Frontline Sees Revenues, Loss Down in 2012

The company said this is "one of the worst winters ever" for crude tankers

Responding to a continuing troubled tanker market, Frontline Ltd. [NYSE:FRO] (Frontline) said it narrowed its loss to $82.8 million in 2012, compared with $529.6 million in 2011 as it reduced capacity, dropping its revenues to $668.1 million from $810.1 million.

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

"Currently crude tankers are going through one of the worst winters ever with [very large crude carrier] VLCC rates close to zero, limited number of fixtures and very high availability of VLCC tonnage."

"Consensus is that the tanker market will not experience sustained recovery until overcapacity is removed."

The company has made a number of adjustments to its fleet in recent months, including terminating charter agreements for a number of ships.

Average daily time charter equivalents (TCEs) for the company's VLCCs fell to $22,200 in 2012, compared with $22,800 the previous year, and stood at $19,300 in Q4 2012, although that represented an improvement over the Q3 level of $12,300.

The company said it will continue to reduce its fleet by redelivering older and non-core vessels and will "remain cautious."

It said if the tanker market does not recover before 2015, and if it cannot raise additional equity or sell assets, it may not have enough cash to repay a $225 million convertible bond loan when it matures in April 2015, and that could force it to restructure and modify charter lease and debt agreements.

Frontline spinoff company Frontline 2012 Ltd said it cancelled a newbuilding contract for a VLCC in September and indicated it was considering more cancellations.