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Grim tidings from Fredriksen's Frontline

Grim tidings from Fredriksen's Frontline
Announcing a net loss of $18.8m for the first quarter, John Fredriksen's tanker outfit Frontline has forecast a gloomy outlook for itself and the tanker market as a whole.

"The tanker market is massively oversupplied today and it may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs," the company's board said in the first quarter earnings release.

During the first quarter 2013, the global VLCC fleet grew from 622 to 634 vessels with 81 vessels on order and the Suezmax fleet grew to 480 vessels from 468 with 54 vessels on order.

Average time charter equivalents (TCEs) in the first quarter for Frontline's VLCCs and suezmaxes were $17,000 and $14,500 respectively compared with $19,300 and $14,000 in the preceding quarter. The company estimates average breakeven rates for the remainder of 2013 on a TCE basis for its VLCCs and suezmax tankers of $25,500 and $18,500, respectively.

As free cash at the owner dropped from $137.6m to $109.5m during the first quarter, Frontline repeated its warning that without an upturn in the tanker market in the short term, it may struggle to repay a $255m loan when it matures in April 2015. This could trigger a restructuring of the company less than four years after the restructuring which birthed Frontline 2012 was completed in December 2011.

Owing to increased dry-docking costs and the market outlook, the company expects its second quarter results to be weaker than those in the first quarter.