Frontline plc.

Ladies and gentlemen, thank you for standing by and welcome to the Frontline 2020 Q1 Limited Earnings Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you do wish to ask a question, you will need to press star 1 on your telephone keypad and wait for your name to be announced. I must advise you the conference is being recorded today, Wednesday the 20th of May 2020. I would now like to hand the conference over to your speaker today, Robert McLeod. Thank you and please go ahead, sir.

Thank you very much. Good morning and good afternoon, everyone. First of all, apologies for the delay in starting the call, which was due to some technical difficulties. So first, to kick off the call, I would like to express gratitude towards our shore staff and our crew members for their extraordinary efforts and dedication. They are clearly critical factors to our strong results. Frontline's performance in the first quarter of 2020 was the strongest since 2008, and we have made solid bookings for the second quarter. The year has been extraordinary, quite a rollercoaster ride, but tanker earnings have been very strong amidst an unprecedented world situation. Let's kick off by moving to slide three, please, and quickly look at the highlights from Q1. Net income of £165.3 million, or 84 cents per share, certainly a solid quarter. Adjusted for non-cash items, the net income was significant. $179.3 million. The $7.1 million profits related to the five profits as service maxes are not included in these figures. Frontline declares a $0.70 dividend. The last dividend paid was $0.40 for Q4 of 2019. The VLCC has made around $75,000 in Q1, and we have booked 75% at $92.5 for Q2. SousMax has made 57.8 in Q1, and we have booked just over 60% of Q2, just shy of 72,000. LR2's made just over 30 in Q1, and are just over 50% done of Q2 at around 50,000. On the finance side, we closed the 544 million ICBC facility for the 10 SUS Maxes. Then before discussing the tanker markets, I would like to hand the call over to Inga. Please take us through the financials.

Thanks, Robert, and good morning, and good afternoon, ladies and gentlemen. Let's then turn to slide four, and then we can look at the income statements. We achieved total operating revenues, net of voyage expenses of $289 million, and EBITDA adjusted for certain non-cash items of $234 million in the first quarter. Frontrun reports a net income of $165.3 million, equivalent to $0.84 per share. and a net income adjusted for certain non-cash items of 179.3 million, equivalent to 91 cents per share in the first quarter. The net income in the first quarter excludes the 7.1 million of net cash received and accrued profit share in relation to the five chartered in and chartered out agreements with Trafigura that have been treated as a reduction of the acquisition cost of the vessels instead. The non-cash items this quarter was net $14 million in total and consisted of $5.4 million unrealized loss on marketable securities, a $15.8 million loss on derivatives, a $1.2 million gain related to our equity method investments, a $1.8 million gain on settlement of claim, and a $4.2 million gain on termination of the lease from Takata. The first quarter shows an increase compared to the fourth quarter of 2019 of 70 million against adjusted EBITDA and an increase of 72 million against adjusted net income. And the increase in net income in the first quarter of 72 million is mainly explained by the increase in results on time-chartered basis due to the higher reported TCE rates in the first quarter compared to the previous quarter. Then let us take a look at the balance sheet on slide five. Changes to the balance sheet as of the end of March 2020 compared to December 31, 2019 mainly relate to an increase in cash and cash equivalents of $54 million, which is the net effect of capex payments, repayment of debts, drawdown of debts, cash flow from operation, and dividend payments. Then we had an increase in new building of $21 million, explained by installments paid in the quarter. We had an increase in vessels of $278 million, related to the five vessels on TC Auto Strategura, which were recorded on the balance sheet when closing of the acquisition took place on March 16 this year. Also, we had an increase in short and long-term debt of $484 million due to drawdown on the $544 million facility with ICBCL offset by repayment this quarter. We had a decrease in short and long-term debt, sorry, short and long-term obligations under finance leases of $298 million, primarily due to the five Safigura vessels moved to owned vessels at closing. and then we had an increase in equity of $94 million, mainly due to the net income for the quarter, offset by cash dividend. As of March 31st, 2020, Frontline has $392 million in cash and cash equivalents, including the undrawn amounts under our unsecured loan facility and marketable securities and minimum cash requirements. Our remaining new billing capex requirements at the end of March amounted to $282 million and related to one suspect banker, which we took delivery of on May 19th, and one VLCC expected to be delivered in June 2020. And then four LR2 tankers expected to be delivered in January, March, and October 2021, and January 2022 respectively. We estimate approximately 239 million in depth capacity for these new buildings, where we drew down 42 million under the term loan facility with Credit Suisse. entered into in November 2019, in May, to finance the delivery of SUSEMAC thank you from Cluser. The short-term part of long-term debt includes approximately 310 million debt faturity of the 500 million facility, which faturates in December 2020, and approximately 40 million debt maturity of the 60.6 million facility, which matured in March 2021. We are in the process of refinancing the 500 million facility, and we have signed a terminal facility with Nordea in May this year in an amount of 50 million dollars to refinance the 40 million maturing in March 2021. In March 2020, as Robert mentioned, we did sign the sale and lease-back agreement, with ICBCL of $544 million. And then in April 2020, we repaid $60 million of our $275 million Senior and Secured Facility Agreement with an affiliate of Heman. And up to $250 million remains now available under the facility following these three payments. In May, finally, we signed a new secure terminal facility with Kredi Agricole in an amount of up to $62.5 million to part-finance the VLTC that we have at the construction at Hyundai. Let's then take a closer look at cash break-even rates and objects on slide 6. We estimate average cash cost per gain rate for 2020 of approximately $22,000 per day for VLCs, $18,600 per day for sewage tankers, and $15,000 per day for the LR2 tankers. And the fleet average is estimated to be about $18,600 per day. These rates are the all-in daily rates that our vessels must earn to cover the budgeted operating costs and dry dock, the estimated interest expenses, time shorter and bearable tire, installments on loans, and G&A expenses. In the graph on the right hand side of this slide, we have shown incremental cash flow after debt service per year and per share, assuming $10,000 per day, $20,000, $30,000, or $40,000 per day in achieved rates and excess of a cash break even rate, irrespectively. These numbers include the vessels on time charter out, and we are looking at a period of 365 days from April 1, 2020. As an example, with a fleet average cash cost break-even rate of $18,600 per day, and assuming $30,000 on top, the average fleet TCE rate would be $48,600 per day. And Frontline would, in this scenario, generate a cash flow per share after debt service of $3.55. With this, I leave the word to Robert again.

