Q1 2026 Frontline PLC Earnings Call
Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 and 1 on your telephone.
Speaker #1: You will then hear an automated message advising your hand is raised. Should we draw your question, please press *1, and 1 is being recorded. I would now like to hand the conference over to your speaker today, Mr. Lars Barstad, CEO.
Speaker #1: Please go ahead.
Speaker #2: Thank you. Dear all, and thank you for dialing into Frontline's quarterly earnings call. 'Unprecedented times' comes to mind as we're reporting Q1 2026, well into the first half of the year.
Lars Barstad: Thank you. Dear all, and thank you for dialing into Frontline's quarterly earnings call. Unprecedented times springs to mind as we're reporting Q1 2026, well into H1 of the year. I've been in this industry for more than 20 years, and I did not imagine us in a situation for this duration where the Strait of Hormuz has been effectively closed. With the opaque and volatile political narrative these days, the Frontline team focuses on the real cash generating business to be done, not speculating too far into the future. We have put the most profitable quarter since 2004 behind us and are well into a potentially even more rewarding one. I'll get back to how we analyze the situation between the call. Before I give the word to Inger, I'll run through our TC numbers on slide 3 in the deck.
Speaker #2: I've been in this industry for more than 20 years, and I did not imagine us in a situation for this duration where the straightforwardness has been effectively closed.
Speaker #2: With OPEC and the volatile political narrative these days, the frontline team focused on the real, cash-generating business to be done, not speculating too far into the future.
Speaker #2: We have put the most profitable quarters since 2004 behind us and are well into a potentially even more rewarding one. I'll get back to how we analyze the situation between the call, and before I give you the word to Inger, I'll run through our TC numbers on slide 3 in the deck.
Speaker #2: In the first quarter of 2026, Frontline achieved $103,500 per day on our B2C fleet, $72,400 per day on our Suezmax fleet, and $50,700 per day on our LR2/Aframax fleet.
Lars Barstad: In Q1 2026, Frontline achieved $103,500 per day on our VLCC fleet, $72,400 per day on our Suezmax fleet, and $50,700 per day on our LR2/Aframax fleet. So far in Q2 2026, 82% of our VLCC days are booked at $181,700. 79% of our Suezmax days are booked at $131,300 per day, and 68% of our LR2/Aframax days are booked at $125,000 per day. Six digits across the board. All numbers in this table are on a loaded to discharge basis with implications of ballast days at the end of the quarter. I'll now let Inger take you through the financial highlights.
Speaker #2: So far in the second quarter of 2026, 82% of our B2C days are booked at $181,700, 79% of our SUSMAX days are booked at $131,300 per day, and 68% of our LR2/Afromax days are booked at $125,000 per day.
Speaker #2: Six digits across the board. All numbers in this table are on the lowest due to discharge basis, with implications of balance days at the end of the quarter.
Speaker #2: And now, let you let Inger take you through the financial highlights.
Speaker #3: Yeah, thanks, Lars. And good morning and good afternoon, ladies and gentlemen. We can then turn to slide 4 and look at the profit statement highlights.
Inger: Yeah. Thanks, Lars, good morning and good afternoon, ladies and gentlemen. We can turn to slide 4, look at the profit statement highlights. We report profit of $559 million, or $2.51 per share, adjusted profit of $344.9 million or $1.55 per share in Q1 2026. The adjusted profit in Q1 increased by $114.5 million compared with the previous quarter, that was primarily due to an increase in our time charter earnings of $112 million from $424.5 million in the previous quarter to $536.5 million in this quarter. Ship operating expenses increased by $5.9 million from previous quarter, that was mainly due to a decrease in supplier rebates of $5.4 million in the quarter.
Speaker #3: We report profit of $559 million, or $2.51 per share, and adjusted profit of $344.9 million, or $1.515 per share, in the first quarter of 2026.
Speaker #3: The adjusted profit in the first quarter increased by $114.5 million compared with the previous quarter, and that was primarily due to an increase in our time charter earnings of $112 million.
Speaker #3: From $424.5 million in the previous quarter to $536.5 million in this quarter. Ship operating expenses increased by $5.9 million from the previous quarter, and that was mainly due to a decrease in supplier rebates of $5.4 million in the quarter.
Inger: Administrative expenses, excluding the synthetic option revaluation loss of $5.8 million in Q1, and gain of $0.5 million in Q4 2025, increased by $8.5 million from the previous quarter. That was primarily due to synthetic option exercises in Q1 2026. The adjusted interest expense decreased by $9.8 million from previous quarter. That was due to lower debt and decrease in interest rates and margins. Also, depreciation decreased by $6.2 million from previous quarter due to sales. Let's look at slide 6. Fleet composition, cash break-even, rates and offsets. Our fleet consists of 33 VLCCs, 21 Supramax tankers, and 18 LR2 tankers, has an average age of 7.5 years and consists of 100% eco-ships, where over 64% are scrubber-fitted.
Speaker #3: Administrative expenses, excluding the synthetic option revaluation loss of $5.8 million in the first quarter and gain of $0.5 million in the fourth quarter of 2025, increased by $8.5 million.
Speaker #3: From the previous quarter. And that was primarily due to synthetic option exercises in the first quarter of 2026. Then the adjusted interest expense decreased by $9.8 million from the previous quarter, and that was due to lower debt and a decrease in interest rates and margins.
Speaker #3: Also, depreciation decreased by $6.2 million from the previous quarter due to sales of B2Cs in the period. Lastly, income tax expense decreased by $0.6 million from the previous quarter.
Speaker #3: Let's then look at the balance sheet on slide 5. Frontline has a solid balance sheet and strong liquidity of $945 million in cash and cash equivalents, including undrawn amounts of revolver capacity of $473 million, marketable securities and minimum cash requirements, as per the 31st of March 2026.
Speaker #3: We have no meaningful debt maturities until 2030. Remaining newbuilding commitments at the end of the first quarter were $925 million, which relates to the acquisition of the nine newbuildings from affiliates of Hammond.
Speaker #3: The company has secured new building financing of up to $737 million, as set out in the press release. Let's then look at slide—these composition cash break-even rates and offsets.
Speaker #3: Our fleet consists of 33 B2Cs, 21 Suezmax tankers, and 18 LR2 tankers, has an average age of 7.5 years, and consists of 100% ECO vessels, where 64% are scrubber-fitted.
