Wednesday, December 5, 2007

Frontline Shares Fall As Contract Ends

Frontline Shares Fall As Contract Ends
Associated Press

Shares of Frontline Ltd. slipped in trading Tuesday, after a JPMorgan analyst reduced his 2008 earnings estimates to reflect the oil tanker operator's expected losses from the end of two long-term charter agreements.

Frontline (FRO) said earlier Tuesday it ended deals for two vessels with Ship Finance International Ltd. (SFL ), which then sold the tankers for $40 million each. Frontline expects $32.8 million for the contract's early termination.

Analyst Jonathan B. Chappell cut his 2008 profit estimate to $2.55 per share from $2.70 per share, saying the company "continues to trade short-term gains for long-term earnings losses."

He reiterated his "Underweight" rating for Frontline, and suggested the stock should underperform other tanker operators for the next nine months to a year.

Shares of Frontline fell $1.76, or 3.9 percent, to close at $42.87. The stock has ranged between $29.35 and $53.09 in the past year.

Chappell also lowered 2008 profit estimate on Ship Finance to $1.77 per share from $1.96 per share.

However, Chappell said that unlike Frontline, he expects Ship Finance to use the sale's proceeds to diversify and expand its fleet outside of the struggling tanker market.

He maintained his "Overweight" rating.

Ship Finance shares fell 57 cents to $24.64.

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