UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August , 2002
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Frontline Ltd.
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(Translation of registrant's name into English)
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton,
HM 08, Bermuda (Address of principal executive offices)
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Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
Item 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 1 is a copy of the press release of Frontline Ltd. (the
"Company"), dated August 22, 2002.
Attached as Exhibit 2 is a copy of a letter from the Company dated August 30,
2002 which accompanies the Second Quarter 2002 Report to Shareholders as
transmitted to the Securities and Exchange Commission.
Exhibit 1
FRONTLINE LTD.
INTERIM REPORT APRIL - JUNE 2002
SECOND QUARTER AND SIX MONTH RESULTS
Frontline Ltd. reports earnings before interest, tax, depreciation, and
amortisation including earnings from associated companies (EBITDA) of $38.2
million and a net loss of $31.8 million for the second quarter of 2002. The net
loss figure includes losses of $2.4 million related to the ordinary ship
operating activities and losses of $29.4 million as a result of non ship
operating activities whereof the main factor is an unrealised foreign currency
loss due to revaluation of Yen debt. The loss per share for the quarter was
$0.42.
The average daily time charter equivalents ("TCEs") earned by VLCCs, Suezmax
tankers, and Suezmax OBO carriers were $17,000, $17,600 and $15,300,
respectively, compared with $20,600, $16,500 and $18,000, respectively in the
immediately preceding quarter. These TCEs include vessels trading on the spot
market and on time charters. Average daily ship operating expenses are in line
with budget with the increased total expense in the second quarter reflecting
the drydocking of five vessels.
Net interest expense for the quarter was $16.7 million (2001 second quarter -
$19.3 million). This compares with $15.1 million the first quarter of 2002, the
increase arising from the delivery of two newbuildings during the first quarter.
Other financial items for the quarter were negative $4.8 million which includes
a $1.7 million charge for the market value adjustment on interest rate swaps and
a $4.5 million charge for the market value adjustment on the Company's Equity
Swap Line. The strengthening of the Yen against the US Dollar in the second
quarter of 2002 resulted in an unrealised foreign currency exchange loss of
$13.8 million due to the revaluation of Yen debt in certain subsidiaries. In the
second quarter of 2002, the $9.5 million negative share of results from
associated companies also includes approximately $7.1 million unrealised
exchange loss on Yen debt.
The Company has in the first half of 2002 reduced its Yen debt and capital lease
obligations (including our share of associated companies) from JPY 37.6 billion
by the end of last year to JPY 26.1 billion as of June 30. A significant part of
the remaining exposure is linked to the non-recourse subsidiary Golden Ocean and
to vessels, which have secured charter income in Yen. Accountingwise this
contract coverage is not used to offset the loss mentioned.
For the first six months of 2002, the Company had EBITDA of $95.0 million (2001
- $351.8 million) and reports a net loss of $16.9 million. This compares with a
first half net income of $299.8 million in 2001 (including $32.3 million
relating to the cumulative effect of a change in accounting policy). Loss per
share for the 2002 year to date is $0.22 (2001 first half - earnings per share
of $3.89).
Net interest expense for the six month period was $31.8 million (2001 first half
- $41.1 million). The foreign exchange loss for the six month period was $12.1
million, reduced from $19.0 million gain at June 30, 2001.
THE MARKET
The soft tanker market at the end of the first quarter continued into the second
quarter. Rates improved somewhat in May but fell back again in June influenced
by among others a reduced Iraqi production. Rates have improved somewhat after
June but the whole market has remained lacklustre and earnings for crude oil
tonnage have been unsatisfactory. The OPEC production has been curtailed in
order to support the oil price in a market which has shown weak oil demand. The
lack of crude oil cargoes out of the Middle East Gulf has put pressure on VLCC
rates. This has led to increased VLCC activity in the Atlantic basin which in
turn has negatively affected rates for other categories of crude oil carriers.
The activity of scrapping in the early part of the year has slowed down
somewhat. So far this year 30 VLCCs have been scrapped, while 20 VLCCs have been
delivered from the yards. For the Suezmax segment 12 ships have been scrapped
while 12 ships have been delivered. Order books currently stand at 71 VLCCs and
65 Suezmaxes for delivery until the middle of 2005. Very few newbuilding orders
have been placed in the period. After a significant fall in newbuilding prices
last year it seems like the prices have flattened out supported partly by a
stronger Yen and Won.
CORPORATE AND OTHER MATTERS
In June 2002, the Company sold four drybulk vessels with delivery of two vessels
to the buyer in June and two in July. The sale of these four vessels releases
approximately $16 million in liquidity, of which $9 million in the second
quarter.
In early July 2002, the Company together with joint venture partners, took
delivery of one VLCC newbuilding, Hakata, in which the Company has a one third
share. Excluding this vessel, at June 30, 2002 the Company has four newbuilding
VLCCs on order. The three ships to be delivered in 2002 have already received
committed financing. Remaining equity investment in the newbuilding program is
estimated to $11 million in the third quarter, $7 million in the fourth quarter
and $9 million in 2003.