Speaker #3: We estimate average cash break-even rates for the next 12 months of approximately $23,000 to $24,300 per day for VLCCs, $24,300 per day for Suezmax tankers, and $23,600 per day for the LR2 tankers.
Inger: We estimate average cash break-even rates for the next 12 months of approximately $24,300 per day for VLCCs, $24,300 per day for Suezmax tankers, and $23,600 per day for the LR2 tankers. That gives a fleet average estimate of about $24,100 per day. This number includes dry dock costs for 6 VLCCs, 3 Suezmax tankers, and 8 LR2 tankers. The fleet average estimate excluding dry dock costs is about $23,000 per day or $1,100 per day less. We recorded OpEx including dry dock in this Q1 of $11,300 per day for VLCCs, $9,100 per day for Suezmax tankers, and $10,900 per day for LR2 tankers. This includes dry dock of 4 VLCCs and 3 LR2 tankers. The Q1 2026 fleet average OpEx excluding dry dock was $8,900 per day. Let's look at slide 7 on cash generation.
Speaker #3: That gives a fleet average estimate of about $24,100 per day. These numbers include dry-dock costs for six B2Cs, three Suezmax tankers, and eight LR2 tankers.
Speaker #3: The fleet average estimate excluding dry-dock costs is about 23,000 dollars per day or 1,100 dollars per day less. We recorded upweights included dry-dock in the first quarter of 11,300 dollars per day for B2Cs, 9,100 dollars per day for SUSMAX tankers, and 10,900 dollars per day for LR2 tankers.
Speaker #3: This includes dry-dock of four B2Cs and three LR2 tankers. And the Q1 2026 fleet average upweights, excluding dry-dock, was $8,900 per day. Then let's look at slide 7 and cash generation.
Inger: Following that, we have been entering into 1-year time charter agreements. We had a fleet renewal in Q1 and also in Q2. Spot days for the next 12 months is about 23,700 days. Frontline has substantial cash generation potential with 27,900 earnings days annually. As you can see from this slide, the cash generation potential basis current fleet, TC rates, and TCE as of 22 May 2026 is $1.5 billion or approximately $7 per share. That provides a cash yield of 18% basis the current share price. If we look at a 30% increase from current spot markets, that will increase the cash generation potential to about $2.1 billion or $9.51 per share. Equal a 30% decrease from current spot markets will decrease the cash generation potential to about $1 billion or $4.41 per share. With this, I leave the word to Lars again.
Speaker #3: Following that, we have been entering into one-year time charter agreements, and we have a fleet renewal in the first quarter and also in the second quarter.
Speaker #3: Spot days for the next 12 months are about 23,700 days. Frontline has substantial cash generation potential with 27,900 earnings days annually. As you can see from this slide, the cash generation potential based on the current fleet TC rates and TCE as of May 22, 2026, is $1.5 billion, or approximately $7 per share.
Speaker #3: That provides a cash flow yield of 18% basis to current share price. If we look at a 30% increase from the current spot market, that will increase the cash generation potential to about $2.1 billion, or $9.51 per share.
Speaker #3: An equal 30% decrease from current spot markets will decrease the cash generation potential to about $1 billion, or $4.41 per share. With this, I leave the word to Lars again.
Speaker #1: Thank you, Inger. Let's move to slide 8 and look at some of the market highlights that we're going to go through in this deck.
Lars Barstad: Thank you, Inger. Let's move to slide 8 and look at some of the market highlights that we're going to go through in this deck. First of all, I'd like to remind the audience that we've had tightening fundamentals in the tank market ever since around this time last year, prior to the Middle East conflict. We reached an unprecedented situation after 28 February with the Strait of Hormuz effectively closed. The chart on the top hand right side kind of indicates this. Here you see the year-on-year weekly changes in flows, whereas the Middle East Gulf drops dramatically starting in week 12. The US-Iran on-off peace talks and the tightening, potentially easing of Iran-related sanctions, together with the uncertainty on Russia or Russian oil assets creates a lot of volatility.
Speaker #1: But first of all, I'd like to remind the audience that we've had tightening fundamentals in the tank market ever since around this time last year.
Speaker #1: Prior to the Middle East conflict, we reached an unprecedented situation after the 28th of February, with the Strait of Hormuz effectively closed. The chart on the top right-hand side kind of indicates this.
Speaker #1: Here you see the year-on-year weekly changes in flows, whereas the Middle East Gulf drops dramatically starting in week 12. The US-Iran on-off peace talks and the tightening and potentially easing of Iran-related sanctions, together with uncertainty on Russia or Russian oil assets, creates a lot of volatility.
Speaker #1: The market is starting to focus on the potential long-term implications coming from the current situation in the Middle East, and even more so if we can imagine the situation getting solved.
Lars Barstad: The market are starting to focus on the potential long-term implications coming from the current situation in the Middle East, more so if we can imagine the situation getting solved. We're going to see restocking of inventories, increased strategic storage, especially amongst Asian importers. We're also going to see higher focus on diversification of oil supply now that we've seen how vulnerable you can be being dependent on purely Middle East supply. We also see that order books continue to grow as they stretch into 2030 delivery windows now. Asset prices continue to appreciate as freight market outlook remains firm and we see a fairly high activity on longer term time charter market or contracts. Just want to give you a small little kind of hint on the bottom left-hand side chart.
Speaker #1: We're going to see restocking of inventories increase strategic storage, especially amongst Asian importers. And we're also going to see a higher focus on diversification of oil supply.
Speaker #1: Now that we've seen how vulnerable you can be being dependent on purely Middle East supply, we also see that order books continue to grow as we stretch into 2030 delivery windows now.
Speaker #1: Asset prices continue to appreciate as the freight market outlook remains firm, and we see fairly high activity on longer-term time charter. Just want to give you a small little kind of hint on the bottom left-hand side chart.
Speaker #1: We basically not only use the TD3C index, which is a Middle East Gulf loading index to China, we're also using the TD15 index outside of the Middle East Gulf—West Africa to China.
