Weak fourth quarter reported by Frontline, but tanker outlook improving due to sanctions.
Frontline, a prominent tanker owner, recently reported a decline in its fourth-quarter earnings; however, the company is optimistic about the market’s outlook for the upcoming year. The firm, controlled by John Fredriksen, witnessed a net profit of $66.7 million in the period spanning from October to December 2024, marking a decrease from the $118.4 million seen during the same timeframe in 2023. Despite the decrease in net profit, the company experienced a slight increase in revenue, with a 2.6% rise to $425.6 million.
According to Chief Executive Lars Barstad, the fourth quarter of 2024 was notably softer than previous years. Barstad attributed this softness to a marginal increase in global oil demand towards the end of the year, coupled with a slowdown in global seaborne exports in the same period. Additionally, Barstad pointed out that sanctioned oil trade, particularly from countries like Iran and Russia, adversely affected the demand for the compliant fleet operated by Frontline. However, he stated that the situation has shown signs of improvement since the beginning of the new year.
Barstad highlighted that for 2025, broader and stricter sanctions have been implemented with a wider scope, while key importers of exposed crude have been diversifying away from suppliers affected by these sanctions. Moreover, he emphasized that the compliant fleet growth for the classes of assets Frontline deploys peaked a few years ago, leading to a positive outlook as the company enters the new year with cost-efficient operations and a modern fleet.
Frontline revealed that the average daily spot rates for very large crude carriers, suezmaxes, and long-range two/aframax tankers were $35,900, $33,300, and $26,100 respectively during the fourth quarter. The company has already secured contracts for a significant portion of its fleet, with 80% of VLCCs, 77% of suezmaxes, and 64% of LR2/aframaxes contracted at daily spot time charter equivalent earnings of $43,700, $35,400, and $29,700 respectively.
In terms of financial activities, Frontline made significant moves by fully drawing down a $512.1 million sale-and-leaseback facility to refinance 10 suezmax tankers, yielding $101 million in cash in the last quarter of 2024. The company also sold its oldest suezmax for $48.5 million. Furthermore, Frontline secured new credit facilities amounting to $239 million to refinance debt on its VLCCs and suezmaxes, ensuring no loan maturities until the end of 2026.
Chief Financial Officer Inger Klemp stated that these financial transactions not only bolster the company’s liquidity but also lower borrowing costs and cash break-even rates. Frontline has declared a dividend of $0.20 per share for the fourth quarter, demonstrating the company’s commitment to rewarding shareholders.
