CORRECTION: FRO - 1st Quarter 2012 resultsMarketwire
HAMILTON, BERMUDA -- (Marketwire) -- 05/25/12 -- This is a correction of the announcementfrom 08:25 25.05.2012 CEST. Reason forthe correction: Incorrect PDF attached in last email.Highlights
* Frontline reports net income attributable to the Company of $7.2million and earnings per share of $0.09 for the first quarter of 2012.
* Frontline sold the double hull Suezmax tanker, Front Alfa, andrecognized a loss of $2.2 million.
* Frontline terminated the charter party for the single hull VLCC, TitanOrion (ex-Front Duke), and recognized a gain of $9.4 million.
* Frontline purchased $10.0 million notional value of the convertiblebonds 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 netincomeattributable to the Company of $7.2 million, equivalent to earnings pershare of$0.09, compared with a net loss of $343.7 million for the fourth quarter of2011, equivalent to a loss per share of $4.41. The net income attributabletothe Company in the first quarter includes a gain on sale of assets andamortization of deferred gains of $11.0 million, which includes a gain of$9.4million on the termination of the charter party for the single hull VLCC,TitanOrion (ex-Front Duke), an aggregate deferred gain of $3.8 million relatingtothe sale and leasebacks of DHT Eagle (ex Front Eagle) and Gulf Eyadah (exFrontShanghai) and a loss of $2.2 million on the sale of the double hull Suezmaxtanker, Front Alfa. The net income attributable to the Company in the firstquarter also includes a gain on the purchase of the Company's convertiblebondsof $4.6 million, which has been recorded in other non-operating income. Thenetloss attributable to the Company in the fourth quarter included a loss onsaleof assets and amortization of deferred gains of $312.9 million, whichincluded aloss of $307.0 million on the sale of ten vessels and five newbuildingcontractsat fair market value to Frontline 2012 Ltd. ("Frontline 2012"), a loss of$9.3million on the termination of the long term charter party for Front Striverandan aggregate deferred gain of $3.8 million relating to the sales andleasebacksof DHT Eagle (ex Front Eagle) and Gulf Eyadah (ex Front Shanghai).
The average daily time charter equivalents ("TCEs") earned in the spot andperiod market in the first quarter by the Company's VLCCs, Suezmax tankersandSuezmax OBO carriers were $25,600, $19,500 and $37,800, respectively,comparedwith $19,100, $13,900 and $41,600, respectively, in the preceding quarter.Thespot 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 spotearningsof $19,200 in the first quarter. The Company's double hull VLCCs excludingthespot index time charter vessels had spot earnings of $27,400 in the firstquarter compared with $18,400 in the fourth quarter.
Profit share expense in the first quarter relates to the amended charterpartyagreements with Ship Finance International Limited ("Ship Finance") and theamended charter party agreements for four leased vessels following therestructuring of the Company in December 2011. Profit share expense in thefourth quarter related to the profit sharing agreement with Ship Financeand wasincome of $0.3 million. The profit share expense is calculated on ayear-to-datebasis and the poor spot market in the fourth quarter resulted in a clawback inthat quarter. The cash sweep expense relates to the amended charter partieswithShip Finance and the amended charter parties for four leased vessels and isbased on the difference between the renegotiated rates and the actualmarketrate up to the original contract rates.
Ship operating expenses decreased by $9.6 million compared with theprecedingquarter primarily as a result of a decrease in running costs mainly due torecent sales and lease terminations and a decrease in drydocking costs of$1.0million.
Charter hire expenses decreased by $2.6 million in the first quartercomparedwith the preceding quarter primarily as a result of a $5.8 million decreasedueto vessel redeliveries in the fourth quarter offset by charter hire of $3.2million on two vessels chartered in from Frontline 2012 on floating ratetimecharters.
Interest expense, net of capitalized interest, was $24.3 million in thefirstquarter of which $5.8 million relates to the Company's subsidiaryIndependentTankers Corporation Limited ("ITCL").
As of March 31, 2012, the Company had total cash and cash equivalents of$169.5million and restricted cash of $86.5 million. Restricted cash includes$82.4million relating to deposits in ITCL.
The Company estimates average total cash cost breakeven rates for 2012 on aTCEbasis for VLCCs and Suezmax tankers of approximately $24,100 and $17,500,respectively.
In March 2012, the Company announced that it had entered into an agreementtosell its 1993-built double hull Suezmax tanker Front Alfa. Delivery to thebuyertook place on March 21, 2012 and the vessel ceased to operate in the tankermarket. All debt pertaining to the vessel of $12.9 million was prepaid inDecember 2011 and the Company recorded a loss of $2.2 million in the firstquarter of 2012.
In September 2011, the Company negotiated the early termination of bareboatcharters on three single hull VLCCs, Titan Orion (ex-Front Duke), TitanAries(ex-Edinburgh) and Ticen Ocean (ex-Front Lady), which are being charteredinfrom Ship Finance. These three vessels have been sold by Ship Finance withexpected delivery during 2012 and 2013. The Titan Orion (ex-Front Duke) wasdelivered and the charter party with Ship Finance was terminated, on March27, 2012.
As of March 31, 2012, and following the restructuring in December 2011, theCompany's newbuilding program comprised two Suezmax tankers, whichconstitute acontractual cost of $124.9 million. Installments of $12.5 million have beenmadeand the remaining installments to be paid as of March 31, 2012, amount to$112.4million with expected payments of $25.0 million in 2012 and $87.4 millionin2013.
The Company purchased $10.0 million notional value of the convertible bondsdue2015 for $5.4 million and recognized a gain of $4.6 million in the firstquarterof 2012.
