outstanding. The TBIP 2019 qualifies as a cash-settled share-based payment transaction as the Company receives services from the participants and incur an obligation to settle the transaction in cash. The Company recognizes a liability at fair value in respect of its obligations under the TBIP 2019. The fair value of the plan is being determined using a binominal model with cost being spread of the expected vesting period over the various tranches. The compensation expense recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 was USD 3.4 million.
Long term incentive plan 2019
The Group's Board of Directors (as of February 2020 Supervisory Board) implemented in 2019 an additional long-term incentive plan ('LTIP') for key management personnel. Under the terms of this LTIP, key management personnel will obtain 100% of their respective LTIP in the form of Euronav restricted stock units ('RSU's'). The RSU's vest over three years in three equal annual installments at the three anniversary dates from the reference date (April 1, 2019) and will be settled in shares. In total 152,346 RSU's were granted on April 1, 2019. As of June 30, 2022, 105,626 RSU's were vested which have been transferred to the beneficiaries out of treasury shares. The compensation income recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 was USD (0.6) million.
Long term incentive plan 2020
The Group's Supervisory Board implemented in 2020 an additional long term incentive plan ('LTIP') for key management personnel. Under the terms of this LTIP, key management personnel will obtain 100% of their respective LTIP in the form of Euronav restricted stock units ('RSU's'). The RSU's vest over three years in three equal annual installments at the three anniversary dates from the reference date (April 1, 2020) and will be settled in shares. In total 144,392 RSU's were granted on April 1, 2020. As of June 30, 2022, 76,166 RSU's were vested however vested RSU's will not be delivered in shares until the first business day after April 1, 2023. The compensation expense recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 was USD 0.4 million.
Long term incentive plan 2021
The Group's Supervisory Board implemented in 2021 an additional long term incentive plan ('LTIP') for key management personnel. Under the terms of this LTIP, key management personnel will obtain 100% of their respective LTIP in the form of Euronav restricted stock units ('RSU's'). The RSU's vest over three years in three equal annual installments at the three anniversary dates from the reference date (April 1, 2021) and will be settled in shares. In total 193,387 RSU's were granted on April 1, 2021. As of June 30, 2022, 64,462 RSU's were vested however vested RSU's will not be delivered in shares until the first business day after April 1, 2024. The compensation expense recognized in the consolidated statement of profit or loss in the six month period ended June 30, 2022 was USD 0.7 million.
32 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 15 - Earnings per share
Basic earnings per share
The calculation of basic earnings per share was based on a result attributable to ordinary shares and a weighted average number of ordinary shares outstanding during the six month period ended June of each year, calculated as follows:
Result attributable to ordinary shares
| For the six month period ended | ||
| June 30, 2022 | June 30, 2021 | |
| Result for the period (in USD) | (48,275,904) | (160,689,698) |
| Weighted average number of ordinary shares | 201,745,255 | 201,677,981 |
| Basic earnings per share (in USD) | (0.24) | (0.80) |
Weighted average number of ordinary shares
| (in shares) | Shares issued | Treasury shares | Shares outstanding | Weighted number of shares |
| On issue at January 1, 2022 | 220,024,713 | 18,346,732 | 201,677,981 | 201,677,981 |
| Issuance of shares | - | - | - | - |
| Purchases of treasury shares | - | - | - | - |
| Withdrawal of treasury shares | - | - | - | - |
| Transfer of treasury shares | - | (105,551) | 105,551 | 67,274 |
| On issue at June 30, 2022 | 220,024,713 | 18,241,181 | 201,783,532 | 201,745,255 |
Diluted earnings per share
For the six months ended June 30, 2022, the diluted earnings per share (in USD) amount to (0.24) (2021: (0.80)). At June 30, 2022 and June 30, 2021 236,590 options issued under the LTIP 2015 were excluded from the calculation of the diluted weighted average number of shares because these 236,590 options were out-of-the money and have been considered as anti-dilutive. At June 30, 2022, the 105,626 vested RSU's under the LTIP 2019, 76,166 vested RSU's under the LTIP 2020 and 64,462 vested RSU's under the LTIP 2021 have been considered as dilutive, as these are only subject to the passage of time and therefore no longer contingent.
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) | June 30, 2022 | June 30, 2021 |
| Weighted average of ordinary shares outstanding (basic) | 201,745,255 | 201,677,981 |
| Effect of share-based payment arrangements | 246,254 | 95,259 |
| Weighted average number of ordinary shares (diluted) | 201,991,509 | 201,773,240 |
There are no more remaining outstanding instruments at June 30, 2022 which can give rise to dilution, except for the Euronav stock options of the LTIP 2015 and the RSU's of the LTIP 2019, LTIP 2020 and LTIP 2021.
