FRO - First Quarter 2008 Results
Market Wire, May, 2008
Highlights
* Frontline reports net income of $221.0 million and earnings per share of $2.95 for the first quarter of 2008, including gain on sale of assets and partial spin-off of subsidiary of $37.0 million
* Frontline announces a cash dividend of $2.75 per share for the first quarter of 2008
* 17.53% of our shareholding in Independent Tankers Corporation Limited was spun off to Frontline's ordinary shareholders
* Frontline invested $20 million in February 2008 in NAVIG8 LIMITED against the issue of new share capital representing a total of 15.8% stake in the company
* Frontline agreed to terminate the long term charter party for the single hull VLCC Front Sabang and has received a compensation payment of approximately $24.6 million in the second quarter of 2008
* In April 2008 Frontline entered into a contract in China for delivery of four 320,000 dwt VLCC newbuildings
* Frontline announces that it has declared options for further two similar VLCC newbuilding contracts in China
* The third heavy lift vessel, Front Comor, converted by COSCO was redelivered to Dockwise in May, 2008.
First Quarter 2008 Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income of $221.0 million for the first quarter of 2008, equivalent to earnings per share of $2.95. Operating income for the quarter was $235.4 million including a gain on sale of assets of $15.5 million. This gain includes $17.1 million relating to the termination of the lease for the Front Maple.
The reported earnings reflect a stronger spot market. The average daily time charter equivalents ("TCEs") earned in the spot and period market in the first quarter by the Company's VLCCs, Suezmax tankers and Suezmax OBO carriers were $82,400, $51,600 and $43,200, respectively compared with $45,700, $33,100 and $42,400 respectively in the fourth quarter of 2007. The results show a continued differential in earnings between single and double hull tonnage. The spot earnings for the Company's double hull VLCC and Suezmax vessels were $104,700 and $53,700 in the first quarter, compared to $43,600 and $37,500 in the fourth quarter of 2007.
Profit share expense of $33.7 million has been recorded in the first quarter as a result of the profit sharing agreement with Ship Finance International Limited ("Ship Finance") compared to $16.1 million in the fourth quarter. No profit share expense was recorded in the first quarter of 2007 since Ship Finance was consolidated in that quarter.
Charterhire expenses have increased by $19.5 million in the first quarter compared with the fourth quarter of 2007 mainly as a consequence of chartering in six vessels from Nordic American Tankers under a floating rate timecharter agreement. These six vessels are also included in result on time charter basis with $19.8 million and about 450 trading days.
Interest income was $10.9 million in the first quarter, of which $7.5 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation ("ITCL"). Interest expense, net of capitalized interest, was $47.9 million in the first quarter of which $13.6 million relates to ITCL.
Other financial items in the first quarter include an $18.0 million gain on the spin-off of 17.53% of the Company's shareholding in ITCL and a $3.5 million gain on the forward contract to purchase shares in Overseas Shipholding Group, Inc. ("OSG").
As of March 31, 2008, the Company had total cash and cash equivalents of $766.9 million which includes $638.2 million of restricted cash. Restricted cash includes $414.6 million relating to deposits in ITCL and $223.6 million in Frontline Shipping Limited and Frontline Shipping II Limited which are restricted under the charter agreements with Ship Finance.
As of May 2008, the Company has average total cash cost breakeven rates on a TCE basis for VLCCs and Suezmaxes of approximately $31,500 and $23,500, respectively.
Fleet development
In line with our strategy to reduce exposure to single hull tonnage, Frontline has in the first quarter of 2008 agreed with Ship Finance to terminate the long term charter party between the companies for the single hull VLCC Front Sabang and Ship Finance has simultaneously leased the vessel to an unrelated party. Frontline has received a compensation payment of approximately $24.6 million in the second quarter of 2008 for the early termination of the charter party, which will be recognized in the second quarter of 2008
The single hull Suezmax Front Maple was sold in January 2008 by Ship Finance and the charter with Frontline terminated. Frontline has recognized a gain in the first quarter of approximately $17.1 million related to the termination of the lease.
The vessels Front Granite and Front Marble were delivered to Dockwise Ltd. for conversion for their account in February and March 2008, respectively. The third heavy lift vessel, Front Comor, converted by COSCO was redelivered to Dockwise Ltd. in May 2008.
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