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Euronav NV (NYSE:EURN)
Q3 2019 Earnings Call
Oct 29, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Euronav Third Quarter 2019 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Mr. Hugo De Stoop and Mr. Brian Gallagher. Please go ahead.

Brian Gallagher -- Head of Investor Relations and Communications

Thank you. Good morning and afternoon to everyone and thanks for joining Euronav's Q3 2019 Earnings Call. Before I start, I would like to say a few words. The information discussed on this call is based on information as of today, Tuesday, October 29, 2019 and may contain forward-looking statements that involve risks and uncertainties. The forward-looking statements reflect current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events, performance, underlying assumptions and other statements which are not statements of historical facts.

All forward-looking statements attributable to the company or to persons acting on its behalf are expressly qualified in their entirety by reference to the risks, uncertainties and other factors discussed in the company's filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. and our own company website at www.euronav.com.

You should not place undue reliance on forward-looking statements. Each forward-looking statemen speaks only as of the date of the particular statement and the company undertakes no obligation to publicly update or revise any forward-looking statements. Actual results may differ materially from these forward-looking statements.

Please take a moment to read our Safe Harbor statement on page 2 of the slide presentation.

I will now pass on to Chief Executive, Hugo De Stoop, to start with the agenda slide on slide 3. Hugo?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you, Brian. I will run through the Q3 highlights and provide a full financial review of the income statement and balance sheet before looking at the current themes in the tanker market and Euronav's outlook before we take questions.

Let's turn to slide 4. Generally, the tanker market for VLCCs and Suezmax was range-bound and a little disappointing in a seasonally soft quarter for Q3. Refinery maintenance program continued to impact the market until August when freight rates enjoyed a counter-seasonal rally. With the exception of 2015, the market recorded the highest rates for August since 2008. This reflected the robust underlying fundamentals of the market.

The freight rates strength has continued and even strengthened into Q4 with Euronav VLCC fleet delivering over $60,000 per day of earnings for 60% of our available days so far. Suezmax has fared less well, but specific transactions in this category have been strong. The good news is that we have 90% of our trading fleet exposed to the spot market for the entire winter period.

Finally, the company is looking to apply the new Belgian company code, meaning we shall have the capability to pay quarterly dividends for the first time starting next year 2020. This will allow us to align our business more closely with our stakeholders.

Let's move to slide 5. Q3 was very similar to Q2 in many ways, with a pronounced period of reduced activity as the refiners deliberately kept out of the market to do the maintenance in preparation ahead of IMO 2020. We nevertheless enjoyed some strong pockets of freight rates of counter-seasonal strength which have illustrated the underlying foundations of market strength which we'll come on to later.

The Euronav balance sheet remained robust as shown on slide 6. This quarter, there is very little to report with only one asset sale, the VLCC V.K. Eddie, which we sold for conversion into an offshore project during Q3 for a very healthy premium.

Leverage remains in the mid 40% range, compared to our target of 50%.

That concludes the financial section of the earnings call and I will now pass back to Brian. Thank you very much.

Brian Gallagher -- Head of Investor Relations and Communications

Thanks, Hugo. Turning now to slide 7, I would now like to take a look at a number of key signals we are currently seeing from the tanker market.

Firstly, a topic that many investors are looking for -- consolidation. The tanker market is highly fragmented and a complaint from many observers is a lack of consolidation. However, this process is already happening. It's only 16 months since we completed our merger with Gener8 Maritime and, during Q3, we saw further commercial consolidation with the announcement of three additional owners opting to place their VLCCs, some of them scrubber fitted, into the Tankers International platform. This will see the TI structure have over 70 VLCCs under its umbrella when these vessels are all delivered.

This low risk and tangible form of consolidation should provide more discipline for the tanker tonnage as it faces the longer-term demand challenges and implementation of IMO regulations. Further development of the platform at TI is something we look forward to and to encourage.

Turning to the fundamental foundations of our sector. On slide 8, it illustrates the short-term role that has been played by short-term storage as a catalyst in our market. Slide 8 firstly shows the one-year VLCC TCEs since 2015. And this illustrates the challenging market in particular during 2018.

However, this was helped with an adjustment in the global fleet of nearly 50 VLCC equivalents leaving the fleet during 2018. This rebalancing has helped underpin freight rates at better levels during this current calendar year, with pockets of counter seasonal strength in Q1 and lately in Q3.

If we move on to slide 9, you can see that this market background has been augmented by IMO 2020 induced storage, with the requirements of around about 30 VLCCs leaving the global fleet to store various grades of fuel oil. This short-term development has helped drive the freight market along with a better outlook and picture for second-half demand for crude. The key point here that this has come out on top of the foundations already set in place in the tanker market that Hugo spoke of earlier.

If we progress to the following slide, on slide 10, the pockets of freight rate strength reflect a finely balanced market that the catalyst of storage restricting vessel supply has driven rates even further in Q4 into positive trading. This has been further boosted by the longer-term fundamentals of limited fleet growth looking forward over the next two years. And with the order book below 10% and at a 25-year low and a fleet age profile not replicated since the mid-2000s, this is a positive background.

