The second quarter profit of $14.3m reported by John Fredriksen’s flagship tanker company reflected the lower rates seen in the tanker market. “In the second quarter the tanker market experienced a downward pressure on rates which has continued into the third quarter,” commented Robert Hvide Macleod ceo of Frontline Management.
Revenues in the second quarter of 2016 were $191.7m up from $103.9m in the same period a year earlier reflecting the merger of Frontline and Frontline 2012.
Looking to the second half of the year Macleod said: “The spot market is currently at a 24 month low, and although we expect the rate environment to improve from current levels, the second half of 2016 will be significantly weaker than the first half of the year.”
As of 30 June this year Frontline had 24 newbuildings on order comprising eight LR2 tankers, eight suezmax and eight VLCCs. However, four of the VLCC’s are on order from STX, which has filed for court receivership. “The company is in discussions with STX and it is unclear whether the four VLCC newbuildings will be delivered,” Frontline said.
The company has secured bank financing of $528m to cover part of its newbuilding programme. “We are also in what we expect to be the final stages of obtaining approval for further bank financing of up to $325m,” said Inger M Klemp, cfo of Frontline Management.
“This new financing will partially finance 20 of our newbuilding contracts at highly attractive terms and we maintain our very low cash breakeven levels.”
The company is not yet arranging financing for the four newbuildings ordered at STX.
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