Q4 2025 Frontline PLC Earnings Call

February 27, 2026

Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Frontline plc Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Mr. Lars H. Barstad, CEO. Please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to the fourth quarter 2025 Frontline plc earnings conference call and webcast. At this time, all participants are in listen-only mode.

Speaker #1: After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you need to press star 11 on your telephone keypad.

Speaker #1: You will hear an automatic message advising your hand is raised. To withdraw your question, please press star 1 and then 1 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to our speaker today, Mr. Lars Barstad, CEO. Please go ahead.

Speaker #2: Thank you very much. Dear all, thank you for dialing into Frontline's quarterly earnings call. In discussions with the market actors in recent weeks, a recurring phrase has been heard: people basically saying, "What a time to be alive." Frontline has been around through many cycles, but the tanking markets do actually evolve over time.

Lars H. Barstad: Thank you very much. Dear all, thank you for dialing in to Frontline's quarterly earnings call. In discussions with the market actors in recent weeks, a recurring phrase has been heard. People basically saying, What a time to be alive! Frontline has been around through many cycles, but the tanker markets do actually evolve over time. We will argue that we've never been in a cycle like this, where indices and freight derivatives weigh so heavily in the freight pricing mechanism. This fuels almost violent moves as we proceed. For every $200,000 per day, dollar per day, fixture done physically, there is an exponential number of contractual obligations that are triggered, giving this market a new dimension and very exciting dynamics. Before I give the word to Inger, I'll run through the TCE numbers, so let's move to slide 3 in the deck.

Speaker #2: We will argue that we've never been in a cycle like this. We're in this season, and freight derivatives weigh so heavily in the freight pricing mechanism.

Speaker #2: This fuels almost violent moves as we proceed. For every 200,000 per day dollar per day, fixture, done physically, there is an exponential number of contractual obligations that are triggered, giving this market a new dimension and very exciting dynamics.

Speaker #2: Before I give the word to Inger, I'll run through the TC numbers, so let's move to slide three in the deck. In the fourth quarter of 2025, Frontline achieved 70-74,200 dollars per day on RVLCC fleet, 53,800 dollars per day on our SUSMAX fleet, and 33,500 dollars per day on our LR2/AFROMAX fleet.

Lars H. Barstad: In Q4 2025, Frontline achieved $74,200 per day on our VLCC fleet, $53,800 per day on our Supramax fleet, and $33,500 per day on our LR2/Aframax fleet. Far in Q1 2026, 92% of our VLCC days are booked at $107,100 per day. 83% of our Supramax days is booked at $76,700 per day, 67% of our LR2/Aframax days are booked at $62,400 per day. Again, all numbers in this table are on a load to discharge basis, with the implications of ballast days at the end of the quarter, this incurs. However, for the VLCCs, there is little mystery left with such a high percentage in the book.

Speaker #2: So far in the first quarter of '26, 92% of RVLCC days are booked at 107,100 dollars per day, 83% of our SUSMAX days are booked at 76,700 dollars per day, and 67% of our LR2/AFROMAX days are booked at 62,400 dollars per day.

Speaker #2: Again, all numbers in this table are on a load-to-discharge basis, with the implications of ballast days at the end of the quarter this incurs.

Speaker #2: However, for the VLCCs, there is little mystery left with such a high percentage in the book. I'll now let Inger take you through the financial highlights.

Lars H. Barstad: I'll now let Inger take you through the financial highlights.

Inger M. Klemp: Thanks, Lars. Good morning and good afternoon, ladies and gentlemen. Let's turn to slide four. Yeah. We report profit of $228 million or $1.02 per share, adjusted profit of $230 million, or $1.03 per share in Q4 2025. The adjusted profit in this quarter increased by $188 million compared with the previous quarter, that was primarily due to an increase in our TCE earnings from $248 million in the previous quarter to $424.5 million in this quarter, that again, was a consequence of higher TCE rates. We also had some decrease in finance and ship operating expenses, also some fluctuations in other income and expenses.

Speaker #3: thanks, Lars. and good morning and good afternoon. Ladies and gentlemen, let's then turn to slide four. yeah. We report profit of 228 million dollars, or 1 dollar and 2 cents, per share.

Speaker #3: And adjusted profit of, 230 million, or 1 dollar and 3 cents, per share in the fourth quarter of 2025. the adjusted profit in this quarter increased by 188 million dollars compared with the previous quarter, and that was primarily due to an increase in our TCE earnings, from 248 million in the previous quarter to 424.5 million in this quarter.

Speaker #3: And that again was a consequence of higher TCE rates. We also had some decrease in finance and ship operating expenses, and also some fluctuations in other income and expenses.

Inger M. Klemp: Ship operating expenses, in particular, decreased $7.1 million from previous quarter, mainly due to an increase in supplier rebates of $7.1 million. Let's look at the balance sheet on Slide 5. The balance sheet movements this quarter are mainly related to ordinary items, prepayment of debt under revolving reducing credit facilities. Frontline has a solid balance sheet and strong liquidity of $705 million in cash and cash equivalents, and that includes undrawn amounts of revolver capacity, marketable securities, and minimum cash requirements, as of in the bag, as per 31 December 2025. We have no meaningful debt maturities until 2030. In January 2026, we sold eight of our oldest first generation Eco VSC for a total sales price of $831.5 million.

Speaker #3: Ship operating expenses, in particular, decreased $7.1 million from the previous quarter, mainly due to an increase in supply rebates of $7.1 million. Let's then look at the balance sheet on slide five.

Speaker #3: The balance sheet movements this quarter were are mainly related to ordinary items and also prepayment of debt under evolving reducing credit facilities. Frontline has a solid balance sheet and strong liquidity, of 705 million in cash and cash equivalents, and that includes underwriting amounts of revolver capacity, marketable securities, and also minimum cash requirements, as of in the bag as per December 21st, '25.

