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Frontline Reports Net Income of $40 Million

Frontline Ltd. yesterday reported unaudited results for the three months ended March 31, 2019:

Highlights

• Net income attributable to the Company was $40.0 million, or $0.24 per share, for the first quarter of 2019.
• Net income attributable to the Company was $45.5 million, or $0.27 per share adjusted for certain non-cash items for the first quarter of 2019.
• Reported spot average daily time charter equivalent (“TCE”) for VLCCs, Suezmax tankers and LR2/Aframax tankers in the first quarter were $35,700, $28,200 and $24,000, respectively.
• For the second quarter of 2019, we estimate spot TCE of $34,800 contracted for 63% of vessel days for VLCCs. The estimated spot TCE is provided using the load-to-discharge method of accounting. We expect the spot TCE for the full quarter will be lower primarily due to impact of ballast days at the end of the quarter.
• In January 2019, the Company increased its ownership interest to 28.9% in Feen Marine Scrubbers Inc. (“FMSI”).
• In January and April 2019, the Company took delivery of the VLCC newbuildings Front Defender and Front Discovery.

Image: Frontline Ltd

Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:

“Following a strong start to the year, crude oil tanker rates weakened significantly in recent months due to elevated levels of refinery maintenance, decrease in oil supply and a number of newbuildings delivering. However, a market improvement is expected in the second half of the year as refinery capacity returns and oil volumes return to the markets. In particular, market analysts expect incremental crude demand to be generated by upcoming IMO 2020 regulations as increased inputs will be required to meet new demand for low sulphur fuels. Our commercial strategy, fleet renewal over recent years and the strong support from our largest shareholder creates significant leverage and opportunity in this exciting market dynamic.”

Inger M. Klemp, Chief Financial Officer of Frontline Management AS added:

“Following strong financial results in the first quarter of 2019 Frontline has remained focused on further strengthening its balance sheet. Based on market expectations and competitive breakeven levels, the Company is well positioned to generate significant cash flow and create value for its shareholders.”

The average daily time charter equivalents (“TCE”) earned by Frontline in the quarter ended March 31, 2019, the prior quarter and in the year ended December 31, 2018 are shown below, along with spot estimates for the second 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 BE rates
Q1 2019 Q4 2018 2018 Q2 2019 2019
VLCC 35,700 28,400 18,300 34,800 63% 24,700
SMAX 28,200 26,100 17,300 19,000 63% 20,000
LR2 24,000 18,700 14,900 19,500 55% 16,600

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 and general and administrative expenses.

Spot estimates are provided using the load-to-discharge method of accounting. The rates quoted are for days currently contracted. The actual rates to be earned in the second 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 based on load to discharge accounting principles.

On February 28, 2019 the Company disclosed that spot TCE of $41,300 per day had been contracted for 84% of vessel days for our VLCCs. As described above, due to the limited number of additional laden days at the end of the first quarter, additional revenues booked were limited and as such the total revenues for the 84% of vessel days contracted was spread over 100% of the days in the quarter, resulting in a lower TCE per day by the end of the first quarter.

The load-to-discharge method 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 first quarter of 2019, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.

Full Report

Source: Frontline Ltd.

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