Every year for the next seven years, there will be at least 25 VLCCs hitting 20 years of age, adding further pressure for the fleet to reduce in size, providing good candidates to be recycled and to rebalance the market in case of freight rate weakness. These fundamentals give Euronav the confidence that there are market conditions for a sustained rally in freight rates over the coming quarters. However, this does require continued restraint in vessel ordering and demand for, and supply of, crude not being impacted by trade tensions or further production cuts.

Finally, on this section on slide 11, we showed a short-term picture and in particular the VLCC freight rates and how quickly they rose to a very high level as a number of short-term temporary factors all combined in a short period of time to produce a perfect set conditions to push freight rates to unsustainable levels. These factors all remain in place to varying degree and may return over the coming winter period and beyond.

However, it would be incorrect to look at these very elevated levels which have persisted for a short period as a real focus. The key focus in our view is the fact that freight rates have been boosted to profitable levels based on solid foundations. These fundamentals have credentials to remain in place for a sustained period, albeit tanker markets will always remain open to seasonal trading patterns, given the way crude has moved around the world during the year.

No quarterly results call will be complete without a slide on IMO 2020 and we provide ours on slide 12. A number of commentators have [Indecipherable] our decision to purchase in high-volume low-sulfur compliant fuel ahead of January 2020. We very carefully undertook this decision in order to reduce the risk to our business and in order to provide a safe, secure source of supply of tested fuel during what we believe will be a very volatile period as IMO 2020 is finally implemented.

As our seminar on September 5 made clear, this compliant fuel has been purchased at a very competitive price, around $100 below the current retail price in Singapore where our ULCC, the Oceania, is storing the fuel. We have already begun to deploy this fuel on to our fleet and in preparation of January 2020 and we've been able to benefit from this cheap feedstock to be consumed when IMO is finally implemented from Q1 onwards.

This means that for our vessels performing long voyages, the fuel needs to be purchased today and stored in separate bunker tanks in order to be ready for switching on or just before 1st January, 2020.

To sum up, we now move on to the outlook slide on slide 13 and an upgrade to our traffic light system. We maintain, on slide 13, our constructive stance on the tanker cycle into 2020 and reflect this by upgrading our vessel supply sector to amber/green as highlighted in slide 13.

The rationale for this stems from a view that some of the vessel storing fuel oil will not return in full to the trading fleet and that retrofits are now likely to persist longer into 2020 as owners avoid retrofitting during an anticipated strong winter freight rate season.

The other fundamentals of demand, oil supply, ton miles and our own current balance sheet remain as they were.

With that, I conclude our prepared remarks and pass back to the operator. Thank you.

Questions and Answers:

Operator

We will now begin the question-and-answer session.

[Operator Instructions]

The first question comes from the line of Jon Chappell with Evercore. Please go ahead.

Jonathan Chappell -- Evercore ISI -- Analyst

Thank you. Good afternoon, guys.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Hi, Jon.

Jonathan Chappell -- Evercore ISI -- Analyst

Hugo, the first question is around the new dividend policy and just some clarification around that. So, when you say you can start paying the quarterly dividend in 2020, should we expect that to mean the dividend off the 4Q results and will that be based strictly on 4Q? Or will that still be the aggregation of 3Q and 4Q?

And then also, there is no kind of payout ratio or update. I know, in the last cycle, you were at 1.80% payout ratio. I think you were down to 1.60% at one point. What's the target distribution ratio as you think about entering next year?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yeah, thank you for those two questions. The first one is a little bit mechanic, and so the law in Belgium is only changing in 2020. So, we're talking about quarterly dividends in 2020. So, Q3 and Q4 will still be consolidated in that regard.

The second one is, we have a dividend policy out there. In the last cycle, we had a dividend policy, distributing 80% of our earnings. And then, we change it to make sure that we could still distribute some sort of dividend even when we were in loss making territory, which we did, and that's the minimum dividend. Above that, any extraordinary dividend can be distributed. And you've seen that we have done a little bit more share buyback than what we have done in the history of the company. And the choice will always be there between dividends and share buybacks. So, it really depends on where the share price is. But, nevertheless, a big chunk of the earnings will be distributed as dividend and we know it is very important for our shareholders.

We don't want to set a percentage because we still want to have the flexibility between those two. And as of a total payout, we'll be generous. If you look at our history of 15 years, history of public company, we have always been very generous. And, obviously, when you look at the balance sheet and when you look at our current leverage, there is no reason to use any of those earnings to decrease the leverage as it is slow enough and, to a certain extent, maybe too low.

Jonathan Chappell -- Evercore ISI -- Analyst

Okay. I understand that. Thanks, Hugo. The second one is on a little bit of the timing of the IMO strategy. And Brian said that you've already started to deploy some of your inventory. So, I think in the September 5th update, you had said that roughly half of your bunk requirements for next year would be met by the inventory that you've already built up. Is that still the case? Should we think kind of through the first two months of next year or is that maybe a little less since you started to deploy it already?

