Q2 2012 Results August 29, 2012
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Agenda Second Quarter 2012 Highlights and Transactions Financial Review Newbuildings Market Update Outlook Q & A 3
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 2012 4
Second Quarter 2012 Financial Highlights 50 7 15 Q2-2012 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 - 2012 results Net loss (ex. vessel impairment losses): $4m -50-150 -250-350 -450 Q2 Q1 FY Q4 Q3 Q2 Q1-24 -35 2012 2011-166 -344 Net loss per share (ex. vessel impairment losses): $0.05-530 -550 Net Income/loss ex sales ($million) 1.00 Sales profit/loss ($million) No dividend declared in Q2-2012 Share price NYSE 28 August 2012: $3.69 Market cap: $287m 0.00-1.00-2.00-3.00 0.09 0.20 0.12 0.02 0.10 Q2 Q1 FY Q4 Q3 Q2 Q1-0.31-0.45 2012 2011-2.13-4.00-5.00-4.41-6.00-7.00-6.80 EPS ($) Dividend per share reported ($) 5
Financial Review Income Statement 2011 2012 CONDENSED CONSOLIDATED INCOME STATEMENTS 2012 2011 Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun 219,398 176,576 Total operating revenues 343,862 454,207 (12,033) 5,135 Gain (loss) on sale of assets and amortization of deferred gains 16,085 1,197 80,348 66,998 Voyage expenses and commission 125,476 156,053 160 (31) Profit share expense - 2,410-17,795 Cash sweep expense 32,727-51,435 35,406 Ship operating expenses 64,911 102,534 17,518 10,102 Charter hire expenses 22,219 34,103 8,538 8,039 Administrative expenses 16,363 16,618-13,141 Impairment loss on vessels 13,141-50,429 29,192 Depreciation 58,591 101,937 208,428 180,642 Total operating expenses 333,428 413,655 (1,063) 1,069 Net operating income (loss) 26,519 41,749 1,517 30 Interest income 50 3,678 (35,698) (23,945) Interest expense (48,262) (71,787) (69) 422 Share of results from associated companies 259 (300) (21) (38) Foreign currency exchange gain (loss) 21 150 125 (1,863) Other non-operating items 3,976 8,262 (35,209) (24,325) Net loss before taxes and noncontrolling interest (17,437) (18,248) (44) (77) Taxes (162) (107) (35,253) (24,402) Net loss (17,599) (18,355) 9 56 Net loss (income) attributable to noncontrolling interest 428 (1,424) (35,244) (24,346) Net loss attributable to Frontline Ltd. (17,171) (19,779) (0.45) (0.31) Loss per share ($) (0.22) (0.25) 6
Financial Review Income on time charter basis 2012 2011 $/day YTD Q2 Q1 FY Q2 Q1 VLCC Spot DH 28 300 31 500 25 400 20 200 23 900 27 400 VLCC w hole fleet 28 200 31 000 25 600 22 800 26 100 28 600 VLCC Spot excl. spot index charters 29 900 31 700 27 400 21 800 25 700 28 200 Suezmax Spot DH 18 000 16 200 19 500 12 600 14 500 16 000 Suezmax w hole fleet 18 000 16 200 19 500 14 100 15 800 17 300 Orion Suezmax pool 18 400 17 400 19 200 13 600 16 200 17 700 OBO 33 100 28 100 37 800 36 700 31 300 36 300 7
Financial Review Ship operating expenses/off-hire 12 000 11 000 10 000 9 000 8 000 7 000 6 000 Total fleet opex ($/day) 11 100 10 800 9 900 10 200 9 000 9 200 9 300 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 10 9 8 7 6 5 4 3 2 1 0 Number of vessels drydocked 9 5 3 3 2 1 0 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 Tentative drydock schedule/no. of vessels Q3-2012: 3 800 700 600 500 Off hire (days) 677 400 300 200 100 0 211 221 141 159 41 86 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 8
