Frontline Share Discussion Threads

[dstanley] 15/8/2005 18:06

Received this from Tobin Smith, an American tipster:

Frontline operates a fleet that consists of 35 Suezmax tankers and
42 very large crude carriers (VLCCs). Its customers include oil
companies, petroleum products traders, government agencies and
various other entities.

The company's Suezmax tankers are used for trading mainly in the
Atlantic Basin, while its VLCCs transport crude oil from the
Middle East Gulf to the Far East, northern Europe, the Caribbean
and the Louisiana offshore oil port. The company also engages in
the charter, purchase and sale of vessels.

The complaint on FRO is that rates for very large tankers have
come down from the record $100,000+ day rates of late last year.

Well, rates HAVE come down, but at $30,000-$50,000 a day, the
business is still hugely profitable -- especially for Frontline.
Those $100,000 rates were unsustainable and represented a panic
attack by oil importers spooked by the Chinese inventory build in
the last half of 2004.

Frontline is the highest profit margin oil shipper going, and its
decision to restructure as an INCOME machine takes most of the
risk out of owning the shares at these prices.

Another reason to own Frontline now besides income is that the
NYMEX started offering two futures contracts for shipping
tankers/freight, and the move should be seen as a potential
positive catalyst for oil shippers.

Frontline will use their futures as a tool to hedge their shipping
rates. (Who better to hedge the futures than the companies who
operate in the space?) This hedging brings less volatility to the
oil shipping business.


DEMAND WILL REMAIN STRONG

The idea that shipping volume is going to drop from here is
baloney.

If you followed Valero's conference call a few weeks ago, the oil
refiner's management said they would need higher imports to meet
growing demand. Also, Royal Dutch Shell recently revealed that it
led all charters with 119 booked vessels that could carry 2
million barrels each from the Persian Gulf and Red Sea to U.S.,
Asia, and European refineries as increased output is necessary to
fill growing global demand. (Do you see the pattern here?)

The global exploration and production companies have been booking
very large crude carriers in order to meet transportation needs
ahead of seasonally strong second half of 2005. VLCCs like the
ones operated by Frontline carry 47% of all oil transported by
sea. Increased production has also kept demand strong.

There will be new VLCCs coming into the shipping industry in 2006
and even more in 2007. But virtually an equal number of
single-hull Suezmax ships will be removed due to international
maritime regulations that are making them obsolete, and the VLCC
fleet will still be the favored shipping method.

Bottom line, I forecast $12-$14 in Frontline dividends annually as
the company tries to pay 90% or so of all their net income to
stockholders, which I love. We have seen the bottom here with
$30,000 day rates -- but with FRO's $18,000-a-day cost structure,
oil shipping is STILL very profitable for them.

I see us recommending Frontline at least into next spring as the
stock moves toward $50. Add in $8-$12 of dividends (85% of those
tax free), and this is just too juicy an investment to pass up.

Buy shares of Frontline under $45 to collect the gains from its
tanker business AND the high dividends ahead.


Has anyone an interest in these shares which are quoted £22-50/£25-50
on the LSE?

[napoleon 14th] 03/10/2004 14:23

Obviously wasn't undervalued.

Oil prices can't be bad for them, and a seaworthy fleet will pay long term.

Bought some when they were called LOF..........

[napoleon 14th] 03/10/2004 14:19

THANKS FOR PUTTING UP A CHART!

[squareroo] 10/8/2004 14:06

this is a frog

[squareroo] 22/1/2004 13:53

please ignore

[captain swing] 24/9/2003 19:47

Reckon it's time to start watching the tankers again, for an entry point. The OPEC production cut will not be taken well, I guess.

Hope I make a better fist of it than last time -- missed a rise in FRO from about $3.20 to $17!

[captain swing] 11/6/2003 19:37

Hi David. You can guess I feel pretty stupid missing out on FRO's latest moves (and OMM's). However I reckon the tanker business is still cyclical, there is probably an entry point about once a year and autumn seems to have provided them in recent times.

Fredriksen seems able to sell and lease back a tanker or two when he needs cash. That is what he did last year (not omitting to pick up a lot of FRO for himself at under $4). It was all announced quite properly, a buying signal for anyone who cared to make use of it. On a similar theme OMM did a share placing just before its run through $4.

Regarding the spread on FRO, I think the quote is fairly meaningless, I am not sure if anyone at all trades it in London. I use (owned by American Express) to trade in New York where spreads are fair and you get a range of stocks OMM FRO TK etc.

Pat.

[davidhp] 11/6/2003 19:19

thank you.

[ashtongray] 11/6/2003 13:35

David

If you are bullish on tanker rates then it might be worth looking at the brokers who would benefit from increased commission earnings. In the UK this means CKN + BMS. This also avoids your concern regarding shipowning financed by debt.

[captain swing] 15/3/2003 15:58

Hello my nonexistent followers. As (apparently) the only tanker investor between Bergen and Cape Cod, I thought I would you give a quick update.

