Q3 2021 Frontline Ltd Earnings Call

November 29, 2021

Welcome to our conference call. Please continue to stand by. Your conference will begin shortly.

[music].

Good day, and thank you for standing by and welcome to the Q3 2021 Frontline limited earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one on your telephone.

Please be advised that today's conference is being recorded. If you require any sort of assistance, please press star zero. I would now like to turn the conference over to your speaker today, Lars Barstad. Pease go ahead. Thank you very much.

Thank you very much.

Good morning, and good afternoon to everyone and welcome to Frontline third-quarter earnings call. These are indeed volatile times, although maybe not as volatile as you hoped for in freight. Q3, '21 mark the bottom of the cures post COVID-19. [inaudible] low point in our markets, but everything seems to have been amplified in these times we currently live in.

These are indeed will at all times, although maybe not as volatile as you hoped for in freight.

Oh Q3, 'twenty, one mark the bottom of the cures post COVID-19.

He says he's led.

Hello point in our markets, but everything seems to have been amplified in these times. We currently live in.

Towards the end of the quarter, we actually started to see a recovery in demand for freight as export volumes group, which has continued into the fourth quarter. Right now we are as to the rest of the world worried about the implication of this new Omnicom variant of the COVID-19 virus. What will OPEC plus dues in that respect I want something come out of the ongoing Iranian nuclear talks in Vienna.

What will the OPEC plus dues in that respect I want something come out of the ongoing Iranian nuclear talks in Vienna.

Let's start with the facts on Frontline's third quarter and look at the highlights on slide three. Q3, '21 performance reflects the challenges the tanker market faces this quarter. It is however a proof that our business model our efficient operations, our modern fleet and very hard working team managed to outperform most of our peers.

Yeah.

Q3, 'twenty one performance reflects the challenges the tanker market faces this quarter. It is some of our are proof that our business model our efficient operations, our modern fleet and very hardworking team managed to outperform most of our peers.

In the third quarter, Frontline achieved $10,500 per day on our VLCC fleet, $7,900 per day on our Suezmax fleet and $10,700 per day on our LR2 fleet. So far in the fourth quarter, we had 17.9% of our VLCC days at $21,600 per day. 72% of our Suezmax days at $17,900 per day, of our luxury SaaS Aframax days at $16,000 per day. All numbers in this table on the load to discharge spaces, but I do think they showed that the markets have indeed recovered from the third quarter, although they have yet to see rates reaching for those cars. I will now let Inger take you through the financial highlights.

Hi Felipe.

So far in the quote in the fourth quarter, we had the 17, 9% of our VLCC days at 21000 and $600 per day.

72% of our Suezmax days at 17.

64% of our luxury SaaS Aframax days at 16000 Boes per day.

All numbers in this table on the load to discharge spaces, but I do think they showed that the markets have indeed recovered from the third quarter, although they have yet to see rates, reaching for those cars.

I will now let Inger take you through the financial highlights.

And then good morning, and good afternoon, ladies and gentlemen. Following the acquisition that we did in the first half of the year, we had been busy on the financing side. In the third and the fourth quarter, we have entered into term loan facilities and obtained financing commitments for a total amount of up to $507 million. [Departure financed that decision on the 229 P M. And also the 60 million contracts.] These facilities will finance, 65% the market vendor and they will carry an interest rate [inaudible] a 170 basis points. And they will have an opportunity to save some profile of most in 20 years, but also 18 commencing in [inaudible] from yard. When we factor in 33.4 million available under the term loan facility entered into in November 2020 to partially finance the delivery of the last and acute tanker we have established bank debt of up to $544 million.

Holdings acquisition that particular there'll be 86 in the first half of the year, we had indicated on the financing side.

In the third and the fourth quarter, we have entered into a term loan facilities and obtained financing commitments for a total amount of up to $507 million.

Departure, they financed that decision on the 229 P M.

And also the 60 million contracts.

This will finance, 65% the market vendor and David carry an interest rate of the hybrid because I'm not in a 170 basis points.

And they will have an amortization profile of most in 20 years, but also 18 commencing in Virginia pretty baked from yard.

When we factor in.

30, 34 million available under the term loan facility entered into in November 2012.

Debt to partially finance the delivery of the last and acute tanker we have established bank debt of up to $544 million.

The company has also raised gross proceeds of $51.2 million in the equity distribution agreement and also net cash proceeds of approximately 67 million Hussain of poor electrode package.

And following this the remaining commitments after September 30th [profit on plans new building] program, consisting of one or two times around the sixth and for that position [inaudible] is fully funded. Through these new financings will reduce other boring, but also reduce our industry, leading cash break even rates. Providing significant operating leverage in classical return during periods of market strength and health protecting our cash flows during periods of market weakness.

Unplanned new building program, consisting of one <unk> tanker in the sixteens disease and for that decision on the two 2019. Please proceed.

Got it.

Yeah.

Through these new financings will reduce other boring, but also reduce our industry, leading cash break even rates. Providing significant operating leverage in classical return during periods of market strength and health protecting our cash flows during periods of market weakness.

Providing significant operating leverage in classical return during periods of market strength and health protecting all the castros during periods of market weakness.

[China] has also extended the term of the senior unsecured revolving credit facility of up to $275 million by 12 months to May 2023 hearings sometime and no loan maturities until 2023. Then, let's turn to slide four and look at the income statement.

In 2023.

Then, let's turn to slide four and they've got the income statement.

Frontline achieved total operating revenues the voyage expenses of $69 million and adjusted EBITDA was $17 million in the third quarter of 2021. We reported net loss of $33.2 million or 17 cents per share and adjusted net loss of 35.9 million or 18 cents per share in the third quarter.

We reported net loss of $33 2 million or 17 cents per share and adjusted net loss of 35 9 million or <unk> 18 per share in the third quarter.

[inaudible] at 1.2 million gain on derivatives, and 0.2 million gain on marketable securities and a $1.3 million amortization of acquired time charters. The adjusted net loss in the third quarter increased by $12.7 million compared with the second quarter.

Consistent at one 2 million gain on derivatives, and <unk> 2 million gain on marketable securities and a $1 3 million amortization of acquired time charters yet.

The adjusted net loss in the third quarter increased by $12 7 million compared with the second quarter.

And this increase in loss was driven by a decrease in our time charter equivalent earnings due to lower TCE rates and the recognition of a gain on the marketable securities sold in the second quarter of $4 million.

And the recognition of a gain on the marketable securities sold in the second quarter of $4 million.

This was partly offset by a decrease in ship operating expenses of $3.2 million, primarily [inaudible] dry-docking cost. Then let us take a look at the balance sheet on slide five. The total benefit numbers have increased with 6 million in the third quarter.

Then let us take a look at the balance sheet on slide five.

Okay.

