FRO – Third Quarter and Nine Months 2022 Results
FRONTLINE LTD. REPORTS RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2022
Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three and nine months ended September 30, 2022:
Highlights
- Net income of $154.4 million, or $0.69 per basic and diluted share for the third quarter of 2022.
- Adjusted net income of $82.9 million, or $0.37 per basic and diluted share for the third quarter of 2022.
- Intention to declare and pay the cash dividend in respect of the third quarter of 2022 only after the contemplated voluntary exchange offer by Frontline for Euronav shares that was initially announced on July 11, 2022 (the “Tender Offer”) has been completed. This dividend is expected to be in the amount of 80% of adjusted net income for the third quarter of 2022.
- Reported total operating revenues of $382.2 million for the third quarter of 2022.
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2/Aframax tankers in the third quarter of 2022 were $25,000, $41,100 and $40,200 per day, respectively.
- For the fourth quarter of 2022, we estimate spot TCE on a load-to-discharge basis of $77,200 contracted for 75% of vessel days for VLCCs, $65,400 contracted for 76% of vessel days for Suezmax tankers and $58,000 contracted for 70% of vessel days for LR2/Aframax tankers. We expect the spot TCEs for the full fourth quarter of 2022 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the fourth quarter. The number of ballast days at the end of the third quarter was 332 for VLCCs, 367 for Suezmax tankers and 269 for LR2/Aframax tankers.
- Final Combination Agreement signed with Euronav in July 2022.
- Entered into two senior secured term loan facilities, one in July and the other in October 2022, for a total amount of up to $287.2 million at attractive terms to refinance two existing term loan facilities maturing in the first quarter of 2023.
- Took delivery of the VLCC newbuildings, Front Tana and Front Gaula, from Hyundai Heavy Industries (“HHI”) in August 2022 and October 2022, respectively.
- In November 2022, the Company extended its senior unsecured revolving credit facility of up to $275.0 million with an affiliate of Hemen Holding Ltd., the Company’s largest shareholder, by 12 months to May 2024 at an interest rate of 8.50% and otherwise on existing terms.
Lars H. Barstad, Chief Executive Officer of Frontline Management AS, commented:
“The market is virtually firing on all cylinders, and Frontline’s efficient operations, modern fleet and transparent business model again shows how quickly a change in market fundamentals is reflected in its cash generation and shareholder returns. We outperformed most of our competitors in terms of higher earnings and lower costs in the third quarter, and with nearly all of our vessels spot exposed, Frontline will continue to capture value as this cycle unfolds.
Irrespective of near-term volatility on the demand side, the supply side remains constrained with an aging global tanker fleet and historically low orderbook. This forms the basis for our positive outlook for a prolonged strong cycle in the tanker market, and we remain committed to continue returning value to our shareholders.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In July and October 2022, we entered into two senior secured term loan facilities for a total amount of up to $287.2 million to refinance two existing term loan facilities with total balloon payments of $267.1 million maturing in the first quarter of 2023. Through these new financings we reduce our borrowing cost and what we believe to be industry leading cash break even rates, providing significant operating leverage and sizeable returns during periods of market strength and help protect our cash flows during periods of market weakness.
The Company has also extended its senior unsecured revolving credit facility of up to $275.0 million by 12 months to May 2024 at an interest rate of 8.50% and otherwise on existing terms, leaving Frontline with no loan maturities until the third quarter of 2023.”
Average daily time charter equivalents ("TCEs")1
| ($ per day) | Spot TCE | Spot TCE estimates | % Covered | Estimated average daily cash breakeven rates | ||||
| 2022 | Q3 2022 | Q2 2022 | Q1 2022 | 2021 | Q4 2022 | 2022 | ||
| VLCC | 19,100 | 25,000 | 16,400 | 15,700 | 15,300 | 77,200 | 75 % | 25,000 |
| Suezmax | 28,500 | 41,100 | 26,500 | 16,900 | 12,000 | 65,400 | 76% | 20,200 |
| LR2/ Aframax | 32,300 | 40,200 | 38,600 | 19,000 | 11,800 | 58,000 | 70% | 17,200 |
The estimated average daily cash breakeven rates are the daily TCE rates our vessels must earn 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 contracted days up until the last contracted discharge of cargo for each vessel in the quarter. The actual rates to be earned in the fourth quarter of 2022 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 on such days. 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 number of ballast days at the end of the third quarter were 332 for VLCCs, 367 for Suezmax tankers and 269 for LR2/Aframax tankers.
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 days and not just the number of days the vessel is laden.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
November 29, 2022
Ola Lorentzon - Chairman and Director
John Fredriksen - Director
Ole B. Hjertaker - Director
James O'Shaughnessy - Director
Steen Jakobsen – Director
Marios Demetriades - Director
Questions should be directed to:
Lars H. Barstad: Chief Executive Officer, Frontline Management AS
+47 23 11 40 00
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 00
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 ability of Frontline and Euronav to successfully complete the proposed combination on anticipated terms and timing, including, among other things, obtaining required shareholder and regulatory approvals, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies, expansion and growth of the combined group’s operations and other important conditions to the completion of the acquisition, risks relating to the integration of operations of Frontline and Euronav and the possibility that the anticipated synergies and other benefits of the proposed combination will not be realized or will not be realized within the expected timeframe, the outcome of any legal proceedings related to the proposed combination, the failure of counterparties to fully perform their contracts with Frontline or Euronav, 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 worldwide 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, the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our ESG policies, 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, environmental factors, political events, public health threats, international hostilities including the ongoing developments in the Ukraine region, acts by terrorists or acts of piracy on ocean-going vessels, the length and severity of epidemics and pandemics, including the ongoing global outbreak of the novel coronavirus ("Covid-19"), and their impacts on the demand for seaborne transportation of petroleum products, the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance policies, the impact of port or canal congestion and other important factors described from time to time in the reports filed by the Company with the 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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