Frontline Ltd. (NYSE:FRO) Q2 2020 Earnings Conference Call - Final Transcript

Aug 27, 2020 • 09:00 am ET

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Frontline Ltd. (NYSE:FRO) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Welcome to today's Quarter Two 2020 Frontline Limited Earnings Conference Call.

I now hand you over to your first speaker, Robert Macleod. Please go ahead. Thank you.

Executive
Robert Hvide Macleod

Thank you very much. Good morning and good afternoon, everyone. Thank you very much for dialing into our second quarter earnings call. First, I would like to express the gratitude towards our shore staff and crew members for their extraordinary efforts and dedication, which clearly are defining factors to our strong results.

Our markets are very volatile. But the volatility seen in the last 12 months have been extreme and serves as a reminder of how little it takes for the tanker market to rally. Frontline performance in the first half of 2020 was the strongest since 2008, and we have also made solid bookings for the third quarter. Despite the recent fall in rates, 2020 will be a very good year for Frontline.

Let's start with Slide 3 and have a quick look at the highlights from the second quarter. Net income of $200 million, just over $1 per share, certainly a solid quarter. Adjusted for non-cash items, the net income was $206 million. We declared a $0.50 dividend, the last dividend was $0.70 for Q1 2020. We opted to repay $60 million on our Hemen facility in the quarter, which is the main reason for the reduced dividend. Inger has done some great work in financing, she will take us through that later on the call.

Two newbuildings were delivered in the quarter, one Suezmax and one VLCC, leaving us with only four ice class LR2s on order and they deliver next year. VLCCs made $75,800 in Q2, and we have booked 76% of Q3 at around $61,000. Suezmax has made $51,100 in Q2, and we've booked 77% of Q3 at $29.500. LR2 made the just shy of $37,000, and we have booked two-thirds of Q3 at $14.500 million. These Q3 rates do not include the long-term time charters.

And then before moving on to the market, I will hand the call over to Inger to take us through the financials.

Executive
Inger M. Klemp

Thanks, Robert, and good morning, and good afternoon, ladies and gentlemen. Let's turn to Slide 4 and look at the income statement of the highlights. Frontline achieved total operating revenues net of voyage expenses of $301 million and adjusted EBITDA of $259 million in the second quarter of 2020. And we reported net income of $200 million approximately and $1.01 per share and adjusted net income is $206 million or $1.04 per share in the quarter.

The adjustment this quarter was in total $6.4 million net. And they consisted of a $5.9 million loss on derivatives, a $0.9 million unrealized gain on marketable securities, a $2.7 million share of losses on associated companies and a $1.3 million amortization of acquired time charters. The adjusted net income increased by $27 million this quarter, and it was mainly driven by an increase in our time