The.

Total benefit numbers have increased with 6 million in the third quarter.

And the balance sheet movements in the quarter are primarily related to taking delivery of their acute tankers from [inaudible] in addition to ordinary debt repayments and depreciation.

As of September the 30th 2021 Frontline has $190 million in cash and cash equivalents, including undrawn amounts under our senior unsecured loan facility, marketable securities and minimum cash requirements.

Marketable securities and minimum cash requirements.

Sometimes remaining new building and this acquisition Capex of $659.4 million at September 30th 2021 is fully funded by 540.4 million and estimated debt capacity and also the $118.2 million in cash rates today and the state of the four [electric] tankers, which I mentioned.

544 million and estimated debt capacity and also the $118 2 million in cash rates today, Jim in the state of the four and a few tankers, which I mentioned.

The company has also no debt maturities until 2023, as I also mentioned. Then, let's take a closer look at cash breakeven rates and Opex on slide six. We estimate average cash cost breakeven rates for the remainder of 2021 of approximately $21400 per day for the VLCCs, $7,800 per day for the Suezmax tankers and $14,100 per day for the LR2 tankers.

Then, let's take a closer look at cash breakeven rates and Opex on slide six.

We estimate average cash cost breakeven rates for the remainder of 2021 of approximately $21400 per day for the Vlccs.

$7,800 per day for the Suezmax tankers and $14,100 per day for the LR2 tankers.

And the fleet average estimate is about $17,600 per day. These rates are the all in daily rates that our vessels must earn to cover the budgeted operating cost and dry dock estimated interest expenses, TCE and bareboat hire installments on loans and G&A expenses.

These rates are the all in daily rates that our vessels must earn to cover the budgeted operating cost and dry dock estimated interest expenses, Tc and bareboat hire installments on loans and G&A expenses.

We recorded Opex expenses in the third quarter of $8,200 per day for the VLCCs, $7,200 per day for the Suezmax tankers and $8,800 per day for the LR2 tankers. We tried to at our two tankers in the third quarter and expect to drydock one VLCC and one Suezmax tanker in the fourth quarter.

Seven $7200 per day for the Suezmax tankers and $8800 per day for the <unk> tankers withdraw.

We tried to at our two tankers in the third quarter and expect to Drydock. One you have to see.

And one suezmax tanker in the fourth quarter.

Then the graph on the right-hand side of the slide shows free cash flow per share and free cash flow yield basis can feed in share price of November 26 is up to an achieved TCE rates.

This shows free cash flow per share and free cash flow yield basis can feed in share price after them, but 26 S upturn achieved TCE rates.

Let's take an example if we assume historic Clarkson TCE rates for non eco vessels in the period 2021 November 2021, adjusted them for frontline fleet scrubber and eco vessels.

<unk> 2021 November 2021, adjusted them for frontline fleet scrubber and eco vessels.

Frontline will have a free cash flow yield of 38%. Free cash flow yield potential increases with higher assumed TCA TCE rates and also on a fully delivered basis. With this I leave the word to Lars again.

Free cash cash flow yield potential increases with higher assumed TCA TCE rates and also on a fully delivered basis.

With this I leave the word to Lars again.

Thank you very much. Let's move over to slide seven and look at the third quarter, you talked to market. So it's accurate bottomed. During Q3 and this is seasonally kind of the normal weakest moment of the year. I think it's safe to say that this is not a normal year, we haven't hub and a normal year since 2009. So global oil consumption averaged $98.6 million barrels per day. It's up to 1.9 million barrels from the second quarter supply averaged 96.8 million also increasing by close to 2 million barrels per day, but we continue to grow them kind of very close to 1.8 million barrels per day of inventories.

Look at the third quarter, you talked to market.

So it's accurate bottomed.

During Q3 and this is seasonally kind of the normal weakest moment of the year.

I think it's safe to say that this is not a normal yes, we have actually I haven't hub and a normal years since 2009 team.

So global oil consumption averaged $98 6 million barrels per day.

It's up to $1 9 million barrels from the second quarter supply averaged $96 8 million also increasing by close to 2 million barrels per day, but we continue to grow them.

Kind of very close to 1 million barrels per day of inventories.

OPEC plus supply rose on a ratio of 1.4 million barrels per day. I think it's important to add some of that a lot of the key OPEC suppliers came out of their peak demand period, which is when they burn fuel for electricity generation basically for cooling.

I think it's important to add some of that a lot of the key OPEC suppliers came out of their peak demand period, which is when they burn fuel for electricity generation basically from Cooley.

This normally happens in September so towards the end of the quarter. We saw strong demand growth in North America, and in Europe, whilst the Asian demand recovery was muted also in the third quarter as we saw in the second quarter. What was special about the quarter that we went through was that oil and energy prices were extremely volatile.

We saw strong demand growth in North America, and in Europe, whilst the Asian demand recovery Wilson muted also in the third quarter like we saw in the second quarter.

What was special about the quarter that we went through was that oil and energy prices were extremely volatile.

We saw natural gas prices, coal prices also other commodities that are affected by energy prices rise rapidly during the quarter. And all the markets performed strongly as we came to the end of the quarter. I think it's important to note here to look at the graph on the left-hand side at the bottom of the slide. So total world consumption is now actually not that far off from where we started in January 19. Sorry in January 2020, before the pandemic hit us.

<unk> rise rapidly.

During the quarter.

And all of the markets performed strongly as we came to the end of the quarter I think it's important to note here. If you look at the graph.

on the left-hand side at the bottom of the slide. So total world consumption is now actually not that far off from where we started. In the in January 19. Sorry in January 2020, before the pandemic hit us.

In the in January 19. Sorry in January 2020, before the pandemic hit us.

Sorry in January 2020, before the pandemic hit us.

And in December were actually some market commentators obviously, arguing for us to end up in or at 100 million barrels per day. What we have seen which is on the slide, the chart on the right at the bottom of the slide is that oil in transit has developed quite well during the last couple of months.

Some market commentators obviously, arguing for us to end up in.

Or.

100 million barrels per day.

What we have seen which is on the slide on the.

chart on the right at the bottom of the slide is that oil in transit has developed quite well during the last couple of months.

Well during the last couple of months.

We saw that during Q3, we remained up these kind of depressed levels, where we're. Kind of oil in transit increase and decrease the gum and increased. This kind of choppy movement, but now as we went into November, we started to see that this oil and water, which is basically a picture of demand or utilization in the tanker fleet increased rapidly to where we are now.

During Q3, we remained up these cut off the.

The depressed levels, where we're.

Kind of oil in transit increase and decrease the gum and increased.

This kind of choppy movement, but not as.

As we went into November we started to see that this oil and water, which is basically a picture of.

Demand or utilization in the tanker fleet increased rapidly to where we all know.

