Frontline : CORRECTION: FRO - 1st Quarter 2012 results
05/25/2012| 05:18am US/Eastern
Recommend:
This is a correction of the announcement from 08:25
25.05.2012 CEST. Reason for the correction: Incorrect
PDF attached in last email.
Highlights
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Frontline reports net income attributable to the Company
of $7.2 million and earnings per share of $0.09 for the
first quarter of 2012.
-
Frontline sold the double hull Suezmax tanker, Front
Alfa, and recognized a loss of $2.2 million.
-
Frontline terminated the charter party for the single
hull VLCC, Titan Orion (ex-Front Duke), and recognized a
gain of $9.4 million.
-
Frontline purchased $10.0 million notional value of the
convertible bonds due 2015 for $5.4 million and
recognized a gain of $4.6 million.
-
Frontline will not pay a dividend for the first quarter
of 2012.
First Quarter 2012 Results
The Board of Frontline Ltd. (the "Company" or
"Frontline") announces net income attributable to
the Company of $7.2 million, equivalent to earnings per share
of $0.09, compared with a net loss of $343.7 million for the
fourth quarter of 2011, equivalent to a loss per share of
$4.41. The net income attributable to the Company in the
first quarter includes a gain on sale of assets and
amortization of deferred gains of $11.0 million, which
includes a gain of $9.4 million on the termination of the
charter party for the single hull VLCC, Titan Orion (ex-Front
Duke), an aggregate deferred gain of $3.8 million relating to
the sale and leasebacks of DHT Eagle (ex Front Eagle) and
Gulf Eyadah (ex Front Shanghai) and a loss of $2.2 million on
the sale of the double hull Suezmax tanker, Front Alfa. The
net income attributable to the Company in the first quarter
also includes a gain on the purchase of the Company's
convertible bonds of $4.6 million, which has been recorded in
other non-operating income. The net loss attributable to the
Company in the fourth quarter included a loss on sale of
assets and amortization of deferred gains of $312.9 million,
which included a loss of $307.0 million on the sale of ten
vessels and five newbuilding contracts at fair market value
to Frontline 2012 Ltd. ("Frontline 2012"), a loss
of $9.3 million on the termination of the long term charter
party for Front Striver and an aggregate deferred gain of
$3.8 million relating to the sales and leasebacks of DHT
Eagle (ex Front Eagle) and Gulf Eyadah (ex Front Shanghai).
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 $25,600, $19,500 and $37,800, respectively,
compared with $19,100, $13,900 and $41,600, respectively, in
the preceding quarter. The spot earnings for the
Company's double hull VLCCs and Suezmax vessels were
$25,400 and $19,500, respectively, compared with $16,800 and
$12,400, respectively, in the preceding quarter. The Orion
Suezmax pool had spot earnings of $19,200 in the first
quarter. The Company's double hull VLCCs excluding the
spot index time charter vessels had spot earnings of $27,400
in the first quarter compared with $18,400 in the fourth
quarter.
Profit share expense in the first quarter relates to the
amended charter party agreements with Ship Finance
International Limited ("Ship Finance") and the
amended charter party agreements for four leased vessels
following the restructuring of the Company in December 2011.
Profit share expense in the fourth quarter related to the
profit sharing agreement with Ship Finance and was income of
$0.3 million. The profit share expense is calculated on a
year-to-date basis and the poor spot market in the fourth
quarter resulted in a claw back in that quarter. The cash
sweep expense relates to the amended charter parties with
Ship Finance and the amended charter parties for four leased
vessels and is based on the difference between the
renegotiated rates and the actual market rate up to the
original contract rates.
Ship operating expenses decreased by $9.6 million compared
with the preceding quarter primarily as a result of a
decrease in running costs mainly due to recent sales and
lease terminations and a decrease in drydocking costs of $1.0
million.
Charter hire expenses decreased by $2.6 million in the first
quarter compared with the preceding quarter primarily as a
result of a $5.8 million decrease due to vessel redeliveries
in the fourth quarter offset by charter hire of $3.2 million
on two vessels chartered in from Frontline 2012 on floating
rate time charters.
Interest expense, net of capitalized interest, was $24.3
million in the first quarter of which $5.8 million relates to
the Company's subsidiary Independent Tankers Corporation
Limited ("ITCL").
As of March 31, 2012, the Company had total cash and cash
equivalents of $169.5 million and restricted cash of $86.5
million. Restricted cash includes $82.4 million relating to
deposits in ITCL.
The Company estimates average total cash cost breakeven rates
for 2012 on a TCE basis for VLCCs and Suezmax tankers of
approximately $24,100 and $17,500, respectively.
Fleet Development
In March 2012, the Company announced that it had entered into
an agreement to sell its 1993-built double hull Suezmax
tanker Front Alfa. Delivery to the buyer took place on March
21, 2012 and the vessel ceased to operate in the tanker
market. All debt pertaining to the vessel of $12.9 million
was prepaid in December 2011 and the Company recorded a loss
of $2.2 million in the first quarter of 2012.
In September 2011, the Company negotiated the early
termination of bareboat charters on three single hull VLCCs,
Titan Orion (ex-Front Duke), Titan Aries (ex-Edinburgh) and
Ticen Ocean (ex-Front Lady), which are being chartered in
from Ship Finance. These three vessels have been sold by Ship
Finance with expected delivery during 2012 and 2013. The
Titan Orion (ex-Front Duke) was delivered and the charter
party with Ship Finance was terminated, on March 27, 2012.
