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 November 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 [_]
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]
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 November 13, 2005.
Exhibit 1
Frontline Ltd. Interim Report July to September 2005
Highlights
o Frontline reports net income of $73.8 million and earnings per share of
$0.99 for the third quarter of 2005.
o Frontline reports nine month results of $473.1 million and earnings per
share of $6.32.
o Frontline announces a cash dividend of $1.50 per share.
Third Quarter and Nine Months Results
The Board of Frontline Ltd. (the "Company) announces net income of $73.8 million
for the third quarter of 2005, equivalent to earnings per share of $0.99.
Operating income for the quarter was $142.1 million compared to $185.1 million
in the second quarter. This reflects the continued decrease in the market during
the third quarter. 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 $37,100, $26,200 and $34,700 respectively compared with
$50,300, $34,100 and $36,400 respectively in the second quarter of 2005. In the
third quarter, a gain of $32.4 million was reported on the sale of a Suezmax
tanker.
Interest income was $10.9 million in the quarter, of which, $5.9 million relates
to restricted deposits held by subsidiaries reported in Independent Tankers
Corporation ("ITC"). The Company recorded interest expense of $50.3 million in
the third quarter of which $15.7 million relates to ITC.
The total for other financial items in the third quarter was a gain of $17.2
million compared to a net gain of $2.7 million in the second quarter of 2005. An
increase in the forward curve for Libor rates in the quarter has resulted in
valuation gains of $8.4 million on interest rate swaps in the third quarter
compared to valuation losses of $8.0 million in the second quarter of 2005. As
at September 30, 2005, the Company had interest rate swaps with a total notional
principal of $622.6 million of which $572.6 million relates to Ship Finance
International Limited ("Ship Finance"). The valuation of freight future
agreements to market value has resulted in a gain of $0.4 million compared to a
gain of $2.7 million in the second quarter.
Frontline announces net income of $473.1 million for the nine months ended
September 30, 2005, equivalent to earnings per share of $6.32. The TCEs earned
in the spot and period market by the Company's VLCCs, Suezmax tankers, and
Suezmax OBO carriers were $54,300, $39,200 and $35,600, respectively.
As at September 30, 2005, the Company had total cash and cash equivalents of
$794.2 million which includes $602.9 million of restricted cash. Restricted cash
includes $310.3 million relating to deposits in ITC and $289.7 million in
Frontline Shipping Limited and Frontline Shipping II Limited. As of November
2005, the Company has cash breakeven rates on a TCE basis for VLCCs and
Suezmaxes of $27,712 and $20,990 respectively.
The results for the quarter and nine months ended September 30, 2004 and the
year ended December 31, 2004 have been restated to reflect discontinued
operations related to the dry bulk operations sold during 2004 and 2005.
Corporate and Other Matters
In August 2005, Frontline sold the Suezmax tanker Front Hunter to a third party
for $71 million. The deal resulted in the cancellation of the long term charter
agreement between Ship Finance and Frontline.
In August 2005, Frontline sold its last remaining dry bulk vessel, the Cos Hero,
to a third party for net proceeds of $20.7 million.
On August 18, 2005, Golden Ocean Group Limited ("Golden Ocean") exercised its
option to acquire the second of two newbuilding Panamax bulk carriers from the
Company at Frontline's cost plus Frontline's funding expenses. The vessel was
delivered to Golden Ocean in early September 2005.
On November 13, 2005, the Board declared a dividend of $1.50 per share. The
record date for the dividend is November 29, 2005, the ex dividend date is 25
November, 2005 and the dividend will be paid on or about 13 December, 2005.
At September 30, 2005, 74,825,169 ordinary shares were outstanding and the
weighted average number of shares outstanding for the quarter and nine months
then ended was also 74,825,169.
The Market
The overall downward trend of the VLCC market witnessed in the second quarter of
the year shifted to a significantly more positive trend during the third
quarter. July started off on a rebound, seeing a peak in rates at Worldscale
("WS") 107 for the benchmark route from the Arabian Gulf to the East. The market
experienced great volatility during the quarter, demonstrated by a fall in rates
down to WS 60 levels in the first half of August. However, at the end of the
quarter the rates rose dramatically, seeing fixtures being concluded at WS 105
levels at period end. The average WS rate from Arabian Gulf to the East was
about WS 83 compared to WS 72 in the second quarter of 2005. This equates to a
TCE of approximately $34,000 per day. The Suezmax market experienced a downward
trend compared to the second quarter. The benchmark route from West Africa to
the East coast of U.S. started off falling from a peak in rates at the end of
the second quarter down to WS 100 levels. The rates remained relatively stable
until the end of September, when the market strengthened considerably and rates
rose to WS 165 at period end. The average WS rate from West Africa to the East
coast of the U.S. was about 115, or approximately $25,500 per day, compared to
WS 133 in the second quarter.
