Frontline (FRO) Tops Q3 EPS by 1c

Frontline (NYSE: FRO) reported Q3 EPS of $0.09, $0.01 better than the analyst estimate of $0.08.

Fleet Development

As of September 30, 2015, Frontline's fleet consisted of 14 VLCC and eight Suezmax tankers with an aggregate carrying capacity of 5.4 million dwt. Of these, two Suezmax tankers are owned by the Company and the remaining 20 vessels are chartered in from third parties. Additionally, the Company has 6 VLCCs, eight Suezmax tankers, 10 LR2 Aframax tankers, and 15 MR2 Handysize tankers under commercial management.

The majority of the Company's leased vessels are leased from Ship Finance International Ltd. ("Ship Finance") under long term charter agreements. In June 2015, the Company and Ship Finance agreed to amend the long term charter agreements on 12 VLCCs and five Suezmaxes for the remaining average charter period of 7.7 years. Under the new agreement, which took effect July 1, 2015, the daily time charter rates for VLCCs and Suezmaxes were decreased to $20,000 and $15,000, respectively. Daily operating expenses payable by Ship Finance for all vessels were increased from $6,500 to $9,000. In connection with the decrease in daily time charter rates and the increase in daily operating expenses, the Company and Ship Finance agreed to revise the profit split above the daily time charter rates to 50%/50%, and 55 million shares of Frontline were issued to Ship Finance. Please refer to Form 6-K filed by the Company with the Securities and Exchange Commission on June 1, 2015 for further details on the amended charter structure.

In August 2015, the Company agreed with Ship Finance to terminate the long term charter for the 1995-built Suezmax tanker Front Glory. The charter with Ship Finance terminated in September. The Company received a compensation payment of $2.2 million from Ship Finance for the termination of the charter.

In September 2015, the Company agreed with Ship Finance to terminate the long term charter for the 1995-built Suezmax tanker Front Splendour, which has surveys due at the end of this year. The charter with Ship Finance terminated in October. The Company received a compensation payment of $1.3 million from Ship Finance for the termination of the charter.

In November 2015, the Company agreed with Ship Finance to terminate the long term charter for the 1998-built Suezmax tanker Mindanao. The charter with Ship Finance is expected to terminate in the fourth quarter of 2015. The Company will receive a compensation payment of approximately $3.3 million from Ship Finance for the termination of the charter.

After giving effect to these terminations, the vessels on charter from Ship Finance will be reduced to 12 VLCCs and two Suezmax tankers. November 23, 2015 Frontline entered into an agreement to purchase two 157,500 dwt Suezmax tanker newbuilding contracts from Golden Ocean Group Limited at a purchase price of $55 million per vessel. The newbuilding contracts are with New Times Shipbuilding Co. Ltd. in China and the vessels are expected to be delivered in the first quarter of 2017.

For earnings history and earnings-related data on Frontline (FRO) click here.

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