In July 2002, the Company has entered into an agreement to timecharter in four
1999-2000 built double-hull VLCCs from British Petroleum ("BP"). The Company has
also entered into a contract of affreightment with BP whereby Frontline will
provide transportation for all BP Group VLCC cargoes worldwide.
At June 30, 2002, and for the quarter then ended, 76,466,566 ordinary shares
were outstanding (as at June 2001, 76,912,566 and for the quarter then ended,
76,943,910). At June 30, 2002, the Bank of Nova Scotia Group had acquired
2,620,000 Frontline shares pursuant to the existing Equity Swap Line, of which
520,000 have been acquired in the first half of 2002.
The Board is seeking to benefit from opportunities created by the weak market
conditions. It is, however, a limitation to the Board's willingness to grow the
company further that the current share price of Frontline only reflects 40 per
cent of the Book value of the shares.
In Frontline's 20 F for 2001 the situation around Golden Ocean's VLCC, Golden
Stream, was described. The Board is pleased to report that Frontline's non
recourse subsidiary Golden Ocean for the time being has reached an agreement
with the lenders to the VLCC Golden Stream. The loans to Golden Stream have been
extended on a pay as you earn basis. The ship is still operated as a part of the
Frontline fleet.
The Board is comfortable with the Company's financial position. The fact that
the Company in the period 2000-01 totally made $697 million in profit has
substantially strengthened the Company compared to the last down cycle. The
daily cash break even for the fleet has been reduced with approximately $4,000
per day, and the Company's cash liquidity has increased with approximately 50
per cent since the last down cycle in 1998-99. The book solidity in the Company
has increased from 32 per cent in 1999 to 41 per cent in 2002. The shareholders
should be assured that the Board continuously is working with the target of
lowering the cash break even further. This can be achieved through reduced costs
as well as through improved debt repayment profiles.
OUTLOOK
In our last quarterly report we expected recovery in oil demand and, as a
consequence, increased chartering activity and rate improvements to take effect
starting in the third quarter of 2002. The absence of economic recovery in
important consumption areas combined with continued high crude oil prices, and a
backwardation in the oil market have, however, hampered oil consumption and
demand for transportation. The overall tanker fleet in dwt is today at the same
level as it was when the market peaked in 2000. The Opec production is, however,
reduced with more than 4 million barrels per day since the peak. Any substantial
improvement in tanker rates will highly depend on increased Opec production.
The Board is pleased with the fact that the Company even in these weak market
conditions can produce a core net income from the ordinary shipping activities,
which is only $ 2.4 million under break even.
The Board expects currents rate levels to be supported against further falls by
the uneconomical operation of the old turbine tankers. This sets the basis for
the results for the third quarter. Based on a likely increase of Opec production
in the fourth quarter the Board remains cautiously optimistic that the results
for the last part of the year again will show a positive development.
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements. These statements are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including Frontline Management's examination of historical
operating trends. Although Frontline believes that these assumptions were
reasonable when made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond its control, Frontline cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions. Important factors that, in
the Company's view, could cause actual results to differ materially from those
discussed in this press release include the strength of world economies and
currencies, general market conditions, including fluctuations in charter hire
rates and vessel values, changes in demand in the tanker market, as a result of
changes in OPEC's petroleum production levels and world wide oil consumption and
storage, changes in the Company's operating expenses, including bunker prices,
drydocking and insurance costs, changes in governmental rules and regulations or
actions taken by regulatory authorities, potential liability from pending or
future litigation, general domestic and international political conditions,
potential disruption of shipping routes due to accidents or political events,
and other important factors described from time to time in the reports filed by
the Company with the United States Securities and Exchange Commission.