33 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 16 - Interest-bearing loans and borrowings
| (in thousands of USD) | Note | Bank loans | Other Notes | Lease liabilities | Other borrowings | Total |
| More than 5 years | - | 102,419 | - | 74 | - | 102,493 |
| Between 1 and 5 years | - | 1,073,416 | 196,895 | 16,685 | 86,198 | 1,373,194 |
| More than 1 year | 1,175,835 | 196,895 | 16,759 | 86,198 | 1,475,687 | |
| Less than 1 year | - | 29,313 | 67,025 | 22,292 | 117,863 | 236,493 |
| At January 1, 2022 | 1,205,148 | 263,920 | 39,051 | 204,061 | 1,712,180 | |
| New loans | - | 748,450 | - | 13,382 | 149,941 | 911,773 |
| Scheduled repayments | - | (81,961) | (67,200) | (11,944) | (227,872) | (388,977) |
| Early repayments | - | (200,000) | - | - | - | (200,000) |
| Other changes | - | 733 | 503 | - | - | 1,236 |
| Translation differences | - | - | - | (137) | (4,069) | (4,206) |
| Balance at June 30, 2022 | 1,672,370 | 197,223 | 40,352 | 122,061 | 2,032,006 | |
| More than 5 years | - | 203,531 | - | 54 | - | 203,585 |
| Between 1 and 5 years | - | 1,356,753 | 197,223 | 15,535 | 78,872 | 1,648,383 |
| More than 1 year | 1,560,284 | 197,223 | 15,589 | 78,872 | 1,851,968 | |
| Less than 1 year | - | 112,086 | - | 24,763 | 43,189 | 180,038 |
| Balance at June 30, 2022 | 1,672,370 | 197,223 | 40,352 | 122,061 | 2,032,006 | |
The amounts shown under "New Loans" and "Early Repayments" related to bank loans include drawdowns and repayments under revolving credit facilities during the year.
The amount shown under "New Loans" related to lease liabilities is mainly attributable to the extension of the time charter agreement for the two Suezmaxes Marlin Sardinia and Marlin Somerset with an additional 12 months. In accordance with IFRS, the Group recognized a lease liability of USD 13.4 million (see Note 12).
34 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Bank loans
Terms and debt repayment schedule
The terms and conditions of outstanding loans were as follows:
| (in thousands of USD) | June 30, 2022 | December 31, 2021 | |||||||
| Curr. | Nominal interest rate | Year of mat. | Facility size | Drawn | Carrying value | Facility size | Drawn | Carrying value | |
|
Secured vessels Revolving loan 750M*
|
USD |
libor + 1.95%
|
2022 | - | - | - | 8,474 | - | (231) |
|
Secured vessels Revolving loan 409.5M*
|
USD |
libor + 2.25%
|
2023 | 63,380 | 40,000 | 39,771 | 125,880 | 65,000 | 64,544 |
|
Secured vessels loan 27.1M
|
USD |
libor + 1.95%
|
2029 | 24,876 | 24,876 | 24,876 | 25,102 | 25,102 | 25,102 |
|
Secured vessels loan 81.4M
|
USD |
libor + 1.50%
|
2029 | 47,491 | 47,491 | 46,209 | 50,883 | 50,883 | 49,454 |
|
Secured vessels loan 69.4M
|
USD |
libor + 2.0%
|
2030 | 52,066 | 52,066 | 52,066 | 54,379 | 54,379 | 54,379 |
|
Secured vessels loan 104.2M
|
USD |
libor + 2.0%
|
2030 | 71,590 | 71,590 | 70,817 | 75,928 | 75,928 | 75,071 |
|
Secured vessels Revolving loan 200.0M*
|
USD |
libor + 2.0%
|
2025 | 110,204 | 75,000 | 74,406 | 123,032 | 55,000 | 54,245 |
|
Secured vessels Revolving loan 700.0M*
|
USD |
libor + 1.95%
|
2026 | 577,900 | 550,000 | 545,593 | 602,320 | 370,000 | 364,987 |
|
Secured vessels Revolving loan 713.0M*
|
USD |
libor + 2.30%
|
2026 | 616,286 | 527,446 | 522,739 | 649,695 | 524,135 | 518,568 |
|
Unsecured Revolving loan 80.0M
|
EUR |
libor + 1.45%
|
2026 | 83,096 | 75,000 | 74,635 | 100,000 | - | (463) |
|
Secured vessels loan 73.45M
|
USD |
libor + 1.80%
|
2028 | 73,450 | 73,450 | 72,983 | - | - | (508) |
|
Secured FSO loan 150M
|
USD |
sofr + 2.15%
|
2030 | 150,000 | 150,000 | 148,275 | - | - | - |
| Total interest-bearing bank loans | 1,870,339 | 1,686,919 | 1,672,370 | 1,815,693 | 1,220,427 | 1,205,148 | |||
* The total amount available under the revolving loan facilities depends on the total value of the fleet of tankers securing the facility.