And then, another part B, sorry, do you anticipate building more inventory either in that ULCC or another or do you feel that you've already kind of taken advantage of the price arbitrage and now you're just going to run down what you've already aggregated?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, the first question, we have started bunkering some vessels that are currently passing by Singapore. As you know, the Oceania is located not very far from Singapore. And it's an ideal location. Very safe where we can do those operations. The first time that we are doing that on our own and for our own oil fleet. We have dedicated parts to do that, to make sure that there is no contamination. And we will continue to do that until the end of the year and then, obviously, next year.

It's not because we're starting to bunkering now that it will limit the amount of bunkers we use in time. So, when we say six months, because we're not going to start using those bunkers ahead of the deadline, maybe a little bit ahead of deadline, you want to make sure that you run out of HFO and switch to LSFO as close as possible to the 31st of December. But that does not change the amount that we will consume over the first six months.

And then last, but not least, could be a little bit more than six months because, obviously, not all the ships -- fleet are passing by Singapore all the time. But we will try to maximize it. We believe that it's really the initial few months, probably Q1, Q2, maybe Q3, that are the most at risk in terms of price volatility and also price quality because it is a new fuel. So, that's really what we wanted to be protective against.

Now, going on to your second question, we have learned a lot about bunker procurement, to be honest. We want to complete the circle, i.e. we report it in one place, we transport it in another place, we're now bunkering the fleet, we want to make sure that everything is working fine before potentially moving to a more stable operation which will probably mean that we're using that ship or maybe more on a permanent basis because there's certainly one advantage in doing what we have done, and that advantage is volume discount. So, we will probably continue to do that, but let's make sure that we complete the circle, the first -- well, cycle and that everything runs smoothly. The focus point is still there for the moment.

Jonathan Chappell -- Evercore ISI -- Analyst

All right. That's insightful. Thank you so much, Hugo.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

The next question is from the line of Mike Webber with Webber Research. Please go ahead.

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Hey, good morning, guys. How are you?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Hi, Mike. Very well. And you?

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Good, good. I just wanted to maybe piggyback on some market questions following Jon's stuff on the dividend. Your slide on VLCC storage is interesting and kind of helping to set the table for a pretty tight dynamic into Q4. I'm just curious, if you go -- with 30 VLCCs in storage now. I guess, how and when do you think that ultimately peaks? I know that's a difficult question to answer on the back end, but is that a number in terms of kind of baseline storage to handle that oil fuel transition? Do you think that number peaks in Q1 of next year? Do you think it could extend further out?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, to a certain extent, it's linked to previous question. It's about LSFO, HSFO price stability and, to a certain extent, flexibility [Phonetic]. I think people will use tonnage and the bigger the better, i.e. VLCCs or maybe Suezmax to store LSFO ahead of the deadline. And then, right after that, HSFO, but it is quite difficult for a refinery to plan and be completely accurate on the demand that they are going to receive, and especially on the location of that demand.

So, I think that it's very much linked to where we're going with the fuel. And there is another dimension, of course, now that the market is doing so well. There is some people, if not a lot of people, certainly in our segment that have postponed the retrofit of scrubbers, which means that you have part of the HSFO demand that has been eliminated and more LSFO demand that have been added on. So, it's an equation with many unknowns.

And again, I can only repeat myself, the reason why we've done this, we have accumulated at least six months of fuel, is not to be trapped in a very volatile market and knowing exactly what we have purchased in terms of quality and at what price, of course. Then you will need to look at the oil market, which is your market -- it's also from time-to-time requiring storage and God knows where the price of the oil is going and is going to go next year. So, unfortunately, I cannot be more accurate than that.

Historically, there's always been some ships being taken on storage. But let's not forget that the first candidate to perform that service are the older part of the fleet, which is good news because once you have performed storage contracts, especially if it's over several months, it's more difficult to bring your ship back into the trading fleet because you have no vetting, and so your ship is usually not easily acceptable. And having a ship that is standstill is not particularly good for that shipbuilder.

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Got you. Okay, that's helpful. For the follow-up, I guess maybe one a bit more in the weeds, but you made a point to call out TI as kind of the factor of consolidation on slide 7. Late last night, or I guess earlier this morning, there's some news out around another competing pool that's kind of bidding tonnage. So, I guess, my question as it pertains to TI and IMO 2020, I think the last time we spoke about this, it's still a bit up in the air, but in terms of differentiation -- I guess, maybe why I would ask is, is there a standardization among major pools around how they're treating pool points for scrubber equipped and non-equipped vessels and is there an opportunity to differentiate TI from a flexibility standpoint in terms of attracting new tonnage over the next year, year-and-a-half because of maybe kind of a well thought-out, flexible point system to accommodate kind of multiple classes of vessels?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, I'm not entirely familiar with what they are doing in other pools. I can only speak about TI. And at TI, the decisions that we have made was to split the accounting side of the pool. So, we're not attributing pool points to vessel with srubbers. We're simply saying, OK, it's one pool, one manager, but splitting two different sub pool, one for scrubber-fitted vessels and one for non-scrubber fitted vessels, it's very important that all those vessels are under the same hat. And that's the reason why we have pushed the pool to attract new members, even though those new members had a scrubber. Last year, I think hat Euronav was more portrayed as a non-scrubber and, therefore, the pool was portrayed as non-scrubber only. So, that's a big change. But it's not very difficult.

