Frontline clinches USD 485 million refinancing

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Frontline reported unaudited results for the three and nine months ended September 30, 2020:

Highlights

  • Net income of $57.1 million, or $0.29 per diluted share for the third quarter of 2020
  • Adjusted net income of $56.4 million, or $0.29 per diluted share for the third quarter of 2020
  • Reported total operating revenues of $247.4 million for the third quarter of 2020
  • Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the third quarter of 2020 were $49,200, $25,100 and $12,800 per day, respectively
  • For the fourth quarter of 2020, we estimate spot TCE on a load-to discharge basis of $22,600 contracted for 74% of vessel days for VLCCs, $12,600 contracted for 61% of vessel days for Suezmax tankers and $13,800 contracted for 65% of vessel days for LR2 tankers. We expect the spot TCEs for the full fourth quarter of 2020 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the fourth quarter as well as current freight rates
  • Entered into three senior secured term loan facilities in November 2020 in an amount of up to $250.7 million, $100.8 million and $133.7 million, respectively, to refinance two existing term loan facilities maturing in the second quarter of 2021 and to partially finance the LR2 tankers under construction
  • Divested our 71.38% ownership interest in ship management company SeaTeam Management Pte Ltd.

Lars H. Barstad, Interim Chief Executive Officer of Frontline Management AS commented:

“Frontline’s strong results in the third quarter of 2020 came amid an extremely volatile quarter for the industry. Oil demand slowly began to recover in the third quarter of 2020, and the record levels of global oil inventories have been gradually declining. While demand remains significantly lower than prior to the pandemic, it is forecast to rebound in 2021. Demand growth coupled with the potential for OPEC+ production cuts to be reversed would quickly boost tanker demand. There continues to be uncertainty about the impact of newly-mandated lockdowns, particularly in the western hemisphere, as well as the timing of the potential reversal of OPEC+ production cuts. In the longer term, the tanker fleet fundamentals remain favorable with the lowest orderbook in 20 years across all asset classes. Frontline is very confident in the long-term prospects due to its modern fuel-efficient fleet, cost efficient organization and robust financial position, and we expect to deliver increasingly strong performance as the global recovery continues.”

Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:

“Following the recently concluded refinancing of two term loan facilities with total balloon payments of $324.4 million due in April 2021 and in June 2021, Frontline has no material maturities until 2023. The Company’s newbuilding program is also fully funded with a new term loan facility in an amount of up to $133.7 million.  Importantly, our recent financings were done at attractive terms, maintaining our competitive cost structure and reinforcing Frontline’s strong standing within the lending community.”

Average daily time charter equivalents (“TCEs”)1

($ per day) Spot TCE Spot TCE estimates % covered Estimated average daily BE rates
Q3 2020 Q2 2020 Q1 2020 Q4 2019 2019 Q4 2020 Q4 2020
VLCC 49,200 75,800 74,800 58,000 35,900 22,600 74% 21,900
SMAX 25,100 51,100 57,800 38,200 25,800 12,600 61% 20,400
LR2 12,800 36,900 31,200 29,800 22,000 13,800 65% 15,700

The estimated average daily cash breakeven rates are the daily TCE rates the vessels must earn in order to cover operating expenses including dry docks, repayments of loans, interest on loans, bareboat hire, time charter hire and net general and administrative expenses for the remainder of the year.

Spot estimates are provided on a load-to-discharge basis, whereby the company recognizes revenues over time ratably from commencement of cargo loading until completion of discharge of cargo. The rates reported are for all days up until the last contracted discharge of cargo for each vessel in the quarter. The actual rates to be earned in the fourth quarter of 2020 will depend on the number of additional days that we can contract, and more importantly the number of additional days that each vessel is laden. Therefore, a high number of ballast days at the end of the quarter will limit the amount of additional revenues to be booked on a load-to-discharge basis. Ballast days are days when a vessel is sailing without cargo and therefore unable to recognize revenues. Furthermore, when a vessel remains uncontracted at the end of the quarter, the Company will recognize certain costs during the uncontracted days up until the period end, whereas if a vessel is contracted, then certain costs can be deferred and recognized over the load-to-discharge period.

The reporting of revenues on a load-to-discharge basis results in revenues being recognized over fewer days, but at a higher rate for those days. Over the life of a voyage there is no difference in the total revenues and costs to be recognized.

When expressing TCE per day for the third quarter of 2020, the Company uses the total available days for the quarter and not just the number of days the vessel is laden.

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