Speaker #3: we have no meaningful debt maturities until 2030. In January 2026, we sold 8 of our oldest first-generation EcoVLCCs, for a total sales price of 831.5 million.

Speaker #3: And after commissions and repayment of existing debt on the vessels, the transaction is expected to generate net cash proceeds of approximately $477 million.

Inger M. Klemp: After commissions and repayment of existing debt on the vessels, the transaction is expected to generate net cash proceeds of approximately $477 million. In parallel, we acquired nine latest generation scrubber-fitted Eco VLCC new buildings from affiliate of Hemen, for an aggregate purchase price of $1.224 billion. We will pay approximately 25% of the purchase price in Q1 2026, and 75% is due upon delivery of each vessel. The company intends to finance this acquisition with cash, 60% long-term debt financing. Let's look at slide 6. That's the fleet composition and cash break even rates and OpEx.

Speaker #3: In parallel, we acquired nine latest-generation, scrubber-fitted EcoVLCC newbuildings from an affiliate of Hemen for an aggregate purchase price of $1.224 billion.

Speaker #3: We will pay approximately 25% of the purchase price in the first quarter of 2026, and 75% is due upon delivery of each vessel. The company intends to finance this acquisition with cash and then 60% long-term debt financing.

Speaker #3: Let's then look at slide six. That's the fleet composition and cash break-even, rates and OPEX. Our fleet consists of 41 VLCCs, 21 SUSMAX tankers, and 18 LR2 tankers, has an average age of 7.5 years, and consists of 100% EcoVessels, a wear of 57% are scrubber-fitted.

Inger M. Klemp: Our fleet consists of 41 VLCCs, 21 Supramax tankers, and 18 LR2 tankers, has an average age of 7.5 years, and consists of 100% Eco vessels, where of 57% are scrubber-fitted. We estimate average cash break-even rates for the next 12 months are approximately $25,000 per day for VLCCs, $23,700 per day for Supramax tankers, and $23,800 per day for LR2 tankers. That gives a fleet average estimate of about $24,300 per day. This number includes dry dock costs for 5 VLCCs, 2 Supramax tankers, and 8 LR2 tankers. The fleet average estimate, excluding dry dock cost, is about $23,300 per day or $1,000 less.

Speaker #3: We estimate average cash break-even rates for the next 12 months of approximately 25,000 dollars per day for VLCCs. 23,700 dollars per day for SUSMAX tankers, and 23,800 dollars per day for LR2 tankers.

Speaker #3: That gives a fleet average estimate of about $24,300 per day. This number includes dry-dock cost for 5 VLCCs, 2 Suezmax tankers, and 8 LR2 tankers.

Speaker #3: And the fleet average estimate excluding dry-dock cost is about 23,300 dollars per day, or 1,000 dollars less. We record OPEX including dry-dock in the fourth quarter of 9,600 dollars per day for VLCCs, 7,600 dollars per day for SUSMAX tankers, and 12,400 dollars per day for LR2 tankers.

Inger M. Klemp: We record OpEx, including dry dock, in Q4 of $9,600 per day for VLCCs, $7,600 per day for Supramax tankers, and $12,400 per day for LR2 tankers. This number includes dry dock of 3 VLCCs and 3 LR2 tankers. The Q4 2025 fleet average OpEx, excluding dry dock, was $7,600 per day. Let's look at slide 7, cash generation. Following that, we entered into 1-year time charter agreements, and we also had fleet renewal in Q1. The spot days for the next 12 months is about 24,400 days. Frontline has substantial cash generation potential, with 27,700 earnings days annually.

Speaker #3: This number includes dry-dock of 3 VLCCs and 3 LR2 tankers. The Q4 '25 fleet average OPEX excluding dry-dock was 7,600 dollars per day. Lastly, let's look at slide seven.

Speaker #3: Cash generation. following that we entered into one-year time-shorter agreements, and we also had fleet renewal in the first quarter, the spot days for the next 12 months is about 24,400 days.

Speaker #3: Frontline has substantial cash generation potential with 27,700 earnings days annually. As you can see from this slide, the cash generation potential bases current fleet TCE rates and TCE as of February 27 is 2.8 billion dollars, or 12 dollars and 51 cents per share.

Inger M. Klemp: As you can see from this slide, the cash generation potential basis current fleet, TCE rates, and TCE as of 27 February, is $2.8 billion, or $12.51 per share, which provides a cash flow yield of 34% basis current share price. A 30% increase from this current spot market will increase the cash generation potential to $3.7 billion or $16.84 per share. Likewise, a 30% decrease from current spot market will decrease the cash generation potential to $1.8 billion, or $8.19 per share. With this, I leave the word to Lars again.

Speaker #3: Which provides a cash flow yield of 34% based on the current share price. And at a 30% increase from this current spot market, it will increase the cash generation potential to $3.7 billion, or $16.84 per share.

Speaker #3: likewise, a 30% decrease from current spot market will decrease the cash generation potential to 1.8 billion dollars, or 8 dollars and 19 cents per share.

Speaker #3: With this, I leave the word to Lars again.

Speaker #1: Thank you very much, Inger. So let's move to slide eight, and look at the current market highlights. So oil demand seems to be growing healthily outright.

Lars H. Barstad: Thank you very much, Inger. Let's move to slide 8 and look at the current market highlights. Oil demand seems to be growing healthily outright, but with key focus on non-sanctioned molecules, creating substantial year-on-year changes in trade, as shown on the illustration or the graph on the right-hand side of the slide. We have a very politically laden market environment. We talk about US-India trade, US-Iran-Israel discussions, and US-EU, Ukraine-Russia talks. Venezuela liberation and further pressure on Russia, in addition to Iran tension, creates strong tailwinds for us operating in the compliant market of oil transportation. We're also in an environment where weakening US dollar is supportive of global oil demand, and the inflationary economic environment is supportive of the commodities in general. Asset prices for ships is appreciating firmly.

