Earnings call transcript: Frontline Q1 2025 highlights positive tanker market outlook

Frontline Ltd (FRO), with a market capitalization of $4.2 billion, recently held its Q1 2025 earnings call, shedding light on its financial performance and providing an optimistic outlook for the tanker market. The company reported a profit of NOK 0.15 per share, with adjusted profits reaching NOK 40.4 million. Despite a slight decrease in time charter earnings, the firm maintains a strong cash position with $85 million in cash and equivalents. The market reacted positively, with Frontline’s stock seeing a premarket increase of 0.43%, trading at $18.87. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.

Key Takeaways

• Frontline’s Q1 profits were NOK 0.15 per share, with adjusted profits at NOK 0.18 per share.
• The company operates a young fleet with an average age of 6.8 years, focusing on eco-friendly vessels.
• A positive outlook for the tanker market is anticipated, driven by potential OPEC production increases and ongoing sanctions on Russia.
• 60-68% of Q3 days are already booked at premium rates.
• The stock price increased by 0.43% in premarket trading.

Company Performance

Frontline’s performance in Q1 2025 shows resilience amidst market challenges. The company reported a decrease in time charter earnings from NOK 249 million to NOK 241 million, yet managed to maintain robust financial health with cash reserves of $85 million. The firm’s operational efficiency is evident in its low operating expenses across its fleet, contributing to its competitive positioning.

Financial Highlights

• Revenue: Not specified
• Earnings per share: NOK 0.15
• Adjusted profit: NOK 40.4 million
• Cash and equivalents: $85 million
• Time charter earnings: NOK 241 million

Market Reaction

Frontline’s stock showed a positive reaction in premarket trading, with a 0.43% increase to $18.87. This movement reflects investor confidence in the company’s strategic positioning and future market prospects, especially given its focus on eco-friendly and scrubber-fitted vessels.

Outlook & Guidance

The company remains optimistic about the tanker market’s future, projecting continued growth in compliant oil exports. Factors such as potential OPEC production increases and the impact of sanctions on Russia are expected to shape market dynamics positively. Frontline’s strategic booking of 60-68% of Q3 days at premium rates further underscores its favorable market positioning.

Executive Commentary

CEO Lars Bartstadt expressed confidence in the market’s potential, stating, "We want to retain the upside because we still have a very firm belief that this market is gonna kind of give us some money back over the coming years." He emphasized the growing demand for compliant tonnage, highlighting the importance of eco-friendly operations.

Risks and Challenges

• Fluctuations in global oil supply and demand could impact tanker rates.
• Geopolitical tensions and sanctions may alter trade routes and demand.
• Potential market volatility due to changes in OPEC production levels.
• Environmental regulations could affect operational costs and fleet composition.
• Economic downturns may reduce global oil consumption, affecting demand for shipping.

Q&A

During the earnings call, analysts inquired about the refinancing of 24 VLCCs and the challenges posed by sanctioned vessels. The company addressed these concerns while highlighting potential market opportunities arising from shifts in global oil trade dynamics.

Full transcript - Frontline Ltd (FRO) Q1 2025:

Conference Operator: day, and thank you for standing by. Welcome to the Q1 twenty twenty five Frontline PLC Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Lars Bartstadt, CEO. Please go ahead.

Lars Bartstadt, CEO, Frontline PLC: Thank you very much. Dear all, thank you for dialing into Frontline’s quarterly earnings call. It’s encouraging to see so many joining us today. Despite all the action around us, both in respect of equity market volatility, changing policies and global trade negotiations, the tanker market has moved along in an orderly manner. To recap the first quarter of the year, the VLCC were volatile with three to four exciting rallies and a rising floor.

Suezmax and Aframax had a strong finish to the first quarter, while Stella 2s struggled. We are in a situation where the inverse earnings relationship between asset classes seem to be gone and the VLCC is taking the lead. This may also be caused by the fact that incremental export growth is finally coming from compliance sources. So before I go and give the word to Inger, I’ll run through our TCE numbers on slide three in the deck. In the first quarter of twenty twenty five, Frontline achieved $37,200 per day on our VLCC fleet, dollars 31,200 per day on our Suezmax fleet, and $22,300 per day on our LR2Aframax fleet.

