管理層發言
Good day, and thank you for standing by. Welcome to the Q1 2026 Frontline plc Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Lars Barstad, CEO. Please go ahead.
Thank you. Dear all, and thank you for dialing into Frontline's quarterly earnings call. Unprecedented times springs to mind as we report in Q1 '26, well into the first half of the year. I've been in this industry for more than 20 years, and I did not imagine us in a situation for this duration where the Strait of Hormuz has been effectively closed. With the opaque and volatile political narrative these days, the Frontline team focused on the real cash-generating business to be done, not speculating too far into the future. We have put the most profitable quarter since 2004 behind us and are well into a potentially even more rewarding one. I'll get back to how we analyze the situation later in the call. And before I give the word to Inger, I'll run through our TCE numbers on Slide 3 in the deck. In the first quarter of 2026, Frontline achieved $103,500 per day on our VLCC fleet, $72,400 per day on our Suezmax fleet and $50,700 per day on our LR2/Aframax fleet. So far in the second quarter of 2026, 82% of our VLCC days are booked at $181,700. 79% of our Suezmax days are booked at $131,300 per day and 68% of our LR2/Aframax days are booked at $125,000 per day, six digits across the board. All numbers in this table are on a load-to-discharge basis with implications of ballast days at the end of the quarter. I'll now let Inger take you through the financial highlights.
Yes. Thanks, Lars, and good morning and good afternoon, ladies and gentlemen. We can then turn to Slide 4 and look at the profit statement highlights. We report profit of $559 million or $2.51 per share and adjusted profit of $344.9 million or $1.55 per share in the first quarter of 2026. The adjusted profit in the first quarter increased by $114.5 million compared with the previous quarter, and that was primarily due to an increase in our time charter earnings of $112 million from $424.5 million in the previous quarter to $536.5 million in this quarter. Ship operating expenses increased by $5.9 million from the previous quarter, and that was mainly due to a decrease in supplier rebates of $5.4 million in the quarter. Administrative expenses, excluding the synthetic option revaluation loss of $5.8 million in the first quarter and a gain of $0.5 million in the fourth quarter of '25, increased by $8.5 million from the previous quarter, and that was primarily due to synthetic option exercises in the first quarter of 2026.
Then the adjusted interest expense decreased by $9.8 million from the previous quarter, and that was due to lower debt and decreases in interest rates and margins. Also, depreciation decreased by $6.2 million from the previous quarter due to sales of VLCCs in the period. Lastly, income tax expense decreased by $0.6 million from the previous quarter. Let's then look at the balance sheet on Slide 5. Frontline has a solid balance sheet and strong liquidity of $945 million in cash and cash equivalents, including undrawn amounts of revolver capacity of $473 million, marketable securities and minimum cash requirements as per 31 March 2026. We have no meaningful debt maturities until 2030. Remaining newbuilding commitments at the end of the first quarter were $925 million, which relates to the acquisition of the nine newbuildings from affiliates of Hemen. The company has secured newbuilding financing of up to $737 million as set out in the press release.
Let's then look at Slide 6, fleet composition, cash breakeven base and OpEx. Our fleet consists of 33 VLCCs, 21 Suezmax tankers and 18 LR2 tankers, has an average age of 7.5 years and consists of 100% eco vessels, of which 64% are scrubber fitted. We estimate average cash breakeven rates for the next 12 months of approximately $24,300 per day for VLCCs, $24,300 per day for Suezmax tankers, and $23,600 per day for the LR2 tankers. That gives a fleet average estimate of about $24,100 per day. This number includes dry dock costs for 6 VLCCs, 3 Suezmax tankers and 8 LR2 tankers. The fleet average estimate, excluding dry dock costs, is about $23,000 per day, or $1,100 per day less. We recorded OpEx including dry dock in the first quarter of $11,300 per day for VLCCs, $9,100 per day for Suezmax tankers and $10,900 per day for LR2 tankers. This includes dry dock of 4 VLCCs and 3 LR2 tankers. The Q1 '26 fleet average OpEx, excluding dry dock, was $8,100 per day.
