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1 Q2 2013 Results August 28, 2013

Frontline Q2 2013 results presentation

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Page 1: Frontline Q2 2013 results presentation

1

Q2 2013 Results

August 28, 2013

Page 2: Frontline Q2 2013 results presentation

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MATTERS DISCUSSED IN THIS DOCUMENT MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE 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 ARE OTHER THAN STATEMENTS OF HISTORICAL FACTS.

FRONTLINE DESIRES TO TAKE ADVANTAGE OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND 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” AND SIMILAR 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, MANAGEMENT'S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA CONTAINED IN FRONTLINE’S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. ALTHOUGH FRONTLINE BELIEVES THAT THESE ASSUMPTIONS WERE REASONABLE WHEN MADE, BECAUSE THESE ASSUMPTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT AND ARE BEYOND FRONTLINE’S CONTROL, YOU CANNOT BE ASSURED THAT FRONTLINE WILL ACHIEVE OR ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. FRONTLINE UNDERTAKES NO DUTY TO UPDATE 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 THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: THE STRENGTH OF WORLD ECONOMIES AND CURRENCIES, GENERAL MARKET CONDITIONS, INCLUDING FLUCTUATIONS IN CHARTERHIRE RATES AND VESSEL VALUES, CHANGES IN DEMAND IN THE TANKER MARKET, INCLUDING BUT NOT LIMITED TO CHANGES IN OPEC'S 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 FOR FRONTLINE’S VESSELS, AVAILABILITY OF FINANCING AND REFINANCING, ABILITY TO COMPLY WITH COVENANTS IN SUCH FINANCING ARRANGEMENTS, FAILURE OF COUNTERPARTIES TO FULLY PERFORM THEIR CONTRACTS WITH US, CHANGES IN GOVERNMENTAL RULES AND REGULATIONS OR ACTIONS TAKEN BY REGULATORY AUTHORITIES, POTENTIAL LIABILITY FROM PENDING OR FUTURE LITIGATION, GENERAL DOMESTIC AND INTERNATIONAL POLITICAL CONDITIONS, POTENTIAL DISRUPTION OF SHIPPING ROUTES DUE TO ACCIDENTS OR POLITICAL EVENTS, VESSEL BREAKDOWNS, INSTANCES OF OFF-HIRE AND OTHER IMPORTANT FACTORS. FOR A MORE COMPLETE DISCUSSION OF THESE AND OTHER RISKS AND UNCERTAINTIES ASSOCIATED WITH FRONTLINE’S BUSINESS, PLEASE REFER TO FRONTLINE’S FILINGS WITH THE SECURITIES 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 OF FRONTLINE.

Forward looking statements

Page 3: Frontline Q2 2013 results presentation

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Agenda

■ Second Quarter 2013 Highlights and Transactions

■ Financial Review

■ Newbuildings

■ Market Update

■ Outlook

■ Q & A

Page 4: Frontline Q2 2013 results presentation

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Highlights and Transactions

Second Quarter 2013

■ Frontline records a vessel impairment loss of $81.3 million.

■ Redelivered the chartered-in VLCC DHT EAGLE in May.

■ At a Special General Meeting in May, our shareholders approved a decrease in the par value of our ordinary shares from $2.50 to $1.00 effective May 14, 2013.

■ Announced an at-the-market (ATM) offering in June

■ Issued 985,054 new ordinary shares in June and July under the ATM program.

Page 5: Frontline Q2 2013 results presentation

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Financial Highlights

Q2 - 2013 results

■ Net loss : $120.3m, equivalent to loss per share of $1.54

■ Impairment loss of $81.3m

■ Net loss (ex impairment loss): $39m, equivalent to loss per share of $0.50

1H - 2013 results

■ Net loss : $139m, equivalent to loss per share of $1.79

■ Net loss (ex impairment loss): $57.7m, equivalent to loss per share of $0.74

No dividend declared in Q2-2013

Share price NYSE August 27, 2013: $2.96

– Market cap: $233m

Second Quarter 2013

-1.54

-0.24

-1.06

-0.21

-0.63

-0.31

0.09

-1.80

-1.60

-1.40

-1.20

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

Q2 Q1 FY Q4 Q3 Q2 Q1

2013 2012

EPS ($)

EPS ($)

-120.3

-18.8

-82.8

-16.6

-49.0

-24.3

7.2

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

Q2 Q1 FY Q4 Q3 Q2 Q1

2013 2012

Net Income/loss ex sales ($million) Sales profit/loss ($million)

