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Frontline Ltd. (FRO)

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Tuesday 22 February, 2011

Frontline Ltd.

FRO - Preliminary Fourth Quarter and Financial ...






Highlights


  * Frontline  reports net loss attributable to the Company of $11.8 million and
    loss per share of $0.15 for the fourth quarter of 2010.
  * Frontline  reports net income attributable to  the Company of $161.4 million
    and earnings per share of $2.07 for the year ended December 31, 2010.
  * Frontline  announces  a  cash  dividend  of  $0.10  per share for the fourth
    quarter of 2010.
  * In  November 2010, the Company  secured pre- and  post-delivery financing in
    the amount of $147 million representing 70 percent of the contract price for
    the first two VLCCs to be delivered in 2012.
  * In January 2011, Frontline sold its 2006-built VLCC Front Shanghai. The sale
    proceeds  were $91.24 million and after repayment of debt the sale generated
    $31.5  million in cash. Frontline has in  connection with the sale agreed to
    charter back the vessel from the new owner. The duration of the time charter
    is approximately two years at a rate of $35,000 per day. Delivery to the new
    owners  took place on January 26, 2011. The Company expects to record a gain
    of approximately $6.2 million on delivery of the vessel. In addition, a gain
    of $15.2 million will be recognized on a straight line basis over the period
    of the time charter.
  * In  January 2011, Frontline sold  all its shares  in OSG. The sale generated
    approximately $46.5 million in cash and the Company expects to record a loss
    of  approximately $3.3 million in the first quarter of 2011 in addition to a
    loss  of $9.4  million recorded  in the  fourth quarter  of 2010 following a
    market price adjustment of the shares.
  * In  February 2011, Frontline has  agreed with Ship  Finance to terminate the
    long  term charter parties  between the companies  for the single hull VLCCs
    Front  Highness and Front  Ace and Ship  Finance has simultaneously sold the
    vessels  to  unrelated  third  parties.  The  termination of the charters is
    expected  to take place in March 2011. Ship Finance will make a compensation
    payment to Frontline of approximately $5.8 million for the early termination
    of the charters, which will be recorded in the first quarter of 2011.


Preliminary Fourth Quarter and Financial Year 2010 Results

The  Board of Frontline Ltd. (the "Company" or "Frontline") announces a net loss
attributable  to the Company of  $11.8 million for the  fourth quarter of 2010,
equivalent  to a loss per share of  $0.15, compared with net income attributable
to  the  Company  of  $12.3  million  and  earnings  per  share of $0.16 for the
preceding  quarter. The loss  attributable to the  Company in the fourth quarter
includes non-operating losses of $5.2 million, which mainly relates to a loss of
$9.4  million following  a market  price adjustment  of shares owned in Overseas
Shipholding  Group  Inc.  ("OSG")  partially  offset  by  a gain of $3.6 million
(before  minority interest) in Independent  Tankers Corporation Limited ("ITCL")
arising  on the termination of a funding agreement. The loss attributable to the
Company  in the fourth quarter also includes  a gain of $4.6 million relating to
the  amortization of a deferred gain  on three lease terminations. Net operating
income  in the fourth quarter  was $29.3 million compared  with $48.4 million in
the  preceding quarter. Net operating income  and net income attributable to the
Company decreased primarily as a result of the weaker spot market.

The  average  daily  time  charter  equivalents  ("TCEs") earned in the spot and
period  market in the fourth quarter by the Company's VLCCs, Suezmax tankers and
Suezmax  OBO carriers  were $24,700  (including single  hull VLCCs), $16,500 and
$45,100,   respectively,   compared   with   $29,800,   $18,200,   and  $48,600,
respectively,  in the  preceding quarter.  The spot  earnings for  the Company's
double hull VLCCs and Suezmax vessels were $22,600 and $15,200, respectively, in
the fourth quarter compared with $30,000 and $15,700, respectively, in the third
quarter. The Gemini Suezmax pool had spot net earnings of $14,600 per day in the
fourth quarter compared with $17,500 per day in the third quarter. The Company's
double  hull VLCCs, excluding  the spot index  related time charter vessels, had
spot  earnings of $23,300 per day in the fourth quarter compared with $30,200 in
the third quarter.