Then let's look at Slide 7 and cash generation. Following that we have been entering into one-year time charter agreements, and we have a fleet renewal in the first quarter and also in the second quarter. Spot days for the next 12 months are about 23,700 days. Frontline has substantial cash generation potential with 27,900 earning days annually. As you can see from this slide, the cash generation potential based on current fleet TCE rates and TCE as of 22 May 2026 is $1.5 billion or approximately $7 per share. That provides a cash flow yield of 18% based on the current share price. If we look at a 30% increase from current spot market, that will increase the cash generation potential to about $2.1 billion or $9.51 per share. An equal 30% decrease from current spot markets will decrease the cash generation potential to about $1 billion or $4.41 per share. With this, I leave the word to Lars again.
Thank you, Inger. Let's move to Slide 8 and look at some of the market highlights that we're going to go through in this deck. But first of all, I'd like to remind the audience that we've had tightening fundamentals in the tanker market ever since around this time last year, prior to the Middle East conflict. We reached an unprecedented situation after 28 February with the Strait of Hormuz effectively closed. The chart on the top right side indicates this. Here, you see the year-on-year weekly changes in flows, whereas the Middle East Gulf drops dramatically starting in week 12. The U.S.-Iran on/off peace talks and the potential easing of Iran-related sanctions together with uncertainty on Russian oil assets creates a lot of volatility. The market is starting to focus on the potential long-term implications coming from the current situation in the Middle East and, more so, if we imagine the situation getting resolved.
We're going to see restocking of inventories, increased strategic storage, especially amongst the Asian importers. We're also going to see a higher focus on diversification of oil supply now that we've seen how vulnerable you can be being dependent on purely Middle East supply. We also see that order books continue to grow as we stretch into 2030 delivery windows now. Asset prices continue to appreciate as freight market outlook remains firm, and we see fairly high activity on the longer-term time charter market or contracts. Just a small hint on the bottom left chart: we're not only using the TD3C index, which is the Middle East Gulf loading index to China, we're also using the TD15 index outside of the Middle East Gulf, West Africa to China. Although it looks quite bleak only kind of rewarding us with $100,000 per day, this is four times our cash breakeven levels. So it's still very good money.
Although we wish we could have made $400,000 per day every day, this is very much a theoretical exercise given the current market. Further, if we move to Slide 9, I'm going to take you through two fairly complicated slides, but I think they're needed for this session given the situation. First of all, the Strait of Hormuz closure is very much a VLCC event. This is a big effect for the VLCCs. This is where the most volume is listed, transporting oil both to the East and to the West. We've seen prior to the closure that the daily tied-up VLCCs in this market has been on average 491 vessels. This consists of laden, dry docked vessels that are doing cargo operations or other activities. We have, at any point in time, had stopped ballasters east of Suez, and we've always had vessels waiting to load in the Red Sea. When the Strait closed, we had a massive loss of 130 ships that were so-called laden, dry docking or doing cargos.
This is the dark blue baseline in the chart in the middle here. Then we had an increase of 21 vessels waiting to load in the Red Sea; this is daily tied-up tonnage, so it shouldn't be looked at as an absolute number. Then suddenly, we had 41 VLCCs laden and loaded with oil waiting inside the Middle East Gulf. And then you had 55 VLCC equivalents stopped and in ballast east of Suez. This brought us back to 480 VLCCs after the Hormuz closed, basically only a reduction of 11 VLCC equivalents in this extremely severe situation for the VLCC segment in particular. If we move to Slide 10 and look at how the flows developed post closure, we were at 17.7 million barrels per day from various suppliers inside the Middle East Gulf. We lost 5.9 million barrels per day from Saudi, 3.2 million from Iraq, almost 2 million from the UAE and on it goes—1.4 million from Kuwait and almost 1 million barrels from Qatar.
As we proceeded, the UAE were able to increase the throughput in the pipeline ending up in Fujairah by almost 1 million barrels per day. Saudi Arabia started to utilize the Yanbu pipeline going from the Middle East Gulf out to the Red Sea, increasing by 3.5 million barrels per day. The rest of the world has gradually increased output by 3.3 million barrels per day. This means a net loss of only 6.2 million barrels per day. Related to that, and we might jump at it straight away—if we move to Slide 11—even with this effective closure of Hormuz, we have had such large changes in trading patterns that we're actually back to oil traveling long distances, oil on water pre the Hormuz closure. The long-haul trade has outgrown the loss of the relatively short-haul trade from the Middle East Gulf to the Far East. We've also seen export capacity that we actually didn't know existed, or at least we didn't really focus on, adding to this volume.
