Frontline Ltd. (the "Company" or
"Frontline"), today reported unaudited results for the period ended
September 30, 2015.
Highlights
-
Frontline achieved net income attributable to
the Company of $17.4 million, or $0.09 per share, for the third
quarter of 2015 and net income attributable to the Company of $65.9
million, or $0.42 per share, for the nine months ended September
30, 2015.
-
The long-term charters for the 1995-built
Suezmax tankers, Front Glory and Front
Splendour, were terminated in September and October,
respectively. The Company received compensation payments of
$2.2 million and $1.3 million, respectively, for the termination of
the charters.
-
In November, the Company agreed to terminate the
long-term charter for the 1998-built Suezmax tanker,
Mindanao. The charter is expected to terminate in the fourth
quarter of 2015. The Company expects to receive a
compensation payment of approximately $3.3 million for the
termination of the charter.
-
In July 2015, the Company and Frontline 2012 Ltd
entered into an agreement and plan of merger. Shareholder meetings
of each of Frontline and Frontline 2012 will be held on November
30, 2015 to vote to approve the Merger Agreement.
-
Assuming shareholder approval and completion of
the merger, the Board of Directors of Frontline has recommended
implementing a dividend strategy to distribute quarterly dividends
to shareholders equal to or close to EPS adjusted for non recurring
items. The timing and amount of dividends is at the discretion of
the Board of Directors. The first dividend for the merged company
is expected to be declared and paid in December 2015.
-
November 23, 2015 Frontline entered into an
agreement to purchase two 157,500 dwt Suezmax tanker newbuilding
contracts from Golden Ocean Group Limited at a purchase price of
$55 million per vessel. The newbuilding contracts are with New
Times Shipbuilding Co. Ltd. in China and the vessels are expected
to be delivered in the first quarter of 2017.
Robert Hvide Macleod, Chief
Executive Officer of Frontline Management AS commented:
"We are very pleased to report our strongest
third quarter since 2008 with net income attributable to the
Company of $17.4 million, or $0.09 per share.
The strength of the tanker market
was driven primarily by high demand for low priced oil, a dynamic
which continued from the second quarter. The high demand for oil
has led to congestion in key ports around the world, which creates
more demand for tanker vessels. Also of note, ballast speeds
increased during the third quarter, returning to normal
levels. We believe that this is a strong sign that capacity
is being absorbed. Indeed, current fleet utilization is at
levels not seen since 2009.
The average daily time charter
equivalents ("TCEs") earned through a combination of spot and time
charters in the third quarter by the Company's VLCCs and Suezmax
tankers were $45,600 and $28,100, respectively. Several of our
tankers were fixed for positioning voyages in the third quarter,
which reduced average TCEs. The positioning voyages were made
to strategically position the vessels ahead of the fourth quarter,
which in the past has yielded seasonally higher rates.
For our vessels employed in the
spot market, we have covered 80% of our VLCC operating days in the
fourth quarter at TCE rates of approximately $68,500 and 88% of our
Suezmax operating days at TCE rates of approximately $42,500.
Rates for vessels on time charters are naturally at lower levels
than those that can be achieved on a spot basis in this strong
market."
Fleet
Development
As of September 30, 2015,
Frontline's fleet consisted of 14 VLCC and eight Suezmax tankers
with an aggregate carrying capacity of 5.4 million dwt. Of
these, two Suezmax tankers are owned by the Company and the
remaining 20 vessels are chartered in from third parties.
Additionally, the Company has 6 VLCCs, eight Suezmax tankers, 10
LR2 Aframax tankers, and 15 MR2 Handysize tankers under commercial
management.
The majority of the Company's
leased vessels are leased from Ship Finance International Ltd.