And the consolidation is important. And if you can't do it on the M&A front, it's very important that you do it on the commercial front. And to that extent, we welcome other pools because, if there are other pools, it means further consolidation. It's good for the market. It's good for us.

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Right.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

We believe that TI is the best pool and that's the reason why we put our ships in it. We don't own the pool. We don't get any earnings from the pool, and that's one of the biggest benefit of the pool. It's owner's pool, i.e. it's a cost center. So, you're not adding a layer of brokerage fees to your earnings and for us it's very important.

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Got you. Okay, that's helpful. Appreciate the time, guys. Thanks.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

The next question is from the line of Randy Giveans with Jefferies. Please go ahead.

Randy Giveans -- Jefferies -- Analyst

Hi, gentlemen. How is it going?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Hi, Randy. Very well. You?

Randy Giveans -- Jefferies -- Analyst

That's brilliant. Good, good. All right. So, on slide 8, you showed the one-year time charter and kind of rates. We're also hearing of one-year time charter rates of higher than kind of these charts of $50,000, maybe even $60,000 for some eco VLCCs without scrubbers. So, I guess, have you gotten any bids for some of your vessels at the $50,000 plus range for one year time charter? And then, if so, will you look to lock away some of your vessels on those time charters either for one year or maybe three years?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

We've not seen that. I think that there was one ship being done at $46,000 and that was for three years. And the one that has been rumored to be done above $50,000, to my knowledge, it's not been confirmed. Maybe it has, maybe it has not. There are very, very few of those available. I think if it's for one year, we are a little bit more optimistic than that. So, the answer is no. If it's for three years, above $50,000, yes, we would definitely consider it. I mean, we have sent some vessels. And if we were not considering locking some of those under such a good rate, then we would be too greedy. And, unfortunately, greediness very often leads to a wall, a brick wall. So, yes, but we haven't seen it and more than one year.

Randy Giveans -- Jefferies -- Analyst

More than one year, OK. That's fair. And then, I guess, on your specific fleet, following the sale of the Eddie, you still have, I guess, one VLCC built in 2005, maybe five Suezmaxes over 15 years of age. At the same time, you mentioned kind of ongoing consolidation. So, do you plan on selling some of these remaining older vessels in the coming quarters and replacing them with more modern tonnage or kind of where do you see your fleet over the next year, maybe current levels, smaller, larger?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, everything, as you said, is true as far as the vintage of our fleet is concerned, but they are not that old either. Certainly, the TI Hellas, which is a 2005 built, is not yet 15 years. She will become 15 years next year. And I guess that all those vessels that you mentioned and we have a few Suezmax which are slightly over 15 years are candidates to be sold, but we're never desperate. And when the market is that good, it either commands a better price as a sales candidate or we keep it and we enjoy the market.

Randy Giveans -- Jefferies -- Analyst

Okay. And then, in terms of -- OK, so the fleet could go out...

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yeah. That's on the sales side. I think that, on the acquisition side, you know how opportunistic we are. If you're talking about a fleet -- if it's an acquisition, we think that the values are getting a little bit too high for our appetite. If it's a merger, it all depends on whether your share price is good.

Randy Giveans -- Jefferies -- Analyst

Sure. Okay. Thanks again. And congrats on a solid quarter.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

Our next question is from the line of Amit Mehrotra with Deutsche Bank. Please go ahead.

Chris Snyder -- Deutsche Bank -- Analyst

Hey, this is Chris on for Amit. So, the first question is on the physical market. Earlier this month, Sinopec, the China's largest refinery, announced it was going to reduce operations in response to higher freight rates. But recent data shows that Chinese crude imports were actually moving higher throughout the month and coming in at near-record high levels. Can you maybe just talk about what you're seeing here because there appears to be a disconnect?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

We are seeing exactly the way you describe it, which means that we live in a world where you can make some declaration and not follow it through. But I have to admit that they made the declaration when the market was supposed to be at $250,000 or even $300,000 a day. All those features were failed in the end. And I guess that their comments came up at that moment in time.

Today, the market is probably more between $80,000 and $120,000 depending on where you trade your ships. And that might be the reason why they have reengaged in the market and indeed booked a lot of vessels and having brought a lot of oil.

