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 , 2003
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Frontline Ltd.
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(Translation of registrant's name into English)
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
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(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
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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
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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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Item 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 1 is a copy of the press release of Frontline Ltd. (the
"Company"), dated August 4, 2003.
Exhibit 1
Frontline Ltd.
Interim Report April - June 2003
SECOND QUARTER AND SIX MONTH RESULTS
Frontline Board is pleased to announce a second consecutive quarter of strong
earnings.
Frontline Ltd. reports net operating income before depreciation of $174.0
million and net income of $155.1 million for the second quarter of 2003.
Earnings per share for the quarter were $2.04.
Net operating revenues decreased by 12 per cent compared with the first quarter
of 2003. The average daily time charter equivalents ("TCEs") earned in the spot
and period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO
carriers were $46,000, $39,600 and $35,200, respectively, compared with
$$55,400, $40,800 and $42,400, respectively in the immediately preceding
quarter. In the second quarter the Company recorded a provision for loss on sale
of assets of $4.3 million, relating to the sale, in the third quarter, of its
shares in two vessels owned through joint ventures.
Net interest expense for the quarter was $13.8 million (2002 comparable quarter:
$15.6 million). Other financial items for the quarter were positive $18.0
million of which $17.1 million is attributable to the gain recorded on the
settlement of the Bank of Nova Scotia Equity Swap Line. In the second quarter of
2003, the Yen was largely unchanged against the US Dollar, resulting in only a
small foreign currency impact for the Company on the Yen debt in subsidiaries
and associated companies.
For the six months ended June 30, 2003 the Company reports net operating income
before depreciation of $379.8 million and net income of $334.7 million. Earnings
per share for the six months were $4.39. This is the best half year result ever
achieved by the Company.
The average daily TCEs earned in the spot and period market by the Company's
VLCCs, Suezmax tankers, and Suezmax OBO carriers in the six months were $50,700,
$40,200 and $38,700, respectively. As of August 4, 2003, Frontline has cash
breakeven rates for VLCCs and Suezmaxes of $20,600 and $14,100, respectively.
The results for the periods of 2002 presented have been restated, principally to
reflect the adoption of Financial Accounting Standard 142 "Goodwill and Other
Intangible Assets". The Company adopted FAS 142 effective January 1, 2002 as
disclosed in the preliminary fourth quarter and financial year 2002 report.
THE MARKET
The very strong charter rates experienced in the first quarter gradually came
down in the second quarter but still remained at a healthy level. Only towards
the very end of the quarter did a seasonal reduction in transportation demand
take its toll resulting in a reduction of rates that has continued into the
summer. Through the first half of the year rates have been very volatile at high
levels. The favourable conditions are explained partly by seasonal effects such
as a very cold winter in the Northern Hemisphere and by political events such as
the strike in Venezuela, unrest in West Africa and the war in Iraq. The market
improvement over last year is also related to a general demand increase and
increase in OPEC production. The volatility is most likely the effect of the
trend towards lower global oil inventories which has resulted in sharper swings
in transportation demand as the requirement for oil "just-in-time" has become
increasingly important. The fact that the crude oil fleet capacity has remained
more or less unchanged has contributed to a favorable supply-demand balance.
Scrapping activity increased in the quarter and to date this year 20 VLCCs and
ULCCs and 7 Suezmaxes have been sold for scrap compared with 23 VLCC and 9
Suezmax newbuilding deliveries. Order books stand at 72 VLCCs and 65 Suezmaxes
for delivery into mid 2006. It is expected that the new EU regulations for
tankers will accelerate the removal of the remaining 1970's built crude oil
tankers which have also lost their main trade with the change of the regime in
Iraq.
The International Maritime Organization (IMO) has recently met to consider the
newly introduced EU rules. It seems likely that the IMO will tighten their
existing rules later this year in order to be more in line with the new EU
rules. This will be of special importance for the phase-out of single hull
tonnage presently scheduled for 2015 in the IMO rules and 2010 in the EU rules.
The strength in the overall shipping markets and particularly the recovery of
the container market, has led to increased ordering and well-filled order books
for the yards. The earliest delivery of large tonnage is now estimated to be
2006 - 2007. Second-hand prices as well as newbuilding prices have moved
slightly upwards in the quarter.
