Euronav to Write Down Value of its VLSFO Stockpile

Euronav owns two ULCCs. Image Credit: Euronav

Euronav today warned it will have to write down the value of its stockpile of IMO2020 compliant bunker fuel.

Oil and bunker prices have cratered in recent weeks, with Ship & Bunker's Global 20 Ports average VLSFO price falling from $672/mt on January 1, 2020 to $274.50/mt on Monday.

"The LSFO ... which has not been consumed yet will be subject to a mark to market valuation at the end of the first quarter and will lead to a write down as the current market is significantly below the acquisition cost," Euronav said in a press release today following the release of its 2019 full year financials.

"Euronav is currently using cheaper feedstock from buying LSFO in the open market."

In an update last September, Euronav said it had purchased 420,000 metric tonnes of compliant fuel - enough to supply its 72 vessels for about six months - paying an average price of $447/mt for VLSFO compared to 400/mt for HSFO.

What has not been revealed is how much of that stockpile has been consumed, and thus the size of the write down is currently unclear.

"It would be reasonable to assume that what appeared, at the time, to be an impressively bold purchasing strategy to ensure VLSFO supply would be supported by the necessary hedges," Adrian Tolson, Director, BLUE Insight Lead, told Ship & Bunker.

"While it appears there will have to be a write down of the inventory value at the end of Q1, whether this is a genuine loss will depend of the benefit of any hedges that may be realized at a future date."

Euronav says it will provide more detail on the situation with the publication of its Q1 results in
May.