Frontline Looks to Further Expansion After Reporting Significant Income Improvement

Frontline anticipates a five year improvement in tanker market  performance.

After reporting a net income of $48.5 million for the first six months of this year, John Fredriksen's Frontline Ltd. now intends to grow through acquisition and consolidation opportunities, ShippingWatch reports.

The oil shipping company's board of directors also claimed it will be able to generate cash and pay dividends to shareholders while remaining resilient to weak markets.

This is a notable turnaround for Frontline, which for the first six months of 2014 posted a net deficit of $90.3 million, and whose revenue for the first half of this year suffered only a slight decline: $279 million compared to $289 million for the same time period in 2014.

One of the reasons cited for the improved net income was the increased rates commanded by its VLCC and Suezmax vessels, with its VLCCs having achieved average daily earnings of $50,000 and its Suezmax vessels earning $33,400, compared to $23,400 and $19,800 respectively for the same time period last year.

Frontline expects the tanker market to better its performance in the next five years, with CEO Robert Hvide Maclaeods adding that oil supply has increased from around 93.5 million barrels  per day (mbd) to 96 mbd.

"Further supply is likely to come from the Atlantic Basin and with two or three new refineries being built east of Suez," he said.

However, he noted that "the threat to the tanker industry is a sharp increase in the newbuilding orders and a rally in the oil price."

In July Frontline announced it would merge with Frontline 2012, which last year merged with Knightsbridge Tankers Ltd. with Ship & Bunker reporting at the time that it created the largest U.S.-listed capesize company with 39 vessels.

"The Board believes the combined companies will be well positioned to grow through acquisition and consolidation opportunities," Frontline said.

At the beginning of this year, Frontline predicted continued demand and solid freight rates for oil tankers going into 2015.