HIGHLIGHTS
-
Frontline reports a net loss attributable to the
Company of $12.1 million for the first quarter of 2014, equivalent
to a loss per share of $0.13.
-
Frontline reports net income attributable to the
Company of $3.6 million for the first quarter of 2014 when
excluding loss on the sale of vessels, equivalent to earnings per
share of $0.04.
- Frontline will not pay a dividend for the first
quarter of 2014.
- Frontline issued 8,829,063 new shares in the
first quarter further to the ATM offering launched in June 2013 and
further 1,635,589 new shares in April 2014.
- In April 2014, Frontline agreed with Rongsheng
shipyard to swap its two Suezmax newbuildings on order with two
similar Suezmax vessels from the same shipyard, at a lower contract
price.
FIRST
QUARTER 2014 RESULTS
The Board of Frontline Ltd. (the
"Company" or "Frontline") announces a net loss attributable to the
Company of $12.1 million in the first quarter, equivalent to a loss
per share of $0.13, compared with a net loss of $13.0 million in
the preceding quarter, equivalent to a loss per share of $0.15. The
net loss attributable to the Company in the first quarter includes
a loss on the sale of the VLCC Ulysses of $15.7 million. The net
loss attributable to the Company in the fourth quarter includes a
net gain of $13.8 million, which was recognized on the lease
terminations of the VLCCs Front Champion and Golden Victory and a
loss of $12.7 million, which was recognized on the conversion of
$25.0 million of the Company's convertible bonds into cash and
shares.
The average daily time charter
equivalents ("TCEs") earned in the spot and period market in the
first quarter by the Company's VLCCs and Suezmax tankers were
$32,700 and $27,700, respectively, compared with $22,400 and
$12,900, respectively, in the preceding quarter. The spot earnings
for the Company's double hull VLCCs and Suezmax vessels were
$32,500 and $27,700, respectively, compared with $21,600 and
$12,900, respectively, in the preceding quarter.
Contingent rental expense of $13.0
million in the first quarter comprises $11.7 million relating to
the amended charter parties for the vessels leased from Ship
Finance International Limited and $1.3 million relating to the
amended charter parties for four vessels leased from German KGs
vessels. Contingent rental expense of $1.7 million in the fourth
quarter relates to the amended charter parties for four KG
vessels.
Ship operating expenses decreased
by $0.2 million. Dry docking costs decreased by $0.6 million and
this was partially offset by an increase in running expenses.
Interest expense, net of
capitalized interest, was $21.6 million in the first quarter of
which $5.9 million relates to the Company's subsidiary Independent
Tankers Corporation Limited ("ITCL").
As of March 31, 2014, the Company
had total cash and cash equivalents of $111.2 million and
restricted cash of $74.9 million. Restricted cash includes $74.1
million relating to deposits in ITCL.
The Company estimates average
total cash cost breakeven rates for the remainder of 2014 on a TCE
basis for VLCCs and Suezmax tankers of approximately $25,200 and
$17,800, respectively.
FLEET
DEVELOPMENT
In March 2014, a wholly-owned
subsidiary of ITCL entered into an agreement to sell the VLCC
Ulysses to an unrelated third party for net sale proceeds of $25.5
million and the vessel was delivered to the buyer on March 11,
2014.
NEWBUILDING
PROGRAM
As of March 31, 2014 the Company had two Suezmax
newbuilding contracts and was committed to making newbuilding
installments of $87.9 million with expected payment in 2014.
In April 2014, the Company agreed with Rongsheng
shipyard to swap its two Suezmax newbuildings on order with two
similar Suezmax vessels from the same shipyard at a lower contract
price. Installments paid to date will be allocated to the new
vessels. The first vessel was delivered on May 19, 2014 following
the payment of the final installment of $41.5 million and the
second vessel is expected to be delivered in September 2014. The
Company is committed to making payments of $41.5 million as of the
date of this press release with expected payment in September
2014.
CORPORATE
The Company issued 8,829,063 new
ordinary shares under the ATM program during the first quarter.
95,340,776 ordinary shares were outstanding as of March 31, 2014,
and the weighted average number of shares outstanding for the
quarter was 93,841,670.
The Company issued 1,635,589 new
shares under the ATM program during April 2014. 96,976,365 ordinary
shares were outstanding as of the date of this press release.
THE MARKET
The market rate for a VLCC trading
on a standard 'TD3' voyage between the Arabian Gulf and Japan in
the first quarter of 2014 was WS 51, representing a decrease of WS
2 point from the fourth quarter of 2013 and WS16 above the first
quarter of 2013. The flat rate decreased by 6.7 percent from 2013
to 2014.
