Frontline Q3 2012 results presentation

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Frontline Q3 2012 results presentation

  1. 1. Q3 2012 Results November 29, 1 2012
  2. 2. Forward looking statementsMATTERS DISCUSSED IN THIS DOCUMENT MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORMACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDEPROSPECTIVE 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 AREOTHER THAN STATEMENTS OF HISTORICAL FACTS.FRONTLINE DESIRES TO TAKE ADVANTAGE OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995AND IS INCLUDING THIS CAUTIONARY STATEMENT IN CONNECTION WITH THIS SAFE HARBOR LEGISLATION. THE WORDS “BELIEVE,”“ANTICIPATE,” “INTENDS,” “ESTIMATE,” “FORECAST,” “PROJECT,” “PLAN,” “POTENTIAL,” “WILL,” “MAY,” “SHOULD,” “EXPECT” “PENDING” ANDSIMILAR 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, MANAGEMENTS EXAMINATION OF HISTORICAL OPERATING TRENDS, DATACONTAINED IN FRONTLINE’S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. ALTHOUGH FRONTLINE BELIEVES THAT THESEASSUMPTIONS WERE REASONABLE WHEN MADE, BECAUSE THESE ASSUMPTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIESAND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT AND ARE BEYOND FRONTLINE’S CONTROL, YOU CANNOT BE ASSUREDTHAT FRONTLINE WILL ACHIEVE OR ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. FRONTLINE UNDERTAKES NO DUTY TOUPDATE ANY FORWARD-LOOKING STATEMENT TO CONFORM THE STATEMENT TO ACTUAL RESULTS OR CHANGES IN EXPECTATIONS.IMPORTANT FACTORS THAT, IN FRONTLINE’S VIEW, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THEFORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: THE STRENGTH OF WORLD ECONOMIES AND CURRENCIES, GENERAL MARKETCONDITIONS, INCLUDING FLUCTUATIONS IN CHARTERHIRE RATES AND VESSEL VALUES, CHANGES IN DEMAND IN THE TANKER MARKET,INCLUDING BUT NOT LIMITED TO CHANGES IN OPECS 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 FORFRONTLINE’S VESSELS, AVAILABILITY OF FINANCING AND REFINANCING, ABILITY TO COMPLY WITH COVENANTS IN SUCH FINANCINGARRANGEMENTS, FAILURE OF COUNTERPARTIES TO FULLY PERFORM THEIR CONTRACTS WITH US, CHANGES IN GOVERNMENTAL RULES ANDREGULATIONS OR ACTIONS TAKEN BY REGULATORY AUTHORITIES, POTENTIAL LIABILITY FROM PENDING OR FUTURE LITIGATION, GENERALDOMESTIC AND INTERNATIONAL POLITICAL CONDITIONS, POTENTIAL DISRUPTION OF SHIPPING ROUTES DUE TO ACCIDENTS OR POLITICALEVENTS, VESSEL BREAKDOWNS, INSTANCES OF OFF-HIRE AND OTHER IMPORTANT FACTORS. FOR A MORE COMPLETE DISCUSSION OF THESEAND OTHER RISKS AND UNCERTAINTIES ASSOCIATED WITH FRONTLINE’S BUSINESS, PLEASE REFER TO FRONTLINE’S FILINGS WITH THESECURITIES 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 OFFRONTLINE. 2
  3. 3. Agenda■ Third Quarter 2012 Highlights and Transactions■ Financial Review■ Newbuildings■ Market Update■ Outlook■ Q & A 3
  4. 4. Third Quarter 2012Highlights and Transactions■ Termination of long term charter party with SFL for OBO carriers ■ Front Climber terminated in October ■ Agreed to terminate Front Driver in November■ Agreed with NAT that Frontline’s nine Suezmax vessels will leave the Orion Pool ■ Subsequently sold Frontline’s 50% ownership of Orion to NAT 4
  5. 5. Third Quarter 2012Financial Highlights 50 15 -24 7 -50 Q3 Q2 Q1 FY Q3 Q2 Q1 -35Q3 - 2012 results -49 2012 2011 -150■ Net loss: $49m -166■ Net loss per share: $0.63 -250 -350Nine months 2012 results■ Net loss: $66.2m -450■ Net loss per share: $0.85 -530 -550 Net Income/loss ex sales ($million) Sales profit/loss ($million) 1.00No dividend declared in Q3-2012 -0.31 0.09 0.02 0.20 0.10 0.00 Q3 Q2 Q1 FY Q3 Q2 Q1 -1.00 -0.63 -0.45Share price NYSE November 28 2012: $3.43 2012 2011 -2.00 – Market cap: $267m -2.13 -3.00 -4.00 -5.00 -6.00 -6.80 -7.00 EPS ($) Dividend per share reported ($) 5