The Board of Directors has decided not to declare a dividend for the firstquarter of 2012.
77,858,502 ordinary shares were outstanding as of March 31, 2012, and theweighted average number of shares outstanding for the quarter was77,858,502.
The market rate for a VLCC trading on a standard 'TD3' voyage between theArabian Gulf and Japan in the first quarter of 2012 was WS 56, representinganincrease of approximately WS 2 points from the fourth quarter of 2011 and adecrease of approximately WS 2 points from the first quarter of 2011.Mainly dueto increased bunker rates the TD3 flat rate was adjusted up by 19.2 percentfrom2011 to 2012, hence the same WS gives 19.2 percent higher gross earnings in2012 than in 2011. Current market indications are approximately $25,000/dayinthe second quarter of 2012.
The market rate for a Suezmax trading on a standard 'TD5' voyage betweenWestAfrica and Philadelphia in the first quarter of 2012 was WS 82.2,representing adecrease of approximately WS 1 point from the fourth quarter of 2011 andthesame as the first quarter of 2011. Mainly due to increased bunker rates theTD5flat rate was adjusted up by 18.7 percent from 2011 to 2012, hence the sameWSgives 18.7 percent higher gross earnings in 2012 than in 2011. Currentmarketindications are approximately $16,000/day in the second quarter of 2012.
Bunkers at Fujairah averaged $730/mt in the first quarter of 2012 comparedto$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 averageOPECoil production, including Iraq, of 31.34 million barrels per day (mb/d)duringFebruary and March 2012. This was an increase of 820 kb/d compared to thefourthquarter of 2011.
IEA further estimates that world oil demand averaged 89.50 mb/d in thefirstquarter of 2012, which is a decrease of 400 kb/d from previous quarter andanincrease of 300 kb/d from first quarter 2011. Additionally, the IEAestimatesthat world oil demand will average approximately 90.0 mb/d in 2012,representingan 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,upfrom 594 vessels at the end of the previous quarter. 11 VLCCs weredeliveredduring the quarter whilst seven were deleted. The order book counted 111vesselsat the end of the first quarter, down from 123 orders from the previousquarter.Current order book represents about 18 percent of the VLCC fleet. AccordingtoFearnleys the single hull fleet stands at 23 vessels.
The Suezmax fleet counts 451 vessels at the end of the first quarter, upfrom446 vessels at the end of the previous quarter. 14 vessels were deliveredduringthe quarter whilst nine were deleted. The order book counted 96 vessels attheend of the first quarter, down from 114 vessels at the end of the previousquarter. No new orders were placed during the quarter and the current orderbooknow represents 21 percent of the total fleet. According to Fearnleys thesinglehull fleet now stands at nine vessels.
Strategy and Outlook
The Board sees a challenging supply / demand situation for the tankermarketwhere the combined VLCC and Suezmax fleet between 2004 and 2012 increasedby 98percent without being backed by a similar increase in demand. Frontlinewillcontinue to remain cautious and focus its resources on the presentactivitiesuntil a clearer sign of recovery can be seen in the tanker market.
Following the restructuring completed in December 2011, the cash break evenrates 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 itsmajorcounterparties to reduce the gross charter payment commitments underexistingchartering arrangements. Frontline will, however, compensate chartercounterparties with 100 percent of any difference between the renegotiatedratesand the actual market rate up to the original contract rates. Some of thecounterparties will receive some additional compensation for earningsachievedabove original contract rates. The TCEs earned in the in the first quarterof2012 were above the renegotiated rates and Frontline recorded cash sweepexpenseof $14.9 million in the quarter. The main part of this relates to theamendedcharter parties with Ship Finance.
The development in the first quarter and so far in the second quarter hasbeenstronger than the Board anticipated at the beginning of the year. Based onresults achieved so far in the quarter and the current outlook the Boardexpectsthe operating result in the second quarter to be better than in the firstquarter.
Forward Looking Statements
This press release contains forward looking statements. These statementsarebased upon various assumptions, many of which are based, in turn, uponfurtherassumptions, including Frontline management's examination of historicaloperating trends. Although Frontline believes that these assumptions werereasonable when made, because assumptions are inherently subject tosignificantuncertainties and contingencies which are difficult or impossible topredict andare beyond its control, Frontline cannot give assurance that it willachieve oraccomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual resultstodiffer materially from those discussed in this press release include thestrength of world economies and currencies, general market conditionsincludingfluctuations in charter hire rates and vessel values, changes in demand inthetanker market as a result of changes in OPEC's petroleum production levelsandworld wide oil consumption and storage, changes in the Company's operatingexpenses including bunker prices, dry-docking and insurance costs, changesingovernmental rules and regulations or actions taken by regulatoryauthorities,potential liability from pending or future litigation, general domestic andinternational political conditions, potential disruption of shipping routesdueto accidents or political events, and other important factors describedfromtime to time in the reports filed by the Company with the United StatesSecurities and Exchange Commission.
The full report is available for download in the link enclosed.The Board of DirectorsFrontline Ltd.Hamilton, BermudaMay 24, 2012
This information is subject of the disclosure requirements pursuant tosection5-12 of the Norwegian Securities Trading Act.
1st Quarter 2012 Results:http://hugin.info/182/R/1614922/514675.pdf
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Source: Frontline Ltd. via Thomson Reuters ONE[HUG#1614922]Questions should be directed to:Jens Martin JensenChief Executive Officer, Frontline Management AS+47 23 11 40 99Inger M. KlempChief Financial Officer, Frontline Management AS+47 23 11 40 76
Source: Frontline Ltd.