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2014-05-27

Frontline Ltd.: FRO - First Quarter 2014 Results

HIGHLIGHTS

* Frontline reports a net loss attributable to the Company of $12.1 million
for the first quarter of 2014, equivalent to a loss per share of $0.13.
* Frontline reports net income attributable to the Company of $3.6 million
for the first quarter of 2014 when excluding loss on the sale of vessels,
equivalent to earnings per share of $0.04.
* Frontline will not pay a dividend for the first quarter of 2014.
* Frontline issued 8,829,063 new shares in the first quarter further to the
ATM offering launched in June 2013 and further 1,635,589 new shares in
April 2014.
* In April 2014, Frontline agreed with Rongsheng shipyard to swap its two
Suezmax newbuildings on order with two similar Suezmax vessels from the
same shipyard, at a lower contract price.

FIRST QUARTER 2014 RESULTS

The Board of Frontline Ltd. (the "Company" or "Frontline") announces a net
loss attributable to the Company of $12.1 million in the first quarter,
equivalent to a loss per share of $0.13, compared with a net loss of $13.0
million in the preceding quarter, equivalent to a loss per share of $0.15.
The net loss attributable to the Company in the first quarter includes a loss
on the sale of the VLCC Ulysses of $15.7 million. The net loss attributable
to the Company in the fourth quarter includes a net gain of $13.8 million,
which was recognized on the lease terminations of the VLCCs Front Champion
and Golden Victory and a loss of $12.7 million, which was recognized on the
conversion of $25.0 million of the Company's convertible bonds into cash and
shares.

The average daily time charter equivalents ("TCEs") earned in the spot and
period market in the first quarter by the Company's VLCCs and Suezmax tankers
were $32,700 and $27,700, respectively, compared with $22,400 and $12,900,
respectively, in the preceding quarter. The spot earnings for the Company's
double hull VLCCs and Suezmax vessels were $32,500 and $27,700, respectively,
compared with $21,600 and $12,900, respectively, in the preceding quarter.

Contingent rental expense of $13.0 million in the first quarter comprises
$11.7 million relating to the amended charter parties for the vessels leased
from Ship Finance International Limited and $1.3 million relating to the
amended charter parties for four vessels leased from German KGs vessels.
Contingent rental expense of $1.7 million in the fourth quarter relates to
the amended charter parties for four KG vessels.

Ship operating expenses decreased by $0.2 million. Dry docking costs decreased
by $0.6 million and this was partially offset by an increase in running
expenses.

Interest expense, net of capitalized interest, was $21.6 million in the first
quarter of which $5.9 million relates to the Company's subsidiary Independent
Tankers Corporation Limited ("ITCL").

As of March 31, 2014, the Company had total cash and cash equivalents of
$111.2 million and restricted cash of $74.9 million. Restricted cash includes
$74.1 million relating to deposits in ITCL.

The Company estimates average total cash cost breakeven rates for the
remainder of 2014 on a TCE basis for VLCCs and Suezmax tankers of
approximately $25,200 and $17,800, respectively.

FLEET DEVELOPMENT

In March 2014, a wholly-owned subsidiary of ITCL entered into an agreement to
sell the VLCC Ulysses to an unrelated third party for net sale proceeds of
$25.5 million and the vessel was delivered to the buyer on March 11, 2014.

NEWBUILDING PROGRAM

As of March 31, 2014 the Company had two Suezmax newbuilding contracts and was
committed to making newbuilding installments of $87.9 million with expected
payment in 2014.

In April 2014, the Company agreed with Rongsheng shipyard to swap its two
Suezmax newbuildings on order with two similar Suezmax vessels from the same
shipyard at a lower contract price. Installments paid to date will be
allocated to the new vessels. The first vessel was delivered on May 19, 2014
following the payment of the final installment of $41.5 million and the
second vessel is expected to be delivered in September 2014. The Company is
committed to making payments of $41.5 million as of the date of this press
release with expected payment in September 2014.

CORPORATE

The Company issued 8,829,063 new ordinary shares under the ATM program during
the first quarter. 95,340,776 ordinary shares were outstanding as of March
31, 2014, and the weighted average number of shares outstanding for the
quarter was 93,841,670.

