Frontline reported unaudited results for the three and twelve months ended December 31, 2021.
• Net income of $19.8 million, or $0.10 per basic and diluted share for the fourth quarter of 2021.
• Adjusted net loss of $4.8 million, or $0.02 per basic and diluted share for the fourth quarter of 2021.
• Reported total operating revenues of $213.5 million for the fourth quarter of 2021.
• Reported spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the fourth quarter of 2021 were $16,500, $14,200 and $13,900 per day, respectively.
• For the first quarter of 2022, we estimate spot TCE on a load-to discharge basis of $21,300 contracted for 58% of vessel days for VLCCs, $19,600 contracted for 65% of vessel days for Suezmax tankers and $18,800 contracted for 56% of vessel days for LR2 tankers.
• Took delivery of the LR2 tanker, Front Feature, from SWS and the 2019 built VLCCs, Front Driva and Front Nausta, respectively, from HHI in October and November 2021.
• Entered into senior secured term loan facilities in October and December 2021 for a total amount of up to $390.0 million to partially finance the acquisition of the six resale VLCC newbuilding contracts.
• Entered into an agreement in November 2021 to sell four scrubber-fitted LR2 tankers built in 2014 and 2015 for an aggregate sale price of $160.0 million. Two vessels were delivered to the new owners in December 2021 and two vessels were delivered in January 2022. The transaction will generate total net cash proceeds after repayment of bank debt of $68.6 million, with net cash proceeds of $35.1 million to be recorded in the first quarter of 2022.
• 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.
• In December 2021, Frontline received a distribution from Den Norske Krigsforsikring for Skib (“DNK”), the Norwegian Shipowners Mutual War Risk Insurance Association of $13.4 million, after tax.
Lars H. Barstad, Chief Executive Officer of Frontline Management AS commented:
“The fourth quarter of the year offered tanker owners some relief. The seasonal uptick, as the northern hemisphere prepared for winter, did materialize, albeit to a modest degree. Rates appreciated firmly, but from decades low levels. Frontline, with what we believe is an industry leading low-cost base, managed to capture the rising rates quickly, and as our fourth quarter numbers show, moved closer to cash-breakeven levels. Our company earnings differ positively from key benchmarks, and even to some extent our peers. This again shows the value of running a modern fleet and a lean operational model with focus on efficiency in a challenging market. Frontline continues to offer our investors an effective exposure to the potential upside in the tanker market. As the year ended, global oil demand was estimated to have reached 101.0 mbpd, against the backdrop of low oil inventories, twenty year low tanker orderbooks and an increasingly older fleet. Frontline continues to be very constructive for what’s to come this year, as the world continues its volatile path to recovery.”
Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:
“In the fourth quarter we have entered into term loan facilities, at what we believe to be highly attractive terms, for a total amount of up to $390.0 million, which together with part of the net cash proceeds after repayment of bank debt of $68.6 million through sale of four LR2 tankers, will fully finance the remaining commitments of $437.4 million related to the acquisition of the six VLCC newbuilding contracts. The Company also extended the terms of its senior unsecured revolving credit facility of up to $275.0 million to May 2023, leaving Frontline with no loan maturities until 2023. Our industry leading cash break even rates protect our cash flows during periods of market weakness and provide significant operating leverage and sizeable returns during periods of market strength.”
The estimated average daily cash breakeven rates are the daily TCE rates our vessels must earn 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 first quarter of 2022 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.