Knightsbridge Tankers Announces 2Q Results

Knightsbridge Tankers Limited reported net income of $7.9 million and earnings per share of $0.46 for the second quarter of 2006. The average daily time charter equivalents earned by the company's five VLCCs was $42,800 compared with $54,300 in the immediately preceding quarter. The second quarter earnings reflect the weakening of the tanker market that occurred in the first quarter and early into the second quarter of 2006 before a steady recovery that continued through the end of the second quarter. The completion of the drydocking for TI Ningbo (formerly named Hampstead) resulted in approximately 18.3 days of off-hire in the second quarter. All of the company's five vessels have now completed their scheduled 10-year drydocking and special survey.

For the six months ended June 30, 2006 the company reports net income of $22.1m and earnings per share of $1.29. The downward pressure at the end of the first quarter for VLCCs eased late in the first week of the second quarter. The lowest rate in the second quarter was witnessed in the first week of April with approximately World Scale ("WS") 55, for the benchmark route MEG to Japan. This equated to a TCE of approximately $18,500 per day. The benchmark rate increased gradually until mid May and thereafter accelerated to its high of approximately WS 120 ($80,500 per day) in the third week of June. The quarter ended with the VLCC market in a gradual decline to approximately WS 97 ($58,500/day).

The average rate from the MEG to Japan in the second quarter of 2006 was approximately WS 80 ($41,700 per day), compared to about WS 71 ($32,600 per day) in the second quarter of 2005. Bunkers continued the upward trend seen in the first quarter with Fujairah's highest bunker quote for the quarter early May at $359 per mt, for thereafter slowly decreasing to $325 per mt at the end of the quarter with an average of $335 per mt. This represents an increase from the average in the second quarter of 2005 of $79/mt.

According to Fearnleys the VLCC fleet totalled 473 vessels at the end of the second quarter of 2006, an increase of 0.9 percent over the quarter. No VLCCs were scrapped in the period while four were delivered. The total order book now stands at 149 vessels at the end of the second quarter, up from 130 vessels after the first quarter of 2006. For the remainder of 2006 there are seven deliveries expected and there are 32 counted for 2007. The current order book represents 31.5 percent of the current VLCC fleet. A total of 23 VLCCs were ordered during the quarter.

At the end of July it was possible to sell freight futures for the remainder of 2006 at a level that equated to TCEs for VLCCs at approximately $84,000 per day.

In June 2006, the Company announced it had entered into new time charter agreements for its VLCCs: TI Ningbo and TI Qingdao. The two VLCCs will commence their new time charter employment directly after the current charters expire in the first half of 2007. The TI Ningbo and TI Qingdao have been chartered to Frontline Ltd for a period of four and five years, respectively. The charter income for each VLCC will consist of a fixed base rate of $37,750 per day plus a market related element being 50 percent of the difference between a spot market related rate index and the base rate. The Board believes that the new charters will serve the Company well. The new charters create secured income into the next decade and at the same time allow the Company to benefit from spot market increases.