The hurricane activity in the Gulf of Mexico during the quarter led to shut
downs of refinery capacity and production capacity. The shut downs boosted the
U.S. demand for sweeter crude from West Africa. Consequently, a larger portion
of heavier, sour crude from the Caribbean went eastwards. Combined with a
seasonal strengthening of the market, the increase in long haul transportation
stimulated the demand side, and led to an upwards pressure on rates.
The International Energy Agency (IEA) reported in its October report an average
OPEC oil production, including Iraq, of approximately 29.7 million barrels per
day during the third quarter of the year, an increase of 0.4 million barrels per
day or 1.4 percent from the second quarter. OPEC announced in September that,
should it be necessary, it would make the entire spare production capacity of 2
million barrels per day available.
IEA estimates that world oil demand averaged 82.4 million barrels per day in the
third quarter, a 0.7 percent increase from the second quarter in 2005. IEA
further predicts that the average demand for 2005 in total will be 83.4 million
barrels per day, or a 1.6 percent growth from 2004. The organisation estimates
world oil demand in 2006 to average 85.2 million barrels per day, showing a
belief in continued demand growth.
The world trading VLCC fleet totalled 461 vessels at the end of the third
quarter of 2005, an increase of 1.1 percent over the quarter. One VLCC was
scrapped in the period and six were delivered. The total order book is at 98
vessels at the end of the third quarter, up from 94 vessels after the second
quarter of 2005. This represents 21.3 percent of the current VLCC fleet. A total
of ten VLCCs were ordered during the quarter.
The world Suezmax fleet totalled 333 vessels at the end of the quarter, up from
328 vessels after the second quarter of 2005, a 1.6 percent fleet growth. No
Suezmaxes were scrapped during the quarter and five were delivered. The total
order book at the end of the quarter is 64, down from 69 after the second
quarter. This represents 19.3 percent of the Suezmax fleet. No Suezmaxes were
ordered during the period.
The freight futures market maintains an optimistic view, demonstrated through
the possibility of selling freight futures for the remainder of the year at a
level that equates to TCEs for VLCCs of approximately $120,000, and $47,500 for
the calendar year 2006.
Strategy
The Board of Frontline has seen limited upside in modern secondhand prices in
2005 and has as a result shown a cautious approach to new investments. Several
ships have been sold. Newbuilding prices as well as secondhand prices have in
the recent months shown a negative development, mainly due to the softening
freight market, and partly caused by the strengthening of the U.S. dollar
against Asian currencies but also driven by lower steel prices. The Board will
closely monitor this development which can create interesting opportunities to
renew and grow the fleet. Frontline will continue its efforts to seek
consolidation among the big tanker companies.
Frontline has recently concluded a new two year time charter of one of the
Company's Suezmaxes at a TCE rate of $36,750 per day. Totally 14 vessels or
approximately 23 percent of the fleet are now fixed out on time charter
agreements with more than a year remaining. The cash breakeven rate for the
remaining fleet operating in the spot market has through these arrangements been
reduced to $12,950 for Suezmaxes and $25,400 for the VLCCs. A number of the time
charters also have upside participation.
Through this chartering strategy Frontline has lowered the cash break rates
which reduce the financial risk and secures a high degree of long term earnings
stability. This in turn supports Frontline's dedicated high dividend strategy.
The high oil price is believed to leave room for a strong increase in offshore
field development utilizing the FPSO concept. Frontline's uniform single hull
fleet is believed to be well suited for conversion, and the Board has therefore
decided to establish a team of experienced employees to manage these efforts.
The team will be fully operational from January 2006.
Frontline has decided to postpone the sale of the Company's remaining 16 percent
in Ship Finance until a later stage. The recent weakness in U.S. shipping stocks
created partly by an oversupply of new companies to the market has influenced
the decision. Frontline sees good value in the Ship Finance stock and feels that
Frontline's shareholders will benefit through waiting for a better timing of the
sale or spin off.