Profit  share expense of $2.0 million has been recorded in the fourth quarter as
a result of the profit sharing agreement with Ship Finance International Limited
("Ship  Finance") compared to  $5.8 million in  the preceding quarter reflecting
the  lower TCEs. The total profit share  expense to Ship Finance for 2010, which
will be paid in the first quarter of 2011, was $30.6 million.

Ship  operating expenses increased  by $4.0 million  compared with the preceding
quarter  mainly  due  to  an  increase  in  dry  docking  costs of $3.3 million.
Frontline  drydocked three vessels in the fourth  quarter and two vessels in the
third  quarter. Charter  hire expenses  decreased by  $2.9 million in the fourth
quarter  compared with the  preceding quarter primarily  due to a  period of off
hire  for one vessel due to  a dry docking and a  decrease in loss making voyage
provisions from the previous quarter.

Interest  income was $2.7 million  in the fourth quarter,  of which $2.6 million
relates  to restricted deposits held by  subsidiaries reported in ITCL. Interest
expense, net of capitalized interest, was $37.7 million in the fourth quarter of
which $7.5 million relates to ITCL.

Frontline announces net income attributable to the Company of $161.4 million for
the year ended December 31, 2010, equivalent to earnings per share of $2.07. The
average  daily  TCEs  earned  in  the  spot  and period market in the year ended
December  31, 2010 by  the  Company's  VLCCs,  Suezmax  tankers  and Suezmax OBO
carriers were $35,900, $25,800 and $47,400, respectively, compared with $38,300,
$25,300  and $43,000,  respectively, for  the year  ended December 31, 2009. The
spot  earnings  for  the  Company's  double  hull VLCCs and Suezmax vessels were
$36,800  and  $24,300,  respectively,  in  the year ended December 31, 2010. The
Company's  double  hull  VLCCs  excluding  the  spot  index related time charter
vessels  had spot earnings  of $38,100 per  day and the  Gemini Suezmax pool had
spot net earnings of $24,900 per day in the year ended December 31, 2010.

As  of December  31, 2010, the Company  had total  cash and  cash equivalents of
$176.6  million and restricted cash of  $244.1 million. Restricted cash includes
$181.6  million relating  to deposits  in ITCL  and $62.0  million in Frontline,
which is restricted under the charter agreements with Ship Finance.

In  February 2011, the Company  has average total  cash cost breakeven rates for
2011 on  a TCE basis for VLCCs and  Suezmax tankers of approximately $30,100 and
$24,500, respectively.


Fleet Development
In  November 2010, Frontline  extended the  time-charter in  agreements of Front
Chief,  Front Commander and Front Crown  (all 1999-built double hull VLCCs), for
one year from January 2011 at $26,500 per day per vessel.

In January 2011, Frontline sold its 2006-built VLCC Front Shanghai. The net sale
proceeds  were $91.24  million and  after repayment  of debt  the sale generated
$31.5  million in  cash. Frontline  has in  connection with  the sale  agreed to
charter  back the vessel from the new owner. The duration of the time charter is
approximately two years at a rate of $35,000 per day. Delivery to the new owners
and commencement of the time charter took place on January 26, 2011. The Company
expects  to  record  a  gain  of  approximately  $6.2 million on delivery of the
vessel.  In addition, a gain  of $15.2 million will  be recognized on a straight
line basis over the period of the time charter.

In  January  2011, the  chartered-in  VLCC  Desh  Ujaala was re-delivered to the
owners.

