Frontline Plc — Investor Presentation 2010

Nov 24, 2010

F R O N T L I N E

Q3 2010 Results

CEO Frontline Mgt, Jens Martin Jensen

CFO Frontline Mgt, Inger M. Klemp

November 24, 2010

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Disclaimer

THIS PRESENTATION AND ITS ENCLOSURES AND APPENDICES (HEREINFER JOINTLY REFERRED TO AS THE "PRESENTATION" HAS BEEN PREPARED BY FRONTLINE LTD. ("FRONTLINE" OR THE "COMPANY") EXCLUSIVELY FOR INFORMATION PURPOSES. THIS PRESENTATION HAS NOT BEEN REVIEWED OR REGISTERED WITH ANY PUBLIC AUTHORITY OR STOCK EXCHANGE. RECIPIENTS OF THIS PRESENTATION MAY NOT REPRODUCE, REDISTRIBUTE OR PASS ON, IN WHOLE OR IN PART, THE PRESENTATION TO ANY OTHER PERSON.

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THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION.

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

• Third Quarter 2010 Highlights and Transactions
• Financial Review
• Newbuildings
• Market Update
• Outlook
• Q & A

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Third Quarter 2010

Highlights and transactions

• Delivery of Newbuildings
• Hull H2420 – Front Signe, VLCC, Shanghai Waigaoqiao Shipyard ("SWS"), 9 August 2010
• Hull H1026 – Front Njord, Suezmax, Rongsheng Shipyard, 12 August 2010
• Renegotiation of Shipbuilding Contracts Jinhaiwan (Sep.)
• New Time Charter Out Contracts
• Golden Victory (3 years, $40,000/day) from October 2010
• Front Eminence (5 years, $43,000/day) from November 2010
• Extension of Time Charter In Contracts
• Front Chief, Commander and Crown extended for one year at $26,500/day from January 2011
• Financing of Two VLCC Newbuildings at Jinhaiwan Shipyard (Nov.)
• Pre and post delivery financing
• Vessels to be delivered in 2012

FRONTLINE

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Third Quarter 2010

Financial Highlights

Q3 2010 results

• Net income: $12.3m
• EPS: $0.16
• Net income excl. gain: $5.4m
• EPS excl. gain: $0.07
• Net income YTD: $173.3m
• EPS YTD: $2.23
• Net income excl. gain YTD: $146.9m
• EPS excl. gain YTD: $1.89

Dividend declared per share Q3: $0.25

Share price NYSE 22 Nov. 2010: $28.68
- Market cap: $2,233m

FRONTLINE

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Financial Review

Income Statement

| 2009 | 2010 | CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands of $) | 2010 | 2009 | 2009 |
| --- | --- | --- | --- | --- | --- |
| Jul-Sept | Jul-Sept | | Jan-Sept | Jan-Sept | Jan-Dec |
| 233,008 | 251,111 | Total operating revenues | 939,050 | 871,145 | 1,133,286 |
| 3,061 | 6,843 | Gain on sale of assets and amortization of deferred gains | 26,324 | 3,061 | 3,061 |
| 45,457 | 71,195 | Voyage expenses and commission | 215,356 | 158,341 | 219,375 |
| 4,767 | 5,839 | Profit share expense | 28,584 | 27,270 | 33,018 |
| 52,565 | 49,555 | Ship operating expenses | 142,095 | 151,972 | 206,381 |
| 37,781 | 20,543 | Charterhire expenses | 116,941 | 134,975 | 169,503 |
| 7,135 | 8,400 | Administrative expenses | 23,913 | 22,406 | 30,647 |
| 60,213 | 53,985 | Depreciation | 159,879 | 177,996 | 237,313 |
| 207,918 | 209,517 | Total operating expenses | 686,768 | 672,960 | 896,237 |
| 28,151 | 48,437 | Net operating income | 278,606 | 201,246 | 240,110 |
| 5,619 | 2,732 | Interest income | 10,708 | 17,243 | 22,969 |
| (39,758) | (39,175) | Interest expense | (112,241) | (120,509) | (160,988) |
| (102) | (120) | Share of results from associated companies | (405) | (367) | (544) |
| 238 | 338 | Foreign currency exchange gain (loss) | 519 | (196) | (346) |
| 1,060 | 561 | Other non-operating items | (2,064) | 3,483 | 4,632 |
| (4,792) | 12,773 | Net income before taxes and noncontrolling interest | 175,123 | 100,900 | 105,833 |
| (60) | (52) | Taxes | (156) | (106) | (361) |
| (4,852) | 12,721 | Net income | 174,967 | 100,794 | 105,472 |
| (758) | (463) | Net income attributable to noncontrolling interest | (1,715) | (2,016) | (2,771) |
| (5,610) | 12,258 | Net income attributable to Frontline Ltd. | 173,252 | 98,778 | 102,701 |
| | | | | | |
| $(0.07) | $0.16 | Basic earnings (loss) per share ($) | $2.23 | $1.27 | $1.32 |

