Frontline Plc — Investor Presentation 2019

Aug 27, 2019

Second Quarter Presentation August 2019

Forward Looking Statements

MATTERS DISCUSSED IN THIS DOCUMENT MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE INFORMATION ABOUT THEIR BUSINESS. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE EVENTS OR PERFORMANCE, AND UNDERLYING ASSUMPTIONS AND OTHER STATEMENTS, WHICH ARE OTHER THAN STATEMENTS OF HISTORICAL FACTS.

FRONTLINE DESIRES TO TAKE ADVANTAGE OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND IS INCLUDING THIS CAUTIONARY STATEMENT IN CONNECTION WITH THIS SAFE HARBOR LEGISLATION. THE WORDS "BELIEVE," "ANTICIPATE," "INTENDS," "ESTIMATE," "FORECAST," "PROJECT," "PLAN," "POTENTIAL," "MAY," "SHOULD," "EXPECT" "PENDING" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS.

THE FORWARD-LOOKING STATEMENTS IN THIS DOCUMENT ARE BASED UPON VARIOUS ASSUMPTIONS, MANY OF WHICH ARE BASED, IN TURN, UPON FURTHER ASSUMPTIONS, INCLUDING WITHOUT LIMITATION, MANAGEMENT'S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA CONTAINED IN FRONTLINE'S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. ALTHOUGH FRONTLINE BELIEVES THAT THESE ASSUMPTIONS WERE REASONABLE WHEN MADE, BECAUSE THESE ASSUMPTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT AND ARE BEYOND FRONTLINE'S CONTROL, YOU CANNOT BE ASSURED THAT FRONTLINE WILL ACHIEVE OR ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. The information set forth herein speaks only as of the dates specified and FRONTLINE UNDERTAKES NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENT TO CONFORM THE STATEMENT TO ACTUAL RESULTS OR CHANGES IN EXPECTATIONS OR CIRCUMSTANCES.

IMPORTANT FACTORS THAT, IN FRONTLINE'S VIEW, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: THE STRENGTH OF WORLD ECONOMIES AND CURRENCIES, GENERAL MARKET CONDITIONS, INCLUDING FLUCTUATIONS IN CHARTERHIRE RATES AND VESSEL VALUES, CHANGES IN DEMAND IN THE TANKER MARKET, INCLUDING BUT NOT LIMITED TO CHANGES IN OPEC'S PETROLEUM PRODUCTION LEVELS AND WORLD WIDE OIL CONSUMPTION AND STORAGE, CHANGES IN FRONTLINE'S OPERATING EXPENSES, INCLUDING BUNKER PRICES, DRYDOCKING AND INSURANCE COSTS, THE MARKET FOR FRONTLINE'S VESSELS, AVAILABILITY OF FINANCING AND REFINANCING, ABILITY TO COMPLY WITH COVENANTS IN SUCH FINANCING ARRANGEMENTS, FAILURE OF COUNTERPARTIES TO FULLY PERFORM THEIR CONTRACTS WITH US, CHANGES IN GOVERNMENTAL RULES AND REGULATIONS OR ACTIONS TAKEN BY REGULATORY AUTHORITIES, POTENTIAL LIABILITY FROM PENDING OR FUTURE LITIGATION, GENERAL DOMESTIC AND INTERNATIONAL POLITICAL CONDITIONS, POTENTIAL DISRUPTION OF SHIPPING ROUTES DUE TO ACCIDENTS OR POLITICAL EVENTS, VESSEL BREAKDOWNS, INSTANCES OF OFF-HIRE AND OTHER IMPORTANT FACTORS. FOR A MORE COMPLETE DISCUSSION OF THESE AND OTHER RISKS AND UNCERTAINTIES ASSOCIATED WITH FRONTLINE'S BUSINESS, PLEASE REFER TO FRONTLINE'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING, BUT NOT LIMITED TO, ITS ANNUAL REPORT ON FORM 20-F.

THIS PRESENTATION IS NOT AN OFFER TO PURCHASE OR SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE OR SELL, ANY SECURITIES OR A SOLICITATION OF ANY VOTE OR APPROVAL.

