Frontline Ltd. has cancelled six of its sixteen newbuildings on order from two Chinese shipyards.
John Fredriksen's Frontline Ltd. has cancelled six of its sixteen newbuildings on order from two Chinese shipyards.
The company said it has entered into an agreement with Jiangsu Rongsheng Heavy Industries (Rongsheng) to cancel the order for four suezmaxes and another two VLCCs on order from Zoushan Jinhaiwan.
The cancellation represents 33% of its newbuilding program and a total contractual cost of $556 million, the company said in a statement Thursday.
"The installments already paid on the cancelled newbuildings will be applied to and set off against future payments on the remaining newbuildings," Frontline said.
Frontline still has four suezmaxes on order at Rongsheng, as well as four VLCCs at Jinhaiwan and another two VLCCs at Shanghai Waigaoqiao Shipbuilding.
In addition to the cancellation, Frontline said that it has secured long-term pre- and post-delivery financing for the two VLCC newbuilding at Waigaoqiao, amounting to $146.4 million or 70% of contractual cost.
"The reduced newbuilding program, the additional committed financing, the low cash cost breakeven rates and the large cash deposits for the vessels on long term lease reduces the financial risk and creates a good platform for cash generation," Frontline explained.
Meanwhile, Frontline reported net profit of $76.6 million in the first quarter (Q1) of 2009, or $0.98 per share, down 65.3% compared to net profit of $221 million in Q1 2008, or $2.95 per share.
Revenues amounted to $356.6 million in Q1 2009, a 32.4% drop from $527.7 million in the same period a year ago.
The company said its earnings in Q1 2009 reflected the weaker spot market.
Frontline's fleet of VLCCs, suexmaxes and suezmax OBO carriers earned an average daily time charter equivalents (TCE) of $50,300, $37,900 and $44,400 per vessel respectively in the spot and period market in Q1 2009.
This compares to daily TCE rate of $82,400, $51,600 and $43,200 per vessel in Q1 2008.
Frontline said it would appoint Acting CEO Jens Martin Jensen as permanent CEO of Frontline Management AS.
"The Board has decided to employ Jens Martin Jensen has as Acting CEO of Frontline Management AS shown a high degree of professionalism in this work and the Board particularly wants to thank him for his huge contribution to reduce Frontline"s newbuilding commitment," the company said.
The company said it would pay a cash dividend of $0.25 per share for Q1 2009.
Frontline's Oslo-listed shares opened 8.8% higher at NOK 160 ($24.57) Thursday.
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