Frontline Plc — Investor Presentation 2010

Feb 26, 2010

F RONTLINE

Q4 2009 Results

CEO Frontline Mgt, Jens Martin Jensen

CFO Frontline Mgt, Inger M. Klemp

February 26, 2010

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Disclaimer

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IN RELATION TO THE UNITED STATES AND U.S. PERSONS, THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND IS BEING FURNISHED SOLELY IN RELIANCE ON APPLICABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THE SHARES OF MDL HAVE NOT AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS, UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IS AVAILABLE. ACCORDINGLY, ANY OFFER OR SALE OF SHARES IN MDL WILL ONLY BE OFFERED OR SOLD (I) WITHIN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS, ONLY TO QUALIFIED INSTITUTIONAL BUYERS ("QIBs") IN PRIVATE PLACEMENT TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING AND (II) OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN ACCORDANCE WITH REGULATION S. ANY PURCHASER OF SHARES IN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OF U.S. PERSONS, WILL BE DEEMED TO HAVE MADE CERTAIN REPRESENTATIONS AND ACKNOWLEDGEMENTS, INCLUDING WITHOUT LIMITATION THAT THE PURCHASER IS A QIB.

NONE OF THE COMPANY'S SHARES HAS BEEN OR WILL BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA. THE COMPANY'S SHARES ARE NOT BEING OFFERED AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO OR FOR THE ACCOUNT OF ANY RESIDENT OF CANADA IN CONTRAVENTION OF THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY THEREOF.

THIS PRESENTATION INCLUDES "FORWARD-LOOKING" STATEMENTS (DEFINED IN SECTION 27A OF THE US SECURITIES ACT AND SECTION 21E OF THE US EXCHANGE ACT AS ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS) INCLUDING, WITHOUT LIMITATION, THOSE REGARDING THE COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY, PLANS AND OBJECTIVES FOR FUTURE OPERATIONS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR, AS THE CASE MAY BE, THE INDUSTRY, TO MATERIALLY DIFFER FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE. AMONG THE IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO MATERIALLY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS ARE, AMONG OTHERS, THE COMPETITIVE NATURE OF THE MARKETS, TECHNOLOGICAL DEVELOPMENTS, GOVERNMENT REGULATIONS, CHANGES IN ECONOMICAL CONDITIONS OR POLITICAL EVENTS.

FRONTLINE

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FRONTLINE
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Agenda

• ☐ Fourth Quarter 2009 Highlights and Transactions
• ☐ Financial Review
• ☐ Newbuildings
• ☐ Market Update
• ☐ Outlook
• ☐ Q & A

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Fourth Quarter 2009

Highlights and transactions

• Redelivery of four of the five Suezmax vessels chartered in from Eiger in Q4.

• The remaining vessel to be redelivered in end Feb. 2010.

• Purchase and sale of VLCC Front Vista (Feb. 10)

• Purchase price $58.5m

• Sold for a price to be settled through installments for a ten year period at a gross rate $43,500/day.

• Agreement with Ship Finance to reduce restricted cash supporting charter obligations with $111.7 million

• Estimated to take effect from April 2010

• Delivery of first Suezmax newbuilding from Rongsheng, hull H1017 named "Northia" (Jan. 10)

• Charter agreements entered into Q4-09 & Q1-10

• Edinburgh, VLCC SH, BB-out two years + two year option period (Jan.10) Vessel will be operated as a floating storage unit and will cease to trade as a regular tanker.
• Front Chief, Front Commander and Front Crown, VLCC, TC-in one year (Jan. 10)
• Desh Ujaala, VLCC, TC-in one year (Feb. 10)

FRONTLINE

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Fourth Quarter 2009

Financial Highlights

Q4 2009 results

• Net income: $3.9m
• EPS: $0.05

FY 2009 results

• Net income: $102.7m
• EPS: $1.32
• Net income excl. gain/loss: $99.6m
• EPS excl. gain/loss: $1.28

