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FRO - Second Quarter and Six Months 2015 Results

HAMILTON, Bermuda, Aug. 26, 2015 (GLOBE NEWSWIRE) --

Highlights

  • Frontline reports net income attributable to the Company of $17.4 million for the second quarter of 2015, equivalent to earnings per share of $0.11.
  • Frontline reports net income attributable to the Company of $48.5 million for the six months ended June 30, 2015, equivalent to earnings per share of $0.35.
  • The Company issued 18.8 million new shares in the second quarter under its ATM program and this program is fully utilized.
  • In April 2015, the remaining outstanding balance on the convertible bond of $93.4 million was repaid in full upon maturity.
  • In June 2015, the Company agreed with Ship Finance to amend the long term charter parties relating to 17 vessels such that the fixed charter payments to Ship Finance are expected to decrease by approximately $283 million.
  • In July 2015, the Company and Frontline 2012 entered into an agreement and plan of merger.

Second Quarter and Six Months 2015 Results

The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income attributable to the Company of $17.4 million in the second quarter, equivalent to earnings per share of $0.11, compared with net income of $31.1 million for the previous quarter, equivalent to earnings per share of $0.25.

The average daily time charter equivalents ("TCEs") earned in the spot and period market in the second quarter by the Company's VLCCs and Suezmax tankers were $50,600 and $33,800 compared with $49,400 and $33,100 in the previous quarter. The spot earnings for the Company's VLCCs and Suezmax vessels were $53,600 and $38,000 compared with $52,200 and $35,000 in the preceding quarter.

Operating expenses in the second quarter were $5.0 million higher than the previous quarter. An increase in dry docking costs accounted for $5.9 million in the quarter, as four vessels were dry docked in the second quarter compared with no vessels in the previous quarter.

Contingent rental expense represents amounts accrued following changes to certain charter parties in December 2011 and was in line with the first quarter.

Frontline announces a net income attributable to the Company of $48.5 million for the six months ended June 30, 2015, equivalent to earnings per share of $0.35. The average daily TCEs earned in the spot and period market in the six months ended June 30, 2015 by the Company's VLCCs and Suezmax tankers were $50,000 and $33,400, respectively, compared with $23,400 and $19,800, respectively, in the six months ended June 30, 2014. The spot earnings for the Company's VLCCs and Suezmax vessels were $52,800 and $36,400, respectively, in the six months ended June 30, 2015 compared with $22,600 and $19,800, respectively, in the six months ended June 30, 2014.

In August 2015, the Company estimates average daily total cash cost breakeven rates for the remainder of 2015 on a TCE basis for its VLCCs and Suezmax tankers of approximately $24,500 and $21,000 respectively.

Fleet Development

In August 2015, the Company agreed with Ship Finance to terminate the long term charter for the 1995 built Suezmax tanker Front Glory. Ship Finance has simultaneously sold the vessel to an unrelated third party. The charter with Ship Finance is expected to terminate during the third quarter of 2015. The Company will receive a compensation payment of approximately $2.2 million from Ship Finance. The number of vessels on charter from Ship Finance will then be reduced to 16 vessels, including 12 VLCCs and four Suezmax tankers.

Corporate

In February 2015, the Company bought $33.3 million notional principal of its 4.50% Convertible Bond Issue 2010/2015 at a purchase price of 99% and recorded a gain of $0.3 million in the first quarter of 2015.

In April 2015, Frontline issued 12,900,323 new shares under the ATM program and in May 2015, Frontline issued 5,941,251 new shares under the ATM program and the existing ATM program is fully utilized.

In April 2015, the remaining outstanding balance on the convertible bond of $93.4 million was repaid in full upon maturity.

