Wednesday, August 22, 2007

Frontline (FRO) Q2 Profit Doubles

Frontline Profit More Than Doubles on Spinoffs, Sales
By Alaric Nightingale

Aug. 22 (Bloomberg)

Frontline Ltd., the world's biggest operator of supertankers, said second-quarter profit more than doubled as it increased charges for hiring out ships and spun off two companies.

Net income rose to $189 million, or $2.53 a share, from $68.6 million, or 92 cents a share, a year earlier, Hamilton, Bermuda-based Frontline said in a statement to the Oslo stock exchange today. Profit will be ``considerably weaker'' in the current quarter because of declining demand, it said.

``They are less optimistic about the future than they have been previously,'' said Anders Rosenlund, an Oslo-based analyst at ABG Sundal Collier ASA who recommends that investors sell the shares. Ship-hire rates were ``a bit better than people were expecting,'' he said.

Profit was boosted by $109.8 million from share and vessel sales. Frontline's biggest tankers earned 2.5 percent more in the quarter than a year earlier while income from smaller carriers rose by a quarter. Vessels leased out in the day-to- day, or spot, market may be operating at a loss as two production cuts by OPEC since November crimp cargo demand.

Frontline's shares climbed 7 kroner, or 2.8 percent, to 257.50 kroner as of 11:16 a.m. in Oslo, valuing the company at 19.3 billion kroner ($3.2 billion).

Frontline, led by Norwegian billionaire John Fredriksen, said it expects the Organization of Petroleum Exporting Countries to boost crude supply ``in the near future.''

The company needs $30,000 a day to break even on each of its very large crude carriers, or VLCCs, and $22,100 on its 1 million-barrel carriers, called suezmaxes. Currently, VLCCs are paying about $22,000 a day and suezmaxes $13,500, based on a formula by Oslo-based shipbrokers RS Platou A/S, benchmark ship- hire rates and marine-fuel prices compiled by Bloomberg.

$51,900 a Day

The company's VLCCs made $51,900 a day in the second quarter, compared with $50,600 a year earlier. Its Suezmax tankers made $38,600, compared with $30,600. Daily rental income from so-called oil-bulk-ore carriers, which are able to carry oil or commodities, earned $38,300, an increase of 27 percent.

The spinoff of Sea Production Ltd., a company that will operate storage and production vessels, boosted profit by $31.2 million, the company said. The merger of SeaLift Ltd., which was spun off in the first quarter, with Dockwise Transport NV contributed $43.7 million.

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