Frontline Reports $18.8 Million Q1 Net Loss
Increasing seizures of oil tankers will help charter rates recover from record lows as oil companies and traders avoid struggling owners, according to Frontline Ltd., the Bermuda-based company led by Norwegian-born billionaire John Fredriksen.
Ten to 20 tankers risk being arrested by lenders and some already have been, Jens Martin Jensen, chief executive officer of Frontline’s management unit, told the Bloomberg financial news service this week.
Oil companies and traders have to do more due diligence and avoid distressed owners, he said.
Owners have lost $27 billion since 2009 because they ordered too many ships before the global recession, and now some will struggle to retain crews and keep up maintenance, Intertanko, the largest trade group, said this month. As lenders arrest ships and oil companies avoid others with known financial problems, remaining owners will benefit from reduced competition, Jensen said.
“Less ships, higher rates,” he said. “It’s positive for owners of good standing that this is actually happening. It should probably have happened before.”
The global fleet of supertankers swelled 30 percent to 189.6 million deadweight tons since rates peaked in 2007, according to Clarkson Plc, the world’s largest shipbroker. Average daily earnings plunged 74 percent in the past year to $8,429, its figures show. Rates averaged $4,209 so far in 2013, heading for the lowest since at least 1997, Clarkson data show.
Frontline said its 32 supertankers need $25,500 a day to break even. The company has reported a first-quarter net loss of $18.8 million, or 24 cents a share, after earning $7.18 million, or 9 cents, in the same period last year.
The world’s largest oil tanker shipping company, the Bermuda firm’s primary business firm’s fleet consists of 83 Very Large Crude Carriers [VLCCs], Suezmax and Suezmax ore-bulk-oil [OBO] carriers. Frontline has 18 more tankers on order.
The company said in a statement it may run out of cash if the market doesn’t recover and it can’t sell assets or raise equities, reiterating comments made in February.