  6. 6. Financial ReviewIncome Statement 2011 2012 CONDENSED CONSOLIDATED INCOME STATEMENTS 2012 2011 Jul-Sept Jul-Sept (in thousands of $) Jan-Sept Jan-Sept 173,914 126,809 Total operating revenues 470,671 628,121 3,787 3,288 Gain on sale of assets and amortization of deferred gains 19,373 4,984 72,061 64,049 Voyage expenses and commission 189,525 228,114 (1,581) - Profit share expense (income) - 829 - 9,904 Contingent rental expense 42,631 - 45,378 36,600 Ship operating expenses 101,511 147,912 16,740 8,880 Charter hire expenses 31,099 50,843 9,871 8,338 Administrative expenses 24,701 26,489 121,443 - Impairment loss on vessels 13,141 121,443 49,603 28,301 Depreciation 86,892 151,540 313,515 156,072 Total operating expenses 489,500 727,170 (135,814) (25,975) Net operating gain (loss) 544 (94,065) 251 40 Interest income 90 3,929 (32,522) (23,551) Interest expense (71,813) (104,309) (111) (92) Share of results from associated companies 167 (411) 21 79 Foreign currency exchange gain 100 171 1,707 341 Other non-operating items 4,317 9,969 (166,468) (49,158) Net loss before taxes and noncontrolling interest (66,595) (184,716) (76) (95) Taxes (257) (183) 388 236 Net loss (income) attributable to noncontrolling interest 664 (1,036) (166,156) (49,017) Net loss attributable to Frontline Ltd. (66,188) (185,935) $(2.13) $(0.63) Basic loss per share ($) $(0.85) $(2.39) 6
  7. 7. Financial ReviewIncome on time charter basis 2012 2011 $/day YTD Q3 Q2 Q1 FY Q3 Q2 Q1 VLCC Spot DH 23 700 13 300 31 500 25 400 20 200 12 600 23 900 27 400 VLCC w hole fleet 23 200 12 300 31 000 25 600 22 800 17 000 26 100 28 600 Suezm ax Spot DH 15 500 10 500 16 200 19 500 12 600 7 800 14 500 16 000 Suezmax w hole fleet 15 500 10 500 16 200 19 500 14 100 9 500 15 800 17 300 Orion Suezmax pool 15 300 11 100 17 400 19 200 13 600 7 600 16 200 17 700 OBO 33 300 33 700 28 100 37 800 36 700 38 200 31 300 36 300 7
  8. 8. Financial Review Ship operating expenses/Off-hire Total fleet opex ($/day) Number of vessels drydocked13 000 10 9 11 800 912 000 11 100 811 000 10 800 7 10 200 9 900 610 000 5 9 200 9 300 5 9 000 4 9 000 4 3 3 8 000 3 2 7 000 2 1 1 6 000 0 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 2012 2011 Off hire (days) 800 700 677  Tentative drydock schedule/no. of vessels 600 – Q4-2012: 1 500 400 300 211 221 200 144 141 159 86 100 41 0 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 8
  9. 9. Financial ReviewBalance Sheet Balance sheet (in $ million) 2012 2012 2011 Sept 30 June 30 Dec 31 Cash 165 177 161 Restricted cash 76 89 101 Other Current assets 149 176 149 Long term assets: Vessels 1 222 1 252 1 334 Newbuildings 20 14 13 Other long term assets 94 95 83 Total assets 1 726 1 803 1 841 Current liabilities 191 194 167 Long term liabilities 1 387 1 412 1 460 Noncontrolling interest 12 12 12 Frontline Ltd. stockholders equity 136 185 201 Total liabilities and stockholders equity 1 726 1 803 1 841 9
  10. 10. Financial Review Cash Cost Breakeven Estimated Cash cost breakeven rates for the remainder of 2012 ($/day) VLCC 23,400 Suezmax 16,200 OBO 12,400Comments to B/E rates:– Included in cash B/E rates are: BB hire, opex , interest expense and admin. costs.– B/E rates exclude vessels on short term TC-in, vessels on BB-out, capex. and ITCL vessels 10
  11. 11. Newbuilding Newbuilding Overview■ Total newbuilding program as of November 28: – Two Suezmax tankers – Remaining installments to be paid approx. $94.2m 11
  12. 12. Corporate OverviewFrontline Fleet Incl. vessels on commercial management & ITCL, excl. newbuildings OBO 3 VLCC SH 2 Suezmax DH 15 VLCC DH 35 Total: 55 As per end Q3-12 DH: Double Hull, SH: Single Hull 12
