307659.pdf (application/pdf Object).
Frontline Ltd. FRO has released their first quarter results and it was another tough quarter for the world’s largest tanker company. The company did stay profitable, earning 98¢ a share in Q1. They declared a 25¢ dividend, the same payout as the 4th quarter of 2008. For the same quarter of 2008, FRO earned $2.95 a share and paid a $2.75 distribution.
In the quarter they earned a average of $50,300 per day on the VLCCs, $37,900 on Suezmax vessels and $44,200 on OBOs (oil/bulk/oil). For comparison, in the conference call management gave these numbers.
The big news was on the fleet front. So far this year Frontline has taken possession of 2 new VLCC tankers. They have also cancelled their orders for 2 more VLCCs and 4 Suezmax tankers. Remaining newbuilds on order are 6 VLCC and 4 Suezmax. In comparison, the company currently has 7 single hull VLCC and one single hull Suez that must leave service in 2010. The new build orders will not all be completed until 2012. The balance due for the ships on order is approximately $700 million, to be paid over the next 4 years.
With the current forward visibility of the revenues currently chartered, Frontline should be able to meet their financial obligations and stay marginally profitable. Spot rates in the tanker sector are currently very low and falling global oil demand does not point to a rate rebound in the forseeable future. They majority of the analysts who follow FRO are calling for target prices below $20.
Remember, when tanker rates are high Frontline can pay huge dividends. They paid over $12 per share in 2004 and over $6 every year since. I will close with this quote from today on the Ton Mile Trader:
Tanker types should note what is going on in the dry bulk sector. The upturn could be nothing more than a short lived phenomenon – but, dry bulk was considered dead and buried only months ago…and yet, it has risen once again from the deep dark bilges.
One Comment
I’m in agreement Tim, my belief is we’ve likely completed the bilge tour. FRO management once again has demonstrated a capacity for navigating treacherous waters by making some prudent decisions, I will be looking for my reentry point based upon this coming week’s performance following last week’s anticipated action.