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.
On June 21, 2022, the group entered into a USD 150 million senior secured amortizing term loan facility to finance the acquisition of the 50% ownership in the FSO joint ventures. The new facility has been concluded with ING and ABN Amro who were also the supporting banks in the existing facility. At the same time the existing facilities for the FSO JV companies which were maturing in July 2022 and September 2022 have also been repaid. The new facility is linked to the sustainability performance of the Company. The commercial terms include a reduction of the interest rate when the Company achieves its targets in relation to two sustainability KPI's. The facility has a duration of 7.75 years with maturity on March 30, 2030.
35 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Other notes
| (in thousands of USD) | June 30, 2022 | December 31, 2021 | ||||||||
| Curr. | Nominal interest rate | Year of mat. | Facility size | Drawn | Carrying value | Facility size | Drawn | Carrying value | ||
| Unsecured notes | USD | 7.50 | % | 2022 | - | - | - | 67,200 | 67,200 | 67,025 |
| Unsecured notes | USD | 6.25 | % | 2026 | 200,000 | 200,000 | 197,223 | 200,000 | 200,000 | 196,895 |
| Total other notes | 200,000 | 200,000 | 197,223 | 267,200 | 267,200 | 263,920 | ||||
In line with the successful placement of the new USD 200 million senior unsecured bond announced on September 2, 2021, the old bond carrying a coupon of 7.50% has been fully repaid during the second quarter of 2022.
On March 18, 2022, the Financial Supervisory Authority of Norway approved the listing on the Oslo Stock Exchange of Euronav Luxembourg S.A.'s USD 200 million senior unsecured bonds due September 2026.
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. On October 1, 2018, KBC was appointed as an additional dealer in the agreement and the maximum amount was increased from 50 million Euro to 150 million Euro. As of June 30, 2022, the outstanding amount was USD 28.7 million or 27.6 million Euro (December 31, 2021: USD 104.0 million or 91.8 million Euro). The Treasury Notes are issued on an as needed basis with different durations 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 June 30, 2022, the fair value of these forward contracts amounted to USD (1.4) million.
On December 30, 2019, the Company entered into a sale and leaseback agreement for three VLCCs. The three VLCCs are the Nautica(2008 - 307,284), Nectar(2008 - 307,284) and Noble(2008 - 307,284). The vessels were sold and were leased back under a 54-months bareboat contract at an average rate of USD 20,681 per day per vessel. In accordance with IFRS, this transaction was not accounted for as a sale but Euronav as seller-lessee will continue to recognize the transferred assets, and recognized a financial liability equal to the net transfer proceeds of USD 124.4 million. As of June 30, 2022, the outstanding amount was USD 93.4 million (December 31, 2021: USD 100.1 million). At the end of the bareboat contract, the vessels will be redelivered to their new owners. Euronav may, at any time on and after the 1st anniversary, notify the owners by serving an irrevocable written notice at least three months prior to the proposed purchase option date of the charterers' intention to terminate this charter on the purchase option date and purchase the vessel from the owners for the applicable purchase option price.
The future lease payments for these leaseback agreements are as follows:
| (in thousands of USD) | June 30, 2022 | December 31, 2021 |
| Less than one year | 22,667 | 22,667 |
| Between one and five years | 22,638 | 33,878 |
| More than five years | - | - |
| Total future lease payables | 45,305 | 56,545 |
36 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 17 - Trade and other payables
| (in thousands of USD) | June 30, 2022 | December 31, 2021 |
| Advances received on contracts in progress, between 1 and 5 years | 451 | 503 |
| Derivatives | - | 2,987 |
| Total non-current other payables | 451 | 3,490 |
| Trade payables | 40,786 | 26,012 |
| Accrued expenses | 61,086 | 38,020 |
| Accrued payroll | 2,074 | 2,160 |
| Dividends payable | 544 | 555 |
| Accrued interest | 7,009 | 6,570 |
| Deferred income | 7,418 | 7,545 |
| Other payables | 1,513 | 3,050 |
| Total current trade and other payables | 120,430 | 83,912 |
The non-current derivatives relate to the interest rate swap derivatives used to hedge the risk related to the fluctuation of the Libor rates (see Note 14). The decrease is due to a positive mark-to-market on these IRSs at June 30, 2022.