In  February 2011, Frontline agreed with Ship Finance to terminate the long term
charter  parties between the companies for  the single hull VLCCs Front Highness
and  Front Ace and Ship Finance has simultaneously sold the vessels to unrelated
third  parties. The  termination of  the charters  is expected  to take place in
March  2011. Ship  Finance  will  make  a  compensation  payment to Frontline of
approximately $5.8 million for the early termination of the charters, which will
be recorded in the first quarter of 2011.
Newbuilding Program

As  of December 31, 2010, Frontline's newbuilding  program comprised two Suezmax
tankers  and five  VLCCs, which  constitute a  contractual cost of $650 million.
Installments  of  $198.5  million  have  been  made  on the newbuildings and the
remaining  installments  to  be  paid  as  of December 31, 2010 amount to $451.5
million,  with expected payments of approximately $106.9 million in 2011, $168.9
million in 2012 and $175.7 million in 2013.

In  November 2010, the Company  secured pre- and  post-delivery financing in the
amount  of $147  million representing  70 percent of  the contract price for the
first two VLCCs to be delivered in 2012.

For  the three  remaining VLCCs  and the  two Suezmax  tanker newbuildings to be
delivered  between late 2012 and 2013, the Company  has not yet established pre-
and  post-delivery financing.  Based  on the recently  secured financing for the
VLCCs   we  assume  a  70 percent  financing  of current market values for these
newbuildings.  On this basis,  Frontline has already  paid the equity investment
and the remaining newbuilding installments will be fully financed by bank debt.


Corporate

In  October 2010, Frontline  sold the  15.8 percent stake  in Navig8 Limited and
received net proceeds of $19.8 million.
In  January  2011, Frontline  sold  all  its  shares  in OSG. The sale generated
approximately  $46.5 million in cash and the Company expects to record a loss of
approximately $3.3 million in the first quarter of 2011 in addition to a loss of
$9.4  million recorded  in the  fourth quarter  of 2010 following a market price
adjustment of the shares. The Board is very disappointed with the performance of
this  investment and also with the way OSG has developed since the investment in
2008. The  management  of  OSG  has  never  opened  for  real  discussions about
consolidation  between Frontline  and OSG.  The decision  to sell the shares was
taken  after thorough  evaluation of  OSG's debt  situation, mainly  focusing on
OSG's  sustainability and  financing needs  in case  of a continued weak freight
market.

In  February 2011, Frixos Savvides has for personal reasons decided to step down
from the Board. The Board will look for a replacement of Mr. Savvides.

On  February 21, 2011, the Company's  Board of Directors  declared a dividend of
$0.10  per share. The record date for the dividend is March 9, 2011, ex dividend
date is March 7, 2011 and the dividend will be paid on or about March 23, 2011.

77,858,502 ordinary  shares were  outstanding as  of December  31, 2010, and the
weighted average number of shares outstanding for the quarter was 77,858,502.


The Market

The  market  rate  for  a  VLCC  trading  on a standard 'TD3' voyage between The
Arabian  Gulf and Japan in  the fourth quarter of  2010 was WS 58; equivalent to
$15,600/day; representing an increase of approximately WS 6 points or $2,400/day
from  the third quarter of 2010 and an  increase of WS 10 points from the fourth
quarter  of 2009. Present  market indications  are approximately $22,000/day for
the first quarter of 2011.

The  market rate for a  Suezmax trading on a  standard 'TD5' voyage between West
Africa  and Philadelphia in the fourth  quarter of 2010 was WS 93; equivalent to
approximately  $21,700/day compared  to approximately  $14,000/day in  the third
quarter.  There was  an increase  of about  WS 18 points  from the third quarter
2010 and  an increase of  WS 23 points from  the fourth quarter of 2009. Present
market indications are approximately $15,000/day in the first quarter of 2011.

Fujairah  bunker prices averaged $488/mt in  the fourth quarter of 2010 compared
to  $444.5/mt in the third quarter of 2010; an increase of approximately $44/mt.
Bunker  prices varied from a low of $462/mt mid October and a high of $512/mt at
the  end of December. On February  18, 2011, the quoted bunker price in Fujairah
was 627/mt.