Dividend declared per share Q4: $0.25

Share price NYSE 24 Feb. 2009: $27.80

• Market cap: $2,164m

FRONTLINE

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Financial Review

Income Statement

| 2008
Oct-Dec | 2009
Oct-Dec | CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands of $) | 2009
Jan-Dec | 2008
Jan-Dec
(audited) |
| --- | --- | --- | --- | --- |
| 451,513 | 262,141 | Total operating revenues | 1,133,286 | 2,104,018 |
| - | | Gain on sale of assets | 3,061 | 142,293 |
| 141,464 | 61,034 | Voyage expenses and commission | 219,375 | 592,188 |
| 15,651 | 5,748 | Profit share expense | 33,018 | 110,962 |
| 55,132 | 54,409 | Ship operating expenses | 206,381 | 213,766 |
| 56,026 | 34,528 | Charterhire expenses | 169,503 | 220,170 |
| 9,335 | 8,241 | Administrative expenses | 30,647 | 35,226 |
| 58,562 | 59,317 | Depreciation | 237,313 | 223,519 |
| 336,170 | 223,277 | Total operating expenses | 896,237 | 1,395,831 |
| 115,343 | 38,864 | Net operating income | 240,110 | 850,480 |
| 9,573 | 5,726 | Interest income | 22,969 | 41,204 |
| (45,480) | (40,479) | Interest expense | (160,988) | (183,925) |
| (635) | (177) | Share of results from associated companies | (544) | (901) |
| 2,206 | (150) | Foreign currency exchange (loss) gain | (346) | 1,565 |
| (28,353) | 1,149 | Other non-operating items | 4,632 | (7,159) |
| 52,654 | 4,933 | Net income before taxes and noncontrolling interest | 105,833 | 701,264 |
| (213) | (255) | Taxes | (361) | (310) |
| 52,441 | 4,678 | Net income | 105,472 | 700,954 |
| (889) | (755) | Net income attributable to noncontrolling interest | (2,771) | (2,184) |
| 51,552 | 3,923 | Net income attributable to Frontline Ltd. | 102,701 | 698,770 |
| | | | | |
| $0.66 | $0.05 | Basic earnings per share ($) | $1.32 | $9.15 |

FRONTLINE

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Financial Review

Income on time charter basis

	2009					2008
$/day	YTD	Q4	Q3	Q2	Q1	YTD	Q4
VLCC Spot DH	38 000	30 400	26 800	38 700	56 200	90 000	59 800
VLCC Spot SH	23 800	12 600	20 000	28 300	28 200	40 500	33 500
VLCC Spot	36 900	29 600	26 300	37 700	53 700	88 200	58 500
VLCC whole fleet	38 300	33 200	32 100	38 400	50 300	74 500	54 100
Suezmax Spot DH	23 200	18 300	12 800	24 400	38 300	58 400	43 400
Suezmax Spot SH	9 100	7 600	-2 200	13 100	18 200	39 900	12 000
Suezmax Spot	22 500	17 800	12 100	23 800	37 300	57 100	42 000
Suezmax whole fleet	25 300	21 300	15 900	26 800	37 900	55 200	41 900
Gemini Suezmax pool		20 300	14 866
OBO	43 000	42 800	42 200	42 700	44 200	43 500	42 800

FRONTLINE

TCE VLCC

TCE SUEZMAX

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Financial Review

Ship operating expenses/Off-hire

Total fleet opex ($/day)

Number of vessels drydocked

☐ Increase in ship operating expenses from Q3-09 refers mainly to:
- Higher drydocking cost

☐ Tentative drydock schedule/no. of vessels
- Q1-10: 3

Off hire (days)

