FRO - 1st Quarter 2012 results
(Thomson Reuters ONE) -
Highlights
* 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:
http://hugin.info/182/R/1614911/514667.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 Ltd. via Thomson Reuters ONE
[HUG#1614911]
Unternehmensinformation / Kurzprofil:
Datum: 25.05.2012 - 08:26 Uhr
Sprache: Deutsch
News-ID 150130
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contact information:
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