HAMILTON, BERMUDA--(Marketwired - Aug 28, 2013) -
* Frontline reports a net loss attributable to the Company of $120.3
for the second quarter of 2013, equivalent to a loss per share of
* Frontline reports a net loss attributable to the Company of $139.0
for the six months ended June 30, 2013, equivalent to a loss per
* Frontline records a vessel impairment loss of $81.3 million in the three
six months ended June 30, 2013.
* Frontline will not pay a dividend for the second quarter of 2013.
* Frontline has issued 985,084 new shares following the launch of an ATM
the market") offering in June 2013.
Second Quarter and Six Months 2013 Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces a net
attributable to the Company of $120.3 million in the second quarter,
to a loss per share of $1.54, compared with a net loss of $18.8 million
first quarter, equivalent to a loss per share of $0.24. The net
attributable to the Company in the second quarter includes a gain on
assets and amortization of deferred gains of $0.5 million being the
gain relating to the sale and leaseback of DHT Eagle (ex Front Eagle).
loss attributable to the Company in the first quarter included a gain on
assets and amortization of deferred gains of $9.2 million, which included a
of $7.6 million on the termination of the charter party for the single
VLCC, Titan Aries (Ex Edinburgh), and a deferred gain of $1.8 million
to the sale and leaseback of the VLCC DHT Eagle.
The Company has recorded a vessel impairment loss of $81.3 million in the
and six months ended June 30, 2013. This loss relates to three vessels
from Ship Finance (Front Century, Front Champion and Golden Victory).
losses are taken when events or changes in circumstances occur that
Company to believe that future cash flows for an individual vessel will be
than its carrying value and not fully recoverable. In such
impairment charge is recognized if the estimate of the undiscounted cash
expected to result from the use of the vessel and its eventual
less than the vessel's carrying amount.
Following the termination of the lease on the Company's final OBO carrier,
Guider, in the first quarter the results of the OBO carriers have been
as discontinued operations in accordance with U.S. generally accepted
principles. The Company reports a net loss from discontinued operations of
million in the second quarter compared with a net loss from
operations of $0.5 million in the preceding quarter.
The average daily time charter equivalents ("TCEs") earned in the
period market in the second quarter by the Company's VLCCs and Suezmax
were $14,100 and $13,800, respectively, compared with $17,000 and
respectively, in the preceding quarter. The spot earnings for the
double hull VLCCs and Suezmax vessels were $11,200 and $13,800,
compared with $14,600 and $14,500, respectively, in the preceding quarter.
Contingent rental expense relates to the amended charter parties with
Finance International Limited ("Ship Finance") and the amended charter
for four other leased vessels and is based on the difference
renegotiated rates and the actual TCE revenues up to the original
rates. Contingent rental expense in the second quarter and the preceding
is income as the contingent rental expense relating to the four non-Ship
vessels is calculated quarterly on a cumulative basis over the four year
to December 31, 2015 and the accrued contingent rental expense at June 30,
and March 31, 2013 was lower than the accrued contingent rental
December 31, 2012.
Ship operating expenses increased by $5.9 million compared with the
quarter due to an increase in dry docking costs.
Charter hire expenses decreased by $3.8 million compared with the
quarter as a result of redelivery of the chartered-in VLCC DHT Eagle
8, 2013. Following this redelivery, the Company no longer has any
chartered-in under operating leases.
Interest expense, net of capitalized interest, was $22.9 million in the
quarter of which $6.1 million relates to the Company's subsidiary
Tankers Corporation Limited ("ITCL").
Frontline announces a net loss attributable to the Company of $139.0
the six months ended June 30, 2013, equivalent to a loss per share of
average daily TCEs earned in the spot and period market in the six months
June 30, 2013 by the Company's VLCCs and Suezmax tankers were
$14,100, respectively, compared with $28,200 and $18,000, respectively,
six months ended June 30, 2012. The spot earnings for the Company's double
VLCCs and Suezmax vessels were $12,900 and $14,100, respectively, in
months ended June 30, 2013 compared with $28,300 and $18,000,
the six months ended June 30, 2012.
As of June 30, 2013, the Company had total cash and cash equivalents of
million and restricted cash of $75.8 million. Restricted cash includes
million relating to deposits in ITCL.