Financial Review Balance Sheet Balance sheet (in $ million) 2012 2012 2011 Jun 30 Mar 31 Dec 31 Cash 177 170 161 Restricted cash 89 87 101 Other Current assets 176 174 149 Long term assets: Vessels 1 252 1 294 1 334 Newbuildings 14 13 13 Other long term assets 95 82 83 Total assets 1 803 1 819 1 841 Current liabilities 194 173 167 Long term liabilities 1 412 1 425 1 460 Noncontrolling interest 12 12 12 Frontline Ltd. stockholders' equity 185 209 201 Total liabilities and stockholders' equity 1 803 1 819 1 841 9
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
Newbuilding Newbuilding Overview Total newbuilding program at end of Q2-2012 approx. $124.9m Two Suezmax tankers Installments paid per end of Q2-2012: $12.5m Remaining installments to be paid approx. $112.4m 11
Corporate Overview Frontline Fleet Incl. vessels on commercial management & ITCL, excl. newbuildings OBO 4 VLCC SH 2 Suezmax DH 15 VLCC DH 36 As per end Q2-12 DH: Double Hull, SH: Single Hull Total: 57 12
Corporate Overview Frontline Fleet 2012 END 2013 No. of vessels Av. TC Coverage Av. Net TC/BB Rate ($/day) No. of vessels Av. TC Coverage (whole year) Av. Net TC/BB Rate ($/day) VLCC Suezmax ITCL DH 22 9 % 39 700 20 8 % 39 900 SH/DS on BB-out 2 100 % 10 900 * DH 8 10 OBO 4 58 % 64 400 3 65 % 63 900 Newbuildings 2 VLCC DH 6 67 % 6 53 % Suezmax DH 3 100 % 3 100 % Com Mgt *Bareboat rate VLCC DH 8 12 Suezmax DH 4 4 Total Fleet (ex. Newbuildings) 57 58 Total Fleet (ex. Newbuildings, ITCL, SH BB coverage, Com Mgt) 34 12 % 52 100 33 11 % 52 500 Total Fleet (ex. Newbuildings, ITCL incl. SH BB coverage, Com Mgt) 48 12 % 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
$ / day $ / day Market Update Earnings & Market Factors 100 000 80 000 VLCC Q2 Average Market earnings / Marex VLCC : $22,750/day (Q1: $19,000/day) Suezmax : $18,000/day (Q1: $22,000/day) 60 000 The Market: 40 000 Sluggish economic growth restrict global oil consumption to rise 0.9mb/d (1.0%) in 2012 20 000 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Q2 2011 2012 Ave 2008-2012 100 000 SUEZMAX 90 000 80 000 70 000 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 60 000 50 000 40 000 30 000 20 000 10 000 0 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! Q1 2011 2012 Ave 2008-2012 Source: MAREX, IEA, Clarksons 14
Market Update VLCC Fleet Fleet Current Fleet 610 Orderbook 95 DH Fleet 587 Delivered 2012 33 SH (DS, DB, SS) Fleet 23 Estimated deliveries 2012 70 Current fleet & Orderbook Delivery Schedule Source: Fearnleys July 2012 15
Market Update Suezmax Fleet Fleet # of vessels Current Fleet 468 Orderbook 79 DH Fleet 459 Delivered 2012 35 SH (DS, DB, SS) 9 Estimated deliveries 2012 65 Current fleet & Orderbook Delivery Schedule Source: Fearnleys July 2012 16
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-12 2006-01 2006-07 2007-01 2007-07 2008-01 2008-07 2009-01 2009-07 2010-01 2010-07 2011-01 2011-07 2012-01 2012-07 $ / DAY M USD Market Update Rates NEWBUILDING TC MARKET 180 170 160 150 140 130 120 110 100 90 80 70 60 80 000 70 000 60 000 50 000 40 000 30 000 20 000 50 10 000 0 VLCC NB SMAX NB FRO SMAX NB Source: Clarksons 3Y TC VLCC 3Y TC SUEZMAX 17
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) $60 000 $50 000 $40 000 $30 000 $20 000 $10 000 $0 -$10 000 -$20 000 1.6.2012 2.5.2012 3.6.2012 4.5.2012 5.5.2012 6.4.2012 7.4.2012 Ras Tanura Chiba VLCC Average Earnings Modern Ras Tanura Loop VLCC Average Earnings Modern *Reliable data 1990-2012 available on selected routes 18
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
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 2012-1 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
Questions? 21