So let's move to slide eight and have a look at the order books. So tanker ordering was obviously muted during third quarter, we sold one Suezmax order and 8 luxury aframax orders no VLCCs were reported orders, thus far as we could see in the quarter.

So tanker ordering was obviously muted during third quarter, we sold one suezmax order on <unk>, a luxury aframax orders no vlccs were reported orders, thus far as we could see in the quarter.

What did happen, though was that the delivery window for ordering any kind of useful number of tankers is now. Starting to get limited for 2014 of them. 2023 is destined to show very few VLCC and Suezmax deliveries. The new building prices are indicated up at very high levels. There hasn't been much price discovery in this market, particularly for the VLCCs as no kind of new builds have been ordered really during the last four to five months.

Any kind of useful number of tankers is now.

Starting to get limited for for 2014 of them.

2023 is destined to show very few VLCC and Suezmax deliveries.

The new building prices are indicated up at very high levels. There hasnt been much price discovery in this market, particularly for the Vlccs as no kind of new builds.

have been ordered really during the last four to five months.

It's obviously governed by a combination of high steel prices and low availability. Basically, the considerations that shipowners need to make now if you are to go into the market and order VLCC say up to 110 or 150 or $120 million, depending on who you speak to, you are actually making a bet on steel prices come 2023.

Basically the.

Considerations that ship owners need to make now if you are to go into the market on board revenue see say up to 110 or 150 or $120 million, depending on who you speak to you are actually making a bet on steel prices come 2023.

So so this is obviously a bet that's a lot of people are hesitant to take at this point in the curve. The VLCC order book is now 71 units, so that's a little bit north of 8% of the existing fleet. But we still have this situation, where 113 VLCCs will be above or past the 20-year mark.

The VLCC order book is now 71 units, so thats, a little bit north of 8% of the existing fleet.

But we still have this situation, where 113 vlccs will be above or past the 20 year Mark.

During that period as the current order book deliveries. For Suezmax. There are 41 units in the order book and 116 will be posting 20 years using the same metrics. One thing about us kind of changed a little bit during the third quarter is that recycling has started to show some promise and let's move to slide nine.

<unk> hundred six team, we will be posting 20 years using the same metrics.

One thing about us.

Change a little bit during the third quarter is that recycling has started to show some promise and let's move to slide nine.

So with the record high recycled steel prices activity is finally accelerating. As you would see on the chart at the top there so 2017 and 2018 was the last big periods for vessel retirements. And now in Q3 alone, we saw close to 0.76% of the global tanker fleet sold for recycling.

So you would see on the chart.

The top there so 2017 and 2018 was the last big periods for vessel retirements.

And now in Q3 alone we saw close to zero point, 76% of the global tanker fleet sold for recycling.

We are in a situation now where alternative use for tankers is extremely limited. As most of you may know that's kind of in the earlier markets you've had the opportunity to either convert a ship for storage or even, it could be converted into an <unk>, so basically in the oil producing unit. These obviously these markets are closed as it is right now.

Most of you may know that's kind of in the earlier markets you've had the opportunity to either convert.

A ship for storage or even.

It could be converted into an <unk>, so basically in the oil producing unit.

These obviously these markets are closed.

Is right now.

And we also see that during the pandemic it's becoming evident that the capacity for recycling was seriously come contracted so basically there has been the Covid pandemic in countries like India, Pakistan and Bangladesh. So basically year to date, we've seen 15 VLCCs, 11 Suezmax this ATM or <unk> and <unk> that are reported sold for demolition and broadly speaking this amounts to actually close to 2% of the existing fleet. So basically we believe that this might accelerate going forward as the recycling values are still extremely strong.

During the pandemic.

It's it's becoming evident that the capacity for restructuring was <unk>.

Seriously come contracted so basically there has been.

The Covid pandemic.

They'll make in countries like India, Pakistan and Bangladesh.

So basically year to date, we've seen 15, Vlccs 11, Suezmax this ATM or <unk> and <unk> that are reported sold for demolition and broadly speaking this amounts to actually close to 2% of the existing fleet.

So basically we believe that this might accelerate going forward as the recycling values are still extremely strong.

The recycling values are still extremely strong.

Then let's move to slide 10. So there's a lot of noise in the market currently. Parts of this presentation should be on the potential impacts from the omicron virus. We believe we will need a few weeks to learn more about this variance to even though where we are heading. What we do know is that in the recent weeks had the kind of a message of U.S. releasing oil from their strategic Petroleum reserve. There are obviously other exogenous factors playing up as well, but let's focus on this one.

So theres a lot of noise in the market currently.

Parts of this presentation should be on the potential impacts from the omicron virus.

We believe we will need a few weeks to learn more about this variance to do even though where we are heading.

We do know is that in the recent weeks.

Had the kind of a message of U S.

<unk> releasing oil from their strategic Petroleum reserve.

There are obviously other exogenous factors, playing up as well, but let's focus on this one.

So U.S. has released volumes from their SPR on a few occasions over the last 18 months. And despite U.S. inventories being below five-year averages, this country is actually not particularly short of crude oil.

And despite U S inventories being below five year averages. This country is actually not particularly short of crude oil.

And after the recent releases, we have actually observed slightly higher exports with a significant part of the volume going to Asia. And particularly so in October and November this year. And it's obviously not the SPR volume itself that is directly kind of heading into the Gulf coast and being exported.

And particularly so in October and November this year.

And it's obviously not the SPR volume itself that is directly kind of heading into the Gulf coast and being exported but.

But it's basically there is ample kind of for the supply of oil in U.S. And what the SPR release creates has said that to depress the low coal prices for crude and this basically makes the crudes attractive to Chinese or Asian buyers. China, India, South Korea, and Japan had pledged to join the US effort unreleased from there as the US the depart from India alone have been very specific on volume.

Kind of for the supply of oil in U S.

We'll then SPR release creates has said that to depress the low coal prices for crude and this basically makes the crudes attractive to Chinese or Asian buyers.

China, India, South Korea, and Japan had pledged to join the U S effort unreleased from there as the US the depart from India alone have been very specific on volume.

And we have to remember that these Asian countries are far more sensitive to severe supply disruptions. Because they have very limited domestic production capacity. And the Northern Asian region is facing record-high energy prices as we now head into winter. So whether if the release, weather oil will be released at all from the SPR now after having a 10 dollar drop in oil prices is always a question, but if it should happen, it could actually trigger a ton-mile increase.

Because they have very limited domestic production capacity.

And the Northern Asian region is facing record high energy prices as of now head into winter.

So whether if the release.

If oil will be released at all from the SPR now after having a 10.

drop in oil prices is always a question, but if it should happen, it could actually trigger a ton-mile increase.

Could actually trigger a ton mile increase.