Page 6: Frontline Q2 2013 results presentation

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Income Statement

Financial Review

2012 2013 CONDENSED CONSOLIDATED INCOME STATEMENTS 2013 2012

Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun

163,728 121,222 Total operating revenues 247,125 312,981

5,135 521 Gain on sale of assets and amortization of deferred gains 9,732 16,085

66,263 74,236 Voyage expenses and commission 144,386 123,816

31,576 32,787 Ship operating expenses 59,664 57,304

14,839 (304) Contingent rental (income) expense (606) 26,845

10,102 203 Charter hire expenses 4,176 22,219

8,039 7,325 Administrative expenses 15,756 16,363

- 81,324 Impairment loss on vessels 81,324 -

26,679 26,227 Depreciation 52,339 53,564

157,498 221,798 Total operating expenses 357,039 300,111

11,365 (100,055) Net operating (loss) income (100,182) 28,955

30 36 Interest income 69 50

(23,688) (22,908) Interest expense (45,526) (47,713)

422 2,298 Share of results from associated companies 6,979 259

(38) (55) Foreign currency exchange (loss) gain (110) 21

(2,164) - Mark to market loss on derivatives (585) (1,206)

- - Gain on redemption of debt - 4,600

301 324 Other non-operating items 606 582

(13,772) (120,360) Net loss before tax and noncontrolling interest (138,749) (14,452)

(77) (94) Taxes (191) (162)

(13,849) (120,454) Net loss from continuing operations (138,940) (14,614)

(10,553) (481) Net loss from discontinued operations (1,030) (2,985)

(24,402) (120,935) Net loss (139,970) (17,599)

56 658 Net loss attributable to noncontrolling interest 938 428

(24,346) (120,277) Net loss attributable to Frontline Ltd. (139,032) (17,171)

$(0.31) $(1.54) Basic loss per share attributable to Frontline Ltd. $(1.79) $(0.22)

Page 7: Frontline Q2 2013 results presentation

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Income on time charter basis

Financial Review

0

20 000

40 000

60 000

80 000

100 000

120 000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

TCE VLCC ($/day) TCE SUEZMAX ($/day)

$/day YTD Q2 Q1 FY Q4 Q3 Q2 Q1

VLCC Spot DH 12 900 11 200 14 600 22 400 18 500 13 300 31 500 25 400

VLCC w hole fleet 15 600 14 100 17 000 22 200 19 300 12 300 31 000 25 600

Suezmax Spot DH 14 100 13 800 14 500 15 200 14 000 10 500 16 200 19 500

OBO 13 300 - 13 300 33 600 35 100 33 700 28 100 37 800

2013 2012

Page 8: Frontline Q2 2013 results presentation

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Ship operating expenses/Off-hire

Financial Review

Tentative drydock schedule/no. of vessels

– Q3-2013: Two Suezmax tankers

The increase in OPEX from Q1 refers mainly to more drydockings.

* Includes one overlapping vessel from Q1

12 500

9 900 10 400

9 700

11 800

11 100

9 000

6 000

7 000

8 000

9 000

10 000

11 000

12 000

13 000

Q2 Q1 FY Q4 Q3 Q2 Q1

2013 2012

Total fleet opex ($/day)

4

1

10

1

45

00

2

4

6

8

10

12

Q2 Q1 FY Q4 Q3 Q2 Q1

2013 2012

Number of vessels drydocked

208

157

368

42

144 141

41

0

50

100

150

200

250

300

350

400

Q2 Q1 FY Q4 Q3 Q2 Q1

2013 2012

Off hire (days)

*

Page 9: Frontline Q2 2013 results presentation

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Balance Sheet

Financial Review

Balance sheet

(in $ million) 2013 2013 2012

Jun 30 Mar 31 Dec 31

Cash 84 109 138

Restricted cash 76 71 88

Other Current assets 137 126 167

Long term assets:

Vessels 1 039 1 147 1 176

Newbuildings 28 28 27

Other long term assets 105 103 93

Total assets 1 468 1 584 1 688

Current liabilities 130 124 187

Long term liabilities 1 346 1 347 1 370

Noncontrolling interest 11 11 11

Frontline Ltd. stockholders' equity -19 101 120

Total liabilities and stockholders' equity 1 468 1 584 1 688

Page 10: Frontline Q2 2013 results presentation

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Cash Cost Breakeven

Comments to B/E rates:

Included in cash B/E rates are: BB hire, opex , interest and admin. expenses

B/E rates exclude capex. and ITCL vessels

Estimated Cash cost breakeven rates

for the remainder of 2013 ($/day)

VLCC 25,000

Suezmax 19,000

Financial Review

Page 11: Frontline Q2 2013 results presentation

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Newbuilding Overview

■ Total newbuilding program as of June 30, 2013:

