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 May , 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-
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 May 8, 2003.
Attached as Exhibit 2 is a copy of the press release of the Company dated May 7,
2003.
Attached as Exhibit 3 is a copy of the press release of the Company dated May
11, 2003.
Exhibit 1
Frontline Ltd.
Interim Report January - March 2003
FIRST QUARTER RESULTS
Frontline Board is pleased to announce the Company's second best quarter ever.
Frontline Ltd. reports earnings before interest, tax, depreciation, and
amortisation including earnings from associated companies of $222.9 million and
net income of $177.6 million for the first quarter of 2003. Earnings per share
for the quarter were $2.32.
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 $55,400, $40,800 and $42,400, respectively, compared with $30,900, $25,300
and $24,200, respectively in the immediately preceding quarter.
Net interest expense for the quarter was $15.1 million (2002 comparable quarter:
$15.2 million). During the quarter, interest rate swaps with principal amounts
of $150 million expired and at March 31, 2003 approximately 85 per cent of bank
debt was floating, increased from 74 per cent at December 31, 2002. Other
financial items for the quarter were positive $4.9 million of which $1.8 million
is attributable to the market value adjustment on interest rate swaps and $5.0
million to the Equity Swap Line. In the first 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.
The net increase in cash and cash equivalents in the quarter was $49.1 million.
The increase comes after build-up of working capital by $53.4 million, dividend
payment of $11.5 million, prepayments of loans in the amount of $29.3 million,
scheduled debt repayment of $36.0 million and net investments of $10.1 million.
On May 8, 2003, the Board declared a dividend of $1.00 per share. The record
date for the dividend is May 20, 2003, ex dividend date is May 16, 2003 and the
dividend will be paid on or about June 6, 2003.
The results for the first quarter of 2002 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 year started with extremely strong charter rates following the recovery that
commenced in the fourth quarter of 2002. Through the first quarter, VLCC rates
showed high volatility with rates bottoming at $35,000 and peaking at $100,000
per day. Suezmax rates varied between $35,000 and $60,000 per day. Apart from an
expected seasonal demand increase the main drivers behind the strong market were
o The strike in Venezuela which shut out short haul oil production for an
extended period requiring imports from more distant suppliers.
o A cold winter in the northern hemisphere resulting in increased demand for
heating oil.
o Nuclear power plant closures in Japan which required substitution with
fossil fuel for power generation.
o Market nervousness concerning effects of a war in Iraq.
o Especially for Suezmaxes, weather delays in the Black Sea and congestion in
the Bosporos resulting in reduced fleet efficiency.
In addition a change of attitude toward using older tankers, especially among
southern European charterers, following the Prestige oil spill is considered to
have contributed to market strengthening.
The winter market enticed owners to keep older vessels for a while in the hope
of making another profitable voyage in a strong market so scrapping was slow
through the winter. Only recently has scrapping picked up again as the seventies
built vessels are becoming increasingly difficult to trade. Iraq's export was
very important for the employment of those tankers. The absence of such exports
and expectations that a new regime may take a different view on choice of
tonnage leaves limited possibilities for future employment of the oldest
vessels.
To date in 2003, 10 VLCCs / ULCCs have been confirmed sold for scrap and up to
another 10 vessels are closely negotiated for scrap sale. Four Suezmaxes have
been confirmed scrapped or otherwise removed from the trading fleet. In the
period 16 VLCCs and 7 Suezmaxes have been delivered. Ordering activity increased
somewhat in the first quarter and the order books now stand at 75 VLCCs and 58
Suezmaxes for delivery into mid 2006. The firm market resulted in increased
prices for newbuildings and second-hand double hull tankers.
CORPORATE AND OTHER MATTERS
In the first quarter of 2003, the Company acquired the Suezmax tankers
Polytrader and Polytraveller. These vessels were owned by two Norwegian K/S
companies in which the Company has a 40 percent and 35 per cent interest,
respectively. The Company subsequently sold the two vessels in March 2003, with
delivery of the second vessel taking place in early April 2003.
The Company has one remaining newbuilding VLCC on order for delivery in July
2003, and as at March 31, 2003, the remaining equity investment was estimated to
be $5 million. Committed financing for the mentioned newbuilding has been
secured. The Company has no other material capital commitments.
At March 31, 2003, 76,480,066 ordinary shares were outstanding and the weighted
average number of shares outstanding for the quarter was 76,470,105 (as at March
31, 2002, 76,466,566 and for the quarter then ended, 76,425,094). During the
first quarter of 2003, the Company issued 13,500 shares in connection with the
exercise of employee share options. At March 31, 2003, the Bank of Nova Scotia
Group had acquired 2,945,000 Frontline shares pursuant to the existing Equity
Swap Line facility that is in place until February 2004. The average cost on the
swap lines shares is $8.91 per share. The Company has the alternative of paying
$26.2 million in cash in order to repay the swap line and thereby effectively
eliminate the shares or continue with the existing swap line until it expires in
February 2004.