So let's move to the summary. And let's go through a couple of other things that are at play right now. The demand and supply of oil continues to rise but the latest virus version is obviously now clouding the outlook. <unk> markets have recovered since Q3 '21. But it's still challenged by all supply not fully at pre-pandemic levels.

And let's go through a couple of other things that are at play right now.

The demand and supply of oil continues to rise.

<unk> the virus version is Silversea now clouding the outlook.

<unk> markets have recovered since Q3 'twenty well.

But it's still challenged by all supply not fully.

Pandemic levels.

Thank you, and I think this is a very important thing to note. Thank you recycling has finally started to make an impact on the lithium supply. And then we have all these exogenous factors that we really don't know much of at this point.

And then we have all this extra genpact is that.

We really don't know much of.

So the U S. SBR release OPEC strategy going forward. They just postpone their meeting for a couple of days in order to find out more on the virus outbreak. And they resumed the Iranian nuclear talks in Vienna, So there's a lot of stuff that is going to happen over the next couple of weeks.

And they resumed the Iranian nuclear talks in Vienna, So theres a lot of stuff.

going to happen over the next couple of weeks.

Oil in transit continues to rise and energy prices are at record highs as the Northern hemisphere is heading into winter. I think the most important part is that clients financial commitments are now fully funded. With reduced overall funding costs and we are indeed well-positioned as the story of this market unfolds.

I think the most important part is that from clients financial commitments are now fully funded.

Reduced overall funding costs and we are indeed, well positioned as the story of this market unfolds.

Finally, I have used this graph below before. And it shows the year on year basically various segments and how that trades are performing. And we do see that for tankers is actually showing a growth of 3.8% year on year in October compared to October 2020.

And it shows the year on year.

Basically.

Various segments.

How that trades are performing.

And we do see that for tankers is actually showing a growth of 3%.

Three 8% year on year in October compared to October 2020.

So tankers have been lagging all the other asset classes in shipping for a while but now we're actually starting to pull forward with. So with that, I'd like to open up for questions.

Shipping for a while but now we're actually starting to pull forward with.

So with that ill.

I'd like to open up floor for questions.

Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound key. Your first question today comes from the line of Chris from Webber Research. Please go ahead. Your line is open.

Your first question today comes from the line of Chris from Webber Research. Please go ahead. Your line is open.

Hi, good afternoon, Lars and Inger, how are you? Very good, thank you. I wanted to just ask about the four LR2 that were sold, were they clean power to the silver where they still go to dirty. No, they were trading clean.

Very good thank you.

Okay.

I wanted to just ask about the four L or to use that were still where they where the clean power to the silver where they still go to dirty.

No they were trading clean.

Okay, and then I think last quarter, there was 730 and then 13 clean, what's the composition of your fleet now? It's actually quite 35% trading dirty and 65% trading clean. Okay. And thanks for that and to dry docking I think Inger you said, one VLCC and Suezmax in Q4, roughly how many days would you estimate for these two? How many days? Around 20 days. That's the kind of founded.

Our fleet now.

It's actually.

<unk>.

65% trading clean.

Okay.

And thanks for that and to dry docking I think you said, one VLCC and Suezmax in Q4, roughly how many days with Jason. Thanks for these two.

How many days.

Around 10 today.

That's the kind of founded.

20 days for each okay. So 40 in total. Alright.

Alright.

And lastly, a quick one for me.

How much of your remaining under the equity distribution agreement.

The equity distributions.

Total of 100 million. So let me now have the.

Thanks for take the $1 2 million the difference is that four to eight 8 million.

Amy.

Alright, great. That's it for me I'll turn it over thanks guys.

Okay. Thank you.

Thank you. Your next question comes from the line of Greg Lewis from <unk>. Please go ahead. Your line is open.

Yeah, Hey, Thank you and good afternoon everybody.

I guess I wanted to discuss a little bit more about the decision to sell the LR twos.

What was it about those vessels, maybe that made them more attractive than some of the other vessels in the fleet is it more of realizing the acquisition what was that last year.

While on the Suezmax was the function of that those vessels being in the sale leaseback transaction really the fact that those were product vessels versus crude or really what I'm wondering is.

I think we're all optimistic that we're going to see a recovery.

In tanker rates in 'twenty two hopefully.

But I guess, what I'm wondering is could we see more of those similar types of transactions, maybe with some of your crude vessels.

Yes. Thank you.

That's a fair question so.

Over the last year, we've obviously grown tremendously in our exposure to the VLCC market.

Is something we've communicated for a long period of time that this has been our ambition.

Historically, we haven't seen that.

Kind of the return we are able to give our shareholders.

Kind of the best return, we're able to give us from the larger vessels.

So so we're kind of in that process. We have obviously reached far in order to increase the fleet.

It's quite a lot.

And then.

<unk>.

During the year and this is kind of a weird one asset class that has appreciated the most is in Scotts <unk>.

So whilst.

All asset prices have risen, but they are not choose have been tremendously strong.

So basically we saw this as an opportunity to capture value at the point in the curve.

Yes.

Could be that we will.

Kind of divest in other vessels as well but.

It's kind of our focus is to grow and maintain our VLCC position.

Where we believe we will get the best Bang for the Buck.

And then.

They are allowed to sell.

<unk> is a very interesting one we believe in that market.

We found it prudent to capture this value to us as we felt the price we could achieve on these four unit the oldest for we have in the fleet Chinese.

Chinese built.

Our ability to capture value there. So we basically took it.

Okay, Great and then and then.

And going thank you for the presentation and in talking about.

The VLCC market you referenced historical prices really what I'm trying to understand as I look at the VLCC fleet today, let's just put those 100 vessels that are the <unk>.

One year old vessels, you referenced 15 or whatever that number over 100, let's say.

Do we have any sense for how much of the call. It the modern VLCC fleet is.

This scrubber fitted.

Actually on the modern.

I don't have that number in front of me, but.

What have you looked at this stopped at this point in time about half of the VLCC fleet is scrubber fitted.

So so.

And I would assume that the most modern vessels are basically has to come from the yard.

But then most of the scrubber investments that probably happened on the kind of non eco more thirsty units, because that's where it makes most economic concerns so but I don't have that split kind of in front of me, but about half of the fleet is selling what is covered.

And then just and then just.

One more for me.

As I think about.

Okay.

It's.

Hold on the side, because if I think about.

All all QM if it comes to me, but I just I just escaped my mind. So thanks for the time everybody.

Thank you.

Thank you, ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Your next question comes from the line of Jon Chappell from Evercore. Please go ahead. Your line is open.

Good afternoon everybody.

Absolutely.

Andrew I'll ask Greg's question for him. So you've got a lot done on the financing side in <unk> and it seems like you're all squared away now with checks of big box as far as meeting the Newbuild commitments I am just curious on the equity distribution why did you feel necessary to issue equity at that size given all of the financing you had lined up.

