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A Look at Frontline’s Performance in a Weak Market

PART:
1 2 3 4 5
Part 2
A Look at Frontline’s Performance in a Weak Market PART 2 OF 5

Factors That Could Affect Frontline’s 3Q17 Revenues

Frontline’s top line

Frontline’s (FRO) revenues dropped to $150.1 million in 2Q17 from $171.1 million in 1Q17. Its 2Q17 revenues fell 21.7% from 2Q16’s revenues of $191.6 million.

Factors That Could Affect Frontline’s 3Q17 Revenues

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Revenue sources

Frontline (FRO) earns its revenues through operation of its Suezmaxes, VLCCs (very large crude carriers), Aframax vessels, LR2 tankers, and MR vessels. The company operates its vessels in the spot market as well as in the time charter market.

2Q17 tanker rates

For its VLCCs, Frontline achieved a spot and time charter rate of $23,800 in 2Q17 compared to $34,400 in 1Q17. Similarly, its Suezmax vessels earned a day rate of $16,400 compared to $23,400 in 1Q17.

Factors affecting 2Q17 revenues

In July, Frontline took delivery of Suezmax Front Cascade and VLCC Front Earl. In August, the company took delivery of LR2 Front Pollux. These will add to the company’s revenue earnings days. Although this is a positive factor for future revenues, the weak tanker market could weigh negatively on the company’s future revenues.

The 3Q17 spot rates earned by the company are significantly lower than those earned in the second quarter. Frontline has covered 62% of its VLCC days at $16,800. Also, 63% of its Suezmax days are covered at $18,500.

Peer revenues

Several crude oil (DBO) tanker companies have already released their second quarter earnings. Below are some of those results:

  • Teekay Tankers (TNK) posted revenues of $89.0 million in 2Q17, which fell 36% YoY (year-over-year).
  • DHT Holdings’ (DHT) revenues fell 28.3% YoY to $59.6 million in 2Q17.
  • Nordic American Tanker’s (NAT) revenues fell 36.5% YoY to $39.1 million in 2Q17.
  • Euronav’s (EURN) revenues fell to $126.4 million in 2Q17 from $89 million in 2Q16.
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