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 March 2006
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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 February 17, 2006.
Exhibit 1
FRONTLINE LTD.
PRELIMINARY FOURTH QUARTER AND FINANCIAL YEAR 2005 RESULTS
Highlights
o Frontline reports net income of $133.8 million and earnings per share
of $1.79 for the fourth quarter of 2005.
o Frontline reports annual results of $606.8 million and earnings per
share of $8.11.
o Frontline announces a cash dividend of $1.50 per share.
o Frontline spins off a further approximately 5 percent of Ship Finance
International Limited.
Fourth Quarter and Financial Year 2005 Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income
of $133.8 million for the fourth quarter of 2005, equivalent to earnings per
share of $1.79. Operating income for the quarter was $236.9 million compared to
$142.1 million in the third quarter. This reflects the strengthening of the
market during the fourth 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 $65,800, $44,100 and $32,900 respectively
compared with $37,100, $26,200 and $34,700 respectively in the third quarter of
2005.
Interest income was $11.2 million in the quarter, of which, $6.2 million relates
to restricted deposits held by subsidiaries reported in Independent Tankers
Corporation ("ITC"). The Company recorded interest expense of $53.8 million in
the fourth quarter of which $15.6 million relates to ITC.
The Company's share of income from associates excludes its share of the profit
arising from its purchase of the Front Tobago from its joint venture partners.
This share of profit has been offset against the cost of the vessel. At December
31, 2005 a $1.8 million loss on impairment was accrued on the Navix Astral which
was sold in January 2006 to its bareboat charterer pursuant to a purchase
option.
The total for other financial items in the fourth quarter was a gain of $6.8
million compared to a net gain of $17.3 million in the third quarter of 2005. An
increase in the forward curve for Libor rates in the quarter has resulted in
valuation gains of $3.1 million on interest rate swaps in the fourth quarter
compared to valuation gains of $8.4 million in the third quarter of 2005. As at
December 31, 2005, the Company had interest rate swaps with a total notional
principal of $618.3 million of which $568.3 million relates to Ship Finance
International Limited ("Ship Finance"). The valuation of freight future
agreements to market value has resulted in a gain of $0.6 million compared to a
gain of $0.4 million in the third quarter.
Frontline announces net income of $606.8 million for the year ended December 31,
2005, equivalent to earnings per share of $8.11. The TCEs earned in the spot and
period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers
were $57,400, $40,300 and $34,900, respectively.
As at December 31, 2005, the Company had total cash and cash equivalents of
$737.3 million which includes $636.8 million of restricted cash. Restricted cash
includes $328.9 million relating to deposits in ITC and $274.4 million in
Frontline Shipping Limited and Frontline Shipping II Limited. As of February
2006, the Company has cash breakeven rates on a TCE basis for VLCCs and
Suezmaxes of $28,149 and $22,027 respectively.
The results for the quarter 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. In addition, the balance sheet has been restated in
the second quarter of 2005 as a result of an adjustment to the accounting for
the purchase of the two vessels Ship Finance acquired from related parties
associated with Hemen Holdings Ltd in June 2005. Following consultation and
advice received from the United States Securities and Exchange Commission, the
Company has now recorded this transaction at fair value and consequently
recorded an equity contribution of approximately $85 million.
Corporate and Other Matters
On December 15, 2005, the Company purchased the VLCC Front Tobago from its two
joint venture partners for a cost of approximately $36 million.
In January 2006, the VLCC Navix Astral was sold to its existing bareboat
charterer pursuant to a charterer's purchase option that was exercised in
November 2005. In January 2006 the Company sold the Front Tobago to Ship Finance
to replace and fulfil the remainder of the Navix Astral time charter with
Frontline.
In the fourth quarter, Ship Finance repurchased $1.0 million of its 8.5% Notes
bringing the total Notes repurchased in 2005 to $73.2 million. The principal
outstanding amount on the Notes is currently $457.1 million.