We've seen Asia increase their sourcing from virtually all available regions, all of them further afield, fueling this ton-mile demand and this high utilization. Despite the volume shortfall, adjusted for distances, shipping demand is surprisingly robust. Crude on water is recovering fast. This is important to note: when you look at a real-time picture, you will not record this until after the fact. It takes 30 to 45 days from when a barrel is contracted to be freighted before the oil is actually loaded on a ship. This means that it's only in the last three to four weeks we've seen this materially happen using the oil on water data. I have to say though—and we might actually flip back to Slide 9 because this is important—on this chart you'll see the number plus 55. These are vessels that are contracted or majorly contracted to players that are not necessarily having the same economic rationale as a shipowner would have.
These are vessels that do the baseline of oil transportation from the Middle East Gulf to Asia. They're contracted to industrial players like refiners and oil majors. For these players to not have vessels available should the Strait open can be an extremely costly affair. These ships are contracted on modest rates—you're talking five-year, six-year, seven- or ten-year deals between $35,000 and $45,000 per day—meaning that's the option premium they pay in order to be able to lift first oil as it comes. For them, this is logistics; it's not necessarily profit, different from Frontline. Of course, had we not had this idle fleet, I think the supply and demand picture would have looked a bit different on tankers, especially VLCCs. But that's the case, and that's the way it is. Right now we're reaping the benefits of the fact that a relatively large portion of the fleet is unutilized waiting for something to happen in the Middle East.
Let's jump forward again and get into Slide 12. I mentioned that the order books continue to grow. We're starting to get into territory where you have percentage numbers that start with three, but still we have this ongoing aging of the fleet. If you look at the table on the top left, the vessels that are currently 15 years or younger are going to be 20 years within five years, and that amounts to 45.5% of the current fleet. If you put that in the back of your head and you look at the order book, which for the asset classes we deploy is around 23.2%, then it doesn't look too alarming. The period that the current order book is delivering over is the next three to four years, where the bulk of the vessels for especially VLCC and Suezmax are actually coming in 2028. So the order book is not nonexistent, but it is manageable. Also, it's important to note that the likely outcome if there is a resolution between the U.S. and Iran is going to include sanctions on Iranian oil.
This means that the current part of the fleet that is now servicing Iranian crude is likely to be obsolete. That amounts to 15% to 17% of the overall VLCC fleet, which could overnight become unusable. We can move to Slide 13 and dig a little further into this argument. We have very strong spot and period markets in addition to the fundamental backdrop I just outlined, and this keeps ordering activity high despite the current opaque situation in the Middle East. Tanker ordering is accelerating for 2029, and we are starting to see slots move into the 2030 window, increasing the runway. We're talking about three years, three and a half years until a new hull can be added to this order book. With the absence of recycling but the continuous aging of the fleet, the net compliant fleet growth is still manageable where we are now. And mind you, we do not see vessels over 20 years being deployed in any markets despite extremely constructive rates.
As I mentioned, the likely end game of the Middle East conflict implies reversal of Iran sanctions, adding to the demand for compliant tonnage and potentially triggering a sought-after wave of recycling. One larger fundamental piece in this picture is that the number of shipyards is still materially lower than the 2010–2011 peak, but consolidation and, more recently, efficiency gains put capacity closer to highs. So although the building capacity to add new tonnage seems limited, we are in a place where we are able to maintain a fleet that can service oil markets for many years to come. The top right chart shows how the overall net fleet development is looking now, and it's not alarming. Then let's move into Slide 14. I'll start with the bottom chart because we've used that for quite a few quarters now. I mentioned that Frontline has not had a quarter like this since 2004. Look at where we are now year to date in 2026.
