Q Results August 29, 2012

Transcription

1 Q Results August 29, 2012

2 Forward looking statements 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. 2

3 Agenda Second Quarter 2012 Highlights and Transactions Financial Review Newbuildings Market Update Outlook Q & A 3

4 Second Quarter 2012 Highlights and Transactions The chartered-in VLCC Hampstead was redelivered on April 22, 2012 Subscribed for 3,546,000 shares in a private placement in Frontline 2012 Ltd. in May 2012 Subscription price of $3.75 After the private placement Frontline has an ownership of 7.9% Termination of long term charter parties with SFL for OBO carriers Front Rider terminated in July 2012 Agreed to terminate Front Climber in September

5 Second Quarter 2012 Financial Highlights Q results Net loss (ex. vessel impairment losses): $11.2m Net loss per share (ex. vessel impairment losses): $0.14 Impairment loss of $13.1m, equivalent to loss per share of $0.17 1H results Net loss (ex. vessel impairment losses): $4m Q2 Q1 FY Q4 Q3 Q2 Q Net loss per share (ex. vessel impairment losses): $ Net Income/loss ex sales ($million) 1.00 Sales profit/loss ($million) No dividend declared in Q Share price NYSE 28 August 2012: $3.69 Market cap: $287m Q2 Q1 FY Q4 Q3 Q2 Q EPS ($) Dividend per share reported ($) 5

6 Financial Review Income Statement CONDENSED CONSOLIDATED INCOME STATEMENTS Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun 219, ,576 Total operating revenues 343, ,207 (12,033) 5,135 Gain (loss) on sale of assets and amortization of deferred gains 16,085 1,197 80,348 66,998 Voyage expenses and commission 125, , (31) Profit share expense - 2,410-17,795 Cash sweep expense 32,727-51,435 35,406 Ship operating expenses 64, ,534 17,518 10,102 Charter hire expenses 22,219 34,103 8,538 8,039 Administrative expenses 16,363 16,618-13,141 Impairment loss on vessels 13,141-50,429 29,192 Depreciation 58, , , ,642 Total operating expenses 333, ,655 (1,063) 1,069 Net operating income (loss) 26,519 41,749 1, Interest income 50 3,678 (35,698) (23,945) Interest expense (48,262) (71,787) (69) 422 Share of results from associated companies 259 (300) (21) (38) Foreign currency exchange gain (loss) (1,863) Other non-operating items 3,976 8,262 (35,209) (24,325) Net loss before taxes and noncontrolling interest (17,437) (18,248) (44) (77) Taxes (162) (107) (35,253) (24,402) Net loss (17,599) (18,355) 9 56 Net loss (income) attributable to noncontrolling interest 428 (1,424) (35,244) (24,346) Net loss attributable to Frontline Ltd. (17,171) (19,779) (0.45) (0.31) Loss per share ($) (0.22) (0.25) 6

7 Financial Review Income on time charter basis $/day YTD Q2 Q1 FY Q2 Q1 VLCC Spot DH VLCC w hole fleet VLCC Spot excl. spot index charters Suezmax Spot DH Suezmax w hole fleet Orion Suezmax pool OBO

8 Financial Review Ship operating expenses/off-hire Total fleet opex ($/day) Q2 Q1 FY Q4 Q3 Q2 Q Number of vessels drydocked Q2 Q1 FY Q4 Q3 Q2 Q Tentative drydock schedule/no. of vessels Q3-2012: Off hire (days) Q2 Q1 FY Q4 Q3 Q2 Q

9 Financial Review Balance Sheet Balance sheet (in $ million) Jun 30 Mar 31 Dec 31 Cash Restricted cash Other Current assets Long term assets: Vessels Newbuildings Other long term assets Total assets Current liabilities Long term liabilities Noncontrolling interest Frontline Ltd. stockholders' equity Total liabilities and stockholders' equity

10 Financial Review Cash Cost Breakeven Estimated Cash cost breakeven rates for the remainder of 2012 ($/day) VLCC 23,900 Suezmax 17,600 OBO 12,300 Comments to B/E rates: Included in cash B/E rates are: BB hire + opex and admin. costs. B/E rates exclude vessels on short term TC-in, vessels on BB-out, capex. and balloon payments on loans. 10

11 Newbuilding Newbuilding Overview Total newbuilding program at end of Q approx. $124.9m Two Suezmax tankers Installments paid per end of Q2-2012: $12.5m Remaining installments to be paid approx. $112.4m 11