On February 17, 2006, the Board declared a dividend of $1.50 per share. The
record date for the dividend is March 6, 2006, the ex dividend date is March 2,
2006 and the dividend will be paid on or about March 20, 2006. The slight
reduction in the pay out ratio represents no change in the corporate philosophy
but should be seen in the context of upcoming investments to be made in
newbuilding orders and conversion of vessels to heavylift vessels.
The Board has also decided to distribute approximately 5 percent of the
outstanding shares in Ship Finance to Frontline's shareholders. The distribution
is driven by the wish to increase the liquidity and the general interest in the
Ship Finance stock. Every Frontline shareholder will receive one share in Ship
Finance for every 20 shares held in Frontline. The record date for this
distribution is March 6, 2006, ex dividend date is March 2, 2006 and the
distribution will be made on or about March 20, 2006.
At December 31, 2005, 74,825,169 ordinary shares were outstanding and the
weighted average number of shares outstanding for the quarter and twelve months
then ended was also 74,825,169.
In February 2006, Frontline ordered two 297,000 dwt VLCC's for delivery in 2009
with an option for another two VLCC's for delivery in 2009/2010 at Jiagnan
Shipyard in China.
The Market
The generally positive trend of the VLCC market witnessed at the end of the
third quarter of the year continued with strength well into the fourth quarter.
After a brief decline in late September, October started off with steady rates
around World Scale ("WS") 100 for the benchmark route from the MEG to Japan.
From late October until the middle of November, the rates rose dramatically,
peaking at WS 226 in the middle of November, the highest rate of the year.
Following the peak, the market softened seeing a steady decline until the middle
of December, when the decline in rates became steeper towards the traditionally
quieter Christmas season. Fixtures were done around WS 120 levels at quarter
end, demonstrating the high volatility experienced during the period. The
average WS rate from the MEG to Japan in the fourth quarter was about WS 156,
compared to WS 83 in the third quarter of 2005. This equates to a TCE of
approximately $94,000 per day. The Suezmax market was also strong throughout the
quarter, with an average of WS 226. This equates to approximately $70,000 per
day.
The tanker market experienced upwards pressure due to disruptions on the supply
side, as tonnage was delayed in the US Gulf, Iraq and the Turkish Straits.
The International Energy Agency (IEA) reported in February an average OPEC Oil
production, including Iraq, of approximately 29.4 million barrels per day during
the fourth quarter of 2005, a 0.06 million barrels per day or 0.2 percent
decrease from the third quarter. OPEC decided at its meeting held 31 January to
maintain current production levels.
IEA estimates world oil demand averaged 84.1 million barrels per day in the
fourth quarter, a 1.3 percent increase from the third quarter in 2005. IEA
further predicts that the average demand for 2006 in total will be 85.1 million
barrels per day, or a 2.1 percent growth from 2005, hence showing a firm belief
in continued demand growth.
The world trading VLCC fleet totalled 472 vessels at the end of the fourth
quarter of 2005, an increase of 2.6 percent over the quarter. No VLCCs were
scrapped in the period and 12 were delivered. The total order book is at 92
vessels at the end of the fourth quarter, down from 98 vessels after the third
quarter of 2005. This represents 19.5 percent of the current VLCC fleet. A total
of six VLCCs were ordered during the quarter.
The world Suezmax fleet totalled 334 vessels at the end of the quarter, up from
330 vessels after the third quarter of 2005, a 1.2 percent fleet growth over the
quarter. No Suezmaxes were scrapped during the quarter and four were delivered.
The total order book at the end of the quarter is 64, unchanged from the end of
the third quarter. This represents 19.2 percent of the Suezmax fleet. Four
Suezmaxes were ordered during the period.
The tanker market looks healthy for next year. The freight futures market seems
to be optimistic, and at the moment it is possible to sell freight futures for
the year 2006 at a level that equates to TCEs for VLCCs at approximately $52,000
per day and $40,000 per day for Suezmax.
Strategy
The Board of Frontline will continue to take a cautious approach to new
investments. The 2 + 2 optional VLCCs which were ordered in China were done
partly to secure a fleet renewal and partly as an opportunistic investment at
levels substantially lower than seen offered from Korean and Japanese yards.
