Q1 2002 RESULTS 21 May 2002 www.frontline.bm 1 1
24 Suezmaxes The Fleet 36 + 5 N/B VLCCs Oldest ship from 1990 Average age 6.4 years Industry Average 12.1 years. Percentage double hull tonnage : 69 % - Industry Average 44 % 8 Suezmax OBOs = 17.7 million dwt. or approximately 118 million barrels transport capacity. 2
Main events 2002 Q1 Sold Mosocean and taken delivery of Front Eagle in early January, Tanabe in late February and Front Serenade in late March 2002. The delivery instalment for Front Serenade was financed out of cash with bank financing of $50 million drawn down after quarter end. Acquired 125,000 shares under the Equity Swap Line in Q1 2002. In total 2,460,000 are acquired as per today at an average price of NOK 75.01. Frontline secured 5 year T/C agreement with Shell France for one VLCC. Dividend payout USD 0.20 for Q4 2001 in March 2002 Four vessels were transferred from GOGL to Frontline late March 2002 and were refinanced from Yen denominated capital leases to $47.25 million bank debt with a discount on the refinancing of $6 million being recorded on the balance sheet. 3
Profit & Loss USD million Q1 02 Q1 01 2 001 Net operating revenues 94,9 219,1 647,3 Gain / loss on sale of vessels 0,0 0,7 35,6 Total expenses 39,1 38,3 176,5 Operating profit before depreciation (EBITDA) 55,8 181,5 506,5 Depreciation 34,0 28,9 121,7 Operating profit (EBIT) 21,8 152,6 384,8 Financial items -7,0 7,3-33,9 Net profit (loss) before min. & taxes 14,9 159,9 350,8 Taxes 0 0 0,4 Cum. effect of change in acc. principle 0 32,3 32,3 Net profit (loss) 14,9 192,3 382,7 EPS 0,19 2,49 4,99 4
Income on time charter basis USD/day Q1 02 Q1 01 2 001 VLCC, spot 18 900 62 100 40 800 VLCC, T/C and B/B vesse ls 28 300 - - Suezma x 16 500 43 000 30 700 Suezma x OBO 18 000 39 400 28 900 Drybulks 10 000 10 900 10 900 80000 70000 60000 USD per day 50000 40000 30000 20000 10000 0 Q1 97 Q2 Q3 Q4 Q1 98 Q2 Q3 Q4 Q1 99 Q2 Q3 Q4 Q1 00 Q2 Q3 Q4 Q1 01 Q2 Q3 Q4 Q102 5 VLCC Suezmax
Ship operating expenses (USD/day) Q1 02 Budget Total 2001 Total Total Opex incl. Opex incl. d/d d/d costs 2002 costs 2000 1999 VLCC 6 916 6 283 6 339 6 940 6 828 Suezmax 4 701 5 560 5 706 5 476 5 976 Suezmax OBO 5 503 5 973 8 996 6 246 6 385 Number of vessels drydocked this quarter was 1 Coming quarter a number of 4 vessels are expected to be drydocked Operating expenses are before G&A 6
Q2 Q3 Q4 Q102 250 200 150 100 50 0-50 EBITDA 7 Q1 01 Q4 Q3 Q2 Q2 Q3 Q4 Q1 99 Q2 Q3 Q4 Q1 00 Q1 98 Q4 Q3 Q2 Q1 97 USD million
Financial items USD million Q1 02 Q1 01 2 001 Net operating revenues 94,9 219,1 647,3 Gain / loss on sale of vessels 0,0 0,7 35,6 Total expenses 39,1 38,3 176,5 Operating profit before depreciation (EBITDA) 55,8 181,5 506,5 Depreciation 34,0 28,9 121,7 Operating profit (EBIT) 21,8 152,6 384,8 Financial items -7,0 7,3-33,9 Net profit (loss) before min. & taxes 14,9 159,9 350,8 Taxes 0,0 0,0 0,4 Cum. effect of change in acc. principle 0,0 32,3 32,3 Net profit (loss) 14,9 192,3 382,7 EPS 0,19 2,49 4,99 Interest income 2,6 4,7 In terest expense -17,8-26,8 Share of results in assoc. 1,0 10,9 Other financial items 5,5-4,2 Foreign currency gain 1,7 22,3 8
