Frontline Ltd., yesterday reported unaudited results for the three and six months ended June 30, 2020:
• Net income of $199.7 million, or $1.01 per diluted share for the second quarter of 2020.
• Adjusted net income of $206.1 million, or $1.04 per diluted share for the second quarter of 2020.
• Declared a cash dividend of $0.50 per share for the second quarter of 2020.
• Repaid $60 million of its $275.0 million senior unsecured facility in the second quarter of 2020.
• Reported total operating revenues of $387.1 million for the second quarter of 2020.
• Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the second quarter of 2020 were $75,800, $51,100 and $36,900 per day, respectively.
• For the third quarter of 2020, we estimate spot TCE on a load-to discharge basis of $60,900 contracted for 76% of vessel days for VLCCs, $29,500 contracted for 77% of vessel days for Suezmax tankers and $14,500 contracted for 67% of vessel days for LR2 tankers. We expect the spot TCEs for the full third quarter of 2020 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the third quarter as well as current weaker rates.
• Took delivery of the VLCC newbuilding Front Dynamic and the Suezmax newbuilding Front Cruiser in the second quarter of 2020.
• Signed a senior secured term loan facility in July 2020 in an amount of up to $328.6 million to refinance an existing loan facility maturing in December 2020.
• Obtained financing commitment for a senior secured term loan facility in August 2020 in an amount of up to $133.7 million to partially finance the four LR2 tankers under construction, which is subject to final documentation.
Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:
“Our results for the first half of 2020 are the strongest in more than 10 years, and we have paid aggregate cash dividends of $1.20 per share for the same period. While tanker rates have seemingly found support at a lower level in the third quarter, we expect oil demand and demand for transportation to recover gradually. We have good visibility in our third quarter results based on our contracted spot days as well as our charter coverage. We also expect our results to be positively impacted by the modern profile of our fleet and breakeven costs that are very competitive. The large moves in tanker rates during the last 12 months clearly illustrates the tight balance in the market and the fact that it does not take much for the tanker market to rally. Looking ahead to 2021 and beyond, recovering demand for crude oil transportation will coincide with rapidly declining fleet growth, which supports our long term highly constructive market outlook.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In the second quarter of 2020 we refinanced two term loan facilities with total balloon payments of $349.4 million due in December 2020 and in March 2021. We expect to refinance further two term loan facilities with total balloon payments of $320.3 million due in April 2021 and in June 2021 prior to maturity, leaving the Company with no material maturities until 2023. Our strong cash flow in the second quarter enabled us to both repay $60 million of our $275.0 million senior unsecured facility, reducing the amount outstanding to $60 million, and to return nearly $99 million to our shareholders in cash dividends.”
The estimated average daily cash breakeven rates are the daily TCE rates the 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 days up until the last contracted discharge of cargo for each vessel in the quarter. The actual rates to be earned in the third quarter of 2020 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 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 period end, whereas if a vessel is contracted, then certain costs can be deferred and recognized over the load-to-discharge period.
The reporting 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.
When expressing TCE per day for the second quarter of 2020, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.
Source: Frontline Ltd.