UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June 2005
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Frontline Ltd.
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(Translation of registrant's name into English)
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [ ]
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-__________
Item 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 1 is a copy of the press release of Frontline Ltd. (the
"Company") dated May 31, 2005.
Exhibit 1
Frontline Ltd. Interim Report January - March 2005
HIGHLIGHTS
o Frontline reports a quarterly result of $279.7 million and earnings per
share of $3.74 for the first quarter of 2005.
o Frontline announces a cash dividend of $3.10 per share.
FIRST QUARTER RESULTS
The Board of Frontline Ltd. is pleased to announce net income of $279.7 million
for the first quarter of 2005, equivalent to earnings per share of $3.74.
Operating income for the quarter was $309.3 million compared to $471.7 million
in the fourth quarter of 2004 - this decrease reflects the lower market rates
experienced in the first quarter of 2005 compared to the exceptionally strong
fourth quarter in 2004. The average daily time charter equivalents ("TCEs")
earned in the spot and period market by the Company's VLCCs, Suezmax tankers and
Suezmax OBO carriers were $77,500, $55,200 and $35,800 respectively compared to
$111,200, $85,000 and $31,100 respectively in the fourth quarter of 2004. In the
first quarter of 2005, the Company reported a gain from sale of assets of $28.5
million as a result of the sale of one Suezmax.
Interest income was $8.7 million in the quarter, of which, $5.8 million relates
to restricted deposits reported in Independent Tankers Corporation ("ITC"). The
Company recorded interest expense of $61.1 million in the quarter, of which
$16.0 million relates to ITC. During the first quarter, Ship Finance
International Limited ("Ship Finance") refinanced its $1,058.0 million facility
and the new facility is for $1,087.0 million. In connection with this
refinancing, $11.7 million in deferred charges relating to the old facility were
written off.
The total for other financial items for the quarter was a net gain of $20.4
million compared to a net gain of $17.1 million in the fourth quarter of 2004.
Movements in interest rates in the quarter have resulted in valuation gains of
$12.6 million on interest rate swaps in the first quarter compared to $5.9
million in the fourth quarter of 2004. As at March 31, 2005, the Company had
interest rate swaps with a total notional principal of $628.8 million of which
$578.8 million relates to Ship Finance. The mark to market valuation of freight
future agreements in the first quarter has resulted in a loss of $5.2 million
compared to a gain of $0.7 million in the fourth quarter. Other financial items
also includes a gain of $12.7 million on the sale of marketable securities.
The Company recorded a foreign exchange gain of $6.9 million in the first
quarter compared to a loss of $9.8 million on the fourth quarter of 2004. This
has arisen due to Yen debt in subsidiaries and certain Yen currency contracts
and reflects the weakening of the Yen from 103.1 at December 31, 2004 to 107.55
at March 31, 2005.
The Company sold in the first quarter its remaining 10.7 percent holding in
Golden Ocean Group Limited that was held after the spin off in 2004 resulting in
a net gain of $12.8 million, of which, $11.8 million has been classified as
discontinued operations.
As at March 31, 2005, the Company had total cash and cash equivalents of $783.5
million which includes $589.6 million of restricted cash. Restricted cash
includes $309.6 million relating to deposits in ITC and $271.0 million in
Frontline Shipping Limited and Frontline Shipping II Limited. As of May 23,
2005, the Company has cash breakeven rates on a TCE basis for VLCCs and
Suezmaxes of $27,565 and $20,850 respectively.
The results for the quarter ended March 31, 2004 have been restated to reflect
discontinued operations related to the dry bulk operations sold during 2004.
CORPORATE AND OTHER MATTERS
On May 31, 2005 the Board declared a dividend of $3.10 per share. The record
date for the dividend is June 10, 2005, ex dividend date is June 8, 2005 and the
dividend will be paid on or about June 24, 2005.
In January 2005, the Company reduced its shareholding in Ship Finance by
approximately 25 percentage points through a share distribution. In March 2005,
the Company distributed a further 10 percentage points of its investment in Ship
Finance. As of today, Frontline's shareholding in Ship Finance is approximately
16 percent.
At March 31, 2005, 74,825,169 ordinary shares were outstanding and the weighted
average number of shares outstanding for the quarter then ended was 74,825,169.