Speaker #1: But with key focus on non-sanctioned molecules, creating substantial year-on-year changes in trade, as shown on the illustration or the graph on the right-hand side of the slide.

Speaker #1: We have a very politically laden market environment. We talk about US-India trade, US-Iran-Israel discussions, and US-EU-Ukraine-Russia talks. Venezuela liberation and further pressure on Russia, in addition to Iran tension, create strong tailwinds for us operating in the compliant market of oil transportation.

Speaker #1: We're also in an environment where weakening US dollar is supportive of global oil demand. And the inflationary economic environment is supportive of the commodities in general.

Speaker #1: Asset prices for ships is appreciating firmly, order books are building materially in 2029 and onwards. But with the 20-year age cap observed, future supply remains manageable.

Lars H. Barstad: Order books are building materially in 2029 and onwards, but with the twenty-year age cap observed, future supply remains manageable. Let's move to slide 9 and look at the flows. Global crude oil in transit continues to be at elevated levels. On the graph on the right, we've added the TD3C Baltic Index, for, you know, by some referred to as the Dow Jones of the freight markets. There you can see how sensitive this index seemingly is to the oil trading on the 7 seas. In this picture, we see sanctioned crudes moving slower, particularly for the Russian barrels, or being stored, particularly for the Iranian barrels. This creates an increased dark fleet utilization, and the dark fleet then needs new capacity or attract new capacity into the dark vessel pool.

Speaker #1: Let's move to slide nine and look at the flow. Global crude oil in transit continues to be at elevated levels. On the graph on the right, we've added the TD3C Baltic Index, you know, by some referred to as the Dow Jones of the, trade markets.

Speaker #1: And there you can see how sensitive this index seemingly is. To the oil trading on the 70s of 70s. In this picture, we see sanctioned crudes moving slower, particularly for the Russian barrels.

Speaker #1: Or being stored, particularly for the Iranian barrels. This creates an increased dark fleet utilization and the dark fleet then needs new capacity or attract new capacity into the dark vessel pool.

Speaker #1: These vessels are pulled out of the compliant fleet. OPEC Middle East exports are growing firmly, and that also adds to this increased demand for compliant and approved tonnage.

Lars H. Barstad: These vessels are pulled out of the compliant fleet. OPEC Middle East exports is growing firmly, also adds to this increased demand for compliant and approved tonnage. Despite the eye-watering freight levels we're facing right now, we see very few charters, in fact, none, breaking this 20-year age cap, which supports the case that we have been arguing for years. Strong import growth to Far East and India contradicting the energy transition narrative, especially for China. I think people are starting to get familiarized with the energy addition, not transition term. Long-haul arbs are challenged. Just to explain what an arb is, that's basically the price difference between one continent to another in respect of oil.

Speaker #1: But despite the oil watering freight levels we're facing right now, we see very few shorters or in fact none breaking this 20-year age cap.

Speaker #1: Which, supports the case that we've been arguing for years. Strong import growth to Far East and India contradicting the energy transition narrative and especially for China.

Speaker #1: I think people are starting to get familiarized with the term 'energy addition,' not 'transition.' Long-haul ARBs are challenged. And just to explain what an ARB is, that's basically the price difference between one continent and another.

Speaker #1: In respect of oil, which basically if it's at a at a at a wide enough point, a trader or an oil major can make a profit moving the oil over long distances and selling it in a different, market.

Lars H. Barstad: Which basically, if it's at a wide enough point, a trader or an oil major can make a profit moving the oil over long distances and selling it in a different market. Freight is, of course, a key component in this, and by example, if the freight from for a VLCC from US Gulf to China is $18 million, the charter is actually exposed to $9 per barrel freight. Basically, this spread between the two oil markets need to accommodate that. This has put some pressure on these arbs, and we've seen fairly little volume moving from the US to the Far East. Again, if oil needs to move or when it needs to move, these differentials will just have to price to accommodate this spread.

Speaker #1: Freight is, of course, a key component in this. And, by example, if the freight for a VLCC from the US Gulf to China is $18 million, the shorter is actually exposed to $9 per barrel freight.

Speaker #1: And basically this spread between the two oil markets need to accommodate that. This has put, some pressure on on these ARBs and we've seen fairly little volume moving from the US to the Far East.

Speaker #1: But again, if oil needs to move, or when it needs to move, this differentials will just have to price to accommodate this spread. The incremental marginal barrel is now compliant.

Lars H. Barstad: The incremental marginal barrel is now compliant. We've also discussed this in previous calls, is that we don't see any kind of fantastic production growth in Iran. We don't see any kind of fantastic production growth coming out of Russia, but then you have countries like Brazil, Guyana, performing extremely well. These are the new molecules coming to market, and they need compliant ships. Let's move to slide 9 and look a little bit at the fleet development. The order book continues to grow.

Speaker #1: We've also discussed this in previous calls, that we don't see any kind of fantastic production growth in Iran. We don't see any kind of fantastic production growth coming out of Russia.

Speaker #1: But we do see compliant oil production and exports growing. The big factor is of course OPEC reversing cuts. But then you have countries like Brazil, Guyana performing extremely well.

Speaker #1: And these are the new molecules coming to market. And they need compliant ships. Let's move to slide nine. And look a little bit at the fleet development.

Speaker #1: So the order book continues to grow. We are but we're basically in a in a market where decades high decades high prices for modern tonnage.

