FRO - Fourth Quarter and Full Year 2020 Results
Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three months and year ended December 31, 2020:
Highlights
- Net income of $412.9 million or $2.09 per diluted share and adjusted net income of $421.6 million or $2.13 per diluted share for the year ended December 31, 2020, being the strongest yearly result since 2008
- Net loss of $9.2 million, or $0.05 per diluted share for the fourth quarter of 2020
- Adjusted net loss of $20.2 million, or $0.10 per diluted share for the fourth quarter of 2020
- Reported total operating revenues of $174.9 million for the fourth quarter of 2020
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the fourth quarter of 2020 were $17,200, $9,800 and $12,500 per day, respectively
- For the first quarter of 2021, we estimate spot TCE on a load-to discharge basis of $22,600 contracted for 78% of vessel days for VLCCs, $17,800 contracted for 68% of vessel days for Suezmax tankers and $12,200 contracted for 65% of vessel days for LR2 tankers. We expect the spot TCEs for the full first quarter of 2021 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the first quarter as well as current prevailing freight rates
- Entered into three senior secured term loan facilities in November 2020 in an amount of up to $250.7 million, $100.8 million and $133.7 million, respectively, to refinance two existing term loan facilities maturing in the second quarter of 2021 and to partially finance the LR2 tankers under construction
- In February 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 2022
Lars H. Barstad, Interim Chief Executive Officer of Frontline Management AS commented:
“In 2020 Frontline recorded its strongest result since 2008, but the fourth quarter of the year reflect the challenging conditions tanker markets experience, as record volume of oil inventories are drawn. Global oil demand is growing firmly, and all leading commodity markets are pointing towards a strong recovery for the world economy in 2021. Demand for tankers is currently muted as the total volume of oil transported is capped. There are indications we may be near the end of the inventory draw cycle as OECD stock levels are approaching 5-year averages. The strong development in oil prices implies real demand returning, most notably in Asia where we are close to pre COVID-19 levels. When global oil markets switch from drawing on inventories, to call on equal volumes from the marketplace, growing demand for freight should be expected. At this point in the curve, we believe Frontline is well positioned to capture a recovery for tankers with our low cash breakeven levels and a spot exposed fleet of modern fuel-efficient vessels.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In the fourth quarter of 2020 we refinanced two term loan facilities with total balloon payments of $324.4 million due in April 2021 and in June 2021, leaving Frontline with no material maturities until 2023. The Company has extended the terms of its senior unsecured revolving credit facility of up to $275.0 million to May 2022 and the Company’s newbuilding program is also fully funded with a new term loan facility in an amount of up to $133.7 million. Frontline’s estimated daily cash breakeven levels for 2021 of $21,600, $17,800 and $15,600 for VLCCs, Suezmax tankers and LR2 tankers, respectively, provide significant operating leverage and help to protect our cash flows during periods of market weakness.”
Average daily time charter equivalents ("TCEs")1
| ($ per day) | Spot TCE | Spot TCE estimates | % covered | Estimated average daily BE rates | ||||||
| 2020 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | 2019 | Q1 2021 | 2021 | ||
| VLCC | 54,500 | 17,200 | 49,200 | 75,800 | 74,800 | 58,000 | 35,900 | 22,600 | 78% | 21,600 |
| SMAX | 35,600 | 9,800 | 25,100 | 51,100 | 57,800 | 38,200 | 25,800 | 17,800 | 68% | 17,800 |
| LR2 | 23,400 | 12,500 | 12,800 | 36,900 | 31,200 | 29,800 | 22,000 | 12,200 | 65% | 15,600 |
The estimated average daily cash breakeven 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 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 days up until the last contracted discharge of cargo for each vessel in the quarter. The actual rates to be earned in the first 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 and not just the number of days the vessel is laden.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
February 18, 2021
Questions should be directed to:
Lars H. Barstad: Interim 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 "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 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 (“non-GAAP”). See Appendix 1 for a full description of the measures and reconciliation to the nearest GAAP measure.
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