Q2 2019 Highlights and Subsequent Events

Financial highlights Adding high quality, modern tonnage at the right time

• Net income attributable to the Company was \$1.1 million, or \$0.01 per share, for the second quarter of 2019.
• Net income attributable to the Company was \$4.2 million, or \$0.02 per share adjusted for certain non-cash items for the second quarter of 2019.
• Reported an estimated spot average daily time charter equivalent ("TCE"):

	Q2 2019	Q3 2019 est.	% done
VLCC	\$25,600	\$28,000	83%
Suezmax	\$16,200	\$18,300	70%
LR2/Aframax	\$18,100	\$18,300	68%

• In August 2019, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to \$42.9 million with Credit Suisse to partially finance the Suezmax tanker resale under construction at HSHI.

Acquisition of 10 modern Suezmax tankers

• 2019 built Korean vessels with exhaust gas cleaning systems
• Total transaction to consist of:

(i) 16,035,856 shares of Frontline common stock; and

(ii) between USD 538 and 547 million in cash, payable upon closing

Options to acquire four additional Suezmax tankers

• 2019 built Chinese vessels with exhaust gas cleaning systems
• Options for first two vessels expire on September 12, 2019

Immediate impact on earnings potential

• Until the closing, Frontline to charter-in the 10 acquired vessels at a cost of ~USD 23,000 / day
• Frontline to charter-out five of the acquired vessels to Trafigura on three-year time charters at a base rate of USD 28,400 / day with a profit split above the base rate

Q2 2019 Financial Highlights

(Million \$ except per share)	Q2 2019	Q1 2019	2019 YTD
Total operating revenues (net of voyage expenses) (*)	103	141	244
Net Income (loss)	1,1	40	41
Net income (loss) adj (*)	4,2	46	50
EBITDA adj (*)	56	96	152
Earnings (loss) per share	0,01	0,24	0,24
Earnings (loss) per share adjusted	0,02	0,27	0,29
Cash	92	97
Interest bearing debt	1 752	1 721

(*) See Appendix 1 for reconciliation to nearest comparable GAAP figure Note: Earnings per share is based on 169,821 and 170,069 weighted average shares (in thousands) outstanding for Q1 2019 and Q2 2019, respectively

Income Statement

	2019	2019	2018
(in thousands of \$)	Apr - Jun	Jan - Mar	Jan-Dec
Total operating revenues	193 408	238 275	742 266
Other operating gain (loss)	1 711	(742)	10 206
Voyage expenses and commission	90 664	97 512	377 772
Contingent rental (income) expense	(1 524)	(1 031)	(19 738)
Ship operating expenses	37 693	32 732	130 623
Charter hire expenses	2 140	2 104	21 244
Administrative expenses	10 988	9 892	37 294
Depreciation	28 318	27 401	122 566
Total operating expenses	168 279	168 610	669 761
Net operating income	26 840	68 923	82 711
Interest income	413	261	843
Interest expense	(23 244)	(23 441)	(93 275)
Gain on sale of shares	-	-	1 026
Unrealized gain (loss) on marketable securities	1 683	(1 381)	(3 526)
Share of result of associated company	842	-	246
Foreign currency exchange loss	(27)	(146)	(869)
Gain (loss) on derivatives	(5 582)	(4 100)	4 256
Other non-operating items	55	37	506
Net income (loss) before income taxes and non-controlling interest	980	40 153	(8 082)
Income tax expense	25	(42)	(316)
Net income (loss)	1 005	40 111	(8 398)
Net (income) loss attributable to non-controlling interest	77	(80)	(482)
Net income (loss) attributable to the Company	1 082	40 031	(8 880)
Basic earnings (loss) per share attributable to the Company (\$)	0,01	0,24	(0,05)
Weighted average number of ordinary shares (in thousands)	170 069	169 821	169 810

Non-cash items in the second quarter of 2019

• \$5.6 million loss on derivatives and
• \$1.7 million unrealized gain on marketable securities
• \$0.8 million in share of result of associated company

Balance Sheet

	2019	2019	2018
(in million \$)	Jun 30	Mar 31	Dec 31
Cash	92	97	68
Marketable securites	10	8	9
Other current assets	192	207	231
Non-current assets
Newbuildings	26	26	52
Vessels	2 718	2 650	2 578
Goodwill	112	112	112
Other long-term assets	18	21	26
Total assets	3 169	3 122	3 078
Liabilities and Equity
Current liabilities
Short term debt	128	123	120
Obligations under finance and operational lease	20	21	12
Other current liabilities	90	83	82
Non-current liabilities
Long term debt	1 624	1 599	1 610
Obligations under finance and operational lease	91	92	88
Other long-term liabilities	1	1	1
Frontline Ltd. stockholders' equity	1 215	1 204	1 164
Total liabilities and stockholders' equity	3 169	3 122	3 078

