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FRO - Second Quarter and Six Months 2020 Results

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Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three and six months ended June 30, 2020:

Highlights

  • Net income of $199.7 million, or $1.01 per diluted share for the second quarter of 2020. 
  • Adjusted net income of $206.1 million, or $1.04 per diluted share for the second quarter of 2020.
  • Declared a cash dividend of $0.50 per share for the second quarter of 2020.
  • Repaid $60 million of its $275.0 million senior unsecured facility in the second quarter of 2020.
  • Reported total operating revenues of $387.1 million for the second quarter of 2020.
  • Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the second quarter of 2020 were $75,800, $51,100 and $36,900 per day, respectively.
  • For the third quarter of 2020, we estimate spot TCE on a load-to discharge basis of $60,900 contracted for 76% of vessel days for VLCCs, $29,500 contracted for 77% of vessel days for Suezmax tankers and $14,500 contracted for 67% of vessel days for LR2 tankers. We expect the spot TCEs for the full third quarter of 2020 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the third quarter as well as current weaker rates.
  • Took delivery of the VLCC newbuilding Front Dynamic and the Suezmax newbuilding Front Cruiser in the second quarter of 2020.
  • Signed a senior secured term loan facility in July 2020 in an amount of up to $328.6 million to refinance an existing loan facility maturing in December 2020.
  • Obtained financing commitment for a senior secured term loan facility in August 2020 in an amount of up to $133.7 million to partially finance the four LR2 tankers under construction, which is subject to final documentation.

Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:

“Our results for the first half of 2020 are the strongest in more than 10 years, and we have paid aggregate cash dividends of $1.20 per share for the same period. While tanker rates have seemingly found support at a lower level in the third quarter, we expect oil demand and demand for transportation to recover gradually. We have good visibility in our third quarter results based on our contracted spot days as well as our charter coverage. We also expect our results to be positively impacted by the modern profile of our fleet and breakeven costs that are very competitive. The large moves in tanker rates during the last 12 months clearly illustrates the tight balance in the market and the fact that it does not take much for the tanker market to rally. Looking ahead to 2021 and beyond, recovering demand for crude oil transportation will coincide with rapidly declining fleet growth, which supports our long term highly constructive market outlook.”

Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:

“In the second quarter of 2020 we refinanced two term loan facilities with total balloon payments of $349.4 million due in December 2020 and in March 2021. We expect to refinance further two term loan facilities with total balloon payments of $320.3 million due in April 2021 and in June 2021 prior to maturity, leaving the Company with no material maturities until 2023. Our strong cash flow in the second quarter enabled us to both repay $60 million of our $275.0 million senior unsecured facility, reducing the amount outstanding to $60 million, and to return nearly $99 million to our shareholders in cash dividends.”

Average daily time charter equivalents ("TCEs")1

($ per day) Spot estimates % covered Estimated average daily cash BE rates
Q2 2020 Q1 2020 Q4 2019 2019 Q3 2020 2020
VLCC 75,800 74,800 58,000 35,900 60,900 76% 22,600
SMAX 51,100 57,800 38,200 25,800 29,500 77% 18,900
LR2 36,900 31,200 29,800 22,000 14,500 67% 15,700

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 for the remainder of the year.

Spot estimates are provided on a load-to-discharge basis, whereby the company recognizes revenues over time ratably from commencement of cargo loading until completion of discharge of cargo. The rates reported are for all days up until the last contracted discharge of cargo for each vessel in the quarter. The actual rates to be earned in the third quarter of 2020 will depend on the number of additional days that we can 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 to be booked on a load-to-discharge basis. Ballast days are days when a vessel is sailing without cargo and therefore unable to recognize revenues. 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 second 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
Frontline Ltd.
Hamilton, Bermuda
August 26, 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

Forward-Looking Statements

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



1 This press release describes Time Charter Equivalent earnings and related per day amounts, which are not measures prepared in accordance with US GAAP (“non-GAAP”). See Appendix 1 for a full description of the measures and reconciliation to the nearest GAAP measure.



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