John Fredriksen’s Frontline ended the year in the red having reported a net loss of USD 248.4 million for the fourth quarter of 2017 and a net loss of USD 264.9 million for the full year.
The poor financial results were attributed to, among other things, an impairment loss of USD 164.2 million on nine VLCCs leased from Ship Finance, as well as three vessels for which the leases with Ship Finance were terminated in 2017, and a USD 112.8 million impairment loss on goodwill in relation to Frontline 2012.
The full-year loss is being recorded on the back of a profit of USD 117 million for the year ended December 31, 2016.
“The spot rates in the fourth quarter were weak, as inventory draws impacted a freight market that was already suffering from high fleet growth. At the same time, the key drivers for the tanker market, crude oil demand and the world economy remain strong, and we may also be nearing the end of the cycle of inventory draws. The headwind factors experienced in 2017 could turn in our favour possibly towards the end of the year. The quarter shows Frontline’s resilience in weak markets, which is the direct result of low break-even levels and access to competitively priced capital,“ Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS, said.
“With asset values, rates and Frontline’s cash break-even rates at historically low levels our downside risk is limited. We are in a unique position to capitalize on increases in both asset values and rates and we have a strong liquidity position in excess of USD 300 million as at the end of December 2017,” Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added.
Since the beginning of the year, the company took delivery of the VLCC newbuildings Front Empire and Front Princess and the LR2/Aframax newbuilding Front Polaris.
In February 2018, the oil tanker shipping company extended the terms of its senior unsecured loan facility of up to USD 275 million with an affiliate of Hemen Holding by 12 months. Following the extension, the loan is repayable in November 2019.
Frontline’s total liquidity as at the end of December 2017 was approximately USD 307 million.
In addition, earlier this month Frontline agreed with Ship Finance to terminate the long-term charter for the 1998-built VLCC Front Circassia.