Frontline Says Tanker Market Will Return to Balance As Vessel Scrapping Increases

TINNews |

Frontline Ltd., today reported unaudited results for the three months ended March 31, 2017:

Highlights of the quarter

Achieved net income attributable to the Company of $27.0 million, or $0.16 per share, for the first quarter of 2017.
Achieved net income attributable to the Company adjusted for certain non-cash items of $27.9 million, or $0.16 per share, for the first quarter of 2017.
Announces a cash dividend of $0.15 per share for the first quarter of 2017.
Acquired two VLCC resales delivering September and October 2017 from DSME, Korea at $77.5 million net per vessel.
Ordered two VLCC newbuildings scheduled to be delivered during December 2018 and April 2019 and obtained options for two additional sister vessels scheduled to be delivered during August and
November 2019 from HHI, Korea at $79.8 million per vessel.
Signed a senior secured term loan facility in an amount of up to $321.6 million provided by China Exim Bank and insured by China Export and Credit Insurance Corporation to partially finance eight newbuildings.
Obtained further financing commitment for two senior secured term loan facilities in an aggregate amount of up to $221.0 million from Credit Suisse and ING to partially finance four recent VLCC resales and newbuilding contracts.

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

“Notwithstanding near-term pressure on crude tanker rates, we believe the market will ultimately return to balance as demand for crude oil continues to increase and vessel scrapping will begin to offset the negative effect of newbuilding deliveries. The recent market weakness and other factors have contributed to a historically low asset price environment that has presented us with opportunities to acquire modern tonnage at attractive prices.

We are pleased that we continue to grow our fleet while also divesting of older vessels, as we recently did with the charter termination of four VLCC’s and two Suezmax tankers, vessels which have put pressure on our earnings lately and particularly in the first quarter. As we have stated before, older vessels are increasingly difficult to trade, a fact that is amplified in a softer rate environment. In the last 12 months, we have taken steps to both grow and modernize our fleet through six resale purchases and newbuilding contracts. We will continue to strive to create value for our shareholders by expanding our fleet through accretive transactions.

Notwithstanding any potential outcome related to our proposal to effect a business combination with DHT, there are many opportunities to continue our strategy of fleet growth and renewal, and we are confident in our ability to execute on this strategy.”

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

“Frontline’s continued ability to access attractively priced capital is indicative of the financial strength of our platform as well as our deep relationships within the lending community. We are very pleased to have secured financing for the newly acquired four VLCC resales and newbuilding contracts in an amount of up to $221.0 million. The financing carries an interest rate of LIBOR plus a margin of 190 basis points and has an amortization profile of 18 years, which supports Frontline’s low cash break-even levels.”