Frontline Ltd. (the âCompanyâ or âFrontlineâ), today reported unaudited results
for the three and nine months ended September 30, 2021:
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Highlights
- Net loss of $33.2 million, or $0.17 per basic and diluted share for the
third quarter of 2021.
- Adjusted net loss of $35.9 million, or $0.18 per basic and diluted share for
the third quarter of 2021.
- Reported total operating revenues of $171.8 million for the third quarter of
2021.
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the third
quarter of 2021 were $10,500, $7,900 and $10,700 per day, respectively.
- For the fourth quarter of 2021, we estimate spot TCE on a load-to discharge
basis of $21,600 contracted for 79% of vessel days for VLCCs, $17,900
contracted for 72% of vessel days for Suezmax tankers and $16,000 contracted
for 64% of vessel days for LR2 tankers.
- Entered into senior secured term loan facilities in September and October
2021 for a total amount of up to $247.0 million to partially finance the
acquisition of two 2019-built VLCCs, which were delivered to the Company in
October and November of 2021, respectively, and the acquisition of two of
the six resale VLCC newbuilding contracts.
- Obtained financing commitments for senior secured term loan facilities in
October and November 2021 for a total amount of up to $260.0 million to
partially finance the acquisition of four of the six VLCC newbuilding
contracts, which are subject to final documentation.
- Entered into an agreement in November 2021 to sell four of its scrubber-
fitted LR2 tankers built in 2014 and 2015 for an aggregate sale price of
$160.0 million. The transaction is expected to generate net cash proceeds of
approximately $67.0 million.
- In November 2021, the Company extended the terms of its senior unsecured
revolving credit facility of up to $275.0 million with an affiliate of Hemen
Holding Ltd. by 12 months to May 2023.
Lars H. Barstad, Chief Executive Officer of Frontline Management AS commented:
âThe third quarter continued to be a challenging period for tanker owners.
Global oil demand rose, but oil supply growth remained muted, resulting in one
of the most demanding quarters on record for tankers. Global inventories were
drawn throughout the period, albeit at a reduced pace compared to the
immediately preceding quarter. Yet again Frontline has been reaping the benefits
of running a âtight shipâ, with what we believe to be industry low operational,
financial, and administrative costs. In the current market, where oil prices and
fuel costs have risen considerably, we believe having a modern, fuel-efficient
fleet has proven advantageous. In the previous quarter I pointed to the fact
that freight rates below operational cost, and in some cases negative for
inefficient tonnage, is not sustainable. During the third quarter of the year,
we finally started to see ship recycling accelerate. The fundamentals of this
market remain the same; the global tanker fleet is aging rapidly, orderbooks are
dwindling as global oil demand is about to grow beyond hundred million barrels
per day. These factors combine to create a potentially potent cocktail for the
recovery of the tanker market.â
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
"In the third and fourth quarter we have entered into term loan facilities and
obtained financing commitments at what we believe to be highly attractive terms
for a total amount of up to $507.0 million to partially finance the acquisition
of the two 2019-built VLCCs and the six VLCC newbuilding contracts. When
factoring in the $33.4 million available under the term loan facility entered
into in November 2020 to partially finance the delivery of the last LR2 tanker,
we have established bank debt of up to $540.4 million. The Company has also
raised gross proceeds of $51.2 million under the Equity Distribution Agreement
and net cash proceeds after the repayment of bank debt of approximately $67.0
million through sale of four LR2 tankers. Following this the remaining
commitments as per September 30, 2021 for Frontlineâs newbuilding program
consisting of one LR2 tanker and six VLCCs and for the acquisition of the two
2019-built VLCCs, is fully funded.
Through these new financings we reduce our borrowing cost and industry leading
cash break even rates, providing significant operating leverage and sizeable
returns during period of market strength and help protecting our cash flows
during periods of market weakness.
The Company has also extended the terms of its senior unsecured revolving credit
facility of up to $275.0 million by 12 months to May 2023, leaving Frontline
with no loan maturities until 2023."
Average daily time charter equivalents (âTCEsâ)(1)
Estimated
average
daily
cash BE
rates for
the
($ remainder
per Spot TCE % of the
day) Spot TCE estimates Covered year
Âą-------------------------------------------------------------------Âą--------+
| Q4 | |
| 2021 Q3 2021 Q2 2021 Q1 2021 2020 2020 Q4 2021 | 2021 |
| | |
|VLCC 14,900 10,500 15,000 19,000 17,200 54,500 21,600 79% | 21,400 |
| | |
|SMAX 11,300 7,900 11,000 15,200 9,800 35,600 17,900 72% | 17,800 |
| | |
| LR2 11,000 10,700 10,600 12,000 12,500 23,400 16,000 64% | 14,100 |
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 fourth 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
November 28, 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, the length and severity of epidemics and
pandemics, including the ongoing global outbreak of the novel coronavirus
(âCOVID-19â), and their impacts on the demand for seaborne transportation of
petroleum products, the impact of increasing scrutiny and changing expectations
from investors, lenders and other market participants with respect to our
Environmental, Social and Governance policies, the impact of port or canal
congestion 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
