INTERIM REPORT APRIL – JUNE 2006
Second Quarter and Six Months Results
The Board of Frontline Ltd. (the “Company” or “Frontline”) announces net income of $68.6 million for the second quarter of 2006, equivalent to earnings per share of $0.92. Operating income for the quarter was $144.9 million compared to $270.5 million in the first quarter. This reflects the decrease in the market during the second quarter as well as the fact that Frontline as a function of the weaker market in the quarter decided to accelerate the drydocking of several vessels. A total of six ships were drydocked in the quarter creating approximately 220 days in lost income as well as higher operating cost linked to the fact that the drydocking cost were expensed in the quarter.
The average daily time charter equivalents (“TCEs”) earned in the spot and period market by the Company’s VLCCs, Suezmax tankers and Suezmax OBO carriers were $50,600, $30,600 and $30,100 respectively compared with $73,000, $49,700 and $31,700 respectively in the first quarter. The income shows an increased differential in earnings between single and double hull tonnage particulary in the Suezmax segment.
Operating income in the second quarter includes a $9.8 million gain on the sale of two VLCC newbuilding contracts.
Interest income was $12.4 million in the quarter, of which $6.2 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation (“ITC”). The Company recorded interest expense of $53.4 million in the second quarter of which $15.2 million relates to ITC.
The total for other financial items in the second quarter was a gain of $3.7 million compared to a gain of $15.0 million in the first quarter of 2006. Valuation gains of $2.9 million were recorded in interest rate swaps in the second quarter compared to $5.2 million in the first quarter. As at June 30, 2006, the Company had interest rate swaps with a total notional principal of $742.0 million all of which relates to Ship Finance International Limited (“Ship Finance”). Other financial items in the first quarter included a gain of $3.6 million in relation to interest rate swaps which terminated in the first quarter. The valuation of freight future agreements to market value has resulted in a loss of $5.2 million compared to a gain of $0.3 million in the first quarter. Dividends received from marketable securities in the second quarter totalled $5.6 million compared to $7.7 million in the first quarter.
Frontline announces net income of $282.6 million for the six months ended June 30, 2006, equivalent to earnings per share of $3.78. The average TCEs earned in the spot and period market by the Company’s VLCCs, Suezmax tankers, and Suezmax OBO carriers for the six months period ended June 30, 2006 were $61,900, $40,100 and $30,900, respectively.
On June 30, 2006, Ship Finance, which is consolidated by Frontline, purchased the jack up rig Seadrill 3 for $210.0 million and subsequently leased the rig back to SeaDrill Limited. In accordance with U.S. generally accepted accounting principles the Company’s investment in Seadrill 3 is being accounted for under the equity method. As a result, an investment in associated companies of $45.9 million has been recorded and the results of the rig owning entity will be recorded under Share of results from associated companies.
As at June 30, 2006, the Company had total cash and cash equivalents of $739.0 million which includes $625.1 million of restricted cash. Restricted cash includes $335.2 million relating to deposits in ITC and $274.4 million in Frontline Shipping Limited and Frontline Shipping II Limited. As of August 2006, the Company has cash breakeven rates on a TCE basis for VLCCs and Suezmaxes of $28,252 and $21,283 respectively.
The full report is available in the below attachment.
August 22, 2006
The Board of Directors
Questions should be directed to:
Contact: Tor Olav Troim: Director, Frontline Ltd.
+44 7734 976 575
Oscar Spieler: Chief Executive Officer, Frontline Management AS
+47 23 11 40 79
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76