Dr Blunt
4 years ago
$FRO Results of Operation
Time charter revenues increased by $116.4 million in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 primarily due to the income recognized from the five vessels chartered out to Trafigura after the closing of the Acquisition and the net delivery of four vessels to time charters with increased rates.
Voyage charter revenues increased by $317.7 million in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 primarily due to the increase in market freight rates, as well as the delivery of five vessels acquired from Trafigura and two new buildings onto voyage charters. These factors were partially offset by the net increase in vessels trading under time charters and the termination of the lease on one vessel chartered-in from SFL.
The finance lease interest income relates to the investment in a finance lease for one VLCC, which has decreased as the underlying lease receivable was fully amortized.
Other income primarily comprises the income earned from the commercial management of related party and third party vessels and newbuilding supervision fees derived from related parties. The decrease in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 was due to a decrease in newbuilding supervision fees earned.
Voyage expenses and commissions decreased by $2.8 million in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 primarily due to the delivery of vessels onto time charters, the termination of the lease for one VLCC chartered-in from SFL and a decrease in bunker costs due to reduced prices. This was partially offset by an increase in expenses due to the charter-in and subsequent acquisition of 10 Suezmax tankers from Trafigura, the delivery of four newbuildings between January 2019 and September 2020, and an increase in commissions due to increased market rates.
Dr Blunt
4 years ago
$FRO Crew & COVID-19 Update
Frontline has maintained specific guidelines for its ship managers in addition to a robust emergency management plan adopted in early January in response to the COVID-19 pandemic in order to ensure the health and safety of our employees while maintaining business operations as efficiently as possible. All crewing managers continue to follow the guidance issued by the World Health Organization and the International Chamber of Shipping to ensure that the proper protocols are in place on board our vessels. Our technical department has set up a task force and is hosting regular meetings with all crewing managers across all business segments to discuss and handle any issues, in particular challenges facing our crew and safe operations, as they arise. To date, concerns have primarily related to crew transfers and preventing COVID-19 infections onboard, which would affect our ability to operate effectively.
After global lockdowns prevented crew transfers in the second quarter of 2020, our focus has been to support crewing managers to safely relieve overdue crew. A reduction in the availability of commercial flights and local restrictions in many ports, along with our internal quarantine requirements, have increased costs related to crew change in the third quarter of 2020. Approximately 720 seafarers will be repatriated in the fourth quarter of 2020 at an estimated cost of $1.5 million.
ESG Update
Efficient, safe and transparent operations have been Frontline core values for years. At Frontline, an Environmental, Social and Governance ("ESG") Strategy means to structure our communication on how our core values are embedded in our day-to-day operations, through the lens of capturing ESG relevant markers. As a significant force in the shipping industry, directly and indirectly through our business model, we have great influence on the standards we expect to be met.
Frontline's ESG report, which can be found on the Company’s website, has been prepared to provide investors and stakeholders easy, transparent access to our ESG reporting. Our ESG report has been prepared in accordance with the Marine Transportation framework established by the Sustainability Accounting Standards Board ("SASB"). The SASB standard allows us to identify, manage and report on material ESG topics with industry specific performance metrics.
Dr Blunt
4 years ago
$FRO Tanker Market Update
Global crude oil supply has decreased by 9.0 million barrels per day in the third quarter of 2020 compared with the third quarter of 2019, according to the U.S. Energy Information Administration (the "EIA"). Oil supply continues to be constrained under the OPEC+ agreement, but Libya has introduced a significant amount of export volumes after the Joint Military Committee ceasefire agreement in October this year. The EIA forecasts that global consumption of petroleum and liquid fuels will average 92.9 million barrels per day (“mb/d”) for all of 2020, down by 8.6 mbd from 2019, before increasing by 5.9 mb/d in 2021. This will not make up for the demand lost this year, but it speaks to a continued belief in the recovery of demand.
At the end of the third quarter of 2020, the year-over-year growth of the overall tanker fleet was 3.7%, which is detrimental for the near-term tanker market. Floating storage, both of crude and refined products, kept vessel utilization relatively high into the third quarter of 2020, but as global oil demand began to recover, oil stored on tankers was gradually released, returning vessels to the market and further increasing effective fleet supply.
In the meantime, the global tanker fleet continues to age. In 2020, 5.5% of the VLCC fleet and 7.0% of the Suezmax and Aframax fleets are either above or passing their 20-year anniversary. Despite conditions that would typically lead to vessel recycling, very few vessels have been reported sold for recycling. This may be due to wide reaching interruptions in docking activity, special survey exemptions and the deferral of the costs associated with both.
