Oil tankers operator Frontline Ltd. (FRO,FRO.L) on Friday reported a plunge in profit for the second quarter, reflecting a weaker spot market. Revenues plummeted year-over-year, hurt by drop in demand for oil and production cuts by the OPEC.
The Hamilton, Bermuda-based company reported net income attributable to the company of $27.77 million or $0.36 per basic share for the second quarter of 2009. In the previous year period, the company earned $318.4 million or $4.25 per basic share.
On average, seven analysts polled by Thomson Reuters expected the company to report breakeven per share. Analysts' estimates typically exclude special items.
Net income for the quarter dropped to $28.34 million from $319.07 million in the prior year.
Total operating revenues plunged to $281.54 million from $547.51 million in the prior-year quarter. Analysts estimated revenues of $229.20 million for the quarter.
In May, the company reported first-quarter net income of $76.62 million or $0.98 per basic share, much lower than $220.97 million or $2.95 per basic share in the previous year. Total first-quarter operating revenue declined to $356.6 million from $527.73 million in the prior-year quarter.
Frontline operates tankers of two sizes: very large crude carriers, or VLCCs, and Suezmaxes. Its principal focus is the transportation of crude oil and its related refined dirty petroleum cargoes for major oil companies and major oil trading companies.
The economic downturn and the fluctuation in oil prices have hurt the oil industry deeply. The drop in oil demand, production cuts by the OPEC, and tanker fleet growth have negatively impacted the dayrates for oil tankers. Average daily time charter equivalent rates, or TCEs, is an important metric as it is a measure of the average daily revenue performance of a vessel.
The OPEC said in a report on August 11 that spot fixtures declined 21% in July, compared to the previous month. On an year-over-year basis, the drop was 15%. "Not a good month for the crude oil tanker market in July with freight rates dipping down once again for all vessel sizes to levels even below breakeven cost throughout most of the month," OPEC said in the report.
Frontline said that in the latest period, VLCCs earned TCEs of $38,400 in the spot and period market, compared to $86,300 last year. Suezmax tankers earned TCEs of $26,800 in the latest period, a sharp deline from last year's $72,000. For Suezmax OBO carriers, second-quarter TCEs earned declined to $42,700 from $44,100.
The spot earnings for the company's double hull VLCCs and Suezmax vessels were $38,700 and $24,400, respectively, in the just concluded quarter.
Net operating income in the second quarter was $62.13 million, significantly lower than $347.14 million reported last year. Total operating expenses dropped to $219.40 million from $347.14 million in the prior year period.
For the first half of the year, net income attributable to the company was $104.39 million or $1.34 per basic share, in comparison with $539.37 million or $7.21 per basic share in the prior year. Revenues plunged to $638.14 million from $1.075 billion.
Among others in the industry, Teekay Corp. (TK) last month reported net income attributable to the stockholders of Teekay of $81.5 million or $1.12 per share, compared to a net loss of $105.1 million or $1.45 per share in the comparable period last year. Net revenues declined to $525.9 million from $571.0 million for the same period of the prior year.
In July, General Maritime Corp. (GMR), another peer, reported second quarter net income of $7.3 million or $0.13 per share, compared to $5.0 million or $0.12 per share in the prior year period. Net voyage revenue edged up to $70.8 million from $69.3 million in the year-ago period.
Frontline said today that on August 27, its board declared a dividend of $0.25 per share. The record date for the dividend is September 11 and will be paid on or about September 24.
Last month, Frontline agreed to terminate the long term charter party for the single hull VLCC Front Duchess. The company will receive a compensation payment of about $2.8 million. Delivery is expected in September.
Looking ahead, the company's fixed charter coverage is estimated to be 40% and 27% of the fleet in 2009 and 2010, respectively. The increased volatility in the market is likely to create interesting opportunities for growth and consolidation, the company added.
In its market outlook, Frontline stated, "the macro economic data released lately, which may indicate that second quarter of 2009 was the turning point for the upturn in the global economy, notably for the commodity intensive economies in Asia, China's plans to build up strategic oil reserves and that Iraq is expected to double the production over the next six years."
FRO closed Thursday's regular trade at $24.35, down from the previous close of $24.60, on 759,000 shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.