Lars Barstad: We're basically not only using the TD3C index, which is a Middle East Gulf loading index to China, we're also using the TD15 index outside of the Middle East Gulf with Africa to China. Although it looks quite bleak, only kind of rewarding us with $100,000 per day, this is four times our cash break-even levels, so it's still very good money. Although we wish we could have made $400,000 per day every day, this is a very much a theoretical exercise as the market is right now. Further, if we move to slide 9, I'm going to take you through 2 fairly complicated slides, but I think needed for this session as we are in the situation we are. First of all, Strait of Hormuz closure is very much a VLCC event. This is a big kind of ride for the VLCCs.
Speaker #1: Although it looks quite bleak, only kind of rewarding us with $100,000 per day, this is four times our cash break-even levels. So it's still very good money.
Speaker #1: Although we wish we did every day, this is very much a theoretical exercise as the market is right now. Further, if we move to slide 9, I'm going to take you through two fairly complicated slides.
Speaker #1: But I think it’s needed for this session, as we are in the situation we are. So we tried to—well, first of all, straight up, from disclosure, it’s very much a B2C event.
Speaker #1: This is a big kind of ride for the B2Cs. This is where the most volume is lifted on B2C—transporting oil both to the East and to the West.
Lars Barstad: This is where the most volume is listed on VLCC, transporting oil both to the east and to the west. We've seen prior to the closure that the daily tied up VLCCs in this market has been on average 491 vessels. This consists of laden, dry dock, vessels that are doing cargo ops or other stuff. We have, at any point in time, have had stopped ballasters east of Suez, and we've always had vessels waiting to load in the Red Sea. Basically, when the straits closed, we had a massive loss of 130 ships that were so-called laden, dry docking, or doing cargo ops. This is the dark blue baseline in the chart in the middle here. We had an increase of 21 vessels waiting, loading in the Red Sea, and this is daily tied up tonnage, so it shouldn't really been looked at as an absolute number.
Speaker #1: We've seen, kind of prior to the closure, that the daily tide of B2Cs in this market has been on average 491 vessels. This consists of laden, dry dock, vessels that are doing cargo ops, or other stuff.
Speaker #1: We have, at any point in time, had stopped ballasters east of Suez. And we've always had vessels waiting to load in the Red Sea.
Speaker #1: Basically, when the Straits closed, we had a massive loss of 130 ships that were so-called laden, dry docking, or doing cargo ops. This is the dark blue kind of baseline in the chart in the middle here.
Speaker #1: Then we had an increase of 21 vessels waiting for loading in the Red Sea. And this is like daily tied-up tonnage. So it shouldn't really have been looked at as an absolute number.
Speaker #1: Then suddenly, we had 41 B2Cs laden, loaded with oil, waiting inside the Middle East Gulf. And then you had 55 B2C equivalents stopped and in ballast east of Suez.
Lars Barstad: Suddenly we had 41 VLCCs laden, loaded with oil, waiting inside the Middle East Gulf. You had 55 VLCC equivalents stopped and in ballast east of Suez. This brought us back to 480 VLCCs after the Hormuz closed. Basically only a reduction of 11 VLCC equivalents in this extremely severe situation for the VLCC segment in special. If we move to slide 10 and look at how the flows developed post-closure. We were at 17.7 million barrels per day, from various suppliers inside the Middle East Gulf. We lost 5.9 million barrels per day from Saudi, 3.2 from Iraq, almost 2 from UAE, and on it goes. 1.4 from Kuwait, and almost a million barrels from Qatar. Well, as we proceeded, UAE were able to increase the throughput in the pipeline ending up in Fujairah of almost a million barrels per day.
Speaker #1: This brought us back to 480 B2Cs, after the Hormuz closed. Basically, only a reduction of 11 B2C equivalents in this extremely severe situation for the B2C segment in particular.
Speaker #1: If we move to slide 10 and look at how the flows developed post-closure, we were barrels per day from various suppliers inside the Middle East Gulf.
Speaker #1: We lost 5.9 million barrels per day from Saudi, 3.2 million from Iraq, almost 2 million from the UAE, and on it goes—1.4 million from Kuwait and almost a million barrels from Qatar.
Speaker #1: Well, as we proceeded, UAE were able to increase the throughput in the pipeline ending up in Fujairah of almost 1 million barrels per day.
Speaker #1: Saudi Arabia started to utilize the Yanbu pipeline, going from the Middle East Gulf out to the Red Sea, increasing by 3.5 million barrels per day.
Lars Barstad: Saudi Arabia started to utilize the Yanbu pipeline going from the Middle East Gulf out to the Red Sea, increasing by three and a half million barrels per day. The rest of the world has gradually, towards where we are now, increased output by 3.3 million barrels per day. This has basically meaning a net loss of only 6.2 million barrels per day. What's related when I look at, and we might jump at it straight away, if we move to slide 11, is that even with this effective closure of Hormuz, we have had so large changes in trading patterns that we're actually back to oil traveling over distances, oil on water, pre the Hormuz closure. The long-haul trade has outgrown the loss of the relatively short-haul trade from the Middle East Gulf to Far East.
Speaker #1: And then the rest of the world has gradually, towards where we are now, increased outputs by 3.3 million barrels per day. This has basically meant a net loss of 6.
Speaker #1: Of only 6.2 million barrels per day. What's related—going to look at, and we might jump at this straight away, if we move to slide 11—is that even with this effective closure of Hormuz, we have had so large changes in trading patterns.
Speaker #1: That was actually back to oil kind of traveling over distances—oil on water—prior to the Hormuz closure. The long-haul trade has kind of outgrown the loss of the relatively short-haul trade from the Middle East Gulf to the Far East.
Speaker #1: We also saw export capacity that we actually didn't know existed, or at least we didn't really focus on it, adding to this volume. We've seen Asia increase their sourcing from virtually all available regions—all of them further afar—fueling this ton-mile and this high utilization.
Lars Barstad: We also see an export capacity that we actually didn't know existed, or at least we didn't really focus on it, adding to this volume. We've seen Asia increase their sourcing from virtually all available regions, all of them further afar, fueling this ton-mile and this high utilization. Despite the volume shortfall then, adjusted for distances, shipping demand is surprisingly robust. Crude on water is recovering fast, and this is important to note. When you look at a real-time picture, you will not record this until after the fact. It takes 30 to 45 days from a barrel is contracted to be freighted before the oil is actually loaded on a ship. This means that it's only in the last 3, 4 weeks we've seen this materially happen, using the data or using the oil on water data.