Outlook
The Board of Frontline has on several occasions warned about the dampening
effect the high oil price will have on the world wide oil consumption. We have
recently seen that crude prices at $60 per barrel lead analysts to reduce their
growth estimates, however the resistance to lower growth has surprised the Board
and indicate a very strong underlying demand.
The VLCC and Suezmax tanker fleets have in the first ten months of 2005 grown by
approximately five percent. In 2006 the delivery schedules for VLCCs will be
reduced to 18 units from the 32 units delivered in 2005, while IEA estimates
annual oil demand increase to move from 1.5 percent in 2005 to 2.0 percent in
2006. Such a reduction in deliveries combined with expectations for lower oil
prices and refinery margins, indications of liberalisation in China's
governmental control of the domestic oil market likely to lead to higher Chinese
imports, reduced U.S. and North Sea production, and reduced efficiency of the
single hull fleet, may change the momentum in the tanker market back to the
benefit of the owners. Increased use for floating storage and conversion of
existing units to offshore purposes further increases the likelihood for such a
scenario. The most important factor is however the uncertainty created by the
fact that 28 percent of the current VLCC and Suezmax tanker fleets are subject
to the potential single hull ban coming into effect in 2010.
The market has developed positively in the fourth quarter. Frontline has the
last week fixed VLCCs at TCEs of $115-130,000 and Suezmax tonnage at $50-60,000
per day on round voyage basis. So far approximately 62 percent of the Suezmax
capacity and 80 percent of the VLCC capacity have been concluded for the quarter
at TCE rates of $38,400 and $53,700 respectively. The recent rise in rates is
likely to lead to increased numbers for the quarter overall. The current
strength in the market combined with the forward nature of the fixtures will
also give a solid basis for the earnings going in to 2006. The results for the
fourth quarter will in line with the third quarter be negatively influenced by
the accounting treatment of the Ship Finance profit sharing. The result for the
year is likely to be above $570 million.
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.
November 13, 2005
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Tor Olav Troim: Director, Frontline Ltd
+44 7734 976 575
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 THIRD QUARTER REPORT (UNAUDITED)
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2004 2005 INCOME STATEMENT 2005 2004 2004
Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec
(restated) (in thousands of $) (restated) (restated)
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402,401 291,546 Total operating revenues 1,083,465 1,198,597 1,854,331
- 32,429 Gain (loss) from sale of assets 77,977 (225) 19,574
91,591 83,724 Voyage expenses and commission 240,575 256,026 361,609
33,264 38,514 Ship operating expenses 115,484 92,599 130,385
10,412 3,911 Charterhire expenses 6,387 31,413 39,302
6,478 5,931 Administrative expenses 14,969 19,524 26,500
45,396 49,754 Depreciation 148,162 134,543 180,497
187,141 181,834 Total operating expenses 525,577 534,105 738,293
215,260 142,141 Operating income 635,865 664,267 1,135,612
6,957 10,883 Interest income 29,843 23,215 31,596
(50,701) (50,294) Interest expense (162,182) (155,123) (205,461)
1,587 628 Share of results from associated companies 3,845 5,933 10,553
(26,161) 17,269 Other financial items 40,408 (13,533) 3,566
2,728 2,938 Foreign currency exchange gain (loss) 14,334 4,003 (4,931)
149,670 123,565 Income before taxes and minority interest 562,113 528,762 970,935
(13,279) (54,922) Minority Interest (99,626) (17,659) (64,995)
- (2) Taxes 82 (113) (178)
5,139 5,156 Discontinued operations 10,491 14,160 117,620
141,530 73,797 Net income 473,060 525,150 1,023,382
Basic Earnings Per Share Amounts ($)
$1.83 $0.92 EPS from continuing operations before cumulative effect $6.18 $6.93 $12.21
of change in accounting principle
$1.90 $0.99 EPS $6.32 $7.12 $13.79
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Income on timecharter basis ($ per day per ship)*
67,200 37,100 VLCC 54,300 66,900 78,000
45,900 26,200 Suezmax 39,200 47,000 57,900