And the fact that you basically covered now even without the more expensive equity.

Well.

Uh huh.

The amendment that we did there was accretive to the company in a way because.

<unk> of that.

The frontline shares.

Ross five below the share price at that point in time, it depends but those sure.

We have let's say a good.

Right thing to do for the company.

Okay and on.

On the macro side, Lars clearly theres a lot of things we can identify right now and this question was probably more fitting two weeks ago before theres more things thrown out there but.

Everyone's put out this very optimistic view you know ourselves included on why things should get better. It's just you know.

Bring as coiling the inventories are really low productions, increasing demands increasing the fleet shrinking.

Yet we're still you know at these very low levels, where every once in a while you get a little bit of an increase in you think here. We go here is to start at the cycle and then it pulls back again.

They're then OPEC, just being a little bit stingy with their releases what has been.

Kind of the limiting factor in letting this recovery from the third quarter trough really gained momentum and other than the things you've addressed already are there any other concerns you have about the sustainability going into early 'twenty two.

So.

I think it's.

No.

Obviously, there is no problem one correct answer of that question, but kind of our experience is that.

<unk>.

In some segments you are suddenly in a position to push so you could kind of push rates north bound, but then other.

Parts of the pie.

Or if the specs.

Experiencing kind of issues. So basically what we have now for the last couple of weeks is something really really good demand in the in the VLCC space, we see middle East exporting finally.

According to the OPEC.

Program.

Who was prior.

We suspect that the countries have actually consumed or kept a lot of the oil in domestic.

Our domestically.

So that's the one that you get with Africa with production issues.

That volume.

Kind of tapers off there has also been over the last couple of months a situation where.

For the long haul oil you need the arbs to be open so basically four.

That's something basin oil to be priced in a manner, where it's attractive to Asian refiners and that has not really been the case.

And this is basically us.

Demand recovery has happened.

Relatively.

Kind of quickly during this second half of this year at least.

In in Europe.

In the U S. So basically the local oils in the around the Atlantic basin have been kind of relatively good priced basic.

Basically meaningless.

Refiners countries compete.

So you've got a couple of these factors.

During this fall.

<unk>.

We're still shy of a couple of million barrels.

Production until we are at pre Covid levels.

So obviously.

There are new ships has been delivered throughout the year. So so think confidence a mixture of those three reasons.

With regards to pricing and how crude price is priced whether if it's going to go into a sour stay low cool that could rapidly change.

With regards to on the production increase I think thats more risky now whether it will actually will increase volumes.

Into Q1.

The one thing thats for certain.

We are very close to our balance.

But we have yet to kind of I think I've mentioned this before that the market has like three or four cylinders.

We need to fire on all cylinders in order for it to get some traction on the regretfully had one cylinder sale.

All the other all the other.

Cylinders go.

Okay, no that all makes sense and if I could just follow up with one point there I mean, all eyes are going be on OPEC. This week, obviously and they they tend to be.

Really driving the sentiment in the tanker markets right now given what you noted about the arbs and you know if the SPR release in the U S leads to lower domestic prices here, which could lead to more exports, which are longer haul as OPEC carry the same amount of sway in the tanker markets that it once did.

Or is it more of a you know more of a sentiment driver that had actual fundamental driver.

I think it's more of a sentiment driver that in actual.

Fundamental driver to be quite honest I.

I think.

The proof is that throughout this year, we've had the OPEC.

Comp growth, adding them settling of adding them kind of.

Delaying meetings.

And also.

Kind of a relatively small portion of production increases.

Being reflected in their exports, we have OPEC producers that are actually over in over compliance basically because they have production issues.

So so.

I think it's more of the headline what we see in our little poems of global transportation of crude oil, we just see volumes gradually increase and obviously if OPEC.

Suddenly.

Funds.

I don't want to increase in January I think you'll have price action.

Suddenly Atlantic barrels will then be attractive kind of been moved out to Asia again.

So for us on the tanker side, that's far more important than kind of what what OPEC may decide for one month.

Got it alright very helpful ours. Thank you. Thanks Inger.

Okay.

Thank you, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press star one on your telephone keypad.

Next question comes from the line of Randy given from Jefferies. Please go ahead. Your line is open.

Good morning, everyone. This is Chris Robertson on for Randy Thanks for taking our call.

Hi.

Just to follow up on the.

The ATM issuance. There can you just talk about how you decided upon the amount that was issued in October and let's say rates stay weak in 2022 would you look to utilize that again with a further issuance.

So based on the current share price, we will not consider to use utilize date yet further.

Okay.

I'd like to add to that that kind of.

Frontline has.

ATM programs before we've always been extremely disciplined and only acted.

It's accretive.

And when the conditions are there for it so.

So.

That should also kind of further.

Answer that question.

Yes definitely thanks for the additional color that's it for us. Thank you very much.

Thank you.

Currently.

The questions I will hand back for any remarks.

Yes, thank you very much for calling in.

<unk>.

Thank you for the time also thank you to the entire frontline team is.

Then the fantastic job again this quarter.

Let's stay safe.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Yes.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Yes.

[music].

Good morning, and good afternoon to everyone and I will come to frontline third quarter earnings call.

These are indeed volatile times, although maybe not as volatile as you hoped for in freight.

Oh Q3, 'twenty, one mark the bottom of the tiers post COVID-19.

She is a low point in our markets, but everything seems to have been amplified in these times. We currently live in.

Towards the end of the quarter, we actually started to see a recovery in demand for France as export volumes group, which has continued into the fourth quarter right. Now we are out to the rest of the world worried about the implication of this new or May come by route of the COVID-19 virus virus.

Wattwil OPEC plus dues in that respect I'm not something come out of the ongoing Iranian nuclear talks in Myanmar.

Well, let's start with the facts on Frontlines third quarter look at the highlights on slide three.

Yeah.

Q3, 'twenty one performance reflects the challenges the tanker market faces this quarter. It is however, a proof that our business model our efficient operations, our modern fleet I'm very hardworking team managed to outperform most of our peers.

In the third quarter frontline achieved $10500 per day on our VLCC fleet $7900 per day on our Suezmax fleet to $10700 per day on our <unk> two slash private fleet.

So far in the court in the fourth quarter, we had a 17, 9% of our VLCC days at $21600 per day.

72% of our Suezmax days at 17.

$900 per day.

64% of our luxury SaaS aframax days at $16000 per day.

All numbers in this table are on the load to discharge spaces, but I do think they showed that the markets have indeed recovered from the third quarter, although we have yet to see rates, reaching for these guys.

I will now let <unk> take you through the financial highlights.

Thanks, Ross and good morning, and good afternoon, ladies and gentlemen.

