FRO - Preliminary Fourth Quarter and Financial Year 2008 Results
Press release from Frontline Ltd. 26.02.2009
Frontline reports net income of $51.6 million for the fourth quarter of 2008, including non-operating losses of $28.4 million and earnings per share of $0.66.
Frontline reports net income for the fourth quarter of 2008, excluding non-operating losses, of $79.9 million and earnings per share $1.03.
Frontline reports annual net income of $698.8 million and earnings per share of $9.15.
Frontline announces a cash dividend of $0.25 per share for the fourth quarter of 2008.
Frontline has paid cash dividends of $641.9 million and a stock dividend of $11.4 million in 2008.
Frontline enters into a three year time charter contract for the VLCC Front Energy with commencement of charter mid November 2008 and a one year time charter contract for the VLCC Front Champion with commencement of charter end November 2008.
Frontline enters into a three year time charter contract for the Suezmax Front Brabant with commencement in January 2009.
Frontline enters into agreement with Teekay Corporation to commercially combine their Suezmax vessels within the Gemini Pool, the world's largest Suezmax tanker pool.
Preliminary Fourth Quarter and Financial Year 2008 Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income of $51.6 million for the fourth quarter of 2008, equivalent to earnings per share of $0.66 compared with net income of $107.8 million for the third quarter of 2008, equivalent to earnings per share of $1.39. Net income in the fourth quarter includes non-operating losses of $28.4 million, mainly related to a loss following a market price adjustment of shares owned in Overseas Shipholding Group Inc. ("OSG"), compared with the third quarter which included a $29.3 million mark-to-market loss on a forward contract for OSG shares which was recorded under other non-operating items. Net income for the fourth quarter of 2008, excluding non-operating losses, was $79.9 million and earnings per share were $1.03.
The reported earnings reflect a weaker spot market compared to the third quarter of 2008. The average daily time charter equivalents ("TCEs") earned in the spot and period market in the fourth quarter by the Company's VLCCs, Suezmax tankers and Suezmax OBO carriers were $54,100, $41,900 and $42,800, respectively, compared with $74,700, $62,700 and $44,100, respectively, in the third quarter. The results show a continued differential in earnings between single and double hull tonnage. The spot earnings for the Company's double hull VLCCs and Suezmax tankers were $59,800 and $43,400 in the fourth quarter, compared to $88,600 and $66,200 in the third quarter.
Profit share expense of $15.7 million has been recorded in the fourth quarter as a result of the profit sharing agreement with Ship Finance International Limited ("Ship Finance") compared to $28.5 million in the third quarter. The total profit share expense to Ship Finance for 2008 was $111.0 million, of which $60.0 million was paid in November 2008. The remainder will be paid in the first quarter of 2009. Ship operating expenses decreased by $11.1 million compared to the third quarter, of which $2.6 million relates to a decrease in drydocking costs.
Charterhire expenses decreased by $11.9 million in the fourth quarter compared with the third quarter. This is mainly due to a decrease of $12.2 million for the six vessels chartered in from Nordic American Tankers Shipping Ltd. under a floating rate time charter agreement and a $2.8 million reduction for the two vessels chartered in from Knightsbridge Tankers Limited under a profit sharing arrangement, offset by an increase in charterhire expense for five Suezmax vessels chartered in. The increase is due to a full charge in the fourth quarter for these vessels.
Interest income was $9.6 million in the fourth quarter, of which $5.9 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation Limited ("ITCL"). Interest expense, net of capitalized interest, was $45.5 million in the fourth quarter of which $12.2 million relates to ITCL.
Other non-operating items in the fourth quarter was a loss of $28.4 million, mainly due to a loss of $27.5 million following a market price adjustment of the OSG shares owned by the Company. Other non-operating items in the third quarter include a $29.3 million loss on a forward contract for OSG shares.
Frontline announces net income of $698.8 million for the year ended December 31, 2008, equivalent to earnings per share of $9.15. Full year net income includes a loss on OSG shares and forward contract of $41.5 million. The average TCEs earned in the spot and period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers for the year ended December 31, 2008 were $74,500, $55,200 and $43,500, respectively.
As of December 31, 2008, the Company had total cash and cash equivalents of $745.6 million, which includes $554.8 million of restricted cash. Restricted cash includes $336.7 million relating to deposits in ITCL and $216.1 million in Frontline, which is restricted under the charter agreements with Ship Finance.
As of February 2009, the Company has average total cash cost breakeven rates on a TCE basis for VLCCs and Suezmax tankers of approximately $32,100 and $25,200, respectively. These are the daily rates our vessels must earn to cover budgeted operating costs, estimated interest expenses and scheduled loan principal repayments, bareboat hire and corporate overhead costs. These rates do not take into account capital expenditures, loan balloon repayments at maturity, which we expect to refinance with new loans, and vessels on short term time charter in.
On February 25, 2009, the Board declared a dividend of $0.25 per share. The record date for the dividend is March 11, 2009, ex dividend date is March 9, 2009 and the dividend will be paid on or about March 27, 2009.
77,858,502 ordinary shares were outstanding as of December 31, 2008, and the weighted average number of shares outstanding for the quarter was 77,858,502.
The full report is available for download in the link enclosed.
The Board of Directors
February 25, 2009
Questions should be directed to:
Jens Martin Jensen: Acting Chief Executive Officer, Frontline Management AS
+47 23 11 40 99
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76
Forward Looking Statements
This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Frontline management's examination of historical operating trends. Although Frontline believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Frontline cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission.