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 2006
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Commission File Number: 001-16601
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 if the registrant is submitting the Form 6-K in paper by
Regulations S-T Rule 101(b)(1):__________
Indicate by check mark if the registrant is submitting the Form 6-K in paper by
Regulations S-T Rule 101(b)(1):__________
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):
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 28, 2006.
FRONTLINE LTD.
INTERIM REPORT JULY - SEPTEMBER 2006
Highlights
o Frontline reports net income of $98.8 million and earnings per share of
$1.32 for the third quarter of 2006.
o Frontline reports nine month results of $381.4 million and earnings per
share of $5.10.
o Frontline announces a cash dividend of $2.50 per share.
Third Quarter and Nine Months Results
The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income
of $98.8 million for the third quarter of 2006, equivalent to earnings per share
of $1.32. Operating income for the quarter was $184.7 million compared to $144.9
million in the second quarter. This reflects the strengthening of the market in
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 $59,800, $40,000 and $30,800 respectively compared with
$50,600, $30,600 and $30,100 respectively in the second quarter. The income
shows a continued differential in earnings between single and double hull
tonnage particularly in the Suezmax segment. It also reflects the drydocking of
seven vessels in the quarter creating approximately 311 days in lost income. The
operating cost continued at above normal level linked to the fact that the
drydocking were expensed in the quarter.
Interest income was $11.0 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 $50.2 million in
the third quarter of which $15.0 million relates to ITC.
The total for other financial items in the third quarter was a loss of $10.1
million compared to a gain of $3.7 million in the second quarter. Valuation
losses of $16.4 million were recorded in interest rate swaps, all of which
relates to Ship Finance International Limited ("Ship Finance"), in the third
quarter compared to gains of $2.9 million in the second quarter. As at September
30, 2006, the Company had interest rate swaps with a total notional principal of
$740.4 million, all of which relates to Ship Finance. The valuation of freight
future agreements to market value has resulted in a loss of $2.0 million
compared to a loss of $5.2 million in the second quarter.
During the third quarter, the Company sold its entire holding in General
Maritime Corporation ("Genmar") for a net gain of $9.8 million.
Frontline announces net income of $381.4 million for the nine months ended
September 30, 2006, equivalent to earnings per share of $5.10. The average TCEs
earned in the spot and period market by the Company's VLCCs, Suezmax tankers,
and Suezmax OBO carriers for the nine month period ended September 30, 2006 were
$61,200, $40,100 and $30,900, respectively.
As at September 30, 2006, the Company had total cash and cash equivalents of
$715.3 million which includes $31.6 million in Ship Finance and $604.5 million
of restricted cash. Restricted cash includes $314.5 million relating to deposits
in ITC and $274.4 million in Frontline Shipping Limited and Frontline Shipping
II Limited.
The payment of a dividend in excess of the net income result, is mainly
compensated by the sale of assets completed in the fourth quarter.
As of November 2006, the Company has cash breakeven rates on a TCE basis for
VLCCs and Suezmaxes of $29,966 and $22,600 respectively.
Fleet development
Third of July 2006, the Company took delivery of the vessel Front Beijing, the
first of two VLCC newbuildings being built at Nantong Cosco Khi Ship Engineering
in China. The delivered cost of this newbuilding was approximately $80 million.
In late September 2006, the Company agreed to sell Front Beijing, for gross sale
proceeds of $141.5 million. Delivery to the buyers has taken place in the mid of
November 2006. This transaction will give a positive result of approximately $59
million, and will generate approximately $58 million in additional liquidity in
the fourth quarter.
In July 2006, Frontline agreed to purchase two additional VLCC newbuildings to
be delivered in 2010/2011 and two Suezmax newbuildings and entered into options
for four more Suezmaxes to be delivered in the period from November 2008 to
February 2009. It has since been announced that Frontline has exercised these
options and sold two of these contracts to Frontline's affiliated company, Ship
Finance. Later Frontline entered into two further options for two more Suezmaxes
to be delivered in 2010.
In September 2006, Frontline announced that the Company has exercised an option
for a further two VLCC newbuilding contracts at Jiangnan Shipyard in China for
delivery 2010/2011 and simultaneously sold the newbuilding contracts to a third
party with a profit element of approximately $6.2 million. The gain on sale will
be released into the income statement based on milestones in the newbuilding
contract, starting in the fourth quarter.
Frontline's total firm newbuilding program now consists of four VLCCs and four
Suezmaxes.
In September 2006, the single hull VLCC Front Tobago was sold for gross sale
proceeds of $45 million. Delivery to the buyers is expected to take place in
December 2006.
In October 2006, the Company took delivery of the vessel Front Shanghai, the
second of two VLCC newbuildings being built at Nantong Cosco Khi Ship
Engineering in China. The delivered cost of this newbuilding was approximately
$81 million which is substantially lower than existing market value.
Other Matters
In August 2006, Frontline announced that it had sold its entire holding of
3,860,000 shares in Genmar for a price of $40 per share.
In August 2006, The Board of Frontline has engaged Mr. Bjorn Sjaastad as the new
Chief Executive Officer for Frontline Management AS. Mr. Sjaastad assumed his
position in October 2006. In connection with the employment Mr. Sjaastad has
been awarded 100,000 options to subscribe for new shares in Frontline at a
subscription price of NOK 238.50. The options vest with 1/3 each year over three
years, and the option period is set to five years.
On November 27, 2006, the Board declared a dividend of $2.50 per share. The
record date for the dividend is December 7, 2006, ex dividend date is December
5, 2006 and the dividend will be paid on or about December 21, 2006.
At September 30, 2006, 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 third quarter was seasonally strong. The average rate for VLCCs from the MEG
to Japan in the third quarter of 2006 was about WS 120 ($81,000 /day), compared
to about WS 84 ($68,000/day) in the third quarter of 2005.
The average rate for Suezmaxes from WAF to USAC in the third quarter of 2006 was
about WS 160 ($51,000/day), compared to about WS 115 ($26,500/day) in the third
quarter of 2005.
Bunker prices followed the development in the oil market with Fujairah's highest
bunker quote for the quarter set mid July at $349/mt. Bunker prices remained
high for about three weeks and thereafter decreased to $280/mt at the end of the
quarter with an average of $313/mt.
The International Energy Agency (IEA) reported in November an average OPEC Oil
production, including Iraq, of 29.98 million barrels per day during the third
quarter of the year, a 0.18 million barrels per day or 0.6 percent increase from
second quarter. OPEC decided at its extraordinary meeting held in Doha, Qatar on
October 19, 2006 "to reduce production by an amount of 1.2 mb/d, from current
production of about 27.5 mb/d, to 26.3 mb/d, effective November 1, 2006" as a
result of the recent developments in the oil market.
IEA estimates that world oil demand averaged 83.9 million barrels per day in the
third quarter, an increase of 0.7 percent from the second quarter of 2006. IEA
further predicts that the average demand for 2007 in total will be 85.9 million
barrels per day, or a 1.7 percent growth from 2006.
According to Fearnleys, the VLCC fleet totalled 475 vessels at the end of the
third quarter of 2006 with eight deliveries and no vessels scrapped during the
quarter. The total order book amounted to 165 vessels at the end of the third
quarter, up from 155 vessels after the second quarter of 2006. For the remainder
of 2006 there are four deliveries expected and there are 31 expected to be
delivered in 2007. The current orderbook represents 34.7 percent of the current
VLCC fleet. There were 161 single hull VLCC vessels as per October 31, 2006.
The Suezmax fleet totalled 343 vessels at the end of the third quarter, up from
335 vessels after the second quarter of 2006, a 2.7 percent fleet growth over
the quarter. No Suezmaxes were scrapped during the quarter whilst eight were
delivered. The total order book at the end of the quarter was 99, an increase of
29 from the end of the second quarter. For the remainder of 2006 there are two
deliveries expected, whilst 26 vessels are expected to be delivered in 2007. The
current orderbook represents 28.9 percent of the Suezmax fleet. There were 71
single hull Suezmax vessels as per October 31, 2006.
Strategy
Frontline currently has four VLCC and four Suezmax newbuildings on order, all
favourably priced compared to current newbuilding prices. Frontline also has
four Suezmax fixed priced options. The ordering of the tonnage has been done as
a combination of a wish to renew the fleet and an opportunistic investment
approach with great flexibility. Our orderbook confirms Frontline's position as
a leading operator of quality Suezmax and VLCC tonnage.
The sale of Front Beijing, represent no material change in the overall strategy,
but should be seen as an opportunistic transaction where the effect on the
overall fleet is compensated by the newbuilding program Frontline has recently
committed to.
The decision to sell the Genmar shares in the third quarter was made based on an
evaluation where increasing the Genmar investment was found less attractive than
investing in the Chinese Suezmax newbuilding contracts.
Frontline seeks to find alternative uses for single hull tanker vessels
including conversion to FPSO, heavylift or other types of conversion. Frontline
is currently converting the Front Puffin to FPSO for a firm two year contract on
an oilfield development in Australia. The conversion, which takes place at
Keppel shipyard, is expected to be completed in second quarter of 2007. The
Company is in the process of converting Front Sunda to a heavylift vessel. This
conversion, which takes place at COSCO shipyard, is expected to be completed in
the first quarter of 2007. The Company also has options to convert further
single hull vessels at COSCO shipyard, which we intend to use.
Frontline has chartered out most of its single hull VLCC and has recently
chartered out six of its double hull VLCCs to Shell under a flexible charter
rate agreement. Frontline has in the fourth quarter concluded more charter deals
for two to three years period.
Frontline is actively monitoring opportunities to seek a higher degree of
coverage. This includes physical as well financial charter coverage. The forward
market indicates $50,000 per day for a three year VLCC charter. Frontline's
eight OBO carriers have good long term physical charter opportunities based on
the strength of the drybulk market. A two year charter was recently concluded
for Front Striver at a gross T/C rate of $45,000 per day. The charter commences
in February 2007.
The value of Frontline's 11.2 % ownership in Ship Finance has increased and is
today worth approximately $185.7 million. The stake is no longer defined as a
strategic investment and the Board will consider different alternatives in order
to maximize the value of the investment to the benefit of Frontline's
shareholders.
Outlook
World economic conditions indicate a good momentum for economic growth with a
forecasted world GDP growth of 5.1 percent for 2006, which is slightly higher
than 2005 world GDP growth of 4.8 percent, along with an optimistic forecast of
4.9 percent for 2007.
IEA projects oil consumption to rise by 1.1 percent in 2006 and 1.7 percent in
2007 (2005: 1.5 percent), and the fleet growth in 2006 will be moderate,
estimated to 3.5 percent in the VLCC segment and 7.5 percent in the Suezmax
segment (2005: VLCC segment 7.5 percent and Suezmax segment 9.5 percent). The
overall orderbook for tankers has now approached 33 percent, and gives some
reasons for concern. However, the fact that the orderbook is stretched over five
years and that 28 percent of the fleet is non double hull reduce this concern.
The third quarter of 2006 was stronger than expected, but we have so far seen
that the fourth quarter will be weaker. Whilst last year we experienced average
TCE rates for modern VLCCs in the fourth quarter, according to the Clarkson
index of $95,000 per day, the same index show an average of $51,000 per day so
far this quarter. However, even though the seasonal upturn that we normally have
in the fourth quarter has been delayed this year, we would anticipate the market
to strengthen as the winter consumption sets in and the inventory levels comes
down. The reduction in oil price which over time should stimulate demand is good
for the tanker market.
Frontline has a large fleet, a low cost base, low cash breakeven rates and is
thus in a good financial position. The increased Charter coverage reduces the
risk in the company and creates a good platform for a continued high return to
shareholders.
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 27, 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
Bjorn Sjaastad: 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
FRONTLINE GROUP THIRD QUARTER REPORT (UNAUDITED)
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2005 2006 INCOME STATEMENT 2006 2005 2005
Jul-Sep Jul-Sep (in thousands of $) Jan-Sep Jan-Sep Jan-Dec
(audited)
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291,546 404,694 Total operating revenues 1,231,398 1,083,465 1,513,833
32,429 - Gain (loss) from sale of assets 21,856 77,977 76,081
83,724 100,883 Voyage expenses and commission 309,408 240,575 337,221
38,514 53,998 Ship operating expenses 151,827 115,484 148,702
3,911 6,263 Charterhire expenses 18,655 6,387 11,711
5,931 8,036 Administrative expenses 19,955 14,969 21,181
49,754 50,835 Depreciation 153,313 148,162 198,359
181,834 220,015 Total operating expenses 653,158 525,577 717,174
142,141 184,679 Operating income 600,096 635,865 872,740
10,883 10,983 Interest income 34,049 29,843 41,040
(50,294) (50,165) Interest expense (156,156) (162,182) (215,994)
628 2,646 Share of results from associated companies 1,988 3,845 3,691
17,269 (10,137) Other financial items 8,608 40,408 47,189
2,938 1,500 Foreign currency exchange gain (loss) 762 14,334 18,830
123,565 139,506 Income before taxes and minority interest 489,347 562,113 767,496
(54,922) (40,715) Minority Interest (107,827) (99,626) (169,459)
(2) 2 Taxes (121) 82 17
5,156 - Discontinued operations - 10,491 8,785
73,797 98,793 Net income 381,399 473,060 606,839
Basic Earnings Per Share Amounts ($)
EPS from continuing operations before cumulative
$0.92 $1.32 effect of change in accounting principle $5.10 $6.18 $7.99
$0.99 $1.32 EPS $5.10 $6.32 $8.11
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Income on timecharter basis ($ per day per ship)*
37,100 59,800 VLCC 61,200 54,300 57,400
26,200 40,000 Suezmax 40,100 39,200 40,300
34,700 30,800 Suezmax OBO 30,900 35,600 34,900
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* Basis = Calendar days minus off-hire. Figures after deduction of broker commission
BALANCE SHEET
(in thousands of $)
2006 2005 2005
Sep 30 Sep 30 Dec 31
(audited)
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ASSETS
Short term
Cash and cash equivalents 110,819 191,295 100,533
Restricted cash 604,446 602,957 636,790
Other current assets 257,767 216,463 398,148
Long term
Newbuildings and vessel purchase options 84,208 15,861 15,927
Vessels and equipment, net 2,591,832 2,507,473 2,584,847
Vessels under capital lease, net 637,970 684,204 672,608
Investment in finance lease 78,485 101,533 96,057
Investment in associated companies 63,242 21,354 10,169
Deferred charges and other long-term assets 48,505 49,612 52,760
Total assets 4,477,274 4,390,752 4,567,839
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term debt and current portion of long term debt 273,311 172,153 240,191
Current portion of obligations under capital lease 27,891 24,378 25,142
Other current liabilities 126,399 158,541 187,645
Long term
Long term debt 2,093,113 2,234,168 2,199,538
Obligations under capital lease 685,359 712,814 706,279
Other long term liabilities 33,632 22,755 23,128
Minority interest 508,083 455,870 470,750
Stockholders' equity 729,486 610,073 715,166
Total liabilities and stockholders' equity 4,477,274 4,390,752 4,567,839
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2005 2006 STATEMENT OF CASHFLOWS 2006 2005 2005
Jul-Sep Jul-Sep (in thousands of $) Jan-Sep Jan-Sep Jan-Dec
(audited)
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OPERATING ACTIVITIES
73,797 98,793 Net income (loss) 381,399 473,060 606,839
Adjustments to reconcile net income to net cash
provided by operating activities
51,731 51,892 Depreciation and amortisation 155,893 164,840 215,836
(298) 354 Unrealised foreign currency exchange (gain) loss (379) (5,261) (2,222)
(37,963) (9,784) Gain or loss on sale of assets (31,640) (111,533) (109,657)
(628) (2,647) Results from associated companies (1,988) (3,845) (3,692)
(5,620) 17,322 Adjustment of financial derivatives to market value 10,875 (8,148) (12,335)
55,722 37,560 Other, net 103,555 106,633 166,173
35,596 (38,650) Change in operating assets and liabilities 10,839 203,620 118,832
172,337 154,840 Net cash provided by operating activities 628,554 819,366 979,774
INVESTING ACTIVITIES
19,235 20,621 Maturity (placement) of restricted cash 32,345 (10,350) (44,183)
(1,874) - Acquisition of minority interest (7,212) (5,874) (33,083)
(37,165) (104,039) Additions to newbuildings, vessels and equipment (257,998) (525,590) (558,163)
- (5,093) Advances to associated companies, net (51,061) (2,679) (2,612)
- - Dividends from associated companies - - 20,911
- - Receipt from investment in finance lease and loans 6,322 14,471 20,540
receivable
- Purchase of other assets (71,067) (98,826) (168,038)
154,400 Proceeds from sale of other assets 154,409 152,752 152,752
100,632 - Proceeds from sale of assets 102,029 250,352 250,339
50,571 - Proceeds from sale of newbuilding contracts - 16,800 16,800
131,399 65,889 Net cash provided by (used in) investing activities (92,233) (208,944) (344,737)
FINANCING ACTIVITIES
163,986 78,163 Proceeds from long-term debt, net of fees paid 193,933 1,584,599 1,653,098
(231,307) (149,657) Repayments of long-term debt (268,665) (1,326,384) (1,361,500)
(5,958) (6,500) Repayment of capital leases (18,170) (16,458) (22,230)
(181,170) (145,856) Dividends paid (433,133) (766,586) (909,574)
(254,449) (223,850) Net cash used in financing activities (526,035) (524,829) (640,206)
49,287 (3,121) Net increase (decrease) in cash and cash equivalents 10,286 85,593 (5,169)
142,008 113,940 Cash and cash equivalents at start of period 100,533 105,702 105,702
191,295 110,819 Cash and cash equivalents at end of period 110,819 191,295 100,533
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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.
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(Registrant)
Date November 28, 2006 By /s/ Inger M. Klemp
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Inger M Klemp
Principal Financial Officer
SK 02089 0009 726220