("Ship Finance") under long term charter agreements. In June
2015, the Company and Ship Finance agreed to amend the long term
charter agreements on 12 VLCCs and five Suezmaxes for the remaining
average charter period of 7.7 years. Under the new agreement,
which took effect July 1, 2015, the daily time charter rates for
VLCCs and Suezmaxes were decreased to $20,000 and $15,000,
respectively. Daily operating expenses payable by Ship
Finance for all vessels were increased from $6,500 to $9,000.
In connection with the decrease in daily time charter rates and the
increase in daily operating expenses, the Company and Ship Finance
agreed to revise the profit split above the daily time charter
rates to 50%/50%, and 55 million shares of Frontline were issued to
Ship Finance. Please refer to Form 6-K filed by the Company with
the Securities and Exchange Commission on June 1, 2015 for further
details on the amended charter structure.
In August 2015, the Company agreed
with Ship Finance to terminate the long term charter for the
1995-built Suezmax tanker Front Glory. The
charter with Ship Finance terminated in September. The Company
received a compensation payment of $2.2 million from Ship Finance
for the termination of the charter.
In September 2015, the Company
agreed with Ship Finance to terminate the long term charter for the
1995-built Suezmax tanker Front Splendour,
which has surveys due at the end of this year. The charter with
Ship Finance terminated in October. The Company received a
compensation payment of $1.3 million from Ship Finance for the
termination of the charter.
In November 2015, the Company
agreed with Ship Finance to terminate the long term charter for the
1998-built Suezmax tanker Mindanao. The
charter with Ship Finance is expected to terminate in the fourth
quarter of 2015. The Company will receive a compensation payment of
approximately $3.3 million from Ship Finance for the termination of
the charter.
After giving effect to these
terminations, the vessels on charter from Ship Finance will be
reduced to 12 VLCCs and two Suezmax tankers.
November 23, 2015 Frontline entered into an agreement to purchase
two 157,500 dwt Suezmax tanker newbuilding contracts from Golden
Ocean Group Limited at a purchase price of $55 million per vessel.
The newbuilding contracts are with New Times Shipbuilding Co. Ltd.
in China and the vessels are expected to be delivered in the first
quarter of 2017.
The Market
World oil supply currently is at
its highest level ever at nearly 97 million barrels per day.
This, along with a strong demand for inexpensive crude oil, has led
to the tanker fleet surpassing 85% utilization, the highest level
seen in many years and a sign of a healthy market, assuming
continuation of these levels of demand. Increasing eastbound
cargoes and new refinery projects in Asia are keeping tonne miles
high, a trend the Company believes will continue.
Additionally, forced storage of oil on tankers due to a high supply
of cargoes is contributing to a strong market.
The average rate for VLCCs trading
on a standard 'TD3' voyage between the Arabian Gulf and Japan in
the third quarter of 2015 was WS 55, or a daily time charter
equivalents ("TCEs") of $58,002, and the average rate for a Suezmax
trading on a standard 'TD20' voyage between West Africa and
Rotterdam in the third quarter of 2015 was WS 73, or a TCE of
$35,274. These average rates were slightly lower than the rates in
the previous quarter.
The VLCC fleet totalled 645
vessels at the end of the quarter, and the Suezmax fleet totalled
450 vessels. The order book for tankers represents
approximately 17% of the tanker fleet, although a relatively small
portion of the order book is expected to be delivered within the
next six to twelve months. Given the strength of the market,
only a limited amount of scrapping activity has occurred.
Corporate
update
On July 2, 2015, Frontline and
Frontline 2012 Ltd. ("Frontline 2012") announced that they have
entered into an agreement and plan of merger (the "Merger
Agreement"), pursuant to which the two companies have agreed to
enter into a merger transaction, with Frontline 2012 becoming a
wholly-owned subsidiary of Frontline. Frontline filed a
registration statement with the United States Securities and
Exchange Commission ("SEC") on August 24, 2015 covering the common
shares to be issued by Frontline to Frontline 2012's shareholders
in the merger. The registration statement was declared
effective by the SEC on November 9, 2015. The shareholders'
meetings of each of Frontline and Frontline 2012 are scheduled to
be held November 30, 2015. Assuming approval by the shareholders of
Frontline and Frontline 2012, the transaction will be accounted for
as a business combination using the acquisition method of
accounting under the provisions of ASC 805, with Frontline 2012
selected as the accounting acquirer under this guidance.