• \$257 million in cash and cash equivalents including undrawn amount of unsecured facility, marketable securities and minimum cash requirements bank
• \$225 million in remaining NB Capex and \$164 million in estimated debt capacity
• No near term debt maturities
  • 2019: N/A
  • Nov 2020: \$120 million

Cash Breakeven and Cash Generation Potential

Well positioned to generate significant cash flow with market rates above current breakeven rates

Cash BE estimate remainder of 2019 Opex Q2 2019

7

Key Market Developments In Play

Weekly VLCC rates (USD/day)

Freight market observations

1

2

3

• Seasonal upturn comes earlier than expected

2019 characterized by counter-seasonal moves as market begins to tighten

• Unusually heavy refinery downtime since April

Preparations for IMO 2020 are beginning to take shape

• Continued shift in trading patterns

US export growth and OPEC production declines lead to tonne-mile growth

Source: Clarksons, Bloomberg, EIA

8

2017 2018 2019 5 Year Average

Deliveries Decline After 2019; Older Vessels Facing Surveys

Orderbooks have grown modestly in 2019, showing a significant disconnect compared to market expectations for freight demand growth

Source: Fearnleys

VLCC

Suezmax

Summary

Positive market outlook Risks to market outlook / mitigating factors

Crude demand set to increase

• Refinery maintenance season comes to an end
• Demand for compliant fuels increases crude oil input requirement

Tonne-mile expansion continues

• US export growth amidst OPEC production cuts increases tonne-mile demand
• Removal of Iranian waivers alters trade flows and remove vessels from the market

Fleet supply is manageable

• Fleet growth slowing in 2H 2019
• Effective capacity impacted by dry dockings and storage of fuels

Macro risks are creating uncertainty

• □ Higher oil price could cause demand destruction
• □ Impact of trade tensions and tariffs are unknown
• □ Global GDP growth may slow demand

IMO 2020 implementation doesn't go as expected

• □ Short-term exemptions granted
• □ HSFO / LSFO spread could diminish scrubber economics

Questions & Answers

www.frontline.bm

Appendix

Reconciliation
(Million \$ except per share)	Q2 2019	Q1 2019	YTD 2019
Total operating revenues net of voyage expenses
Total operating revenues	193,4	238,3	432
Voyage expenses	-90,7	-97,5	-188
Total operating revenues net of voyage expenses	102,7	140,8	244
Net income adj.
Net income (loss) attributable to the Company	1,1	40,0	41
Add back:
Unrealized loss on marketable securities	0,0	1,4	1
Loss on derivatives	5,6	4,1	10
Less:
Share of results of associated company	-0,8	0,0	- 1
Unrealized gain on marketable securities	-1,7	0,0	- 2
Net income adj.	4,2	45,5	50
(in thousands)
Weighted average number of ordinary shares	170,069	169,821	169 946
(in \$)
Basic (loss) earnings per share adjusted for certain non-cash charges	0,0	0,0	0,29
EBITDA adj.
Net income attributable to the Company	1,1	40,0	41
Add back:
Interest expense	23,2	23,4	47
Depreciation	28,3	27,4	56
Income tax expense	0,03	0,04	0,07
Net income attributable to the non-controlling interest	0,1	0,1	0
Unrealized loss on marketable securities	0,0	1,4	1
Loss on derivatives	5,6	4,1	10
Less:
Unrealized gain on marketable securities	-1,7	0,0	- 2
Share of results of associated company	-0,8	0,0	- 1
EBITDA adj.	55,8	96,5	152

This presentation describes: total operating revenues net of voyage expenses, net income attributable to the Company adjusted for certain non-cash items ("Net income adj.") and related per share amounts and Earnings Before Interest, Tax, Depreciation & Amortisation adjusted for the same non-cash items ("EBITDA adj."), which are not measures prepared in accordance with US GAAP ("non-GAAP").

We believe the non-GAAP financial measures presented in this press release provides investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance.

These non-GAAP financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP.

13 Second Quarter 2019| Aug 19