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More orders for Frontline 2012 as it reports 2014 profit

More orders for Frontline 2012 as it reports 2014 profit
John Fredriksen's Frontline 2012 reported a $234m profit for 2014, and has hit newbuilding market with two new suezmax orders and pair of contracts unidentified.

The result improves on a $69.5m profit in 2013, and excludes a $149.5m goodwill impairment loss related to the Knightsbridge agreement.

In September 2014 stage one of Frontline 2012's deal with Knightsbridge closed. The company received 31m shares in Knightsbridge for 13 bulker newbuildings and stage two is expected to close in March, with Frontline 2012 receiving a further 31m share in return for 12 capesize newbuildings.

Fourth quarter earnings were strong, driving up average rates for the year as tight supply and demand boosted usual seasonal improvements. Average daily time charter equivalents (TCEs) in the spot and period market in Q4 were $38,300 per day and $35,600 per day for VLCCs and suezmaxes. Daily earnings for MRs were $19,900 and the LR2 earned $19,200 per day. For the year as a whole, average TCE earnings for VLCCs and suezmaxes were $32,500 per day and $24,500 per day, respectively with MRs earning $16,600 per day.

Frontline 2012 estimates breakeven daily TCE rates in 2015 for its VLCCs, suezmaxes,MR product tankers and LR2s of around $24,400, $27,500, $13,600 and $13,700, respectively.

The company revealed that it now has on order 13 LR2 newbuildings and six suezmax tanker newbuildings, two of which were previously unannounced. Payments made for the orders so far total $111.2m, with $844.7m in instalments to pay. In 2015 the company has ordered two further vessels, but it has not identified at which yard or the vessel type.

In December Frontline 2012 cancelled another MR tanker order at STX Dalian, brining the total to four. Payments including interest have been received for three of the cancelled orders, but one remains in arbitration.

Finance was secured in December 2014 for 10 of the company's 14 LR2s with the agreement of a $466.5m term loan facility over 20 years.

Commenting on the market prospects as it manoeuvres to become a pure crude and product tanker company, Frontline 2012 stated "The continued positive development in the crude and product tanker market into the first quarter is likely to give an improved operating result (excluding one time gains and losses) in the first quarter."

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