Frontline Ltd. (NYSE:FRO) Q2 2022 Earnings Conference Call August 25, 2022 9:00 AM ET

Company Participants

Lars Barstad - Chief Executive Officer

Inger Klemp - Chief Financial Officer

Conference Call Participants

Jonathan Chappell - Evercore ISI

Chris Tsung - Webber Research

Lars Barstad

Good morning and good afternoon to everyone. Welcome to Frontline’s Second Quarter Earnings Call. As mentioned in our release, this is the quarter where the LR2s took center stage. The market tends to forget that close to a third of our vessel days come from this asset class. We started to see the displacement of Russian crude and products also affecting the Suezmaxes during the second quarter. And finally, the VLCC got a pulse as the second quarter came to an end.

Before we get to the Q2 financials and what lies ahead, let’s have a look at the highlights on Slide 3 in the deck. So in the second quarter, Frontline achieved $16,400 per day on our VLCC [Technical Difficulty] $6,500 per day on our Suezmax fleet and very impressive $38,600 per day on our LR2/Aframax fleet. So far, in the first quarter of 2022, we have booked 73% of our VLCC days at $28,100 per day, 73% of our Suezmax days at a solid $45,000 per day and 62% of our LR2/Aframax days at even more impressive $46,200 per day. All numbers in this table are on a load to discharge basis and maybe affected by the amount of ballast days we end up having at the end of Q3. This is more relevant to the VLCCs that normally tend to go on the longer voyages. It occasionally affects Suezmaxes and to a lesser degree, LR2s.

With that, I will now let Inger take you through the financial highlights.

Inger Klemp

Thanks, Lars and good morning and good afternoon, ladies and gentlemen. Let’s turn to Slide 5 and look at the income statement. This quarter, Frontline achieved total operating revenues of $159 million and adjusted EBITDA of $98 million. We reported net income of $47.1 million or $0.23 per share and adjusted net income of $42.5 million or $0.21 per share in this quarter.

On the right hand side of the slide, we show the adjustments made this quarter, which consists of a $8.9 million gain on derivatives, a $6.1 million share results of associated companies, a $1.3 million amortization of acquired time charters, a $0.8 million gain on insurance claim, $12 million loss on marketable securities and $0.4 million loss on termination of leases. The adjusted net income in the second quarter increased $44.1 million compared with the first quarter. And the increase in interested net income was driven by an increase in our time charter equivalent earnings due to the higher TCE rates in the quarter, but it was partly offset by an increase in ship operating expenses of $7.5 million, mainly as a result of higher drydocking costs and other movements in income and expenses.