Euronav’s Hugo De Stoop has shed more light on how a bigger combined tanker operation with John Fredriksen’s Frontline could unlock major efficiencies and cost savings.

As work continues on merging the two VLCC and suezmax specialists, the chief executive told a conference call that Euronav obviously expects significant synergies in different parts of the business.

“I think on the revenue side, it is about utilisation,” he added. “And so, when you think about traditional shipping, we usually carry over from production base to the refineries and then we come back empty.

“But obviously, the bigger the fleet, the more optionality you have on triangulation and these sort of things.”

The next logical area for savings is general and administrative expenses, but De Stoop does not expect many synergies to be found here, as the two companies are “structured in very different ways”.

Frontline outsources parts of its operation, whereas Euronav is “more vertically integrated, and the model that we are thinking of is a combination of both”, he added.

On the operating expense side, procurement costs will be key.

De Stoop said economies of scale will come into play here.

“You are dealing with more volume in pretty much everything that you buy. There are some bigger elements than others when you think about the fuel that we buy,” he told the call.

A numbers game

“So obviously, this is a numbers game. And as always, if you are a more important client for your service providers, then you can bargain a better price.”

The financing element will also be important.

“We believe that the platform will be very attractive to many people providing capital to companies, especially on the debt side. And here I am thinking about the banking side, but also the bond side, which should benefit from an even better credit rating,” he said.

The Belgian owner is not yet putting a figure on any of these savings, but its boss promised to return to the market with a “hard number”, even though that itself will still be an estimate.

“So it’s too early to have numbers, but we are working and crunching the numbers and will communicate that in due course. And certainly, ahead of a merger proposal, that will be put before both sets of shareholders,” he said.

Euronav faces a key shareholder vote on 19 May, at which its own board nominations will go up against those of the Saverys family, the biggest shareholder.

The current board backs the Frontline deal, but the Saverys clan wants to combine Euronav with its own zero-carbon shipowning operation CMB.Tech instead.

Under the proposed all-share deal, Euronav would own 59% and Frontline 41% of the combined group.

Analysts sought more clarity on how that ratio was arrived at.

De Stoop said: “I think that we didn’t really want to come to market with the calculation behind it. That was a result of the negotiation.

“In the end, it is a relatively simple calculation, because we have hard assets — ships, namely — and then we have a certain amount of debt, and that gives you the NAV [net asset value] number, and that is the starting point of any conversation.

“And the rest is about negotiation.”