So far in the third quarter, ’60 ’8 percent of our VLCC days are booked at $56,400 per day, sixty nine percent of our Suezmax days are booked at $44,900 per day, and 66% of our LR2Aframax days are booked at $36,100 per day. Again, all numbers in this table are on a low to discharge basis with implications of ballast days at the end of the quarter. And I think it is worth mentioning that in particular for our LR2s in Q1, we finished the quarter with quite a few ballast days as we entered Q2. Now I’ll let Inger take you through the financial highlights.

Inger, CFO, Frontline PLC: Thanks, Lars, and good morning and good afternoon, ladies and gentlemen. Let’s then turn to slide four, profit statement and look at some highlights. We report profits of million or NOK0.15 per share and adjusted profit of NOK40.4 million or NOK0.18 per share in this quarter. Adjusted profit in the first quarter decreased by NOK4.7 million compared with the previous quarter, and that was primarily due to a decrease in our time charter earnings from NOK $249,000,000 in the previous quarter to NOK $241,000,000 in the first quarter. That again is a result of lower TCE rates.

That was also partially offset by fluctuations in other income and expenses. Let’s then look at the balance sheet on Slide five. The balance sheet movements this quarter are related to ordinary items. Frontline has a solid balance sheet and strong liquidity of $8.00 $5,000,000 in cash and cash equivalents, including undrawn amounts of revolver capacity, marketable securities and minimum cash requirements for bank as per 03/31/2025. We have no meaningful debt maturities until 02/1930 and no newbuilding commitments.

Let’s then look at Slide six. Fleet composition, cash breakeven based on FX. Our fleet consists of 41 vessels, 22 Suezmax tankers, and 18 LR2 tankers. Has an average age of six point eight years and consists of 99% eco vessels, whereof 56% are scrubber fitted. We estimate average cash breakeven rates for the next twelve months of approximately $29,700 per day for VLCCs, 24,300 per day for Suezmax tankers and $23,300 per day for LR2 tankers, with a fleet average estimate of about $26,800 per day.

This includes dry dock costs for 10 VLCCs, two Suezmax tankers and five LR2 tankers. The fleet average estimate excluding dry dock costs is about $25,700 per day or $1,100 per day less. No vessels were dry docked in the first quarter and we recorded OpEx expenses of $8,400 per day for VLCCs, dollars 8,000 per day for Suezmax tankers and $8,200 per day for LR2 tankers. The Q1 fleet average was $8,300 per day. Lastly, let’s look at Slide seven, cash generation.

Frontline has a substantial cash generation potential with about thirty thousand earnings days annually. As you can see from the graph on the left hand side of this slide, the cash generation potential bases our current fleet and May 25 forward rates for TD3C for VLCCs, TD20 for Suezmax tankers and an average of TD25 and TC1 for Aframax and LR2 tankers from the Baltic Exchange as of May 23, is $332,000,000 or $1.49 per share And a 30% increase from current spot market will increase the potential cash generation with about 100%. With this, I leave the word to Lars again.

Lars Bartstadt, CEO, Frontline PLC: Thank you very much, Singer. Let’s look at slide eight and have a discussion on the various market themes. So, I mentioned initially that it’s been a lot of noise around us. We’ve had paralyzing US policy changes, likely limited impact on the energy complex so far and for tankers in general. But this is in total quite worrying for global growth prospects.

And as we proceed, we will learn how kind of big these impacts may be. We’ve had a very positive development on sanctions, both by way of scope widening. The various agencies are literally adding new vessels to the sanction list and new operators on a day to day basis. But we’ve also seen that there is a bit more will in enforcement of the same sanctions. But I think most importantly, it’s the behavioral changes, specifically by India and China on the way they operate with or towards OFAC listed vessels.

And so far both Russia and India sorry, China and India seem to be shunning vessels that are on the OFAC list. There are some excitement around Russia and the Ukraine ceasefire discussions. There is also a parallel discussion ongoing in respect of a nuclear deal with Iran. Both outcomes can have pivotal changes for tanker market dynamics, and I’m going to come to that later. We’re also seeing some positive movements on OPEC stands and OPEC policy.