Perfect. Thank you very much, Inga. Let's move to slide seven, please. The first quarter was certainly a volatile one. As the COVID-19 pandemic swept across the globe, Traditional drivers like ton miles and refinery runs were disregarded as a new powerful dynamic emerged. As crude oil imports to China began to decrease, the market turned sharply upwards as expected production cuts did not materialize and instead Saudi Arabia, Russia, and the UAE increased output. In the freight market, we witnessed the busiest chartering period I've seen in my career as charters were scrambling for tonnage. With a rapid decline in global oil consumption due to lockdown across the globe, oil production was soon well in excess of demand. Under normal circumstances, a drop in demand might lead to lower freight rates. This time, it led to a search for places to store. On ships was one solution. These were not normal circumstances, and the speed and the severity of the drop had an opposite impact on tanker rates. as a record increase on oil and water saw freight rates firm significantly. In the chart on the slide, we see how demand has retracted faster than production cuts, implying inventories being built at an unprecedented rate, both on land and water. These moves in the global oil trade have happened very quickly. Trade developments going forward is linked to how fast demand recovers and to what degree and how quickly production returns. This is obviously very hard to predict. I'll get back to this on the final slide, but let's first look at the global fleet capacity. Turn to slide eight, please. The global fleet capacity growth is slowing. Global tank fleet growth is a key driver of long-term earnings, and the order book is at a level not seen since 1997. Various factors support our expectation that order books will remain low over the next 24 months. In addition to the historically low order book, it is worth noting that 24% of the LCC fleet is above 15 years this year. Customers versus modern tonnage is only increasing, and that puts Frontline's fleet in a great position. We also expect vessel off-hire to continue to have a material impact on fleet capacities this year, as a large number of vessels are due for periodic dry dock, and quite a few of the vessels due have recently been granted short extensions, but this is temporary postponement only. The surveys must be carried out. All IS are currently on inventory draws. But vessel supply could be a big surprise in the second half of 2020 and into 2021. We watch it very closely. Moving on to the present market and a bit of outlook. Oil demand has been described as destroyed in recent months. We think suppressed describes the situation more accurately, as we believe the decrease in oil demand is temporary. The recent production cuts have been both immediately real, absolutely no doubt, and has affected the freight levels negatively. On the oil demand, there has been surprises in recent weeks. Chinese gasoline demand above 2019 figures and recent figures from India also shows a sharp recovery in gasoline sales. Not surprisingly, Asia leads the way on demand recovery, whilst the US is likely to recover faster than Europe. Over to floating storage, we currently estimate around 200 million barrels floating, and we might be close to the peak. We expect to see an unwind of floating storage during the balance of 2020. Afromats in Europe are likely to be the first ones to unload. Some have already done so, whilst VOCs are likely to be locked up on a longer structure. It is pure speculation, of course, but given recent news on the demand side, we could see production cuts reverse as early as during the second half of 2020. One fact can be stated, volatility will continue forward, going forward, sorry, very much like the year so far. So, in conclusion, Frontline enjoys the youngest fleet and lowest break-even level in the history of the company. And 2020 is shaping up to be a great year for Frontline and its shareholders. With that, operator, I would like to turn over to questions, please.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. What is star and 1 to ask a question and the hash key to cancel? Thank you. Your first question comes from the line of John Chappell. of Evercall. Please ask your question.