Lars H. Barstad: We're basically in a market where decades high prices for modern tonnage, if tonnage is even there for sale, that is on the water, meaning that the vessel can trade straight away, is so high that it pushes actors into the yards. Other asset classes, as LNG, containers, bulkers, continue to populate yards' order books, but we do see tanker ordering accelerating for 2029, especially in China. As the chart on the top right hand indicates, it shows basically the efficiency loss of a vessel as it ages, and the curve starts to dip around 10 years of age and then further deteriorates into almost ignorable when it gets to 20 years.

Speaker #1: If tonnage is even there for sale, that is on the water, meaning that the vessel can trade straight away. It's so high that it pushes actors into the yards.

Speaker #1: Other asset classes, such as LNG, containers, and brokers, continue to populate yards' order books. But we do see tanker ordering accelerating for 2029, especially in China.

Speaker #1: As the chart on the top right-hand indicates, it shows basically the efficiency loss of a vessel as it ages. And the curve starts to dip around 10 years of age.

Speaker #1: And then further deteriorates into almost ignorable when it gets to 20 years. With this in mind, as we move forward and move into 2029, we're gonna meet the generations of ships that were delivered around 2010 and onwards.

Lars H. Barstad: With this in mind, as we move forward and move into 2039, we're gonna meet the generations of ships that were delivered around 2010 onwards. This is a large population of ships that then again, will be 20 years of age and exposed to this deteriorating efficiency curve. With that in mind, although ordering is accelerating and we have a kind of high amount of ships expected to come in 2020 to 2029, and it's basically being added for every day. It's not alarming with this in mind, or considering the fleet age or the age of the fleet and the fleet profile. We see it as we have 2 to 3 years of a very good runway before the supply could become a worry. We also expect going forward, that yard capacity will grow, and especially in China.

Speaker #1: And this is a large population of ships. That then again will be 20 years of age. And exposed to this deteriorating efficiency curve. With that in mind, although ordering is accelerating, and we have a kind of high amount of ships expected to come in 2029, and it's basically being added, for every day.

Speaker #1: It's not alarming with this in mind, considering the fleet age, or the age of the fleet and the fleet profile. We see it as we have two to three years of a very good runway.

Speaker #1: Before the supply could become a worry. We also expect going forward that yard capacity will grow, and especially in China. And it's not necessarily new yards, but it's yards it's yards that haven't built tankers or at least not been specialized in tankers.

Lars H. Barstad: It's not necessarily new yards, but it's yards that haven't built tankers, or at least not been specialized in tankers, but they're now adding berths in order to cater for this industry. We believe there is another trend that will evolve as we proceed here, considering or assuming this rate environment is sustainable, that Korea and Japan will increase its focus on building tankers in general, and we also see in special, as the margins on these contracts start to compete with what they can achieve for containers or LNGCs. Let's move into slide 11, where we have the familiar tables. I'm not going to spend too much time on this slide, only to say that in our methodology, and we try to be consistent, we use data that's based on when an IMO number is registered.

Speaker #1: But they're now adding both in order to cater for this industry. We believe there is another trend that will evolve as we proceed here.

Speaker #1: Considering or assuming this rate environment is sustainable, that Korea and Japan will increase its focus on building tankers in general. And we also see in special, as the margins on these contracts start to compete with what they can achieve for containers or LNGC.

Speaker #1: Let's move into slide 11, where we have the familiar tables. I'm not gonna spend too much time on this slide. only to say that in our methodology, and we try to be consistent, we use data that's based on when an IMO number is registered.

Speaker #1: This means that these statistics will always be a little bit slow to react. In general, the order book to fleet ratio for VLCC is probably already at 20%.

Lars H. Barstad: This means that this statistics will always be a little bit slow to react. The general assumption in the market is that the order book to fleet ratio for VLCC is probably already at 20%, but this will become more and more evident as these contracts are being registered and the IMO numbers are being created. With that, I think we move on to the summary. I've changed the headline here. VLCC take the center stage, Suezmax and Aframax to follow, question mark. It's actually not much of a question mark because the Suezmaxes are already on the way, and the Aframaxes is boiling. We are in a fundamentally tight market condition that yields extreme volatility. Oil demand and supply is developing positively, but especially for compliant molecules. The global tanker fleet age profile and efficiency loss tighten the supply-demand balances.

Speaker #1: But this will become more and more evident as these contracts are being registered. And the IMO numbers are being created. With that, I think we move on to the summary.

Speaker #1: And I've changed the headline here, so VLCCs take center stage. Suezmax, MRs, and Aframax to follow—question mark. It's actually not much of a question mark, because the Suezmaxes and MRs are already on the way.

Speaker #1: And the AFROMAXs is boiling. We are in a fundamentally tight market condition. That yields extreme volatility. Oil demand and supply is developing positively but especially for compliant molecules.

Speaker #1: The global tanker fleet age profile and efficiency loss tighten the supply-demand balances. Asset prices are on the move as both spot and period markets support the investment decisions.

Lars H. Barstad: Asset prices are on the move as both spot and period markets support the investment decisions. The volatile political landscape fuels energy insecurity, conditions where tankers tend to thrive. Frontline's efficient business model stand to produce material shareholder returns as we proceed. Thank you very much. With that, I will open up for questions.

Speaker #1: The volatile political landscape fuels energy insecurity—conditions where tankers tend to thrive. And Frontline’s efficient business models tend to produce material shareholder returns, as we proceed.

Speaker #1: Thank you very much. And with that, I will open up for questions.

Speaker #2: Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced.

Operator: Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. This will take a few moments. Now we're going to take our first question. It comes the line of Jonathan Chappell from Evercore ISI. Your line is open. Please ask your question.

Speaker #2: To withdraw a question, please press star 1, and then 1 again. Please then buy or compile the Q&A queue. This will take a few moments.

Speaker #2: And now we're going to take our first question. And it comes line of John Chappell from Evercore ISI. Your line is open. Please ask your question.