  13. 13. Corporate Overview Frontline Fleet Q4 2012 2013 No. of Av. Net Av. TC Av. Net No. of Av. TC vessels TC/BB Rate Coverage TC/BB Rate vessels Coverage (per end ($/day) (whole year) ($/day) 2013) DH 22 9% 39 700 20 8% 39 900 VLCC SH 2 DH 8 10 Suezmax OBO 3 74 % 64 400 2 91 % 63 900 Newbuildings 2 VLCC DH 6 67 % 6 53 % ITCL Suezmax DH 3 100 % 3 100 % VLCC DH 7 8 Com Mgt Suezmax DH 4 4Total Fleet (ex. Newbuildings) 55 53Total Fleet (ex. Newbuildings, ITCL, SH BB coverage, Com Mgt) 33 12 % 52 100 32 11 % 52 500Total Fleet (ex. Newbuildings, ITCL incl. SH BB coverage, Com Mgt) 46 9% 44 8%- The average TC coverage percentage is based on estimated total trading days- TC-in vessels are assumed redelivered upon contract expiration 13
  14. 14. Market Update Earnings & Market Factors Q3 – Average Market earnings / Marex 100 000 VLCC ■ VLCC : -$3,750/day (Q2: $22,750/day) ■ Suezmax : $9,500/day (Q2: 18,000/day) 80 000 60 000 The Market:$ / day ■ Reduced crude oil imports to China 40 000 ■ VLCC fleet increased by seven vessels and Suezmax fleet increased by four vessels during the quarter 20 000 ■ Negative sentiment in the market ■ Lack of westbound VLCC cargoes 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec ■ IEA expected Q4 global oil demand has been reduced to Q3 2011 2012 Ave 2008 - 2012 90.1 mb/d, reflecting persistent weakness in Europe 100 000 SUEZMAX ■ OPEC crude exports fell to a nine month low at the end of 90 000 Q3. 80 000 ■ Global refinery throughputs averaged 75.9 mb/d in Q3, as recovering Chinese runs and strong OECD margins, notably 70 000 in Europe offset US hurricane outages. A seasonal dip is 60 000 expected to leave refinery runs at an average of 75.5 mb/d$ / day 50 000 in Q4 40 000 30 000 20 000 10 000 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Q3 2011 2012 Ave 2008 - 2012 14 Source: MAREX, IEA, Clarksons
  15. 15. Market UpdateVLCC Fleet Fleet Slippage 11 vessels ytdCurrent Fleet 622 Orderbook 88DH Fleet 600 Delivered 2012 43SH (DS, DB, SS) Fleet 22 Estimated deliveries 2012 58 Current fleet & Orderbook Delivery Schedule 15 Source: Fearnleys November 2012
  16. 16. Market UpdateSuezmax Fleet Fleet SlippageCurrent Fleet 466 Orderbook 63 14 vessels ytdDH Fleet 457 Delivered 2012 44SH (DS, DB, SS) Fleet 9 Estimated deliveries 2012 50 Current fleet & Orderbook Delivery Schedule 16 Source: Fearnleys November 2012
  17. 17. M USD 50 60 70 80 90 100 110 120 130 140 150 160 170 180 2006-02 2006-07 2006-12 VLCC NB 2007-05 Rates Market Update 2007-10 2008-03 2008-08 2009-01 SMAX NB 2009-06 2009-11 2010-04 2010-09 NEWBUILDING 2011-02 2011-07 2011-12 2012-05 2012-10 $ / DAY 30 000 40 000 50 000 80 000 10 000 20 000 60 000 70 000 0 Apr-05 Sep-05 Feb-06Source: Clarksons Jul-06 Dec-06 May-07 3Y TC VLCC Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 TC MARKET Apr-10 Sep-10 3Y TC SUEZMAX Feb-11 Jul-11 Dec-11 May-12 17 Oct-12
  18. 18. Market Update Outlook General Frontline■ Increase in tonnage miles as Motiva have restarted ■ Restructuring of the fleet continues, older non-core vessels their Port Arthur refinery importing from AG to Caribs sold and one TC vessel will be redelivered in December■ 10 second hand VLCC sold to non regular trading ■ Continued outperformance of peers in the VLCC segment buyers (why not let us run your VLCCs!) –suezmax segment was disappointing■ Vessels still slow speeding reducing available tonnage ■ Frontline will continue to remain cautious and focus its■ Big owners controlling the available tonnage in tight resources on the present activities until a clearer sign of windows recovery can be seen in the tanker market■ Consensus is that the recent rate spike could be short lived and that recovery in the crude tanker market could take some time 18 Source: Various
  19. 19. Q uestions? 19

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