They seem at least until now quite eager on returning oil to the market, which is positive for compliant factory utilization. I’m also going to come into or pop into old school demand, supply and inventory movements. It’s quite funny. This chart was a recurring theme, in our presentations kind of early in 2020 and 2021 and so forth. But it’s been out of the deck for a while, but there are some interesting moves happening.

And also again, Reis, I said the same after the Q4 report, active trading fleet has stopped growing. And despite the deliveries we’re going to see in 2025 and to some extent ’twenty six as well, the overall trading fleet looks to continue to reduce. I would very much like to draw your attention to the chart on the top right hand side and this is kind of mind boggling. If you look at vessels that are either sanctions, not sanctioned yet, but have been lifting Iranian Russian or Venezuelan barrels during the last year or are older than twenty years, that population of vessels makes up 25% of the VLCC fleet. It makes up 46% of the Suezmax fleet and 52% of the Afrevolute fleet.

Of course, a reversal of sanctions will make a material amount of particularly Suezmaxes and Aframaxes a return to the market. A lot of these guys that are lifting Russian barrels are doing so in accordance with the price cap. So they are of course, you know, perfectly allowed to do that. But any tightening on sanctions could suddenly make them move from the gray side to the more dark side. There is also an increasing demand for non UFA listed vessels in particular the Russian market.

And, you know, so this fleet or this portion of the fleet is gradually growing. But it also exemplifies how sensitive our market is to sanctions and changes in sanctions basically due to the amount of tonnage that is up or in play. So let’s move to slide nine and look at the old school market logics. The chart on the left, you know, it looks a bit extreme, but it’s obviously post COVID development in oil demand and supply. So, you know, quite a steep pricing curve there in the beginning, but now it’s more normalized.

If you look at the gray area, which represents EIA latest forecast, we’re actually moving into an overall supply and demand around 106,000,000 barrels by the end of twenty twenty six. What’s more interesting is that supply and this is obviously motivated by OpEx increase, but also or fueled by OpEx increase, but also to some extent by expected production growth in especially Guyana and some in Brazil, where we’re going to end up in an oversupplied position in the oil markets. Historically, and this is the chart on the right, if you look at the ebb and flows of inventory builds and draws, they correlate quite strongly to the performance of the overall tanker market. This is pretty easy to explain, and this is not due to utilization by way of floating storage. You don’t need a carrier strong enough in order to achieve this in the market.

It’s simply the incremental volume that ends up being transported. That’s not going directly for consumption, it’s going for storages, either in China, Japan, Korea or even in The US. And I don’t think I need to remind the audience that we are at years low inventory around the globe. Let’s move to slide 10 and just go through some of the headlines affecting tankers these days. So on tariffs, there was a ninety day delay on the enforcement of the Liberation Day tariffs and the tariffs themselves are being eased.

Also on the tariff side, energy is to a large extent, So we don’t really need to or we don’t really fear this will affect global trading patterns that much. On the USTR, the recent proposal from USTR shows a softening stand or softening wording with the key exceptions for oil and energy. The final proposal is expected by the May after the more recent hearing. But so far it looks like exports from The US is exempt and oil discharge into The US is not a material exposure to Frontline. And also half of our fleet is non Chinese, So we may still be able to serve that market.

Overall, The US accounts for around 17% of the global oil market. So it’s not an absolute disaster if the related relationship or communication from the USCR remains as we saw it last. We have maximum pressure on Iran Two Point Zero or a nuclear deal. This is back in the headlines in the middle of this trade war. Negotiations are ongoing, but in the case of making a nuclear deal with Iran, for them lifting of sanctions is a red line.

And if the audience can imagine what will happen then, so 1.4 to 1,600,000 barrels per day of export capacity that can grow quite rapidly will then all of a sudden become a compliant barrel. And as I’ve said repetitively, compliant barrels need compliant ships. Yes, you might see some vessels being able to return to the compliant market, but in general terms, most of the vessels that are engaged in Iranian trade right now have absolutely no chance to come back into the compliant market. The actors in the compliant market have extremely strict rules and regulations around the ships they want to engage. And these ships are also carrying an environmental risk cargo worth for a VLCC around $120,000,000 So it’s not something a charter is going to kind of take a light on.