It's quite extraordinary. Yes, a portion of this index is colored by the fact that we have some trades that cannot be performed but are being printed at extremely high levels, but still we are in unprecedented times. Fundamentally, tight market conditions were present prior to the Middle East disruptions. The disruption in trade lanes has yielded inefficiencies and new trades and longer trade lanes have been developing. We believe this can be somewhat sticky due to the energy security element. We have continued muted growth in the compliant tanker fleet, and that remains at the core of the case for owning tanker stocks. Asset prices continue to move and both spot and period markets support investment decisions as we move forward. The current political environment changes the game. We are focused on collecting cash and benefiting from our VLCC-heavy efficient business model as hopefully positive outcomes near. Thank you very much for your attention, and I'll open up for questions.
分析師問答
This question comes from Sherif Elmaghrabi from BTIG. We have continued muted growth in the compliant tanker fleet, and that remains at the core of the case for owning tanker stocks. Asset prices continue to move, and both spot and period markets support investment decisions as we move forward. The current political environment changes the game. We are focused on collecting cash and benefiting from our VLCC-heavy, efficient business model as we await hopefully positive outcomes. Thank you very much for your attention, and I'll open up for questions.
First, starting with the fixture count. When I look at VLCC fixtures, I see activity out of the U.S. Gulf and West Africa declining slightly from April to May, even though rates have remained very strong. So I'm curious if you're seeing the same thing and if you have an idea of what's going on with the fixture activity.
Well, this market has moved into a stealth mode. It's, of course, not everything that is visible. From a utilization perspective, if you are an oil trader, you'll always utilize your own fleet first. Those fixtures will not be reported in the public market, although the volume might remain the same. Secondly, the fixing happening out of the U.S. Gulf has been very mini-cyclical. It starts with short-term barrels being fixed on Aframaxes, which we've seen recently. Then suddenly it trickles into Suezmaxes bringing the oil to Europe until dates are confirmed for oil moving into the Far East, which brings VLCCs into the game. Then VLCCs fade, Suezmaxes fade, and we're back to Aframaxes again, and it repeats. So it seems like U.S. Gulf fixtures on the VLCC side happen on a monthly cycle and only within a week to 1.5 weeks in that month. It's quite difficult to read from fixtures because it's hard to see all of them and because you have this atypical pattern. You don't have a continuous flow of VLCCs being fixed or a continuous flow of Suezmaxes or Aframaxes. It depends on crude prices and how the arbs are opening or closing. And of course, with an extremely volatile narrative—virtually every Friday there's a headline about opening Hormuz and every Monday it's closed again—this makes it a very difficult playground even for traders.
Yes, I definitely get whiplash from the headlines. Sticking with the idea of captive fleets, the presentation mentioned 55 VLCCs on standby outside the Arabian Gulf. Do you have a thought on why the NOCs—I'm assuming the NOCs might do that rather than participate in alternative trades for the time being?
I don't know for certain, but a likely theory is this: in the event of an opening—say a press release tomorrow saying it's all okay and we can travel through—the first vessel that goes through can potentially buy Iraqi oil with a $30 discount to Dubai or Brent. That's $60 million right there. So I think that's the motivation: having the ability to move quickly to take the first barrels as opposed to having to call Frontline and ask us for a rate that has huge value. The alternative is that if they went in to compete with us in the Atlantic market, that vessel would be gone for 70 to 90 days. Then they'd really have to call us if they needed freight out of the Middle East Gulf quickly. So I would assume that's the analysis behind this. Since the cost of holding these vessels is not a current spot market cost but a time charter contract that was agreed years ago, the cost to keep that option is manageable. But of course, what happens tomorrow is impossible to say.
Our next question comes from the line of Jon Chappell from Evercore ISI.
Lars, Slides 9 through 11 are really fantastic. Tons of detail, super interesting. I haven't seen it laid out this way before. My question is: if the impact from the fleet on Slide 9 is only 11 VLCCs and then Slides 10 and 11 kind of net themselves out, like you said—the loss of volume is obviously negative, but the ton-mile impact is almost a complete offset—it feels like utilization overall should be relatively balanced to before the Strait closed, yet rates have obviously been incredibly strong. You have the theoretical ones, but then you also have the real ones as well. So what's the differentiating factor that takes what looks to be a balanced outcome versus three months ago and has put rates into the stratosphere?
