2
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,” “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. THE INFORMATION SET FORTH HEREIN SPEAKS ONLY AS OF THE DATES SPECIFIED AND FRONTLINE UNDERTAKES NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENT TO CONFORM THE STATEMENT TO ACTUAL RESULTS OR CHANGES IN EXPECTATIONS OR CIRCUMSTANCES.
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 OR A SOLICITATION OF ANY VOTE OR APPROVAL.
Forward Looking Statements
Highlights
•
Net loss of $26.6 million, or $0.13 per diluted share
•
Adjusted net loss of $23.2 million, or $0.12 per diluted share
Q2 2021 Q3 2021 est. % done
$15,000 $14,000 70%
$11,000 $9,800 64%
$10,600 $11,800 63%
Reported earnings basis load to discharge
VLCC
LR2/Aframax Suezmax
•
Acquisition through resale of six VLCCs – latest generation ECO-type currently under construction at the
HHI shipyard in South Korea – and acquisition of two latest generation ECO-type VLCCs built in 2019 at
the same shipyard
•
Obtained financing commitments for three senior secured term loan facilities in a total amount of up to
$247.0 million to partially finance the two acquired 2019 built VLCCs and two of the six VLCC
newbuildings, subject to final documentation
2021 2021 2020
(in thousands of $ except per share data) Apr - Jun Jan - Mar Jan - Dec
Total operating revenues (net of voyage expenses) 79 955 107 113 868 089
Other operating gain 596 537 29 902
Contingent rental (income) expense (961) (663) 14 568
Ship operating expenses 48 727 39 427 183 063
Charter hire expenses 322 2 271 9 557
Administrative expenses 7 947 6 384 44 238
EBITDA 25 422 80 370 627 018
EBITDA adj (*) 27 641 59 050 632 407
Interest expense (14 654) (14 760) (72 160)
Net income (26 631) 28 895 412 875
Net income adj (*) (23 192) 8 774 421 602
Diluted earnings per share (0,13) 0,15 2,09
Diluted earnings per share adjusted (0,12) 0,04 2,13
4
Note: Diluted earnings per share is based on 197,692 and 197,775 weighted average shares (in thousands) outstanding for Q2 2021 and Q1 2021, respectively
*See Appendix 1 for reconciliation to nearest comparable GAAP figures
Adjustment items for Q2 2021:
Income Statement – Highlights
• $0.8 million gain on marketable securities
• $4.7 million loss on derivatives
• $0.8 million share of losses of associated companies
• $1.3 million amortization of acquired time charters
2021 2021 2020
(in millions $) Jun 30 Mar 31 Dec 31
Assets
Cash 142 154 190
Other current assets 190 221 189
Non-current assets
Vessels and newbuildings 3 526 3 423 3 418 Goodwill 112 112 112 Other long-term assets 12 18 10
Total assets 3 982 3 928 3 918
Liabilities and Equity
Short term debt and current portion of long term debt 326 172 167
Obligations under finance and operational lease 9 9 12
Other current liabilities 92 92 102
Non-current liabilities
Long term debt 1 891 1 961 1 969
Obligations under finance and operating lease 49 51 53
Other long-term liabilities 1 2 4
Noncontrolling interest (0) (0) (0)
Frontline Ltd. stockholders' equity 1 614 1 641 1 612
Total liabilities and stockholders' equity 3 982 3 928 3 918
Balance Sheet - Highlights
Notes
• $257 million in cash and cash equivalents, including undrawn amount of unsecured facility, marketable securities and minimum cash requirements bank as per 30.06.21
Note: Daily cash breakeven in USD based on estimate for remainder of 2021. Cash generation 365 days from 1. July 2021 and adjusted for NB deliveries & acquired vessels
6
Cash Breakeven and Cash Generation Potential
Low cash breakeven levels provide significant operating leverage & protect our cash
flows during periods of market weakness
$21 800
$17 500
$15 400
$7 600 $8 500 $9 000
- 5 000 10 000 15 000 20 000 25 000
VLCC Suezmax LR2
Cash breakeven 2021 Opex Q2 2021 Avg. breakeven Fleet 2021
$18 000
$239
$467
$695
$924
$ 1,21
$ 2,36
$ 3.51
$ 4,67
- 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 5,00
- 200 400 600 800 1 000
