Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three months ended March 31, 2020.
- Net income of $165.3 million, or $0.84 per diluted share for the first quarter of 2020, excluding $7.1 million of net cash receipts and accrued profit share in relation to the five charter-in and charter-out agreements with Trafigura that have been treated as a reduction of the acquisition cost of the vessels.
- Net income adjusted for certain non-cash items of $179.3 million, or $0.91 per diluted share for the first quarter of 2020, excluding the net impact of the item above.
- Declared a cash dividend of $0.70 per share for the first quarter of 2020.
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the first quarter of 2020 were $74,800, $57,800 and $31,200, respectively.
- For the second quarter of 2020, we estimate spot TCE on a load-to discharge basis of $92,500 contracted for 75% of vessel days for VLCCs, $69,500 contracted for 63% of vessel days for Suezmax tankers and $50,200 contracted for 53% of vessel days for LR2s. We expect the spot TCEs for the full second quarter of 2020 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the quarter as well as current weaker rates.
- In March 2020, the Company signed a sale-and-leaseback agreement in an amount of $544.0 million with ICBCL to finance the acquisition of 10 Suezmax tankers built in 2019 and closing took place on March 16, 2020.
Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:
“Frontline achieved its strongest first quarter result since 2008 amid an extremely volatile rate environment. We are extremely thankful to our staff and crewmembers for their extraordinary efforts and dedication, which contributed to our results during this challenging period. Our strong performance has carried over into the second quarter, as reflected in our bookings thus far. We have also secured some very attractive time charters and we will continue to explore period charter opportunities going forward. Our market view remains constructive, based on an order book at 25-year lows, an aging fleet and an expectation that oil volumes will return going forward as oil demand recovers. Frontline enjoys historically low estimated daily cash breakeven rates of $18,600 per day on average for our full fleet for the balance of 2020. The tanker market has corrected downwards in recent weeks and faces pressure in the short term, both from production cuts and inventory draws, but we believe we are well positioned due to our strong balance sheet and low cost base.”
|Average daily time charter equivalents (“TCEs”)|
|($ per day)||Spot estimates||% covered||Estimated average daily BE rates for the balance of 2020|
|Q1 2020||Q4 2019||2019||Q2 2020||2020|
The estimated average daily cash breakeven rates are the daily TCE rates the vessels must earn in order to cover operating expenses including dry docks, repayments of loans, interest on loans, bareboat hire, time charter hire and net general and administrative expenses.
Spot estimates are provided on a load-to-discharge basis. The rates quoted are for days currently contracted. The actual rates to be earned in the second quarter of 2020 will therefore depend on the number of additional days we contract, and more importantly the number of additional days that each vessel is laden. Therefore, a high number of ballast days at the end of the quarter will limit the amount of additional revenues booked on a load to discharge basis. Furthermore, when a vessel remains uncontracted at the end of the quarter, the Company will recognize certain costs during the uncontracted days up until the period end, whereas if a vessel is contracted, then certain costs can be deferred and recognized over the load-to-discharge period.
The reporting of revenues on a load-to-discharge basis results in revenues being recognized over fewer days, but at a higher rate for those days. Over the life of a voyage there is no difference in the total revenues and costs to be recognized.
When expressing TCE per day for the first quarter of 2020, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.
The Board of Directors
May 19, 2020
Questions should be directed to:
Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 84
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
Frontline Ltd. and its subsidiaries, or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this document, the words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “will,” “may,” “should,” “expect” and similar expressions, terms or phrases may identify forward-looking statements.
The forward-looking statements in this report are based upon various assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter hire rates and vessel values, changes in the supply and demand for vessels comparable to ours, changes in world wide oil production and consumption and storage, changes in the Company’s operating expenses, including bunker prices, dry docking and insurance costs, the market for the Company’s vessels, availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements, availability of skilled workers and the related labor costs, compliance with governmental, tax, environmental and safety regulation, any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to bribery, general economic conditions and conditions in the oil industry, effects of new products and new technology in our industry, the failure of counter parties to fully perform their contracts with us, our dependence on key personnel, adequacy of insurance coverage, our ability to obtain indemnities from customers, changes in laws, treaties or regulations, the volatility of the price of our ordinary shares; our incorporation under the laws of Bermuda and the different rights to relief that may be available compared to other countries, including the United States, 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, political events or acts by terrorists, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission or Commission.
We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are no guarantee of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act