I think it's the big effect factor, and we did not see this coming at all. The amount of vessels that seemingly, for various non-economic reasons, sit unutilized is significant. The ton-miles do amount to a lot. People were surprised by how much Saudi has been able to ramp up Yanbu loads, but I don't think you can get away from the fact that we have a portion of the fleet that remains unutilized for reasons other than immediate economics. That's the biggest factor here, because even we did not believe that what has transpired since 28 February could be so bullish for VLCCs.
Okay. You spoke on Slide 13 about the likely end game, and I think most people would agree with you that that's the most likely scenario. Frontline has always been positioned to maximize spot market exposure. If we consider the other end game—continued and escalated hostilities and maybe a more permanent closure of that waterway—how do you think about managing risk in that outcome? I know you have to lean toward the likely outcome and what the market is telling you, but have you thought about managing the fleet or even the balance sheet differently in case that unlikely tail risk emerges from this unprecedented time?
Yes, we have. We've done some additional time charter coverage, particularly on the VLCCs during Q1 and continuing thereafter. The first iteration of that was that we looked at the unprecedented market prior to the Hormuz closure, so we had already taken some action. Since then, we've continued to secure short-term covers like one-year time charters on VLCCs. Inger has a table in the deck: we're closing on roughly 30% of our voyage days for VLCCs for the next 12 months being covered by time charter contracts for at least the first couple of quarters. We've always communicated that our proposition to investors is to give spot exposure, but at certain points in the curve we'll cover. That's to prevent ourselves from going bankrupt should we be wrong. We could be all-spot at this point, but we're actually close to 30% covered on VLCC voyage days.
We are now going to take our next question. This one comes from Devin Sangoi of Tetch Investments.
I just want to ask you two questions. First, we've seen many countries use their crude reserves because of the disruptions. If they have to go back to the reserve levels prior to this war and restock, how will demand shape up even if the war is over?
If I understood your question correctly, you're asking how the market will look when it normalizes. In our view, and we lean on analysts who know this properly, I don't think Middle East exports will resume to pre-closure levels anytime soon. That will take time. There will be an initial flow of oil coming out—first, vessels already laden; second, barrels that sit in tanks inside the Gulf; and then new production coming on. For some exporters, this is a liquidity issue, so they want to get as much oil into the market and get cash as soon as possible. At the same time, we have a high probability that Iranian crude will become compliant when this is resolved, and that's 1.5 to 2 million barrels per day needing compliant tonnage. If I were a refinery or a short oil entity in Asia, the minute I filled my inventories I would start to spread my procurement risk. That could create a more long-term situation where we see longer ton-miles become more stable.
The opening scenario is difficult to paint as bleak for tankers. There could also be a bullish picture for oil prices because you need inventory builds, you will not get production back overnight, and there will be some shortness on oil going forward. This situation, now lasting many weeks, is also a push for energy diversification—nuclear, wind, solar—and that's more of a multi-year theme. But in the short term, I believe the tanker market outlook is constructive.
And Lars, the other thing is that India contracted today from Venezuela. After this war is over, the 20% dependence many countries have on Middle East supply—especially India and China—do you think they will permanently diversify? Does that permanently change ton-mile demand and ton-mile travel for ships, especially the large ones?
Yes, I believe so. I think this is the root cause for some of the interest we're seeing from Asian industrial players trying to access the time charter market, taking ships for delivery in '27, '28 and '29. They are committing themselves to oil supply contracts from Latin America, West Africa and the U.S., and they need to secure tonnage against those contracts. That suggests a structural shift in sourcing patterns and a potential lasting impact on ton-miles.
So does that mean through calendar year 2029 we'll have very strong or stably high rates for ships?
I think that's impossible to say with certainty. We see freight and period markets are backwardated. A one-year contract for a vessel delivering fairly soon is around $120,000 per day. A two-year contract is around $90,000 per day. A three-year contract is around $75,000 to $76,000 per day. When you go out to a five-year deal for delivery in 2029, you're down in the $40,000s. So the curve clearly shows a decline as you extend duration and push delivery further out. There are directional signals, but predicting a firm rate level through 2029 is not feasible.
There are no further questions for today. I will now hand the call back to Mr. Lars Barstad for closing remarks.
Yes. Again, thank you very much for listening in. It's quite a hectic political landscape we're working under. But rest assured, Frontline is focused on collecting cash as we proceed here, and it looks pretty okay for now. Thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.