1 Q4 2012 Results February 22, 2013
Aug 20, 2015
2
MATTERS DISCUSSED IN THIS DOCUMENT MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE INFORMATION ABOUT THEIR BUSINESS. 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.
FRONTLINE DESIRES TO TAKE ADVANTAGE OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND IS INCLUDING THIS CAUTIONARY STATEMENT IN CONNECTION WITH THIS SAFE HARBOR LEGISLATION. THE WORDS “BELIEVE,” “ANTICIPATE,” “INTENDS,” “ESTIMATE,” “FORECAST,” “PROJECT,” “PLAN,” “POTENTIAL,” “WILL,” “MAY,” “SHOULD,” “EXPECT” “PENDING” AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS.
THE FORWARD-LOOKING STATEMENTS IN THIS DOCUMENT ARE BASED UPON VARIOUS ASSUMPTIONS, MANY OF WHICH ARE BASED, IN TURN, UPON FURTHER ASSUMPTIONS, INCLUDING WITHOUT LIMITATION, MANAGEMENT'S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA CONTAINED IN FRONTLINE’S 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 FRONTLINE’S CONTROL, YOU CANNOT BE ASSURED THAT FRONTLINE WILL ACHIEVE OR ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. FRONTLINE UNDERTAKES NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENT TO CONFORM THE STATEMENT TO ACTUAL RESULTS OR CHANGES IN EXPECTATIONS.
IMPORTANT FACTORS THAT, IN FRONTLINE’S VIEW, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: THE STRENGTH OF WORLD ECONOMIES AND CURRENCIES, GENERAL MARKET CONDITIONS, INCLUDING FLUCTUATIONS IN CHARTERHIRE RATES AND VESSEL VALUES, CHANGES IN DEMAND IN THE TANKER MARKET, INCLUDING BUT NOT LIMITED TO CHANGES IN OPEC'S PETROLEUM PRODUCTION LEVELS AND WORLD WIDE OIL CONSUMPTION AND STORAGE, CHANGES IN FRONTLINE’S OPERATING EXPENSES, INCLUDING BUNKER PRICES, DRYDOCKING AND INSURANCE COSTS, THE MARKET FOR FRONTLINE’S VESSELS, AVAILABILITY OF FINANCING AND REFINANCING, ABILITY TO COMPLY WITH COVENANTS IN SUCH FINANCING ARRANGEMENTS, FAILURE OF COUNTERPARTIES TO FULLY PERFORM THEIR CONTRACTS WITH US, 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, VESSEL BREAKDOWNS, INSTANCES OF OFF-HIRE AND OTHER IMPORTANT FACTORS. FOR A MORE COMPLETE DISCUSSION OF THESE AND OTHER RISKS AND UNCERTAINTIES ASSOCIATED WITH FRONTLINE’S BUSINESS, PLEASE REFER TO FRONTLINE’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING, BUT NOT LIMITED TO, ITS ANNUAL REPORT ON FORM 20-F.
THIS PRESENTATION IS NOT AN OFFER TO PURCHASE OR SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE OR SELL, ANY SECURITIES OF FRONTLINE.
Forward looking statements
3
Agenda
■ Fourth Quarter 2012 Highlights and Transactions
■ Financial Review
■ Newbuildings
■ Market Update
■ Outlook
■ Q & A
4
Highlights and Transactions
Fourth Quarter 2012
■ The company terminated a number of vessels in the recent period:
■ The OBO carriers Front Climber and Front Driver in October and November
■ The VLCC Ticen Ocean in November, 2012. Recognized a gain of $11.2m
■ The VLCC Titan Aries in January, 2013. Expects to recognize a gain of $7.5m in Q1-13.
■ The Suezmax Front Pride in February, 2013. Recorded an impairment loss of $4.7m in Q4-12.
■ Agreed to an early termination of the TC-out contracts on the OBO carriers Front Viewer and
Front Guider in December.
■ Received compensation for loss of hire of $35m
■ Paid $23.5m in compensation to SFL as the long term charter parties on the vessels were terminated.