FRONTLINE

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Financial Review

Balance sheet

| Balance sheet
(in $ million) | 2009
Dec. 31 | 2009
Sep. 30 | 2008
Dec. 31
(audited) |
| --- | --- | --- | --- |
| Cash | 83 | 106 | 191 |
| Restricted cash | 430 | 410 | 370 |
| Other Current assets | 271 | 218 | 260 |
| Long term assets: | | | |
| Restricted cash | 70 | 69 | 185 |
| Vessels | 2 419 | 2 578 | 2 539 |
| Newbuildings | 414 | 397 | 454 |
| Other long term assets | 29 | 29 | 29 |
| Total assets | 3 715 | 3 807 | 4 028 |
| Current liabilities | 605 | 587 | 711 |
| Long term liabilities | 2 359 | 2 472 | 2 608 |
| Noncontrolling interest | 9 | 9 | 7 |
| Frontline Ltd. stockholders' equity | 741 | 739 | 702 |
| Total liabilities and stockholders' equity | 3 715 | 3 807 | 4 028 |

FRONTLINE

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Financial Review

Cash Cost Breakeven

Estimated Cash cost breakeven rates 2010 ($/day)
VLCC 30,800
Suezmax 25,500
Suezmax OBO 24,300

Comments to B/E rates:
☐ B/E rates have decreased from previous quarter as a result of lower expected drydocking cost in 2010.
☐ Included in cash B/E rates are: BB hire/instalments & interest loans + opex and admin. costs.
☐ B/E rates exclude M/T Hampstead, M/T Kensington, the remaining Genmar vessel on T/C-in, the three vessels on BB-out, capex. and balloon repayments on loans.

FRONTLINE

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Newbuildings

FRONTLINE

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Newbuildings

Newbuildings Overview

• Total newbuilding program after cancellations and restructuring approx. $990m
• Six VLCCs and four Suezmax tankers

• Financial exposure limited to $792m (four VLCCs and four Suezmax tankers + $54m)

• Installments paid per end Q4-09: $364m (Q3 $364m)

• Remaining installments to be paid approx. $428m
• "Northia", the Suezmax newbuilding with hull number H1017, was delivered 5 January 2010. Remaining installments to be paid excl. this vessel is $400m

FRONTLINE

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Newbuildings

Financing

• 80% of contract price for first two VLCCs from Waigaoqiao and four Suezmax tankers from Rongsheng
• $256.9m outstanding debt per end Q4-09 (incl. drawdown delivery installment H1017)

• Expect to draw further $122.3m in 2010

• 70% of contract price for last two VLCCs from Waigaoqiao

• $44m outstanding debt per end Q4-09

• The VLCCs built at Jinhaiwan (del. 2H-11/1H-12) currently unfinanced.

• Indications received for financing at minimum $65m per vessel

FRONTLINE

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Newbuildings

Capital Expenditures

FRONTLINE

*Assumed financing for the two unfinanced VLCCs is $65m/vessel

14

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Corporate Overview

Frontline Fleet

Incl. vessels on commercial management & ITCL, excl. newbuildings

Total: 84

FRONTLINE

DH: Double Hull, SH: Single Hull

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Corporate Overview

Frontline Fleet

	2010			VESSELS AS PER END 2011
		No. of vessels (current)	Av. TC Coverage (2010)	Av. Net TC/BB Rate $/day (2010)	No. of vessels	Av. TC Coverage (year)	Av. Net TC/BB Rate ($/day)
VLCC	DH	30	13 %	46 500	34	7 %	47 700
	SH	3	75 %	41 300
	SH/DS on BB-out	3	92 %	17 300 *	3	64 %	16 300
	Newbuildings	6			2
Suezmax	DH	16	16 %	36 900	18	7 %	38 500
	SH	1
	OBO	8	89 %	49 300	8	63 %	49 900
	Newbuildings	3
ITCL	VLCC DH	6	100 %		6	100 %
	Suezmax DH	3	100 %		3	100 %
Com. Mng.	VLCC DH	5			5
	Suezmax DH	9			9
*Bareboat rate
Total Fleet (ex. Newbuildings & SH BB)		81	29 %	45 300	86	17 %	48 000
Total Fleet (ex. Newbuildings, incl. SH BB)		84	33 %		88	20 %
Total Fleet (ex. Newbuildings, incl. SH BB & floating rate charters		44 %			35 %

• The TC/BB rates exclude profit split.