Dr Blunt
4 years ago
Tanker Recovery Still A Prospect
$FRO related news:
January 7, 2021 09:36 AM ET (BZ Newswire) -- News
"It feels a bit like someone stole our clothes while we were enjoying a swim," mused the analyst team at Fearnleys. They were quoting a political saying and referring to what just went down in the tanker market.
For very large crude carriers (VLCCs, tankers that carry 2 million barrels of crude), 2021 started out "with hope in the air." Crude-tanker stocks including Euronav (NYSE:EURN) and Frontline (NYSE:FRO) rose on the first few trading days of the year. "Tanker stocks certainly caught a bid," said Jefferies analyst Randy Giveans of the earlier tanker stock gains.
Then Saudi Arabia announced Tuesday that it would unilaterally cut crude production by 1 million barrels per day (b/d) in February and March.
Positive sentiment after New Year Asked about drivers of positive investor sentiment, Evercore ISI analyst Jon Chappell told American Shipper that there "seems to be a fair amount of optimism on oil demand recovering post the rollout of the vaccine. Throw in a historically depressed orderbook and stocks trading at large discounts to NAV [net asset value] and it doesn't take much of a sentiment shift to move the need off the bottom."
Then came the OPEC+ coalition meeting. Tanker proponents pinned hopes on a Russia/Kazakhstan proposal to increase collective output by 500,000 b/d.
Instead, Saudi made its surprise cut. Russia's and Kazakhstan's February-March output were increased by 65,000 b/d and 10,000 b/d, respectively. Gains will reportedly be used to cover increased wintertime domestic needs, not tanker exports.
The latest OPEC move followed the decision to relax production quotas by 500,000 b/d in January. That's well below the 2 million b/d relaxation being hoped for by tanker players.
Saudi decision near-term negative The Saudi cuts are "likely to reduce demand for VLCCs, putting freight rates under further pressure," said Platts.
Citing data from Vortexa, Platts noted that VLCCs carried over 82% of Saudi Arabia's exports. It estimated that Tuesday's cuts would equate to around 12 fewer VLCC loads per month in February and March. That would "negate any impacts of the relaxation of OPEC production constraints from January."
Chappell warned in a new client note, "Fewer Middle East exports will pile on to a market already under pressure from inventory destocking, shaky demand and elevated overcapacity, threatening to keep spot rates for most crude-tanker sectors well below cash breakeven for the remainder of the first quarter."
He added, "Spot rates today, in the dead of the Northern Hemisphere winter, are as soft as at any time over the last several decades."
According to Clarksons Platou Securities, VLCC rates are currently at $16,600 per day, down 17% month-on-month. At this time last year, they were $95,300 per day; at this time in 2019, $38,500 per day.
Rates for Suezmaxes (tankers that carry 1 million barrels of crude) are now $5,300 per day, down 24% month-on-month. A year ago, they were $66,900 per day; two years ago, $33,000 per day.
Saudi decision could heal market faster Giveans said that Saudi Arabia's decision reflects that nation's "should help rapidly reduce floating crude inventories."
According to Chappell, "The Saudi decision is likely to prevent a more punitive inventory build through a softer demand patch, enabling draws to continue and thus placing the oil and tanker markets in a position where a stronger rebound can unfold as soon as global oil demand finds its footing, which will hopefully be associated with a more robust vaccine rollout."
"A quicker inventory drawdown associated with this move will only help tanker markets to eventually embark on a more sustainable cyclical recovery," said Chappell.
Recovery timing "My expectations are that the tanker market remains weak for the next three to six months as inventory levels continue to be destocked and demand slowly increases," Giveans told American Shipper.
"However, we expect a much stronger market in the second half and throughout 2022 as ton-mile demand accelerates and fleet supply growth remains muted through at least 2022."
Chappell sounds more bearish. He expects "the early stages" of a fundamental tanker recovery in the second half. "Not a great period by any means. But substantially better than the second half of 2020 and first half of 2021."
After the early recovery, he believes "2022 should start to look pretty good — but probably still not great."
Geopolitics is the wild card
In tanker markets, rate environments change overnight due to major geopolitical events. There is currently a very high level of tension in the Middle East. A limpet mine attached to the hull of the tanker Pola moored off Iraq's Basra Oil Terminal.
On Monday, Iranian military sezied the South Korean-flagged chemical tanker Hankuk Chemi. The Iranian military allegedly seized the ship due to environmental pollution. But the timing coincides with allegations that South Korea owes Iran for oil sales.
