· Frontline reports net income attributable to the Company of $79.7 million and earnings per share of $1.02 for the first quarter of 2010
· Frontline announces a cash dividend of $0.75 per share for the first quarter of 2010
· Frontline successfully completed a private placement of $225 million of convertible bonds
· Frontline announced the acquisition of two double hull VLCC tankers and secured long term bank financing for both vessels
· Frontline took delivery of three out of a total of four Suezmax newbuildings from Rongsheng
· Frontline agreed to terminate the long term charter party for the single hull VLCC Golden River and received a compensation payment of approximately $2.9 million
First Quarter 2010 Results
The Board of Frontline Ltd. (the “Company” or “Frontline”) announces net income attributable to the Company of $79.7 million for the first quarter of 2010, equivalent to earnings per share of $1.02 compared with net income attributable to the Company of $3.9 million for the fourth quarter of 2009, equivalent to earnings per share of $0.05. The net income attributable to the Company in the first quarter includes a gain of $6.7 million relating to the amortization of a deferred gain on three lease terminations and a gain of $3.1 million relating to a lease termination.
The reported earnings reflect a stronger spot market compared to the fourth quarter of 2009. The average daily time charter equivalents (“TCEs”) earned in the spot and period market in the first quarter by the Company’s VLCCs, Suezmax tankers and Suezmax OBO carriers were $45,300, $31,800 and $47,900, respectively, compared with $33,200, $21,300 and $42,800, respectively, in the fourth quarter. The spot earnings for the Company’s double hull VLCCs and Suezmax tankers were $49,200 and $30,600, respectively, compared to $30,400 and $18,300 in the fourth quarter. The Gemini Suezmax pool had spot earnings of $30,900 per day in the first quarter, compared to $20,300 per day in the fourth quarter. The Company’s double hull VLCC tankers excluding the floating time charter vessels had spot earnings of $54,000 per day in the first quarter, compared with $32,100 in the fourth quarter.
Profit share expense of $11.3 million has been recorded in the first quarter as a result of the profit sharing agreement with Ship Finance International Limited (“Ship Finance”), compared to $5.7 million in the fourth quarter. Ship operating expenses decreased by $9.0 million compared to the fourth quarter due to a decrease in dry docking costs of $5.5 million and a decrease in running costs of $3.5 million.
Charterhire expenses increased by $9.4 million in the first quarter compared with the fourth quarter, mainly due to three vessels which were chartered in under long term leases up to the end of December 2009 but are now chartered in and accounted for as short term operating leases, profit share payments on two vessels and an increase in charterhire expenses regarding the Nordic American Tanker (“NATS”) vessels due to the stronger spot market. These items were partially offset by the redelivery in the first quarter of the final vessel chartered in from Eiger.
Interest income was $4.1 million in the first quarter, of which $3.9 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation Limited (“ITCL”). Interest expense, net of capitalized interest, was $35.5 million in the first quarter of which $9.0 million relates to ITCL.
As of March 31, 2010 the Company had total cash and cash equivalents of $85.5 million and restricted cash of $291.5 million. Restricted cash includes $228.8 million relating to deposits in ITCL and $62.0 million in Frontline, which is restricted under the charter agreements with Ship Finance. Restricted cash deposits held in respect of the Ship Finance charter reserves decreased by a total of $122.3 million, of which $111.7 million relates to the amendments of the charter agreements and $10.6 million relates to reserves no longer required for two vessels.
As of May 2010, the Company has average total cash cost breakeven rates on a TCE basis for VLCCs and Suezmax tankers of approximately $31,100 and $25,300, respectively.
On May 20, 2010, the Board declared a dividend of $0.75 per share. The record date for the dividend is June 4, 2010, the ex dividend date is June 2, 2010 and the dividend will be paid on or about June 21, 2010.
The complete report is available for download in the enclosed link and from the Company’s website www.frontline.bm.
The Board of Directors
May 20, 2010
Questions should be directed to:
Jens Martin Jensen: 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.