FRNT - First Quarter 2015 Results

Highlights

• Frontline 2012 reports net income attributable to Frontline 2012 of $103.5 million and earnings per share of $0.43 for the first quarter of 2015.
• Frontline 2012 received $7.6 million in January in connection with the cancellation of a newbuilding contract and recorded a gain of $1.8 million in the first quarter.
• The Company announces a special dividend consisting of up to 77.5 million Golden Ocean Group Limited shares.
• Frontline 2012 took delivery of the LR2 tanker newbuildings, Front Panther and Front Puma, in January and March, respectively.
• In January 2015, the first two VLGC carriers newbuildings, Front Mistral and Front Monsoon, were delivered to Avance Gas and Frontline 2012 recorded a gain of $19.1 million in the first quarter.
• In March 2015, Frontline 2012 took delivery of the Front Balder (ex Roxen Star) and the Front Brage (ex Chapter Genta).
• In March, the Company completed the previously announced sale of 12 newbuilding contracts.
• In March, the Company paid a stock dividend of 4.1 million AGHL shares.

First Quarter 2015 Results  

On September 15, 2014, Frontline 2012 Ltd. (the "Company" or Frontline 2012") closed the first stage of the previously announced transaction with Golden Ocean Group Limited (formerly Knightsbridge Shipping Limited), or Knightsbridge. The Company received 31.0 million shares in Knightsbridge in exchange for 11 Capesize bulk carrier newbuildings and two Newcastlemax newbuildings and owned approximately 58 percent of the total shares outstanding in Knightsbridge following this first stage. The Company has consolidated Knightsbridge from September 15, 2014 as required by U.S. GAAP. The second and final stage of this transaction closed in March 2015 at which time the Company received a further 31.0 million shares in Knightsbridge in exchange for 12 Capesize bulk carrier newbuildings. Knightsbridge issued 61.5 million new shares on March 31, 2015 to the shareholders of the former Golden Ocean Group Limited upon completion of the merger with that company, at which time the Company has de-consolidated Knightsbridge as the Company's shareholding fell below 50%. References in this press release to the Company refer to Frontline 2012 on an unconsolidated basis.

Frontline 2012 announces net income attributable to Frontline 2012 of $103.5 million and earnings per share of $0.43 for the first quarter compared with net income attributable to Frontline 2012 of $23.4 million and earnings per share of $0.10 in the preceding quarter, excluding goodwill impairment loss of $149.5 million. Net income attributable to Frontline 2012 in the first quarter includes (i) a gain of $1.8 million in connection with the cancellation of the fourth newbuilding contract (D-2174) at STX Dalian, (ii) a gain of $19.1 million on the delivery of the Front Mistral and the Front Monsoon to Avance Gas Holding Ltd. ("AGHL") and (iii) a gain of $60.4 million arising on the non-controlling interest in Knightsbridge. Net income attributable to Frontline 2012 in the fourth quarter, excluding goodwill impairment loss, includes a gain of $2.0 million in connection with the cancellation of the third contract newbuilding contract (D-2173) at STX Dalian.

The average daily time charter equivalents ("TCEs") earned in the spot and period market in the first quarter by the Company's VLCCs and Suezmax tankers were $53,800 and $42,600 compared with $38,300 and $35,600, respectively, in the preceding quarter. The spot earnings for the Company's VLCC and Suezmax tankers were $57,700 and $43,400, respectively, compared with $39,000 and $35,600, respectively, in the preceding quarter. The daily earnings for the Company's MR product tankers were $21,500 compared with $19,900 in the preceding quarter. The daily earnings for the Company's LR2 tankers were $23,800 compared with $19,200 in the preceding quarter.

In May 2015, the Company estimates average cash breakeven TCE rates for the remainder of 2015 on a TCE basis for its VLCCs, Suezmax tankers, MR product tankers and LR2 tankers of approximately $24,300 $21,600, $13,600 and $13,900, respectively.

Fleet Development

The Company took delivery of the second and third LR2 tanker newbuildings, Front Panther and Front Puma, in January and March, respectively.

