FRO – Second Quarter and Half Year 2022 Results

Frontline Ltd. (the “Company” or “Frontline”), today announced unaudited results for the three and six months ended June 30, 2022:

Strong points

• Net earnings of $47.1 million, or $0.23 per basic and diluted share for the second quarter of 2022.
• Adjusted net earnings of $42.5 million, or $0.21 per basic and diluted share for the second quarter of 2022.
• Declared a cash dividend of $0.15 per share for the second quarter of 2022.
• Reported total operating revenue of $300.4 million for the second quarter of 2022.
• Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the second quarter of 2022 were $16,400, $26,500 and $38,600 per day, respectively.
• For the third quarter of 2022, we estimate spot TCE on a load-unload basis of $28,100 contracted for 73% of ship-days for VLCCs, $45,000 contracted for 73% of ship-days for Suezmax tankers and $46,200 contracted for 62% of ship days for LR2 tankers.
• Announcement of the signing of a definitive business combination agreement for a combination of shares between Frontline and Euronav NV (“Euronav”) (NYSE & Euronext: EURN) to create a leading independent global tanker operator which, on a combined base, would own and operate 68 VLCC and 56 Suezmax tankers, and 20 LR2/Aframax tankers.
• Taken delivery of the new VLCC, Front Alta and Front Tweed buildings from Hyundai Heavy Industries (“HHI”) in April and June 2022, respectively.
• Entered into two senior secured term loan facilities in April and July 2022 for an aggregate amount of up to $356.4 million on attractive terms to refinance two existing term loan facilities maturing in the first quarter of 2023.

Lars H. Barstad, CEO of Frontline Management AS, said:
“Frontline’s fleet of LR2 tankers took center stage in the second quarter of 2022, during which time we achieved the highest quarterly TCE we have recorded on this class of vessel. Sanctions on Russian oil and other products have disrupted trade routes for refined products globally, driving up refining margins and freight rates. Crude oil shipping was also affected and Suezmax tankers saw increased utilization and freight rates throughout the second quarter.

Frontline is proud to post strong earnings in the second quarter and to be able to distribute dividends. Over the past few quarters we have highlighted what we believe to be a cyclical rally for oil tankers, and this view was only reinforced in the first half of the year. Oil and product transportation supply and demand have gradually tightened as the world recovers from the COVID-19 pandemic, and a turning point appears to have been found. With the lowest order book as a percentage of the fleet in decades and the normalization of oil supply and demand, we believe this bodes well for the years to come.

Frontline announced on July 11 its intention to merge shares with Euronav, with the full support of the respective board, and we are moving diligently towards what will ultimately create an unparalleled service offering for our customers and the largest owner listed oil tanker in the world.

Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In April and July 2022, we entered into two senior secured term loan facilities for an aggregate amount of up to $356.4 million to refinance two existing term loan facilities with aggregate lump sum payments of 324, $6 million maturing in the first quarter of 2023. The refinancing will reduce our borrowing costs and what we believe to be the highest cash breakeven rates in the industry and maximize potential cash flow per share after debt service charges. We expect to refinance another existing term loan facility with total lump sum payments of $33.7 million due in the first quarter of 2023 prior to maturity.

Estimated average daily break-even rates are the TCE daily rates our vessels must earn to cover operating expenses, including drydocks, loan repayments, loan interest, bareboat charter, rental time and net general and administrative expenses for the remainder of the year. .

Point estimates are provided on a loading to unloading basis, whereby the Company recognizes revenue over time on a pro rata basis from the start of cargo loading until the completion of cargo unloading. The rates quoted are for all contract days up to the last contract discharge of cargo for each vessel during the quarter. The actual rates to be collected in the third quarter of 2022 will depend on the number of additional days that we can contract, and especially on the number of additional days that each vessel is loaded. Therefore, a high number of ballast days at the end of the quarter will limit the amount of additional revenue to be recognized on a load-unload basis. Ballast days are days when a vessel is sailing without cargo and therefore we are unable to recognize revenue on these days. In addition, when a vessel remains uncontracted at the end of the quarter, the Company will accrue certain costs on non-contracted days until the end of the period, whereas if a vessel is under contract, certain costs may be deferred and recognized on the charge-discharge period.

Recognizing revenue on a charge-to-discharge basis results in revenue being recognized on fewer days, but at a higher rate for those days. Over the duration of a trip, there is no difference in the total revenues and costs to be recognized compared to a landfill to landfill basis.

When expressing the TCE per day, the Company uses the total number of days available, net of days not rented and not just the number of days the vessel is loaded.
Source: Frontline