The increase in trade payables and accrued expenses is mainly due to the increased drydocking activities during the first half year of 2022 and prepayments to the yard. This is strengthened by an increased amount of outstanding bunker invoices as well as outstanding invoices with regards to Protection & Indemnity (P&I) insurances paid via installments at June 30, 2022 compared to December 31, 2021.
37 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 18 - Financial instruments
Accounting classifications 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.
38 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
| Carrying amount | Fair value | ||||||||
| (in thousands of USD) |
Note
|
Fair value -Hedging instruments | Financial assets at amortized cost | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total |
| December 31, 2021 | |||||||||
| Financial assets measured at fair value | |||||||||
| Interest rate swaps | 20 | 6,392 | - | - | 6,392 | - | 6,392 | - | 6,392 |
| Cap contracts | 22 | 2 | - | - | 2 | - | 2 | - | 2 |
| 6,394 | - | - | 6,394 | ||||||
| Financial assets not measured at fair value | |||||||||
| Non-current receivables | 20 | - | 44,669 | - | 44,669 | - | - | 42,150 | 42,150 |
| Lease receivables | 20 | - | 4,578 | - | 4,578 | - | 3,816 | - | 3,816 |
| Trade and other receivables * | 22 | - | 213,641 | - | 213,641 | - | - | - | - |
| Cash and cash equivalents | - | - | 152,528 | - | 152,528 | - | - | - | - |
| - | 415,416 | - | 415,416 | ||||||
| Financial liabilities measured at fair value | |||||||||
| Forward exchange contracts | 16 | 2,927 | - | - | 2,927 | - | 2,927 | - | 2,927 |
| Interest rate swaps | 17 | 2,987 | - | - | 2,987 | - | 2,987 | - | 2,987 |
| 5,914 | - | - | 5,914 | ||||||
| Financial liabilities not measured at fair value | |||||||||
| Secured bank loans | 16 | - | - | 1,205,148 | 1,205,148 | - | 1,234,739 | - | 1,234,739 |
| Unsecured other notes | 16 | - | - | 263,920 | 263,920 | 68,722 | 194,586 | - | 263,308 |
| Other borrowings | 16 | - | - | 204,061 | 204,061 | - | 204,061 | - | 204,061 |
| Lease liabilities | 16 | - | - | 39,051 | 39,051 | - | 36,913 | - | 36,913 |
| Trade and other payables * | 17 | - | - | 76,319 | 76,319 | - | - | - | - |
| Advances received on contracts | 17 | - | - | 503 | 503 | - | - | - | - |
| - | - | 1,789,002 | 1,789,002 |
39 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
| Carrying amount | Fair value | ||||||||
| (in thousands of USD) | Note |
Fair value -Hedging instruments |
Financial assets at amortized cost |
Other financial liabilities |
Total | Level 1 | Level 2 | Level 3 | Total |
| June 30, 2022 | |||||||||
| Financial assets measured at fair value | |||||||||
| Interest rate swaps | 20 | 22,315 | - | - | 22,315 | - | 22,315 | - | 22,315 |
| Cap contracts | 22 | - | - | - | - | - | - | - | - |
| Commodity derivatives | 21 | 344 | - | - | 344 | - | 344 | - | 344 |
| 22,659 | - | - | 22,659 | ||||||
| Financial assets not measured at fair value | |||||||||
| Non-current receivables | 20 | - | 14,368 | - | 14,368 | - | - | 14,368 | 14,368 |
| Lease receivables | 20 | - | 3,613 | - | 3,613 | - | 2,939 | - | 2,939 |
| Trade and other receivables * | 22 | - | 233,989 | - | 233,989 | - | - | - | - |
| Cash and cash equivalents | - | - | 277,220 | - | 277,220 | - | - | - | - |
| - | 529,190 | - | 529,190 | ||||||
| Financial liabilities measured at fair value | |||||||||
| Forward exchange contracts | 16 | - | - | - | - | - | - | - | - |
| Interest rate swaps | 17 | - | - | - | - | - | - | - | - |
| - | - | - | - | ||||||
| Financial liabilities not measured at fair value | |||||||||
| Secured bank loans | 16 | - | - | 1,672,370 | 1,672,370 | - | 1,625,358 | - | 1,625,358 |
| Unsecured other notes | 16 | - | - | 197,223 | 197,223 | 192,500 | - | - | 192,500 |
| Other borrowings | 16 | - | - | 122,061 | 122,061 | - | 122,061 | - | 122,061 |
| Lease liabilities | 16 | - | - | 40,352 | 40,352 | - | 38,550 | - | 38,550 |
| Trade and other payables * | 17 | - | - | 112,960 | 112,960 | - | - | - | - |
| Advances received on contracts | 17 | - | - | 451 | 451 | - | - | - | - |
| - | - | 2,145,417 | 2,145,417 | ||||||
* Deferred charges, deferred fulfillment costs and VAT receivables (included in other receivables) (see Note 22), deferred income and VAT payables (included in other payables) (see Note 17), which are not financial assets (liabilities) are not included.