– Two Suezmax tankers

– Remaining installments to be paid approx. $87.9m

Newbuilding

Page 12: Frontline Q2 2013 results presentation

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Frontline Fleet

Incl. vessels on commercial management & ITCL, excl. newbuildings

Total: 48 As per xx August DH: Double Hull

Corporate Overview

VLCC DH 32

Suezmax DH 16

Page 13: Frontline Q2 2013 results presentation

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Frontline Fleet

Corporate Overview

DH 20 7 % 40 000 20 5 % 40 400

DH 7 9

Newbuildings 2

VLCC DH 6 50 % 6 20 %

Suezmax DH 3 100 % 3 100 %

VLCC DH 6 6

Suezmax DH 6 6

Total Fleet (ex. Newbuildings) 48 50

Total Fleet (ex. Newbuildings, ITCL, Com Mgt) 27 5 % 40 000 29 3 % 40 400

Total Fleet (ex. Newbuildings, ITCL incl. Com Mgt) 39 3 % 41 2 %

- The average TC coverage percentage is based on estimated total trading days

2014

No. of

vessels

Av. TC

Coverage

Av. Net TC

($/day)

No. of

vessels

Av. TC

Coverage

(whole year)

Av. Net TC

($/day)

VLCC

ITCL

2013

Com Mgt

Suezmax

Page 14: Frontline Q2 2013 results presentation

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Earnings & Market Factors

Q2 – Average Market earnings / Marex

■ VLCC (TD3) : $ 8,000/day (Q1-13: $1,250/day)

■ Suezmax (TD5) : $11,500/day (Q1-13: $12,500/day)

The Market:

■ Global refinery throughput remained low until April due to spring maintenance and seasonally low demand before increasing

■ According to IEA demand increased by 0.5 mb/d in Q2 compared to Q1

■ Global refinery crude demand surged by 3.1 mb/d in June, its highest monthly increase on record

■ IEA expects oil demand to accelerate by 1.1 mb/d y/y in 2014 to compared to 0.9mb/d y/y increase in 2013

■ Ten VLCC newbuilding and six Suezmax were delivered during the quarter

■ Five VLCC and no Suezmaxes were removed during the quarter

■ Increased AG activity supported VLCC freight rates during the second half of the quarter

■ Increased activity at west Africa and narrowing WTI/Brent spread supported Suezmax rates

Market Update

Source: MAREX, IEA, Clarksons

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

55 000

60 000

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

$ / d

ay

VLCC

Q2 2012 2013 Ave 2009 - 2013

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

$ / d

ay

SUEZMAX

Q1 2013 2012 Ave 2009 - 2013

Page 15: Frontline Q2 2013 results presentation

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VLCC Fleet

Market Update

Source: Fearnleys August 2013

Delivery Schedule

Fleet

Current fleet & Orderbook

Current Fleet 639 57

DH Fleet 624 25

SH (DS, DB, SS) Fleet 15 Estimated deliveries 2013 16

Delivered 2013

Orderbook

Page 16: Frontline Q2 2013 results presentation

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Suezmax Fleet

Market Update

Source: Fearnleys August 2013

Delivery Schedule

Fleet

Current fleet & Orderbook

Current Fleet 448 Orderbook 39

DH Fleet 443 Delivered 2013 18

SH (DS, DB, SS) Fleet 5 Estimated deliveries 2013 14

Page 17: Frontline Q2 2013 results presentation

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Rates

TC MARKET

Source: Clarksons

Market Update

NEWBUILDING

Page 18: Frontline Q2 2013 results presentation

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Outlook General

■ Periods of increased volatility but not lasting long enough to sufficiently increase earnings

■ Western VLCC demand remains disappointing making triangulation trade challenging

■ Last year with extensive newbuilding deliveries

■ No scrapping despite a low market

■ 1999 was the first year with a substantial newbuilding deliveries which means many vessels will turn 15 years in 2014 and less preferable by larger charterers

– 29 VLCCS built in 1999, total 85 ships before 1999 or 13%

Market Update

Frontline

■ Fleet reduced to core fleet (long term leased in tonnage)

■ Will seriously consider the investment we have to make in vessels which are more than 15 years old in order to take the vessels through special survey

■ Frontline has two vessels coming up for special survey in the second part of this year

■ Continued cost cutting

- Focus on speed and consumption

- Keep slim management

■ Monitoring the situation and looking for opportunities to restructure the balance sheet and improve the Company’s financial position

Page 19: Frontline Q2 2013 results presentation

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Questions?