CORPORATE AND OTHER MATTERS
On August 4, 2003, the Board declared a dividend of $1.10 per share. The record
date for the dividend is August 18, 2003, ex dividend date is August 14, 2003
and the dividend will be paid on or about September 2, 2003. The dividend
consists of $0.25 per share in normalised dividend and an extra dividend of
$0.85 per share reflecting the strong earnings achieved in the quarter. The
Board maintains its long-term strategy of retaining approximately $200 million
in free liquidity.
In June 2003, the Company sold two of its 2001 built Suezmax tankers, the Front
Melody and Front Symphony, to two German K/Gs promoted by Dr. Peters GmbH. The
vessels will be chartered back on 12.5 years time charter arrangements,
including options for the Company to buy back the vessels at the end of the
charter period. The sale of these two vessels generated cash of approximately
$39 for the Company and a gain on sale of approximately $7 million that is being
recognized over the term of the charter.
In June 2003, the Company agreed to sell two 2000 built Suezmax tankers, the
Front Sun and the Front Sky to OMI Corporation (OMI), for $49.25 million per
vessel, consisting of $43.25 million cash and one million shares of OMI common
stock valued at $6.00 per share, with a share price guarantee from OMI at $5.70
over a six month period. Frontline will pay to OMI any shortfall of time charter
equivalent earnings per vessel below an average of $20,000 per day for one year
from delivery. Deliveries to OMI are expected in August 2003. Both vessels will
continue in Alliance Chartering, the co-operation between OMI and Frontline. The
sale of these vessels will generate cash of approximately $39 for the Company in
addition to receiving 2,000,000 OMI shares and a gain on sale of approximately
$4 million.
In June 2003, the Company acquired for $9.5 million the remaining 50 per cent
interest in the VLCC New Circassia which is now wholly-owned by the Company.
In June 2003, the Company agreed with its partners, Euronav Luxembourg SA
(Euronav) and Overseas Shipholding Group, Inc. (OSG), to swap interests in six
joint companies, which each own a VLCC. These agreements will result in the
Company selling its interest in the vessel Pacific Lagoon to Euronav; acquiring,
jointly with OSG, Euronav's interest in the Ariake and Sakura I increasing its
share in such vessels to 50.1 per cent each; and exchanging its interest in the
Ichiban (33.33 per cent) with Euronav for a portion of Euronav's interest in the
Tanabe and Hakata increasing its interest in these vessels to 50.1 per cent
each. OSG will continue as partner with remaining interest in four vessels.
Commercial management for Ariake and Sakura I will be transferred from the
Tankers International Pool to Frontline in Oslo.
On July 1, 2003, the Company, through its non-recourse subsidiary Golden Ocean
Group Limited (GOGL), entered into an option agreement with Hemen Holding Ltd
(Hemen). The option agreement gives GOGL the right to acquire all shares in
Independent Tankers Corporation ("ITC") from Hemen for a total consideration of
$4.0 million plus 4 per cent interest per year. ITC operates a total of six
VLCCs and four Suezmaxes which are on long term charters to BP and Chevron.
Hemen is a holding company indirectly controlled by Frontline's Chairman, John
Fredriksen. GOGL has paid $10.0 million for the option, which expires on July 1,
2010. The total book value of ITC's consolidated assets was $964 million as of
December 31, 2002. A previous option agreement between the Company and Hemen
relating to ITC, and with a strike price of $14.0 million, lapsed on July 1,
2003.
The Company's last remaining newbuilding VLCC was delivered in July 2003, and
financed through traditional bank financing. The Company has no other material
capital commitments.
In June 2003, the Company exercised its call option on the Frontline shares held
by the Bank of Nova Scotia. This transaction involved the Company acquiring
3,070,000 shares at a cost of $8.97 per share. These Frontline shares were
immediately cancelled upon acquisition by the Company. During the first quarter
of 2003, the Company issued 63,000 shares in connection with the exercise of
employee share options and at June 30, 2003, 73,473,066 ordinary shares were
outstanding and the weighted average number of shares outstanding for the
quarter and six months was 76,108,176 and 76,288,141, respectively.
OUTLOOK
The Tanker market has shown a negative development so far in the third quarter.
This situation reflects the facts that we are going through the traditionally
weakest seasonal demand and no material increase in worldwide storage has
occurred. The number of monthly VLCC cargoes fixed in the spot market has been
around 100 but there has been a trend whereby more relets from the major Asian
oil consumers have competed with the normal spot fleet. This situation is
expected to improve in September when the Asian consumers normally start to
increase their storage in order to meet winter demand.