40 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Measurement of fair values
Valuation techniques and significant unobservable inputs
Level 1 fair value was determined based on the actual trading of the unsecured notes, due in 2022, and the trading price on June 30, 2022. The following tables show the valuation techniques used in measuring Level 1, 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 |
| Interest rate swaps | Swap models: the fair value is calculated as the present value of the estimated future cash flows. Estimates of future floating-rate cash flows are based on quoted swap rates, futures prices and interbank borrowing rates. | Not applicable |
| Forward cap contracts |
Fair values for both the derivative and the hypothetical derivative are determined based on the net present value of the expected cash flows using Liborrate curves, futures and basis spreads.
|
Not applicable |
| Commodity derivatives | Fair value is determined based on the present value of the quoted forward price. | Not applicable |
| Financial instruments not measured at fair value | ||
| Type | Valuation Techniques | Significant unobservable inputs |
| Non-current receivables (consisting primarily of shareholders' loans) | Discounted cash flow | Discount rate and forecasted cash flows |
| Lease receivables | Discounted cash flow | Discount rate |
| Other financial liabilities (consisting of secured and unsecured bank loans and lease liabilities) | Discounted cash flow | Discount rate |
| Other financial notes (consisting of unsecured notes) | List price | Not applicable |
41 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Transfers between Level 1, 2 and 3
There were no transfers between these levels in 2021 and for the six-month period ended June 30, 2022.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The sources of financing are diversified and the bulk of the loans are irrevocable, long-term and maturities are spread over different years.
The following are the remaining contractual maturities of financial liabilities:
42 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
| Contractual cash flows December 31, 2021 | ||||||
| (in thousands of USD) | Note | Carrying Amount | Total | Less than 1 year | Between 1 and 5 years | More than 5 years |
| Non derivative financial liabilities | ||||||
| Bank loans and other notes | 16 | 1,469,068 | 1,667,567 | 145,175 | 1,413,221 | 109,172 |
| Other borrowings | 16 | 204,061 | 223,550 | 126,672 | 96,878 | - |
| Lease liabilities | 16 | 39,051 | 41,125 | 23,464 | 17,585 | 77 |
| Current trade and other payables * | 17 | 76,319 | 76,319 | 76,319 | - | - |
| 1,788,499 | 2,008,562 | 371,629 | 1,527,684 | 109,249 | ||
| Derivative financial liabilities | ||||||
| Interest rate swaps | 16 | 2,987 | 6,505 | 2,397 | 4,108 | - |
| Forward exchange contracts | - | - | - | - | - | - |
| 2,987 | 6,505 | 2,397 | 4,108 | - | ||
| Contractual cash flows June 30, 2022 | ||||||
| (in thousands of USD) | Carrying Amount | Total | Less than 1 year | Between 1 and 5 years | More than 5 years | |
| Non derivative financial liabilities | ||||||
| Bank loans and other notes | 16 | 1,869,593 | 2,141,133 | 248,220 | 1,678,834 | 214,078 |
| Other borrowings | 16 | 122,061 | 136,987 | 51,349 | 85,638 | - |
| Lease liabilities | 16 | 40,352 | 41,756 | 26,022 | 15,678 | 56 |
| Current trade and other payables * | 17 | 112,960 | 112,960 | 112,960 | - | - |
| 2,144,966 | 2,432,835 | 438,551 | 1,780,150 | 214,134 | ||
| Derivative financial liabilities | ||||||
| Interest rate swaps | 16 | - | - | - | - | - |
| Forward exchange contracts | - | - | - | - | - | - |
| - | - | - | - | - | ||
* Deferred income and VAT payables (included in other payables) (see Note 16), which are not financial liabilities, are not included.