Then we have Russian sanctions expansion. There is a peace or a ceasefire discussion going on between Russia and Ukraine. On the table, there will for sure be sanctions either lifting or tightening. By the looks of it right now, it’s more likely that we’re going to see tightening rather than easing. EU lastly added 168 or I thought thereabouts vessels to their sanction list.

UK added 100 about a week and a half ago and it seems like OFAC is going to continue their pursuit to find sanctions breakers around the Russian trade. There’s also a discussion coming up whether if the oil price cap is going to reduce from $60 to $50 So a lot of excitement on that. Venezuela exemptions removal, there was formally a situation where you could export equity barrels out of Venezuela. So typically Chevron were allowed to take the oil that they actually own Venezuela. This has to a large degree now been removed and it’s only on a case by case basis we see Chevron being able to take oil out of Venezuela.

This means that their export, which actually grew to 800,000 barrels per day in the last cycle, is now going dark. And then we have this, as I also touched upon earlier, the Shandong Port Authority and India OFA compliance. This is extremely welcoming because it’s actually the only way sanctions can work is that the receivers or the actors self sanctioning using these vessels. We have the Red Sea, Israel and Hamas and I should add The US to this. There is now a ceasefire between US and the Houthis.

This has not materially changed our position on trading the Red Sea area and it has not materially altered the traffic lanes yet. But it’s also so that it’s quite a fluid situation and any kind of action that happens around this conflict could suddenly trigger an attack. So, so far we do not want to risk the lives of our seafarers by trading through the Red Sea. But then finally, we have OPEC plus which is almost disappearing in all these other narratives that have said that they might potentially kind of return their voluntary cuts back to the market by October. It’s going to be exciting to see what comes out of the next meeting.

And there’s already signals that they might add 411,000 barrels per day in July as well. What we have seen kind of the initial production rises have not really given us that many more molecules into the market. I think this is primarily due to the fact that it’s more a paper exercise to catch up to the overproduction that’s already present in OPEC. But from June onwards, the volumes that might come will be real molecules coming into the market. I’d like to draw your attention to the right hand side on this slide.

You’ve all seen the fleet development with the orange line being soldiers plainly below twenty years of age. And again, it’s still so that very few charters, if any, except the ship that’s above twenty years in our industry. But if you look at the chart below here, we’ve looked at basically all tankers that take part in the markets that are not OFAC listed and not on long term storage and not kind of coastal trading tankers. And there you can see that the overall tanker fleet actually shrunk by 05% in 2024 and including all the deliveries coming into 2025, it’s not really that many, but there are some looks to continue to shrink. Let’s move to slide 11.

And I’m quite happy to say that sanctions actually do work not by way of volume. It’s more or less, it’s quite sticky, the volume that is coming into the market, but by way of the fleet that is actually carrying this oil. The January expansion of, in particular, OFAC sanctions and also the self sanctioning by China and India has made the market conditions for an OFAC listed tanker extremely poor. As particularly the Russian crude has been below the price cap, it’s attracted a lot of compliance tonnage to come in and service this market. But this kind of fall in utilization of OFAC listed tankers is extremely promising.

On the right hand side, on the top we’ve played with a scenario that sanctions are either are removed And this is important because tightening sanctions and removal of sanctions will actually both yield a positive effect on our market. And there is about 7,000,000 barrels per day of global transported oil that is exposed to one sanction or another around the world. And just imagine if all this comes back. It’s not likely, but it just gives you a picture. This 7,000,000 barrels would equate to more than 200 VLCCs worth of transport need.

And looking at the fleet composition, it’s not very likely that we have that kind of capacity easily. I think it is however likely that one or maybe two of these will actually come in and become non sanctioned barrels over the next years. Back to sanctions that do work. If you look at Iranian crude inventories, there’s a floating storage seems to be on the rise. And this is basically due to crude struggling to find a hole.

