FRONTLINE LTD.
INTERIM REPORT JANUARY – SEPTEMBER 2010
Highlights
· Frontline reports net income attributable to the Company of $12.3 million and earnings per share of $0.16 for the third quarter of 2010.
· Frontline reports net income attributable to the Company of $173.3 million and earnings per share of $2.23 for the nine months ended September 30, 2010.
· Frontline announces a cash dividend of $0.25 per share for the third quarter of 2010.
· The fourth and final VLCC newbuildings from Shanghai Waigaoqiao Shipbuilding Co., Ltd., Front Signe and the fourth and final of the original series of Suezmax newbuildings from Jiangsu Rongsheng Heavy Industries Co., Ltd., Front Njord, were delivered in August 2010.
· In September 2010, Frontline entered into an agreement to time charter out two VLCCs; Front Eminence for a period of five years at a gross rate of $43,000 per day and Golden Victory for a period of three years at a gross rate of $40,000 per day.
· In September 2010, Frontline agreed with Zhoushan Jinhaiwan Shipyard Co., Ltd. to re-structure its VLCC newbuilding program resulting in a commitment to take delivery of five 320,000 dwt VLCC newbuildings with a total contract price of $525 million.
· In November 2010, Frontline extended the time-charter in agreements of Front Chief, Front Commander and Front Crown (all 1999-built double hull VLCCs); for one year from January 2011 at $26,500 per day per vessel.
· In November 2010, the Company secured pre- and post delivery financing in the amount of $147 million representing 70 percent of the contract price for the first two VLCCs to be delivered in 2012.
Third Quarter and Nine Months 2010 Results
The Board of Frontline Ltd. (the “Company” or “Frontline”) announces net income attributable to the Company of $12.3 million for the third quarter of 2010, equivalent to earnings per share of $0.16, compared with net income attributable to the Company of $81.3 million and earnings per share of $1.04 for the preceding quarter. The net income attributable to the Company in the third quarter includes a gain of $6.8 million relating to the amortization of a deferred gain on three lease terminations. Net operating income in the third quarter was $48.4 million compared with $118.0 million in the preceding quarter. Net operating income and net income attributable to the Company decreased primarily as a result of the weaker spot market.
The average daily time charter equivalents (“TCEs”) earned in the spot and period market in the third quarter by the Company’s VLCCs, Suezmax tankers and Suezmax OBO carriers were $29,800 (incl. single hull VLCCs), $18,200 and $48,600, respectively, compared with $46,600, $31,000, and $47,700, respectively, in the preceding quarter. The spot earnings for the Company’s double hull VLCCs and Suezmax vessels were $30,000 and $15,700, respectively, in the third quarter compared with $50,000 and $30,300, respectively, in the second quarter. The Gemini Suezmax pool had spot net earnings of $17,500 per day in the third quarter compared with $29,800 per day in the second quarter. The Company’s double hull VLCCs, excluding the floating time charter vessels, had spot earnings of $30,200 per day in the third quarter, compared with $51,900 in the second quarter.
Profit share expense of $5.8 million has been recorded in the third quarter as a result of the profit sharing agreement with Ship Finance International Limited (“Ship Finance”) compared to $11.4 million in the preceding quarter reflecting the lower TCEs. Ship operating expenses increased by $2.4 million compared with the preceding quarter due to an increase in running costs of $1.5 million mainly related to the delivery of newbuildings and a $0.9 million increase in drydocking costs. Frontline drydocked three vessels in the second quarter and two vessels in the third quarter, but a portion of cost related to Front Tina, which entered dry dock in the second quarter, was expensed in the third quarter.
Charter hire expenses decreased by $32.0 million in the third quarter compared with the preceding quarter primarily due to the fact that we no longer chartered in the Nordic American Tanker Shipping Ltd. (“NATS”) vessels from July 1, 2010. The result on time charter basis were reduced equally and the number of on hire days decreased by 1,129 due to termination of NATS charter.
Interest income was $2.7 million in the third quarter, of which $2.6 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation Limited (“ITCL”). Interest expense, net of capitalized interest, was $39.2 million in the third quarter of which $7.7 million relates to ITCL.
Frontline announces net income attributable to the Company of $173.3 million for the nine months ended September 30, 2010, equivalent to earnings per share of $2.23. The average daily TCEs earned in the spot and period market in the nine months ended September 30, 2010 by the Company’s VLCCs, Suezmax tankers and Suezmax OBO carriers were $40,300, $28,200 and $48,100, respectively, compared with $40,200, $26,600 and $43,000, respectively, in the nine months ended September 30, 2009. The spot earnings for the Company’s double hull VLCCs and Suezmax vessels were $42,100 and $26,800, respectively, in the nine months ended September 30, 2010. The Company’s double hull VLCCs excluding the floating time charter vessels had spot earnings of $42,500 per day and the Gemini Suezmax pool had spot net earnings of $26,700 per day in the nine months ended September 30, 2010.
As of September 30, 2010, the Company had total cash and cash equivalents of $208.0 million and restricted cash of $225.5 million. Restricted cash includes $163.0 million relating to deposits in ITCL and $62.0 million in Frontline, which is restricted under the charter agreements with Ship Finance.
In November 2010, the Company has average total cash cost breakeven rates on a TCE basis for VLCCs and Suezmax tankers of approximately $31,300 and $24,900, respectively.
On November 23, 2010, the Company’s Board of Directors declared a dividend of $0.25 per share. The record date for the dividend is December 7, 2010, ex dividend date is December 3, 2010 and the dividend will be paid on or about December 21, 2010.
The full interim report is available in the link enclosed.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
November 23, 2010
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.
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)