Frontline plc. (NYSE: FRO) Q1 2025 Earnings: Resilient Performance & Strong Bookings | May 23, 2025

Frontline plc. Q1 2025 Earnings Summary

Frontline plc. (NYSE: FRO) released its Q1 2025 financial results on May 23, 2025, with CEO Lars Barstad and CFO Inger providing an overview of the company's performance and market outlook. Despite global market volatility, the tanker market has shown orderly movement, with VLCCs taking the lead in earnings.

Q1 2025 Financial and Operational Highlights

Frontline reported a profitable first quarter, driven by solid Time Charter Equivalent (TCE) rates across its fleet, though overall earnings saw a slight decrease from the previous quarter.

• Net Profit: $33.3 million, or $0.15 per share.
• Adjusted Net Profit: $40.4 million, or $0.18 per share. This was a decrease of $4.7 million from the previous quarter, primarily due to lower TCE rates.
• VLCC TCE: $37,200 per day.
• Suezmax TCE: $31,200 per day.
• LR2/Aframax TCE: $22,300 per day.
• Fleet Composition: As of Q1 2025, Frontline's fleet consists of 41 VLCCs, 22 Suezmax tankers, and 18 LR2 tankers, with an average age of 6.8 years. Notably, 99% are eco-vessels, and 56% are scrubber-fitted.
• Liquidity: The company maintains a strong balance sheet with $805 million in cash and cash equivalents (including undrawn revolver capacity and marketable securities) as of March 31, 2025.
• Debt & Commitments: No meaningful debt maturities until 2030 and no newbuilding commitments.
• Cash Break-Even Rates (Next 12 Months):
  • VLCCs: $29,700 per day
  • Suezmax: $24,300 per day
  • LR2: $23,300 per day
  • Fleet Average: $26,800 per day (including dry dock costs for 10 VLCCs, 2 Suezmax, and 5 LR2s). Excluding dry dock costs, the average is $25,700 per day.
• OPEX: Average OPEX expenses were $8,300 per day across the fleet.
• Cash Generation Potential: Substantial potential, estimated at $332 million annually or $1.49 per share based on current fleet and May 23rd forward rates. A 30% increase in spot rates could boost this by 100%.

Market Outlook and Industry Dynamics

Lars Barstad highlighted several market themes impacting the tanker industry:

• Market Volatility: VLCCs saw volatility with rallies and a rising floor. Suezmax and Aframax finished Q1 strongly, while LR2s struggled. The traditional inverse earnings relationship between asset classes seems to have disappeared, with VLCCs now leading.
• Sanctions & Enforcement: Increasing scope and enforcement of sanctions (e.g., OFAC listings) are reducing the available compliant fleet. India and China are increasingly shunning OFAC-listed vessels.
  • Approximately 25% of the VLCC fleet, 46% of the Suezmax fleet, and 52% of the Aframax/LR2 fleet are either sanctioned, lifting Iranian/Russian/Venezuelan barrels, or are over 20 years old. This underscores the market's sensitivity to sanction changes.
• Geopolitical Events:
  • Russia-Ukraine Ceasefire & Iran Nuclear Deal: Potential pivotal changes for tanker dynamics. Lifting sanctions would return significant compliant barrel volumes, demanding compliant ships. However, many current "dark fleet" vessels are unlikely to re-enter the compliant market due to strict charterer rules.
  • OPEC+ Policy: Positive movements, with OPEC+ seemingly eager to return oil to the market, which is beneficial for compliant tanker utilization. Initial production rises have yet to significantly impact cargo volumes, but future increases from June onwards are expected to be real.
  • Red Sea/Israel-Hamas/US Conflict: A ceasefire between the US and Houthis has not materially changed Frontline's stance on trading through the Red Sea due to safety concerns, and traffic lanes have not significantly altered yet.
• Supply & Demand: Oil demand continues to grow, with overall supply and demand potentially reaching 106 million barrels per day by end of 2026. Global oil inventories are at multi-year lows, and historical data shows a strong correlation between inventory builds and tanker market performance, suggesting potential upside as inventories are replenished.
• Fleet Dynamics: The active trading fleet has stopped growing and is expected to continue shrinking through 2025, even with new deliveries. Very few charters accept ships over 20 years old. The orderbook for VLCCs is smaller than the number of OFAC-listed VLCCs, indicating limited new capacity in the compliant market.
• Tariffs & USTR Proposals: Recent U.S. tariff proposals and USTR wording show a softening stance, with oil and energy largely exempt. Frontline anticipates limited impact on global trading patterns.
• Refinancing: Successfully refinanced 24 VLCCs, extending debt maturity until 2030. The primary driver was a significant margin reduction (from ~200 basis points to 170 basis points), with duration extension as an added benefit.
• Dry Docking: An increased number of dry docks are scheduled for Q4 2025 and Q1 2026 (10 VLCCs, 2 Suezmax, 5 LR2s), primarily due to age and delivery schedules, with a concentration in early 2026.
• Scrapping: The CEO highlighted a "clog" in the recycling industry, as dollar-based recyclers cannot buy vessels from sanction-breaking actors, preventing older, sanctioned ships from being scrapped. This is a significant environmental concern that IMO needs to address.