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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August ,1999
____________________________________________
Frontline Ltd.
_________________________________________________________________
(Translation of registrant's name into English)
Mercury House, 101 Front Street, Hamilton, HM 12, Bermuda
_________________________________________________________________
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F
Form 20-F ____X____ Form 40-F __________
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ___________ No ____X____
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-_______
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FRO: INTERIM RESULTS
Frontline reports a net loss of $3.6 million for the second
quarter of 1999 (1998 - net income of $14.7 million) and a net
loss of $3.4 million for the first six months of 1999 (1998 - net
income of $23.9 million). Earnings per share for the quarter were
$(0.08), (1998 - $0.32), and for the six months $(0.07), (1998 -
$0.52).
(figures in $000)
1998 1999 1999 1998
APR-JUN APR-JUN JAN-JUN JAN-JUN
NET OPERATING REVENUE 52,441 38,532 91,259 105,137
OPERATING PROFIT
BEFORE DEPRECIATION 32,825 16,349 44,953 65,765
OPERATING PROFIT
AFTER DEPRECIATION 21,185 2,316 17,071 42,461
NET INCOME (LOSS)
AFTER TAX 14,723 (3,594) (3,444) 23,851
EARNINGS PER SHARE 0.32 (0.08) (0.07) 0.52
SECOND QUARTER AND SIX MONTH RESULTS
Frontline reports a net loss of $3.6 million for the second
quarter of 1999, compared with net income of $14.7 million for
the second quarter of 1998. This result reflects the weakness in
the tanker market, particularly the VLCC sector, offset by a
dividend of $9.0 million received in respect of the Company's
investment in ICB Shipping. In the second quarter of 1998, the
reported results included the consolidation of Independent
Tankers Corporation ("ITC"). As previously reported, ITC was
subsequently sold to a related party and consequently not
included in the consolidated results for any period of 1998. The
financial information as at, and for the quarter ended June 30,
1998, included herein, has been restated to exclude ITC.
Earnings before interest, tax, depreciation, and amortisation
(EBITDA) for the quarter, including earnings from associated
companies were $17.2 million, compared with $33.6 million for the
comparable period. The reduction reflects the sharp decline in
timecharter equivalent earnings ("TCEs") earned which offset the
effect of the increase in Frontline's fleet. The average daily
TCEs earned by the VLCCs, Suezmax tankers, and Suezmax OBO
carriers were $17,800, $17,000 and $16,800, respectively,
compared with $37,200, $26,200 and $24,000 in the second quarter
of 1998. Total days offhire in the 1999 quarter were 18 for the
VLCCs and 56 for the Suezmax fleet, of which 24 days were for
scheduled dry-docking. Of the remaining offhire, 14 days is the
deductible period in connection with damage to the propeller of
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one of the Company's VLCCs. Total operating costs and
depreciation have increased due to the expansion of the fleet,
while administration costs have decreased as the benefits of the
restructuring of the Company's operations are being realised.
If the majority holding position in ICB had been accounted for on
an equity basis in Frontline's accounts, it would have increased
EBITDA by approximately $6.9 million.
Net other expenses for the quarter, including the dividend from
ICB, were $6.7 million (1998 - $7.2 million). In addition to an
increase in the average debt resulting from the fleet expansion
and further investment in ICB, the Company incurred non-recurring
charges in respect of restructuring of its debt arrangements as
discussed below.
Earnings per share for the quarter were $(0.08), (1998 - $0.32).
The weighted average number of shares outstanding for the quarter
and at June 30, 1999 was 46,106,860 (as at June 30, 1998 and for
the quarter then ended - 46,106,860). Cashflow per share for the
quarter was $0.23, compared with $0.57 for the same quarter in
1998.
For the first six months of 1999, the Company incurred a net loss
of $3.4 million (1998 - net income of $23.9 million) and EBITDA
of $46.3 million (1998 - $67.6 million). The average daily TCEs
earned by the VLCCs, Suezmax tankers, and Suezmax OBO carriers
were $22,600, $18,700 and $18,700, respectively, compared with
$33,300, $25,800 and $25,700 in the first half of 1998.
Net other expenses for the six months were $21.8 million (1998 -
$20.4 million). As for the quarter, this principally reflects an
increase in the average debt resulting from the fleet expansion,
offset by the ICB dividend.
Earnings per share for the six months were $(0.07), (1998 -
$0.52) and cashflow per share was $0.53, compared with $1.02 for
the first six months of 1998.
THE MARKET
The strong compliance to the 1.7 million barrels per day cut in
production, introduced by OPEC in the beginning of the year, lead
to a reduced demand in the freight market. Combined with annual
overhauls at refineries and a negative and nervous psychology in
the market, this substantially reduced the earnings, particularly
in the VLCC market. The increase in the oil price pushed bunker
prices from $55/60 per ton in the first quarter to as high as
$105/110 per ton. These negative factors, combined with an
oversupply of available tonnage, depressed the VLCC market with
market rates for modern VLCC tonnage falling to $10,000 - $12,000
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per day in April and May. For old turbine tonnage the earnings
went as low as $2,000 - $3,000 per day, which is approximately
$10,000 under operating cost for that type of tonnage. The VLCC
market recovered somewhat in June before rates again tumbled in
the third quarter. A total of 15 VLCCs were delivered in the
first half of 1999, while 15 have been sold for scrap.