The Group has secured bank loans that contain loan covenants. A future breach of covenant may require the Group to repay the loan earlier than indicated in the above table. As of June 30, 2022 and December 31, 2021, the Group was in compliance with all of the covenants contained in the debt agreements.
The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. It is not expected that the cash flows included in the table above (the maturity analysis) could occur significantly earlier, or at significantly different amounts than stated above.
43 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 19 - Deferred tax assets and liabilities
Euronav NV and its subsidiaries had available combined cumulative tax losses and other tax credits carried forward of USD 122.1 million and USD 128.9 million as of June 30, 2022 and December 31, 2021, 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 Company did not recognize deferred tax assets of USD 28.1 million and USD 30.0 million as of June 30, 2022 and December 31, 2021, 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.
44 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 20 - Non-current receivables
| (in thousands of USD) | June 30, 2022 | December 31, 2021 |
| Shareholders loans to joint ventures | - | 30,242 |
| Derivatives | 22,315 | 6,392 |
| Other non-current receivables | 14,367 | 14,426 |
| Lease receivables | 3,613 | 4,578 |
| Investment | 1 | 1 |
| Total non-current receivables | 40,296 | 55,639 |
The decrease in shareholders loans to joint ventures as of June 30, 2022 compared to December 31, 2021, is related to the full repayment of the shareholders loan to Bari Shipholding Ltd. due to the sale of Suezmax Bari (2005 - 159,186 dwt) as well as the full repayment of the shareholders loan to TI Africa Ltd following the acquisition of the remaining 50% shares in TI Africa Ltd as described in note 5 and 12.
The increase in derivatives as of June 30, 2022 compared to December 31, 2021 relates to the higher fair market value of the Interest Rate Swaps in connection with an increasing interest rate environment.
The lease receivables relate to the subleases of office space to third parties regarding the leased offices of Euronav UK and Euronav MI II Inc. (formerly Gener8 Maritime Inc.).
45 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 21 - Bunker inventory
In addition to bunker fuel stored on board of the Euronav vessels, the Group purchases and stores compliant fuel on board of a Euronav vessel, the ULCC Oceania, so that there is a safety, high quality inventory available for the use of its own fleet.
The bunker inventory is accounted for at the lower of cost and net realizable value with cost being determined on a weighted average basis. The cost includes: the purchase price, fuel inspection costs, the transport and handling costs for loading the bunker on our vessel and the effective portion of the change in fair value of derivatives (see Note 11) designated as a cashflow hedge of the underlying index between commitment and pricing. Fuel derivatives used to hedge risk between pricing and consumption are measured at fair value with fair value changes recognized in the consolidated statement of profit or loss.
In the first six months of 2022, the Company purchased an additional 73,590 metric ton of compliant fuel for an amount of USD 54.8 million (all costs included). As of June 30, 2022 the carrying amount of the total bunker inventory amounted to USD 47.6 million (December 31, 2021: USD 69.0 million) of which USD 13.3 million (2021: 45.0 million) was the carrying amount of the bunker inventory related to the purchase and storage of compliant fuel oil inventory on board of the Oceania.
The compliant fuel has already been partially transferred to our vessels in the first semester of 2022, the remaining fuel is expected to be transferred to our vessels and used in the remainder of 2022. As of June 30, 2022 the carrying amount of the bunker inventory on board of these vessels amounted to USD 34.3 million (2021: USD 24.0 million). Bunkers delivered to vessels operating in the TI Pool, are sold to the TI Pool and bunkers on board of these pooled vessels are no longer shown as bunker inventory but as trade and other receivables.
In compliance with the accounting policy no write-down needs to be considered at the end of June 30, 2022, the net realizable value remained positive as the market price of compliant fuel oil exceeded our weighted average cost.
46 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 22 - Trade and other receivables
| (in thousands of USD) | June 30, 2022 | December 31, 2021 |
| Receivable from contracts with customers | 92,449 | 55,704 |
| Receivable from contracts with customers - TI Pool | 117,619 | 139,672 |
| Accrued income | 13,702 | 8,480 |
| Accrued interest | 664 | 580 |
| Deferred charges | 26,796 | 22,083 |
| Deferred fulfillment costs | 1,592 | 1,156 |
| Other receivables | 8,640 | 7,977 |
| Lease receivables | 1,971 | 2,091 |
| Derivatives | - | 2 |
| Total trade and other receivables | 263,433 | 237,745 |
The increase in receivable from contracts with customers is partially due to the full consolidation of TI Asia and TI Africa as per June 30, 2022. The other part is mainly attributable to open invoices from bunkers delivered from the Oceania as part of the Fuel Management program (see Note 21) as well as an increase in the amount of open freight invoices partially in consequence of an improved market compared to the end of 2021.