Speaker #1: Despite the volume shortfall, then, a just-for-distances shipping demand is surprisingly robust. Crude on water is recovering fast, and this is important to note.
Speaker #1: When you look at a real-time picture, you will not record this until after the fact. It takes 30 to 45 days from when a barrel is contracted to be freighted before the oil is actually loaded on a ship.
Speaker #1: This means that it's only in the last three, four weeks we've seen this materially happen using the data, or using the kind of 'oil on water' data.
Speaker #1: I have to say, though—and we might actually flip back to slide 9, because this is important. On this chart, you'll see, kind of in the middle on the top right-hand side there, the number plus 55.
Lars Barstad: I have to say, though, we might actually flip back to slide 9, because this is important. On this chart, you'll see in the middle on the top right-hand side there's a number +55. These are vessels that are contracted or majorly contracted to players that are not necessarily having the same economical rationale that then we as a ship owner would have. These are vessels who do the baseline of oil transportation from the Middle East Gulf to Asia. They're contracted to industrial players like refiners and oil majors. For these guys to not have vessels available should the strait open, can be an extremely costly affair. These ships are contracted on modest rates. You're talking 5-year deals, 6-year or 7 or 10-year deals, between $35,000 and $45,000 per day.
Speaker #1: These are vessels that are contracted, or majorly contracted, to players that are not necessarily having the same economical rationale that we as a shipowner would have.
Speaker #1: These are vessels that do the baseline of oil transportation from the Middle East Gulf to Asia. They're contracted to industrial players like refiners and oil majors, and for these guys to not have vessels available should the Strait open can be an extremely costly affair.
Speaker #1: These ships are contracted on modest rates—you're talking five-year deals, six-year or seven- or ten-year deals—between $35,000 and $45,000 per day.
Speaker #1: Meaning that that's the option premium they pay in order to be able to lift first oil as it comes. And for them, this is logistics.
Lars Barstad: Meaning that that's the option premium they pay in order to be able to lift first oil as it comes. For them, this is logistics. It's not necessarily profit, different from Frontline. Of course, hadn't we had this kind of idle fleet, I think the supply and demand picture would have looked a bit different on tankers and especially VLCC. But that's the case, and that's the way it is. Right now we're reaping the benefits of the fact that a relatively large portion of the fleet is unutilized, waiting for something to happen in the Middle East. Let's jump forward again and get into slide number 12. I mentioned that the order books continue to grow.
Speaker #1: It's not necessarily profit. Different from Frontline. And of course, hadn't we had this kind of idle fleet, I think the supply and demand picture would have looked a bit different on tankers, and especially B2C.
Speaker #1: But that's the case, and that's the way it is. And right now, we're reaping the benefits of the fact that a relatively large portion of the fleet is unutilized, waiting for something to happen in the Middle East.
Speaker #1: Let's jump forward again and get into slide number 12. So I mentioned that the order books continue to grow. We're starting to get into territory where you have kind of percentage numbers that start with a three.
Lars Barstad: We're starting to get into kind of territory, where you have kind of percentage numbers that start with a 3, but still we have this aging of the fleet that is ongoing. If you look at the table on the top left-hand side, the vessels that are currently 15 years or younger, they are going to be 20 years within 5 years, and that amounts to 45.5% of the current fleet. If you put that in the back of your heads and you look at the order book, which for the asset classes we deploy is around 23.2%, then it doesn't look too alarming. The period that the current order book is delivering over is the next 3 to 4 years, where kind of the bulk of the vessels for especially VLCC and Suezmax are actually coming in 2028.
Speaker #1: But still, we have this aging of the fleet that is ongoing. If you look at the table on the top left-hand side, the vessels that are currently 15 years or younger, they are going to be 20 years within five years.
Speaker #1: And that amounts to 45.5% of the current fleet. If you put that in the back of your heads and you look at the order book, which for the asset classes we deploy is around 23.2%, then it doesn't look too alarming.
Speaker #1: The period that the current order book is delivering over is the next three to four years, where kind of the bulk of the vessels for especially B2C and Suezmax are actually coming in 2028.
Speaker #1: So, with this in mind, I'm not saying that the order book is non-existent, but I'm saying that the order book is manageable. Also, I think it's important to note, when we look at these charts, that the likely outcome—or the likely kind of points on the list—if there is a peace solution between the US and Iran, is going to include sanctions on Iranian oil.
Lars Barstad: With this in mind, I'm not saying that the order book is non-existent, but I'm saying that the order book is manageable. Also, I think it's important to note when we look at these charts, that the likely outcome or the likely kind of points on the list if there is a peace solution between US and Iran, is going to include sanctions on Iranian oil. This means that the current part of the fleet that is now servicing the Iranian crude is going to be obsolete, and that amounts to 15% to 17% of the overall VLCC fleet, which overnight are going to become useless. We can move to slide 13 and dig a little bit further into this argument.
Speaker #1: This means that the current part of the fleet that is now servicing the Iranian crude is going to be obsolete. And that amounts to 15–17% of the overall B2C fleet, which overnight are going to become useless.
Speaker #1: We can move to slide 13 and dig a little bit further into this argument. So, we have very strong spot and period markets in addition to the fundamental backdrop, which I just pointed out.
Lars Barstad: We have very strong spot and period markets in addition to the fundamental backdrop, which I just pointed on, and this keeps ordering activity high despite the current opaque situation in the Middle East. Tanker ordering is accelerating for 2029, and we are starting to see slots move into the 2030 window, increasing the runway. We're talking about 3 years, 3 and a half years until a new hull can be added to this order book. With the absence of recycling, but the continuous aging of the fleet, the net compliant fleet growth is still manageable where we are now. Mind you, again, we do not see vessels over 20 years being deployed in any markets despite extremely constructive rates.
Speaker #1: And this keeps ordering activity high, despite the current opaque situation in the Middle East. Tanker ordering is accelerating for 2029, and we are starting to see slots move into the 2030 window.
Speaker #1: Increasing the runway, we're talking about three years, three and a half years, until a new hull can be added to this order book. With the absence of recycling, but the continuous aging of the fleet, the net compliant fleet growth is still manageable where we are now.
Speaker #1: And mind you, again, we do not see vessels over 20 years being deployed in any markets, despite extremely constructive rates. And as I mentioned, the likely endgame of a Middle East conflict implies reversal of Iran sanctions, adding to the demand for compliant tonnage, and potentially triggering the very kind of sought-after wave of recycling.
