FRO – First Quarter 2009 Results


  • Frontline reports net income of $76.6 million and earnings per share of $0.98 for the first quarter of 2009.
  • Frontline announces a cash dividend of $0.25 per share for the first quarter of 2009.
  • The second VLCC newbuilding from Waigaoqiao, Front Queen, was delivered on May 18, 2009.
  • Frontline enters into agreement with two ship yards to cancel four Suezmax and two VLCC newbuildingcontracts representing 33 percent of the newbuilding program and a total contractual cost of $556 million.
  • Frontline secures long term pre- and post delivery financing for two further VLCC newbuildings in an amount of $146.4 million, representing 70 percent of contractual cost.
  • Frontline amends the time charter agreements on Front Lady and Front Highness to bareboat charters and extends the periods to mid 2011. The vessels will be operated as floating storage units and will cease to trade as regular tankers.
First Quarter 2009 Results
The Board of Frontline Ltd. (the “Company” or “Frontline”) announces net income of $76.6 million for the first quarter of 2009, equivalent to earnings per share of $0.98 compared with net income of $51.6 million for the fourth quarter of 2008, equivalent to earnings per share of $0.66. Net operating income for the quarter was $111.0 million compared with $115.3 million in the fourth quarter of 2008.
The reported earnings reflect a weaker spot market. 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 $50,300, $37,900 and $44,200, respectively, compared with $54,100, $41,900 and $42,800, respectively, in the fourth quarter of 2008. The results show a continued differential in earnings between single and double hull tonnage. The spot earnings for the Company’s double hull VLCC and Suezmax vessels were $56,200 and $38,300 in the first quarter, compared to $59,800 and $43,400 in the fourth quarter of 2008.
Profit share expense of $14.5 million has been recorded in the first quarter as a result of the profit sharing agreement with Ship Finance International Limited (“Ship Finance”) compared to $15.7 million in the fourth quarter of 2008. Ship operating expenses decreased by $6.5 million compared to the fourth quarter, due to an increase in operating costs offset by a $10.6 million decrease in drydocking costs. Charter hire expenses were $52.0 million in the first quarter compared with $56.0 million in the fourth quarter in 2008.
Interest income was $6.1 million in the first quarter, of which $4.7 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation Limited (“ITCL”). Interest expense, net of capitalized interest, was $40.6 million in the first quarter of which $9.9 million relates to ITCL.
Other non-operating items in the first quarter was a gain of $1.2 million compared with a loss of $28.4 million in the fourth quarter, which was mainly due to a loss of $27.6 million following a market price adjustment of the Overseas Shipholding Group Inc. (“OSG”)  shares owned by the Company. The market price adjustment on the OSG shares in the first quarter was a loss of $27.4 million which was booked directly to equity as the OSG shares were not deemed to be impaired at March 31, 2009.
At March 31, 2009, the Company had total cash and cash equivalents of $666.2 million, which includes $459.6 million of restricted cash. Restricted cash includes $264.5 million relating to deposits in ITCL and $189.6 million in Frontline, which is restricted under the charter agreements with Ship Finance. The Company has reclassified some of its restricted cash balances to long term. These balances relate to the restricted cash in some of its ITCL subsidiaries that are segregated for the settlement of long term lease obligations. The amount reclassified as of March 31, 2008 to conform to the current year presentation was $246.6 million.
In May 2009, the Company has average total cash cost breakeven rates on a TCE basis for VLCC and Suezmax tankers of approximately $32,400 and $25,300, respectively. These are the daily rates our vessels must earn to cover budgeted operating costs, estimated interest expenses and scheduled loan principal repayments, bareboat hire and corporate overhead costs. These rates do not take into account capital expenditures or loan balloon repayments at maturity.  Furthermore, M/T Kensington, M/T Hampstead and the five Genmar vessels chartered in are not included in the cash cost break even rates.
On May 27, 2009, the Board declared a dividend of $0.25 per share. The record date for the dividend is June 9, 2009, ex dividend date is June 5, 2009 and the dividend will be paid on or about June 23, 2009.

77,858,502 ordinary shares were outstanding as of March 31, 2009, and the weighted average number of shares outstanding for the quarter was 77,858,502.
The full report is available for download in the link enclosed.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
May 27, 2009
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
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.

1st quarter 2009 results