Chris Snyder -- Deutsche Bank -- Analyst

Yeah, makes sense. Thanks for the color. And then, just next question, can you maybe talk a little bit about the impact of IMO just as it relates to global crude oil demand? It feels like there could have been a headwind into 2019 demand as we've just seen elevated global refinery maintenance. And then, for 2020, potentially a tailwind with more waste in the refining process. Can you provide any context to this or how you guys think about this shaking out?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

We're not a refinery. So, we can only tell you what we heard in the markets. But God knows that we have visited a lot of refineries. And they pretty much all told us the same. They anticipate that they will do additional runs to produce all the material that is required in the market, including LSFO. And the best estimate that we have seen range between an additional 400,000 barrels on the low side to 700,000 barrels additional today on the high side. And I suppose the truth will be a little bit in the middle. Now, it also depends on the oil price itself.

We don't believe that there's going to be a lot of material stranded. Obviously, there's going to be a period during which price needs to be adjusted according to the demand, but as I explained on the first question, it's a moving target which is, as people have postponed their scrubber retrofit, it means that we'll have probably a little bit more demand on the LSFO initially, actually more than anticipated, but very quickly it will catch up with what was planned. And so, it will provide opportunities for ships to be used as storage. But I don't think that it will mean that the demand for oil by those refineries will go down.

Chris Snyder -- Deutsche Bank -- Analyst

And then, have you guys seen anything in 2019? Obviously, like, oil demand in 2019 has been pretty soft. There's a lot of kind of factors at play. But just has this elevated global refinery maintenance year-to-date had any impact from what you guys are seeing?

Brian Gallagher -- Head of Investor Relations and Communications

Maybe, Chris, if I can jump in there. It's Brian Gallagher here. I was just going to mention -- I think we've seen that in Q2 and Q3. And I think that's the point we wanted to try and make in our prepared remarks, in that we did have a pretty respectable market in Q1 and Q4 of last year, $35,000 a day. And as we went into September and early October, again, we had a good market and a good setup for the winter program. I think it's been that refinery maintenance program which has been very, very prolonged and also more assertive and more aggressive than we were all anticipating. And that's been almost certainly the key driver where we've had reasonably challenging markets in Q2 and Q3. I say challenging, we were still -- while it was slightly loss making as we reported today, the fact that underlying that the market has had some sort of a reasonable balance between demand and supply. So, our view would be, is that Q2 and Q3, what you saw was very much driven by the refiners, and now that they're back in play and now ready for IMO 2020.

Chris Snyder -- Deutsche Bank -- Analyst

I appreciate the color. That's it from me. Thanks for the time, guys.

Operator

The next question is from the line of Ben Nolan with Stifel. Please go ahead.

Ben Nolan -- Stifel -- Analyst

Thanks. Good afternoon, Hugo and Brian. So, I have -- well, my first question, You touched, Hugo, on this a little bit, I think, on Randy's question. But there's been clearly some noise in the market about owners who have placed new buildings, who are looking to sell those assets. Curious, and it sounds like there -- the ask price is a bit too high for you. But how do you think about that more broadly as some of these speculative newbuilds look to be sold? Is that something that you would be interested in doing at some point?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

It's very difficult to be accurate. Yes, there is a number of VLCCs, particularly the VLCCs which have been built speculatively, those vessels were earmarked for sale. Some of them have been sold. But you have to recognize that most of those, well, speculative units had been -- are starting to be operated in proper companies. The pool is welcoming two of those in the name of Hunter and Hartree, and that's because they have equipped themselves with the necessary people, management systems in order to operate them. So, I don't think that they are desperate. And who knows, maybe they want to become shipowners themselves. So, it's quite difficult to read who wants what.

It's true that once the vessel -- and I think there was a rumor in the market today that one of those had been sold at way above $105 million. It's true that, for us, it's probably on the very expensive side. If it's a fleet, you can pay with shares. Your share price is potentially trading at a premium to NAV, then it's something different. Actually, now, we always look -- we always take care of our shareholders, our existing shareholders, and we want to make sure that whatever we do, we create value. But there is always a limit to the price that we are willing to pay.

Ben Nolan -- Stifel -- Analyst

Okay. No, that's helpful. Certainly, that discipline is something that you've shown in the past. My next question shifts a little bit. It sort of ties in with the quarterly dividends, which I think at least in the US many people will appreciate. But in the past, you guys have in periods of strength done the special dividend, that sort of thing. It looks like 4Q, based on the rates that you've locked in thus far and where the market is now, it should be one of those periods of time when things are pretty good. You mentioned earlier that the balance sheet is appropriately or maybe even under-levered. If there is a windfall quarter or a couple of quarters, is special dividend sort of on the table or how are you thinking about the use of your capital beyond just the normal quarterly dividend?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yes, of course. Whether you call them special dividends or extraordinary dividends, we're going to look at them on a quarterly basis going forward. As I mentioned earlier in this call, this is true for 2020 because the law is only changing on 1 January. So, as far as Q3, that obviously remain the laws [Phonetic] And Q4 are concerned, that will be the way we've done it in the past.

Ben Nolan -- Stifel -- Analyst

Okay, all right. Thank you, Hugo.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

The next question is from the line of Omar Nokta with Clarksons. Please go ahead.

Omar Nokta -- Clarksons -- Analyst

Hi there. Hi, Hugo. Hi, Brian.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Morning, Omar.