Associated companies Debt Our Gua rantee outstanding sh are liability Rasmussen K/S parts nil nil nil Front Tobago (40%) partners OSG and Euronav 15,6 6,3 2,4 Ariake (33%), partner OSG and Euronav 53,3 17,7 4,8 Sakura (33%), partner OSG and Eurona v 53,3 17,7 4,8 Ichiban (33%), partner OSG and Euronav 50,3 16,7 5,6 Ta nabe (33%), partner OSG and Euronav 52,5 17,3 5,8 Hull 4983 (33%), pa rtner OSG a nd Euronav nil nil nil Edinburgh (50,1%), partner OSG 30,6 15,3 4,6 Dundee (50,1%), partner OSG 30,6 15,3 4,6 Golden Fountain (50%) partner Euronav 34,0 17,0 34,0 New Circassia (50%) partners Ropner and Runciman 52,1 26,1 52,1 Pacific La goon (50%) pa rtner Euronav 51,8 26,0 51,8 Golden Daisy (50%) partner Samartzis 14,0 7,0 14,0 Golden Rose (50%) partner Samartzis 14,1 7,1 14,1 USD 144,3 million is Yen denominated, our share is USD 72,1 million Tota l = 452,1 189,7 198,6 9
JPY exposure and interest exposure of short term + long term debt and capital leases Yen denom inated debt/capital le as es 31.03.2002 31.12.2001 Change Consolidated 128 822 196 272-67 450 Associated companies, our share 72 118 74 566-2 448 Total 200 940 270 838-69 898 Floating debt 31.03.2002 31.12.2001 Change Consolidated 1 069 818 996 782 73 036 Associated companies, our share 189 631 175 742 13 890 Total 1 259 450 1 172 524 86 926 Total debt/capital leases 31.03.2002 31.12.2001 Change Consolidated 1 683 408 1 692 741-9 333 Associated companies, our share 189 631 175 742 13 890 Total 1 873 039 1 868 483 4 556 10
Balance sheet - Assets USD million Q1 02 Q1 01 2001 Short term Cash and Bank deposits 81,6 206,4 186,4 Marketable securities 1,1 0,8 1,2 Other current assets 95,1 123,9 90,4 Long term Newbuildings 62,1 57,7 102,8 Vessels and equipment, net 2 623,1 2 334,7 2 514,2 Associated companies 116,6 59,1 109,9 Goodwill 11,9 14,2 14,0 Def. charges and other assets 15,6 43,7 15,0 Total assets 3 007,1 2 840,6 3 033,8 The delivery insta lment for Front Serenade was financed out of cash w ith bank financing of $50 million drawn after quarter end Trade rec./voyage in progress 58,1 Prepaym / inventory 19,4 Other 17,6 Oscilla 8.4 Oscilla 8.9 Other 6.7 11
Balance sheet - Assets USD million Q1 02 Q1 01 2001 Short term Cas h and B ank deposits 81,6 206,4 186,4 Mark etable s ecurities 1,1 0,8 1,2 Other current ass ets 95,1 123,9 90,4 Long term Newbuildings 62,1 57,7 102,8 Vessels and equipment, net 2 623,1 2 334,7 2 514,2 Ass ociated companies 116,6 59,1 109,9 Goodwill 11,9 14,2 14,0 Def. charges and other assets 15,6 43,7 15,0 Total assets 3 007,1 2 840,6 3 033,8 FL 2 464,8 GOGL 158,4 FL Capital lea se 209,3 include s 3 VLs GOGL include s 2 cape s, 1 handy and 1 VL GOGL Ca pital lea se 29,5 includes 1 cape 12
