Frontline(FRO) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Frontline achieved total operating revenues of $107 million in Q1 2021, with an adjusted EBITDA of $59 million and a net income of $28.9 million or $0.15 per share [6][7] - Adjusted net income increased by $21 million compared to the previous quarter, driven by a decrease in ship operating expenses of $11 million and an increase in time charter equivalent earnings of $6.8 million [7][8] - Cash and cash equivalents stood at $380 million as of March 31, 2021, reflecting an increase of $10 million in the first quarter [8] Business Line Data and Key Metrics Changes - The VLCC fleet generated $19,000 per day, Suezmax fleet $15,200 per day, and LR2/Aframax fleet $12,000 per day in Q1 2021 [4] - For Q1, 70% of VLCC days were booked at $18,100 per day, 63% of Suezmax days at $13,600 per day, and 59% of LR2/Aframax days at $14,200 per day [4] Market Data and Key Metrics Changes - Total oil consumption rose by 4.3 million barrels from January to March, reaching 96.5 million barrels per day, while supply fell by 0.5 million barrels [11] - The overall tanker order book shrunk by approximately 4% year-to-date, with VLCC orders standing at around 9% of the existing fleet [13] Company Strategy and Development Direction - The company maintains a strategy focused on being mostly spot exposed and does not expect an imminent recovery in the market [4] - Frontline confirmed the acquisition of six high-spec ECO scrubber-fitted VLCCs to be delivered from Hyundai Heavy Industries, indicating a commitment to modernizing the fleet [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the tanker market, citing a firm recovery in key macro indicators and a projected global GDP increase of 6% in 2021 [17] - The company is well-positioned to capitalize on the anticipated recovery in tanker markets with its modern, fuel-efficient fleet [17] Other Important Information - The company recorded operating expenses of $7,300 per day for VLCCs, $7,100 for Suezmax tankers, and $7,200 for LR2 tankers [9] - Drydocking costs are expected to increase in the second quarter, with plans to drydock two Suezmax and four LR2 tankers [9] Q&A Session Summary Question: Outlook on asset acquisition and market conditions - Management indicated that while they are always aggressive in seeking opportunities, the right conditions must align for asset acquisition [20][21] Question: Financing strategy for new builds - Management clarified that they have flexibility regarding debt financing and will assess opportunities for equity raises based on market conditions [23][24] Question: Product tanker market outlook - Management noted that the product market is in a recovery phase but requires a return of jet demand to see significant rate improvements [28][29] Question: Operating expenses and future run rates - Management provided insights on expected increases in operating expenses due to drydocking and indicated that G&A expenses would likely be around $8.3 to $8.5 million going forward [31][34] Question: Scrapping of older ships - Management reported that eight VLCCs and three Suezmaxes have been sold for scrap year-to-date, with expectations for increased scrapping activity due to rising recycling prices [39] Question: Drydocking schedule - Management confirmed that no drydockings are planned for the fourth quarter, focusing on the second and third quarters instead [43]