12 Corporate Overview Frontline Fleet Incl. vessels on commercial management & ITCL, excl. newbuildings OBO 4 VLCC SH 2 Suezmax DH 15 VLCC DH 36 As per end Q2-12 DH: Double Hull, SH: Single Hull Total: 57 12

13 Corporate Overview Frontline Fleet 2012 END 2013 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 Suezmax ITCL DH 22 9 % % SH/DS on BB-out % * DH 8 10 OBO 4 58 % % Newbuildings 2 VLCC DH 6 67 % 6 53 % Suezmax DH % % Com Mgt *Bareboat rate VLCC DH 8 12 Suezmax DH 4 4 Total Fleet (ex. Newbuildings) Total Fleet (ex. Newbuildings, ITCL, SH BB coverage, Com Mgt) % % Total Fleet (ex. Newbuildings, ITCL incl. SH BB coverage, Com Mgt) % 49 8 % - The TC/BB rates exclude profit split - The average TC coverage percentage is based on estimated total trading days - No. of vessels in 2013 is an estimate of vessels in the fleet at the end of the year - TC-in vessels are assumed redelivered upon contract expiration 13

14 $ / day $ / day Market Update Earnings & Market Factors VLCC Q2 Average Market earnings / Marex VLCC : $22,750/day (Q1: $19,000/day) Suezmax : $18,000/day (Q1: $22,000/day) The Market: Sluggish economic growth restrict global oil consumption to rise 0.9mb/d (1.0%) in Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Q Ave SUEZMAX Crude fleet growth was about 6.7% in the first half of 2012 Saudi Arabian exports remains at highest levels since 2008 Ton mile reduced in Q2 due to refinery closure in the US + Iran crude was mainly sold to East destination replacing crudes from West Africa/Caribbean Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Decrease in July liftings for China however that situation seems to normalize now No new orders for VLCC and Suezmax have been placed so far in 2012! Q Ave Source: MAREX, IEA, Clarksons 14

15 Market Update VLCC Fleet Fleet Current Fleet 610 Orderbook 95 DH Fleet 587 Delivered SH (DS, DB, SS) Fleet 23 Estimated deliveries Current fleet & Orderbook Delivery Schedule Source: Fearnleys July

16 Market Update Suezmax Fleet Fleet # of vessels Current Fleet 468 Orderbook 79 DH Fleet 459 Delivered SH (DS, DB, SS) 9 Estimated deliveries Current fleet & Orderbook Delivery Schedule Source: Fearnleys July

17 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul $ / DAY M USD Market Update Rates NEWBUILDING TC MARKET VLCC NB SMAX NB FRO SMAX NB Source: Clarksons 3Y TC VLCC 3Y TC SUEZMAX 17

18 Market Update How long is this horrid market sustainable? Ag East at lowest level on record* AG West at lowest level on record* Triangulation AG-West with backhaul voyage close to zero result TD3 AG-Japan is -$7,850, TD1 AG-USG is -$25,935 (August 24) $ $ $ $ $ $ $0 -$ $ Ras Tanura Chiba VLCC Average Earnings Modern Ras Tanura Loop VLCC Average Earnings Modern *Reliable data available on selected routes 18

19 Market Update Market Example Voyage first part, Ningbo, AG, USG (Loop), 3 days waiting Backhaul Galveston (1 day from Loop ballast), 7 days waiting Ship particulars; Ballast 10knots, Laden 13 knots consumption 35mt fuel per day ballast and 70 mt/day laden (=average ship) Market is currently* WS22 AG West and $3.3M Caribbean East (Singapore) Total voyage result first part -$190,000 over 80 days Backhaul $660,000 over 58 days In total $470,000/ $3,400 per day over 138 days! Not very good for ships costing $80-150M! * 16 Aug 19

20 Market Update Outlook General Reduced transatlantic activity as US refineries have closed down Lower Chinese growth followed by lower import volumes towards the end of Q2 Still limited newbuilding activities but a challenging supply/demand situation persist in the tanker market. Delivery slippage on halt in Q2 due to the strong market, is expected to return in Q3 and more scrapping is expected during the 2 nd half of 2012 Frontline Restructuring fleet - Continue to sell older non-core fleet and redeliver charter in tonnage - 4 vessels sold/leases terminated YTD TC vessels redelivered Outperformed our peers on VLCC s, however Suezmax earnings was disappointing Following the restructuring, the cash B/E rates for the company was significantly reduced, creating downside protection for the company. Limited upside potential as major counterparties will be compensated 100% for earnings up to original contract rates. The company will remain cautious and focus its resources on the present activities until a clearer sign of recovery can be seen in the tanker market. 20

21 Questions? 21