There is also concern over the risk of potential military action between Iran and the U.S. in the waning days in power for President Donald Trump. In the past, heightened military action led to higher tanker spot rates as importers rushed to obtain cargoes, fearing a blockage of the Strait of Hormuz. This time, the equation is somewhat different, given that there is already a large amount of floating storage available.
Middle East unrest scenarios
Asked what would happen to tanker markets if there were a conflict or increased threat, Chappell responded, "You can never ignore the psychological impact of Middle Eastern conflict on tanker markets. Even a pickup in rhetoric can have an impact on chartering activity and sentiment.
"A military conflict, though certainly unlikely, could have an outsized impact on tanker markets and equities. I do believe the spare capacity in the market today and the still-elevated floating storage could mute the panic. But at the outset, with little clarity on duration, there would still likely be a desire to secure supply — both of oil and tankers.
"I would expect any escalation or conflict to lead to an immediate boost to chartering and support to VLCC rates," he said.
The problem, Chappell continued, is that "if the rhetoric or event is short-lived, the market has to deal with the front-end loading of this chartering and additional storage. So, although that type of event could boost [tanker] stocks for a short period, it is not a desired outcome."
Asked the same question, Giveans responded, "Geopolitical turmoil and hostility, especially in the Middle East, usually disrupts the oil trade and causes chaos in the tanker markets. If there is a military conflict at the Strait of Hormuz, that would certainly be a short-term negative. But the positive would be that the currently elevated inventory levels would decrease rapidly. And longer-haul voyages — exports out of the U.S., Brazil, Norway and West Africa — would increase." Click for more reightWaves/American Shipper articles by Greg Miller
MORE ON TANKERS: Frontline's disappearing dividend speaks volumes on tanker fears: see story here. Tanker shipping at risk of rare winter hibernation: see story here. Why crude tanker collapse could be long and painful: see story here.
Copyright © 2021 Benzinga (BZ Newswire, http://www.benzinga.com/licensing). Benzinga does not provide investmentadvice. All rights reserved. Write to editorial@benzinga.com with any questions about this content. Subscribe to Benzinga Pro (http://pro.benzinga.com).
Dr Blunt
4 years ago
$FRO pricing
The Meeting welcomed the positive performance in overall conformity levels to the production adjustments since it last met in June, and the constructive response from many countries to the compensation mechanism in accommodating their underperformed volumes as agreed at the June ministerial meetings, and later amended in September 2020.
Looking ahead, the Meeting emphasized that it was vital that DoC participants, and all major producers, remain fully committed to efforts aimed at balancing and stabilizing the market. It noted that renewed lockdowns, due to more stringent COVID-19 containment measures, continue to impact the global economy and oil demand recovery, with prevailing uncertainties over the winter months.
In light of the current oil market fundamentals and the outlook for 2021, the Meeting agreed to reconfirm the existing commitment under the DoC decision from 12 April 2020, then amended in June and September 2020, to gradually return 2 mb/d, given consideration to market conditions.
Beginning in January 2021, DoC participating countries decided to voluntary adjust production by 0.5 mb/d from 7.7 mb/d to 7.2 mb/d.
Furthermore, DoC participating counties agreed to hold monthly OPEC and non-OPEC ministerial meetings starting January 2021 to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d.
The Meeting also agreed to extend the compensation period established from the 11th ONOMM, and later amended in September 2020, for the period of January until the end of March 2021, to ensure full compensation of over production from all DoC participating countries.
OPEC and non-OPEC participating countries appealed to Saudi Arabia’s Minister of Energy HRH Prince Abdul Aziz bin Salman to continue in his role as Chair of the OPEC and non-OPEC Ministerial Meeting. His perseverance, diligence and extraordinary efforts have been highly appreciated by all participating countries and instrumental in helping counter the impacts of the COVID-19 pandemic and in stabilizing the oil market through the successful implementation of DoC objectives.
HRH Prince Abdul Aziz bin Salman accepted the offer to continue in his role as Chairman of the Meeting and vowed to vigorously pursue the sustainable oil market stability desired by both producers and consumers.
The Meeting also expressed its deep appreciation and gratitude to HE Alexander Novak, Deputy Prime Minister of the Russian Federation, for his exemplary leadership as co-Chair of the ONOMM. The Meeting asked him to continue in this role and thanked him for his tireless efforts and strong support for the DoC during these extremely challenging times.
The Meeting also noted the four-year anniversary of the signing of the DoC on 10 December 2016 and commended participating countries for their continued commitment to principles underpinning the DoC.
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