Lars Barstad: As I mentioned, the likely endgame of Middle East conflict implies reversal of Iran sanctions, adding to the demand for compliant tonnage and potentially triggering the very kind of sought-after wave of recycling. One kind of larger fundamental piece in this picture is that the number of shipyards is still materially lower than what we saw in the 2010, 2011 peak, but the consolidation and more recently, efficiency gains, put the CGT capacity closer to highs. I'm almost saying this, that basically to explain how even though the building capacity and the capacity to basically have new tonnage into the market to service future oil transportation demand seems limited. We are actually in a place where we are going to be able to maintain a fleet that can service oil markets for many years to come.
Speaker #1: One kind of larger fundamental piece in this picture is that the number of shipyards is still materially lower than what we saw in the 2010–2011 peak.
Speaker #1: But the consolidation, and more recently, efficiency gains put the CGE capacity closer to highs. And one more saying this, that basically, to explain how even though the building capacity and the capacity to basically have new tonnage into the market to service future oil transportation demand seems limited, we are actually in a place where we are going to be able to maintain a fleet that can service the oil markets for many years to come.
Speaker #1: The top right-hand side chart shows us basically how the kind of overall net fleet development is looking right now. And it's not alarming by any means.
Lars Barstad: The top right-hand side chart shows us basically how the kind of overall net fleet development is looking right now, and it's not alarming by any means. Let's move into slide 14. I think I'll just start so that you can look at the bottom hand slide, bottom hand chart, because we've used that for quite a few quarters now. Mind you, the orange thing at the end there. I mentioned that we, Frontline, has not had a quarter like this since 2004. Look at where we are now year to date in 2026. It's quite extraordinary. Yes, there is a certain portion of this index that is colored by the fact that we have some of the trades that cannot be performed but are being printed at extremely high levels. Still, we are in unprecedented times.
Speaker #1: Then let's move into slide 14. I think I'll just start so that you can look at the bottom-hand chart, because we've used that for quite a few quarters now.
Speaker #1: And mind you, the orange thing at the end there—I mentioned that we at Frontline have not had a quarter like this since 2004. Look at where we are now, year to date in 2026.
Speaker #1: It's quite extraordinary. Yes, there is a certain portion of this index that is colored by the fact that we have some of the trades that cannot be performed but are being printed at extremely high levels.
Speaker #1: But still, we are in unprecedented times. Fundamentally, tight market conditions—and they were present prior to the Middle East disruptions. The disruption in trade lanes has yielded inefficiencies, and new trades and longer trade lanes have been developing.
Lars Barstad: Fundamentally, tight market conditions. They were present prior to the Middle East disruptions. The disruption in trade lanes has yielded inefficiency and new trades and longer trade lanes have been developing. We believe this can be a bit sticky, basically due to the energy security part of this. We have continuous muted growth in the compliant tanker fleet. That is still at the core of the case of owning tanker stocks. Asset prices continue to move and both spot and period markets support investment decisions as we move forward here. The current political environment changes the game. I repeat myself, we will see a higher focus on energy supply security going forward. Frontline is in center stage with our VLCC heavy efficient business model as hopefully positive outcomes nears. Thank you very much for the attention. I'll open up for questions.
Speaker #1: And we believe this can be a bit sticky, basically due to the energy security part of this. We have continuous muted growth in the compliant tanker fleet.
Speaker #1: And that remains—that is still at the core of the case for owning tanker stocks. Asset prices continue to move, and both spot and period markets support investment decisions as we move forward here.
Speaker #1: The current political environment changes the game. And I repeat myself, we are focused—we will see a higher focus on energy supply security going forward.
Speaker #1: Frontline is in center stage with our B2C-heavy, efficient business model, as hopefully positive outcomes near. Thank you very much for the attention. And then I'll open up for questions.
Speaker #1: Thank you. To ask a question, you will need to press star, one, and one on your telephone, and wait for your name to be announced.
Operator: Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. One moment for our first question. This question comes from the line of Sherif Elmaghrabi from BTIG. Please go ahead.
Speaker #1: To withdraw your question, please press star one and then one again. One moment for our first question. And this question comes from the line of Sheryl Elmaghrabi from BTIG.
Speaker #1: Please go ahead.
Speaker #3: Hi, thanks, and good afternoon. First, starting with the six-year count, when I look at B2C fixtures, I see activity out of the US Gulf/West Africa declining slightly from April to May, even though rates have remained very strong.
Sherif Elmaghrabi: Hi. Thanks and good afternoon. First, starting with the fixture count. When I look at VLCC fixtures, I see activity out of the US Gulf and West Africa declining slightly from April to May, even though rates have remained very strong. I'm curious if you're seeing the same thing and if you have idea of what's going on with the fixture activity.
Speaker #3: So, I'm curious if you're seeing the same thing, and if you have an idea of what's going on with the fixture activity.
Speaker #4: Well, it's kind of—this market has kind of moved into very much a stealth mode. So, of course, not everything is seen.
Lars Barstad: Well, this market has moved into very much a stealth mode. It's of course not everything that is seen. I think from a utilization perspective, if you are a oil trader, you'll always utilize your own fleet first. This means that those are fixtures that will not be reported in the market, although the volume might remain the same. Secondly, we've seen that the fixing happening out of the US Gulf has been extremely mini cyclical. It starts with the short-term barrels being fixed on Aframaxes, which we've seen recently. Suddenly it tricks into Suezmaxes bringing the oil to Europe, until suddenly you see dates being confirmed for oil moving into the Far East, which brings the VLCC into the game. Suddenly the VLCC fade, the Suezmax fade, and we're back on the Aframaxes again. It just repeats itself.
Speaker #4: But I think, kind of from a utilization perspective, if you are an oil trader, you'll always utilize your own fleet first. And this means that those are fixtures that will not be reported in the market, although the volume might remain the same.
Speaker #4: Secondly, we've seen that kind of the fixturing happening out of the US Gulf has been extremely kind of meaning cyclical. It starts with kind of the short-term barrels being fixed on Aframaxis, which we've seen kind of recently.
Speaker #4: Then, suddenly, it shifts into Suezmaxes, bringing the oil to Europe. Until suddenly, you see dates being kind of confirmed for oil moving into the Far East, which brings the B2C kind of into the game.
