Frontline Beats Street as Tanker Market Improves

Maritime Activity Reports, Inc.

November 16, 2018

CEO says increasingly upbeat on tanker profits. OPEC cuts, Iran sanctions may impact tanker demand.

Frontline, one of the world's largest oil tanker firms, posted a surprise third-quarter profit on Friday, helped by rising rates for its fleet.

The Oslo-listed shipper, controlled by billionaire investor John Fredriksen, said the outlook was improving due to rising global demand for crude after a lengthy downturn for shippers.

"We are increasingly optimistic that the tanker market will generate profits going forward," Chief Executive Robert Hvide Macleod told an investor call.

Net earnings for July to September swung to a profit of $2.2 million from a $24.1 million loss in the same period last year.

Adjusted for one-off gains, the company lost $8.4 million in the quarter but still beat a forecast loss of $21.9 million in a Reuters poll of analysts.

Frontline, which will not pay a dividend for the third quarter, rose 4.7 percent in early trade but gave up most gains to trade flat at 53.25 Norwegian crowns by 1515 GMT, lagging a 0.8 percent gain for the Oslo benchmark index.

"Oil inventory draws, fleet growth and production cuts have been against us, but these important factors are now turning in our favour. The most important factor, oil demand, remains strong," the company said in a statement.

Global oil supply rose this year compared with 2017, helping the tanker market, Frontline said.

In October, global output stood at 100.7 million barrels per day (bpd), 2.6 million bpd more than a year ago, the International Energy Agency said.

A fall in the Brent crude price has sparked renewed talk of production cuts by the Organization of Petroleum Exporting Countries.

"Obviously, it would be negative," Macleod said of any new cuts. But he downplayed the impact: "I don't think it's going to be a showstopper."

U.S. sanctions on Iran could mean more oil being transported from the United States, where production has been surging, Frontline said, adding this could help the tanker market.

Frontline also said it has ordered exhaust gas cleaning systems for 12 more vessels, which it said would make its fleet more attractive when tougher international emissions regulations kick in from 2020.

It has so far announced plans to install so-called "scrubbers" on 20 of its vessels, including two new tankers being built.

The company owns 46 very large crude carriers (VLCCs), Suezmax and Aframax tankers, and leases or manages another 17.

Reporting by Terje Solsvik and Nerijus Adomaitis

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