Low oil inventories in the United States, as well as in Europe, provide a
fundamental strength to the market and make any negative development in OPEC
production unlikely. The negative development in North Sea Production seen in
the last few months is an interesting trend and will, over time, lead to
replacement with longer haul crude transportation.
The Board is actively looking into the way the Company employs its equity. It is
the Board's target to optimise the use of equity through financing solutions
that keep the necessary cash break even rates at reasonable historic levels and
at the same time preserve a good liquidity buffer. Such financing solutions can
include sale-leasebacks, bond financing as well as refinancing with traditional
bank financing. Any capital successfully released in such refinancing is, for
the time being, likely to be distributed to the shareholders in the form of
extraordinary dividend. This is in line with what happened in connection with
the June dividend payment.
Approximately 50 per cent of the open capacity for the third quarter is fixed at
rates, which for both the Company's vessels classes, are approximately $10,000
per day higher than cash break even. The results achieved so far thereby support
the payment of the targeted U$0.25 per share in normalised dividend for the
quarter. Any excess dividend for the quarter will be dependent on a positive
market development for the remaining part of the quarter.
The Board maintains the market view described in the first quarter report. It is
likely that the tanker market, based on the existing tight supply demand
balance, will show substantial volatility. The need to increase storage levels
to meet the winter demand is likely to push a recovery of rates in September -
October. The strength of the likely recovery will depend of such factors as
world wide economic growth, weather, the forward oil price curve as well as
political developments with special focus on Venezuela, Nigeria and Iraq. A
major change in the IMO rules later this year could significantly influence the
market and could, combined with a well filled order backlog for the yards,
create an improved long term market situation for tanker owners. The Board
remains optimistic overall for the development for the rest of the year, as well
as the overall outlook for the Company.
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements. These statements are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including Frontline management's examination of historical
operating trends. Although Frontline believes that these assumptions were
reasonable when made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond its control, Frontline cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to
differ materially from those discussed in this press release include the
strength of world economies and currencies, general market conditions including
fluctuations in charter hire rates and vessel values, changes in demand in the
tanker market as a result of changes in OPEC's petroleum production levels and
world wide oil consumption and storage, changes in the Company's operating
expenses including bunker prices, dry-docking and insurance costs, changes in
governmental rules and regulations or actions taken by regulatory authorities,
potential liability from pending or future litigation, general domestic and
international political conditions, potential disruption of shipping routes due
to accidents or political events, and other important factors described from
time to time in the reports filed by the Company with the United States
Securities and Exchange Commission.
August 4, 2003
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Tor Olav Tr0im: Director and Vice-President, Frontline Ltd
+47 23 11 40 00
Ola Lorentzon, Managing Director, Frontline Management AS
+47 23 11 40 00
Kate Blankenship: Chief Accounting Officer, Frontline Ltd
+ 1 441 295-6935
FRONTLINE GROUP SECOND QUARTER REPORT (UNAUDITED)
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2002 2003 INCOME STATEMENT 2003 2002 2002
Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun Jan-Dec
(restated) (restated) (audited)
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87,333 228,993 Net operating revenues 487,935 177,852 416,521
- (4,271) Gain (loss) from sale of assets (3,778) - (1,228)
28,645 28,918 Ship operating expenses 55,758 53,991 109,286
9,754 19,303 Charterhire expenses 42,850 19,532 60,634
2,601 2,458 Administrative expenses 5,721 5,020 12,806
46,333 174,043 Operating income before depreciation 379,828 99,309 232,567
33,661 35,582 Depreciation 70,941 66,477 136,891
12,672 138,461 Operating income after depreciation 308,887 32,832 95,676
2,947 3,273 Interest income 5,981 5,428 13,042
(18,525) (17,082) Interest expense (35,553) (35,818) (71,311)
(9,451) 13,287 Share of results from associated companies 30,452 (8,464) (10,711)
(6,142) 18,005 Other financial items 24,849 (424) (8,614)
(11,437) (878) Foreign currency exchange gain (loss) 127 (11,093) (10,932)
(29,936) 155,066 Income (loss) before taxes and minority 334,743 (17,539) 7,150
interest
(2) (1) Taxes (3) (1) (22)
- - Cumulative effect of change in accounting - (14,142) (14,142)
principle
(3,152) - Discontinued operations - (1,518) (1,929)
(33,086) 155,067 Net income (loss) 334,746 (33,198) (8,899)
Basic Earnings (loss) Per Share Amounts ($)
$(0.39) $2.04 EPS from continuing operations before $4.39 $(0.23) $0.09
cumulative effect of change in accounting
principle
$(0.43) $2.04 EPS $4.39 $(0.43) $(0.12)
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Income on timecharter basis ($ per day per
ship)*
17,000 46,000 VLCC 50,700 18,700 22,500
17,600 39,600 Suezmax 40,200 17,000 18,400
15,300 35,200 Suezmax OBO 38,700 16,600 17,700
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* Basis = Calendar days minus off-hire.