August 22, 2002
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Ola Lorentzon, Managing Director, Frontline Management AS
+47 23 11 40 00
Tom E. Jebsen: Chief Financial Officer, Frontline Management AS
+47 23 11 40 00
Tor Olav Tr0im: Director and Vice-President, Frontline Ltd
+47 906 88267
FRONTLINE GROUP SECOND QUARTER REPORT (UNAUDITED)
2001 2002 INCOME STATEMENT 2002 2001 2001
Apr-Jun Apr-Jun (in thousands of $) Jan-Jun Jan-Jun Jan-Dec
(audited)
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186,256 92,798 Net operating revenues 187,701 405,345 647,345
15,300 (2,269) Gain (loss) from sale of assets (2,269) 16,017 35,620
33,109 30,451 Ship operating expenses 57,366 57,370 121,452
10,509 9,754 Charterhire expenses 19,545 21,055 41,858
2,884 2,655 Administrative expenses 5,076 6,359 13,176
155,054 47,669 Operating income before depreciation and amortisation 103,445 336,578 506,479
29,248 34,774 Depreciation and amortisation 68,727 58,145 121,725
125,806 12,895 Operating income after depreciation and amortisation 34,718 278,433 384,754
3,207 2,877 Interest income 5,432 7,881 12,953
(22,555) (19,536) Interest expense (37,200) (48,939) (91,800)
4,391 (9,451) Share of results from associated companies (8,464) 15,269 22,317
32 (4,759) Other financial items 719 (4,163) (5,709)
(3,355) (13,802) Foreign currency exchange gain (loss) (12,117) 18,966 28,318
107,526 (31,776) Income (loss) before taxes and minority interest (16,912) 267,447 350,833
(15) (1) Taxes 1 (15) 444
45 - Minority interest - 45 -
- - Cumulative effect of change in accounting principle - 32,339 32,339
107,496 (31,775) Net income (loss) (16,913) 299,756 382,728
Earnings (loss) Per Share Amounts ($)
$1.40 $(0.42) EPS before cumulative effect of change in accounting principle $(0.22) $3.47 $4.57
- - Cumulative effect of change in accounting principle - $0.42 $0.42
$1.40 $(0.42) EPS $(0.22) $3.89 $4.99
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Income on timecharter basis ($ per day per ship)*
51,400 17,000 VLCC 18,700 56,600 40,800
36,500 17,600 Suezmax 17,000 39,800 30,700
33,400 15,300 Suezmax OBO 16,600 36,500 28,900
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* Basis = Calendar days minus off-hire. Figures after
deduction of broker commission
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BALANCE SHEET 2002 2001 2001
(in thousands of $) Jun 30 Jun 30 Dec 31
(audited)
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ASSETS
Short term
Cash and cash equivalents 95,072 130,066 189,277
Other current assets 85,344 116,780 88,641
Long term
Newbuildings and vessel purchase options 80,566 105,988 102,781
Vessels and equipment, net 2,318,742 2,366,229 2,196,959
Vessels under capital lease, net 234,336 106,137 317,208
Investment in associated companies 112,769 62,223 109,898
Goodwill 11,892 14,285 14,049
Deferred charges and other long-term assets 15,287 40,084 19,110
Total assets 2,954,008 2,941,792 3,033,774
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 230,009 237,394 227,597
Current portion of obligations under capital lease 12,426 7,383 17,127
Other current liabilities 43,971 56,490 70,332
Long term
Long term interest bearing debt 1,201,871 1,320,230 1,164,354
Obligations under capital lease 221,691 88,058 283,663
Other long term liabilities 28,721 12,964 11,478
Minority interest 166 7,267 6,822
Stockholders' equity 1,215,153 1,212,006 1,252,401
Total liabilities and stockholders' equity 2,954,008 2,941,792 3,033,774
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STATEMENT OF CASHFLOWS 2002 2002
(in thousands of $) Apr-Jun Jan-Jun
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OPERATING ACTIVITIES
Net income (loss) (31,775) (16,913)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortisation 35,667 69,753
Unrealised foreign currency exchange (gain) loss 14,044 12,359
Gain or loss on sale of assets 2,269 2,269
Results from associated companies 9,451 8,464
Adjustment of financial derivatives to market value 5,301 907
Change in operating assets and liabilities 7,884 (7,474)
Net cash provided by operating activities 42,841 69,365
INVESTING ACTIVITIES
Additions to newbuildings, vessels and equipment (19,823) (136,937)
Advances to associated companies, net (5,660) (11,202)
Purchase of minority interest (447) (4,499)
Proceeds from sale of assets 31,941 42,441
Net cash provided by (used in) investing activities 6,011 (110,197)
FINANCING ACTIVITIES
Proceeds from long-term debt, net of fees paid 49,911 172,754
Repayments of long-term debt (78,505) (144,658)
Repayment of capital leases (2,950) (62,576)
Dividends paid (3,822) (19,116)
Issue of shares, net - 223
Net cash used in financing activities (35,366) (53,373)
Net increase (decrease) in cash and cash equivalents 13,486 (94,205)
Cash and cash equivalents at start of period 81,586 189,277
Cash and cash equivalents at end of period 95,072 95,072
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Exhibit 2
[LETTERHEAD OF FRONTLINE LTD.]
August 30, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
USA
Dear Sirs,
Frontline Ltd. (the "Registrant")
File No. 022704
We refer to the accompanying periodic report on Form 6-K. To the best of the
knowledge of each of the undersigned, this report fully complies with the
requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934.
The information contained in this report fairly presents in all material
respects the Registrant's financial condition and results of operations as of
the periods stated therein.
Yours faithfully,
/s/ John Fredriksen
John Fredriksen
President and Chief Executive officer
/s/ Tor Olav Troim
Tor Olav Troim
Vice President
/s/ Kate Blankenship
Kate Blankenship
Chief Accounting Officer
/s/ Tom Jebsen
Tom Jebsen
Chief Financial Officer, Frontline Management AS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
Frontline Ltd.
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(Registrant)
Date August 30, 2002 By /s/ Kate Blankenship
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Kate Blankenship
Secretary and Chief Accounting Officer
02089.0009 #346598