FRONTLINE

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Financial Review

Income on time charter basis

	2010				2009
$/day	YTD	Q3	Q2	Q1	YTD	Q3
VLCC Spot DH	42 100	30 000	50 020	49 200	40 700	26 800
VLCC Spot SH	23 500	24 400	22 100	23 600	25 900	20 000
VLCC Spot	41 500	29 900	49 500	47 500	39 400	26 300
VLCC whole fleet	40 300	29 800	46 600	45 300	40 200	32 100
VLCC Spot excl. floating charter	42 500	30 200	51 900	54 000
Suezmax Spot DH	26 800	15 700	30 300	30 600	24 900	12 800
Suezmax Spot SH	7 300	N/A	N/A	8 700	9 600	-2 200
Suezmax Spot	26 400	15 700	30 100	29 500	23 800	12 100
Suezmax whole fleet	28 200	18 200	31 000	31 800	26 600	15 900
Gemini Suezmax pool	26 700	17 500	29 800	30 900	26 900	14 100
OBO	48 100	48 600	47 700	47 900	43 000	42 200

FRONTLINE

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Financial Review

Ship operating expenses/Off-hire

Total fleet opex ($/day)

Number of vessels drydocked

Off hire (days)

☐ Tentative drydock schedule/no. of vessels
- Q4-10: 3

FRONTLINE

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Financial Review

Balance sheet

| Balance sheet
(in $ million) | 2010
Sep. 30 | 2010
Jun. 30 | 2009
Dec. 31 |
| --- | --- | --- | --- |
| Cash | 208 | 169 | 83 |
| Restricted cash | 225 | 236 | 430 |
| Other Current assets | 228 | 345 | 271 |
| Long term assets: | | | |
| Restricted cash | 0 | 69 | 70 |
| Vessels | 2 911 | 2 782 | 2 419 |
| Newbuildings | 185 | 278 | 414 |
| Other long term assets | 87 | 88 | 29 |
| Total assets | 3 845 | 3 967 | 3 715 |
| Current liabilities | 432 | 514 | 605 |
| Long term liabilities | 2 634 | 2 626 | 2 359 |
| Noncontrolling interest | 11 | 11 | 9 |
| Frontline Ltd. stockholders' equity | 767 | 816 | 741 |
| Total liabilities and stockholders' equity | 3 845 | 3 967 | 3 715 |

FRONTLINE

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Financial Review

Cash Cost Breakeven

Estimated Cash cost breakeven rates Q4 2010 ($/day)
VLCC 31,300
Suezmax 24,900
Suezmax OBO 30,600

Comments to B/E rates:
☐ Included in cash B/E rates are: BB hire/installments & interest loans + opex and admin. costs.
☐ B/E rates exclude vessels on short term TC-in, vessels on BB-out, capex. and balloon repayments on loans.
☐ Suezmax OBO breakeven rates have increased following Front Driver due for docking in Q4-2010

FRONTLINE

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Newbuildings

FRONTLINE

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Newbuildings

Newbuildings Overview

• Total newbuilding program end Q3-10 approx. $650m

• Five VLCCs and two Suezmax tankers.

• Installments paid per end Q3-10: $162m

• Remaining installments to be paid approx. $488m
• H1026 "Front Njord" and H2420 "Front Signe" were delivered in August 2010.