The Board firmly believes that in order to meet the world's demand for seaborne
transportation of crude, single hull vessels will be needed beyond 2010. Our
strategy has been to fix single hull vessels out on long term time charters and
currently seven out of our nine single hull VLCCs are fixed out on charters
varying from three to five years. In addition we have a number of double hull
vessels and OBOs out on timecharters reducing our cash break even rates for
remaining unfixed vessels to $24,832 and $15,889 per day for VLCCs and Suezmaxes
respectively.
Frontline continues to hold 3,860,000 shares in General Maritime Corporation
("Genmar"). Through Genmar's repurchase of their own stock Frontline's ownership
in the Company has increased from 9.9 percent to 11.25 percent in January 2006.
The Company remains committed long term to work for a further consolidation in
the tanker market.
As reported in the last report the Company has established a separate FSPO team.
Development work for a generic FPSO has started and the Company expects to
convert a number of our single hull vessels to FPSO/FSO in the years to come.
The very high activity in the drilling and offshore sector has lead to increased
demand for transportation of rigs and equipment for offshore projects. The Board
has therefore approved a project for conversion of two Suezmaxes into heavylift
vessels. The vessels will be converted at a yard in China and expected
completion is end of 2006.
The shareholders are assured that the Company's main focus will remain in crude
oil transportation. However, in order to maximize the long term value of the
fleet and the skills of our organisation, the Company will actively pursue new
opportunities which can extract enchanced value from the Group's assets.
Outlook
The current upturn in the tanker market has lasted for more than three years,
and the freight rates so far this winter have been stronger than we expected in
spite of the record high fleet growth in 2005 of around seven percent.
IEA projects oil consumption to rise by 2.1 percent in 2006 and the fleet growth
will be moderate at an estimated 3.6 percent in the VLCC segment and 7.1 percent
in the Suezmax segment.
The market consensus has been that the freight market will show a negative
development in 2006 and 2007. However the fact that the fleet growth will be
lower than in 2005, and that the oil demand growth is expected to be higher than
in 2005, increase the likelihood of a positive market scenario. The trend with
falling oil production in short haul transportation areas like the North Sea and
US Gulf and the low non-US oil inventory storage numbers further increases this
likelihood. The current strength of the market with VLCC fixtures AG-East
currently above $100,000 per day confirms the tightness of the market. The main
uncertainty remains a possible negative development in the world's economy.
The charter coverage and the low cash break even rates put the Company in a
healthy financial position. The Board expects the Company to deliver strong
results for the first quarter as well as strong results and solid dividend
payments for the full year.
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.
February 17, 2006
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 FOURTH QUARTER REPORT (UNAUDITED)
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2004 2005 INCOME STATEMENT 2005 2004
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
(restated) (in thousands of $) (restated)
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655,735 430,368 Total operating revenues 1,513,833 1,854,331
19,799 (1,896) Gain (loss) from sale of assets 76,081 19,574
105,583 96,646 Voyage expenses and commission 337,221 361,609
37,786 33,218 Ship operating expenses 148,702 130,385
7,890 5,324 Charterhire expenses 11,711 39,302
6,976 6,212 Administrative expenses 21,181 26,500
45,954 50,197 Depreciation 198,359 180,497
204,189 191,597 Total operating expenses 717,174 738,293
471,345 236,875 Operating income 872,740 1,135,612
8,380 11,197 Interest income 41,040 31,596
(50,337) (53,812) Interest expense (215,994) (205,461)
4,620 (154) Share of results from associated companies 3,691 10,553
17,099 6,779 Other financial items 47,189 3,566
(8,935) 4,497 Foreign currency exchange gain (loss) 18,830 (4,931)
442,172 205,382 Income before taxes and minority interest 767,496 970,935
(47,335) (69,833) Minority Interest (169,459) (64,995)
(64) (64) Taxes 17 (178)