Frontline's chartering arrangement with BP contributed positively
to the earnings in the first half of 1999.
The Suezmax market was also hit hard by the adverse market
conditions and showed a strong negative development in the second
quarter. Continued competition from VLCCs, especially in the West
African market, further contributed to this development. A total
of 8 Suezmaxes were delivered and 6 were scrapped in the first
half of 1999.
There are indications that the declining ship values and
newbuilding prices, which prevailed in the latter half of 1998,
and continued into the first quarter of 1999, have stabilised.
Increased buying interest, especially for second-hand tonnage, is
starting to give support to the market. For the first time, after
seven quarters in a row with falling values, some brokers
assessments include a value appreciation of tanker tonnage. The
strengthening of the Japanese Yen and the major restructuring
taking place in the Korean Shipyard industry give further room
for a positive development in values.
CORPORATE AND OTHER MATTERS
In the first half of 1999, the Company has taken steps to improve
its liquidity position and to address certain covenant breaches
that existed at the end of 1998. In June, the Company's largest
bank syndicate, led by Skandinaviska Enskilda Banken ("SEB"),
agreed to change the loan profile on the facility provided to the
Company. The agreed reduction in quarterly instalments will boost
the Company's liquidity by $37.8 million during the remaining
period of the loan to November 2003, equivalent to $8.4 million
per annum. In addition, the Company signed a loan agreement for
refinancing the Suezmax vessel "Lillo". The loan was drawn down
on June 30, 1999, and partly used to repay the portion relating
to "Lillo" under the SEB facility discussed above. The net effect
of the refinancing was to improve the Company's liquidity by $9.2
million.
The Company initiated, in the first half of this year,
discussions with the its lending banks with the purpose of
lowering the covenant requirements in the loan agreements at
least until January 1, 2001. The changes were requested with the
intention of increasing the flexibility of the Company's
financing arrangements in the event of a prolonged negative
market scenario. Included in the request for changes was a
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proposal to subordinate a $89.0 million loan (the "Subordinated
Loan") given by Metrogas Holdings ("Metrogas"), a company related
to Frontline's Chairman, to loans given by the Company's lending
banks. In addition, the proposal included reclassifying the
Subordinated Loan as equity for the purpose of calculating the
Company's equity ratio.
In July 1999, the discussions with Metrogas and the Company's
lending banks have been concluded and the Company and Metrogas
have signed a Subordinated Convertible Loan Facility Agreement.
Accordingly, the Company has received acceptance of reduced
covenant levels from all but one of the Company's 19 lending
banks. The Subordinated Loan is a three-year loan. In the case
Frontline does not comply with certain covenants when the
Subordinated Loan expires, then Frontline has the right to
convert, and Metrogas is forced to accept, a conversion of the
Subordinated Loan to equity at the then prevailing market prices.
It is important to advise that Metrogas, in the meantime, does
not have a conversion right under the existing arrangement. In
order to strengthen the liquidity position further, Metrogas has
agreed to an accumulation of the interest in the loan period
instead of an annual interest payment.
In July 1999, Frontline took delivery of the fourth VLCC C-Class
newbuilding, the "Front Commander", financed by traditional bank
financing. The fifth and last VLCC, "Front Crown", will be
delivered from the yard within the next two weeks. The ship is
financed through the same arrangement as "Front Commander".
Frontline has filed its Annual Form 20-F with the SEC, including
therein its audited consolidated financial statements for the
year ended December 31, 1998.
The Board of Frontline is continuing to actively address the
ownership deadlock situation with respect to ICB Shipping AB and
remains cautiously optimistic that a solution will be reached in
the near future. At June 30, 1999, Frontline owned approximately
68% of the outstanding shares of ICB, representing 44% of the
voting power. The market prices for ICB shares used in
Frontline's balance sheet as of June 30, was SEK 140 per A share
and SEK 64 per B share. ICB has estimated the NAV of the company
to be approximately SEK 72 per share. A possible solution to the
ICB situation would significantly impact Frontline's results and
balance sheet for 1999.
OUTLOOK
The current status of the oil market, with high spot prices and
negative forward prices, puts pressure on the oil companies and
refineries to reduce the oil in storage. The existing drawdown of
storage, estimated to be approximately 1 million barrels per day
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("mbpd"), is negatively influencing the demand side in the tanker
market. A solid improvement in rates is not likely to occur until
OPEC decides to change their production strategy, and thereby
open up for more Arabian Gulf ("AG") production. Such a decision
could be taken in OPEC's forthcoming September meeting and would
significantly influence the short-term outlook in the market as
well as the current negatively influenced psychology. The Board
anticipates that material tonnage will be tied up as storage
prior to the millennium change. This could, together with
increased storage on land, and the positive growth signals from
the Asian economies, positively influence the market balance for
the rest of the year.
