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FRO - Fourth Quarter and Full Year 2018 Results

Frontline Ltd. (the "Company" or "Frontline"), today reported unaudited results for the three months and year ended December 31, 2018:

Highlights

  • Net income attributable to the Company was $25.4 million, or $0.15 per share, for the fourth quarter of 2018.
  • Net income attributable to the Company was $26.3 million, or $0.15 per share adjusted for certain non-cash items for the fourth quarter of 2018.
  • Reported spot average daily time charter equivalent ("TCE") was $28,400 for VLCCs in the fourth quarter, impacted significantly by a high number of ballast days towards the end of the quarter, deferring revenue recognition into the first quarter of 2019.[1] Reported spot TCE for Suezmax tankers and LR2/Aframax tankers were $26,100 and $18,700, respectively.
  • Spot TCE of $41,300 contracted for 84% of vessel days for VLCCs, spot TCE of $33,300 contracted for 77% of vessel days for Suezmax tankers and spot TCE of $26,100 contracted for 73% of vessel days for LR2/Aframax tankers, estimated for the first quarter of 2019, including deferred revenue recognition from the fourth quarter of 2018.
  • In November 2018, the Company extended the terms of its senior unsecured loan facility of up to $275.0 million with an affiliate of Hemen Holding Ltd. by 12 months to November 2020.
  • In January 2019, the Company increased its ownership interest to 28.9% in Feen Marine Scrubbers Inc. ("FMSI").
  • In January 2019, the Company took delivery of the VLCC newbuilding Front Defender.

Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:

"The market improved in the fourth quarter before pulling back due to OPEC cuts, accelerated fleet growth and seasonal factors. In recent weeks, the market has reversed course, with US export volumes and VLCC rates doubling since January. We expect the market to remain volatile but continue to trend higher as the fleet prepares for new regulations and oil volumes return. Crude oil tanker demand will also receive a significant boost as refineries increase crude import runs to meet incremental demand for compliant fuels prior to the implementation of IMO 2020 regulations. Although there are always risks related to slowing global demand, multiple positive market drivers should result in strong year over year growth in earnings."

Inger M. Klemp, Chief Financial Officer of Frontline Management AS added:

"Our current newbuilding program will be completed with the delivery of our last VLCC newbuilding expected in April 2019.  With limited capital expenditure requirements going forward and backed by attractive financing, Frontline is committed to maintaining its healthy balance sheet. This supports our low breakeven rates and enables the Company to generate significant cash flow in a strengthening tanker market."

The average daily time charter equivalents ("TCE") earned by Frontline in the quarter ended December 31, 2018, the prior quarters and in the year ended December 31, 2017, are shown below, along with spot estimates for the first quarter of 2019 and the estimated average daily cash break-even ("BE") rates for the remainder of 2019:

Average daily time charter equivalents ("TCE")
($ per day) Spot Spot estimates % covered Estimated average daily cash BE rates
  2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 2017 Q1 2019 2019
VLCC 18,300 28,400 19,900 11,700 14,900 22,400 41,300 84% 24,400
SMAX 17,300 26,100 13,500 14,100 15,400 17,300 33,300 77% 19,900
LR2 14,900 18,700 14,300 11,700 14,800 14,400 26,100 73% 16,700

The estimated average daily cash break-even rates are the daily TCE rates the vessels must earn in order to cover operating expenses including dry docks, repayments of loans, interen loans, bareboat/tc hire and general and administrative expenses.

Spot estimates are provided using the load-to-discharge method of accounting as described in Note 2 to our Unaudited Condensed Consolidated Financial Statements. The rates quoted are for days currently contracted. The actual rates to be earned in the first quarter of 2019 will therefore 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 based on accounting under ASC 606.

The load-to-discharge method of accounting 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.

When expressing TCE per day, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.

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

Forward-Looking Statements

Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which 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 Ltd. and its subsidiaries, or the Company, 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. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this document, the words "believe," "anticipate," "intend," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect" and similar expressions, terms or phrases may identify forward-looking statements.

The forward-looking statements in this report are based upon various assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and data available from third parties. Although we believe 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 our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter hire rates and vessel values, changes in the supply and demand for vessels comparable to ours, changes in world wide oil production and consumption and storage, changes in the Company's operating expenses, including bunker prices, dry docking and insurance costs, the market for the Company's vessels, availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements, availability of skilled workers and the related labor costs, compliance with governmental, tax, environmental and safety regulation, any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to bribery, general economic conditions and conditions in the oil industry, effects of new products and new technology in our industry, the failure of counter parties to fully perform their contracts with us, our dependence on key personnel, adequacy of insurance coverage, our ability to obtain indemnities from customers, changes in laws, treaties or regulations, the volatility of the price of our ordinary shares; our incorporation under the laws of Bermuda and the different rights to relief that may be available compared to other countries, including the United States, 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, political events or acts by terrorists, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission or Commission.

We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are no guarantee of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.





[1] See note 2 to the condensed unaudited financial statements for an explanation of the impact of the adoption of ASC 606 on the financial statements for the year ending December 31, 2018.



This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.

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