In March 2015, Frontline 2012 took delivery of the 2009-built and 2011-built Suezmax tankers, Front Balder (ex Roxen Star) and Front Brage (ex Chapter Genta), following the agreement to purchase these vessels in January 2015.

During the first quarter, the Company entered into the following time charters: two Suezmax tankers, the Front Balder and the Front Brage have been chartered out for a period of approximately 12 months from March 2015 at a rate of $28,000 per day plus 50% profit split. The two LR2 vessels delivered in the first quarter, the Front Panther and the Front Puma, have been chartered out for a period of approximately 12 months from February/March 2015 at a rate of $25,000 per day.

During the first quarter, the Company chartered in four MR tankers for a firm period of 6 months and with options to extend the vessels for another 6-18 months. The Company plans to build its TC book further going forward. 

Newbuilding Program

In January 2015, the first two VLGC carrier newbuildings, Front Mistral and Front Monsoon, were delivered to AGHL.

The 12 remaining Capesize newbuildings, which the Company had previously agreed to sell to Knightsbridge, were sold in March 2015 at which time the Company received 31.0 million shares in Knightsbridge.

As of March 31, 2015, the Company's newbuilding program, excluding newbuildings agreed to be sold and newbuilding contracts with STX Dalian and STX Korea, comprises 11 LR2 newbuildings, six Suezmax tanker newbuildings and two VLCC newbuildings. As of March 31, 2015 total installments of approximately $128.2 million have been paid and the remaining installments to be paid amounted to approximately $936.6 million.

Subsequent to March 31, 2015, the Company has concluded two LR2 newbuilding contracts and the Company's newbuiding program currently comprises 21 newbuildings.

In 2012 and 2013, the Company cancelled all of its five newbuilding contracts at Jinhaiwan ship yard and has received a total refund to date of $296.2 million for four of these contracts, of which $89.8 million has been used to repay debt. The total unpaid claim for the final contract (hull J0106) is $24.6 million.

The Company cancelled the first four MR tanker newbuildings, hulls D2171, D2172, D2173 and D2174, at STX Dalian in May, July, September and December 2014, respectively. We have paid total instalments on these contracts of $34.8 million and have received payments under the refund guarantees for D2172, D2173 and D2174 of $29.7 million, including interest of $4.4 million. Hull D2171 is still in arbitration. The total outstanding including interest is approximately $11.4 million.

Corporate

242,307,883 ordinary shares were outstanding as of March 31, 2015, and the weighted average number of shares outstanding for the quarter was 242,307,883.

In March 2015, the Company paid a stock dividend consisting of 4.1 million AGHL shares. All shareholders of Frontline 2012, holding 60.74 shares or more, received one share in AGHL for every 60.74 shares they held, rounded down to the nearest whole share. The remaining fractional shares were paid in cash.

The Company announces a special dividend consisting of up to 77.5 million Golden Ocean Group Limited ("GOGL") shares. All shareholders of Frontline 2012, holding 3.21 shares or more, will receive one share in GOGL for every 3.21 shares they hold in Frontline 2012, rounded down to the nearest whole share. The remaining fractional shares will be payable in cash based on the GOGL share price at the Record date. Shareholders holding less than 3.21 shares will also receive the dividend as cash. The record date for this distribution is June 15, 2015, ex dividend date is June 12, 2015 and the distribution will be made on or about June 26, 2015.

Frontline 2012 announces that Miss Cecile Fredriksen and Mr. Harald Thorstein have today resigned from their positions as Directors of the Company. Both Miss Fredriksen and Mr. Thorstein will continue to be Board members in other related group companies.

The Company further announces the appointment of Jens Martin Jensen, Paul Leand and Hans Petter Aas as Directors to fill three of the vacancies on the Board. Mr. Jensen is also a Director of Flex LNG Ltd. Mr. Leand is also a Director of Ship Finance International Limited, Seadrill Limited and North Atlantic Drilling Ltd.. Mr. Aas is also a Director of Golden Ocean Group Limited, Ship Finance International Limited and Seadrill Limited.
 

