FRO - Fourth Quarter and Full Year 2019 Results

Thursday, 27. February 2020 07:30



Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three months and year ended December 31, 2019:

Highlights

  • Highest quarterly net income in more than eleven years of $108.8 million, or $0.55 per diluted share for the fourth quarter of 2019, excluding $8.7 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 $106.9 million, or $0.54 per diluted share for the fourth quarter of 2019, excluding the net impact of the item above.
  • Declared a cash dividend of $0.40 per share for the fourth quarter of 2019.
  • Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the fourth quarter of 2019 were $58,000, $38,200 and $29,800, respectively.
  • For the first quarter of 2020, we estimate spot TCE on a load-to discharge basis of $90,300 contracted for 83% of vessel days for VLCCs, $71,900 contracted for 75% of vessel days for Suezmax tankers and $36,300 contracted for 72% of vessel days for LR2s. We expect the spot TCEs for the full first 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 tanker market weakness.
  • The Company is in the final process of signing the sale-and-leaseback agreement in an amount of up to $544.0 million with ICBC Financial Leasing Co., Ltd (“ICBCL”) to finance the cash amount payable upon closing of the acquisition (as defined below), expected to take place on March 16, 2020.
  • In November 2019, the Company signed a senior secured term loan facility in an amount of up to $42.9 million with Credit Suisse to part finance the Suezmax tanker resale under construction at HSHI.
  • In February 2020, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $62.5 million from Crédit Agricole to part finance the VLCC resale under construction at HSHI.

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

“Frontline’s ability to generate significant income has been proven in our fourth quarter results, and the strong market continued into the first quarter of 2020, resulting in the strongest earnings period since 2008 for owners of modern, fuel-efficient vessels. However, primarily due to the effect of the coronavirus, we have a near-term macro headwind with a slowdown in oil demand, particularly in China. We can’t forecast the duration of this impact, but once the coronavirus is contained Frontline is exceptionally well positioned for the strong rebound we believe will follow. We have a very modern fleet and robust capital structure at a historically low cash breakeven level, and a clear ambition to continue paying significant dividends to our shareholders.”
   

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

"Frontline’s superior access to financing evidenced by the interest margins and terms of our recently concluded financings is a clear endorsement of the Company and reflects our strong relationships within the lending community. The terms of our recently concluded financing agreements further reduce the highly competitive breakeven levels across our fleet. Frontline’s estimated daily cash breakeven levels of $22,700, $19,700 and $15,600 for VLCCs, Suezmax tankers and LR2 tankers, respectively, provide significant operating leverage and help to protect our cash flows during periods of market weakness."

Average daily time charter equivalents ("TCEs")
($ per day) Spot Spot estimates % covered Estimated average daily BE rates
  2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 2018 Q1 2020 2020
VLCC 35,900 58,000 22,900 25,600 35,700 18,300 90,300 83% 22,700
SMAX 25,800 38,200 16,200 16,200 28,200 17,300 71,900 75% 19,700
LR2 22,000 29,800 15,900 18,100 24,000 14,900 36,300 72% 15,600

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 first quarter of 2020 will therefore 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. 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.

On November 27, 2019 the Company disclosed that spot TCE of $64,800 per day had been contracted for 78% of vessel days for our VLCCs in the fourth quarter of 2019. As described above, due to the limited number of additional laden days at the end of the fourth quarter, additional booked revenues were limited and as such the total revenues for the 78% of vessel days contracted were spread over 100% of the days in the quarter, resulting in a lower TCE per day by the end of the fourth quarter of 2019.

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 fourth quarter of 2019, 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
February 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 of the Norwegian Securities Trading Act.

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