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1
Q3 2012 Results
November 29, 2012
2
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
3
Agenda
■ Third Quarter 2012 Highlights and Transactions
■ Financial Review
■ Newbuildings
■ Market Update
■ Outlook
■ Q & A
4
Highlights and Transactions
Third Quarter 2012
■ 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
5
Financial Highlights
Q3 - 2012 results
■ Net loss: $49m
■ Net loss per share: $0.63
Nine months 2012 results
■ Net loss: $66.2m
■ Net loss per share: $0.85
No dividend declared in Q3-2012
Share price NYSE November 28 2012: $3.43
– Market cap: $267m
Third Quarter 2012
-0.63
-0.31 0.09
-6.80
-2.13
-0.45
0.200.02 0.10
-7.00
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
Q3 Q2 Q1 FY Q3 Q2 Q1
2012 2011
EPS ($) Dividend per share reported ($)
-49
-24 7
-530
-166
-35
15
-550
-450
-350
-250
-150
-50
50
Q3 Q2 Q1 FY Q3 Q2 Q1
2012 2011
Net Income/loss ex sales ($million) Sales profit/loss ($million)
6
Income Statement
Financial Review
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)
7
Income on time charter basis
Financial Review
$/day YTD Q3 Q2 Q1 FY Q3 Q2 Q1
VLCC Spot DH 23 700 13 300 31 500 25 400 20 200 12 600 23 900 27 400
VLCC w hole fleet 23 200 12 300 31 000 25 600 22 800 17 000 26 100 28 600
Suezmax Spot DH 15 500 10 500 16 200 19 500 12 600 7 800 14 500 16 000
Suezmax w hole fleet 15 500 10 500 16 200 19 500 14 100 9 500 15 800 17 300
Orion Suezmax pool 15 300 11 100 17 400 19 200 13 600 7 600 16 200 17 700
OBO 33 300 33 700 28 100 37 800 36 700 38 200 31 300 36 300
2012 2011
8
Ship operating expenses/Off-hire
Financial Review
Tentative drydock schedule/no. of vessels
– Q4-2012: 1
11 800
11 100
9 000
9 900
9 200 9 300
10 80010 200
6 000
7 000
8 000
9 000
10 000
11 000
12 000
13 000
Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Total fleet opex ($/day)
4
5
9
1
3 3
2
0
1
2
3
4
5
6
7
8
9
10
Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Number of vessels drydocked
144 141
41
677
86
159211 221
0
100
200
300
400
500
600
700
800
Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
2012 2011
Off hire (days)
9
Balance Sheet
Financial Review
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
10
Cash Cost Breakeven
Comments 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
Estimated Cash cost breakeven rates
for the remainder of 2012 ($/day)
VLCC 23,400
Suezmax 16,200
OBO 12,400
Financial Review
11
Newbuilding Overview
■ Total newbuilding program as of November 28:
– Two Suezmax tankers
– Remaining installments to be paid approx. $94.2m
Newbuilding
12
Frontline Fleet
Incl. vessels on commercial management & ITCL, excl. newbuildings
Total: 55 As per end Q3-12 DH: Double Hull, SH: Single Hull
Corporate Overview
VLCC SH 2
VLCC DH 35
Suezmax DH 15
OBO 3
13
Frontline Fleet
Corporate Overview
DH 22 9 % 39 700 20 8 % 39 900
SH 2
DH 8 10
OBO 3 74 % 64 400 2 91 % 63 900
Newbuildings 2
VLCC DH 6 67 % 6 53 %
Suezmax DH 3 100 % 3 100 %
VLCC DH 7 8
Suezmax DH 4 4
Total Fleet (ex. Newbuildings) 55 53
Total Fleet (ex. Newbuildings, ITCL, SH BB coverage, Com Mgt) 33 12 % 52 100 32 11 % 52 500
Total Fleet (ex. Newbuildings, ITCL incl. SH BB coverage, Com Mgt) 46 9 % 44 8 %
- The average TC coverage percentage is based on estimated total trading days
- TC-in vessels are assumed redelivered upon contract expiration
2013
No. of
vessels
Av. TC
Coverage
Av. Net
TC/BB Rate
($/day)
No. of
vessels
(per end
2013)
Av. TC
Coverage
(whole year)
Av. Net
TC/BB Rate
($/day)
VLCC
Suezmax
ITCL
Q4 2012
Com Mgt
14
Earnings & Market Factors Q3 – Average Market earnings / Marex
■ VLCC : -$3,750/day (Q2: $22,750/day)
■ Suezmax : $9,500/day (Q2: 18,000/day)
The Market:
■ Reduced crude oil imports to China
■ VLCC fleet increased by seven vessels and Suezmax fleet increased by four vessels during the quarter
■ Negative sentiment in the market
■ Lack of westbound VLCC cargoes
■ IEA expected Q4 global oil demand has been reduced to 90.1 mb/d, reflecting persistent weakness in Europe
■ OPEC crude exports fell to a nine month low at the end of Q3.