The Company announced in a 13D filing submitted to the U.S. SEC on April 28,
2005, that it had reduced its ownership in General Maritime ("Genmar"). As of
this date, Frontline held a total of 1,693,000 shares in Genmar equal to 4.5
percent of Genmar's outstanding share capital.
In January 2005, Ship Finance exercised its option to acquire the VLCC Oscilla
from an unrelated third party. The vessel was delivered in April 2005 and
renamed Front Scilla. Between January and March 2005, the Company took delivery
of three additional double hull VLCCs on the exercise of purchase options from
German KGs. These four vessels are now owned by Ship Finance and are subject to
time charters, management and profit sharing arrangements between Ship Finance
and Frontline on similar terms as the rest of the Ship Finance tanker fleet.
In March 2005, the Company sold the Suezmax tanker Front Fighter to an unrelated
third party. The time charter and management arrangements between the Company
and Ship Finance were concurrently cancelled.
The Company announces the sale of the dry bulk carrier, Cos Hero. The vessel is
anticipated to be delivered to its new owners in August, 2005.
In March and May, 2005 the Company has chartered out three VLCCs. The vessels
are chartered out until 2010, with an option for the charterer to extend the
charters. The contracts will provide the Company with a guaranteed minimum hire
of $34,500 per day and in addition provide for a 50:50 profit sharing of
earnings in excess of $36,500 per day.
In May 2005, Ship Finance announced the sale of the three Suezmax tankers, Front
Lillo, Front Emperor and Front Spirit, for a total consideration of $92.0
million. The vessels will be delivered to the buyers within the next few weeks.
At the same time, Ship Finance also announced the acquisition of three similar
vessels, Front Traveller, Front Transporter, and Front Target from the Company
for an aggregate amount of $92.0 million. The time charter and management
arrangements between Ship Finance and Frontline will be cancelled for the
vessels being sold and replaced with new agreements on similar terms for the
vessels acquired.
THE MARKET
The strong tanker market that we experienced in the fourth quarter of 2004
became weaker in the first quarter of 2005. The market experienced a strong
correction in January and the rates did not bottom out before we reached the WS
70 level. January became a weak month, but in February and March the market
rebounded and stayed at approximately WS 150 for the remainder of the quarter.
The average WS rate Arabian Gulf to East was approximately 107 compared to 257
in the fourth quarter which equates to a TCE of $55,000 per day compared to
$160,000 per day. In the Suezmax market from West Africa to the east coast of
the U.S. the average WS rate for the first quarter of 2005 was 164 or
approximately a TCE of $42,000 compared to WS 297 and a TCE of $91,000 in the
fourth quarter. The weakening of the market along with the cutback in OPEC
production came despite a continued growth in the crude oil demand particularly
in China. The cutbacks had a psychological effect on the market which resulted
in a larger correction in the freight market than can be explained purely on the
basis of lower demand for transportation services.
According to the IEA May report, the average OPEC oil production, including
Iraq, in the first quarter of 2005 was approximately 28.79 million barrels per
day (b/d), a decrease from the fourth quarter of 2004 of about 2.5 percent when
they produced about 29.52 million b/d. OPEC had expected an overproduction and a
gradual softening of prices during the quarter, but in spite of the record high
crude oil prices it appears that demand remained firm and OPEC had to announce
an increase in their production in March.
IEA estimates that world crude oil demand averaged 84.25 million b/d in the
first quarter, a decrease of 0.2 percent from the fourth quarter of 2004. IEA
further predicts that the average demand for 2005 will be 84.30 million b/d.
There are still oil analysts that think that IEA are conservative in their
estimates and that demand will be considerably higher.
The world VLCC fleet totalled 451 vessels at the end of the first quarter 2005,
an increase of seven vessels or 1.6 percent over the quarter. No VLCC's was
scrapped in the period and seven were delivered. The total order book is now at
83 vessels down from 86 after the fourth quarter 2004. This represents 18.4
percent of the current VLCC fleet. A total of four VLCC's were ordered during
the quarter
The world Suezmax fleet totalled 313 vessels at the end of the quarter, up from
310 vessels after the fourth quarter 2004. No Suezmax was scrapped during the
quarter and three were delivered. The total orderbook for Suezmaxes is now at
80, down from 83 after the fourth quarter. This represents 25.6 percent of the
current Suezmax fleet. No Suezmaxes were ordered in the quarter.
