Highlights
-
Frontline 2012 reports net income
of $37.9 million and earnings per share of $0.18 for the second
quarter of 2013.
-
Frontline 2012 reports net income
of $33.1 million and earnings per share of $0.16 for the six months
ended June 30, 2013.
-
Frontline 2012 received $94.0
million in April 2013 in connection with the cancellation of its
second newbuilding contract (J0026) at Jinhaiwan and recorded a
gain of $30.3 million.
-
Frontline 2012 cancels the third
and fourth of its five newbuilding contracts at Jinhaiwan
-
Frontline 2012 received $50.6
million in August 2013 in connection with the cancellation of its
third newbuilding contract (J0027) at Jinhaiwan and expects to
record a gain of approximately $27.0 million in the third
quarter.
-
Frontline 2012 entered into a
heads of agreement (HOA) with Stolt-Nielsen Limited whereby
Frontline 2012 will become a shareholder in Avance Gas Holding Ltd
(AGHL) along with Stolt-Nielsen Gas Ltd. and Sungas Holdings Ltd.
Introduction
Frontline 2012 Ltd. (the "Company"
or "Frontline 2012") is a commodity shipping company incorporated
in Bermuda on December 12, 2011, which as of today owns a total of
ten crude oil tankers and 61 newbuilding contracts within the crude
oil, product, liquefied petroleum gas and dry bulk markets.
The Company's sailing fleet is one
of the youngest in the industry and currently consists of six very
large crude carriers, or VLCCs, and four Suezmax tankers, with an
average age of 3.5 years operating in the spot and the period
markets.
The largest shareholder is Hemen
Holding Ltd. ("Hemen") with a shareholding of approximately 51
percent.
Second Quarter
and Six Months 2013 Results
Frontline 2012 announces net
income of $37.9 million and earnings per share of $0.18 for the
second quarter of 2013 compared with a net loss of $4.8 million and
a net loss per share of $0.02 in the preceding quarter. Frontline
2012 recorded a gain of $30.3 million in the second quarter
following the receipt of $94.0 million in April 2013 in connection
with the cancellation of its second newbuilding contract at
Jinhaiwan. The Company also recognized a gain of $8.5 million in
the second quarter on the mark-to-market revaluation of interest
rate swap agreements.
The average daily time charter
equivalents ("TCEs") earned in the spot and period market in the
second quarter by the Company's VLCCs and Suezmax tankers were
$21,500 and $13,800, respectively, compared with $19,600 and
$11,800, respectively, in the preceding quarter. The spot earnings
for the Company's VLCC and Suezmax tankers were $17,900 and
$13,800, respectively, compared with $14,900 and $11,800,
respectively, in the preceding quarter.
Frontline 2012 announces net
income of $33.1 million and earnings per share of $0.16 for the six
months ended June 30, 2013 compared with net income of $8.4 million
and net income per share of $0.08 in the six months ended June 30,
2012. Frontline 2012 recorded a gain of $30.3 million in the six
months ended June 30, 2013 following the receipt of $94.0 million
in April in connection with the cancellation of its second
newbuilding contract at Jinhaiwan. The Company also recognized a
gain of $7.7 million in the six months ended June 30, 2013 on the
mark-to-market revaluation of certain swap agreements.
The average daily time charter
equivalents ("TCEs") earned in the spot and period market in the
six months ended June 30, 2013 by the Company's VLCCs and Suezmax
tankers were $20,600 and $12,800, respectively, compared with
$30,300 and $19,400, respectively, in the six months ended June 30,
2012. The spot earnings for the Company's VLCC and Suezmax tankers
were $16,400 and $12,800, respectively, compared with $31,400 and
$19,400, respectively, in the six months ended June 30, 2012.
The Company estimates average cash
breakeven TCE rates for the remainder of 2013 for its VLCCs and
Suezmax tankers of approximately $14,600 and $13,500,
respectively.
Newbuilding
Program
In April 2013, the Company
received $94.0 million in refund in connection with the
cancellation of its second newbuilding contract (J0026) at
Jinhaiwan.