Speaker #3: Good afternoon. Thanks very much. Lars, so many things to ask you, but I'm not gonna be greedy. I'll keep it to two. So the first thing is, obviously, we're in a parabolic situation right now.

Jonathan Chappell: Good afternoon. Thanks very much. Lars, many things to ask you, but I'm not going to be greedy. I'll keep it to two. The first thing is, obviously, we're in a parabolic situation right now. We've seen this once or twice before, but as you said, what's the underlying factors seem to be very different this time. Rates don't go to the moon. There's a certain point where there's a ceiling. What's the catalyst to, you know, provide a plateau and maybe a little bit of an easing from here? Is that a geopolitical event? Is it a seasonal event? Is it a Sinopec event? What takes a little bit of the froth out of the market? Which would still be very fantastic rates, but maybe lower than where they're moving this week.

Speaker #3: we've seen this once or twice before, but as you said, what's the underlying factors seem to be very different this time. But rates don't go to the moon.

Speaker #3: There's a certain point where there's a, a, a ceiling. So what's the catalyst to, you know, provide a plateau and maybe a little bit of an easing from here?

Speaker #3: Is that a geopolitical event? Is it a seasonal event? Is it a sign of a core event? What takes a little bit of the froth out of the market?

Speaker #3: Those would still be very fantastic rates, but maybe lower than where they're moving this week.

Speaker #4: Well, it's an extremely good question. I think the answer is kind of seasonality. There is also, you know, kind of normal seasonality.

Lars H. Barstad: No, it's an extremely good question. I think the answer is kind of seasonality. There is also, you know, kind of normal seasonality. We're actually not, you know, unused to having fairly, you know, poised markets during this time of the year. Many times due to US refineries going into turnaround, allowing for more barrels to be exported. So we're actually going into that phase now. So there will be potentially a few more months, where we actually can sustain these rates, depending on how the flows work. Then, you know, there is going to be a summer low, you know, and it's based almost in inevitable.

Speaker #4: We're actually not, you know, unused to having fairly, you know, kind of poised markets during this time of the year—many times due to U.S. refineries going into turnaround, allowing for more barrels to be exported.

Speaker #4: And, and so, so we're, we're kind of we're actually going into that phase now. So, so there will be potentially a few more months, where we actually can't sustain these rates.

Speaker #4: Depending on how the flows work. But then, you know, there is gonna be a summer low, you know, and, and, and it's, it's almost inevitable.

Speaker #4: But, but whether if it's a summer low that moves from 200,000 dollars a day to 100 or, you know, that, that, that's all is almost, almost impossible to gauge.

Lars H. Barstad: Whether if it's a summer low that moves from $200,000 a day to $100,000 or, you know, that's all, it's almost impossible to gauge.

Jonathan Chappell: Mm-hmm.

Lars H. Barstad: I also think one needs to note that, you know, there's one major importer in this market, being China, and they have built an enormous amount of inventory over the years. They could, for any reason, choose to basically turn down the speed a little bit for a period of time, and this will also create volatility. This is, and I expect this to occur, but it's of course, extremely impossible or extremely difficult to say when something like that might happen.

Speaker #4: Also, I think one needs to note that, you know, there is one major importer in this market, being China. And they have built an enormous amount of inventory over the years.

Speaker #4: they could, for any reason choose to basically turn down, the, the, the speed a little bit. For, for a period of time. And this will also create volatility.

Speaker #4: But, but this is, and I—I expect this to occur. But, it's of course extremely impossible or, or extremely difficult to—to say when something like that might happen.

Speaker #3: Yeah. Definitely. thanks for that. The other one is, also maybe a bit difficult, but, it's just something I've been wondering about. Nobody's done what your Korean friends are doing right now for like seemingly 50 years.

Jonathan Chappell: Yeah, definitely. Thanks for that. The other one is, also maybe a bit difficult, but it's just something I've been wondering about. Nobody's done what your Korean friends are doing right now for like, seemingly 50 years, and that includes your shareholder, who many people probably would have anticipated would have been the one to try this. Why hasn't anyone tried to corner the VLCC market in the past? Where could it go spectacularly wrong for them? You know, just what are the risks, I guess? I guess the final thing is, how do you position Frontline so that you're not affected by if it does go spectacularly wrong for this player?

Speaker #3: And that includes your shareholder who, many people probably would have anticipated would have been the one to try this. why hasn't anyone tried to corner the VLCC market in the past?

Speaker #3: And where could it go spectacularly wrong for them? you know, just what, what are the, the risks, I guess? And I guess the final thing is how do you position frontline so that you're not affected by if it does go spectacularly wrong for this player?

Speaker #4: Yeah, no, it's a good question. And you're right, it hasn't really been done in a material manner in the tanker markets for at least longer than I can remember.

Lars H. Barstad: Yeah, no, it's a good question. It's, and you're right, it hasn't really been done in a material manner in the tanker markets for at least longer than I can remember. There is a parallel story from the mid-2000s involving a certain person from Taiwan, this was in the dry bulk space. The key to his success in dry, and the potential key to the success that the Korean actor might have, is actually that you go in a market that is already fundamentally tight, you don't need much to weigh it, or to slow the supply side of tanker capacity before you get these violent moves.

Speaker #4: But, but there is a parallel story from the mid-2000s involving a certain person from, from Taiwan. But this was in the dry bulk space.

Speaker #4: And but, but the key to his success in dry, and the potential key to the success that the Korean actor might have, is actually that you go in in a market that is already fundamentally tight.

Speaker #4: And then you don't need much to weigh it, kind of, or, or, or to slow the supply side of tanker capacity before you get these violent moves.

Speaker #4: And also, as most people are familiar with, if you look at how freight prices just empirically you know, the minute you go from 90% utilization to 95, you know, h-h-how freight prices, the moves are exponential.