Speaker #4: And then suddenly the B2C fade, the SUZMAX fade, and we're back on the Aframaxes again. And then it just repeats itself. So it seems like the US Gulf fixtures on the B2C side happen on a kind of a monthly cycle.
Lars Barstad: It seems like the US Gulf fixtures on the VLCC side happens on a monthly cycle, and it only happens within a week and a half in that month. I think it's quite difficult to read from fixtures, first of all, because it's very difficult to see all of them. Secondly, because you have this little bit untypical pattern. You don't have a continuous flow of VLCCs being fixed, or a continuous flow of Suezmaxes, or continuous flow of Aframaxes. It basically depends a little bit on the prices of crude and how the arbs are opening or closing. Of course, with extreme volatile narrative, virtually every Friday we're about to open Hormuz, and every Monday it's closed again. This makes this a very difficult playground for even the traders.
Speaker #4: And it only happens within a week, week and a half in that month. So I think it's quite difficult to read from fixtures, first of all, because it's very difficult to see all of them.
Speaker #4: And secondly, because you have this kind of a little bit untypical pattern. You don't have a kind of a continuous flow of B2Cs being fixed, or a continuous flow of Suezmaxes, or a continuous flow of Aframaxes.
Speaker #4: It basically depends a little bit on the prices of crude and how the ARBs are kind of opening or closing. And, of course, with an extremely volatile narrative, virtually every Friday we're about to open Hormuz.
Speaker #4: And every Monday it's closed again. This makes this kind of a very difficult playground for even the traders.
Sherif Elmaghrabi: Yeah, I definitely get whiplash from the headlines. Sticking with the idea of captive fleets, the presentation mentions 55 VLCCs on standby outside the Arabian Gulf. Do you have a thought on why the NOCs, I'm assuming they're NOCs, might do that rather than participate in alternative trades for the time being?
Speaker #3: Yeah, I definitely get whiplash from the headlines. Thinking with the idea of captive fleets, the presentation mentions 55 B2Cs on standby, outside the Arabian Gulf.
Speaker #3: Do you have a thought on why the NOCs—I'm assuming they're NOCs—might do that rather than participate in alternative trades for the time being?
Speaker #4: No, I think it's obvious I don't know this. But a likely theory is that, in the event of an opening—say somebody kind of tweets or kind of releases something coming out tomorrow, saying that now it's all OK.
Lars Barstad: No, I think it's. Obviously, I don't know this, but a likely theory is that, in the event of an opening, say somebody tweets and a press release is coming out tomorrow saying that now it's all okay, we can travel through. The first vessel that goes through can potentially buy Iraqi oil with a $30 discount to Dubai or Brent. That's a $60 million right there. I think that's the motivation. Having the ability to be able to move quickly to take the first barrels, as opposed to having to call Frontline and ask us for a rate. That has huge value. The alternative is that if they went in to compete with, say, us in Atlantic Market, that vessel would be gone for 70 to 90 days, and then they really have to call us if they need freight out of the Middle East Gulf quickly.
Speaker #4: We can travel through. The first vessel that goes through can potentially buy Iraqi oil with a $30 discount to Dubai or Brent. That's $60 million right there.
Speaker #4: So I think kind of that's the motivation. Having the ability to be able to move quickly to take the first barrels, as opposed to having to call Frontline and ask us for a rate, that has huge value.
Speaker #4: And the alternative is that if they went in to compete with, say, us in the Atlantic market, that vessel would be gone for 70 to 90 days.
Speaker #4: And then they really have to call us if they need freight out of the Middle East Gulf quickly, kind of. So I think I would assume that's the analysis behind this.
Lars Barstad: I think, I would assume that's the analysis behind this. Since the cost on holding these vessels is not like a current market cost, it's a time charter contract that was agreed years ago. I think the cost to keeping that option is manageable. Of course, what happens tomorrow is impossible to say.
Speaker #4: And since the cost, kind of, on holding this vessel is not like a current market cost, it's a time-shorter contract. That was agreed years ago.
Speaker #4: I think the cost to kind of keeping that option is manageable. But, of course, what happens tomorrow is impossible to say.
Speaker #3: Great colors always. Thank you, Lars.
Sherif Elmaghrabi: Great color as always. Thank you, Lars.
Speaker #4: Thank you.
Lars Barstad: Thank you.
Speaker #1: Thank you. Our next question comes from the line of John Campbell from Evercore ISI. Please go ahead.
Operator: Thank you. Our next question comes from the line of John Campbell from Evercore ISI. Please go ahead.
John Campbell: Close enough. Good afternoon, Lars and Inger. Lars, these slides 9 through 11 are really fantastic. Ton of detail, super interesting. Haven't seen it laid out this way before. My question is, if the impact from the fleet on slide 9 is only 11 VLCCs, and then 10 and 11 net themselves out, like you said, like the loss of volume is obviously negative, but the ton-mile impact is almost a complete offset. It feels like the utilization then overall should be relatively balanced to before the Strait closed, yet rates have obviously been incredibly strong. You have the theoretical ones, but then you also have the real ones as well. What's the differentiating factor that takes what looks to be a balanced outcome versus 3 months ago and has put rates into the stratosphere?
Speaker #5: Close enough. Good afternoon, Lars and Inger. Lars, these slides 9 through 11 are really fantastic. A ton of detail. Super interesting. Haven't seen it laid out this way before.
Speaker #5: My question is, if the impact from the fleet on slide 9 is only 11 B2Cs, and then 10 and 11 kind of net themselves out, like you said—the loss of volume is obviously negative, but the ton-mile impact is almost a complete offset.
Speaker #5: It feels like the utilization, then, overall should be relatively balanced to before the stray close. Yet rates have obviously been incredibly strong. You have the theoretical ones, but then you also have the real ones as well.
Speaker #5: So, what's the differentiating factor that takes what looked to be a balanced outcome versus three months ago and has put rates into the stratosphere?
Speaker #4: No, I think again, the biggest X factor—and we didn't kind of see this coming at all—was the amount of vessels that, seemingly, for kind of, it's not like obvious economical reasons.