Omar Nokta -- Clarksons -- Analyst

Yeah, just wanted to just maybe revisit the ULCC being used for storage of low-sulfur fuel. You've discussed, I'd say, extensively on the call and in the September 5th announcement as well that, during the next two to three quarters, or at least the first two to three quarters of 2020, there is a lot of uncertainty of supply. Generally, over the past few weeks, there has been some reports that the concern over availability of the low-sulfur fuel is maybe overblown and that the market may be OK. That's, obviously, in stark contrast to where things were six months ago. Of course, we're not going to really know ultimately until we get into January and have a better sense.

But as we kind of think about it from Euronav's perspective, you've got an embedded gain in that bunker fuel. You've got a lot of working capital tied up with that. Does it make sense at all if we get to the January timeframe and, sure enough, there is a good amount of supply available at the low-sulfur fuel? Does it make sense to accelerate that discharge or sell as much as possible that fuel and maybe bring that ULCC back into the trading market?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yeah. So, in fact, there are two questions there. The first one is clearly not. We are not traders and we did not do that to speculate. We did that primarily because we were worried about quality. And, yes, there seems to have certain quantities of benefit for they had been stockpiled either on land or on the ships. But that doesn't tell us anything about the quality. So, again, the first few months are going to be about the availability, the quality, but also the pricing. At the moment, we're sitting on a product that is definitely in the money. We are happy about that. That was not the primary goal. I don't know where the pricing will go. And I don't know in which location -- it may go up or down. Obviously, we are in only one location, but we can always swap product if we see that pricing are going all over the place in another region.

As far as the vessel is concerned, it's a very good question. I'm very happy that you asked because we have had it in the past and we've not been able to explain that thoroughly to the markets. We're talking here about the ULCCs. A ULCC can carry 3 million barrels. They were built in 2002. We acquired them in 2004 and we traded them or we used them as trading ships until 2008.

After 2008, two were converting to FSO and the other two were only used as storage units. So, they have not been part of the trading fleet. And the reason is that the market structure is not made for 3 million barrel lots. So, we are not missing out on those vessels of the goods markets that we're seeing on the VLCCs, on the Suezmax.

The top that we have earned on those two units -- well, in fact, one because we only bought the other one last year -- in the last 10 years, since 2008, must be in the low 30s. So, our cost of -- lost opportunity is very minimal. And we have calculated that when we were thinking about using those vessels, and that's maybe also one of the reason why we are not using VLCCs and our Suezmax.

Omar Nokta -- Clarksons -- Analyst

Okay, thank you. That makes sense. And I didn't realize actually that the ULCC hadn't traded in the VL market since '08. So, thanks for that. I do have just a follow-up. On the guidance for the fourth quarter, obviously, VLCCs looked generally, I'd say, firm, especially relative to what we've seen in the past and how the markets average. But when we think about the Suezmaxes at $27,300, how do you feel about that? It seems a bit lighter than what we would have expected. I know we're somewhat in unchartered territory here. The past several weeks where rates that we've seen reported don't actually end up coming into fruition. But how do you think about the $27,000? Is that really what you would say is reflective of where the market average has been? Or do you think there is something else?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, I think we would tend to agree with you that we are a little bit disappointed on the Suezmax front. But you're also correct to say that, in the last few weeks, the Suezmax market has rebounded and has caught up with with the VLCCs, relatively speaking, of course. So, I think it's too early to draw conclusions. Let's not forget that, in the market, we see a lot more new building deliveries last year. Did not recycle as many ships as what we have recylced on the VLCC. But, conversely, the order book is so much smaller than the VLCC which is already at historically low levels, around 9% as we've shown on the slide.

So, it's true that we have not given you those data point, but I'm sure you have them. The order book on the Suezmax, it's even more attractive than on the VLCC. So, if there was a disconnect with the VLCC market, I believe that you have to look at it over more than a few weeks and potentially more than a quarter because it's a market that can come back in 2019. As I mentioned, has come back already.

Ben Nolan -- Stifel -- Analyst

Got it. Okay. Thanks, Hugo, for that. Appreciate it.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

The next question is from the line of Eirik Haavaldsen with Pareto Securities. Please go ahead.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Yeah, hi. Thank you. I just wanted to follow up a little bit on the capital allocation because I think that's sort of the key theme in 2020. So, you have the most conservative depreciation profile which, in a way, punishes a little bit your net profit. So, is there any reason not to expect you to pay out more than your full earnings next year because you say you're not going to pay down debt, you're not going to buy ships? Then, where will sort of the cash go?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

It's a very good question, but you will have to wait until we cross those quarters and tell you how much we're going to pay. I think that it's for purpose that we have not limit ourselves to a certain percentage and that we are a little bit more flexible than in the past between share buyback and dividends.

But when it comes to depreciation, it's a funny game because, yes, we are maybe a little bit more conservative than the others, but when we sell the assets, obviously, we depreciate it more than the others. So, we are catching all of those profits back at the time of selling those vessels. And you will recognize, hopefully, that we're not that bad at selling. And, usually, the profit that comes with the sales is pretty healthy.