In April 2013, the Company
cancelled the third of its five VLCC newbuilding contracts (hull
J0027) at Jinhaiwan due to the excessive delay compared to the
contractual delivery date and demanded payment from Jinhaiwan and
the refund guarantee bank in respect of installments paid and
accrued interest. This amount includes installments paid by
Frontline Ltd. prior to the acquisition by the Company in December
2011, at which time the newbuilding contracts were valued at
estimated fair value. The yard initiated arbitration proceedings on
this matter. In July 2013, the arbitrator found in favor of the
Company and declared that the yard should repay the installments
paid together with interest. In August 2013, the Company received
$50.6 million in connection with the cancellation of J0027 at
Jinhaiwan and expects to record a gain of approximately $27.0
million in the third quarter.
In August 2013, the Company
cancelled the fourth of its five VLCC newbuilding contracts (hull
J0028) at Jinhaiwan due to the excessive delay compared to the
contractual delivery date and demanded payment from Jinhaiwan in
respect of installments paid and accrued interest. This amount
includes installments paid by Frontline Ltd. prior to the
acquisition by the Company in December 2011, at which time the
newbuilding contracts were valued at estimated fair value.
The Company has cancelled four of
the five newbuilding contracts at Jinhaiwan ship yard and has
received a total refund of $144.6 million, where $44.9 million has
been used to repay debt and $ 99.7 million is cash to the Company.
Total claims, where refund is not received is $146.9 million,
where $44.9 million is allocated to repay debt and $102.0 million
is cash to the Company.
As of June 30, 2013, the Company's newbuilding program totaled 60
vessels and comprised 22 newbuildings within the crude oil and
petroleum product markets, 28 Capesize vessels, eight very large
gas carriers or VLGCs and two VLCCs. Total installments of $381.3
million have been paid and the remaining installments to be paid
amount to $2,478.5 million.
Since June 30, 2013 the Company has negotiated and concluded two
newbuilding contracts and cancelled one VLCC (i.e. J0028). The
Company's newbuilding program currently comprises 61 newbuildings.
The total capital commitment is approximately $2,854 million of
which approximately $2.5 billion is still to be paid.
The first MR tanker Front Arrow is
expected to be delivered in the third quarter of 2013. This vessel
has been fixed on a short term time charter for 60-90 days at just
excess of USD 20,000 net per day basis delivery ex shipyard and the
company aim to employ the balance on the vessels on similar
charters. There will be approximately two months delay in delivery
of the vessels from the original delivery schedule.
Frontline 2012 has eight
newbuilding contracts with STX (Dalian) Shipbuilding Co., Ltd. and
further six newbuildings with STX Offshore & Shipbuilding
(Korea). STX Korea has subsequently subcontracted these vessels to
STX Dalian. STX Dalian has encountered financial difficulties, and
the progress in the construction is slow. The Company is following
the situation closely and will make every effort to ensure that STX
deliver the new buildings, which they are contractually committed
to. There are however a risk that these newbuildings not will be
delivered according to the contracts and that Frontline 2012 will
need to take legal measures to be compensated for any loss caused
by non or late delivery.
Corporate
In July 2013, a subsidiary of the
Company entered into a $136.5 million term loan facility non
recourse to the Company at attractive terms. The facility will be
used to partially fund six MR newbuilding vessels to be delivered
from STX Offshore & Shipbuilding Co., Ltd., Korea.
215,000,000 ordinary shares were
outstanding as of June 30, 2013, and the weighted average number of
shares outstanding for the quarter was 215,000,000.
In August 2013, Frontline 2012
entered into a heads of agreement ("HOA") with Stolt-Nielsen
Limited whereby Frontline 2012 will become a shareholder in Avance
Gas Holding Ltd ("AGHL") along with Stolt-Nielsen Gas Ltd. and
Sungas Holdings Ltd.
As part of the HOA, Frontline 2012
and AGHL will enter into discussions regarding the purchase of
eight 83,000 cbm VLGC newbuildings from Frontline 2012. The ships
have been ordered by Frontline 2012 from the Jiangnan Changxing
Shipyard in China, with deliveries expected to take place between
mid 2014 and end 2015.
Frontline 2012 will initially
purchase 37.5% of the shares in AGHL and subsequently dividend
shares to Frontline 2012's shareholders. Frontline 2012 will
following this directly own 25% of AGHL.
It is the partners' decision to
immediately register AGHL on the OTC market in Norway.