Third Quarter and
Nine Months 2015 Results
The Company generated net income
attributable to the Company of $17.4 million, or $0.09 per share,
in the third quarter, compared with net income attributable to the
Company of $17.4 million, or $0.11 per share, for the previous
quarter. The Company recorded a gain of $1.8 million in the third
quarter from the termination of the lease for the Front Glory.
The TCEs earned in the spot and
period market in the third quarter by the Company's VLCCs and
Suezmax tankers were $45,600 and $28,100, respectively, compared
with $50,600 and $33,800 in the previous quarter. The spot earnings
for the Company's VLCCs and Suezmax vessels were $49,100 and
$28,700, respectively compared with $53,600 and $38,000 in the
preceding quarter.
Total operating expenses in the
third quarter were in line with the previous quarter. Dry docking
costs fell by $2.2 million compared with the previous
quarter. Two vessels were dry docked in the third quarter
compared with four in the previous quarter.
Contingent rental expense
represents amounts accrued following changes to the charter parties
related to the four vessels leased from German limited partnerships
and the vessels leased from Ship Finance. Contingent rental expense
in the third quarter includes $16.6 million attributable to the
amended lease agreements with Ship Finance, which took effect on
July 1, 2015.
Net income attributable to the
Company was $65.9 million, or $0.42 per share, for the nine months
ended September 30, 2015. The average daily TCEs earned by the
Company's VLCCs and Suezmax tankers in the spot and period market
in the nine months ended September 30, 2015 were $48,500 and
$31,700, respectively, compared with $23,800 and $19,300,
respectively, in the nine months ended September 30, 2014. The spot
earnings for the Company's VLCCs and Suezmax vessels were $51,600
and $34,000, respectively, in the nine months ended September 30,
2015 compared with $23,000 and $19,700, respectively, in the nine
months ended September 30, 2014.
The Company estimates that average
daily total cash cost breakeven rates for the remainder of 2015
will be approximately $27,700 and $22,100 for the Company's VLCCs
and Suezmax tankers, respectively.
Strategy
and Outlook
The shareholders' meetings of each
of Frontline and Frontline 2012 to vote on the announced Merger
Agreement are scheduled to be held on November 30, 2015.
Assuming shareholder approval and
completion of the merger, Frontline together with its subsidiary
Frontline 2012 (together, the "Surviving Company") will have a
fleet of approximately 90 vessels, including vessels on commercial
management, vessels on time charter in and newbuildings due for
delivery in the next 24 months. With a large modern fleet, a
strong balance sheet and attractive cash break even rates, the
Company believes that the Surviving Company should be equally well
positioned to generate significant free cash in a strong market and
to sustain a weak market. The Company believes the Surviving
Company will be well positioned to grow through acquisition and
consolidation opportunities.
Assuming shareholder approval and
completion of the merger, the Board of Directors of Frontline has
recommended implementing a dividend strategy to distribute
quarterly dividends to shareholders equal to or close to EPS
adjusted for non recurring items. The timing and amount of
dividends is at the discretion of the Board of Directors. The first
dividend for the merged company is expected to be declared and paid
in December 2015.
Conference Call
and Webcast
On Tuesday November 24, 2015 at
9:00 A.M. ET (3:00 P.M. CET), the Company's management will host a
conference call to discuss the results.
Participants should dial into the
call 10 minutes before the scheduled time using the following
numbers:
International Dial-In/UK
Local
+44(0)20 3427 0503
Norway Toll
Free
800 56054
UK Toll
Free
0800 279 4841
USA Toll
Free
1877 280 2342
USA
Local
+1212 444 0895
Conference ID: 8145275
Presentation materials and a
webcast of the conference call may be accessed on the Company's
website, www.frontline.bm, under the 'Webcast' link.