The Company estimates average total cash cost breakeven rates for the
of 2013 on a TCE basis for VLCCs and Suezmax tankers of approximately
and $19,000, respectively.
In December 2012, the Company agreed to an early termination of the time
out contracts on the two OBO carriers, Front Viewer and Front
received a compensation payment in December 2012 from the charterers for
hire due to the early termination of $35.0 million. This amount was
operating revenues in 2012 and has now been recorded in the results
discontinued operations. The Company also agreed with Ship Finance to
the long term charter parties for these two OBO carriers. The charter
Front Viewer terminated in December 2012 and the charter party for the
Guider terminated in March 2013. The Company paid $23.5 million to Ship
as compensation for the early termination of the charters and the estimated
of contingent rentals relating to the two vessels. The Company recorded a
on termination of the lease for Front Viewer of $16.5 million in the
quarter of 2012 and a vessel impairment loss of $14.2 million on the
termination of the lease on Front Guider in March 2013. These losses have
recorded in the results from discontinued operations.
In January 2013, the Company terminated the charter party for the single
VLCC Titan Aries and recognized a gain of $7.6 million in the first
In January 2013, BP Shipping gave twelve months notice of its
terminate the bareboat charter for the VLCC British Progress from the
subsidiary ITCL. Termination will take effect on February 2, 2014.
In February 2013, the Company agreed with Ship Finance to terminate the
term charter party between the companies for the Suezmax tanker, Front
and Ship Finance simultaneously sold the vessel. The termination of the
party took place on February 15, 2013 and the Company made a net
payment to Ship Finance of $2.1 million for the early termination of the
In March 2013, the VLCC Ulysses (ex Phoenix Voyager) was redelivered to
Chevron and the vessel commenced trading in the spot market.
In May 2013, the Company redelivered the chartered-in VLCC DHT Eagle
As of June 30, 2013 the Company was committed to make newbuilding
of $87.9 million with expected payment of $6.2 million in 2013 and $81.7
In January 2013, the Company paid $6.0 million for 1,143,000 shares in a
placement by Frontline 2012 of 59 million new ordinary shares at a
price of $5.25 per share. Following the private placement, the
ownership in Frontline 2012 was reduced from 7.9% to 6.3%. The
recognized a gain on the dilution of its ownership of $5.2 million in the
quarter of 2013 in "share of income (losses) from associated companies".
In April 2013, Ms. Cecile Fredriksen and Mr. Tony Curry resigned from
positions as directors of the Company. One of the vacancies created by
departures was filled by Georgina Sousa. Mrs. Sousa joined the Company as
of Corporate Administration in 2007. Mrs. Sousa is also a Director of
Limited, Golden Ocean Group Limited and Frontline 2012 Ltd.
At a special general meeting of shareholders held on May 8, 2013 the
shareholders approved a decrease in the par value of our ordinary shares
$2.50 to $1.00 per share effective May 14, 2013.
In June 2013, the Company announced that it has entered into an
distribution agreement with Morgan Stanley & Co. LLC, ("Morgan Stanley")
which Frontline may, at any time and from time to time, offer and
ordinary shares having aggregate sales proceeds of up to $40.0 million
Morgan Stanley in an at-the-market ("ATM") offering.
The Company issued 655,552 new ordinary shares under that program
month of June 2013. 78,514,054 ordinary shares were outstanding as of
30, 2013, and the weighted average number of shares outstanding for the
The market rate for a VLCC trading on a standard 'TD3' voyage
Arabian Gulf and Japan in the second quarter of 2013 was WS 37,
increase of WS 2 points from the first quarter of 2013 and a
approximately WS 18 points from the second quarter of 2012. The flat
increased by 9.1 percent from 2012 to 2013.
The market rate for a Suezmax trading on a standard 'TD5' voyage between
Africa and Philadelphia in the second quarter of 2013 was WS 54,
decrease of WS 3.5 points from the first quarter of 2013 and a decrease
18 points from the second quarter of 2012. The flat rate increased by
percent from 2012 to 2013.
Bunkers at Fujairah averaged $614/mt in the second quarter of 2013
$633/mt in the first quarter of 2013. Bunker prices varied between a
$640/mt on April 2(nd) and a low of $597/mt on June 28(th).