Following the acquisition that's figured there'll be 86 in the first half of the year, we had been busy on the financing side.

And the third and the fourth quarter, we have entered into term loan facilities and obtained financing commitments for total amount of up to $507 million.

To partially finance the acquisition on the 2000.

Nine.

Basically as Steve and also the <unk> billion contract.

These facilities will finance, 65% the market vendor David carry an interest rate of LIBOR, plus a margin of 170 basis points.

And they will have an amortization profile of most in 20 years, but also 18 commencing from the delivery date from yard.

When we factor in.

$33 4 million available under the term loan facility entered into in November 2020 to partially finance the delivery of the lost and acute tanker we have established banks depths of up to $544 million.

The company has also raised gross proceeds of $51 2 million under the equity distribution agreement and also net cash proceeds of approximately 67 million the sale of core electrode tankers.

And following this remaining commitments Aspen September 30th.

The last new building program, consisting of one <unk> tanker in the six Vlccs and codec decision on the two 2000 19 billion. Please proceed.

This.

Yeah.

Through these new financings will reduce our borrowing costs.

So it reduces our industry, leading cash breakeven rates.

Providing significant operating leverage as possible return during periods of market strength and held protecting our cash flows during periods of market weakness.

She has also extended the term of the senior unsecured revolving credit facility of up to two hours into $5 million by 12 months to May 2023 hearings sometime and no loan maturities.

2023.

Then, let's turn to slide four and look at the income statement.

Frontline achieved total operating revenues of voyage expenses of $69 million and adjusted EBITDA of $17 million in the third quarter of 2021.

We reported net loss of $33 2 million or <unk> 17 cents per share.

And adjusted net loss of $75 9 million or <unk> 18 per share in the third quarter.

Can you discuss the consistent at $1 2 million gain on derivatives and <unk> 2 million gain on marketable securities.

And a $1 3 million amortization of acquired time charters.

The adjusted net loss in the third quarter increased by $12 7 million compared with the second quarter.

And this increase in loss was driven by a decrease in our time charter equivalent earnings due to lower TCE rates.

And the recognition of a gain on our marketable securities sold in the second quarter of $4 million.

This was partly offset by a decrease in ship operating expenses of $3 2 million, primarily as result of lower dry docking cost.

Then let us take a look at the balance sheet on slide five.

This.

Total benefit numbers have increased with $6 million in the third quarter.

And the balance sheet movements in the quarter are primarily related to taking delivery of their acute tanker front favor. In addition to ordinary debt repayments and depreciation.

As of September 32021, frontline has $190 million in cash and cash equivalents, including Undrawn amounts under our senior unsecured loan facility.

Marketable securities and minimum cash requirements.

Sometimes remaining new building and the <unk> acquisition Capex of $659 4 million at September 32021 is fully funded.

By a $540 4 million and estimated debt capacity and also the $118 2 million in cash rates to date, Jim and the state of the four and a few tankers, which I mentioned.

The company has also no debt maturities until 2023 as I also mentioned.

Then, let's take a closer look at cash breakeven rates and Opex on slide six.

We estimate average cash cost breakeven rates for the remainder of 2021 of approximately $21400 per day for the Vlccs.

<unk> thousand $800 per day for the Suezmax tankers and $14100 per day for the other two tankers.

And the fleet average estimate is about $17600 per day.

We recorded Opex expenses in the third quarter of $8200 per day for the Vlccs.

<unk> $7200 per day for the Suezmax tankers and $8800 per day for the <unk> tankers withdraw.

<unk> <unk>, two and our two tankers in the third quarter and expect to drive up one VLCC and one suezmax tanker in the fourth quarter.

Then the graph on the right hand side of the slide.

And shows free cash flow per share and free cash flow yield basis, Karen feat in share price of November 2006, as upturn achieved TCE rates.

Let's take an example, if we assume historic Clarkson TCE rates for non eco vessels in the period 2000 to 2021.

Remember 2021, adjusted them for frontline fleet scrubber and equal basis.

Frontline will have a free cash flow yield of 38%.

Free cash cash flow yield potential increases with higher assumed TCA TCE rates and also on a fully delivered basis.

With this I leave the word to Lars again.

Thank you very much senior so let's move over to slide seven.

Look at the.

Third quarter Youre talking to market.

So thank you it's bottomed.

During Q3, and this is seasonally kind of off the normal weakest moments of the year.

I think it's safe to say that this is not a normal year, we have actually avon's hub and a normal year since 2009 team.

So global oil consumption averaged $98 6 million barrels per day.

It's up to $1 9 million barrels from the second quarter supply averaged $96 8 million also increasing muscles to 2 million barrels per day, but we continue to grow them.

Kind of very close to 1 million.

Million barrels per day of inventories.

We will take plus supply rolls on a ratio of one 4 million barrels per day.

I think it's important to add some of ups a lot of the key OPEC suppliers came out of their peak demand period, which is when they burn fuel for electricity generation and basically from Cooley.

This normally happens in September so towards the end of the quarter.

We saw strong demand growth in North America and Europe.

The Asian demand recovery Wilson muted also in the third quarter like we saw in the second quarter.

What was special about the quarter that we went through was that oil and energy prices were extremely volatile.

We saw natural gas prices coal prices also other commodities that are affected by energy prices.

Rise rapidly.

During the quarter.

And all the market comp performed strongly.

We came to the end of the quarter I think it's important to note here if you look at the graph.

On the left hand side at the bottom of the slide So total world consumption is now actually not that far off from where we started.

In the in January 19.

Sorry in January.

20, before the pandemic hit those.

And in December were actually.

There are some market commentators obviously, arguing for us to end up in.

<unk>.

100 million barrels per day.

What we have seen which is on this slide on the side of the chart on the right at the bottom of the slide is that oil in transit hub develops.

Well during the last couple of months.

We saw that.

During Q3, we remain of these cut off the depressed levels, where we're.

Kind of oil in transit increase and decrease the gang and increased.

Just kind of choppy.

The amount, but not as.

As we went into November we started to see that this oil on Walter which is basically a fixture of.

Demand or utilization in the tanker fleet increased rapidly to where we all know.

So let's move to slide eight and have a look at the order books.

So tanker ordering was obviously muted during third quarter, we sold one suezmax ordered eight luxury Aframax orders no Vlccs were reported orders, thus far as we could see in the quarter.

What did happen, though will start the delivery window for ordering.

Any kind of useful number of tankers is now.

Starting to get limited for 424 of them.

2023 is that still to show very few VLCC and Suezmax deliveries.

New building prices are indicated up at very high levels. There hasnt been much price discovery in this market, particularly for the Vlccs as no kind of new builds.

That's been warded really during the last four to five months.

It's obviously governed by a combination of high steel prices and low availability.

Basically.