Lars Barstad: I think, again, the biggest X factor, and we didn't see this coming at all, was the amount of vessels that seemingly It's not like obvious economical reasons sit unutilized. I think that the ton-miles do amount to a lot. I think people are surprised by the amount of volume Saudis have been able to ramp up the Yanbu loads with. I don't think you can get away from the fact that we have this uneconomical, for different reasons, part of the fleet that remains unutilized is the biggest factor in here. Even we did not believe that what's happened or transpired over since 28 February could be bullish VLCC or neutral to VLCC.
Speaker #4: Sit unutilized. So I think that kind of the ton-miles do amount to a lot. I think people were surprised by the amount of volume.
Speaker #4: Saudi has been able to ramp up the Yanbu loads with. But I don't think you can get away from the fact that we have this kind of uneconomical and, for different reasons, part of the fleet that remains unutilized is the biggest kind of factor in here.
Speaker #4: Because even we did not believe that what’s happened or transpired over—since the 28th of February—could be bullish. B2C or neutral to B2C.
John Campbell: Okay. You spoke on slide 13 about the likely end game, I think that most people would agree with you that that's most likely, certainly the stock market acts that way. Frontline's always been positioned, obviously, to maximize spot market exposure. If we were to consider the other end game, which is continued and escalated hostilities and maybe a more permanent closure of that waterway, how do you think about how you manage risk in that outcome? Again, I know we have to lean towards the likely outcome and what the market's telling you and the Friday afternoon tweets, have you thought about managing the fleet or even the balance sheet in a different manner just in case that unlikely tail risk emerges from this unprecedented time?
Speaker #3: OK. You spoke on slide 13 about the likely endgame. And I think that most people would agree with you that that's most likely—certainly, the stock market acts that way.
Speaker #3: And Frontline's always been positioned, obviously, to maximize spot market exposure. If we were to consider the other endgame, which is continued and escalated hostilities and maybe a more permanent closure of that waterway, how do you think about how you manage risk in that outcome?
Speaker #3: Again, I know we have to lean towards the likely outcome, and what the market's telling you, and the Friday afternoon tweets. But have you thought about managing the fleet or even the balance sheet in a different manner, just in case that unlikely tail risk emerges from this unprecedented time?
Speaker #4: Yes, we have. And I think although kind of we've done some more kind of time shorter coverage, particularly so on the B2Cs kind of during Q1 and also continuing and I think kind of the first iteration of that was basically we looked at unprecedented market prior to the Hormuz closing.
Lars Barstad: Yes, we have. I think although we've done some more time charter coverage, particularly so on the VLCC during Q1 and also continuing. I think the first iteration of that was basically we looked at unprecedented market prior to the Hormuz closing. Of course we didn't know that was going to happen. What's happened in the aftermath is that we've actually continued to secure short-term coverage, like 1-year coverage on the VLCCs, to the point where Inger has a table in there. We're closing on 30% of our voyage dates for VLCC for the next 12 months or thereabout, or at least for the first couple of quarters being covered by time charter contracts. We've always kind of communicated this, that our proposition to you as investors is to try and give you a spot exposure.
Speaker #4: So, of course, we didn't know that was going to happen. But what's happened in the aftermath is that we've actually continued to secure short-term covers, like one-year coverage on the B2Cs, to the point where—and Inger has a table in there.
Speaker #4: We're closing on 30% of our voyage days for B2C for the next 12 months or thereabouts, or at least for the first couple of quarters.
Speaker #4: Being covered by time shorter contracts. And we've always kind of communicated this, that our proposition to you as investors is to try and give you a spot exposure.
Speaker #4: But of course, at certain points in the curve, we'll try to cover. And that's, of course, to try and prevent ourselves from going bankrupt should we be wrong.
Lars Barstad: Of course, at certain points in the curve, we'll try to cover, and that's of course to try and prevent ourselves from going bankrupt should we be wrong. I think that is the answer to your question.
Speaker #4: So, I think that is the answer to your question. We could kind of be all spot at this point in time. But we're actually very close to 30% of our voyage days on B2C.
Lars Barstad: We could be all spot at this point in time, but we're actually very close to 30% of our voyage dates on VLCC, which is the most exposed segment we believe for a long-term closure, in case nothing is sold there.
Speaker #4: Which is the most exposed segment, we believe, for a long-term closure, in case nothing is sold here?
Speaker #3: Yeah, that's great. All right. Thank you, Lars. Really helpful.
John Campbell: Yeah, that's great. All right. Thank you, Lars. Really helpful.
Speaker #4: Thank you, John.
Lars Barstad: Thanks, John.
Speaker #1: Thank you. As a reminder, to ask a question you will need to press *11 on your telephone. That is, star 1 and 1 to ask a question.
Operator: Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone. That is star one and one to ask a question. We are now going to take our next question. This one comes from the line of Deven Sanghvi from Tej Investments. Please go ahead.
Speaker #1: We are now going to take our next question, and this one comes from the line of Devin Sangoy from Tej Investments. Please go ahead.
Deven Sanghvi: Hi, Lars. I just want to ask you 2 questions. First 1 is that we've seen a lot of countries have used the reserves, crude reserves what they had because of the disruptions. If they have to go back to the previous reserves, previous to this war and crude oil problems, how the demand will shape up even if the war is over?
Speaker #6: Hi, Lars. I just want to ask you two questions. First one is that we have seen a lot of countries have used the crude reserves they had, because of the disruptions.
Speaker #6: And if they have to go back to the previous reserves, if previous to this war and close-up problems, how will the demand shape up even if the war is over?
Lars Barstad: If I got your question correctly, you're asking basically how will this market look when it normalizes, right?
Speaker #4: Well, kind of—this is the big, and if I go to your question correctly, you're asking basically: How will this market look when it normalizes, right?
Speaker #6: Yeah, yes, yes.
Deven Sanghvi: Yes.
Lars Barstad: In our world, and of course, we lean on analysts that actually know this properly, I don't think we'll see Middle East exports resume to levels prior to the closure anytime soon. I think that will take time. You'll have an initial flow of oil coming out. First of all, the vessels that are already laden. Secondly, barrels that sit in tanks inside the Gulf currently. New production is going to be coming on. For some other exporters, this is, of course, a liquidity thing, so they want to get as much oil into the market sold and get some cash as soon as possible. At the same time, you'll also have this, what we believe, high probability of Iranian crude also being a compliant crude when this happens.
