Frontline Ltd. (the “Company” or “Frontline”), today reported unaudited results for the three and nine months ended September 30, 2022:
- 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.”
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.