$10 000 $20 000 $30 000 $40 000
$ per share / year
$ millions / year
$/day above BE rates
Cash generation above BE rates Total cash generation per share
6
Increased Cash Generation Potential after the acquisition of eight VLCCs
Highly attractive terms on the obtained financing commitments on four acquired VLCCs decreases their daily cash breakeven rates with ~$1.400 per vessel compared to existing terms on similar vessels
Q221 Tanker Market
•
Global oil consumption averaged 96.7 million bbl/day in Q2-21, up 2.1 mbd from Q1-21. Production averaged 94.9 million
bbl/day hence the world continued to draw 1.8 mbd of inventories
•
Tanker rates gradually slipped throughout the quarter, and volatility faded
•
OPEC+ did increase supply by more than 1 mbd during Q2-21, but key OPEC producers also went into higher demand
periods. US and Brazil added another 900k bbl/day
•
Demand rose sharply in North America and greater Europe, whilst Asia, that led the recovery, saw a far more muted
development in the second quarter of the year
42,15 42,18
30 32 34 36 38 40 42 44 46
Million BBL/Day
North America, Europe & Eurasia Oil Consumption
56,03 56,32
45 47 49 51 53 55 57 59 61 63
Million BBL/Day
Rest of The World
Sliding rates but positive developments in oil demand
8
Source: Fearnleys; Frontline
Tanker Orderbooks
Tanker orderbooks are shrinking as vessels deliver
•
New ordering has naturally been muted during Q2-21
•
Delivery window for ordering a significant number of VLCC or
Suezmax is now firmly 2024
•
The overall tanker orderbook for VLCC, Suezmax and LR2 has shrunk
~10% year to date
•
The overall orderbook for tankers above 10k dwt stands at 8% of
existing fleet, comparable to Q1-97. In absolute dwt terms we are at
20-year lows
•
VLCC orderbook is now at 81 units, 124 VLCC’s will be above or pass
20 years in the same period, for Suezmax we are at 41 units and 123
passing 20 years on same metrics
3 1 5 6 8 1114 13 28 35
29 12 18
7 13
2732 35 2029
10 13 11
19 18 2
-20 -5 -6 -8
-30 -20 -10 0 10 20 30 40
# of vessels
On order Sum on order 20Y+
LR2
18 14 24 2125 23 25 23 14
45 37 43 45 17 8 9
26 51
31 2618 20 1 32
6 2 -18-24-15-13-7 -4 -1 -6 -10 -8
-19-4 -8 -1 -12-23
-4 -1
-51
-24-21-27
-60 -40 -20 0 20 40 60
# of vessels
Delivered Sum on order Scrapped 20Y+
Suezmax
38 27 36 36 29 31 19 28 39 53 58 65
49 31 23 21 47 49 40 68 37 24
13 48 20 -28 -26 -34 -28
-3 -1 -3 -9 -13 -6 -16-18 -7 -1 -2 -10-31
-4 -2 -4
-55 -34 -35
-80 -60 -40 -20 0 20 40 60 80
# of vessels
Delivered Sum on order Scrapped 20Y+
VLCC
Oil In Transit
Volume of oil being transported is back to 2019 levels
Commentary
•
2020 was a noisy year for oil transportation
•
Saudi-Russia price war distorted Q1 and
Q2. Covid-19 demand shock and following
inventory build followed suit
•
Q4-20 crude went into backwardation, Oil
in Transit below 2017 levels. Floating
storage saved tanker utilization
•
1H-21 tanker markets have been facing
increased fleet supply by vessels released
from storage, deliveries of newbuilds and
deep inventory draws
•
OECD commercial inventories are now
down to 2019 levels, a fair proxy for Global
inventories
•
When inventories are no longer drawn,
transported oil will come in to play
903 908 919
650 700 750 800 850 900 950 1 000 1 050
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3
2015 2016 2017 2018 2019 2020 2021
Million BBL
Oil In Transit
2 900 3 000 3 100 3 200 3 300
Million BBL
OECD Commercial Inventory
10
Source: Clarkson SIN, Fearnleys
VLCC Fleet Paradox
Adjusted for inefficient tonnage – fleet growth has been moderate
Commentary
•
We may all speculate in what the older
generation of VLCC’s are doing
•
It’s undisputable that a 20-year-old vessel
will struggle as a very limited number of
charterers accept them
•
With the challenging trading environment
during 1H this year, earnings achieved on
non-eco high consuming vessels have
been zero or negative
•
Year to date 8 VLCC are reported sold for
