Frontline (FRO) - Can anyone make a bearish case?

ogarbitrage · Jan 16, 2015

VLCC fixtures get off to a flying start in 2015

TradeWinds said:
Time-charter business is brisk as traders seek cover for spot trading and storage plays in what promises to be an upbeat year for the sector

Charterers swooped on a raft of VLCC tonnage in the first days of the new year as the crude oil contango moved back into play against the backdrop of continuing crude oil price falls.

The market was awash with unfolding reports and rumours of one-year-plus time charters, with vessels being locked in at rates some Worldscale (WS) 10 points higher than those done late last year.

Brokers say traders were particularly active locking in vessels but closely guarding fixture details.

Reports show that Vitol was linked to at least four vessels. The trader reportedly fixed the 299,000-dwt Maran Centaurus (built 1995) for 10 months’ storage at $33,000 per day, with an option for a similar period at $39,000 per day, and 306,000-dwt Maran Corona (built 2003) for one year at $37,000 per day, with an option on a second at a daily rate of $39,000. Vitol was also reported fixing the 302,000-dwt Armada Ulysses (built 1999) for 12 months storage at $37,000 per day.

Trafigura was widely reported as fixing Navios’s 309,887-dwt Nave Synergy (built 2010) for a one-year period at $35,000 per day, with an option on a second term of 12 months.

Shell is said to have snapped up the 297,000-dwt sisterships Xin Tong Yang and Xin Run Yang (both built 2009) at $36,000 per day each.

“It’s been a very busy market,” one source said, with another describing the time charters as adding “another dynamic” to what is proving to be a strong VLCC market.

One of the most compelling signs that interest is strong were reports that the 441,000-dwt, laid-up ultra large crude carrier (ULCC) TI Oceania (built 2003) was being put into a shipyard for reactivation after being fixed on subjects to a trader. The Overseas Shipholding Group (OSG)-controlled vessel was being linked to Vitol for a nine-month period with an option on further three at a rate of $40,000 per day.

Enquiry is reported to remain strong, with one broker saying “everyone is looking”.

Charterers who have taken VLCCs on one-year time charters at rates in the mid-$30,000s have done “a very clever job on it”, another broker says, adding that just a couple of months ago they were paying daily rates of $28,000 to $30,000 on the same tonnage.

“Owners are very bullish and putting a high premium on their ships,” he explained. “2015 is where owners see an opportunity to make money on the spot market.”

Brokers say the more modern vessels are likely to be used for spot trading but there is an expectation that some have been chartered in for storage plays as traders move to hedge against the market.

Market players say 2015 was always expected to be a better year for VLCCs, which struggled in the first half of 2014 before rates turned upwards towards the end of the year.

There are few VLCC newbuildings being delivered this year, with some 28 listed. Yard space is also heavily booked with other tonnage types for next year.

At the start of 2015, shipbuilders are reporting little interest in VLCC newbuildings despite the market upturn, which traditionally might have sparked some excitement. One yard official says there was a little enquiry from Greek owners on large tankers but added that it was unclear how serious this is.

Several market specialists flagged up that there are widespread indications from Middle East producers that the price of crude oil is expected to fall further.

The falling oil price has provided what one broker described as “an added kicker” to the VLCC sector with the cost of bunkers slashed by almost half, leading to a saving on operating costs.

But while optimism pervades for the sector in 2015, there were notes of caution sounded.

“There are so many different scenarios that can occur,” said one VLCC broker, highlighting the political unrest in some of the key areas.

“We’ve been promised contango for a long time and it looks like we are finally beginning to see it,” commented another key tanker market player. He says the rate of fixing suggests the VLCC market will be radically different this year but was unwilling to predict how long the strength in the sector might last. “No one saw the oil price falls coming and I presume we won’t see it rise again,” he added.

Tanker brokers say that with the recent fizz in time-charter business and busy market, almost all the January cargo stems are now fixed. As a result, the sector now looks tight on tonnage through this month, they comment.

In response, already-upbeat owners have hardened their resolve and spot market rates, which appeared to have stalled late last year, have also tipped up, with levels for Middle East Gulf-east being quoted at WS 70 at the start of a new week.
More...

ogarbitrage · Jan 16, 2015

Sustainable tanker rally predicted

ogarbitrage · Jan 17, 2015

Did a quick analysis of Frontline's debt and asset values this afternoon. I have their debt around $950m while their fleet value is conservatively valued at $1.8 billion. With 100 million shares outstanding, their breakup value alone is over $8/share.

ogarbitrage · Jan 22, 2015

VLCCs charge forward with levels not seen since 2010

TulsaTrader · Feb 11, 2015

Anyone still in this? I'm in with 3500 shares at an average of 3.13/sh. That's about as much as I'm willing to risk on this.

I think the 4Q 2014 results will not be that exciting other than the possible announcement of paying off the debt coming due. 1Q 2015 is where the magic happens if we continue to see rates like this.

ogarbitrage · Feb 11, 2015

I am still in. 3200 shares and 80 calls.

TulsaTrader · Feb 13, 2015

Double Bond Boost for Fredriksen --- from TradeWinds
John Fredriksen’s Frontline has purchased another chunk of its convertible bond amid increased confidence the tanker owner can hurdle an April payment without the need to sell assets or restructure.

Fredriksen has also put his own money to work by increasing his holding in a Golden Ocean bond, which analysts have interpreted as a positive development given the battered bulker market.

Frontline announced this morning it had bought a further $33.3m of its convertible bond, a move that raised its holding to $131.6m.

Erik Nikolai Stavseth of Arctic Securities explains there is now $93m outstanding on the bond.

“It’s very likely they will be able to repay in April in some form without selling shares in Frontline 2012 or doing anything in terms of restructuring,” the analyst said during a phone conversation today.

The development could also aid a potential merger between Frontline and Frontline 2012’s tanker fleet as such a move would now appear much less dilutive to existing Frontline shareholders, the analyst said.

In a statement, Golden Ocean said Fredriksen’s Geveran Trading had acquired $3.8m in the bulker owner’s convertible due in 2019.

The latest purchase, which takes Fredriksen’s interest in the bond to around $75m, “shows he has confidence in Golden Ocean,” Stavseth said.

FINANCE
ANDY PIERCE IN LONDON 13 February 2015, 10:34 GMT

TulsaTrader · Apr 13, 2015

Stock has been moving up the last couple days. We should see some action regarding the convertible bond soon.

TT

TulsaTrader · May 28, 2015

Earnings release tonight/tomorrow morning. Anyone else still in this one?

TT

xandman · May 28, 2015

Yeah. I'm an investor. This time I'm leaving a Limit Sell GTC at a crazy price.

Also, selling TK put options on a periodic basis. My timing has been terrible.