■ Re-delivered the chartered-in VLCC Gulf Eyadah in December
5
Financial Highlights
Q4 - 2012 results
■ Net loss: $16.9m
■ Net loss per share: $0.21
Preliminary full year 2012 results
■ Net loss: $82.8m
■ Net loss per share: $1.06
No dividend declared in Q4-2012
Share price NYSE February 21, 2013: $2.90
– Market cap: $226m
-82.8
-16.6 -49.0
-24.3
7.2
-529.6
-343.7
-166.2
-35.2 15.5
-600
-500
-400
-300
-200
-100
0
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Net Income/loss ex sales ($million) Sales profit/loss ($million)
Fourth Quarter 2012
-1.06
-0.21
-0.63
-0.31 0.09
-6.80
-4.41
-2.13
-0.45
0.200.12 0.02 0.10
-8.00
-7.00
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
EPS ($) Dividend per share reported ($)
6
Income Statement
Financial Review
2011 2012 CONDENSED CONSOLIDATED INCOME STATEMENTS 2012 2011
Oct-Dec Oct-Dec (in thousands of $) Jan-Dec Jan-Dec
181,981 197,436 Total operating revenues 668,107 810,102
(312,878) (2,560) Gain (loss) on sale of assets and amortization of deferred gains 16,813 (307,894)
67,673 84,607 Voyage expenses and commission 274,132 295,787
(347) - Profit share expense (income) - 482
- 11,981 Contingent rental expense 54,612 -
39,098 29,174 Ship operating expenses 130,685 187,010
14,758 6,362 Charter hire expenses 37,461 65,601
9,397 9,205 Administrative expenses 33,906 35,886
- 18,901 Impairment loss on vessels 32,042 121,443
44,057 27,953 Depreciation 114,845 195,597
174,636 188,183 Total operating expenses 677,683 901,806
(305,533) 6,693 Net operating gain (loss) 7,723 (399,598)
29 40 Interest income 130 3,958
(37,188) (23,149) Interest expense (94,962) (141,497)
(189) (171) Share of results from associated companies (4) (600)
(65) (16) Foreign currency exchange gain (loss) 84 106
(816) (198) Other non-operating items 4,119 9,153
(343,762) (16,801) Net loss before taxes and non controlling interest (83,396) (528,478)
(349) (122) Taxes (379) (532)
445 357 Net loss (income) attributable to non controlling interest 1,021 (591)
(343,666) (16,566) Net loss attributable to Frontline Ltd. (82,754) (529,601)
(4.41) (0.21) Basic loss per share attributable to Frontline Ltd. ($) (1.06) (6.8)
7
Income on time charter basis
Financial Review
$/day FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
VLCC Spot DH 22 400 18 500 13 300 31 500 25 400 20 200 16 800 12 600 23 900 27 400
VLCC w hole fleet 22 200 19 300 12 300 31 000 25 600 22 800 19 100 17 000 26 100 28 600
Suezmax Spot DH 15 200 14 000 10 500 16 200 19 500 12 600 12 400 7 800 14 500 16 000
Orion Suezmax pool 15 500 9 000 11 100 17 400 19 200 13 600 12 000 7 600 16 200 17 700
OBO 33 600 35 100 33 700 28 100 37 800 36 700 41 600 38 200 31 300 36 300
2012 2011
8
Ship operating expenses/Off-hire
Financial Review
Tentative drydock schedule/no. of vessels
– Q1-2013: 3 VLCCs
10 400
9 700
11 800
11 100
9 000
9 900
9 2009 300
10 80010 200
6 000
7 000
8 000
9 000
10 000
11 000
12 000
13 000
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Total fleet opex ($/day)
10
1
45
9
1
3 32
0
2
4
6
8
10
12
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Number of vessels drydocked
368
42
144 141
41
677
86
159211 221
0
100
200
300
400
500
600
700
800
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Off hire (days)
9
Balance Sheet
Financial Review
Balance sheet
(in $ million) 2012 2012 2011
Dec 31 Sept 30 Dec 31
Cash 138 165 161
Restricted cash 88 76 101
Other Current assets 167 149 149
Long term assets:
Vessels 1 176 1 222 1 334
Newbuildings 27 20 13
Other long term assets 93 94 83
Total assets 1 688 1 726 1 841
Current liabilities 187 191 167
Long term liabilities 1 370 1 387 1 460
Noncontrolling interest 11 12 12
Frontline Ltd. stockholders' equity 120 136 201
Total liabilities and stockholders' equity 1 688 1 726 1 841
10
Cash Cost Breakeven
Comments to B/E rates:
– Included in cash B/E rates are: BB hire, opex , interest and admin. expenses
– B/E rates exclude vessels on short term TC-in, vessels on BB-out, capex. and ITCL vessels
Estimated Cash cost breakeven rates
for the remainder of 2013 ($/day)
VLCC 24,200
Suezmax 18,800
Financial Review
11
Newbuilding Overview
■ Total newbuilding program as of December 31, 2012:
– Two Suezmax tankers
– Remaining installments to be paid approx. $87.9m
Newbuilding
12
Frontline Fleet
Incl. vessels on commercial management & ITCL, excl. newbuildings
Total: 48 As per 21 February DH: Double Hull
Corporate Overview
VLCC DH 34
Suezmax DH 14
13
Frontline Fleet
Corporate Overview
DH 20 8 % 39 800 20 5 % 40 400
DH 7 9
Newbuildings 2
VLCC DH 6 53 % 6 53 %
Suezmax DH 3 100 % 3 100 %
VLCC DH 8 8
Suezmax DH 4 4
Total Fleet (ex. Newbuildings) 48 50
Total Fleet (ex. Newbuildings, ITCL, Com Mgt) 27 6 % 39 800 29 3 % 40 400
Total Fleet (ex. Newbuildings, ITCL incl. Com Mgt) 39 4 % 41 2 %
- The average TC coverage percentage is based on estimated total trading days
- TC-in vessels are assumed redelivered upon contract expiration
2014
No. of
vessels
Av. TC
Coverage
Av. Net
TC/BB Rate
($/day)
No. of
vessels
Av. TC
Coverage
(whole year)
Av. Net
TC/BB Rate
($/day)
VLCC
ITCL
2013
Com Mgt
Suezmax
14
Earnings & Market Factors
Q4 – Average Market earnings / Marex
■ VLCC (TD3) : $9,000/day (current: $5/day)
■ Suezmax (TD5) : $11,500/day (current: 10,750/day)
The Market:
■ IEA estimates world oil demand in the fourth quarter averaged 91 mb/d in the fourth quarter, an increase of 0.8 mb/d compared to Q3. Parts of this increase might be “borrowed” demand from Q1 because of Chinese refinery startups.
