Frontline (FRO) earnings increase in Q2

Second Quarter and Six Months Results 2007

The Board of Frontline Ltd. (the ``Company'' or ``Frontline'') announces net income of $189.1 million for the second quarter of 2007, equivalent to earnings per share of $2.53. Operating income for the quarter was $190.9 million, including a gain on sale of assets of $66.1 million. This gain consists of $31.2 million relating to the sale of the shares in Sea Production Ltd. (``Sea Production''), $21.8 million to the delivery of the first converted heavy lift vessel and $13.1 million relating to the termination of the capital lease for Front Vanadis. Operating income was $178.6 million in the first quarter which then included a gain on sale of assets of $21.3 million. Net income also includes a gain on the issuance of shares in Sealift in connection with the business combination with Dockwise of $43.7 million in the second quarter. Net income in the first quarter included a gain on the issuance of shares in Sea Production of $39.8 million.

The reported earnings reflect a somewhat improved market partly offset by a reduction is trading days in the second quarter compared to the first quarter. 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 $51,900, $38,600 and $38,300, respectively compared with $50,200, $34,900 and $36,600, respectively in the first quarter. The results show a continued differential in earnings between single and double hull tonnage. The spot earnings for the Company's double hull VLCC and Suezmax vessels were $57,700 and $50,500, in the second quarter, compared to $56,600 and $48,100, in the first quarter.

In the second quarter of 2007 Frontline is no longer consolidating Ship Finance International Limited (``Ship Finance''). As a consequence the earnings reflect a decrease in revenues compared to the first quarter of 2007 related to the vessels in Ship Finance which are not chartered in by Frontline. Profit share expense of $15.7 million has been recorded in the second quarter as a result of the profit sharing agreement with Ship Finance. In the first quarter of 2007 the profit share expense was eliminated on consolidation of Ship Finance in the income statement, and the profit share expense was booked directly to equity as part of the spin off of Ship Finance.

Charterhire expenses have increased by $5.8 million in the second quarter as a consequence of more vessels chartered in compared to the first quarter. Ship operating expenses have increased by $4.6 million in the second quarter compared to the first quarter due to more drydocking costs expensed in the second quarter.

Administrative expenses have decreased by $3.3 million compared to the first quarter. Administrative expenses in the first quarter included non-recurring items of $1.6 million for Ship Finance and $1.9 million for the Company's FPSO activities.

Interest income was $15.7 million in the second quarter, of which $8.3 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation (``ITC''). Interest expense was $63.9 million in the second quarter of which $16.9 million relates to ITC and $47.9 million relates to the capital lease interest expense in Frontline.

Other financial items in the second quarter were a gain of $0.7 million compared to a gain of $5.1 million in the first quarter. Frontline has no valuation losses or gains in interest rate swaps and bond swaps in the second quarter compared to valuation losses of $2.5 million in interest rate swaps along with valuation gains of $6.1 million in bond swaps recorded in the first quarter. All interest rate and bond swaps related to Ship Finance.

Frontline announces net income of $347.9 million for the six months ended June 30, 2007, equivalent to earnings per share of $4.65. The average TCEs earned in the spot and period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers for the six months period ended June 30, 2007 were $51,000, $36,700 and $37,500, respectively.

As of June 30, 2007, the Company had total cash and cash equivalents of $861.0 million which includes $651.4 million of restricted cash. Restricted cash includes $416.6 million relating to deposits in ITC and $232.0 million in Frontline Shipping Limited and Frontline Shipping II Limited which are restricted under the charter agreements with Ship Finance.

The 2006 financial statements have been restated to reflect the revised accounting treatment for three entities within the ITC group which were previously fully consolidated but are now being accounted for as investments under the equity method. The restatement has no effect on net income.

As of August 2007, the Company has average cash breakeven rates on a TCE basis for VLCCs and Suezmaxes of approximately $30,000 and $22,100, respectively.

The full report is available in the link below.

http://hugin.info/182/R/1148282/219291.pdf