The high bunker prices, combined with the weak freight market,
generate substantial operating losses for owners of old turbine
tonnage. It is highly likely that, in the current market
situation, we will see increased scrapping for the rest of the
year.
IEA recently released new numbers for expected oil consumption
for the year 2000. The number shows an increased demand of
approximately 2.3 mbpd. With the main part of this increased
production having to come from AG, the Board is moderately
optimistic about the medium term outlook (2000 - 2001) for the
tanker market.
Frontline will, in the coming period, concentrate on
strengthening Alliance Chartering's market position in the
Suezmax market. Such a concentration could include acquisition of
new tonnage as well as co-ordination with other owners.
The recent improvement in the Capesize bulk market combined with
the weak tanker market has created an opportunity for trading the
Company's 8 OBOs partly in the dry bulk market. The chartering
department is currently considering such opportunities.
The Board is closely monitoring the Company's cashflow and is
evaluating different ways to strengthen the Company's balance
sheet and liquidity position if the market remains weak. The
flattening to positive development in second-hand prices, and the
new arrangement with the Company's banks, reduce the negative
consequences of the weak spot market.
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The shareholders should anticipate an operating result for the
third quarter in line with, or somewhat weaker than, the second
quarter. Based on the factors described above, the Board expects
that the market will again show a positive development from the
fourth quarter.
August 23, 1999
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Tor Olav Troim: Director
+47 23 11 40 00
Tom E. Jebsen: CFO Frontline Management A.S.
+47 23 11 40 00
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FRONTLINE GROUP SECOND QUARTER REPORT (UNAUDITED)
1998 1999 INCOME STATEMENT 1999 1998 1998
APR-JUN APR-JUN ($000) JAN-JUN JAN-JUN JAN-DEC
(audited)
67,778 54,009 Freight revenues 123,381 138,138 270,405
(15,337) (15,477) Voyage expenses (32,122) (33,001) (66,545)
52,441 38,532 NET OPERATING REVENUES 91,259 105,137 203,860
222 - Gain (loss) from sale of
vessels 207 222 (1,514)
13,765 15,023 Ship operating expenses 30,298 28,103 55,586
3,401 5,386 Charterhire expenses 12,679 7,168 14,889
2,672 1,774 Administrative expenses 3,536 4,323 7,757
32,825 16,349 OPERATING PROFIT BEFORE
DEPRECIATION 44,953 65,765 124,114
11,640 14,033 Depreciation 27,882 23,304 51,659
21,185 2,316 OPERATING PROFIT AFTER
DEPRECIATION 17,071 42,461 72,455
610 454 Interest income 1,018 1,628 2,998
(12,946) (15,373) Interest expense (30,476) (27,559) (59,320)
5,324 9,000 Dividends 9,000 5,324 5,324
737 818 Results from associated
companies 1,300 1,793 2,807
(187) (809) Other financial items (1,357) 204 2,765
14,723 (3,594) INCOME (LOSS) BEFORE
TAXES (3,444) 23,851 27,029
- - Taxes - - 30
14,723 (3,594) NET INCOME (LOSS) AFTER
TAX (3,444) 23,851 26,999
0.32 (0.08) EARNINGS PER SHARE ($) (0.07) 0.52 0.59
INCOME ON TIMECHARTER BASIS ($ PER DAY PER SHIP)*
37,200 17,800 VLCC 22,600 33,300 31,800
26,200 17,000 Suezmax 18,700 25,800 22,400
24,000 16,800 Suezmax OBO 18,700 25,700 21,800
* Basis = Calendar days minus off-hire. Figures after
deduction of broker commission
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BALANCE SHEET 1999 1998 1998
($000) JUN 30 JUN 30 DEC 31
(audited)
ASSETS
Short term
Cash and bank deposits 61,554 105,420 75,950
Other current assets 28,795 34,831 30,439
Long term
Newbuildings 60,401 132,908 75,681
Vessel and equipment, net 1,134,311 999,611 1,078,956
Marketable securities 148,162 135,201 110,157
Associated companies 2,163 2,778 3,837
Deferred charges and other assets 4,486 3,053 4,501
TOTAL ASSETS 1,439,872 1,413,802 1,379,521
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 164,825 156,915 170,551
Other current liabilities 29,140 36,068 27,952
Long term
Long term interest bearing debt 762,043 716,478 712,470
Other long term liabilities 14,656 13,844 10,867
Stockholders' equity 469,208 490,497 457,681
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,439,872 1,413,802 1,379,521
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorised.
Frontline Ltd.
____________________________
(Registrant)
Date August 24, 1999 By /s/ Kate Blankenship
___________________ ___________________________
Kate Blankenship
Secretary
02089006.AB5