The tanker market looks relatively healthy for the remainder of the year. The
freight futures market seems to be reflecting this view, and at the moment it is
possible to sell freight futures for the rest of the year 2005 at a level that
equates to approximately $45,000 per day on VLCCs, and $40,000 per day for 2006.
For Suezmaxes we can now hedge the rest of the year 2005 at $33,000 per day and
$31,000 per day for 2006.
STRATEGY
The Company will continue to seek to optimise long term return on equity. Such a
return will be achieved through having limited capital tied up in asset
ownership, high payout ratios and a balanced freight portfolio including good
forward coverage.
It is expected that the tanker fleet in the coming years will grow at a higher
pace than it has done the last five years. In order to meet the risk of such a
changing environment, Frontline has worked in order to increase the charter
coverage for the fleet. Special focus has been put on charter coverage for
single hull tonnage.
Frontline has further reduced its position in Genmar since its last SEC filing.
In line with what was written in the fourth quarter report, Frontline sees the
investment in Genmar as opportunistic. The negative response towards
consolidation from Genmar's management has reduced our interest and forced
Frontline to look for alternatives. It is of vital importance for the future of
the tanker market that the responsible tanker companies, including their
shareholders, are looking for ways to reverse the current trend of a more
fragmented industry. This should over time spur the outbreak of the mega mergers
which we recently have seen in other parts of the shipping market. Economies of
scale, flexibility to customers, reduced financing cost, better interest from
the capital market and a much improved fleet utilisation and efficiency are all
factors which strongly direct the industry to further consolidation.
The Board today sees limited opportunities to grow the Company through purchase
of modern tonnage in the S&P market. The relationship between risk and reward
has changed dramatically during the last two years. It should be anticipated
that the most interesting opportunities in the coming period will come from
corporate opportunities and charter deals.
The Board had targeted a divestment of the remaining Ship Finance shares in the
first half of 2005. The recent weakness in the market and the relative low
valuation of Ship Finance compared to other yield focused shipping shares might
change the strategy for this divestment somewhat.
OUTLOOK
The market has in line with the development in 2004 shown seasonal weakness in
the second quarter. The world wide consumption of crude oil in the latter part
of the year is close to four million barrels higher than in May. The increase in
demand will lead to increased production levels, and is expected to push freight
rates up significantly. The increase in fleet size in second half of 2005 is
likely to lead to a somewhat lower freight market than in 2004. However, this
will to a large extent depend on the development in the global economy. The
delivery situation of particularly VLCCs in 2006 is lower than 2005 and might
reverse the trend. The long term demand effects of high crude oil prices and the
increased inefficiencies of the single hull fleet are further factors which will
decide the direction of this market.
Frontline is well positioned through partly fixed employment. The cash break
even rates for the open tonnage are reduced to $24,335 and $12,544 per day for
VLCCs and Suezmaxes respectively. The forward market for VLCCs and Suezmaxes
indicate that the Company will generate substantial amounts of cash in the
coming quarters. The free cash position as per end May 2005 is just below $300
million. In addition to positive cash flow from operations, the development in
free cash in the coming months will be positively influenced by the sale of the
three Suezmaxes and the Cos Hero.
The Board is pleased with the results achieved so far this year, and remains
optimistic about the outlook for the Company. The Company is likely generate
strong positive net income numbers for the remaining three quarters of 2005, and
the shareholders should expect continuous high pay out ratios.
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 crude 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.
