Frontline Navigates Choppy Waters: Q2 Revenue Soars, But EPS Sinks In Spicy Tanker Market

Frontline Plc FRO reported second-quarter revenue of $607.5 million, beating the consensus of $382.3 million.

Reported spot TCEs for VLCCs, Suezmax tankers, and LR2/Aframax tankers were $49,600 (vs. $64,000 last year), $45,600 (vs. $61,700 last year) and $53,100 (vs. $52,900 prior year) per day. 

In the quarter, ballast days totaled 1,043 for VLCCs, 306 for Suezmax tankers, and 147 for LR2/Aframax tankers.

Net operating income for the quarter improved to $255.92 million from $252.98 million a year ago. Adjusted EPS was $0.62 versus $0.94 a year ago, missing the consensus of $0.67.

In the second quarter, operating cash flow was $232.68 million compared to $283.14 million a year ago quarter. FRO held cash and cash equivalents of $359.24 million as of June-end.

In the quarter, the company agreed to sell its oldest Suezmax tanker for a net sales price of $48.5 million. After settling existing debt, the transaction is expected to result in approximately $36.5 million in net cash proceeds.

The company secured a $512.1 million sale-and-leaseback commitment to refinance 10 Suezmax tankers, pending final documents. It is expected to generate $101.0 million in Q4 2024, with part allocated to repaying $75.0 million from the $275.0 million Hemen credit facility.

Dividend: The company declared a dividend of $0.62 per share for the second quarter, payable on or about September 30, 2024. The record date for the dividend will be September 13, 2023.

Lars H. Barstad, Chief Executive Officer said, “The second quarter of 2024 was very much in line with first quarter. Markets carried on at the same pace with positive volatility in an increasingly complicated geo-political landscape. Frontline continued optimizing its position by divesting older assets, consolidating our financials and executing on our strategy of efficiently running one of the largest modern fleets in the tanker market to enhance shareholder returns.”

“Seasonality has a big effect on tanker markets, and as most of the global population lives in the northern hemisphere, the summer is the soft period. Historically, refinery utilization increases from here, as the world begins to prepare for winter and volatility in the tanker markets resumes.”

Outlook: Frontline anticipates that spot TCEs for the third quarter of 2024 to be lower than current contracted rates due to ballast days at the end of the quarter.

Looking ahead, the company stated that oil demand is expected to increase in the second half of the year, potentially reaching 104.9 mbpd by December 2024.

Investors can gain exposure to the stock via Invesco Oil & Gas Services ETF PXJ and SonicShares Global Shipping ETF BOAT.

Price Action: FRO shares are up 0.21% at $23.37 premarket at the last check Friday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.