In the last few quarters, the Board has discussed the company's dividend policy.
The focus has been to find a solution that provides shareholders with a more
predictable minimum dividend stream. The Board has consequently adopted a
strategy whereby the Company will seek to have a normalised future quarterly
dividend target of $ 0.25 per share or $1.00 total per share per year which
corresponds to a yield of 8.7 per cent based on current share price. In order to
pay a quarterly dividend of $0.25 per share without eroding the Company's cash
position, the Company will currently need to make TCE rates of $23,900 and
$16,700 for VLCCs and Suexmaxes, respectively. The average market rates for the
last 13 years have been $29,400 and $21,500, respectively.
In addition to the normalised quarterly dividend, each quarter the Board will
evaluate how to utilise any potential earnings achieved in excess of the
dividend break even level. Such earnings may be retained in the Company to
strengthen the balance sheet, they may be used for capital investments, for
repurchase of shares or paid out as additional dividend. The decision will be
taken based on existing market conditions at the time, and will also take into
consideration the need to have a large enough cash position to secure future
ordinary dividends.
For the first quarter, the Board has decided to set the additional dividend at
$0.75 per share while the balance of earnings will be used to strengthen the
balance sheet. Total dividend paid for the first quarter is thereby set to $1.00
per share, representing $0.25 ordinary dividend and $0.75 special dividend.
The Board is pleased with the strengthening of the Company's balance sheet and
particularly with the continued lowering of the break even rates. It is an
interesting observation that the Company today would generate an annual profit
in excess of $50 million even if annual rates fell to the lowest levels
Frontline has achieved since the Company's restructuring started in 1996.
As of May 7, 2003, Frontline has cash breakeven rates for Suezmaxes and VLCCs of
$20,700 and $13,500, respectively.
OUTLOOK
The Board is of the opinion that the weakness we have seen in the tanker market
in the last few weeks is materially different to the situation which led to a
weak market for major parts of 1999 and 2002. In those cases, worldwide oil
inventories were at very high levels and OPEC had to reduce production levels by
up to 4 - 5 million barrels a day for a substantial period in order to take down
inventories. Currently we are in a situation where inventories are running at
very low levels in the seasonal low demand period. The fundamental strength of
this situation clearly limits OPECs flexibility with respect to production quota
cuts for the second part of the year.
During the last days, the Board has seen signs that the market has already
troughed and is showing signs of recovery. However, the Board is cautious about
short term developments and believe that a more sustained recovery will have to
be supported by re-introduction of Iraqi export and increased seasonal demand.
A lower oil price, low inventories and increased focus on Middle East production
after the Iraq war gives comfort on the demand side. The supply side is
supported by the fact that, even in the current weak market, there is no
material excess supply of ships and that very limited waiting time is being
experienced on modern tonnage. This, combined with the anticipated introduction
of new EU legislation for tankers from July 1, 2003, and the current
acceleration of scrapping, gives strength on the supply side. Political unrest
in several short haul production areas can create significant upside in the
market.
In the first week of May, the Company's cash position passed $200 million. It is
predicted, based on the fixtures already concluded, that the Company will have a
cash position, after the $1.00 distribution, of more than $180 million. This
increased financial flexibility has dramatically changed the strength of the
Company and has given it a position to take advantage of market opportunities.
Based on the TCE earnings achieved so far in the quarter of $51,000 for VLCCs
and $39,000 for Suezmaxes, the Board expects a good result for the second
quarter. As stated by the Board in February, it is likely that there will be
substantial volatility in the market. 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.