The Company issued 1,635,589 new shares under the ATM program during April
2014. 96,976,365 ordinary shares were outstanding as of the date of this
press release.

THE MARKET

The market rate for a VLCC trading on a standard 'TD3' voyage between the
Arabian Gulf and Japan in the first quarter of 2014 was WS 51, representing a
decrease of WS 2 point from the fourth quarter of 2013 and WS16 above the
first quarter of 2013. The flat rate decreased by 6.7 percent from 2013 to
2014.

The market rate for a Suezmax trading on a standard 'TD5' voyage between West
Africa and Philadelphia in the first quarter of 2014 was WS 79, representing
an increase of WS 13 points from the fourth quarter of 2013 and an increase
of WS 21 points from the first quarter of 2013. The flat rate decreased by 6
percent from 2013 to 2014.

Bunkers at Fujairah averaged $611/mt in the first quarter of 2014 compared to
$615/mt in the fourth quarter of 2013. Bunker prices varied between a high of
$627/mt on January 15th and a low of $599/mt on March 12th.

The International Energy Agency's ("IEA") May 2014 report stated an OPEC crude
production of 30.0 million barrels per day (mb/d) in the first quarter of
2014. This was an increase of 0.2 mb/d compared to the fourth quarter of
2013.

The IEA estimates that world oil demand averaged 91.3 mb/d in the first
quarter of 2014, which is a decrease of 1.1 mb/d compared to the previous
quarter. IEA estimates that world oil demand in 2014 will be 92.8 mb/d,
representing an increase of 1.5 percent or 1.4 mb/d from 2013.

The VLCC fleet totalled 627 vessels at the end of the first quarter of 2014,
four vessels up from the previous quarter. Five VLCCs were delivered during
the quarter, one was removed. The order book increased by 12 vessels and
counted 94 vessels at the end of the first quarter, which represents 15
percent of the VLCC fleet.

The Suezmax fleet totalled 449 vessels at the end of the first quarter, up
three from 446 vessels at the end of the previous quarter. Three vessels were
delivered during the quarter whilst none were removed. The order book counted
40 vessels at the end of the first quarter, which represents approximately
nine percent of the Suezmax fleet.

STRATEGY AND OUTLOOK
As of March 31, 2014, the Company had total debt and lease obligations,
excluding non-recourse debt in ITCL, of $1,044 million comprised of $718
million in capital lease obligations to Ship Finance, $76 million in notes
payable to Ship Finance, $60 million in capital lease obligations to German
KGs and $190 million in convertible bond loan. A full repayment of this debt
is, to a large extent, dependent on a sustained improvement in tanker rates
going forward.
In the event that cash flow from operations does not enable Frontline to
satisfy short term or medium to long term liquidity requirements, Frontline
will have to consider alternatives, such as raising equity or selling assets,
establish new loans or refinance existing arrangements. If no additional
equity can be raised, assets sold, new loans established or existing
arrangements refinanced, there is a risk that Frontline will not have
sufficient cash to repay the existing $190 million convertible bond loan at
maturity in April 2015. Such a situation might force a restructuring of the
Company, including modifications of charter lease obligations and debt
agreements.

The Company is also committed to make newbuilding installments of $41.5
million as of the date of this press release with expected payment in
September 2014 relating to one newbuilding after having taken delivery of one
newbuilding May 19, 2014, which was financed by $41.5 million cash on hand.
The Company expects to partly finance these payments with bank debt that it
intends to arrange.
The balance sheet has been strengthened after March 31, 2014 from the raising
of $6.3 million in new equity in April 2014. The Board is actively monitoring
the situation and looking into opportunities to restructure the balance sheet
and further improve the Company's financial position.
The recent negative development in the tanker market is likely to give a
weaker operating result (excluding one time gains and losses) in the second
quarter.
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 management's examination of
historical operating trends. Although Frontline 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 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 Board of Directors
Frontline Ltd.
Hamilton, Bermuda
May 26, 2014

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

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
1st Quarter 2014 Results
http://hugin.info/182/R/1788644/614568.pdf

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