In June 2015, the Company and Ship Finance agreed to amend the terms of the long term charter agreements for 17 vessels on charter from Ship Finance with an average remaining charter period of 7.7 years. The new agreement took effect from July 1, 2015. The general terms of the agreement are the following: new time charter rates for the VLCCs of $20,000 per day; new time charter rates for Suezmax tankers of $15,000 per day; new operating expenses for all vessels of $9,000 per day payable by Ship Finance; a new profit split of 50%/50% above the new time charter rates; and in connection with entering into the agreement the Company issued 55.0 million of its common shares to Ship Finance. The chartering counterparty will continue to be a subsidiary of the Company, and in exchange for releasing the Company from its current guarantee obligation, a cash buffer of $34.0 million ($2.0 million per vessel) will be built up in the chartering counterparty. The new profit split arrangement started accruing from July 1, 2015 and will be calculated and payable on a quarterly basis. Going forward, profit split payments will not be subject to the previous $50.0 million threshold. The shares issued to Ship Finance as a result of the new agreement represented approximately 27.7% of the Company's shares and votes. The Company has registered those common shares for resale with the Securities and Exchange Commission.

Reference is made to the announcement dated July 2, 2015, that Frontline and Frontline 2012 Ltd. ("Frontline 2012") have entered into an agreement and plan of merger (the "Merger Agreement"), pursuant to which the two companies have agreed to enter into a merger transaction, with Frontline as the surviving legal entity ("the "Surviving Company") and Frontline 2012 becoming a wholly-owned subsidiary of Frontline. Frontline has on August 24, 2015, filed a registration statement with the United States Securities and Exchange Commission ("SEC") covering the common shares to be issued by Frontline to Frontline 2012's shareholders in the merger. The shareholders' meetings of each of Frontline and Frontline 2012 will be held after the registration statement is declared effective. The effectiveness of the registration statement is subject, among other things, to SEC review. This transaction will be accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, with Frontline 2012 selected as the accounting acquirer under this guidance.

The Company had an issued share capital at June 30, 2015 of $198,375,854 divided into 198,375,854 ordinary shares (December 31, 2014: $112,342,989 divided into 112,342,989 ordinary shares). The weighted average number of shares outstanding for the second quarter was 153,281,991.

The Market

The average rate for a VLCC trading on a standard 'TD3' voyage between the Arabian Gulf and Japan in the second quarter of 2015 was WS 64, representing an increase of 5 WS points from the first quarter of 2015. The market rate for a Suezmax trading on a standard 'TD20' voyage between West Africa and Rotterdam in the second quarter of 2015 was WS 88, representing a decrease of 2 WS points from the first quarter of 2015. The VLCC fleet totalled 639 vessels at the end of the quarter, whilst the Suezmax fleet counted 449 vessels at the end of the quarter.

The order book for tankers represented about 16% of the overall tanker fleet.

Bunkers in Rotterdam averaged $326/mt in the second quarter of 2015 compared to $280/mt in the first quarter of 2015.

Strategy and Outlook

The Board of Directors is very pleased with the merger agreement entered into between Frontline and Frontline 2012. With a large modern fleet, a strong balance sheet and attractive cash break even rates, the combined companies should be well positioned to generate significant free cash in a strong market, and sustain a weak market.

Despite the slowdown seen in the market the last weeks, the Board of Directors hopes the combined companies will be in a position to start returning cash to shareholders as quarterly dividends as soon as the merger is completed. The intention is to pay out excess cash as dividends at the Board's discretion.

The Board believes the combined companies will be well positioned to grow through acquisition and consolidation opportunities.

Important Information For Investors And Shareholders

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction between Frontline and Frontline 2012, Frontline has filed relevant materials with the Securities and Exchange Commission (the "SEC"), including a registration statement of Frontline on Form F-4 (File No. 333-206542) , filed on August 24, 2015, that includes a joint proxy statement of Frontline 2012 and Frontline that also constitutes a prospectus of Frontline. The registration statement has not yet become effective. After the registration statement is declared effective by the SEC, a definitive joint proxy statement/prospectus will be mailed to shareholders of Frontline 2012 and Frontline. INVESTORS AND SECURITY HOLDERS OF FRONTLINE 2012 AND FRONTLINE ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus (when available) and other documents filed with or furnished to the SEC by Frontline through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with or furnished to the SEC by Frontline will be available free of charge on Frontline's website at http://www.Frontline.bm. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with or furnished to the SEC when they become available.

Forward Looking Statements

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Frontline management's examination of historical operating trends. Although Frontline believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Frontline cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, 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, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission.

The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
August 25, 2015

Questions should be directed to:

Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 84

Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

2nd Quarter 2015 Results http://hugin.info/182/R/1947564/707200.pdf

HUG#1947564

Source:Frontline Ltd