Frontline Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• TCE numbers: Second quarter VLCC: $43,100/day, Suezmax: $38,900/day, LR2/Aframax: $29,300/day; Q3 so far: VLCC 82% booked at $38,700/day, Suezmax 76% at $37,200/day, LR2/Aframax 73% at $36,600/day.
• Financial highlights: Second quarter profit $77.5 million ($0.35 per share), adjusted profit $80.4 million ($0.36 per share), up from previous quarter due to higher TCE earnings.
• Balance sheet: Solid balance sheet with $844 million in cash and cash equivalents as of June 30, 2025, no meaningful debt maturities until 2030.
• Fleet position: 41 VLCCs, 21 Suezmax, 18 LR2; average age 7 years, 100% ECO vessels, 55% scrubber-fitted.
• Cash breakeven rates: Next 12 months average $28,700/day for VLCC, $22,900/day for Suezmax and LR2; fleet average $25,900/day (including dry dock).
• Cash generation: Substantial potential with 30,000 earnings days annually; current cash generation potential $648 million ($2.91 per share), 30% increase in spot market could boost by 64%.
• Market themes: Compliant fleet utilization improving, trade policy affecting crude sourcing, OPEC production cut reversals, improved refinery margins.
• Policy effects: India and China balancing feedstock exposure, U.S. and EU pressure on sanctions, sanctioned barrels tapering off.
• Flows: Global crude exports increasing, compliance sources driving growth, U.S. oil pointing to Asia.
• Order books: Tanker fleet not growing, limited order book, tanker market sold out for 2027.

In the second quarter of 2025, Frontline's VLCC fleet achieved $43,100 per day on a load-to-discharge basis. The Suezmax fleet had $38,900 per day, and the LR2/Aframax fleet had $29,300 per day. In the third quarter of 2025 so far, 82% of VLCC days are booked at $38,700 per day, 76% of Suezmax days at $37,200 per day, and 73% of LR2/Aframax days at $36,600 per day.

Guidance:

• Q3 bookings: Fixed very far into Q3, not much to move needle.
• Cash generation potential: Substantial with 30,000 earnings days annually; 30% increase in spot market could boost cash generation by 64%.
• Market trends: Improved utilization in compliant fleet, longer trade lanes, stable fleet development.

Risks:

• Market fluctuations: Spot rate volatility, artificial ceilings affecting market progression.
• Policy changes: U.S. tariff pressure on India, potential impact on trade.
• Fleet aging: Record amount of vessels above 20 years old, potential operational issues.

Q: Omar Nokta asks about West to East flows and how OPEC exports affect the long-haul VLCC trade.

A: Lars Barstad responds that Goldman and others are bearish on crude prices due to OPEC return, potential contango in oil curve, and need for inventory building.

Q: Omar Nokta follows up on recent spot rate gains.

A: Lars Barstad attributes gains to shift from compliant sources replacing sanctioned oil, artificial ceiling around $50,000/day on VLCCs, charters trying to push market down but finding support, potential new floor higher up.