FRNT - First Quarter 2012 Results
(Thomson Reuters ONE) -
FRONTLINE 2012 LTD.
FIRST QUARTER 2012 RESULTS
Highlights
* Frontline 2012 reports net income of $2.4 million and earnings per share of
$0.02 for the first quarter of 2012.
* Frontline 2012 was incorporated in Bermuda on December 12, 2011 and owns six
VLCCs, four Suezmax tankers and five newbuilding contracts for VLCCs with
contractual delivery in 2012 and 2013.
Introduction
Frontline 2012 Ltd. (the "Company" or "Frontline 2012") is a shipping company
incorporated in Bermuda on December 12, 2011 which owns a total of ten crude oil
tankers and five newbuilding contracts for VLCCs. The vessels have contractual
delivery dates in 2012 and 2013. The Company's sailing fleet is one of the
youngest in the industry and currently consists of six very large crude
carriers, or VLCCs, and four Suezmax tankers, operating in the spot and the
period markets. The largest shareholder is Hemen Holding Ltd. with 50 percent
shareholding.
First Quarter 2012 Results
The Board of Frontline 2012 announces net income of $2.4 million and earnings
per share of $0.02 for the first quarter of 2012.
The average daily time charter equivalents ("TCEs") earned in the spot and
period market in the first quarter by the Company's VLCCs and Suezmax tankers
were $27,900 and $21,200, respectively. The spot earnings for the Company's VLCC
and Suezmax tankers were $28,000 and $21,200, respectively.
As of March 31, 2012, the Company had cash and cash equivalents of $105.2
million.
The Company has prepaid bank debt instalments for 2012 in exchange for a one
year payment holiday in 2013. Following this the estimated daily cash cost break
even rates for VLCCs and Suezmax tankers in 2012 are approximately $14,800 and
$13,700, respectively.
Newbuilding Program
As of March 31, 2012, the Company's newbuilding program comprised of five VLCC
tankers, which constitute a contractual cost of $525 million. Installments of
$213 million have been paid and the remaining installments to be paid as of
March 31, 2012 amount to $312 million.
In the second quarter of 2011, Frontline Ltd reported some delays in the
newbuilding program. The shipbuilding contracts include contractual compensation
for late delivery from one to seven months delay and contractual cancellation
rights after seven months delay.
Corporate
The Company has been managed by Frontline Management (Bermuda) Ltd., a wholly
owned subsidiary of Frontline Ltd., from its incorporation. The Company aims to
establish its own management subsidiary with a management team solely focused on
its activities over time.
100,000,000 ordinary shares were outstanding as of March 31, 2012, and the
weighted average number of shares outstanding for the quarter was 100,000,000.
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 9 vessels.
Strategy and Outlook
The Board has since the start up of Frontline 2012 discussed the Company's
business model. The dramatic fall in newbuilding and secondhand prices in most
of the commodity shipping market has created an attractive risk / reward balance
and interesting opportunities. We currently see newbuilding prices in several
markets at historically low levels, close to or in some cases even lower than
the shipyards all in construction cost. This should clearly limit the financial
risk and the dramatic differential in fuel efficiency between the next
newbuilding generation and the existing fleet further highlights this
opportunity.
The board sees however a challenging supply / demand situation for several of
the commodity shipping markets. This is particularly the case for the tanker
market where the combined VLCC and Suezmax fleet between 2004 and 2012 increased
with 98 percent without being backed by a similar increase in demand.
The commodity shipping industry is presently lacking leadership and
consolidation strength. Several of the historically strong players are suffering
from financial weakness created by overexpansion in the period between 2004 and
2010.
The Board will, supported by these facts, adopt a new strategy where Frontline
2012's activities are expanded to include all commodity shipping business
segments hereunder dry bulk, LPG as well as tankers.
The target is to within three years create a global leading commodity shipping
company based on modern, high quality and fuel efficient tonnage.
The Board will, as the markets evolve, be open to consider spin offs and /or
separation of the different business segments, but is of the opinion that a more
diversified platform will be valuable and increase credibility versus
counterparts and financial institutions in the challenging period ahead of us.
Frontline 2012 will focus on building its fleet in the coming years. This will
limit the dividend capacity in the short term. The ambition is to change this
over time as the market improves and the company develops. The Company will have
a strong focus on maximising return on equity and Frontline 2012 will to a
certain extent use debt to optimize the return.
The Company is presently in discussion to take over a total of 16 firm
newbuilding contracts and eight fixed price optional contracts. These
newbuilding contracts are within the crude and product markets and are arranged,
financed and entered into by the Company's major shareholder Hemen Holding. In
order to finance these contracts with a total contract value of USD 578 million
the Company will seek to raise approximately USD 200 million in new equity.
Hemen will subsequent to a potential transaction remain responsible for the
performance guarantees versus the yards on these contracts.
The development in the first quarter and so far in the second quarter has been
stronger than expected when the Company was established. Based on the current
outlook the second quarter is expected to be better than the first quarter. The
Board is confident that we through aggressive expansion of economically
efficient tonnage in the presently distressed market can create an advantage
which over time can be converted into a superior long term return to our
shareholders from cash flow as well as asset appreciation. The Board anticipates
a high activity level in the year to come.
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 Ltd's management's examination of historical
operating trends. Although Frontline Ltd 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 2012 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 2012 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
1st quarter 2012 results:
http://hugin.info/150498/R/1614703/514532.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Frontline 2012 Ltd. via Thomson Reuters ONE
[HUG#1614703]
Datum: 24.05.2012 - 14:46 Uhr
Sprache: Deutsch
News-ID 149881
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