May 8, 2003
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Ola Lorentzon, Managing Director, Frontline Management AS
+47 23 11 40 00
Tom E. Jebsen: Chief Financial Officer, Frontline Management AS
+47 23 11 40 00
Kate Blankenship: Chief Accounting Officer, Frontline Ltd
+ 1 441 295-6935
FRONTLINE GROUP FIRST QUARTER REPORT (UNAUDITED)
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INCOME STATEMENT 2003 2002 2002
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
(restated)
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Net operating revenues 258,942 94,806 429,025
Gain (loss) from sale of assets 493 - (4,337)
Ship operating expenses 26,840 26,821 113,596
Charter hire expenses 23,547 9,792 60,634
Administrative expenses 3,263 2,421 12,895
Operating income before depreciation 205,785 55,772 237,563
Depreciation 36,155 33,953 139,855
Operating income after depreciation 169,630 21,819 97,708
Interest income 2,706 2,481 13,052
Interest expense (17,778) (17,662) (72,898)
Share of results from associated companies 17,165 986 (10,711)
Other financial items 4,878 5,718 (6,649)
Foreign currency exchange gain (loss) 1,007 691 (13,313)
Income before taxes 177,608 14,033 7,189
Taxes (2) 3 (22)
Cumulative effect of change in accounting principle - (14,142) (14,142)
Net income (loss) 177,610 (112) (6,931)
Earnings per Share ($)
EPS before cumulative effect of change in accounting principle $ 2.32 $ 0.18 $ 0.09
Cumulative effect of change in accounting principle $ - $ (0.18) $ (0.18)
EPS $ 2.32 $ - $ (0.09)
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Income on time charter basis ($ per day per ship)*
VLCC 55,400 21,600 22,500
Suezmax 40,800 16,500 18,400
Suezmax OBO 42,400 18,000 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 $) Mar 31 Mar 31 Dec 31
(restated)
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ASSETS
Short term
Cash and cash equivalents 149,365 81,586 100,298
Other current assets 188,348 94,943 133,066
Long term
Newbuildings and vessel purchase options 35,019 62,140 27,405
Vessels and equipment, net 2,345,498 2,384,341 2,373,239
Vessels under capital lease, net 259,570 238,761 264,902
Investment in associated companies 136,687 116,560 119,329
Deferred charges and other long-term assets 18,417 16,487 17,708
Total assets 3,132,904 2,994,818 3,035,947
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 163,889 314,448 167,807
Current portion of obligations under capital leases 13,481 12,046 13,164
Other current liabilities 58,692 49,498 61,408
Long term
Long term interest bearing debt 1,218,222 1,134,345 1,277,665
Obligations under capital leases 256,055 222,568 259,527
Other long term liabilities 26,717 23,106 28,199
Minority interest - 613 -
Stockholders' equity 1,395,848 1,238,194 1,228,177
Total liabilities and stockholders' equity 3,132,904 2,994,818 3,035,947
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STATEMENT OF CASHFLOWS 2003 2002 2002
(in thousands of $) Jan-Mar Jan-Mar Jan-Dec
(restated)
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OPERATING ACTIVITIES
Net income (loss) 177,610 (112) (6,931)
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortisation 36,638 34,086 142,149
Unrealised foreign currency exchange (gain) loss (1,258) (1,685) 14,176
Gain or loss on sale of assets (493) - 4,337
Results from associated companies (17,165) (986) 10,711
Change in accounting principle - 14,142 14,142
Adjustment of financial derivatives to market value (6,160) (5,116) 7,495
Other 1,131 - -
Change in operating assets and liabilities (53,379) (34,816)
(11,112)
Net cash provided by operating activities 136,924 29,217 151,263
INVESTING ACTIVITIES
Additions to newbuildings, vessels and equipment (14,314) (376,844)
(118,542)
Advances to associated companies, net 269 (5,541) (20,010)
Purchase of minority interest - (5,652) (6,822)
Proceeds from sale of assets 3,943 10,500 177,902
Net cash used in investing activities (10,102) (119,235) (225,774)
FINANCING ACTIVITIES
Proceeds from long-term debt, net of fees paid (1,077) 123,177 370,880
Repayments of long-term debt (62,103) (341,784)
(66,153)
Repayment of capital leases (3,156) (24,671)
(59,626)
Dividends paid (11,471) (19,116)
(15,294)
Issue of shares, net 52 223 223
Net cash used in financing activities (77,755) (14,468)
(17,673)
Net decrease in cash and cash equivalents 49,067 (88,979)
(107,691)
Cash and cash equivalents at start of period 100,298 189,277 189,277
Cash and cash equivalents at end of period 149,365 81,586 100,298
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Exhibit 2
FRO - Mandatory notification of trade
Frontline has, based on the Stock Indexed Total Return Swap Programme with Nova
Scotia Group (Scotia), been informed that the latter through market purchases
executed today has acquired 125,000 Frontline common shares. The shares have
been acquired at an average price of NOK 73.99.
Since the shares are owned by Scotia the shares will not be subject to immediate
cancellation, which has been the case for regular buy backs carried out by the
Company. However, these shares will be considered acquired within the current
Board authorization to buy back up to 7,500,000 shares (announced on 9 May,
2001). Based on the above, 6,997,145 shares have been acquired within the total
authorized, out of which the swap program consists of 3,070,000 at an average
purchase price of USD 8,97.
Hamilton, Bermuda
7 May, 2003
Contact persons:
Kate Blankenship, +1 441 295 69 35
Tom E. Jebsen, +47 23 11 40 00
Exhibit 3
FRO - Capital adjustments
Employees of Frontline have exercised options to acquire a total of 37,500
shares in Frontline. All shares have been acquired at a strike price of NOK
27.58 per share. Total proceeds were NOK 1,034,250.
Total number of outstanding shares after this is 76,517,566.
Hamilton, Bermuda
11 May, 2003
Contact persons:
Ola Lorentzon, +47 23 11 40 00
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 May 13, 2003 By /s/ Kate Blankenship
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Kate Blankenship
Company Secretary and Chief Accounting Officer
#404430