Frontline Ld Fro - Second Quarter And Six Months 2015 Results
August 26 2015 - 2:42AM
UK Regulatory
TIDMFRO
Highlights
-- Frontline reports net income attributable to the Company of $17.4 million
for the second quarter of 2015, equivalent to earnings per share of
$0.11.
-- Frontline reports net income attributable to the Company of $48.5 million
for the six months ended June 30, 2015, equivalent to earnings per share
of $0.35.
-- The Company issued 18.8 million new shares in the second quarter under
its ATM program and this program is fully utilized.
-- In April 2015, the remaining outstanding balance on the convertible bond
of $93.4 million was repaid in full upon maturity.
-- In June 2015, the Company agreed with Ship Finance to amend the long term
charter parties relating to 17 vessels such that the fixed charter
payments to Ship Finance are expected to decrease by approximately $283
million.
-- In July 2015, the Company and Frontline 2012 entered into an agreement
and plan of merger.
Second Quarter and Six Months 2015 Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces net
income attributable to the Company of $17.4 million in the second
quarter, equivalent to earnings per share of $0.11, compared with net
income of $31.1 million for the previous quarter, equivalent to earnings
per share of $0.25.
The average daily time charter equivalents ("TCEs") earned in the spot
and period market in the second quarter by the Company's VLCCs and
Suezmax tankers were $50,600 and $33,800 compared with $49,400 and
$33,100 in the previous quarter. The spot earnings for the Company's
VLCCs and Suezmax vessels were $53,600 and $38,000 compared with $52,200
and $35,000 in the preceding quarter.
Operating expenses in the second quarter were $5.0 million higher than
the previous quarter. An increase in dry docking costs accounted for
$5.9 million in the quarter, as four vessels were dry docked in the
second quarter compared with no vessels in the previous quarter.
Contingent rental expense represents amounts accrued following changes
to certain charter parties in December 2011 and was in line with the
first quarter.
Frontline announces a net income attributable to the Company of $48.5
million for the six months ended June 30, 2015, equivalent to earnings
per share of $0.35. The average daily TCEs earned in the spot and period
market in the six months ended June 30, 2015 by the Company's VLCCs and
Suezmax tankers were $50,000 and $33,400, respectively, compared with
$23,400 and $19,800, respectively, in the six months ended June 30,
2014. The spot earnings for the Company's VLCCs and Suezmax vessels were
$52,800 and $36,400, respectively, in the six months ended June 30, 2015
compared with $22,600 and $19,800, respectively, in the six months ended
June 30, 2014.
In August 2015, the Company estimates average daily total cash cost
breakeven rates for the remainder of 2015 on a TCE basis for its VLCCs
and Suezmax tankers of approximately $24,500 and $21,000 respectively.
Fleet Development
In August 2015, the Company agreed with Ship Finance to terminate the
long term charter for the 1995 built Suezmax tanker Front Glory. Ship
Finance has simultaneously sold the vessel to an unrelated third party.
The charter with Ship Finance is expected to terminate during the third
quarter of 2015. The Company will receive a compensation payment of
approximately $2.2 million from Ship Finance. The number of vessels on
charter from Ship Finance will then be reduced to 16 vessels, including
12 VLCCs and four Suezmax tankers.
Corporate
In February 2015, the Company bought $33.3 million notional principal of
its 4.50% Convertible Bond Issue 2010/2015 at a purchase price of 99%
and recorded a gain of $0.3 million in the first quarter of 2015.
In April 2015, Frontline issued 12,900,323 new shares under the ATM
program and in May 2015, Frontline issued 5,941,251 new shares under the
ATM program and the existing ATM program is fully utilized.
In April 2015, the remaining outstanding balance on the convertible bond
of $93.4 million was repaid in full upon maturity.
In June 2015, the Company and Ship Finance agreed to amend the terms of
the long term charter agreements for 17 vessels on charter from Ship
Finance with an average remaining charter period of 7.7 years. The new
agreement took effect from July 1, 2015. The general terms of the
agreement are the following: new time charter rates for the VLCCs of
$20,000 per day; new time charter rates for Suezmax tankers of $15,000
per day; new operating expenses for all vessels of $9,000 per day
payable by Ship Finance; a new profit split of 50%/50% above the new
time charter rates; and in connection with entering into the agreement
the Company issued 55.0 million of its common shares to Ship Finance.
The chartering counterparty will continue to be a subsidiary of the
Company, and in exchange for releasing the Company from its current
guarantee obligation, a cash buffer of $34.0 million ($2.0 million per
vessel) will be built up in the chartering counterparty. The new profit
split arrangement started accruing from July 1, 2015 and will be
calculated and payable on a quarterly basis. Going forward, profit split
payments will not be subject to the previous $50.0 million threshold.
The shares issued to Ship Finance as a result of the new agreement
represented approximately 27.7% of the Company's shares and votes. The
Company has registered those common shares for resale with the
Securities and Exchange Commission.
Reference is made to the announcement dated July 2, 2015, that Frontline
and Frontline 2012 Ltd. ("Frontline 2012") 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 as the surviving legal entity ("the "Surviving Company") and
Frontline 2012 becoming a wholly-owned subsidiary of Frontline.
Frontline has on August 24, 2015, filed a registration statement with
the United States Securities and Exchange Commission ("SEC") covering
the common shares to be issued by Frontline to Frontline 2012's
shareholders in the merger. The shareholders' meetings of each of
Frontline and Frontline 2012 will be held after the registration
statement is declared effective. The effectiveness of the registration
statement is subject, among other things, to SEC review. This
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.
The Company had an issued share capital at June 30, 2015 of $198,375,854
divided into 198,375,854 ordinary shares (December 31, 2014:
$112,342,989 divided into 112,342,989 ordinary shares). The weighted
average number of shares outstanding for the second quarter was
153,281,991.
The Market
The average rate for a VLCC trading on a standard 'TD3' voyage between
the Arabian Gulf and Japan in the second quarter of 2015 was WS 64,
representing an increase of 5 WS points from the first quarter of 2015.
The market rate for a Suezmax trading on a standard 'TD20' voyage
between West Africa and Rotterdam in the second quarter of 2015 was WS
88, representing a decrease of 2 WS points from the first quarter of
2015. The VLCC fleet totalled 639 vessels at the end of the quarter,
whilst the Suezmax fleet counted 449 vessels at the end of the quarter.
The order book for tankers represented about 16% of the overall tanker
fleet.
Bunkers in Rotterdam averaged $326/mt in the second quarter of 2015
compared to $280/mt in the first quarter of 2015.
Strategy and Outlook
The Board of Directors is very pleased with the merger agreement entered
into between Frontline and Frontline 2012. With a large modern fleet, a
strong balance sheet and attractive cash break even rates, the combined
companies should be well positioned to generate significant free cash in
a strong market, and sustain a weak market.
Despite the slowdown seen in the market the last weeks, the Board of
Directors hopes the combined companies will be in a position to start
returning cash to shareholders as quarterly dividends as soon as the
merger is completed. The intention is to pay out excess cash as
dividends at the Board's discretion.
The Board believes the combined companies will be well positioned to
grow through acquisition and consolidation opportunities.
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) ,
filed on August 24, 2015, that includes a joint proxy statement of
Frontline 2012 and Frontline that also constitutes a prospectus of
Frontline. The registration statement has not yet become effective.
After the registration statement is declared effective by the SEC, a
definitive joint proxy statement/prospectus will be 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
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