Speaker #4: Yeah, so in our world—and, of course, we lean on analysts that actually know this properly—I don't think we'll see, kind of, Middle East exports resume to levels prior to the closure.
Speaker #4: Anytime soon. I think that will take time. You will have an initial kind of flow of oil coming out. First of all, the vessels that are already laden.
Speaker #4: Secondly, kind of barrels that sit in tanks, inside the Gulf currently. And then new production is going to be coming on. For some of the exporters, this is, of course, a liquidity thing.
Speaker #4: So, they want to get as much oil into the market, sold and get some cash as soon as possible. At the same time, you'll also have this, what we believe, high probability of Iranian crude also being a compliant crude when this happens.
Speaker #4: And mind you, that that's one and a half to two million barrels there as well coming from Iran that needs compliant tonnage. But as we move forward here, I think if I was a refiner in the Asia or a short kind of oil entity in Asia, I would kind of the minute I filled up my inventories, I would start to basically spread my risk on how I procure oil going forward.
Lars Barstad: Mind you, that's 1.5 to 2 million barrels there as well, coming from Iran, that needs compliant tonnage. As we move forward here, I think if I was a refinery in Asia or a short oil entity in Asia, the minute I filled up my inventories, I would start to basically spread my risk on how I procure oil going forward. I think that could create a more long-term situation where we see this longer old-school ton-miles become more and more stable as we proceed. The opening scenario, I think it's very difficult to paint a bleak picture for tankers. There could also be the possibility to paint a quite bullish picture for oil price, basically because you need all this inventory build.
Speaker #4: So, I think that could kind of create a more long-term situation where we see these longer, old-school ton-miles become more and more stable.
Speaker #4: As we proceed—so, kind of the opening scenario—I think it's very difficult to paint a bleak picture for tankers. There could also be the possibility to paint a quite bullish picture for oil price, basically because you need all this inventory build.
Speaker #4: You will not get production back overnight, and there will be kind of a bit of a shortness on oil as well going forward. But I think the point that we cannot get away from is that this whole situation, which has now lasted for 12 weeks or whatever and counting, is also a huge kind of push for energy diversification by way of looking at other kinds of energy sources, like nuclear, wind, gas, what have you.
Lars Barstad: You will not get production back overnight, and there will be a bit of a shortness on oil as well going forward. I think the point that we cannot get away from is that this whole situation, which has now lasted for 12 weeks or whatever, counting, it's also a huge push for energy diversification by way of looking at other energy sources like nuclear, wind, gas, what have you. Maybe not gas, but at least solar, then. This is actually a push towards long-term energy transition. I think that's five years out. It's not something that we need to think about right now. I think the short-term scenario is how I described it.
Speaker #4: Maybe not gas, but at least solar then. So, kind of, this is actually a push towards long-term energy transition. But I think, kind of, that's five years out.
Speaker #4: It's not something that we need to think about right now, but I think kind of the short-term scenario is how I described it.
Deven Sanghvi: Lars, the other thing is that India contracted today from Venezuela, and after this war is over, the 20%, which is a huge dependence of a lot of countries, especially India, China, which is taking it from Middle East, they would like to diversify. Does that permanently change the ton-mile demand and the ton-mile travel for the ships, especially the large ones?
Speaker #6: And Lars, the other thing is that India contracted today from Venezuela. And after this war is over, the 20%—which is a huge dependence for a lot of countries, especially India and China, which are taking it from the Middle East—they would like to diversify.
Speaker #6: Does that permanently change the ton-mile demand and the ton-mile travel for the ships? Especially the large ones.
Speaker #4: Yeah, I believe so. And I think this is also the root cause for some of the interest we're seeing from kind of these Asian industrial players—that they actually are trying to access the term-shorter market, taking ships for delivery in 2027, 2028, and 2029.
Lars Barstad: Yeah, I believe so, and I think this is also the root cause for some of the interest we're seeing from these Asian industrial players, that they actually are trying to access the time charter market, taking ships for delivery in 2027, 2028, and 2029. I think that's the long game in this, that they are there to try and commit themselves for oil supply contracts from Latin America, West Africa, and US, and then basically need to secure tonnage against those contracts.
Speaker #4: So I think that's kind of the long game in this. That they are there to try and commit themselves for oil supply contracts from Latin America, West Africa, and the US.
Speaker #4: And then basically need to secure tonnage against those contracts.
Deven Sanghvi: Does it mean till FY29, calendar year 2029, you're going to have a very strong or a stable high rate scenario for the ship?
Speaker #6: So I think my answer is still, at least for '29—calendar year '29—you’re going to have a very strong or a stable high-rate scenario for the
Speaker #4: I think that's impossible to say, to be quite honest. We see that the freight markets and the period markets are backwardated. So, kind of a year contract for a vessel delivering fairly soon is around $120,000 per day.
Lars Barstad: I think that's impossible to say, to be quite honest. We see that the freight markets and the period markets are backwardated. A year contract for a vessel delivering fairly soon is around $120,000 per day. The minute you do a 2-year contract, you talk about $90,000. 3-year contract, $75,000, $76,000. If you go out and do a 5-year deal for delivery 2029, you're down in the $40,000s.
Speaker #4: The minute you do a two-year contract, you talk about 90. Three-year contract, 75, 76. And then if you kind of go out and do a five-year deal for delivery 2029, you're down in the 40s.
Speaker #4: So it's yeah.
Deven Sanghvi: Okay.
Lars Barstad: Yeah.
Speaker #6: Thanks a lot, Lars. All the best.
Deven Sanghvi: Thanks a lot, Lars. All the best.
Speaker #4: Thank you.
Lars Barstad: Thank you.
Speaker #1: Thank you. There are no further questions for today. I will now hand the call back to Mr. Lars Barstad for closing remarks.
Operator: Thank you. There are no further questions for today. I will now hand the call back to Mr. Lars Barstad for closing remarks.
Speaker #4: Yeah, again, thank you very much for listening in. It's quite a hectic political landscape we're working under. But rest assured, at Frontline our focus is on trying to collect cash as we proceed here.
Lars Barstad: Yeah. Again, thank you very much for listening in. It's quite a hectic political landscape we're working under, but rest assured, Frontline are focused on trying to collect cash as we proceed here, and it looks pretty okay for now. Thank you.
Speaker #4: And it looks pretty okay, for now. Thank you.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