Figures after deduction of broker
commission
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BALANCE SHEET 2003 2002 2002
(in thousands of $) Jun 30 Jun 30 Dec 31
(restated) (audited)
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ASSETS
Short term
Cash and cash equivalents 244,984 95,149 100,298
Other current assets 159,202 84,500 132,707
Long term
Newbuildings and vessel purchase options 35,333 80,566 27,405
Vessels and equipment, net 2,275,918 2,318,742 2,373,239
Vessels under capital lease, net 347,756 234,336 264,902
Investment in associated companies 131,344 112,769 119,329
Deferred charges and other long-term assets 16,479 16,132 16,863
Total assets 3,211,016 2,942,194 3,034,743
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 156,802 230,009 167,807
Current portion of obligations under capital lease 16,755 15,198 13,164
Other current liabilities 147,105 50,849 78,850
Long term
Long term interest bearing debt 1,161,742 1,201,871 1,277,665
Obligations under capital lease 342,905 218,920 259,527
Other long term liabilities 33,508 25,722 10,757
Minority interest - 166 -
Stockholders' equity 1,352,199 1,199,459 1,226,973
Total liabilities and stockholders' equity 3,211,016 2,942,194 3,034,743
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2002 2003 STATEMENT OF CASHFLOWS 2003 2002 2002
Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun Jan-Dec
(audited)
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OPERATING ACTIVITIES
(33,086) 155,067 Net income (loss) 334,746 (33,198) (8,899)
Adjustments to reconcile net income to net
cash provided by operating activities
35,667 35,509 Depreciation and amortisation 72,146 69,753 142,154
14,044 188 Unrealised foreign currency exchange (1,070) 12,359 14,176
(gain) loss
2,269 4,271 Gain or loss on sale of assets 3,778 2,269 4,337
9,451 (13,287) Results from associated companies (30,452) 8,464 10,711
6,617 (16,250) Adjustment of financial derivatives to (22,410) 1,501 7,495
market value
- - Change in accounting principle - 14,142 14,142
- (3,983) Other, net (4,963) - 1,968
6,863 53,682 Change in operating assets and liabilities 345 (4,249) (44,059)
41,825 215,197 Net cash provided by operating activities 352,120 71,041 142,025
INVESTING ACTIVITIES
(18,395) (157,899) Additions to newbuildings, vessels and (172,213) (136,937) (376,844)
equipment
(5,660) 226 Advances to associated companies, net 495 (11,202) (20,010)
(447) - Purchase of minority interest - (6,099) (6,822)
31,941 111,942 Proceeds from sale of assets 115,885 42,441 177,902
7,439 (45,731) Net cash provided by (used in) investing (55,833) (111,797) (225,774)
activities
FINANCING ACTIVITIES
49,576 52,149 Proceeds from long-term debt, net of fees 51,073 172,755 380,294
paid
(78,505) (116,038) Repayments of long-term debt (178,141) (144,658) (341,959)
(2,950) (1,853) Repayment of capital leases (5,009) (62,576) (92,838)
- 91,977 Additions to capital leases 91,977 - 68,167
(3,822) (76,037) Dividends paid (87,508) (19,116) (19,117)
- (24,045) Issue of shares, net (23,993) 223 223
(35,701) (73,847) Net cash used in financing activities (151,601) (53,372) (5,230)
13,563 95,619 Net increase (decrease) in cash and cash 144,686 (94,128) (88,979)
equivalents
81,586 149,365 Cash and cash equivalents at start of 100,298 189,277 189,277
period
95,149 244,984 Cash and cash equivalents at end of period 244,984 95,149 100,298
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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.
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(Registrant)
Date August 4, 2003 By /s/ Kate Blankenship
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Kate Blankenship
Secretary and Chief Accounting Officer
02089.0009 #421070