FRO preliminary 4th quarter and year end results.
It appears that the 1st quarter of 2009 will be even tougher on tanker giant Frontline, Ltd. FRO than the difficult 4th quarter of 2008. Frontline has released their 4th quarter and year end results and the numbers were pretty ugly for Q4. The net income and dividend declared are about half of the Q3 numbers and just a fraction of what FRO was earning in the 1st half of 2008. Shareholders will have received just 75ยข for quarters 3 and 4 compared to the $5.75 paid out in the 1st half of 2008.
At the current time FRO has a daily breakeven rate of $32,100 on VLCC’s and $25,200 on Suezmax tankers. In the 4th quarter the company earned an average of $54,100 and $41,900, respectively on these classes of tankers. My current data has the VLCC and Suezmax spot rates at about $42k and $31k per day. This is getting to be a pretty tight spread for FRO and with OPEC continuing to cut production, rates could easily fall further. One positive is that Frontline has about 40% of their fleet on longer term charters.
The earnings press release stated the company was upbeat about the first quarter of 2009. From what I see from the 4th quarter and charter rates into the 1st quarter, I do not see very much good news. For long term buyers of this stock I believe that there will be opportunities in the near future to pick up shares at a much lower price.
A final note: Ship Finance Ltd. SFL leases FRO about 30 of their tankers and has a lucrative profit sharing agreement with FRO. I personally own some SFL and think of it as a more conservative way to participate in Frontline’s revenues. Ship Finance also was hit hard yesterday on their earnings news and dividend cut. I will follow up on that story soon.
Flash Player 9 or higher is required to view the chart Click here to download Flash Player now
2 Comments
Tim, what are you thoughts on SFL? The stock has gotten crushed on heavy volume, yet from listening to the conference call, I am not sure why. The company is erring on the side of caution to reserve cash for possible accretive deals, yet it is being treating like a spot tanker company. The company has fairly stable and predictable cash flows, in my opinion.
Mark, good question. I plan to write something on SFL today. I was pretty pissed when they cut the dividend.