Newbuilding Program
As of March 31, 2012, and following the restructuring in
December 2011, the Company's newbuilding program
comprised two Suezmax tankers, which constitute a contractual
cost of $124.9 million. Installments of $12.5 million have
been made and the remaining installments to be paid as of
March 31, 2012, amount to $112.4 million with expected
payments of $25.0 million in 2012 and $87.4 million in
2013.
Corporate
The Company purchased $10.0 million notional value of the
convertible bonds due 2015 for $5.4 million and recognized a
gain of $4.6 million in the first quarter of 2012.
The Board of Directors has decided not to declare a dividend
for the first quarter of 2012.
77,858,502 ordinary shares were outstanding as of March 31,
2012, and the weighted average number of shares outstanding
for the quarter was 77,858,502.
The Market
The market rate for a VLCC trading on a standard
'TD3' voyage between the Arabian Gulf and Japan in
the first quarter of 2012 was WS 56, representing an increase
of approximately WS 2 points from the fourth quarter of 2011
and a decrease of approximately WS 2 points from the first
quarter of 2011. Mainly due to increased bunker rates the TD3
flat rate was adjusted up by 19.2 percent from 2011 to 2012,
hence the same WS gives 19.2 percent higher gross earnings in
2012 than in 2011. Current market indications are
approximately $25,000/day in the second quarter of 2012.
The market rate for a Suezmax trading on a standard
'TD5' voyage between West Africa and Philadelphia in
the first quarter of 2012 was WS 82.2, representing a
decrease of approximately WS 1 point from the fourth quarter
of 2011 and the same as the first quarter of 2011. Mainly due
to increased bunker rates the TD5 flat rate was adjusted up
by 18.7 percent from 2011 to 2012, hence the same WS gives
18.7 percent higher gross earnings in 2012 than in 2011.
Current market indications are approximately $16,000/day in
the second quarter of 2012.
Bunkers at Fujairah averaged $730/mt in the first quarter of
2012 compared to $672/mt in the fourth quarter of 2011; an
increase of approximately $58/mt.
The International Energy Agency's ("IEA") May
2012 report stated an average OPEC oil production, including
Iraq, of 31.34 million barrels per day (mb/d) during February
and March 2012. This was an increase of 820 kb/d compared to
the fourth quarter of 2011.
IEA further estimates that world oil demand averaged 89.50
mb/d in the first quarter of 2012, which is a decrease of 400
kb/d from previous quarter and an increase of 300 kb/d from
first quarter 2011. Additionally, the IEA estimates that
world oil demand will average approximately 90.0 mb/d in
2012, representing an increase of 0.9 percent or
approximately 800 kb/d from 2011.
The VLCC fleet counts 598 vessels at the end of the first
quarter of 2012, up from 594 vessels at the end of the
previous quarter. 11 VLCCs were delivered during the quarter
whilst seven were deleted. The order book counted 111 vessels
at the end of the first quarter, down from 123 orders from
the previous quarter. Current order book represents about 18
percent of the VLCC fleet. According to Fearnleys the single
hull fleet stands at 23 vessels.
The Suezmax fleet counts 451 vessels at the end of the first
quarter, up from 446 vessels at the end of the previous
quarter. 14 vessels were delivered during the quarter whilst
nine were deleted. The order book counted 96 vessels at the
end of the first quarter, down from 114 vessels at the end of
the previous quarter. No new orders were placed during the
quarter and the current order book now represents 21 percent
of the total fleet. According to Fearnleys the single hull
fleet now stands at nine vessels.
Strategy and Outlook
The Board sees a challenging supply / demand situation for
the tanker market where the combined VLCC and Suezmax fleet
between 2004 and 2012 increased by 98 percent without being
backed by a similar increase in demand. Frontline will
continue to remain cautious and focus its resources on the
present activities until a clearer sign of recovery can be
seen in the tanker market.
Following the restructuring completed in December 2011, the
cash break even rates for the Company were substantially
reduced for the period 2012-2015, creating a downside
protection for the Company.
As part of the restructuring, the Company obtained agreements
with its major counterparties to reduce the gross charter
payment commitments under existing chartering arrangements.
Frontline will, however, compensate charter counterparties
with 100 percent of any difference between the renegotiated
rates and the actual market rate up to the original contract
rates. Some of the counterparties will receive some
additional compensation for earnings achieved above original
contract rates. The TCEs earned in the in the first quarter
of 2012 were above the renegotiated rates and Frontline
recorded cash sweep expense of $14.9 million in the quarter.
The main part of this relates to the amended charter parties
with Ship Finance.
The development in the first quarter and so far in the second
quarter has been stronger than the Board anticipated at the
beginning of the year. Based on results achieved so far in
the quarter and the current outlook the Board expects the
operating result in the second quarter to be better than in
the first quarter.
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.
The full report is available for download in the link
enclosed.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
May 24, 2012
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
This information is subject of the disclosure requirements
pursuant to section 5-12 of the Norwegian Securities Trading
Act.
1st
Quarter 2012 Results
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