Frontline Ltd. (the âCompanyâ or âFrontlineâ), today reported unaudited results
for the three and six months ended June 30, 2021:
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Highlights
- Net loss of $26.6 million, or $0.13 per basic and diluted share for the
second quarter of 2021.
- Adjusted net loss of $23.2 million, or $0.12 per basic and diluted share for
the second quarter of 2021.
- Reported total operating revenues of $170.0 million for the second quarter
of 2021.
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the second
quarter of 2021 were $15,000, $11,000 and $10,600 per day, respectively.
- For the third quarter of 2021, we estimate spot TCE on a load-to discharge
basis of $14,000 contracted for 70% of vessel days for VLCCs, $9,800
contracted for 64% of vessel days for Suezmax tankers and $11,800 contracted
for 63% of vessel days for LR2 tankers. We expect the spot TCEs for the full
third quarter of 2021 to be lower than the TCEs currently contracted, due to
the impact of ballast days at the end of the third quarter as well as
current freight rates.
- Entered into an agreement in May 2021 for the acquisition through resale of
six scrubber fitted, latest generation ECO-type VLCC newbuilding contracts
currently under construction at the Hyundai Heavy Industries (âHHIâ)
shipyard in South Korea. The vessels are scheduled to deliver during 2022
starting in the first quarter.
- Entered into agreement in June 2021 to acquire two scrubber fitted, latest
generation ECO-type VLCCs built in 2019 at the HHI shipyard in South Korea.
The vessels are scheduled to deliver during the fourth quarter of 2021.
- Obtained financing commitments for three senior secured term loan facilities
in August 2021 in a total amount of up to $247.0 million to partially
finance the acquisition of the two VLCCs built in 2019 and two of the six
VLCC newbuilding contracts, which are subject to final documentation.
Lars H. Barstad, Chief Executive Officer of Frontline Management AS commented:
âThe tanker markets remained challenging throughout the second quarter of 2021,
even though most energy related commodities and shipping markets saw a firm
upswing in demand and prices. Soft tanker markets did catch up with Frontline
this quarter, but with our modern fleet, cost-efficient and agile operating
model we continued to yield returns above key benchmarks. Oil demand is
recovering firmly in the U.S. and Europe, and with relatively high vaccination
rates, the spread of the Delta variant has had a limited impact on oil demand
recovery in these regions. In Asia however the pace of the recovery is more
clouded as countries again move in to lock-downs. The fundamentals of the tanker
market continue to be encouraging, and even more pronounced now as orderbooks
are being filled with vessels catering for trades other than oil and refined
products. Looking at key market indices for tankers, and the fleet average age
and composition, we believe that we are now in a situation where a significant
portion of the fleet is experiencing negative freight rates. This is not
sustainable. Frontline has faced markets like these before, and we continue to
position ourselves towards what we believe will be a firm recovery as global
markets continues to regain lost ground.â
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
âWe are very pleased to have secured financing commitments in a total amount of
up to $247.0 million on highly attractive terms to partially finance four of our
newly acquired VLCCs. Through this financing we extend our bank group, reduce
our borrowing cost and industry leading cash break even rates and maximize
potential cash flow per share after debt service costs.â
Average daily time charter equivalents (âTCEsâ)(1)
Estimated
average
daily cash
BE rates
for the
($ per Spot TCE remainder
day) Spot TCE estimates % Covered of the year
Âą-----------------------------------------------------------------Âą----------+
| 2021 Q2 2021 Q1 2021 Q4 2020 2020 Q3 2021 | 2021 |
| | |
|VLCC 17,100 15,000 19,000 17,200 54,500 14,000 70% | 21,800 |
| | |
|SMAX 13,100 11,000 15,200 9,800 35,600 9,800 64% | 17,500 |
| | |
|LR2 11,200 10,600 12,000 12,500 23,400 11,800 63% | 15,400 |
Âą-----------------------------------------------------------------Âą----------+
The estimated average daily cash breakeven rates are the daily TCE rates our
vessels must earn in order to cover operating expenses including dry docks,
repayments of loans, interest on loans, bareboat hire, time charter hire and net
general and administrative expenses for the remainder of the year.