The receivables from contracts with customers - TI Pool relates to income to be received by the Group from the Tankers International Pool. These amounts decreased in the first six months of 2022 due to a refund from the pool of working capital funded by Euronav from prior periods.
The increase in accrued income is attributable to slightly higher market freight rates and the timing of the cut-off in the voyages in progress at year-end.
The increase in deferred charges is mainly due to prepayments to the yard related to drydockings and scrubber installations.
Fulfillment costs represent primarily bunker costs incurred between the date on which the contract of a spot voyage charter was concluded and the next load port. These expenses are deferred according to IFRS 15 Revenue from Contracts with Customers and are amortized on a systematic basis consistent with the pattern of transfer of service.
The lease receivables relate to the subleases of office space to third parties regarding the leased offices of Euronav UK and Euronav MI II Inc. (formerly Gener8 Maritime Inc.).
47 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 23 - Provisions and contingencies
| (in thousands of USD) | Note | Onerous contract | Total |
| At January 1, 2022 | 1,154 | 1,154 | |
| Provisions used during the year | - | (133) | (133) |
| Balance at June 30, 2022 | 1,021 | 1,021 | |
| Non-current | - | 743 | 743 |
| Current | - | 278 | 278 |
| Total | 1,021 | 1,021 | |
The Group is currently involved in litigation. Provisions related to legal and arbitration proceedings are recorded in accordance with the Group accounting policy. The claim was submitted on January 15, 2021 by Unicredit Bank in London with the High Court of Justice of England and Wales. The claim relates to an alleged misdelivery of 101,809 metric tons of low sulphur fuel oil that was transported by the Suezmax vessel, Sienna. The charterer, Gulf Petrochem FZC, a company of GP Global, instructed the vessel to discharge the cargo at Sohar without presentation of the bill of lading but against a letter of indemnification issued by the charterer as is customary practice in the crude oil shipping industry. Unicredit bank, who had financed the cargo for an amount of USD 26,367,200 and allegedly had become the holder of the bill of lading, was not repaid in accordance with the financing arrangements agreed with Gulf Petrochem FZC. As alleged holder of the bill of lading, Unicredit Bank is claiming that amount of USD 26,367,200 together with interest from Euronav NV. The GP Global group is currently under a restructuring plan and any recourse under the letter of indemnity issued by Gulf Petrochem FZC is therefore doubtful.
On April 28, 2022, the relevant UK Court rejected the claim by UniCredit to obtain USD 26.4 million in damages from Euronav.
On July 18, 2022, Euronav was informed that the Court of Appeal has granted Unicredit appeal.
Management believes that it has followed well established standard working practices and that it has valid defense arguments. Management refers in that respect to the outcome of the UK Court ruled in favor of Euronav as first important indication. Based on an external legal advice, management continues to believe that it has strong arguments that the risk of an outflow is less than probable and therefore no provision is recognized. The appeal process is in an early stage.
At this moment of time, provisions are currently not impacted by the COVID-19 situation.
48 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 24 - Equity-accounted investees
| (in thousands of USD) | June 30, 2022 | December 31, 2021 |
| Assets | ||
| Interest in joint ventures | 2,126 | 72,446 |
| TOTAL ASSETS | 2,126 | 72,446 |
Joint Ventures
The following table contains a roll forward of the balance sheet amounts with respect to the Group's joint ventures:
| ASSET | ||
| (in thousands of USD) | Investments in equity accounted investees | Shareholders loans |
| Gross balance | 51,703 | 33,936 |
| Offset investment with shareholders loan | - | - |
| Balance at January 1, 2021 | 51,703 | 33,936 |
| Group's share of profit (loss) for the period | 22,976 | - |
| Group's share of other comprehensive income | 951 | - |
| Dividends received from joint ventures | (4,635) | - |
| Movement shareholders loans to joint ventures | - | (2,242) |
| Gross balance | 70,995 | 31,693 |
| Offset investment with shareholders loan | 1,451 | (1,451) |
| Balance at December 31, 2021 | 72,446 | 30,242 |
| Reversal prior year offset investment with shareholders loan | (1,451) | 1,451 |
| Group's share of profit (loss) for the period | 14,574 | - |
| Group's share of other comprehensive income | 159 | - |
| Dividends received from joint ventures | (1,000) | - |
| Movement equity to shareholders loans | (2,000) | 2,000 |
| Movement shareholders loans to joint ventures | - | (33,693) |
| FSO transaction | (80,602) | - |
| Gross balance | 2,126 | - |
| Offset investment with shareholders loan | - | - |
| Balance at June 30, 2022 | 2,126 | - |
The decrease in the balance of the shareholders' loan to joint ventures in 2022 is attributable to the full repayment of the shareholders loans to TI Africa and Bari Shipholding Ltd. The latter was repaid following the sale of the vessel in 2022 and the remaining amount was written-off.