May 31, 2005
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Oscar Spieler: Chief Executive Officer, Frontline Management AS
+47 23 11 40 79
Tom Jebsen, Chief Financial Officer, Frontline Management AS
+47 23 11 40 21
FRONTLINE GROUP FIRST QUARTER REPORT (UNAUDITED)
INCOME STATEMENT 2005 2004 2004
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
(restated)
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Total operating revenues 460,624 444,488 1,856,428
Gain from sale of assets 28,528 244 19,574
Voyage expenses 84,464 81,665 361,609
Ship operating expenses 40,743 30,163 130,395
Charter hire expenses 1,118 11,756 39,302
Administrative expenses 5,155 7,254 26,516
Depreciation 48,405 44,545 181,274
Total operating expenses 179,885 175,383 739,096
Operating income 309,267 269,349 1,136,906
Interest income 8,690 7,962 31,595
Interest expense (61,082) (53,635) (205,641)
Share of results from associated companies 1,930 2,863 10,553
Other financial items 20,401 (12,639) 3,566
Foreign currency exchange gain (loss) 6,998 (3,396) (5,378)
Income before discontinued operations, taxes and minority interest 286, 204 210,504 971,601
Minority interest (18,399) - (64,995)
Taxes - - (178)
Discontinued operations 11,864 3,929 116,954
Net income 279,669 214,433 1,023,382
Earnings per Share ($)
EPS from continuing operations $3.58 $2.86 $12.22
EPS $3.74 $2.91 $13.79
Income on time charter basis ($ per day per ship)*
VLCC 77,500 74,900 78,000
Suezmax 55,200 59,100 57,900
Suezmax OBO 35,800 26,100 27,900
* Basis = Calendar days minus off-hire. Figures after deduction of broker
commission
2005 2004 2004
BALANCE SHEET Mar 31 Mar 31 Dec 31
(in thousands of $)
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ASSETS
Short term
Cash and cash equivalents 193,979 285,325 105,702
Restricted cash 589,578 571,858 592,607
Other current assets 357,321 229,070 456,595
Long term
Newbuildings and vessel purchase options 24,231 8,370 24,231
Vessels and equipment, net 2,397,147 2,316,654 2,254,361
Vessels under capital lease, net 707,346 753,580 718,842
Investment in finance leases 107,727 120,958 107,664
Investment in associated companies 22,414 12,888 22,955
Deferred charges and other long-term assets 53,894 42,829 55,803
Total assets 4,453,637 4,341,532 4,338,760
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 167,903 138,763 151,614
Current portion of obligations under capital leases 22,906 20,446 21,498
Other current liabilities 147,437 107,431 166,320
Long term
Long term interest bearing debt 2,112,439 2,115,341 1,990,131
Obligations under capital leases 725,720 748,718 732,153
Other long term liabilities 24,770 65,643 30,346
Minority interest 545,381 - 328,730
Stockholders' equity 707,081 1,145,190 917,968
Total liabilities and stockholders' equity 4,453,637 4,341,532 4,338,760
2005 2004 2004
STATEMENT OF CASHFLOWS
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
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OPERATING ACTIVITIES
Net income (loss) 279,669 214,433 1,023,382
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortisation 60,762 45,184 194,083
Unrealised foreign currency exchange (gain) loss (4,827) 8,407 390
Gain or loss on sale of assets (including marketable securities) (53,074) (244) (126,230)
Results from associated companies (1,930) (2,863) (10,552)
Adjustment of financial derivatives to market value (10,615) 12,842 (15,675)
Other, net 17,862 3,201 61,659
Change in operating assets and liabilities 49,787 (30,614) (221,070)
Net cash provided by operating activities 337,634 250,346 905,987
INVESTING ACTIVITIES
Maturity (placement) of restricted cash 3,029 322,491 301,743
Purchase of short-term investment - (9,988) -
Additions to newbuildings, vessels and equipment (218,915) - (141,660)
Proceeds from sales of vessels 67,750 11,181 59,787
Investments in associated companies, net 2,984 (32,143) (22,443)
Acquisition of business, net of cash acquired - - (18,858)
Receipts from investments in finance leases and loans receivable 1,085 17,482
Purchases and sales of other assets, net 55,192 (15,098)
(88,875) 291,541 180,953
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Proceeds from long-term debt, net of fees paid 1,102,855 1,464,119 1,707,655
Repayments of long-term debt (968,559) 1,506,943) (1,814,269)
Repayment of capital leases (5,024) (4,796) (20,311)
Dividends paid (289,754) (331,989) (1,038,315)
Issue of shares, net - 1,321 62,276
Net cash provided by (used in) financing activities (160,482) (378,288) (1,102,964)
Net increase (decrease) in cash and cash equivalents 88,277 163,599 (16,024)
Cash and cash equivalents at start of period 105,702 121,726 121,726
Cash and cash equivalents at end of period 193,979 285,325 105,702
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
Frontline Ltd.
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(Registrant)
Date June 8, 2005 By /s/ Kate Blankenship
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Kate Blankenship
Company Secretary and Chief Accounting Officer
02089.0009 #578233