The International Energy Agency's ("IEA") August 2013 report stated an
production, including Iraq, of 30.8 million barrels per day (mb/d) in the
quarter of 2013. This was an increase of 0.4 mb/d compared to the first
The IEA estimates that world oil demand averaged 90.4 mb/d in the second
of 2013, which is an increase of 0.5 mb/d compared to the previous
estimates that world oil demand in 2013 will be 90.8 mb/d,
increase of 1.0 percent or 0.9 mb/d from 2012.
The VLCC fleet totalled 639 vessels at the end of the second quarter of
from 634 vessels at the end of the previous quarter. 10 VLCCs were
during the quarter, five were removed. The order book counted 57 vessels
end of the second quarter, down 10 from the previous quarter. The current
book represents nine percent of the VLCC fleet. According to
single hull fleet is 15 vessels, two less than last quarter.
The Suezmax fleet totalled 448 vessels at the end of the second quarter, up
442 vessels at the end of the previous quarter. Six vessels were
during the second quarter whilst none were removed. The order book
vessels at the end of the second quarter which represents approximately
percent of the Suezmax fleet. According to Fearnley's, the single hull
stands unchanged at five vessels.
Strategy and Outlook
The Board is of the opinion that the tanker market is massively
today and that it may take some time before a reasonable market
restored and sustained recovery of the tanker market occurs. The Board
that such a market balance and sustained recovery of the tanker market
dependent on the extent of phase out of existing tonnage as well as
Facing a market where tanker vessels are operated below cash cost break
rates, the Board is of the opinion that we as owners should seriously
the investment we have to make in vessels which are more than 15 years
order to take the vessels through special survey. Based on market rates
likely that these investments will be unprofitable and we will be
scrapping these vessels.
Frontline has two vessels coming up for special survey in the second
this year. Based on no material improvement in the tanker market it is
that Frontline will invest in these vessels to continue trading. If
decisions are taken by other owners, it is likely to reduce the
the tanker market.
As of June 30, 2013 Frontline had total debt and lease obligations
debt linked to ITCL of 1,135 million. This is composed of approximately
million in lease obligations to Ship Finance, approximately $69 million in
obligations to German KGs and $215 million in convertible bond loan. A
repayment of this debt is to a large extent dependant on a
improvement in tanker rates in the years to come. The Company has as of
30, 2013 no bank debt.
If the tanker market does not recover in the short term and no additional
can be raised or assets sold there is a risk that Frontline will
insufficient cash to satisfy liquidity requirements and to repay the
$225 million convertible bond loan at maturity in April 2015. Such a
might force a restructuring of the Company, including modifications of
lease obligations and debt agreements.
The Board expects that the operating result excluding gains and losses in
third quarter will be in line with the operating result in the second
and that the free cash position of the Company will continue to decrease.
The Board is actively monitoring the situation and looking for
restructure the balance sheet and improve the Company's financial position.
Forward Looking Statements
This press release contains forward looking statements. These
based upon various assumptions, many of which are based, in turn, upon
assumptions, including Frontline management's examination of
operating trends. Although Frontline believes that these assumptions
reasonable when made, because assumptions are inherently subject to
uncertainties and contingencies which are difficult or impossible to
are beyond its control, Frontline cannot give assurance that it will
accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual
differ materially from those discussed in this press release
strength of world economies and currencies, general market conditions
fluctuations in charter hire rates and vessel values, changes in demand
tanker market as a result of changes in OPEC's petroleum production
world wide oil consumption and storage, changes in the Company's
expenses including bunker prices, dry-docking and insurance costs,
governmental rules and regulations or actions taken by regulatory
potential liability from pending or future litigation, general
international political conditions, potential disruption of shipping
to accidents or political events, and other important factors described
time to time in the reports filed by the Company with the United
Securities and Exchange Commission.
The full report is available for download in the link enclosed.
The Board of Directors
August 27, 2013
Questions should be directed to:
Jens Martin Jensen:
Chief Executive Officer
Frontline Management AS
+47 23 11 40 99
Inger M. Klemp:
Chief Financial Officer
Frontline Management AS
+47 23 11 40 76
This information is subject of the disclosure requirements pursuant to
5-12 of the Norwegian Securities Trading Act.
2nd Quarter 2013 Results:
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Source: Frontline Ltd. via Thomson Reuters ONE