103,460 (1,706) Discontinued operations 8,785 117,620
498,233 133,779 Net income 606,839 1,023,382
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Basic Earnings Per Share Amounts ($)
$5.28 $1.81 EPS from continuing operations before cumulative effect $7.99 $12.21
of change in accounting principle
$6.66 $1.79 EPS $8.11 $13.79
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Income on timecharter basis ($ per day per ship)*
111,200 65,800 VLCC 57,400 78,000
85,000 44,100 Suezmax 40,300 57,900
31,100 32,900 Suezmax OBO 34,900 27,900
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* Basis = Calendar days minus off-hire. Figures after deduction of broker commission
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2005 2004
BALANCE SHEET Dec 31 Dec 31
(in thousands of $) (audited)
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ASSETS
Short term
Cash and cash equivalents 100,533 105,702
Restricted cash 636,790 592,607
Other current assets 398,148 456,595
Long term
Newbuildings and vessel purchase options 15,927 24,231
Vessels and equipment, net 2,584,847 2,254,361
Vessels under capital lease, net 672,608 718,842
Investment in finance lease 96,057 107,664
Investment in associated companies 10,169 22,955
Deferred charges and other long-term assets 52,760 55,803
Total assets 4,567,839 4,338,760
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term debt and current portion of long term debt 240,191 151,614
Current portion of obligations under capital lease 25,142 21,498
Other current liabilities 187,645 166,320
Long term
Long term debt 2,199,538 1,990,131
Obligations under capital lease 706,279 732,153
Other long term liabilities 23,128 30,346
Minority interest 470,750 328,730
Stockholders' equity 715,166 917,968
Total liabilities and stockholders' equity 4,567,839 4,338,760
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2004 2005 2005 2004
Oct-Dec Oct-Dec STATEMENT OF CASHFLOWS Jan-Dec Jan-Dec
(in thousands of $) (audited)
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OPERATING ACTIVITIES
498,233 133,779 Net income (loss) 606,839 1,023,382
Adjustments to reconcile net income to net cash
provided by operating activities
47,761 50,996 Depreciation and amortisation 215,836 194,083
3,007 3,039 Unrealised foreign currency exchange (gain) loss (2,222) 390
(126,455) 1,876 Gain or loss on sale of assets (109,657) (126,230)
(4,620) 153 Results from associated companies (3,692) (10,552)
(15,818) (4,187) Adjustment of financial derivatives to market value (12,335) (15,675)
46,788 69,153 Other, net 166,173 61,658
(207,684) (73,490) Change in operating assets and liabilities 139,743 (217,269)
241,212 181,319 Net cash provided by operating activities 1,000,685 909,787
INVESTING ACTIVITIES
(25,742) (33,833) Maturity (placement) of restricted cash (44,183) 299,280
(14,713) (27,209) Acquisition of minority interest (33,083) (14,713)
(80,306) (32,586) Additions to newbuildings, vessels and equipment (558,163) (126,947)
(4,360) 67 Advances to associated companies, net (2,612) (37,424)
- - Proceeds from sale of investments in associated - 11,181
companies
- - Acquisition of subsidiaries, net of cash acquired - (18,858)
8,428 6,069 Receipt from investment in finance lease and loans 20,540 17,482
receivable
(14,927) (69,212) Purchase of other assets (15,286) (15,098)
59,104 - Proceeds from sale of assets 250,339 59,787
16,800 -
- - Loan advances to related parties - -
- - Repayment of loan advances by related parties (365,648) 174,690
(72,516) (156,704) Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
35,606 68,499 Proceeds from long-term debt, net of fees paid 1,653,098 1,707,655
(51,202) (35,116) Repayments of long-term debt (1,361,500) (1,814,269)
(5,104) (5,772) Repayment of capital leases (22,230) (20,310)
(217,304) (142,988) Dividends paid (909,574) (1,038,315)
15,411 - Issue of shares, net - 62,275
(222,593) (115,377) Net cash used in financing activities (640,206) (1,102,964)
(53,897) (90,762) Net increase (decrease) in cash and cash equivalents (5,169) (18,487)
159,599 191,295 Cash and cash equivalents at start of period 105,702 124,189
105,702 100,533 Cash and cash equivalents at end of period 100,533 105,702
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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 March 6, 2006 By /s/ Tom E. Jebsen
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Tom E. Jebsen
Principal Financial Officer
SK 02089 0009 652029