The market rate for a Suezmax
trading on a standard 'TD5' voyage between West Africa and
Philadelphia in the first quarter of 2014 was WS 79, representing
an increase of WS 13 points from the fourth quarter of 2013
and an increase of WS 21 points from the first quarter of 2013. The
flat rate decreased by 6 percent from 2013 to 2014.
Bunkers at Fujairah averaged
$611/mt in the first quarter of 2014 compared to $615/mt in the
fourth quarter of 2013. Bunker prices varied between a high of
$627/mt on January 15th and a low of $599/mt on March
12th.
The International Energy Agency's
("IEA") May 2014 report stated an OPEC crude production of 30.0
million barrels per day (mb/d) in the first quarter of 2014. This
was an increase of 0.2 mb/d compared to the fourth quarter of
2013.
The IEA estimates that world oil
demand averaged 91.3 mb/d in the first quarter of 2014, which is a
decrease of 1.1 mb/d compared to the previous quarter. IEA
estimates that world oil demand in 2014 will be 92.8 mb/d,
representing an increase of 1.5 percent or 1.4 mb/d from 2013.
The VLCC fleet totalled 627
vessels at the end of the first quarter of 2014, four vessels up
from the previous quarter. Five VLCCs were delivered during the
quarter, one was removed. The order book increased by 12 vessels
and counted 94 vessels at the end of the first quarter, which
represents 15 percent of the VLCC fleet.
The Suezmax fleet totalled 449
vessels at the end of the first quarter, up three from 446 vessels
at the end of the previous quarter. Three vessels were delivered
during the quarter whilst none were removed. The order book counted
40 vessels at the end of the first quarter, which represents
approximately nine percent of the Suezmax fleet.
STRATEGY AND
OUTLOOK
As of March 31, 2014, the Company had total debt and lease
obligations, excluding non-recourse debt in ITCL, of $1,044 million
comprised of $718 million in capital lease obligations to Ship
Finance, $76 million in notes payable to Ship Finance, $60 million
in capital lease obligations to German KGs and $190 million in
convertible bond loan. A full repayment of this debt is, to a large
extent, dependent on a sustained improvement in tanker rates going
forward.
In the event that cash flow from operations does not enable
Frontline to satisfy short term or medium to long term liquidity
requirements, Frontline will have to consider alternatives, such as
raising equity or selling assets, establish new loans or refinance
existing arrangements. If no additional equity can be raised,
assets sold, new loans established or existing arrangements
refinanced, there is a risk that Frontline will not have sufficient
cash to repay the existing $190 million convertible bond loan at
maturity in April 2015. Such a situation might force a
restructuring of the Company, including modifications of charter
lease obligations and debt agreements.
The Company is also committed to make newbuilding
installments of $41.5 million as of the date of this press release
with expected payment in September 2014 relating to one newbuilding
after having taken delivery of one newbuilding May 19, 2014, which
was financed by $41.5 million cash on hand. The Company expects to
partly finance these payments with bank debt that it intends to
arrange.
The balance sheet has been strengthened after March 31, 2014 from
the raising of $6.3 million in new equity in April 2014. The Board
is actively monitoring the situation and looking into opportunities
to restructure the balance sheet and further improve the Company's
financial position.
The recent negative development in the tanker market is likely to
give a weaker operating result (excluding one time gains and
losses) in the second quarter.
FORWARD LOOKING STATEMENTS
This press release contains
forward looking statements. These statements are based upon various
assumptions, many of which are based, in turn, upon further
assumptions, including Frontline management's examination of
historical operating trends. Although Frontline believes that these
assumptions were reasonable when made, because assumptions are
inherently subject to significant uncertainties and contingencies
which are difficult or impossible to predict and are beyond its
control, Frontline cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions.
Important factors that, in the
Company's view, could cause actual results to differ materially
from those discussed in this press release include the strength of
world economies and currencies, general market conditions including
fluctuations in charter hire rates and vessel values, changes in
demand in the tanker market as a result of changes in OPEC's
petroleum production levels and world wide oil consumption and
storage, changes in the Company's operating expenses including
bunker prices, dry-docking and insurance costs, 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 or political events,
and other important factors described from time to time in the
reports filed by the Company with the United States Securities and
Exchange Commission.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
May 26, 2014
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 section 5-12 of the
Norwegian Securities Trading Act.
1st Quarter 2014 Results
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Frontline Ltd. via Globenewswire
HUG#1788644
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