Out of OMM at $5.03 and FRO at $11.94, both sold 17.1.03

I'm guessing OMM and TK are in ABC corrections and C is about to start. The charter rates are fine, even firming again, but I don't think these stocks can withstand mayhem in the major indices. Any silly story could knock them down in the war hysteria atmosphere e.g. OPEC oil embargo. So, studying for a re-entry point.

FRO is a bit stronger but has not passed the Jan high. If it does I may reconsider.

[memberservices] 15/1/2003 21:02

We just started a new ADVFN discussion board and are looking for a few posters who would like to be Sheriff and Deputy there. Come on over and check it out, fill in a resume, ha ha ha.


A few FRO'rs are already there

[captain swing] 15/1/2003 20:42

There's plenty of bullish stuff about tanker rates on Bloomberg FRO news today. Including this Frontline company presentation 15 Jan 2003. NB FRO hit $12.50, OMM was at $5 at one stage.



Final Comments :

• Good News to all the Bears who believe that tankers rates will fall later
this year.

• You are most likely right. VLCC rates of USD 90 - 100.000 per/ day and
rolling P/ E level of less than 1 will not last. However remember :

1. The Prestige Accident Changed the Tanker Market.
2. Oil Inventories are at historic lows.
3. N/ B prices and second hand values are moving upwards
4. High economic growth in Asia, signs of recovery in US.
5. VLCC FFA market for Q 2- 4 – 2003 pays USD 30.000 per day.
6. One year T/ C VLCC USD 33.000 + implies Frontline Net Income of approximately USD 250 mill [$3.30/share!].
7. Frontline is changing.

[captain swing] 09/1/2003 17:19

Am I the only tanker investor in the country? OMM is popping today, $4.55 last I looked. It was kicked up by one 700k trade amid otherwise rather thin volume since New Year. FRO and TK have also been very strong.

[captain swing] 30/12/2002 23:55

I have just seen a remarkable outbreak of knowledgableness, erudition and general knowhow and knowwhat and knowwhen on the Yahoo OMM thread. I won't give the link. If you are clever enough to find this you are clever enough to find that.

[captain swing] 17/12/2002 22:19

Got this off Tankerworld. Music to my eyes.

Key Fixtures Tuesday, December 17, 2002, 14:33:04 GMT WORLD STANDARD TIME
17th December 2002 -
A continuing shortage of suezmaxes in the Atlantic Basin for first half January stem dates has enabled owners to ramp rates up from W125 to W155 this week so far, taking t/c equivalent returns to well over $50,000 a day. The Knock Clune fixed 130,000 tonnes at W155 for West Africa to Philadelphia off 15/1 account Sun, while the British Hunter managed 135,000 tonnes at W155 from the North Sea Nigg Bay terminal to the US Gulf off 8/1 account ChevronTexaco. [Bill Box - Seatrends Web]


16th December 2002 -
Tight availability of medium-sized tankers in the Middle East has prompted a particularly firm rate for the Alliance pool's Front Lillo which achieved W150 basis 135,000 tonnes off end December or early January dates for a voyage from the AG to the East. 'Market' fixtures have been being done in the W130s. [Bill Box - Seatrends Web]

---------------------------------
Suppose you own 40 suezmaxes and they gross 50k a day, tum te tum, thats 2 million dollars a day... FRO breakeven is around 20k a day... net 1.2M a day, 110M a quarter, $1.50 per share per quarter... yup, FY $6.00 a share from a $9 share. And thats just the suezmaxes, FRO's fleet is actually over 70.

I think t/c (time charter) equivalent allows for the time the tankers are empty on the way to pick up cargoes... not sure about that part.

[captain swing] 17/12/2002 15:30

I'll stick my neck out and say OMM's break above $4 today is for real. It will stake out some territory, maybe retest the 4 but cannot live below it for long. $5.80 NAV (my estimate). 12c/share Q4 earnings guidance.

EA Gibson report (link at top of the thread) shows super charter rates. I think the move in the tankers today is significant with background of war worries, higher oil prices and $ weakness. Everything that happens e.g. loss of Prestige, new fracas in Caracas, new Turkish Government (rumoured threat to close Bosphorus) -- seems to get charterers more worried, so good for rates, & the whole mood now feeding a blow off in the equities.

Frontline FRO is now above $9 so my entry price of $12.30 may be more than a distant memory.

EDIT: OMM held above 4$, closed at day's high $4.19, never really threatened to break down.

This move did have a slightly manufactured look, possibly not unconnected with the $21 million equity drawdown @$3.60 announced the other day.

[ashtongray] 15/12/2002 19:20

ff: quite so. And like Bill C across the pond, you have immunity whilst Prez, and hope that by the time you are out of office, everybody will have lost interest in prosecuting you. And it seems to work, too.

[flangefighter] 15/12/2002 18:02

It has been said that if he wasn`t in the Palace he would be in jail.