The
Market
Crude
The market rate for a VLCC trading
on a standard "TD3" voyage between the Arabian Gulf and Japan in
the second quarter of 2013 was WS 37, representing an increase of
WS 2 points from the first quarter of 2013 and a decrease of
approximately WS 18 points from the second quarter of 2012. The
flat rate increased by 9.1 percent from 2012 to 2013.
The market rate for a Suezmax
trading on a standard "TD5" voyage between West Africa and
Philadelphia in the second quarter of 2013 was WS 54, representing
a decrease of WS 3.5 points from the first quarter of 2013 and a
decrease of WS 18 points from the second quarter of 2012. The flat
rate increased by 9.3 percent from 2012 to 2013.
Bunkers at Fujairah averaged
$614/mt in the second quarter of 2013 compared to $633/mt in the
first quarter of 2013. Bunker prices varied between a high of
$640/mt on April 2nd and a low of $597/mt on June 28th.
The International Energy Agency's
("IEA") August 2013 report stated an OPEC oil production, including
Iraq, of 30.8 million barrels per day (mb/d) in the second quarter
of 2013. This was an increase of 0.4 mb/d compared to the first
quarter of 2013.
The IEA estimates that world oil
demand averaged 90.4 mb/d in the second quarter of 2013, which is
an increase of 0.5 mb/d compared to the previous quarter. IEA
estimates that world oil demand in 2013 will be 90.8 mb/d,
representing an increase of 1.0 percent or 0.9 mb/d from 2012.
The VLCC fleet totaled 639 vessels
at the end of the second quarter of 2013, up from 634 vessels at
the end of the previous quarter. 10 VLCCs were delivered during the
quarter, five were removed. The order book counted 57 vessels at
the end of the second quarter, down 10 from the previous quarter.
The current order book represents nine percent of the VLCC fleet.
According to Fearnleys, the single hull fleet is 15 vessels, two
less than last quarter.
The Suezmax fleet totaled 448
vessels at the end of the second quarter, up from 442 vessels at
the end of the previous quarter. Six vessels were delivered during
the second quarter whilst none were removed. The order book counted
39 vessels at the end of the second quarter which represents
approximately eight percent of the Suezmax fleet. According to
Fearnley's, the single hull fleet stands unchanged at five
vessels.
Product
The market rate for an MR trading
on Standard "TC2" voyage between Rotterdam and New York in the
second quarter of 2013 was WS 137, representing a decrease of WS23
from the first quarter of 2013 and an increase of WS5 from the
second quarter of 2012. The flat rate increased by 9% from 2012 to
2013.
Bunkers in Rotterdam averaged
$585/mt in the second quarter of 2013 compared to $618/mt in the
first quarter of 2013. Bunker prices varied between a high of
$615/mt on April 2nd and a low of $578/mt on June 28th.
The MR fleet totaled 1,491 vessels
at the end of the second quarter of 2013, down from 1,493 vessels
at the end of the previous quarter. The order book counted 143
vessels at the end of the first quarter, which represents
approximately ten percent of the MR fleet.
The LR2 fleet totaled 212 vessels
at the end of the first quarter of 2013, unchanged from the
previous quarter. The order book counted 11 vessels at the end of
the first quarter, which represents approximately 5.2 percent of
the LR2 fleet.
LPG
According to Fearnley's the
monthly average VLGC time charter hire was $990,000 in the second
quarter of 2013 compared to $375,000 in the first
quarter.
The VLGC fleet (60,000+ Cbm) totaled 153 vessels at the end of the
second quarter of 2013, an increase of five vessels from the
previous quarter. The order book counted 23 vessels at the end of
the second quarter, unchanged from the previous quarter,
representing 15 percent of the VLGC fleet according to
Platou.
Drybulk
According to the Baltic Exchange
the average Capesize spot earnings in the second quarter of 2013
was $6,214/day compared to $6,056/day in the first quarter.
According to Chinese official data
iron ore imports to China increased from 186 million tons in the
first quarter to 200 million tons in the second quarter of 2013.
The coal imports increased from 65 million tons to 69 million tons
in the same period.
