Frontline Q4 2012 results presentation

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Frontline Q4 2012 results presentation

  1. 1. Q4 2012 Results February 22, 1 2013
  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■ Fourth Quarter 2012 Highlights and Transactions■ Financial Review■ Newbuildings■ Market Update■ Outlook■ Q & A 3
  4. 4. Fourth Quarter 2012Highlights and Transactions■ The company terminated a number of vessels in the recent period: ■ The OBO carriers Front Climber and Front Driver in October and November ■ The VLCC Ticen Ocean in November, 2012. Recognized a gain of $11.2m ■ The VLCC Titan Aries in January, 2013. Expects to recognize a gain of $7.5m in Q1-13. ■ The Suezmax Front Pride in February, 2013. Recorded an impairment loss of $4.7m in Q4-12.■ Agreed to an early termination of the TC-out contracts on the OBO carriers Front Viewer and Front Guider in December. ■ Received compensation for loss of hire of $35m ■ Paid $23.5m in compensation to SFL as the long term charter parties on the vessels were terminated.■ Re-delivered the chartered-in VLCC Gulf Eyadah in December 4
  5. 5. Fourth Quarter 2012Financial Highlights -16.6 -49.0 7.2 -35.2 15.5 0 -100Q4 - 2012 results -82.8 -24.3 -200 -166.2■ Net loss: $16.9m■ Net loss per share: $0.21 -300 -343.7 -400Preliminary full year 2012 results -500 -529.6■ Net loss: $82.8m -600 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1■ Net loss per share: $1.06 2012 2011 Net Income/loss ex sales ($million) Sales profit/loss ($million)No dividend declared in Q4-2012 1.00 0.20 -0.21 -0.31 0.09 0.12 0.02 0.10 0.00 -1.00 -0.63Share price NYSE February 21, 2013: $2.90 -1.06 -0.45 -2.00 -2.13 – Market cap: $226m -3.00 -4.00 -4.41 -5.00 -6.00 -7.00 -6.80 -8.00 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 EPS ($) Dividend per share reported ($) 5
  6. 6. Financial ReviewIncome Statement 2011 2012 CONDENSED CONSOLIDATED INCOME STATEMENTS 2012 2011 Oct-Dec Oct-Dec (in thousands of $) Jan-Dec Jan-Dec 181,981 197,436 Total operating revenues 668,107 810,102 (312,878) (2,560) Gain (loss) on sale of assets and amortization of deferred gains 16,813 (307,894) 67,673 84,607 Voyage expenses and commission 274,132 295,787 (347) - Profit share expense (income) - 482 - 11,981 Contingent rental expense 54,612 - 39,098 29,174 Ship operating expenses 130,685 187,010 14,758 6,362 Charter hire expenses 37,461 65,601 9,397 9,205 Administrative expenses 33,906 35,886 - 18,901 Impairment loss on vessels 32,042 121,443 44,057 27,953 Depreciation 114,845 195,597 174,636 188,183 Total operating expenses 677,683 901,806 (305,533) 6,693 Net operating gain (loss) 7,723 (399,598) 29 40 Interest income 130 3,958 (37,188) (23,149) Interest expense (94,962) (141,497) (189) (171) Share of results from associated companies (4) (600) (65) (16) Foreign currency exchange gain (loss) 84 106 (816) (198) Other non-operating items 4,119 9,153 (343,762) (16,801) Net loss before taxes and non controlling interest (83,396) (528,478) (349) (122) Taxes (379) (532) 445 357 Net loss (income) attributable to non controlling interest 1,021 (591) (343,666) (16,566) Net loss attributable to Frontline Ltd. (82,754) (529,601) (4.41) (0.21) Basic loss per share attributable to Frontline Ltd. ($) (1.06) (6.8) 6
  7. 7. Financial Review Income on time charter basis 2012 2011$/day FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1VLCC Spot DH 22 400 18 500 13 300 31 500 25 400 20 200 16 800 12 600 23 900 27 400VLCC w hole fleet 22 200 19 300 12 300 31 000 25 600 22 800 19 100 17 000 26 100 28 600Suezm ax Spot DH 15 200 14 000 10 500 16 200 19 500 12 600 12 400 7 800 14 500 16 000Orion Suezmax pool 15 500 9 000 11 100 17 400 19 200 13 600 12 000 7 600 16 200 17 700OBO 33 600 35 100 33 700 28 100 37 800 36 700 41 600 38 200 31 300 36 300 7
  8. 8. Financial Review Ship operating expenses/Off-hire Total fleet opex ($/day) Number of vessels drydocked 13 000 12 11 800 10 12 000 10 9 11 100 11 000 10 400 10 800 10 200 8 9 700 9 900 10 000 9 000 9 2009 300 6 5 9 000 4 4 3 3 8 000 2 2 1 1 7 000 6 000 0 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 2012 2011 Off hire (days) 800 700 677 Tentative drydock schedule/no. of vessels 600 500 – Q1-2013: 3 VLCCs 368 400 300 211 221 200 144 141 159 86 100 42 41 0 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 2012 2011 8
  9. 9. Financial ReviewBalance Sheet Balance sheet (in $ million) 2012 2012 2011 Dec 31 Sept 30 Dec 31 Cash 138 165 161 Restricted cash 88 76 101 Other Current assets 167 149 149 Long term assets: Vessels 1 176 1 222 1 334 Newbuildings 27 20 13 Other long term assets 93 94 83 Total assets 1 688 1 726 1 841 Current liabilities 187 191 167 Long term liabilities 1 370 1 387 1 460 Noncontrolling interest 11 12 12 Frontline Ltd. stockholders equity 120 136 201 Total liabilities and stockholders equity 1 688 1 726 1 841 9