VLCC

Hull no.	Name	Yard	Delivery
J0025	Front Destiny	Jinhaiwan	Q1-2012
J0026	Front Dragon	Jinhaiwan	Q2-2012
J0027	Front Dynamic	Jinhaiwan	Q3-2012
J0028	Front Dynasty	Jinhaiwan	Q4-2012
J0106	Front Dream	Jinhaiwan	Q1-2013

Suezmax

Hull no.	Name	Yard	Delivery
H1161	Front Ran	Rongsheng	Q1-2013
H1162	Front Hermod	Rongsheng	Q2-2013

FRONTLINE

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Newbuildings

Financing

• Fully drawn financing on newbuildings delivered as per end Q3-10:
• Two VLCCs from SWS and four Suezmax from Rongsheng: $367.4m outstanding debt

• Two VLCCs from SWS: $145.2m outstanding debt

• $147m facility secured for Jinhaiwan hull no. J0025 and J0026 in Nov.

• 70% of contract price

• No financing established for the remaining three VLCCs ordered at Jinhaiwan or the two Suezmax vessels at Rongsheng

• Assumed financing approx. 70% of market values

FRONTLINE

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Newbuildings

Capital Expenditures

FRONTLINE

*Assumed financing for the unfinanced NBs approx. 70% of market value

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FRONTLINE

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Corporate Overview

Frontline Fleet

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

FRONTLINE

DH: Double Hull, SH: Single Hull

Total: 80

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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	34	15 %	45 600	31	17 %	43 900
	SH	1	77 %	41 100
	SH/DS on BB-out	4	94 %	15 800	4	69 %	13 000
	Newbuildings	5			5
Suezmax	DH	18	14 %	37 100	18	6 %	38 500
	OBO	8	96 %	47 500	8	63 %	49 900
	Newbuildings	2			2
ITCL	VLCC DH	6	99 %		4	100 %
	Suezmax DH	3	100 %		3	100 %
Com. Mng.	VLCC DH	6			6
*Bareboat rate
Total Fleet (ex. Newbuildings & SH BB)		76	29 %	45 300	70	21 %	46 400
Total Fleet (ex. Newbuildings, incl. SH BB)		80	34 %		74	25 %
Total Fleet (ex. Newbuildings, incl. SH BB & floating rate charters		45 %			37 %

• The TC/BB rates exclude profit split.
• ITCL vessels 2011 assumes two VLCCs sold when the current charters expire

FRONTLINE

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Market Update

Earnings & Market Factors

Q3 - Average Market earnings

VLCC : $17,000/day

Suezmax : $14,500/day

Market Movers

Fall in floating VLCC storage (from abt. 35 in Q2 to 3-5 in Q3)

Chinese oil demand expected to average 9.2 mb/d in 2010 (+9.5% year-on-year); but somewhat slow numbers for Q3

OPEC production up 390,000 b/d from Q3 2009

• Up 220,000 kb/d from Q2 2010

Global Oil Demand up 3.2 mb/d from Q3 2009

• Up 1.5 mb/d from Q2 2010

Iran situation

Fos/Lavera strikes + Bosphorous delays

Winter season should trigger an increase in demand

FRONTLINE

Source: IEA November monthly, Clarksons

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Market Update

VLCC Fleet

Fleet				Slippage
Current Fleet	538	Orderbook	185	43 vs. 55
22%
DH Fleet	490	Deliveries 2010	63
SH (DS, DB, SS) Fleet	48	Deliveries 2011	68

Current fleet & Orderbook

Delivery Schedule

FRONTLINE

Source: Fearnleys October 2010

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Market Update

Suezmax Fleet

Fleet

Current Fleet	409	Orderbook	150
DH Fleet	388	Deliveries 2010	54
SH (DS, DB, SS)	21	Deliveries 2011	48

Sippage

32 vs. 49

35%

Current fleet & Orderbook

Delivery Schedule

FRONTLINE

Source: Fearnleys October 2010

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Market Update

Rates

NEWBUILDING

TC MARKET

FRONTLINE

Source: Clarksons

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Outlook

FLEET

• Large tanker ordering slowing down, but the orderbook is still sizeable
• Delivery slippage continues
• Oil Major vetting criteria being tightened

WORLD

• Chinese oil demand expected to continue its growth to 9.5 mb/d in 2011 (up 4.2% from 2010)
• Increased ton mile situation
• Continued high oil prices going forward, any call on OPEC?
• Trade disruptions still there: Piracy, France, Black Sea

FRONTLINE

• Positive charter adjustments (in/out)
• Waiting policy
• Good name in the financial market
• Charter coverage / Spot exposure
• Downside protection / Upside potential
• Well positioned for market opportunities

FRONTLINE

Source: IEA, Gibson 29 Oct report