Balance sheet - Liabilities USD million Q1 02 Q1 01 2001 Short term Short term interest bearing debt 266,4 211,9 214,0 Other current liabilities 55,1 57,5 87,5 Long term Long term interest bearing debt 1 182,4 1 270,0 1 177,9 Other long term liabilites 248,7 92,5 295,1 Minority 0,6 6,1 6,8 Stockholder's equity 1 253,9 1 202,5 1 252,4 Corporate loans 4,5 Ship mort loans core FL 136,1 Sh term loan dry bulks 47,3 GOGL 53,6 Cr.lines / comm.paper 25,0 Corporate loans 11,3 Sh mort loans core FL 1 111,7 GOGL 59,5 FL Capital lease 201,9 GOGL cap leas e 20,6 Other 26,1 Total stockholders' equity and liab. 3 007,1 2 840,6 3 033,8 Ye n denominated debt 129 million 13
The macro trend Opec production is at 10-year low. Oil inventories are heading for new lows if Opec continues the low production level. World economic recovery is expected to come in second half of 2002. Oil demand forecasts are being raised in second half of 2002 in line with the world economic recovery. Opec will have to increase its production. The fleet balance is still reasonable and a modest demand increase will increase charter rates. Scrapping of old tonnage is continuing at a high level in current pessimistic rate environment. =>the above should lead to an increase in freight rates in second half of 2002 14
WTI-Brent 5,00 4,00 3,00 2,00 1,00 0,00-1,00-2,00 Source: J P Morgan 15 jan-90 jan-91 jan-92 jan-93 jan-94 jan-95 jan-96 jan-97 jan-98 jan-99 jan-00 jan-01 jan-02
NYMEX Henry Hub natural gas 12,00 10,00 8,00 6,00 4,00 2,00,00 Source: J P Morgan 16 09.10.1997 09.02.1998 09.06.1998 09.10.1998 09.02.1999 09.06.1999 09.10.1999 09.02.2000 09.06.2000 09.10.2000 09.02.2001 09.06.2001 09.10.2001 09.02.2002 $/mmbtu
SEABORNE OIL EXPORTS FROM FSU QUARTERLY 1999-2002 FSU OIL EXPORTS 1998-2005 MBD MBD 2.5 2.5 5.0 5.0 4.0 4.0 2.0 2.0 3.0 3.0 1.5 1.5 2.0 2.0 1.0 1.0 1.0 1.0 0.5 99.1 2 3 4 00.1 3 2 BLACK SEA 4 01.1 2 BALTIC 3 4 02.1(f) 0.5 0.0 98 99 00 01 02 03 04 05 SOURCE: CREDIT SUISSE CRUDE EXP PRODUCT EXPORT 0.0 R.S. Platou Economic Research a.s 17
Opec production, incl. Iraq (mbd) 32,0 31,0 30,0 29,0 28,0 27,0 26,0 25,0 24,0 23,0 Jul. 92: 23.89 mbd Apr. 02: 24.01 mbd 22,0 jan.92 jan.93 jan.94 jan.95 jan.96 jan.97 jan.98 jan.99 jan.00 jan.01 jan.02 Source: P F Bassøe 18
Commercial oil inventories, OECD, mb 2 900 10-year max 2 800 2 700 2 600 2002 Estimate*) 2001 2 500 10-year min 2 400 2 300 Des Jan Feb Mar Apr Mai Jun Jul Aug Sep Okt Nov Des Source: P F Bassøe *) Estimate assumes flat Opec production 19
Estimated call on OPEC 2002 Avg. 01Q102 Q202 Q302 Q402 Avg. 02 JP Morgan 26,7 26,1 25,7 27,1 27,7 26,7 IEA 26,3 25,2 24,8 25,8 26,6 25,6 US DOE 26,4 26,4 24,6 25,2 26,2 25,5 JP Morgan estimates as of May 15, 2002. IEA and DOE as of May, 2002. 20
Estimated call on OPEC 2003 Avg. 02Q103 Q203 Q303 Q403 Avg. 03 JP Morgan 26,7 26,8 26,0 27,7 28,6 27,3 US DOE 25,5 26,9 24,6 25,3 26,3 25,8 IEA has not yet released projections for 2003. 21