Lars H. Barstad: Also, as most people are familiar with, if you look at how freight prices just empirically, you know, the minute you go from 90% utilization to 95%, you know, how freight prices, the moves are exponential. So, you know, that would be kind of my explanation to why this is possible. I'm not going to comment on why, you know, Mr. Frederiksen hasn't looked at this or... The thing is, you know, we are a stock-listed public company. This is of course, easier to do if you are a private entrepreneur in this market, and, of course, willing to risk a substantial amount of money in such a, such a game.

Speaker #4: So, so, so, so I, I, you know, that would be kind of, you know, be my explanation to, to, to, to why this is, possible.

Speaker #4: I'm not gonna comment on, on, on why, why, you know, Mr. Fredericksen hasn't looked at this or, but, but the thing is, you know, we are a stock-listed public company.

Speaker #4: This is, of course, easier to do if you are a private entrepreneur in this market. And, of course, willing to risk a substantial amount of money in such a game.

Lars H. Barstad: Where it can go wrong? In these situations, and we've seen them before, potentially to a smaller scale, it ends up being, you know, it's almost like a game of chicken. You know, who can hold the longest? This is what makes me extremely excited over the months to come and the summer and so forth, because we'll see some very interesting dynamics, kind of, come to play. One thing I'm 100% certain of, is that there will be volatility.

Speaker #4: Where it can go wrong in these situations, and we've seen them before, potentially on a smaller scale, it ends up being—you know, it's almost like a game of chicken.

Speaker #4: You know, who, who can who can hold the longest? So, so this is what make, makes me extremely excited of, of the months to come.

Speaker #4: And, and the summer and so forth. because we, we, we'll see some very interesting, dynamics, kind of come, come to play. but it but one thing I'm 100% certain of is that there will be, volatility.

Speaker #3: That's all very helpful. Thank you, Lars.

Jonathan Chappell: That's all very helpful. Thank you, Lars.

Lars H. Barstad: Mm.

Speaker #2: Thank you. Now we're going to take our next question. And the next question comes line of Sharif Al-Maghrabi, from BTIG. Your line is open.

Operator: Thank you. Now we're going to take our next question. The next question comes line of Sherif El-Maghraby from BTIG. Your line is open, please ask your question.

Speaker #2: Please ask a question.

Speaker #5: Hey, good afternoon. It seems like charters are seeing what you're seeing, and willing to take more ships on term. Would you say that's the case in the TC markets—are they more active, or is it just that rates have risen to a level that shipowners are more comfortable with?

Sherif El-Maghraby: Hey, good afternoon. It seems like charterers are seeing what you're seeing, and willing to take more ships on term. Would you say that's the case and the TC market's more active, or is it just that rates have risen to a level that shipowners are more comfortable with?

Sherif Elmaghrabi: Hey, good afternoon. It seems like charterers are seeing what you're seeing, and willing to take more ships on term. Would you say that's the case and the TC market's more active, or is it just that rates have risen to a level that shipowners are more comfortable with?

Lars H. Barstad: No, I think, as I kind of touched upon in the introduction today, is that, you know, this market has evolved quite a lot in the last 20, 25 years. By example, if you look at the Middle East market, for instance, for VLCC, you know, transport from, you know, Ras Tanura from Middle East to Asia. You know, this market used to have a lot of physical liquidity. What happened over the years is that more and more actors are using the index itself to price the freight. Basically, doing contracts, floating contracts, that prices off the Baltic Index quote to the point where actually very little liquidity is actually transacted in the market.

Speaker #4: no, I think I think, as I kind of touched upon in, in the introduction today, is that, you know, this market has, has evolved quite a lot, in the last 20, 25 years.

Speaker #4: And, if you buy, for example, if you look at the Middle East market, for instance, for VLCC, you know, transport from, you know, plain vanilla from, from, from Middle East to Asia, you know, this market used to have a lot of physical liquidity.

Speaker #4: What happened over the years is that more and more actors are using the index itself to price the freight. So basically doing contracts, floating contracts that prices off the Baltic index quote.

Speaker #4: to the point where actually very little liquidity i-is o i-is actually transacted in the market. So, so, so, so this is, you know, price visibility has been quite difficult actually sometimes.

Lars H. Barstad: This, you know, price visibility has been quite difficult, actually, sometimes. To do a parallel, you know, for every barrel, physical barrel of Brent oil that is produced, you know, it tends. It trades tenfolds on paper. We've seen a little bit of the same kind of tendency or trend in freight. This, you know, this becomes a problem then, if everybody are kind of pricing their freight off an index that runs out of control.

Speaker #4: To, to, to, to do a parallel, you know, for, for every barrel physical barrel of Brent oil that, that, is, is produced, you know, it tends i-it trades tenfolds, on paper.

Speaker #4: And we've seen a little bit of the same kind of tendency or trend in freight. And this, you know, this becomes a problem then if everybody are kind of pricing their freight off an index that runs out of control.

Lars H. Barstad: Then suddenly you need to hedge, then you need to access the paper market, or you need to buy back hedges for the guys who have taken ships from time charter, and basically hedge the, you know, parts of the curve in that exposure and so forth. You end up with a very vibrant FFA market, which every FFA broker today would you know, would testify to. You get these kind of ebb and flows out on the curve from panic to some sort of quiet until the panic kicks in again. Because over the last couple of weeks, we've seen, you know, you see the index, it's just relentlessly printing what is physically actually being done. It's not like 10 cargoes are fixed a day.

Speaker #4: And then suddenly you, you need to hedge, and then you need to access the paper market, or you need to buy back hedges for the guys who have taken ships on time charter, and basically hedge the, you know, parts of the curve in that exposure and so forth.

Speaker #4: And you end up with a very vibrant FFA market, which every FFA broker today would, you know, would testify to. And you get these kind of ebb and flows out on the curve from panic to, to, to some sort of quiet, until the panic kicks in again.

