Frontline reported unaudited results for the three and nine months ended September 30, 2021:
• Net loss of $33.2 million, or $0.17 per basic and diluted share for the third quarter of 2021.
• Adjusted net loss of $35.9 million, or $0.18 per basic and diluted share for the third quarter of 2021.
• Reported total operating revenues of $171.8 million for the third quarter of 2021.
• Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the third quarter of 2021 were $10,500, $7,900 and $10,700 per day, respectively.
• For the fourth quarter of 2021, we estimate spot TCE on a load-to discharge basis of $21,600 contracted for 79% of vessel days for VLCCs, $17,900 contracted for 72% of vessel days for Suezmax tankers and $16,000 contracted for 64% of vessel days for LR2 tankers.
• Entered into senior secured term loan facilities in September and October 2021 for a total amount of up to $247.0 million to partially finance the acquisition of two 2019-built VLCCs, which were delivered to the Company in October and November of 2021, respectively, and the acquisition of two of the six resale VLCC newbuilding contracts.
• Obtained financing commitments for senior secured term loan facilities in October and November 2021 for a total amount of up to $260.0 million to partially finance the acquisition of four of the six VLCC newbuilding contracts, which are subject to final documentation.
• Entered into an agreement in November 2021 to sell four of its scrubber-fitted LR2 tankers built in 2014 and 2015 for an aggregate sale price of $160.0 million. The transaction is expected to generate net cash proceeds of approximately $67.0 million.
• In November 2021, the Company extended the terms of its senior unsecured revolving credit facility of up to $275.0 million with an affiliate of Hemen Holding Ltd. by 12 months to May 2023.
Lars H. Barstad, Chief Executive Officer of Frontline Management AS commented:
“The third quarter continued to be a challenging period for tanker owners. Global oil demand rose, but oil supply growth remained muted, resulting in one of the most demanding quarters on record for tankers. Global inventories were drawn throughout the period, albeit at a reduced pace compared to the immediately preceding quarter. Yet again Frontline has been reaping the benefits of running a ‘tight ship’, with what we believe to be industry low operational, financial, and administrative costs. In the current market, where oil prices and fuel costs have risen considerably, we believe having a modern, fuel-efficient fleet has proven advantageous. In the previous quarter I pointed to the fact that freight rates below operational cost, and in some cases negative for inefficient tonnage, is not sustainable. During the third quarter of the year, we finally started to see ship recycling accelerate. The fundamentals of this market remain the same; the global tanker fleet is aging rapidly, orderbooks are dwindling as global oil demand is about to grow beyond hundred million barrels per day. These factors combine to create a potentially potent cocktail for the recovery of the tanker market.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In the third and fourth quarter we have entered into term loan facilities and obtained financing commitments at what we believe to be highly attractive terms for a total amount of up to $507.0 million to partially finance the acquisition of the two 2019-built VLCCs and the six VLCC newbuilding contracts. When factoring in the $33.4 million available under the term loan facility entered into in November 2020 to partially finance the delivery of the last LR2 tanker, we have established bank debt of up to $540.4 million. The Company has also raised gross proceeds of $51.2 million under the Equity Distribution Agreement and net cash proceeds after the repayment of bank debt of approximately $67.0 million through sale of four LR2 tankers. Following this the remaining commitments as per September 30, 2021 for Frontline’s newbuilding program consisting of one LR2 tanker and six VLCCs and for the acquisition of the two 2019-built VLCCs, is fully funded.
Through these new financings we reduce our borrowing cost and industry leading cash break even rates, providing significant operating leverage and sizeable returns during period of market strength and help protecting our cash flows during periods of market weakness.
The Company has also extended the terms of its senior unsecured revolving credit facility of up to $275.0 million by 12 months to May 2023, leaving Frontline with no loan maturities until 2023.”
The estimated average daily cash breakeven rates are the daily TCE rates our 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 contracted 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 2021 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, we are 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 end of the period, whereas if a vessel is contracted, then certain costs can be deferred and recognized over the load-to-discharge period.
The recognition 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 as compared to a discharge-to-discharge basis.
When expressing TCE per day the Company uses the total available days, net of off hire days and not just the number of days the vessel is laden.