Let’s move to slide 12 and look at the good old order book. There’s nothing material that’s changed since our Q4 report, but I like to draw the attention to the fact that for the VLCCs there are now far more OFAC listed VLCCs than there are vessels in the order book. Suezmax more of the same if you adjust for what’s on OFAC and mind you OFAC listed vessels are extremely unlikely to return to the compliant market. The order book is almost ignorable. And the same goes for Aframaxes and LR2s, even though the LR2 has a very high nominal order book.

If we look or kind of have a look back at the chart I showed on slide eight, with 52% of that fleet exposed to one sanction or another, we’re actually not that worried about that fleet going forward. Also on the age situation for LR2s in particular, they seem to lose efficiency and become less attractive as a products trading vessel at the age of 15. And this is still the case in the normal tanker market. So let’s move to slide 13 and look at the summary. I’ve basically put the positive heading of pressure building question mark.

That’s at least what it feels like on the floor here. So oil supply and demand suggests we approach a period with the old school inventory buildings with the utilization implications that has for the tanker market in general. Demand for compliant tonnage is growing as the sanction scope and enforcement widens. And again, the fact that certain key players in this market are actually self sanctioning, particularly against UFAC. The effective tanker fleet growth will remain muted for 2025.

We actually continue to see oil demand looking to increase. And considering the aging of the fleet, this gives us the tailwind need further into 2025 and into 2026. Policy changes do create more questions than answers. We will get hopefully some answers by the end of this month, but the overall wording has softened. And again, I’m going to repeat this until it changes.

World oil trade continues to be serviced by the oldest fleets in more than two decades And obviously, if we look at the regulatory landscape we are in with decarbonization being a key goal for the industry, this is very contradicting. And lastly, Frontline continued to retain our material up side as Inger pointed to. We have a modern spot exposed fleet ready to service the compliant oil market. Thank you for that and we can open up for questions.

Conference Operator: Thank you. We will now take the first question from the line of Sherif Elmagabi from BTIG. Please go ahead.

Sherif Elmagabi, Analyst, BTIG: Hi. Thanks for taking my questions. First, at a high level, when I look at VLCC fixtures over the last few weeks, activity in The Atlantic has been a bit on the quiet side. Do you think that’s a reaction to OPEC’s accelerated ramp? And do you have a sense what might drive more long haul cargoes out of the Atlantic Basin?

Lars Bartstadt, CEO, Frontline PLC: Yeah. No. It’s a very good question. The art and basically the economics of US exports is very much an ebb and flow business. We actually find it difficult to explain the quietness in The US Gulf area as we speak basically.

In general terms, there’s quite a bit of tonnage sitting on kind of oil majors and traders hands. And these are fixtures you will not really see in the market. They will basically be concluded in house and the material will sail. So it could be a degree of that. But it could also be a degree of refinery runs in The US ahead of summer.

That basically kind of lessens the demand for exports or the push for exports. And lastly, there is also an element around Canada who have increased their exports away from US, not materially because it’s limited mostly to the TMX pipeline expansion, but it also adds to the picture. But I have to say on same note, we’ve seen extremely active flows coming out of Brazil and also a good kind of volume coming out Of Guyana. And we’ve also seen an increased interest, particularly from India on lifting West African barrels.

Sherif Elmagabi, Analyst, BTIG: That’s great color, Lars. And just one on, I guess, the operating side. Operating costs were a bit higher sequentially and also year over year on a per vessel basis. So could you shed some light on what’s driving that?

Inger, CFO, Frontline PLC: Yes. If you refer to this ship operating expenses this quarter, it was more like a going rate in a way. The number you had last quarter was affected by rebates on insurance and on the supplier rebates, about SEK4.9 million. So I think the SEK60.3 million is more like a going rate in a way. Also, if you refer to the administrative expenses, you can’t really compare these two numbers against each other.

You have to adjust for this revaluation of the synthetic option liability that we are giving information about in the press release. In the Q4, you had a gain of SEK7.9 million and in Q1, you have a loss of SEK1.6 million. So if you do those adjustments, you will see that the cost increase in Q1 on administrative expenses is only $2,000,000 And then you have the interest expense, which is down from previous quarter with about 6,000,000. So all in all, actually, we are quite good on cost development.