FRONTLINE

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Market Update

Earnings & Market Factors

Q4 - Average Market earnings

VLCC : $29,700/day

Suezmax : $23,300/day

Positive

Fewer newbuilding deliveries than expected

• VLCC: 10 del. Vs. 19 estimated
• Suezmax: 10 del. Vs. 21 estimated

Storage still in play with arnd 40/45 DH VLCCs in Q4

Tonne-miles on par with Q408

Historically low ordering activity

China increased their oil consumption with 8% (2009)

Rising discrimination towards single hulls

• Demolition prices elevated to abt. 400/ldt year end

Single hull fleet end 2009 & removals 2009

• VLCC : 84
• Suezmax : 33
• Removals: 3
• Removals: 15

FRONTLINE

Source: Fearnleys, Clarksons, Platts

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Market Update

VLCC Fleet

Fleet

Current Fleet	529	Orderbook	178
DH Fleet	445	Delivered 2009	54
SH (DS, DB, SS) Fleet	84	Deliveries 2010	67

Delivery Schedule

FRONTLINE

Source: Fearnleys, Frontline

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Market Update

Suezmax Fleet

Fleet

Current Fleet	393	Orderbook	134
DH Fleet	360	Delivered 2009	46
SH (DS, DB, SS)	33	Deliveries 2010	62

Current fleet & Orderbook

Delivery Schedule

FRONTLINE

Source: Fearnleys, Frontline

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Market Update

Rates

NEWBUILDING

TC MARKET

FRONTLINE

Source: Clarksons

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Market Update

Fleet Development

Deliveries; 2009 Estimate vs. 2009 Actual

	VLCC	SUEZMAX
2009 (Est.):	68	73
2009 (Actual):	54	46
Change:	-14	-27
2010 (Est.):	67	62

First Generation DH's over 15 year old

	VLCC (32)	SUEZMAX (42)
1991/92/93:	17	28
1994:	3	9
1995:	12	5

Slippage VLCC SUEZMAX

2009: 20% 37%

2010 (Est.): 20% 20%

FRONTLINE

Source: Fearnleys, Frontline

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Market Update

Tonne-Miles

Number of VLCCs needed to lift one 'average' VLCC cargo per month bound for;
Japan/S.Korea	1,3
Europe	0,4
USA	0,9
China	1,8

2009 2010 (est.
- Tonne-mile demand: -4% +7%
- Global oil demand: -1.5% +1.9%

Fundamentals

• Average transport distance - longer hauls & oil demand
• China and India increasing imports from WAF & US
• Chinese tonne-mile demand up 37% in December (y-o-y) & 30% increase in imports
• Expectations of enhanced 2010 MEG/US crude program

Tanker Demand (VLCC equiv)

FRONTLINE

Source: IEA, Pareto, ACM Report 12/2-10

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Market Update

Outlook

FLEET

• Fleet growth for VLCCs in 2010?
• Cancellations, delays and deferrals are still positively affecting the market, as evidenced in 2009
• Single hull phase out

WORLD

• 2010 – global oil demand expected to increase with 1.9%
• Tonne-miles estimated to increase 7% for 2010
• China still dominating
• Q4 imports from FSU, Africa and Venezuela rose 60%

FRONTLINE

• Reduced our newbuilding program with $797.5 million
• Expensive charter-in units redelivered
• Market consolidator (Gemini)
• Restricted cash release
• Outperformance of peers – income/cost wise
• Lower breakeven

FRONTLINE

Source: IEA

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Any questions?