Philadelphia  bunker prices averaged $503.5/mt in  the fourth quarter, which was
an  increase of $39/mt from the third quarter of 2010. Bunker prices varied from
a  low of $475.5/mt at the end of October  and a high of $527.5/mt at the end of
December.  On  February  18, 2011, the  quoted  bunker price in Philadelphia was
600/mt.

The International Energy Agency's ("IEA") February 2011 report stated an average
OPEC  oil production,  including Iraq,  of 29.46 million  barrels per day (mb/d)
during  the fourth quarter of the year.  This was an increase of 190,000 barrels
per  day compared  to the  third quarter  of 2010, and  an increase  of 500,000
barrels per day compared to the fourth quarter of 2009.

IEA  further estimates  that world  oil demand  averaged 89.3 mb/d in the fourth
quarter  of 2010, representing an increase  of approximately 680,000 barrels per
day  compared to the third quarter  of 2010, and approximately 3.4 mb/d from the
fourth  quarter of 2009. Additionally,  the IEA estimates  that world oil demand
will  average approximately 89.3 mb/d  in 2011 representing an  increase of 1.7
percent or approximately 1.5 mb/d from 2010.

The VLCC fleet totalled 547 vessels at the end of the fourth quarter of 2010, up
from  539 vessels at  the end  of the  previous quarter. 11 VLCCs were delivered
during  the quarter  versus an  estimated 17 at  the beginning  of the year. 54
vessels were delivered in 2010 versus an estimate of 67 deliveries, representing
19 percent  slippage, and throughout 2011 the current estimate is 79 deliveries.
The  orderbook counted 185 vessels at  the end of the  fourth quarter, down from
189 orders  from the previous  quarter. Seven new  orders were placed during the
quarter  and the  current orderbook  represents approximately  34 percent of the
VLCC fleet. During the quarter three vessels were removed from the trading fleet
for  scrapping or conversion/storage purposes. According to Fearnleys the single
hull fleet now stands at 43 vessels.

The Suezmax fleet totalled 409 vessels at the end of the fourth quarter, up from
405 vessels  at  the  end  of  the  previous quarter. Six vessels were delivered
during  the quarter  versus an  estimated 17 at  the beginning  of the year. 37
vessels were delivered in 2010 versus an estimate of 61 deliveries, representing
39 percent  slippage, and throughout 2011 the current estimate is 63 deliveries.
The  orderbook counted  146 vessels at  the end  of the  quarter, down from 151
vessels  at the end of  the previous quarter. Two  new orders were placed during
the  quarter and  the current  orderbook now  represents 36 percent of the total
fleet.  During  the  quarter  one  newbuilding  contract  was cancelled two more
vessels  were removed from the trading  fleet. According to Fearnleys the single
hull fleet now stands at 14 vessels.


Strategy

We focus on maintaining our position as the leading operator of VLCC and Suezmax
tankers. By following a strategy of maintaining a certain fixed charter coverage
percentage  for the  double hull  vessels, full  fixed charter  coverage for our
single  hull vessels and  a high fixed  charter coverage percentage  for the OBO
vessels,  we provide  downside protection  in a  weak tanker  market as  well as
preserving upside opportunities from the spot trading vessels in a strong tanker
market.

We  maintain a lean organization  and use outsourcing extensively  to keep a low
cost  basis and  low cash  cost breakeven  rates. We  emphasize maintaining high
financial  flexibility and  a strong  balance sheet  and are  always looking for
enhancing  shareholder value  and maintaining  a high  quarterly dividend payout
ratio.