According to Fearnley's the
Capesize fleet (150-200'dwt) totaled 1,034 vessels at the end of
the second quarter of 2013, an increase of six vessels from the
previous quarter. The revised order book counted 71 vessels at the
end of the second quarter, compared with 100 vessels the previous
quarter, representing 6.9 percent of the Capesize fleet.
Strategy and
Outlook
Frontline 2012 operates a fleet
consisting of six VLCCs and four Suezmax tankers and owns 61
newbuilding contracts. Due to this fleet composition, the Company
has limited exposure to the current weak freight market. The major
part of the fleet will be delivered in 2014 and 2015, when it is
expected that freight market will have strengthened somewhat and
thereby creating better operating economics.
The value of the Company's
newbuilding program increased in the second quarter of 2013 and the
positive development has continued in the third quarter. This is in
line with the Company's expectation that newbuilding prices are
likely to firm up before the freight market. The Board believes
there is currently additional value in the newbuildings compared to
contract price.
The Board is confident that the
historically low contracting cost and the significant fuel
efficiency of the new tonnage materially reduces the risk of the
Company's extensive ordering and will position Frontline 2012
favorably to industry competitors and offer shareholders an
attractive future reward. In view of the perceived limited downside
risk in asset prices, the Board will seek to optimize the Company's
debt to equity level with the target to increase the equity return
going forward.
The acquisition of shares in AGHL
enables Frontline 2012 to expand its investment in the LPG segment
where the Company today has eight 83,000 cbm VLGC newbuildings
expected to be delivered between mid 2014 and end 2015. The Company
will get immediate market exposure to what today is a healthy
freight market. With AGHL's six existing modern VLGCs, a solid
operation, and strong owners AGHL is well positioned to grow and
act as a major consolidator in the large LPG market.
There are also signs of positive
development in the cape size segment where the Company has 30
newbuildings, including eight vessels from STX Dalian, to be
delivered in 2014 and 2015. This trend is mainly driven by
increased supply of cheap iron ore from Brazil and Australia giving
a positive ton mile effect.
As the Company develops and the
ships come into operation, the Board targets a dividend strategy.
The Board is also exploring alternatives to streamline the
activities by breaking the company up in several new companies.
This can include a dry bulk company, an LPG company and a
crude/product company. One of the current ideas is to establish a
low levered, high yielding dry bulk vehicle. The low ordering
prices create a unique opportunity for such a vehicle. The Company
will actively seek consolidation, as represented by the AGHL
transaction.
The Company will selectively
consider further ordering with a strong focus on early delivery
time.
The Board is currently considering
to raise another US$ 200 - 250 mill to partly finance the AGHL
acquisition and secure capital for growth. Priority will in such
case be given to existing shareholders. A final decision regarding
this will be taken shortly.
The Board is pleased with the
execution of the Company's strategic plan, and looks optimistically
on the opportunity to create solid return to our shareholders over
the next three to five years.
Forward Looking
Statements
This press release contains
forward looking statements. These statements are based upon various
assumptions, many of which are based, in turn, upon further
assumptions, including Frontline Ltd's management's examination of
historical operating trends. Although Frontline Ltd believes that
these assumptions were reasonable when made, because assumptions
are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are
beyond its control, Frontline 2012 cannot give assurance that it
will achieve or accomplish these expectations, beliefs or
intentions.
Important factors that, in the
Company's view, could cause actual results to differ materially
from those discussed in this press release include the strength of
world economies and currencies, general market conditions including
fluctuations in charter hire rates and vessel values, changes in
demand in the tanker market as a result of changes in OPEC's
petroleum production levels and world wide oil consumption and
storage, changes in the Company's operating expenses including
bunker prices, dry-docking and insurance costs, 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,
and other important factors described from time to time in the
reports filed by the Company with the United States Securities and
Exchange Commission.
The full report is available for
download in the link enclosed.
The Board of Directors
Frontline 2012 Ltd.
Hamilton, Bermuda
September 3, 2013
Questions should be directed
to:
Jens Martin Jensen: Chief
Executive Officer, Frontline Management AS, +47 23 11 40 99
Inger M. Klemp: Chief Financial
Officer, Frontline Management AS, +47 23 11 40 76
2nd Quarter 2013 Results
This
announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Frontline 2012 Ltd. via Thomson Reuters ONE
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