Jon Chappell, Analyst, Evercore ISI: Thanks, Inger. I’ll turn it over.

Lars Bartstadt, CEO, Frontline PLC: Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Jon Chappell from Evercore ISI. Please go ahead.

Jon Chappell, Analyst, Evercore ISI: Thank you. Good afternoon. Lars, Frontline’s had a tried and true strategy. You’re sticking with it. A lot of spot market exposure, 100% dividend payout ratio, you’ve just refinanced the balance sheet, probably arguably the strongest the capital structure has been this millennium.

You’ve laid out a very positive industry dynamic with OPEC production increases and the older fleet and all the headlines, etcetera. And it feels for the first time that business model isn’t being appreciated. It feels like it’s the first time with this much of a positive outlook in the industry, your balance sheet is strong as it is, still well above cash breakeven that you’re trading at a discount to NAV. So do you feel like there needs to be a strategic change, whether it’s the way that you think about your leverage, whether it’s the way you think about your fleet, the dividend versus buyback, anything that you think needs to be altered to get Frontline back to that premium valuation at a time when the industry outlook is so favorable?

Lars Bartstadt, CEO, Frontline PLC: Question, John. And, you know, you’ve been very long in kind of you know Frontline very well. The and I you know, the the fact that we’re given this kind of discount surprises us as well. You know, relative to peers, Q4 was, not relative to peers, but together with peers, Q4 was an absolute disaster for tanker stocks. I think kind of if you compare it to last year this time, it was a lot more funny to be a tanker CEO and the incoming calls from large journalists globally was literally on a weekly basis.

I think they did not appreciate the fact that the second half last year failed and have lots of alternatives in their investment universe. So it means that we basically had the kind of an outflow of shareholders in our stock, which has put it under some pressure. We also note that the short interest in Frontline is unusual high, you know, which probably could be in connection with kind of big investment banks having global strategies going and where a short and frontline suits that purpose. You know, my impression is that previously investors were willing to price expectations or a twelve month forward NAV into the share. But they have, you know, a much lower inclination of doing that now and basically want to see the proof in the pudding before they make the investment decision.

So that I think that’s kind of or I hope that’s the key kind of reason and not necessarily that Frontline is running the wrong strategy. We’re actually trying to act quite disciplined in this market. It’s tempting to engage in, say, time charter contracting and take away the upside. Some of our peers have done that too quite extensively. We want to retain the upside because we still have a very firm belief that this market is gonna kind of give us some money back over the coming years.

Omar Nokta, Analyst, Jefferies: Mhmm. Just as a quick follow-up to that

Jon Chappell, Analyst, Evercore ISI: and so on the same lines of thinking, there’s also been, you know, some asset sales in the industry at at values that are still somewhat elevated, you know, especially for older tonnage. And I understand that the sanction fleet or shadow fleet, whatever you want to call it, is under a bit more pressure. But are there opportunities for you? You still have 81 vessels, a ton of operating leverage. Are there some older vessels that you may be able to monetize now without giving up much of your operating leverage, but maybe providing a bit of an arb on asset values versus equity value?

Lars Bartstadt, CEO, Frontline PLC: Of course. But as you probably appreciate, and I don’t think it’s a big secret, some of the demand for the kind of more vintage tonnage is coming from counterparties that quite obviously want to engage in trades we don’t like. So we’re very cautious on addressing that market. However, there are also players out there that not necessarily are big owners now, but have a growth strategy for the compliant market and actually see the same opportunity in buying vessels that have five to seven years life in them or for storage projects or conversion projects. So you’re right, there are opportunities out there.

But we want to retain this kind of magic 30,000 earnings days per year. We have maybe one candidate out there, but it’s not going to be material in our strategy to reduce the fleet here.

Jon Chappell, Analyst, Evercore ISI: Yep. Understood. Thank you, Lars.

Lars Bartstadt, CEO, Frontline PLC: Thank you, John.

Conference Operator: Thank you. We will now take the next question from the line of Omar Nokta from Jefferies. Please go ahead.