Considerations that ship owners need to make now if you are to go into the market on board revenues to see say up to 110 or 150 or $120 million, depending on who you speak to you are actually making a bet on steel prices come 2023.

So so this is obviously a bet that's a lot of people are hesitant to take at this point in the curve.

The VLCC order book is now 71 units, so that's a little bit north of 8% of the existing fleet.

But we still have this situation, where 113 vlccs will be above or past the 20 year Mark during that period as the current order book deliveries for Suezmax. There are 41 units in the order book of 106 team, we'll be posting 20 years using the.

Same metrics.

One thing that's changed.

Changed a little bit during the third quarter is that recycling has started to show some promise now let's move to slide nine.

So with the record high recycled steel prices activity is finally accelerating.

So you would see on the chart at the top there. So 2017 and 2018 were the last big periods for vessel retirement.

And now in Q3 alone we saw close to zero point, 76% of the global tanker fleet sold for recycling.

We are in a situation now where alternative use for tankers is extremely limited.

A ship for storage or even.

It could be converted into <unk>, so basically in the oil producing unit.

These obviously these markets are closed.

This right now.

And we also see that.

During the pandemic.

It's becoming evident that the capacity for recycling was.

Seriously com contracted so basically there has been.

The Covid pandemic.

Pandemic in countries like India, Pakistan and Bangladesh.

So basically a year to date, we've seen 15, Vlccs 11, Suezmax this ATM or trends in <unk> that are reported sold for demolition and broadly speaking this amounts to actually close to 2% of the existing fleet.

So basically we believe that this might accelerate going forward there.

The recycling values are still extremely strong.

Then let's move to slide 10.

So theres a lot of noise in the market currently.

Parts of this presentation should be on the potential impacts from the omicron virus.

We believe we will need a few weeks to learn more about this variance to do even though where we're heading.

We do know is that in the recent weeks.

Had the kind of a message of U S.

<unk> releasing oil from their strategic Petroleum reserve.

There are obviously other <unk>, playing up as well, but let's focus on this one.

So you haven't released volumes from their SPR on a few occasions over the last 18 months.

And despite U S inventories being below five year averages. This country is actually not particularly short of crude oil.

And after the recent releases, we have actually observed slightly higher exports with a significant part of the volume going to Asia.

I am, particularly so in October and November this year.

And it's obviously not the SPR volume itself that is directly kind of heading into the Gulf coast and being exported.

But it's basically there is.

Ample kind of for the supply of oil in U S.

Well then SPR release creates has served to depress the low coal prices for crude and this basically makes the crudes attractive to Chinese or Asian buyers.

China, India, South Korea, and Japan have pledged to join the U S effort unreleased from there as the US the depart from India have been very specific on volume.

And we have to remember that these Asian countries are far more sensitive to severe supply disruptions.

Because they have very limited domestic production capacity.

And the Northern Asian region is facing record high energy prices as of now head into winter.

So whether if the release.

If oil will be released at all from the SPR now after having a 10.

The drop in oil prices is always a question, but if it should happen.

Could actually trigger a ton mile increase.

So let's move to the summary.

And let's go through a couple of other things that are at play right now.

The demand and supply of oil continues to rise, but the latest the virus version is silversea now clouding the outlook <unk>.

Markets have recovered since Q3 'twenty one.

But it is still challenged by all supply not fully a pre pandemic levels.

<unk> I think this is a very important thing to note that tanker recycling has finally started to make an impact on lithium supply.

And then we have all this extra genpact is that.

Really don't know much of.

At this point so the U S. SBR release OPEC strategy going forward. They just postpone the REIT has the meeting for a couple of days in order to to find out more on the virus outbreak.

Im very resumed the Iranian nuclear talks in Vienna, So theres a lot of stuff.

It's going to happen over the next couple of weeks.

Oil <unk> Sips continues to rise and energy prices are at record highs.

Northern hemisphere is heading into winter.

I think the most important part is that strong client financial commitments are now fully funded.

With reduced overall funding costs and we are indeed, well positioned as the story of this market unfolds.

Finally, I've used this graph below before on.

And it shows the year on year.

Basically.

Various segments.

How that trades are performing.

And we do see that four tankers is actually showing a growth of 3%.

Three 8% year on year in October compared to October 2020.

So tankers have been lagging all of the other asset classes.

In shipping for a while but now we're actually starting to perform.

So with that ill.

I'd like to open up for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound husky.

Your first question today comes from the line of question from Webber Research. Please go ahead. Your line is open.

Hi, Good afternoon alert and go how are you.

Very good thank you.

Okay.

I wanted to just ask about the four LR twos that we are still where they where they claim prior to the sale or would they still go to dirty.

No they were trading clean.

Okay, and then I think last quarter, there was 730 <unk>, what's the composition.

Your fleet now.

It is actually.

Quite.

35% trailing the 65% trading clean.

Yes.

Okay.

And thanks for that and to Drydocking I think.

You said, one VLCC and once U S. Max Q4, roughly how many days with Jason Thanks for these two.

How many days.

Around 20 days.

So kind of founded 20.

20 days for each okay. So 40 in total.

Alright, Thanks, and lastly, a quick one for me how.

How much is remaining under the equity distribution agreement.

The equity distributions.

Total of 100 million. So let me now have the.

<unk> 40 to $1 2 million the difference is that four to eight 8 million.

<unk>.

Alright, great. That's it for me I'll turn it over thanks guys.

Okay. Thank you.

Thank you. Your next question comes from the line of Greg Lewis from <unk>. Please go ahead. Your line is open.

Yeah, Hey, Thank you and good afternoon everybody.

I guess I wanted to discuss a little bit more about the decision to sell the LR twos.

What was it about those vessels, maybe that made them more attractive than some of the other vessels in the fleet is it more of realizing the acquisition what was that last year.

While in the Suezmax was the function of that those vessels being in the sale leaseback transaction really the fact that those were product vessels versus crude or really what I'm wondering is.

We're all optimistic that we're going to see a recovery.

In tanker rates in 'twenty two hopefully.

But I guess, what I'm wondering is could we see more of those similar types of transactions, maybe with some of your crude vessels.

Yes. Thank you.

That's a fair question so.

Over the last year, we've obviously grown tremendously in our exposure to the VLCC market. This is something we've communicated for a long period of time that this has been our ambition.

Historically, we haven't seen that kind.

Kind of the return we are able to give our shareholders.

Kind of the best return, we're able to give us from the larger vessels.

So so we're kind of in that process. We have obviously reached far in order to increase the fleet quite a lot.

And then.

<unk>.

During the year and.

This is kind of a weird one.

<unk> cost that has appreciated the most is in Scotts <unk>.

So so whilst.

Asset prices have risen, but they are not choose have been tremendously strong.

So basically that we saw this as an opportunity to capture value at the point in the curve.