recycling, the average recycling price in
Asia has risen 70% in the same period – to
$25.5m
•
Crude oil curves turned to backwardation in
Q4 last year, not supporting floating
storage
•
3 VLCC spot fixtures have been reported
year to date for a vessel of 20 years or
older (of 660)
847
796
600 650 700 750 800 850 900 950 1 000
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21
VLCC Fleet Development
VLCC Fleet Development VLCC Fleet Deveopment Adj. for 20+
0,63%
-1,0 % 1,0 % 3,0 % 5,0 % 7,0 % 9,0 %
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21
Adj. VLCC fleet growth % Year on Year
Adj. VLCC Fleet Development %QoQ
Summary
• Demand, and supply of oil continues to rise, ‘Delta type’ infections cloud the outlook in Asia
• Asset prices remain firm, steel prices continue to rise and activity good for non-tanker assets
• The tanker fleet continues to age, the overall orderbook shrinks and potential delivery windows move further out
• OPEC+ plan to add 400 kbd each month to the end of the year
• Oil in transit continue to rise, when do we reach the inflexion point ?
• Frontline has increased its position significantly, secured attractive financing and are ready to capitalize as we sail on
towards the expected recovery!
Mar-21
-15 -10 -5 0 5 10 15 20 25
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21
Year over Year % Growth
Key Shipping Sectors
Questions & Answers
www.frontline.bm
This presentation describes: total operating revenues net of voyage expenses, net income attributable to the Company adjusted for certain non-cash items ("Net income adj.") and related per share amounts and Earnings Before Interest, Tax, Depreciation & Amortisation adjusted for the same non-cash items ("EBITDA adj."), which are not measures prepared in accordance with US GAAP (“non-GAAP”).
We believe the non-GAAP financial measures presented in this press release provides investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance.
These non-GAAP financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP.
14
Appendix
Appendix I Reconciliation
(Million $ except per share) Q2 2021 Q1 2021 Q4 2020 FY 2020
Total operating revenues net of voyage expenses
Total operating revenues 170 194 175 1 221
Voyage expenses -90 -87 -74 -353
Total operating revenues net of voyage expenses 80 107 101 868
Net income adj.
Net income attributable to the Company -27 29 -9 413
Add back:
Unrealized loss on marketable securities 0 0 0 5
Share of losses of associated company 1 0 2 6
Loss on derivatives 5 0 0 22
Less:
Gain on sale of subsidiary 0 0 -7 -7
Gain on termination of lease (net of cash received) 0 0 0 -4
Share of results of associated company 0 0 0 -1
Gain on settlement of claim 0 0 0 -2
Unrealized gain on marketable securities -1 -3 -2 -3
Gain on derivatives 0 -16 -3 -3
Amortization of acquired time charters -1 -1 -1 -4
Net income adj. -23 9 -20 422
(in thousands)
Weighted average number of ordinary shares (basic) 197 692 197 962 197 692 195 637 Weighted average number of ordinary shares (diluted) 197 692 197 775 197 692 197 808 (in $)
Basic earnings per share adjusted for certain non-cash items -0,12 0,04 -0,10 2,16 Diluted earnings per share adjusted for certain non-cash items -0,12 0,04 -0,10 2,13 EBITDA adj.
Net income attributable to the Company -27 29 -9 413
Add back:
Interest expense 15 15 15 72
Depreciation 36 36 36 139
Income tax expense 0 0 0 0
Net income attributable to the non-controlling interest 0 0 0 0
Share of losses of associated company 1 0 2 6
Unrealized loss on marketable securities 0 0 0 5
Loss on derivatives 5 0 0 22
Less:
Gain on sale of subsidiary 0 0 -7 -7
Gain on termination of lease (net of cash received) 0 0 0 -4
Unrealized gain on marketable securities -1 -3 -2 -3
Gain on settlement of claim 0 0 0 -2
Share of results of associated company 0 0 0 -1
Gain on derivatives 0 -16 -3 -3
Amortization of acquired time charters -1 -1 -1 -4
EBITDA adj. 28 59 31 632