OPEC DECIDES VLCC RATES VLCC SPOT RATES $/DAY CORRELATION BETWEEN OPEC OUTPUT AND VLCC RATES MONTHLY DEC 1999 - APR 2002 100000 AG/LOOP 80000 60000 R2=0.90 DATA FOR DEC 99 TO APR 02 (DEC 00 IS EXCLUDED) * DEC 00 AUG 00 MAR 01 JAN 01 SE P 00 NOV 00 OCT 00 ws125 ws100 OPEC OUTPUT FELL FROM 29.6 MBD IN NOV 2000 TO 24.9 MBD IN FEB 2002 - A COMBINATION OF CYCLICAL AND SEASONAL CORRECTIONS. IN APRIL OPEC PRODUCTION FELL FURTHER TO 24.0 MBD DUE TO IRAQI EXPORT EMBARGO. 40000 20000 FEB 02 JAN 02 OCT 01 JUN 01 JAN 00 DEC 01 NOV 01 DE C 99 FEB 01 JUN 00 JUL 00 APR 01 MAY 00 SEP 01 APR 00 MAY 01 MA R 00 AUG 01 FEB 00 JUL 01 ws75 ws50 AS A RESULT RATES DECLINED FROM $85,000 TO LESS THAN $20,000 PER DAY THE ACTIVE VLCC FLEET WAS UNCHANGED IN THE SAME PERIOD. AP R 02 MAR 02 0 24 25 26 27 28 29 30 Source: R.S.Platou OPEC CRUDE PRODUCTION IN MBD 22 R.S. Platou EconomicResearch a.s
Correlation between OPEC production and VLCC rates 100 000 Vlcc rates (l.s.) 90 000 Opec production (r.s.) 80 000 30,0 29,0 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 jan.99 jul.99 jan.00 jul.00 jan.01 jul.01 jan.02 Source: Bassøe/IEA 28,0 27,0 26,0 25,0 24,0 23,0 23
Breakeven rates (USD / day) Cash Breakeven P/L Breakeven VLCC 22 350 20 850 Suezmax 14 840 13 400 Suezmax OBO 14 220 14 540 24
Breakeven requirements are very low VLCC TCE versus P/L Breakeven Suezmax TCE versus P/L Breakeven 100,000 80,000 70,000 USD/day 50,000 US D/day 60,000 50,000 40,000 30,000 20,000 0,000 05.01.1990 05.01.1991 05.01.1992 05.01.1993 05.01.1994 05.01.1995 05.01.1996 05.01.1997 05.01.1998 05.01.1999 05.01.2000 05.01.2001 05.01.2002 10,000 0,000 05.01.1990 05.01.1991 05.01.1992 05.01.1993 05.01.1994 05.01.1995 05.01.1996 05.01.1997 05.01.1998 05.01.1999 05.01.2000 05.01.2001 05.01.2002 VLCC TCE P/L Breakeven May 2002 Aver age T CE in the per iod Suezm ax TCE P/L Breakeven May 2002 Aver age T CE in the per iod Average TCE VLCC s in the period 1990-10 May 2002 is USD 28,609 per day, as compared to P/L breakeven May 2002 of USD 20,850 per day and cash B/E of USD 22,350 per day. Source: Clarkson Studies Average TCE Suezmax in the period 1990-10 May 2002 is USD 20,812 per day, as compared to P/L Breakeven May 2002 of USD 13,400 per day and cash B/E of USD 14,840 per day. 25
Supply VLCC s / Suezmaxes (No. of vessels) Of which VLCC's ULCC's*) Suezmaxes Building year 200,00-320,000 dw t 320,000 + dw t 120,000-200,000 dw t 1973 or earlier 2 1 1974-75 15 2 14 1976-77 34 14 19 1978-80 13 8 17 1981 or later 351 5 226 Fleet as at May 14, 2002 415 29 277 On order 2002 28 2 19 2003 35 31 2004+ 16 12 Total on order 2001-2004 79 2 62 *) Each ULCC representing an average of 400,000 Dwt Source: P.F.Bassøe 26
VLCC and Suezmax fleet 8,0% 6,0% development (year-on-year growth) Suezmax VLCC 4,0% 2,0% 0,0% -2,0% -4,0% -6,0% jan.99 mai.99 sep.99 jan.00 mai.00 sep.00 jan.01 mai.01 sep.01 jan.02 Source: P F Bassøe 27
Going forward Frontline will continue to develop it s position as the world leading tanker company with focus on modern Suezmax and VLCC tonnage. Frontline will continue to act as a consolidator within a highly fragmented industry. Frontline will continue focusing on having a cost effective operation. Frontline will take delivery of the remaining 5 N/B s under the N/B programme, 4 in 2002 and 1 in 2003. Pragmatic look at dividend / buy back / M&A activities. 28