That could be that we will.

Kind of divest.

In other vessels as well.

But.

It's kind of our focus is to grow and maintain our VLCC position.

We believe we will get the best Bang for the Buck.

And then.

The <unk> segment is it.

It's a very interesting one.

Even that market.

We found it prudent to capture this value to us as we felt kind of the prices. We can achieve on these four unit the oldest for we have in the fleet Chinese.

Chinese built.

Our ability to capture value there. So we basically took it.

Okay, Great and then and then.

And going thank you for the presentation and then talking about.

The VLCC market you referenced historical prices really what I'm trying to understand as I look at the VLCC fleet today, let's just put those 100 vessels that are the 20 year old vessels you referenced 15.

<unk> 15, or whatever that number over 100, let's say.

<unk>.

Do we have any sense for how much of the call. It the modern VLCC fleet is.

Scrubber fitted.

Actually on the modern.

I don't have that number in front of me, but.

What have we looked at this starts at this point in time about half of the VLCC fleet is scrubber fitted.

So so.

And I would assume that the most modern vessels are basically have they come from the yard.

But then most of the scrubber investments that probably happened on the kind of non eco more thirsty units, because that's where it makes most economical sense. So but I don't have that split kind of in front of me, but about half of the fleet is selling what is covered.

And then just and then just.

One more for me.

As I think about.

Okay.

Sure.

<unk>.

Hold on the side because as I think about.

Okay.

I'll ask <unk> if it comes to me if I just I guess the escape my mind, thanks for the time everybody.

Okay. Thank you.

Thank you, ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Your next question comes from the line of Jon Chappell from Evercore. Please go ahead. Your line is open.

Thank you good afternoon everybody.

Yesterday afternoon.

Inger I'll ask Greg's question for him. So you've got a lot done on the financing side in <unk> and it seems like you're all squared away now with checks of big box as far as meeting the Newbuild commitments I'm just curious on the equity distribution why did you feel necessary to issue equity at that size given all the financing you had lined up.

And the fact that you basically covered now even without the more expensive equity.

Well.

Yes.

The movement that we did there was accretive to the company in a way because.

Yeah.

Frontline's share.

It was a five below the share price at the point in time, it depends a little share.

So first.

First let's say a good.

I thing to do for the company.

Okay and on.

On the macro side, Lars clearly theres a lot of things we can identify right now and this question was probably more fitting two weeks ago before theres more things thrown out there but.

Everyone's put out this very optimistic view you know ourselves included on why things should get better. It's just you know the.

Spring is coiling the inventories are really low productions, increasing demands increasing the fleet shrinking yet we're still you know at these very low levels, where every once in a while you get a little bit of a an increase in you think here. We go here at the start of the cycle.

And then it pulls back again.

Other than the OPEC, just being a little bit stingy with their releases what has been kind.

So.

I think it's.

No.

Obviously, there is no problem one correct answer of the question, but kind of our experience is that.

<unk>.

In some segments you are suddenly in a position to push so you could kind of push rates north bound, but then other.

Parts of the pie.

Or if the specs.

Experiencing kind of issues. So basically what we have now for the last couple of weeks is really really good demand in the in the VLCC space, we see middle East exporting finally.

According to the OPEC.

Program.

Whilst prior with.

We suspect that they will.

The countries have actually consumed or kept a lot of the oil in domestic.

Our domestically.

You get West Africa with production issues.

Hey that volume.

Kind of tapers off there has also been over the last couple of months a situation where.

For the long haul oil you need the arbs to be open so basically four.

That's something basin oil to be priced in a manner, where it's attractive too.

Asian refiners and that has not really been the case.

And this is basically us.

Demand recovery.

Relatively quickly.

Quickly during this second half of this year at least in in.

In Europe.

In the U S. So basically the local oils in the around the Atlantic basin have been kind of relatively good price.

Basically medium out there.

And refiners countries compete.

So you've got a couple of these factors.

<unk>.

During this fall.

And <unk>.

Still shy of a couple of million barrels.

Production until we are at pre Covid levels.

So obviously.

There are new ships has been delivered throughout the year. So so think confidence a mixture of those three reasons.

<unk>.

With regards to pricing and how crude price is priced whether if it's going to go into a sour stay local that could rapidly change.

With regards to on the production increase I think thats more risky now whether it will actually will increase volumes.

Q1.

The one thing thats for certain is that.

We are very close to the balance.

But we have yet to kind of I think I mentioned this before that the market has like three or four cylinders.

We need to fire on all.

Cylinders in order for it to get some traction and regretfully had one cylinder sale.

And all the other all the other cylinders.

Cylinders go.

Okay, no that all makes sense and if I could just follow up with one point there I mean, all lives are going to be on OPEC. This week, obviously and they tend to be.

Really driving the sentiment in the tanker market is right now given what you noted about the arbs and you know if the SPR release in the U S leads to lower domestic prices here, which could lead to more exports, which are longer haul does OPEC carry the same amount of sway in the tanker markets that it once did.

Or is it more of a you know more of a sentiment driver that had actual fundamental driver.

I think it's more of a sentiment driver that in actual.

Fundamental driver to be quite honest.

I think not.

The proof is that throughout this year, we've had the OPEC.

Both are being then settling of adding them.

Kind of.

Delaying meetings.

And also.

Relatively small portion of production increases.

<unk> been reflected in their exports, we hope that produces that actually over in over compliance basically because they have production issues.

So so.

I think it's more the headline what we see in our little poems of global transportation of crude oil, we just see volumes gradually increase and obviously if OPEC.

Suddenly.

Funds.

I don't want to increase in January I think youll have price action.

Suddenly Atlantic barrels will then be attractive kind of been moved out to Asia.

So for us on the tanker side, that's far more important than kind of what what OPEC may decide for one month.

Got it alright very helpful. <unk>. Thank you. Thanks Inger.

Okay.

Thank you, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press star one on your telephone keypad.

Your next question comes from the line of Randy given from Jefferies. Please go ahead. Your line is open.

Good morning, everyone. This is Chris Robertson on for Randy Thanks for taking our call.

Hi.

But just to follow up on.

So based on the current share price, we will not consider to use utilize.

Utilized date, yet further.

Okay.

I'd like to add to that.

No.

Frontline has hub ATM programs before we've always been extremely disciplined and only when it's accretive.

And when the conditions are there for it so.

So.

That should also kind of further.

Answer that question.

Yes definitely thanks for the additional color that's it for us. Thank you very much.

Thank you.

There are currently no further questions I will hand back for any remarks.

Yes, thank you very much for calling in.

<unk>.

Thank you for the time and also thank you to the entire frontline team is.

So on the fantastic job again this quarter.

Let's stay safe.

Q3 2021 Frontline Ltd Earnings Call

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