A replay of the conference call
will be available for seven days following the live call. The
following numbers may be used to access the telephonic replay:
International Dial-In/UK
Local
+44 (0)20 3427 0598
Norway
Dial-In
+47 2100 0498
USA
Local
+1 347 366 9565
National free phone - United
Kingdom
0800 358 7735
National free phone - United States of America 1866 932
5017
Replay Access
Number
8145275
Important
Information for Investors and Shareholders
This communication does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval. In
connection with the proposed transaction between Frontline and
Frontline 2012, Frontline has filed relevant materials with the
Securities and Exchange Commission (the "SEC"), including a
registration statement of Frontline on Form F-4 (File No.
333-206542), initially filed on August 24, 2015 and subsequently
amended, that includes a joint proxy statement of Frontline 2012
and Frontline that also constitutes a prospectus of Frontline. The
registration statement was declared effective by the SEC on
November 9, 2015. A definitive joint proxy statement/prospectus has
been mailed to shareholders of Frontline 2012 and Frontline.
INVESTORS AND SECURITY HOLDERS OF FRONTLINE 2012 AND FRONTLINE ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders will be
able to obtain free copies of the registration statement and the
joint proxy statement/prospectus (when available) and other
documents filed with or furnished to the SEC by Frontline through
the website maintained by the SEC at http://www.sec.gov. Copies of
the documents filed with or furnished to the SEC by Frontline will
be available free of charge on Frontline's website at
http://www.frontline.bm. Additional information regarding the
participants in the proxy solicitations and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the joint proxy statement/prospectus and other
relevant materials to be filed with or furnished to the SEC when
they become available.
Forward-Looking
Statements
Matters discussed in this press
release may constitute forward-looking statements. Forward-looking
statements 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. Words, such as, but not limited to "believe,"
"anticipate," "intends," "estimate," "forecast," "project," "plan,"
"potential," "may," "should," "expect," "pending" and similar
expressions identify forward-looking statements.
Forward-looking statements
include, without limitation, statements regarding:
-
The effectuation of the transaction between
Frontline and Frontline 2012 described above;
-
The delivery to and operation of assets by
Frontline;
-
Frontline's and Frontline 2012's future
operating or financial results;
-
Future, pending or recent acquisitions, business
strategy, areas of possible expansion, and expected capital
spending or operating expenses; and
-
Tanker market trends, including charter rates
and factors affecting vessel supply and demand.
The forward-looking statements in
this press release are based upon various assumptions, many of
which are based, in turn, upon further assumptions, including
without limitation, examination of historical operating trends,
data contained in records and other data available from third
parties. Although Frontline believes 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 the control of
Frontline, Frontline cannot assure you that they, or the combined
company, will achieve or accomplish these expectations, beliefs or
projections. In addition to these important factors, other
important factors that could cause actual results to differ
materially from those discussed in the forward-looking statements,
including the strength of world economies and currencies, general
market conditions, including fluctuations in charter rates and
vessel values, changes in demand for tanker shipping capacity,
changes in the combined company's operating expenses, including
bunker prices, drydocking and insurance costs, the market for the
combined company's vessels, availability of financing and
refinancing, 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, vessels breakdowns and instances
of off-hires and other factors. Please see Frontline's filings with
the SEC and the Prospectus for a more complete discussion of these
and other risks and uncertainties. The information set forth herein
speaks only as of the date hereof, and Frontline disclaims any
intention or obligation to update any forward-looking statements as
a result of developments occurring after the date of this
communication.
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
November 23, 2015
Questions should be directed
to:
Robert Hvide Macleod: Chief
Executive Officer,
Frontline Management AS
+47 23 11 40 84
Inger M. Klemp: Chief Financial
Officer,
Frontline Management AS
+47 23 11 40 76
This information is subject
to the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.
3rd Quarter 2015 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#1968929
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