So, I don't think it's a real point. When you have a fleet of 70 vessels, you're probably selling a few -- a couple of them or a few of them every year. And when you do, you're catching back on your depreciation policy. We are discussing the depreciation policy with the board and we feel very, very comfortable about it. So, we will continue and maintain the depreciation policy.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Yeah. But you're completely obviously then -- I understand and aware of the difference between cash flow and net profit, obviously, and I think the investors should be as well. But just also, on slide 12, you have current HSFO price in Singapore at $545 a tonne. I just wonder...

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

LSFO. LSFO.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Okay. It's LSFO. Because it says HSFO. But then it's misspelt [Phonetic] Okay, thank you.

Unidentified Speaker

Apologies for this mistake. Absolutely. It's LSFO. And it's -- well, it's the price that people are paying when they want to bunker their ships in Singapore. And many people are doing that at the moment. So, the demand is picking up because, on the large vessels, and that's maybe something that people don't understand, for the large vessels, if you want to have LSFO onboard, and obviously you have to have LSFO onboard for the end of the year. If you're starting to perform a long voyage, you better book it now.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Yeah. Perfect. Thank you. Hugo.

Operator

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

Gregory Lewis -- BTIG -- Analyst

Yeah, hi. Thank you and good afternoon.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Hi, Greg.

Gregory Lewis -- BTIG -- Analyst

I was hoping to talk a little bit more about the Suezmax market. I remember going back to the webinar presentation. You talked about potential new routes developing for Suezmaxes around IMO 2020. Is that something that you've seen at all or is that something that kind of it's still more of a wait and see?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

We've seen some of them. They've not been long-term trades. Certainly not as much as the VLCCs going out of the Gulf and going to the Far East. There is a lot of demand coming from Europe for whatever is exported from the US and we anticipate that that will continue because the European refineries are not very sophisticated, i.e. they will probably demand more light oil than what they have done in the past.

It's in addition to what we have. Two, three years ago, we had no export from the US. There are other trading routes that we anticipate could develop. It's probably a little bit too soon. But, again, I think that we are drawing conclusion a little bit too fast here. As I mentioned, the market has cooled up. There's a strong correlation with the VLCC market and the strong correlation is coming from the fact that two Suezmax is one VLCC.

So, if the VLCC market is too high, then you switch your cargo and you use two Suezmax. So, there is always correlation between the two markets. And, thankfully, we have seen that it's the Suezmax who has gone up rather than the VLCC being taken down by the Suezmax, and that's very positive.

Gregory Lewis -- BTIG -- Analyst

Okay, thank you very much.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you, Greg.

Operator

The next question is from the line of Chris Wetherbee with Citi. Please go ahead.

James Monigan -- Citigroup -- Analyst

Hi. It's James on for Chris. Wanted to follow up on that speculative newbuild question and ask about the current vessel technology. Are you confident that newbuild vessel today will meet regulations that might come down the line over the next decade or is that a risk that you think might continue to curtail the order book?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

It's a very good question. And as far as we're concerned, and I suppose everybody has the same topic in their mind, the short answer is, we don't know. Everybody believes today that LNG will be at least a transition and that the yards are telling us that, as of 2022, they will only start LNG-used-as-fuel VLCC, and then we'll have to wait what the next technology is about.

Today, the biggest problem that we all have is that comes at a premium, and that premium is $16 million. So, if you set a new building, a conventional VLCC new building at $90 million or $92 million, you have to add $14 million or $15 million if you want that ship to be able to use LNG. And it's a significant premium.

So, in order to justify, either you need to make sure that the fuel you're going to use -- in other words, the LNG price is going to come at a big discount to the LSFO or you sign a time charter which recognize that your ship is capable of using LNG as a fuel. And in other words, it's time charter that comes at a premium over a conventional vessel. As long as it stays such a big premium, it should refrain a lot of people ordering conventional vessels because they have no idea whether that vessel when it gets delivered -- and there are only a few slots in 2021. So, we're already contemplating the early slots of '22. So, when those vessels are delivered, whether it's still going to be the technology that is accepted for a new building. And on the other side, the guys that want to jump on the board of the LNG fuel VLCC vessels are a bit reluctant to pay that premium. So, we will see how the market evolves. But we are pretty confident that it will indeed restrain a lot of people until either one of those gets more clarity or cheaper.

James Monigan -- Citigroup -- Analyst

Yeah. Thank you.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you.

Operator

The next question is from the line of George Burmann with Cabot Lodge Securities. Please go ahead.

George Burmann -- Cabot Lodge Securities -- Analyst

Good afternoon. Thanks for taking my question.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

You're welcome.

Brian Gallagher -- Head of Investor Relations and Communications

Hi, George.