Speaker #4: So b-b-because over the last couple of weeks, we, we've seen, you know, y-you see the index—it's just relentlessly printing what is physically actually being done.

Speaker #4: But it's not like 10 cargoes are fixed a day. It's two to three cargoes may be fixed a day. But the amount of pricing exposure around that quote is enormous.

Lars H. Barstad: It's two to three cargoes maybe fixed a day. The amount of pricing exposure around that quote is enormous, and this triggers kind of this almost like self propelled move going forward. I think it's important to note, this is, you know, this is not manipulation. The market is fundamentally extremely tight. Of course, you could argue that maybe freight rates are moving ahead, basically due to this tightness, you know, as the panic ebbs and flows.

Speaker #4: And this triggers—kind of—it's almost like a self-propelled move going forward. But, but, I think it's important to note this is, you know, this is not manipulation.

Speaker #4: The market is fundamentally extremely tight. But, of course, you could argue that maybe freight rates are moving ahead basically due to this tightness, you know, as the panic ebbs and flows.

Sherif El-Maghraby: Oh, that's very interesting. Something else that I thought was interesting and was your comments specifically about new tanker yard capacity coming online. I apologize if you've mentioned this and I missed it, but do you have a sense of what the turnaround time on these projects might be and when first ships might hit the water?

Sherif Elmaghrabi: Oh, that's very interesting. Something else that I thought was interesting and was your comments specifically about new tanker yard capacity coming online. I apologize if you've mentioned this and I missed it, but do you have a sense of what the turnaround time on these projects might be and when first ships might hit the water?

Speaker #3: Well, it's, very interesting. Something else, that I thought was interesting, and, was your comments, specifically about, new tanker yard capacity coming online. And so I apologize if, if you mentioned this, and I missed it.

Speaker #3: But do you have a sense of what the turnaround time on these projects might be? and, and when first ships might hit the water?

Speaker #4: So it's, m it's 2029. So, so, so the yard that is now marketing, kind of a new birth that they're gonna build, but, but it's not like it's not like a greenfield.

Lars H. Barstad: No, it's 2029. A yard that is now marketing, kind of a new berth that they're gonna build, but it's not like, it's not like a greenfield, because the yard exists, it is there. They're just kind of introducing a new berth that can say, accommodative, we also see build. That is 2029, 3 years then.

Speaker #4: B-because the yard exists, it is there. But if they're just, kind of, i-introducing a new berth that can, say, accommodate the VLCC build, that is, 2029.

Speaker #4: So three years then.

Speaker #3: Got it. Lars, thank you for your time.

Sherif El-Maghraby: Got it. Lars, thank you for your time.

Sherif Elmaghrabi: Got it. Lars, thank you for your time.

Speaker #4: Thank you.

Lars H. Barstad: Thank you.

Speaker #2: Thank you so much. The participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And now we're going to take our next question.

Operator: Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star one on your telephone keypad. Now we're going to take our next question. It comes line of Dhaval Sanghavi from Tetch Investments. Your line is open, please ask your question.

Speaker #2: And it comes line of Devon Sangoy from Tech Investments. Your line is open. Please ask a question.

Dhaval Sanghavi: Hi. Hi, Lars. I just want to ask you, what will be your strategy on, you know, spot versus time charter as you go through this interesting times? That's, that's my first question.

Speaker #3: Hi. Hi, Lars. I just wanna ask you, what will be your strategy on, you know, spot versus time charter as you go through this interesting times?

Speaker #3: And that's, that's my first question.

Speaker #4: Yeah. No, and it's a good question. As we said before, you know, we, we, we, we, we kind of, y-you know, our proposition to our investors is, of course, to, to, to give you spot returns.

Lars H. Barstad: Yeah. No, it's a good question. As we said before, you know, we kind of, you know, our proposition to our investors is, of course, to give you spot returns. Basically, you don't have to buy a ship, you can just buy Frontline. You know, at times we will choose to use elevated markets to try and secure revenues. We don't have a fixed policy or anything, but we have, like, a golden rule of one third. In theory, you know, our board would be comfortable under certain conditions that we get up to, you know, time charter coverage of 30%.

Speaker #4: So basically, you don't have to buy a ship. You can just buy frontline. but, you know, at times, we will choose, to, to use elevated markets to try and secure revenues.

Speaker #4: We've also kind of—we don't have a fixed policy or anything, but we have like a golden rule of one-third. So, in theory, you know, our board would be comfortable under certain conditions that we get up to, you know, time charter coverage of 30%.

Speaker #4: We're, of course, in, in, you know, as, as you've seen from the stuff we did, you know, we reported the, the, the 71-year time charters.

Lars H. Barstad: We're, of course, in, you know, as you've seen from the stuff we did, you know, we reported the 7 one-year time charters. You know, in the report today, we also reported another one that was done, like a week later. We are in this modus operandi to try and secure some longer-term income. We are so constructive about this market that we're not really engaged in, yet at least, in the longer term. Because we actually do believe that there is still some to go for the longer-term contracts. They're also appreciating quickly. You know, I'm not gonna exclude anything.

Speaker #4: You know, on in the report today, we also reported another one that was done, like, a week later. So, so we are in this modus operandi to try and secure some longer-term income.

Speaker #4: But we, we are so constructive about this market that we, we are not really engaged in yet, at least in the longer term. Because we actually do believe that there is still some, some, some to go for, for, for the longer-term contracts.

Speaker #4: But, but they're also appreciating h quickly. So, so, you know, I'm not gonna I'm not gonna, exclude anything. But, but you will not find frontline in a situation where we've put, you know, 50% of our exposure out on time charter because that's not really what our investors are after, we believe.