Spot estimates are provided on a load-to-discharge basis, whereby the Company
recognizes revenues over time ratably from commencement of cargo loading until
completion of discharge of cargo. The rates reported are for all contracted days
up until the last contracted discharge of cargo for each vessel in the quarter.
The actual rates to be earned in the third quarter of 2021 will depend on the
number of additional days that we can contract, and more importantly the number
of additional days that each vessel is laden. Therefore, a high number of
ballast days at the end of the quarter will limit the amount of additional
revenues to be booked on a load-to-discharge basis. Ballast days are days when a
vessel is sailing without cargo and therefore we are unable to recognize
revenues. Furthermore, when a vessel remains uncontracted at the end of the
quarter, the Company will recognize certain costs during the uncontracted days
up until the end of the period, whereas if a vessel is contracted, then certain
costs can be deferred and recognized over the load-to-discharge period.
The recognition of revenues on a load-to-discharge basis results in revenues
being recognized over fewer days, but at a higher rate for those days. Over the
life of a voyage there is no difference in the total revenues and costs to be
recognized as compared to a discharge-to-discharge basis.
When expressing TCE per day the Company uses the total available days, net of
off hire days and not just the number of days the vessel is laden.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
August 25, 2021
Ola Lorentzon - Chairman and Director
John Fredriksen - Director
Tor Svelland - Director
James O'Shaughnessy - Director
Questions should be directed to:
Lars H. Barstad: Chief Executive Officer, Frontline Management AS
+47 23 11 40 37
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76
Forward-Looking Statements
Matters discussed in this report may constitute forward-looking statements. The
Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements, which include statements concerning
plans, objectives, goals, strategies, future events or performance, and
underlying assumptions and other statements, which are other than statements of
historical facts.
Frontline Ltd. and its subsidiaries, or the Company, desires to take advantage
of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in connection with this safe
harbor legislation. This report and any other written or oral statements made by
us or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance and are
not intended to give any assurance as to future results. When used in this
document, the words âbelieve,â âanticipate,â âintend,â âestimate,â âforecast,â
âproject,â âplan,â âpotential,â âwill,â âmay,â âshould,â âexpectâ and similar
expressions, terms or phrases may identify forward-looking statements.
The forward-looking statements in this report are based upon various
assumptions, including without limitation, managementâs examination of
historical operating trends, data contained in our records and data available
from third parties. Although we believe that these assumptions were reasonable
when made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections. We undertake no obligation to update
any forward-looking statements, whether as a result of new information, future
events or otherwise.
In addition to these important factors and matters discussed elsewhere herein,
important factors that, in our view, could cause actual results to differ
materially from those discussed in the forward-looking statements include the
strength of world economies, fluctuations in currencies and interest rates,
general market conditions, including fluctuations in charter hire rates and
vessel values, changes in the supply and demand for vessels comparable to ours,
changes in worldwide oil production and consumption and storage, changes in the
Companyâs operating expenses, including bunker prices, dry docking and insurance
costs, the market for the Companyâs vessels, availability of financing and
refinancing, our ability to obtain financing and comply with the restrictions
and other covenants in our financing arrangements, availability of skilled
workers and the related labor costs, compliance with governmental, tax,
environmental and safety regulation, any non-compliance with the U.S. Foreign
Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to
bribery, general economic conditions and conditions in the oil industry, effects
of new products and new technology in our industry, the failure of counter
parties to fully perform their contracts with us, our dependence on key
personnel, adequacy of insurance coverage, our ability to obtain indemnities
from customers, changes in laws, treaties or regulations, the volatility of the
price of our ordinary shares; our incorporation under the laws of Bermuda and
the different rights to relief that may be available compared to other
countries, including the United States, 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, political
events or acts by terrorists, and other important factors described from time to
time in the reports filed by the Company with the Securities and Exchange
Commission or Commission.
We caution readers of this report not to place undue reliance on these forward-
looking statements, which speak only as of their dates. These forward-looking
statements are no guarantee of our future performance, and actual results and
future developments may vary materially from those projected in the forward-
looking statements.
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act.
(1) This press release describes Time Charter Equivalent earnings and related
per day amounts, which are not measures prepared in accordance with US GAAP
(ânon-GAAPâ). See Appendix 1 for a full description of the measures and
reconciliation to the nearest GAAP measure.
Kilde