On April 26, 2022, Euronav announced the sale of the Suezmax Bari (2005 - 159,186 dwt) for USD 21.5 million. A capital gain on the sale of approximately USD 6.6 million was recorded in the second quarter in the joint venture company. The vessel was acquired in November 2019 in a 50/50 joint venture with affiliates of Ridgebury Tankers and clients of Tufton Oceanic. The vessel was delivered to her new owners during the second quarter.
49 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 25 - Subsequent events
On July 11, 2022, Euronav announced that Euronav and Frontline have entered into a definitive combination agreement for a stock-for-stock combination based on an exchange ratio of 1.45 Frontline shares for every 1.0 Euronav share (the "Combination"), which was unanimously approved by all the members of Frontline's Board of Directors and by all members of Euronav's Supervisory Board. The agreement underlines the principal aspects of the previously announced term sheet that was signed on April 7, 2022. Full details are provided in the press release of July 11, 2022. https://www.euronav.com/en/investors/company-news-reports/press-releases/2022/frontline-ltd-considers-voluntary-public-takeover-bid-on-euronav-nv/
50 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 26 - Standards issued but not yet effective
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2022, and have not been applied in preparing these condensed consolidated financial statements:
Amendments to IAS 1 Presentation of Financial statements: Classification of Liabilities as Current or Non-current,issued on 23 January 2020, clarify a criterion in IAS 1 for classifying a liability as non-current: the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendments:
•specify that an entity's right to defer settlement must exist at the end of the reporting period;
•clarify that classification is unaffected by management's intentions or expectations about whether the entity will exercise its right to defer settlement;
•clarify how lending conditions affect classification; and
•clarify requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments.
On July 15, 2020, the IASB issued Classification of Liabilities as Current or Non-current - Deferral of Effective Date (Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year to annual reporting periods beginning on or after January 1, 2023 with early application permitted. The amendments have not yet been endorsed by the EU.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies, issued on 12 February 2021, include narrow-scope amendments to improve accounting policy disclosures so that they provide more useful information to investors and other primary users of the financial statements. The amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.
The amendments are effective for annual periods beginning on or after 1 January 2023 with early application permitted. These amendments have not yet been endorsed by the EU.
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates,issued on 12 February 2021, clarify how companies should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important because changes in accounting estimates are applied prospectively only to future transactions and other future events, but changes in accounting policies are generally also applied retrospectively to past transactions and other past events.
The amendments are effective for annual periods beginning on or after 1 January 2023 with early application permitted. These amendments have not yet been endorsed by the EU.
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction, issued on 6 May 2021, clarifies how companies should account for deferred tax on transactions such as leases and decommissioning obligations. IAS 12 Income Taxes specifies how a company accounts for income tax, including deferred tax, which represents tax payable or recoverable in the future. In specified circumstances, companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time. Previously, there had been some uncertainty about whether the exemption applied to transactions such as leases and decommissioning obligations-transactions for which companies recognize both an asset and a liability. The amendments clarify that the exemption does not apply and that companies are required to recognize deferred tax on such transactions. The aim of the amendments is to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations.
The amendments are effective for annual periods beginning on or after 1 January 2023 with early application permitted. These amendments have not yet been endorsed by the EU.
51 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022
Note 27 - Statement on the true and fair view of the consolidated financial statements and the fair overview of the management report
Mrs. Grace Reksten Skaugen, Chairperson of the Supervisory Board, Mr. Hugo De Stoop, CEO and Mrs. Lieve Logghe, CFO, hereby certify that, to the best of their knowledge, (a) the condensed consolidated interim financial statements as of June 30, 2022 and for the six-month period then ended, which have been prepared in accordance with IAS 34 "Interim Financial Reporting" as issued by the IASB and as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and results of Euronav NV and the entities included in the consolidation, and (b) the interim management report includes a true and fair overview of the information required to be included therein under Article 13 §5 and §6 of the Royal Decree of November 14, 2007 on the obligations of issuers of financial instruments admitted to trading on a regulated market.
52 Financial Report
Notes to the condensed consolidated interim financial statements for the six-month period ended June 30, 2022