Frontline: Tanker Market "Massively Oversupplied"

Frontline is looking to scrapping to relieve the oversupply of tankers

Frontline Ltd. [NYSE:FRO] (Frontline) reports it lost $139 million in the first half of 2013, compared with a $17 million loss in the same period last year, citing a "massively oversupplied" tanker market that could benefit from increased scrapping.

The company's revenues fell 21 percent to $247 million year-over-year.

"[I]t may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs," the company said.

"The Board believes that such a market balance and sustained recovery of the tanker market will be dependent on the extent of phase out of existing tonnage as well as global growth conditions."

The company said the market conditions should encourage it to consider whether vessels that are more than 15 years old are worth keeping.

"Based on market rates it is likely that these investments will be unprofitable and we will be better of scrapping these vessels," it said.

Two of the company's vessels are due for special survey in the second half of the year, and Frontline said that, barring improvement in the tanker market, it is likely to remove the ships from service.

"If similar decisions are taken by other owners, it is likely to reduce the oversupply in the tanker market," the company said.

Frontline said it expects its operating result for the third quarter to be in line with its second-quarter results.

"The Board is actively monitoring the situation and looking for opportunities to restructure the balance sheet and improve the Company's financial position," it said.

The company reduced its capacity in 2012 in response to the difficult market.