Lars H. Barstad: You will not find Frontline in a situation where we've put, you know, 50% of our exposure out on time charter, because that's not really what our investors are after, we believe.

Speaker #3: Sure. And, so I see the dark fleet, which we've been struggling in finally, it's, it's coming with sanctions and whatever was needed to be done has been done now.

Dhaval Sanghavi: Sure. I see the dark fleet, which we've been struggling, and finally it's coming with sanctions and whatever was needed to be done has been done now. In this, though, the probability is 50%, if Russian crude oil and, if the war stops and the sanctions are lifted, it's also going to get into a compliant fleet. Do you foresee in such scenario, what will happen to the market?

Speaker #3: in this, though the probability is 50%, if Russian, crude oil and, if the war stops, and the sanctions are lifted, it's also going to get into a compliance fleet.

Speaker #3: Do you see in foreseeing such scenario what will happen to the market?

Speaker #4: Yeah, so if you'd asked me this in, like, September 2022, I would have said it would be, you know, like, in a— in the— in my immediate kind of bearish kind of proposition.

Lars H. Barstad: Yeah. If you'd asked me this in, like, September 2022, I would have said it would be, you know, like an immediate kind of bearish kind of proposition. So much time has passed and, you know, if the Russian barrel becomes a compliant barrel, you know, kind of you'll probably get half of the capacity back into the compliant on the shipping side, into the compliant fold. The other half will actually be disqualified, basically due to age. This is the same for the Iranian or the fleet servicing the Iranian oil. You know, it's a lot of ships, yes, but these are ships that were supposed to be recycled years ago, basically due to age.

Speaker #4: But so much time has passed, and, you know, if the Russian barrel becomes a compliant barrel, you know, kind of, you'll probably get half of the capacity back into the compliant on the shipping side.

Speaker #4: Into the compliant fold. But the other half will either be—well, will actually be disqualified, basically, due to age. And this is the same for the Iranian, or the fleet servicing the Iranian oil.

Speaker #4: you know, it's a lot of ships, yes, but these are ships that were supposed to be recycled years ago. Basically, due to age. So very few of them are actually gonna come back into t into, kind of compliant trade.

Lars H. Barstad: Very few of them are actually gonna come back into kind of compliant trade. Also the scrutiny in the compliance market on ships history is extremely kind of tough. One point I need to make, you know, we've actually seen this before when sanctions were eased to, you know, towards Iran in 2016. They have a national fleet, national tanker company, NITC, and of course, any part of a sanctions lifting kind of solution will also involve, you know, nationally controlled shipping companies. For Russia, that would be Sovcomflot and potentially others. Again, you know, just analyzing those fleets, age is the problem.

Speaker #4: And also, the scrutiny in the compliant market on ships' history is extremely kind of tough. So, so it, it, it-it's not very easy to, to, to, to kind of, whitewash, a tanker that's been, involved in illicit, trades.

Speaker #4: But, one point I need to make, you know, w-we've actually seen this before when, when sanctions were eased, to, you know, towards Iran in, in 2016.

Speaker #4: they, they have a national fleet, national tanker company, NITC, and, of course, any part of a sanctions lifting, kind of, solution will also involve, you know, nationally controlled, shipping, companies.

Speaker #4: So for Russia, that would be, so 'complot' and potentially others. But again, you know, just analyzing those fleets, age is the problem. So actually, we would welcome that, these molecules into the compliant fold.

Lars H. Barstad: Actually we would welcome, these molecules into the compliance fold.

Speaker #3: Sure. And the last problem is that if this sustains, and obviously, and you do the best to get make out of the cash becomes a cash pile obviously, you're paying out large part of it, but, do you think at what point in time you will start deleveraging, balance sheet, or you will stay levered?

Dhaval Sanghavi: Sure. The last problem is that if this sustains and obviously, and you do the best to make out of, the cash becomes a cash pile. Obviously, you're paying out large part of it, but do you think at what point in time you will start deleveraging balance sheet or you will stay levered?

Lars H. Barstad: No, our intention is to stay levered because for every share you buy in Frontline, you get like a 1.4 ship exposure equivalent, basically due to our leverage. We still believe that's the model. Obviously, I can't rule anything out, but we have, you know, no inclination to delever apart from what naturally happens when you pay down debt. The point of cash is actually going to you guys.

Speaker #4: no, o-our intention is to stay levered because for, for, for every share you buy in frontline, you get like a 1.4, ship exposure equivalent, basically, due to our leverage.

Speaker #4: So, so we still believe that's the model. and, obvi-obviously, I can't, rule anything out, but, but we have, you know, no inclination to delever apart from what actually happens when you pay down debt.

Speaker #4: So, so the pile of cash is, is actually going to you guys.

Speaker #3: Okay. Congratulations, and all the best for the future. Thanks a lot.

Dhaval Sanghavi: Okay. Congratulations and all the best for the future. Thanks a lot.

Lars H. Barstad: Thank you very much.

Speaker #4: Thank you very much.

Speaker #2: Thank you.

Operator: Thank you. Dear participants, just a quick reminder, if you would like to ask a question, please press star one. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the speaker, Lars H. Barstad, for any closing remarks.

Speaker #5: The participants, just a quick reminder, if you would like to ask a question, please press star, 1, 1. The speakers are on for the questions for today.

Speaker #5: I would now like to hand the conference over to speaker Lars Barstad for any closing remarks.

Speaker #4: Thank you. Thank you very much for listening in. And I hope you are as excited as I am for what the future is going to bring.

Lars H. Barstad: Thank you. Thank you very much for listening in, and I hope you are as excited as I am to what the future is gonna bring. I think it's the tanker market's turn now, so let's enjoy the ride. Thank you very much.

Speaker #4: I think it's the, tanker market's turn now. So, so, let's, enjoy the ride. Thank you very much.

Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

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