  10. 10. Financial Review Cash Cost Breakeven Estimated Cash cost breakeven rates for the remainder of 2013 ($/day) VLCC 24,200 Suezmax 18,800Comments to B/E rates:– Included in cash B/E rates are: BB hire, opex , interest and admin. expenses– 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 December 31, 2012: – Two Suezmax tankers – Remaining installments to be paid approx. $87.9m 11
  12. 12. Corporate OverviewFrontline Fleet Incl. vessels on commercial management & ITCL, excl. newbuildings Suezmax DH 14 VLCC DH 34 Total: 48 As per 21 February DH: Double Hull 12
  13. 13. Corporate OverviewFrontline Fleet 2013 2014 Av. Net Av. TC Av. Net No. of Av. TC No. of TC/BB Rate Coverage TC/BB Rate vessels Coverage vessels ($/day) (whole year) ($/day) VLCC DH 20 8% 39 800 20 5% 40 400 DH 7 9 Suezmax Newbuildings 2 VLCC DH 6 53 % 6 53 % ITCL Suezmax DH 3 100 % 3 100 % VLCC DH 8 8 Com Mgt Suezmax DH 4 4Total Fleet (ex. Newbuildings) 48 50Total Fleet (ex. Newbuildings, ITCL, Com Mgt) 27 6% 39 800 29 3% 40 400Total Fleet (ex. Newbuildings, ITCL incl. Com Mgt) 39 4% 41 2%- 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 100 000 VLCC Q4 – Average Market earnings / Marex ■ VLCC (TD3) : $9,000/day (current: $5/day) 80 000 ■ Suezmax (TD5) : $11,500/day (current: 10,750/day) 60 000 The Market:$ / day 40 000 ■ IEA estimates world oil demand in the fourth quarter averaged 91 mb/d in the fourth quarter, an increase of 0.8 mb/d compared to Q3. Parts of this increase might be 20 000 “borrowed” demand from Q1 because of Chinese refinery startups. 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec ■ High OPEC output through the first part of the quarter and Chinese import with higher tonnage miles supported freight rates Q4 2011 2012 Ave 2008 - 2012 100 000 SUEZMAX 90 000 ■ Global refinery throughputs averaged 75.9 mb/d in Q4 with 80 000 growth in activity concentrated in China, India and Russia. 70 000 Favorable refinery margins and cold snap in Asia supporting 60 000 throughputs. 11 VLCC newbuilding and 14 Suezmax were delivered$ / day 50 000 ■ 40 000 during the quarter 30 000 ■ 6 VLCC and 8 Suezmax were removed during the quarter 20 000 10 000 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Q4 2011 2012 Ave 2008 - 2012 14 Source: MAREX, IEA. Graphs: Clarksons
  15. 15. Market UpdateVLCC Fleet Fleet Current Fleet 622 Orderbook 81 DH Fleet 605 Delivered 2012 49 SH (DS, DB, SS) Fleet 17 Estimated deliveries 2013 50 Current fleet & Orderbook Delivery Schedule 15 Source: Fearnleys January 2013
  16. 16. Market UpdateSuezmax Fleet FleetCurrent Fleet 468 Orderbook 72DH Fleet 463 Delivered 2012 47SH (DS, DB, SS) Fleet 5 Estimated deliveries 2013 37 Current fleet & Orderbook Delivery Schedule80 23 # of vsls % 20 17 14 55 11 46 47 8 38 35 12 24 27 25 26 25 5 5 20 22 23 15 17 7 8 8 8 11 14 2 0 1 -6 -6 -4 -6 -4 -6 -1 -12 -13 -9 -10 -12 -9 -15 -15 -15 -17 -18 -17 -20 -26 -29 -4 -7 -10 -13 -16 -19 1988 1990 1993 1995 2000 2005 2009 2010 2011 2012 2013 2014 2015 -22-80 -25 FRO Assumptions on Phase Out / Deletions Suezmax Deletions Orderbook Suezmax DH 16 Source: Fearnleys January 2013
  17. 17. M USD 50 60 70 80 90 100 110 120 130 140 150 160 170 180 2006-02 2006-06 2006-10 2007-02 VLCC NB Rates 2007-06 Market Update 2007-10 2008-02 2008-06 2008-10 2009-02 SMAX NB 2009-06 2009-10 2010-02 2010-06 2010-10 NEWBUILDING 2011-02 2011-06 2011-10 2012-02 2012-06 2012-10 2013-02 $ / DAY 10 000 30 000 50 000 70 000 20 000 40 000 60 000 80 000 0 Feb-06 Jun-06 Oct-06 Feb-07Source: Clarksons Jun-07 Oct-07 Feb-08 3Y TC VLCC Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 TC MARKET Oct-10 Feb-11 3Y TC SUEZMAX Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 17 Feb-13
  18. 18. Market Update Outlook General Frontline■ Market at rock bottom ■ Reducing fleet:■ Increased technical issues on ships observed in market - Continue to redeliver older and non core chartered – less maintenance of ships in tonnage■ Last year with big newbuilding program ■ Outperformed our peers on VLCC’s and Suezmax earnings■ Increased tonnage demand but not enough to offset ■ Frontline will continue to remain cautious and focus its newbuilding program resources on the present activities until a clearer sign of recovery can be seen in the tanker market■ Some more interest in scrapping 18
  19. 19. Q uestions? 19

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