Appendixes 29
Income on time charter basis USD'000s Q1 02 Q1 01 2001 VLCC, spot 27 896 92 907 243 886 VLCC, T/C ve sse ls 7 532 - - VLCC, B/B vessels T/C equivalent 9 483 - - Suezmax 30 975 75 577 220 787 Suezmax OBO 12 524 27 281 79 435 Trading days minus off hire Q1 02 Q1 01 2001 VLCC, spot 1 477 1 439 5 973 VLCC, T/C ve sse ls 242 - - VLCC, B/B vessels 360 - - Suezmax 1 881 1 758 7 195 Suezmax OBO 695 693 2 746 30
Total expenses USD million Q1 02 Q1 01 2001 Ship oper. exp. 26,9 26,1 121,5 Charterhire exp. 9,8 10,6 41,9 Adm. exp. 2,4 3,5 13,2 31
Off balance sheet vessels Front Century Front Champion Front Warrior Kim Jacob (t/c until Dec. 2002) Golden Victory 32
Estimated oil demand/supply 2002 Avg. 01 Q102 Q202 Q302 Q402 Avg. 02 Demand* 76.2 76.7 75.6 77.5 78.7 77.1 Supply* 76.7 75.9 74.6 76.5 77.7 76.1 *)Based on JP Morgan estimates as of May 15, 2002 33
Oil production Change 2000 2001 2002 2000-2002 Source: JP Morgan Canada 2,68 2,74 2,87 0,19 Mexico 3,45 3,56 3,61 0,16 USA 8,11 8,10 8,11 Argentina 0,82 0,84 0,81 Brazil 1,50 1,61 1,72 0,22 Colombia 0,71 0,62 0,58-0,13 Ecuador 0,41 0,42 0,42 Denmark 0,37 0,35 0,34 Norway 3,35 3,42 3,39 UK 2,60 2,44 2,46-0,14 Oman 0,96 0,98 0,96 Syria 0,54 0,54 0,52 Yemen 0,54 0,54 0,52 Australia 0,82 0,72 0,69-0,13 Brunei 0,20 0,19 0,18 China 3,25 3,30 3,32 India 0,79 0,78 0,77 Malaysia 0,81 0,77 0,77 Vietnam 0,32 0,32 0,33 Angola 0,75 0,74 0,87 Egypt 0,80 0,72 0,69-0,11 Gabon 0,33 0,30 0,29 Total 34,11 34,00 34,22 Other / smaller prod 2,00 2,05 Refinery proc gain 1,90 2,00 Non OPEC supply ex FSU 37,90 38,20 20
Oil production Change 2000 2001 2002 2000-2002 Russia 6,54 7,11 7,46 0,92 Kazakhstan 0,75 0,80 0,90 0,15 Other FSU 0,75 0,80 0,83 FSU 8,04 8,71 9,19 OPEC NGL / Condensate 3,00 3,00 Call on OPEC crude 26,70 26,80 Stockbuild 0,40-0,80 OPEC crude 27,20 25,70 Source: JP Morgan 35
Difference in TCE old/modern VLCCs Needed daily cash to cover expenses: Daily op ex 8000 D/D res / upgrading (USD 2 million per 2.5 years) 2200 Cash cover 10200 TC modern VLCC 21000 - difference extra speed / consumption TT -9000 - tech offhire 20 days extra -700 - commercial offhire 50 days -1700 Effective TC old TT 9600 36
Newbuildings versus scrapping candidates VL/ULCC fleet as of May 14, 2002 45 40 Order No. Vsls Fleet No. Vsls 35 30 NO. VSLS 25 20 15 10 5 0 28 41 39 35 31 28 26 26 24 21 18 19 16 13 10 10 1 1 5 8 9 10 11 13 16 13 6 3 2 4 1 3 1 2 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 37 Source: P.F. Bassoe
Newbuildings versus scrapping candidates Suezmax fleet as of May 14, 2002 35 30 Order No. Vsls Fleet No. Vsls 25 NO VSLS 20 15 10 5 0 19 31 27 22 21 23 17 15 15 13 11 8 8 8 9 6 6 1 3 1 3 4 3 0 1 4 6 7 8 9 11 11 7 1 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 38 Source: P.F. Bassøe