■ Global refinery throughputs averaged 75.9 mb/d in Q3, as recovering Chinese runs and strong OECD margins, notably in Europe offset US hurricane outages. A seasonal dip is expected to leave refinery runs at an average of 75.5 mb/d in Q4
Market Update
Source: MAREX, IEA, Clarksons
0
20 000
40 000
60 000
80 000
100 000
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
$ / d
ay
VLCC
Q3 2011 2012 Ave 2008 - 2012
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
$ / d
ay
SUEZMAX
Q3 2011 2012 Ave 2008 - 2012
15
VLCC Fleet
Market Update
Source: Fearnleys November 2012
Delivery Schedule
Fleet
Current fleet & Orderbook
Slippage
11 vessels ytd Current Fleet 622 88
DH Fleet 600 43
SH (DS, DB, SS) Fleet 22 Estimated deliveries 2012 58
Delivered 2012
Orderbook
16
Suezmax Fleet
Market Update
Source: Fearnleys November 2012
Delivery Schedule
Fleet
Current fleet & Orderbook
Slippage
14 vessels ytd Current Fleet 466 Orderbook 63
DH Fleet 457 Delivered 2012 44
SH (DS, DB, SS) Fleet 9 Estimated deliveries 2012 50
17
Rates
TC MARKET
Source: Clarksons
Market Update
NEWBUILDING
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
Ap
r-05
Se
p-0
5
Fe
b-0
6
Jul-
06
Dec-0
6
Ma
y-0
7
Oct-
07
Ma
r-0
8
Au
g-0
8
Jan
-09
Jun
-09
Nov-0
9
Ap
r-10
Se
p-1
0
Fe
b-1
1
Jul-
11
Dec-1
1
Ma
y-1
2
Oct-
12
$ / D
AY
3Y TC VLCC 3Y TC SUEZMAX
50
60
70
80
90
100
110
120
130
140
150
160
170
180
20
06
-02
20
06
-07
20
06
-12
20
07
-05
20
07
-10
20
08
-03
20
08
-08
20
09
-01
20
09
-06
20
09
-11
20
10
-04
20
10
-09
20
11
-02
20
11
-07
20
11
-12
20
12
-05
20
12
-10
M U
SD
VLCC NB SMAX NB
18
Outlook General
■ Increase in tonnage miles as Motiva have restarted their Port Arthur refinery importing from AG to Caribs
■ 10 second hand VLCC sold to non regular trading buyers
■ Vessels still slow speeding reducing available tonnage
■ Big owners controlling the available tonnage in tight windows
■ Consensus is that the recent rate spike could be short lived and that recovery in the crude tanker market could take some time
Market Update
Source: Various
Frontline
■ Restructuring of the fleet continues, older non-core vessels sold and one TC vessel will be redelivered in December
■ Continued outperformance of peers in the VLCC segment (why not let us run your VLCCs!) –suezmax segment was disappointing
■ Frontline will continue to remain cautious and focus its resources on the present activities until a clearer sign of recovery can be seen in the tanker market
19
Questions?