Omar Nokta, Analyst, Jefferies: Thank you. Hi, Lars. Hi, Inger. Good afternoon. Just a couple of questions from my end and maybe just first on the market.

We’ve seen obviously VLCCs improve here into the second quarter, definitely better than what we saw second half of last year. As you said, it was a real disappointment back then. But things have improved, although they don’t necessarily jump off the page when we look at where rates are. I guess from your perspective, how would you say things have been progressing? We’ve seen the sanctions take out a big portion of the fleet.

We’ve got the OPEC volumes now coming. How do you explain kind of the rate structure today? Is it still too early to expect a real gapping up? Have we seen the benefit yet of these sanctions fully? Or is there still more to come?

Lars Bartstadt, CEO, Frontline PLC: I don’t think we’ve seen it fully. Well, of all, just on the OpEx side, as I mentioned in the presentation, I you know, we haven’t really seen the impact on cargos that they have kind of month over month grown materially from The Middle East OPEC producers. Know, the only kind of area where we’ve seen a significant growth is out of Kazakhstan, which might actually be the reason why OPEC decided to do this. But on the general note, what we’re observing and hopefully is a trend is that, you know, ever since it started off, of course, Venezuela being sanctioned, Iran going back being fully sanctioned. And, you know, we saw that volume getting kind of moving over to the dark side.

Then came Russia, which is a big chunk coming into the dark side. Basically, the incremental barrel that comes to market now, and mind you, demand is still growing, is actually coming from compliance sources. So, you know, the market that we operate in has actually seen a gradually declining volume. Particularly Iran has been able to ramp up their exports quite materially second half last year. But now that’s finished too.

And I’ve said before that, you know, kind of this will be solved eventually anyway, because kind of it’s not very likely that Iran, Venezuela or Russia can manage to increase their production and exports materially going forward. Then you need compliant oil exports to grow to satisfy demand. And that seems to be going on now and further kind of amplified by the fact that the OPEC is returning barrels to the market. So this is kind of good news for the compliant fleet and a lot of these barrels are VLCC barrels. And that’s why we have, you know, we made a huge investment in VLCCs.

Half of our fleet are VLCCs. We believe that maybe it can be the dawn of, you know, a proper VLCC market over the next six months.

Omar Nokta, Analyst, Jefferies: Thanks Lars. Yeah, and I guess, you know, maybe just a quick follow-up to that point, over the next six months, and maybe your last comment there, how do you think the summer seasonality shakes out this year? Does that take a back seat you think to kind of these current dynamics that you’re talking about?

Lars Bartstadt, CEO, Frontline PLC: I think the most exciting part around what’s going to happen in the near term and over the summer, I think on which was it now, this slide 11, where I mentioned that sanctions actually do work. You know, any action coming out of EU or US in respect of the sanctions and it’s very likely to come quickly because either you have a breakdown or a success in the nuclear talks in Iran or, you know, people get tired of, you know, no cease fire being able to be negotiated between Russia and Iran. So I think kind of we’re talking weeks rather than months before you’re gonna see increased action either way in this respect. And since, you know, this volume is pulling now so much kind of tonnage out of the compliant market and also, you know, these sanctions mean so much to the utilization on the compliant fleet, I think kind of we can have a very interesting summary if you just look at the political narrative around these two situations in particular.

Omar Nokta, Analyst, Jefferies: Yeah. Yeah, thank you. And thanks Lars. And just a final one, maybe perhaps to you Inger. The refinancing of the 24 VLCCs, obviously nice to have that termed out now till 02/1930.

You did refinance, as you mentioned, the release three and a half years before, maturity of the existing or prior facility. What would you say was the main driver of the refinance? I’m doing it so early with the margin benefit that important, or was it really about extending the duration?

Inger, CFO, Frontline PLC: It was the margin reduction, which was the most important. And obviously the extension line was kind of benefits on top of it in a way.

Omar Nokta, Analyst, Jefferies: Can you give a sense of what the savings were on the spread?

Inger, CFO, Frontline PLC: Well, we came from a level which was not, let’s say, our norm, I think we can call it that. So I wouldn’t be precise on it, but it’s we were about 200 basis points and now we are at more than 70.