The Market

Crude

The market rate for a VLCC trading on a standard 'TD3' voyage between the Arabian Gulf and Japan in the first quarter of 2015 was WS 59, representing an increase of 3 WS point from the fourth quarter of 2014 and 8 WS points higher than the first quarter of 2014. The flat rate decreased by 2.25 percent from 2014 to 2015.

The market rate for a Suezmax trading on a standard 'TD20' voyage between West Africa and Rotterdam in the first quarter of 2015 was WS 90, representing an increase of 2 WS points from the fourth quarter of 2014 and an increase of 11 WS points from the first quarter of 2014. The flat rate decreased by 1.7 percent from 2014 to 2015.

Bunkers at Fujairah averaged $323/mt in the first quarter of 2015 compared to $447/mt in the fourth quarter of 2014. Bunker prices varied between a high of $386.5/mt on the 18^th of February and a low of $264.5/mt on January 13^th.

The International Energy Agency's ("IEA") April 2015 report stated an OPEC crude production of 30.5 million barrels per day (mb/d) in the first quarter of 2015. This was unchanged from fourth quarter of 2014.

The IEA estimates that world oil demand averaged 93 mb/d in the first quarter of 2015, which is a decrease of 0.7 mb/d compared to the previous quarter. IEA estimates that world oil demand in 2015 will be 93.6 mb/d, representing an increase of 1.2 percent or 1.1 mb/d from 2014.

The VLCC fleet totalled 642 vessels at the end of the first quarter of 2015, 4 vessels up from the previous quarter. Five VLCCs were delivered during the quarter, one were removed. The order book counted 87 vessels at the end of the first quarter, which represents 13.5 percent of the VLCC fleet.

The Suezmax fleet totalled 455 vessels at the end of the first quarter, 5 vessels up from the previous quarter. Six vessels were delivered during the quarter whilst one was removed. The order book counted 71 vessels at the end of the first quarter, which represents approximately 16 percent of the Suezmax fleet.

Product

The market rate for an MR trading on a standard "TC2" voyage between Rotterdam and New York in the first quarter of 2015 was WS 143, representing a decrease of 17 points from the fourth quarter of 2014 and a increase of 9 WS points from the first quarter of 2014. The flat rate decreased by 0.5 percent from 2014 to 2015.

Bunkers in Rotterdam averaged $280/mt in the first quarter of 2015 compared to $417/mt in the fourth quarter of 2014. Bunker prices varied between a high of $325/mt on the 16^th of February and a low of $232/mt on January 13^th.

The MR product fleet (47'-52' dwt) totalled 747 vessels at the end of the first quarter of 2015, up from 734 vessels at the end of the previous quarter. The order book counted 210 vessels at the end of the first quarter, which represents approximately 28 percent of the MR fleet.

The LR2 fleet totalled 241 vessels at the end of the first quarter of 2015, up nine from the previous quarter. The order book is at 66 vessels at the end of the first quarter, which represents approximately 28 percent of the LR2 fleet, but we view this as part of the Aframax order book (therefore less concerned about the high percentage).

Strategy and Outlook

The Company will become a pure crude and product tanker company following the planned distribution of the shares in Golden Ocean Group Limited in the second quarter of 2015.

Consequently, the Board is totally focused on developing the Company's crude and product portfolio, consisting of a sailing fleet of 21 vessels comprising six VLCCs, six Suezmax tankers, six MR tankers and three LR2 tankers and a newbuilding program of 21 vessels. The Board is committed to get a US listing during 2015.

The continued positive development in the crude and product tanker market into the second quarter is likely to give an operating result (excluding one time gains and losses) in the second quarter in line with the first quarter.

Forward Looking Statements

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Frontline Ltd's management's examination of historical operating trends. Although Frontline Ltd believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Frontline 2012 cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission.

The Board of Directors
Frontline 2012 Ltd.
Hamilton, Bermuda
May 28, 2015

Questions should be directed to:

Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 99

Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76