FRO - Third Quarter and Nine Months 2021 Results
Frontline Ltd. (the “Company” or “Frontline”),
today reported unaudited results for the three and nine months
ended September 30, 2021:
Highlights
- Net loss of $33.2 million, or $0.17 per basic and diluted share
for the third quarter of 2021.
- Adjusted net loss of $35.9 million, or $0.18 per basic and
diluted share for the third quarter of 2021.
- Reported total operating revenues of $171.8 million for the
third quarter of 2021.
- Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers
in the third quarter of 2021 were $10,500, $7,900 and $10,700 per
day, respectively.
- For the fourth quarter of 2021, we estimate spot TCE on a
load-to discharge basis of $21,600 contracted for 79% of vessel
days for VLCCs, $17,900 contracted for 72% of vessel days for
Suezmax tankers and $16,000 contracted for 64% of vessel days for
LR2 tankers.
- Entered into senior secured term loan facilities in September
and October 2021 for a total amount of up to $247.0 million to
partially finance the acquisition of two 2019-built VLCCs, which
were delivered to the Company in October and November of 2021,
respectively, and the acquisition of two of the six resale VLCC
newbuilding contracts.
- Obtained financing commitments for senior secured term loan
facilities in October and November 2021 for a total amount of up to
$260.0 million to partially finance the acquisition of four of the
six VLCC newbuilding contracts, which are subject to final
documentation.
- Entered into an agreement in November 2021 to sell four of its
scrubber-fitted LR2 tankers built in 2014 and 2015 for an aggregate
sale price of $160.0 million. The transaction is expected to
generate net cash proceeds of approximately $67.0 million.
- In November 2021, the Company extended the terms of its senior
unsecured revolving credit facility of up to $275.0 million with an
affiliate of Hemen Holding Ltd. by 12 months to May 2023.
Lars H. Barstad, Chief Executive Officer
of Frontline Management AS commented:
“The third quarter continued to be a challenging
period for tanker owners. Global oil demand rose, but oil supply
growth remained muted, resulting in one of the most demanding
quarters on record for tankers. Global inventories were drawn
throughout the period, albeit at a reduced pace compared to the
immediately preceding quarter. Yet again Frontline has been reaping
the benefits of running a ‘tight ship’, with what we believe to be
industry low operational, financial, and administrative costs. In
the current market, where oil prices and fuel costs have risen
considerably, we believe having a modern, fuel-efficient fleet has
proven advantageous. In the previous quarter I pointed to the fact
that freight rates below operational cost, and in some cases
negative for inefficient tonnage, is not sustainable. During the
third quarter of the year, we finally started to see ship recycling
accelerate. The fundamentals of this market remain the same; the
global tanker fleet is aging rapidly, orderbooks are dwindling as
global oil demand is about to grow beyond hundred million barrels
per day. These factors combine to create a potentially potent
cocktail for the recovery of the tanker market.”
Inger M. Klemp, Chief Financial Officer of Frontline
Management AS, added:
“In the third and fourth quarter we have entered
into term loan facilities and obtained financing commitments at
what we believe to be highly attractive terms for a total amount of
up to $507.0 million to partially finance the acquisition of the
two 2019-built VLCCs and the six VLCC newbuilding contracts. When
factoring in the $33.4 million available under the term loan
facility entered into in November 2020 to partially finance the
delivery of the last LR2 tanker, we have established bank debt of
up to $540.4 million. The Company has also raised gross proceeds of
$51.2 million under the Equity Distribution Agreement and net cash
proceeds after the repayment of bank debt of approximately $67.0
million through sale of four LR2 tankers. Following this the
remaining commitments as per September 30, 2021 for Frontline’s
newbuilding program consisting of one LR2 tanker and six VLCCs and
for the acquisition of the two 2019-built VLCCs, is fully
funded.
Through these new financings we reduce our
borrowing cost and industry leading cash break even rates,
providing significant operating leverage and sizeable returns
during period of market strength and help protecting our cash flows
during periods of market weakness.
The Company has also extended the terms of its
senior unsecured revolving credit facility of up to $275.0 million
by 12 months to May 2023, leaving Frontline with no loan maturities
until 2023.”
Average daily time charter equivalents
("TCEs")1
($ per day) |
Spot TCE |
Spot TCE estimates |
% Covered |
Estimated average daily cash BE rates for the remainder of
the year |
|
2021 |
Q3 2021 |
Q2 2021 |
Q1 2021 |
Q4 2020 |
2020 |
Q4 2021 |
2021 |
VLCC |
14,900 |
10,500 |
15,000 |
19,000 |
17,200 |
54,500 |
21,600 |
79% |
21,400 |
SMAX |
11,300 |
7,900 |
11,000 |
15,200 |
9,800 |
35,600 |
17,900 |
72% |
17,800 |
LR2 |
11,000 |
10,700 |
10,600 |
12,000 |
12,500 |
23,400 |
16,000 |
64% |
14,100 |
The estimated average daily cash breakeven rates
are the daily TCE rates our vessels must earn in order to cover
operating expenses including dry docks, repayments of loans,
interest on loans, bareboat hire, time charter hire and net general
and administrative expenses for the remainder of the year.
Spot estimates are provided on a
load-to-discharge basis, whereby the Company recognizes revenues
over time ratably from commencement of cargo loading until
completion of discharge of cargo. The rates reported are for all
contracted days up until the last contracted discharge of cargo for
each vessel in the quarter. The actual rates to be earned in the
fourth quarter of 2021 will 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 on a load-to-discharge basis. Ballast days
are days when a vessel is sailing without cargo and therefore, we
are unable to recognize revenues. Furthermore, when a vessel
remains uncontracted at the end of the quarter, the Company will
recognize certain costs during the uncontracted days up until the
end of the period, whereas if a vessel is contracted, then certain
costs can be deferred and recognized over the load-to-discharge
period.
The recognition of revenues on a
load-to-discharge basis 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 as compared to a discharge-to-discharge basis.
When expressing TCE per day the Company uses the
total available days, net of off hire days and not just the number
of days the vessel is laden.
The Board of DirectorsFrontline Ltd.Hamilton,
BermudaNovember 28, 2021
Ola Lorentzon - Chairman and DirectorJohn
Fredriksen - DirectorTor Svelland - Director
James O'Shaughnessy - Director
Questions should be directed to:
Lars H. Barstad: Chief Executive Officer,
Frontline Management AS+47 23 11 40 37Inger 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 worldwide 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, the length and
severity of epidemics and pandemics, including the ongoing global
outbreak of the novel coronavirus ("COVID-19"), and their impacts
on the demand for seaborne transportation of petroleum products,
the impact of increasing scrutiny and changing expectations from
investors, lenders and other market participants with respect to
our Environmental, Social and Governance policies, the impact of
port or canal congestion 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.
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act.
1 This press release describes Time Charter Equivalent earnings
and related per day amounts, which are not measures prepared in
accordance with US GAAP (“non-GAAP”). See Appendix 1 for a full
description of the measures and reconciliation to the nearest GAAP
measure.
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