Frontline boasts $200 million Q2 profit, lands major financing deals

Tanker shipping company Frontline booked a net income of $365 million for the first half of 2020, the strongest first half in more than 10 years, cashing in on strong quarterly earnings.

For the second quarter, the Norwegian shipowner reported a net income of $199.7 million amid higher charter rates than in the previous three months.

Front Prince; Image Courtesy: Kees Torn/Flickr

The increase in the company’s time charter equivalent earnings in Q2 stood at $296.3 million compared to $279.4 million in the first quarter of 2020, due to higher rates achieved by VLCCs and LR2 tankers, along with a gain of $12.4 million as a result of the sale of one VLCC.

High demand for floating storage resulted in exceptionally strong tanker rates, which have receded in the third quarter.

“While tanker rates have seemingly found support at a lower level in the third quarter, we expect oil demand and demand for transportation to recover gradually. We have good visibility in our third-quarter results based on our contracted spot days as well as our charter coverage. We also expect our results to be positively impacted by the modern profile of our fleet and breakeven costs that are very competitive,” Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented.

“Looking ahead to 2021 and beyond, recovering demand for crude oil transportation will coincide with rapidly declining fleet growth, which supports our long term highly constructive market outlook.”

The company has been working hard on securing financing and in July the shipowner inked a senior secured term loan facility worth $328.6 million to refinance an existing loan facility maturing in December 2020.

Frontline also obtained financing commitment for a senior secured term loan facility in August 2020 worth $133.7 million to partially finance the four LR2 tankers under construction, which is subject to final documentation.

Two LR2s are expected to be delivered in January 2021 and February 2021, respectively, and two are expected to be delivered in August 2021.

“We expect to refinance further two term loan facilities with total balloon payments of $320.3 million due in April 2021 and in June 2021 prior to maturity, leaving the company with no material maturities until 2023,” Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added.

“Our strong cash flow in the second quarter enabled us to both repay $60 million of our $275.0 million senior unsecured facility, reducing the amount outstanding to $60 million, and to return nearly $99 million to our shareholders in cash dividends.”

As of June 30, 2020, the company’s fleet consisted of 71 vessels, with an aggregate capacity of approximately 13.4 million DWT.

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