Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three and nine months ended September 30, 2019:
Highlights
- Reports a net loss of $10.0 million, or $0.06 per share, for the third quarter of 2019.
- Reported spot average daily time charter equivalent (“TCE”) for VLCCs, Suezmax tankers and LR2 tankers in the third quarter were $22,900, $16,200 and $15,900, respectively.
- For the fourth quarter of 2019, we estimate spot TCE of $64,800 contracted for 78% of vessel days for VLCCs, $49,400 contracted for 71% of vessel days for Suezmax tankers and $29,900 contracted for 74% of vessel days for LR2s. The estimated spot TCEs are provided on a load-to-discharge basis. In line with previous quarters, we expect the spot TCEs for the full quarter to be lower than the TCEs currently contracted, primarily due to the impact of ballast days at the end of the quarter.
- In October 2019, the Company announced that it had extended its senior unsecured revolving credit facility of up to $275.0 million with an affiliate of the Company’s shareholder, Hemen Holding Ltd. to May 2021.
- In November 2019, the Company secured a commitment from ICBC Financial Leasing Co., Ltd (“ICBCL”) for a sale-and-leaseback agreement in an amount of up to $544.0 million, which is subject to final documentation.
- Declared a cash dividend of $0.10 per share for the third quarter of 2019.
Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:
“We believe that tanker market fundamentals look encouraging and we have entered a period of substantially stronger vessel earnings. Our strategy has focused on increasing our spot exposure throughout the year and we believe this will be reflected in our results for the fourth quarter. While the brief spike in tanker rates made news headlines, it would not have been possible without a fundamentally tighter tanker market. We expect to see a dynamic and volatile market environment in the coming quarters and we will seek to opportunistically secure charter coverage if market strength persists.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS added:
“We are very pleased to have secured the financing commitment from ICBCL on highly attractive terms, which marks an important transaction between ICBCL and Frontline. Through this transaction we extend our capital sources at a very attractive capital cost, maintain our industry leading cash break-even rates and maximise potential cash flow per share after debt service.”
The average daily time charter equivalents (“TCE”) earned by Frontline in the quarter ended September 30, 2019, the prior quarters and in the year ended December 31, 2018 are shown below, along with spot estimates for the fourth quarter of 2019 and the estimated average daily cash break-even (“BE”) rates for the remainder of 2019:
| Average daily time charter equivalents ("TCEs") |
| ($ per day) | | Spot | Spot estimates | % covered | Estimated average daily cash BE rates |
| | Q3 2019 | Q2 2019 | Q1 2019 | 2018 | Q4 2019 | 2019 |
| VLCC | 22,900 | 25,600 | 35,700 | 18,300 | 64,800 | 78% | 23,400 |
| SMAX | 16,200 | 16,200 | 28,200 | 17,300 | 49,400 | 71% | 21,100 |
| LR2 | 15,900 | 18,100 | 24,000 | 14,900 | 29,900 | 74% | 16,100 |
The estimated average daily cash break-even rates are the daily TCE rates the 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.
Spot estimates are provided on a load-to-discharge basis. The rates quoted are for days currently contracted. The actual rates to be earned in the fourth quarter of 2019 will therefore 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. Furthermore, when a vessel remains uncontracted at the end of the quarter, the Company will recognize any costs during the uncontracted days up until the period end, whereas if a vessel is contracted, then certain costs can be deferred and recognized over the load-to-discharge period.
For example, on August 27, 2019 the Company disclosed that spot TCE of $28,000 per day had been contracted for 83% of vessel days for our VLCCs. The number of ballast days at the end of the third quarter was higher than the uncontracted days on August 27, 2019 and no additional revenues were booked. Furthermore, due to the number of uncontracted days at the end of the period, costs have been recognized for those days. This resulted in a lower TCE per day by the end of the third quarter.
The load-to-discharge basis of accounting 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.
When expressing TCE per day for the third quarter of 2019, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
November 26, 2019
Questions should be directed to:
Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 84
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 "believe," "anticipate," "intend," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect" 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, management's 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 world wide oil production and consumption and storage, changes in the Company's operating expenses, including bunker prices, dry docking and insurance costs, the market for the Company's 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 of the Norwegian Securities Trading Act.