27,300 34,700 Suezmax OBO 35,600 26,800 27,900
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* Basis = Calendar days minus off-hire. Figures after
deduction of broker commission
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2005 2004 2004
BALANCE SHEET Sep 30 Sep 30 Dec 31
(in thousands of $) (audited)
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ASSETS
Short term
Cash and cash equivalents 191,295 159,599 105,702
Restricted cash 602,957 566,865 592,607
Other current assets 216,463 222,674 456,595
Long term
Newbuildings and vessel purchase options 15,861 24,231 24,231
Vessels and equipment, net 2,507,473 2,297,344 2,254,361
Vessels under capital lease, net 684,204 730,438 718,842
Investment in finance lease 101,533 113,668 107,664
Investment in associated companies 21,354 13,078 22,955
Deferred charges and other long-term assets 49,612 38,455 55,803
Total assets 4,390,752 4,166,352 4,338,760
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term debt and current portion of long term debt 172,153 147,559 151,614
Current portion of obligations under capital lease 24,378 21,139 21,498
Other current liabilities 158,541 133,134 166,320
Long term
Long term debt 2,234,168 2,057,741 1,990,131
Obligations under capital lease 712,814 737,615 732,153
Other long term liabilities 22,755 46,393 30,346
Minority interest 455,870 222,022 328,730
Stockholders' equity 610,073 800,749 917,968
Total liabilities and stockholders' equity 4,390,752 4,166,352 4,338,760
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2004 2005 2005 2004 2004
Jul-Sep Jul-Sep STATEMENT OF CASHFLOWS Jan-Sep Jan-Sep Jan-Dec
(in thousands of $) (audited)
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OPERATING ACTIVITIES
141,530 73,797 Net income (loss) 473,060 525,150 1,023,382
Adjustments to reconcile net income to net cash
provided by operating activities
48,717 51,731 Depreciation and amortisation 164,840 146,322 194,083
(4,944) (298) Unrealised foreign currency exchange (gain) loss (5,261) (2,618) 390
- (37,963) Gain or loss on sale of assets (111,533) 225 (126,230)
(1,587) (628) Results from associated companies (3,845) (5,933) (10,552)
16,298 (5,620) Adjustment of financial derivatives to market value (8,148) 142 (15,675)
12,071 55,722 Other, net 106,633 14,871 61,658
12,905 35,596 Change in operating assets and liabilities 203,620 (13,386) (217,269)
224,990 172,337 Net cash provided by operating activities 819,366 664,773 909,787
INVESTING ACTIVITIES
27,613 19,235 Maturity (placement) of restricted cash (10,350) 327,485 299,280
- (1,874) Acquisition of minority interest (5,874) (14,713)
(61,107) (37,165) Additions to newbuildings, vessels and equipment (525,590) (61,352) (126,947)
1,480 - Advances to associated companies, net (2,679) (29,263) (37,424)
- - Proceeds from sale of investments in associated - 11,181 11,181
companies
- - Acquisition of subsidiaries, net of cash acquired - (4,145) (18,858)
946 - Receipt from investment in finance lease and loans 14,471 9,056 17,482
receivable
- - Purchase of other assets (98,826) (173) (15,098)
- 100,632 Proceeds from sale of assets 403,104 682 59,787
(33,771) - -
- - Loan advances to related parties
50,571 - -
50,571 Repayment of loan advances by related parties
(208,944) 253,471 174,690
(31,068) 131,399 Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
119,155 163,986 Proceeds from long-term debt, net of fees paid 1,584,599 1,672,049 1,707,655
(147,111) (231,307) Repayments of long-term debt (1,326,384) (1,763,066) (1,814,269)
(5,569) (5,958) Repayment of capital leases (16,458) (15,207) (20,310)
(159,392) (181,170) Dividends paid (766,586) (821,010) (1,038,315)
45,735 - Issue of shares, net - 46,863 62,275
(147,182) (254,449) Net cash used in financing activities (524,829) (880,371) (1,102,964)
46,740 49,287 Net increase (decrease) in cash and cash equivalents 85,593 37,873 (18,487)
112,859 142,008 Cash and cash equivalents at start of period 105,702 121,726 124,189
159,599 191,295 Cash and cash equivalents at end of period 191,295 159,599 105,702
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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.
(Registrant)
Date November 22, 2005 By /s/ Tom E. Jebsen
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Tom E. Jebsen
Principal Financial Officer
02089.0009 #621221