Omar Nokta, Analyst, Jefferies: Okay. Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Geoffrey Scott from Scott Asset Management. Please go ahead.

Geoffrey Scott, Analyst, Scott Asset Management: Good morning. Thank you for taking my question. On Page six of the presentation, in the presentation for 4Q24, it said that the dock for the next twelve months or for calendar twenty five was going to be two Versus and one Suezmax tanker. And then on today’s presentation, we’ve upped it to 10 Versus, two Suez and five LRs. And all we’ve done is slide into the first quarter of twenty twenty six.

Is that just a normal, very heavy dry dock for that first quarter of twenty twenty six? Or is there something else happening to the maintenance of the fleet? Thank you. No,

Inger, CFO, Frontline PLC: it’s you’re completely correct about what we mentioned that it was two VLCCs and one Suezmax last time we spoke. And that was for the calendar year of ’twenty five. Then what happened now is that two VLCCs were moved from ’twenty six into Q4 in 2025. And then in addition to that, we have added on the first quarter of twenty twenty six since this is a twelve month forward looking cash breakeven rate. And that takes the total number to these 10 VLCCs, two Suezmaxes and five LR2s, because it’s the kind of very many of these vessels which are going to be dry docked in 2026 are dry docked in the first quarter.

Geoffrey Scott, Analyst, Scott Asset Management: Okay. So it’s just a heavy maintenance for the first quarter of twenty twenty six?

Inger, CFO, Frontline PLC: Yes, yes, yes.

Lars Bartstadt, CEO, Frontline PLC: And just to add, this obviously follows the age and delivery of the vessel. It’s not untypical that you have deliveries lumped into first quarter of any year. This time, we have quite a few ships due in 2026.

Geoffrey Scott, Analyst, Scott Asset Management: Okay. Thank you. A quick question for you, Lars. With the you’re suggesting it’s going to be a lot harder to trade OFAC ships in the future, trade restrictions plus the age, they’re never coming back into the compliant market. One would think that that would drive the older ships and the OFAC ships to scrapping.

And so far that has not happened. What do you think will be necessary to drive that scrapping decision? And when do you think it’s likely to happen? Thank you.

Lars Bartstadt, CEO, Frontline PLC: Yes. No, it’s a very, very good question and thank you for bringing it up because this is something that needs to come into the discussion, with the IMO and other regulatory, kind of, offices or whatever you call it. Because we actually have a big issue ahead of us. You know, if you look at, I think the last number I saw, you know, if you combine all the various sanctioned entities and ships or ships actually, other relevant ones. We’re talking about 600, seven hundred ships being on OFAC list or EU sanction list or similar.

What some of you might not know is that, you know, the recycling industry is a dollar industry and they are also, you know, they need to do their KYC and they obviously can’t buy a vessel for recycling from an actor that has broken sanctions. So this is kind of a clog in the recycling world. So there I think actually there needs to be set up some sort of rules for exemptions for recycling. And this is typically where IMO as a UN organization can take a strong initiative in order to find the method how we can facilitate that. Because the scary picture is that these vessels will sit somewhere in Southeast Asia with keys in and just be kind of a floating environmental bombs.

So this is very kind of a good point to make. And and hopefully, this is gonna come up higher on the agenda from the regulators, hopefully higher than further, decolonization. So have that conversation first, and then we can talk on on decarb later. So on timing Yep. On on timing, it’s, regretfully so that, you know, these processes take very, very long until they sit kind of in front of you.

There was this VLCC that was sitting outside Libya, no, sorry, Syria, and it sat there for fifteen years until people were able to actually do something about it.

Geoffrey Scott, Analyst, Scott Asset Management: Okay. Thank you very much. Appreciate it.

Lars Bartstadt, CEO, Frontline PLC: Thank you.

Conference Operator: Thank you. There are no further questions at this time. I would now like to turn the conference back to Lars Barstad for closing remarks.

Lars Bartstadt, CEO, Frontline PLC: Well, thank you very much for dialing in. Spring is ahead of us. Hopefully, it will be a spring in the tanker markets as well as we proceed. And obviously, every headline that comes up can be important for our markets. So with that, thank you all.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.