■ High OPEC output through the first part of the quarter and Chinese import with higher tonnage miles supported freight rates
■ Global refinery throughputs averaged 75.9 mb/d in Q4 with growth in activity concentrated in China, India and Russia. Favorable refinery margins and cold snap in Asia supporting throughputs.
■ 11 VLCC newbuilding and 14 Suezmax were delivered during the quarter
■ 6 VLCC and 8 Suezmax were removed during the quarter
Market Update
Source: MAREX, IEA. Graphs: Clarksons
0
20 000
40 000
60 000
80 000
100 000
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
$ / d
ay
VLCC
Q4 2011 2012 Ave 2008 - 2012
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
$ / d
ay
SUEZMAX
Q4 2011 2012 Ave 2008 - 2012
15
VLCC Fleet
Market Update
Source: Fearnleys January 2013
Delivery Schedule
Fleet
Current fleet & Orderbook
Current Fleet 622 Orderbook 81
DH Fleet 605 Delivered 2012 49
SH (DS, DB, SS) Fleet 17 Estimated deliveries 2013 50
16
Suezmax Fleet
Market Update
Source: Fearnleys January 2013
Delivery Schedule
Fleet
Current fleet & Orderbook
Current Fleet 468 Orderbook 72
DH Fleet 463 Delivered 2012 47
SH (DS, DB, SS) Fleet 5 Estimated deliveries 2013 37
1
7 8 8 8 11 20
15 22
17 23 24 27 25 26 25
14
46 38 35
47
55
5 12
-12 -13 -9 -10 -6 -6
-26 -20
-29
-15 -15 -15
-4 -6
-17 -18
-4 -12
-6
-17 -9
-25
-22
-19
-16
-13
-10
-7
-4
-1
2
5
8
11
14
17
20
23
-80
0
80
1988
1990
1993
1995
2000
2005
2009
2010
2011
2012
2013
2014
2015
% # of vsls
FRO Assumptions on Phase Out / Deletions Suezmax Deletions
Orderbook Suezmax DH
17
Rates
TC MARKET
Source: Clarksons
Market Update
NEWBUILDING
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
Fe
b-0
6
Jun
-06
Oct-
06
Fe
b-0
7
Jun
-07
Oct-
07
Fe
b-0
8
Jun
-08
Oct-
08
Fe
b-0
9
Jun
-09
Oct-
09
Fe
b-1
0
Jun
-10
Oct-
10
Fe
b-1
1
Jun
-11
Oct-
11
Fe
b-1
2
Jun
-12
Oct-
12
Fe
b-1
3
$ / D
AY
3Y TC VLCC 3Y TC SUEZMAX
50
60
70
80
90
100
110
120
130
140
150
160
170
180
20
06-0
2
20
06-0
6
20
06-1
0
20
07-0
2
20
07-0
6
20
07-1
0
20
08-0
2
20
08-0
6
20
08-1
0
20
09-0
2
20
09-0
6
20
09-1
0
20
10-0
2
20
10-0
6
20
10-1
0
20
11-0
2
20
11-0
6
20
11-1
0
20
12-0
2
20
12-0
6
20
12-1
0
20
13-0
2
M U
SD
VLCC NB SMAX NB
18
Outlook General
■ Market at rock bottom
■ Increased technical issues on ships observed in market
– less maintenance of ships
■ Last year with big newbuilding program
■ Increased tonnage demand but not enough to offset newbuilding program
■ Some more interest in scrapping
Market Update
Frontline
■ Reducing fleet:
- Continue to redeliver older and non core chartered in tonnage
■ Outperformed our peers on VLCC’s and Suezmax earnings
■ Frontline will continue to remain cautious and focus its resources on the present activities until a clearer sign of recovery can be seen in the tanker market