George Burmann -- Cabot Lodge Securities -- Analyst

Glad you clarified slide 12. It's not the high sulfur, but the low-sulfur fuel oil trading at the $545 right now and your procurement apparently was around $445. So, you're up about a 100 bucks a tonne there?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yeah, that's correct. [Indecipherable]

George Burmann -- Cabot Lodge Securities -- Analyst

The unexpectedly low procurement rate for your Suezmaxes here into the fourth quarter, is that partially due to most of your fleet having been on voyages when weights exploded higher here the last couple of weeks?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Well, we will need to see what the others are doing on this Suezmax. To answer your question, yes, a lot of them were performing voyages, as they should, because we like to utilize and to maximize the utilization of our ships. But it's also true that a lot of fixtures which were done at very high rates were cancelled. So, the first market that picked up was the VLCC, then the Suezmax caught up. But with the delay and what we see happening in the VLCC market in a lot of those fixtures between $250,000 and $300,000 being failed, as we call it, we had the same phenomenon happening on the Suezmax. And so, I think it's a question of starting later and then being caught in the window of cancelling those fixtures, rather than not being able to pick up any of those good grades.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay. Has the continued export strength from the United States, Houston, Corpus Christi continued into the third and fourth quarter? Or have you seen a slowdown there due to lower Chinese imports?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

No, we have not seen...

Brian Gallagher -- Head of Investor Relations and Communications

[Indecipherable]. No, George. I think it was last week, we saw a new $3.7 million mark. So, we still anticipate we'll have a $4 million mark sometime in this quarter. So, no, we continue to see growth. The recent panels we're appearing on would suggest that Corpus Christi is really driving that growth.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay. And...

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Sorry, just to add one element, the reason why your'e asking the question is because we have seen in some reports or in some press articles that the growth rate was diminishing, but that's very different than the nominal growth, of course. If you have a growth rate of 10% or 15% year-on-year, and suddenly, instead of 15%, you only have 10%, you nevertheless continue to see a growth pattern. And that's what we're seeing.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay. And your Suezmaxes, are they individually managed by yourself or are they in a pool as well?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

No, they are individually managed by our Suezmax desk, which is an in-house operation indeed.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay. And Suezes are the primary source of exports from the US since they can only -- I think one port can only accommodate VLCCs, right? Everything else has to be ship to ship transferred offshore.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yes, which does not seem to be a problem. I think that when the distance is long enough, then it's still more economical to lightering. Lightering means that you're bringing the oil to the VLCC with another smaller ship. It could be an Aframax or a Suezmax. And that's the reason why there are, well, a lot of VLCCs leaving the US Gulf Coast and going to the Far East.

When it goes to Europe, it's true that it is more of a Suezmax trade and, therefore, Suezmax have been used and the Suezmax don't need to be lightered. So, it's a less complicated operation.

George Burmann -- Cabot Lodge Securities -- Analyst

And then, maybe one final one. Comment on the export capacities and volumes out of Brazil currently. Recently, Petrobras there, big oil company, announced strong oil volumes. Have you seen any pickup there in exports into the world?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yes, definitely. As a matter of fact, when we talk about the export from the Atlantic, most of the time we talk about the Americas and the Americas -- and we call it carried because that's -- in our jargon, it's usually called carried Far East. But carried means oil stretching from Brazil up to the East Coast of the US, be it in Gulf or be it really on the East coast. So, that captures all of it.

And it's true that the Brazilian had announced an increase in production. Most of that production is offshore. So, it's something that is planned many, many years in advance and it requires a pretty heavy investment. And it came online a little bit delayed compared to what they had told the market. But nevertheless, it's a very -- it's a growing market and a very interesting market to lift oil from.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay. And the carry trade, as you call it, from the Americas to the east, remind me, that generally takes between 60 and 90 days?

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Yes. It depends where you are leaving from. Most of it, if not all of it, is going around Africa as the Suezmax canal is limited to a Suezmax size. And, yes, it could be between 70 and 90 days indeed.

George Burmann -- Cabot Lodge Securities -- Analyst

Okay, great. Thanks very much. And look forward to a great fourth quarter for you guys.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Thank you. We too.

Operator

This concludes our question-and-answer session. I would like to turn the conference over back to Mr. Hugo De Stoop for any closing remarks. Thank you.

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

I just would like to thank everyone who was on the call and for all the good questions and looking forward to the next one, which hopefully will bring even more good news. Thank you. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Brian Gallagher -- Head of Investor Relations and Communications

Hugo De Stoop -- Chief Executive Officer and Interim Chief Financial Officer

Unidentified Speaker

Jonathan Chappell -- Evercore ISI -- Analyst

Michael Webber -- Webber Research & Advisory LLC -- Analyst

Randy Giveans -- Jefferies -- Analyst

Chris Snyder -- Deutsche Bank -- Analyst

Ben Nolan -- Stifel -- Analyst

Omar Nokta -- Clarksons -- Analyst

Eirik Haavaldsen -- Pareto Securities -- Analyst

Gregory Lewis -- BTIG -- Analyst

James Monigan -- Citigroup -- Analyst

George Burmann -- Cabot Lodge Securities -- Analyst

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