Outlook
IEA  estimated in the February 2011 report  that the global oil demand increased
by  680,000 b/d  or  0.8 percent  in  the  fourth  quarter compared to the third
quarter. At the same time the tanker market experienced a higher growth in fleet
supply  due  to  a  high  number  of  newbuilding  deliveries and henceforth the
depressed  tanker rates experienced  in the third  quarter also continued in the
fourth  quarter. This development has also continued so far in the first quarter
of 2011, however with some improved trend in the VLCC market.

The  International Monetary Fund forecasts world growth to rise by approximately
5.0 percent in 2010 and 4.4 percent in 2011, and the IEA projects an increase in
world's  oil consumption in 2011 by  1.5 mb/d, compared to 2010, which indicates
strong long term oil demand.

The  newbuilding orderbook includes a high  number of expected vessel deliveries
in 2011 and 2012. However, the actual deliveries in 2010 have been significantly
lower  than anticipated  with 19 percent  slippage in  the VLCC  segment and 39
percent  in the  Suezmax segment  and this  development is  likely to be further
strengthened  by the expected delays,  slippage and cancellations of newbuilding
orders  going  forward.  This  combined  with  slow steaming, increased ton-mile
scenario  and stricter oil major requirements could create a more positive fleet
utilization for both the VLCC and Suezmax tanker segments going forward.

In  2010, Frontline secured approximately $640 million in new capital, committed
new  bank  financing  and  release  of  restricted  cash.  The  Company also re-
negotiated the newbuilding program and managed to reduce the program in 2009 and
2010 with  net $476 million.  Furthermore, sale of  vessels and shares in 2011,
have generated additional $84 million in cash after repayment of debt.

The Company's newbuilding program contributes to renew the fleet and the vessels
will be delivered in the period 2012 to 2013. Assuming 70 percent debt financing
of  current market values, Frontline has  already paid the equity investment and
the remaining newbuilding instalments will be fully financed by bank debt.

The Board is not satisfied with reported earnings for the quarter. The poor
earnings are mainly a reflection of the weak global freight market. This
weakness might continue until the current large gap between supply and demand in
the tanker market narrows. Based on the Company's trading results achieved so
far in the first quarter, the Board expects the weak trend in the fourth quarter
results to be extended into the first quarter.

Frontline will in case of a continued challenging market situation focus on
having financial flexibility and a healthy balance sheet. Through such a
strategy the Company will be better positioned than peers to tolerate a
prolonged weak trend in the tanker market and be able to react to attractive
market opportunities that may occur.

Forward Looking Statements


This  press release  contains forward  looking statements.  These statements are
based  upon various assumptions, many of which  are based, in turn, upon further
assumptions,   including   Frontline   management's  examination  of  historical
operating  trends.  Although  Frontline  believes  that  these  assumptions were
reasonable  when made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are  beyond its control, Frontline cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions.

Important  factors that,  in the  Company's view,  could cause actual results to
differ  materially  from  those  discussed  in  this  press  release include the
strength  of world economies and currencies, general market conditions including
fluctuations  in charter hire rates and vessel  values, changes in demand in the
tanker  market as a result of changes  in OPEC's petroleum production levels and
world  wide  oil  consumption  and  storage,  changes in the Company's operating
expenses  including bunker prices,  dry-docking and insurance  costs, 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,  and other  important factors described from
time  to  time  in  the  reports  filed  by  the  Company with the United States
Securities and Exchange Commission.

The full report is available for download in the link enclosed.

The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
February 21, 2011

Questions should be directed to:

Jens Martin Jensen: Chief Executive Officer, Frontline Management AS
+47 23 11 40 99
Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76


This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.



4th quarter 2010 results: 


http://hugin.info/182/R/1491186/426841.pdf




This announcement is distributed by Thomson Reuters on behalf of 
Thomson Reuters clients. The owner of this announcement warrants that: 
(i) the releases contained herein are protected by copyright and 
    other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and 
     originality of the information contained therein. 
    
Source: Frontline Ltd. via Thomson Reuters ONE

[HUG#1491186] 
  



                                                                                                                                                                                                                                                       

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