Frontline Narrows Losses in Q3

Frontline says the tanker market will only recover when more vessels are scrapped

Crude tanker company Frontline Ltd. [NYSE:FRO] narrowed its losses in the third quarter of 2012 compared with the same period last year, but the company predicts a slow market recovery contingent on "substantial scrapping of vessels."

Frontline reported a net loss of $49 million for the period ended September 30, 2012, down from a loss of $166 million in Q3 2011 as its total operating revenues fell to $127 million from $173 million.

"The tanker market has shown a strong negative development in the last four years," the company said.

"Several tanker companies are already experiencing severe problems.

"If the weak market continues it is likely to lead to significant financial problems for the whole tanker industry."

Frontline said spot rates for very large crude carriers (VLCCs) have risen recently, but those for Suezmax and Aframax tankers have not followed suit, and "consensus is that the recent rate hike could be short lived."

"In order for sustainable recovery to happen substantial scrapping of vessels must take place," the company said.

Frontline has been reducing its expenses, including terminating long-term charter agreements for twoOre-bulk-oil carriers with Ship Finance and taking its nine Suezmax vessels out of the Orion Suezmax pool while selling its 50 percent share in Orion Tankers Ltd.

The company said it expects some improvement in the fourth quarter compared with the third, but it "will continue to remain cautious and focus its resources on the present activities until a clearer sign of recovery can be seen in the tanker market."