Thank you. Good morning, Rob, or good afternoon, and good afternoon, Inder. Three questions for you today. Hopefully, they'll all be relatively quick. Rob, you guys do a great job explaining the accounting on the quarter to date and kind of how that plays out. So the 75% that you've done it over 90,000 a day, can you just kind of help us frame what we should be thinking about in the next 25%? I mean, obviously, the market's come down but there's always these ballast days. And if you look at one queue and we took what you had to date and then we back into the 74.8, it looks like that was actually negative for the last 17% of the day. So I'm not asking for guidance or, you know, the exact number, but is it closer to what the GQ is today? Is it closer to zero? Is it somewhere in between? Just so we can frame how the second quarter will kind of shake out.

Yeah, obviously it's difficult to predict here, but... It will be some better states at the end of the quarter which will take it down. It will also be taken down a bit by that the current rates are weaker than what we so far for the 75% has contracted. So to give you a precise number or anything, that's difficult or very impossible in a way. So sorry about that.

That's okay. Maybe another way to ask is the ballast days that you foresee for the rest of 2Q, would it be similar to a normal end of quarter? Are there more or less? It does vary.

The number of ballast days do vary between the quarters, but... For this quarter, it was quite high, actually. It was 390 ballast days for the wild disease, as an example. And that was up from the previous quarter.

Okay. That's helpful. Rob, on the sleep side, obviously something that we're watching very closely and have been very hopeful to set up the next real sustainable recovery, not just the blips. I heard earlier this week that the Korean yards are becoming a bit desperate. Now, we were hopeful that they would be filled up with LNG carriers from Qatar, but we're hearing they're becoming a bit more desperate out of the OTC front. Can you confirm or deny whether you've been hearing from the yards? And then also, you know, frontline and your larger shareholders specifically have been, you know, kind of early. on ordering at attractive prices. So what's your appetite to order ships today if the Koreans are really becoming aggressive on pricing?

Now, the yachts have over time here been, I wouldn't say desperate, but the price have come down and we've seen there's virtually been no ordering here lately. When it comes to frontline and our interest, we have a constructive view of the tank market in 20 and 21. So our interest in the third round of 2022, when there are resales available and other opportunities, then I think that will take the main focus. And ordering new buildings here is not on our radar.

Okay, thanks. And then just the last one. I don't think anybody is worried about Frontline's ability to get credit facilities, given their relationship with European banks. The $310 million is a pretty big chunk at a time where the world is pretty uncertain right now and banks are under pressure. What should we think about as far as the timing of that refinancing ahead of December 2020? How deep are the discussions? And, you know, that the $100 million ATM that you put in the press release, obviously you said you wouldn't do it at today's prices, but is that something you're thinking about putting in place just in case the financing market becomes very difficult in this uncertain time?

I think it's very easy to, in terms of the backing of the company and Mr. Fredrickson and the access to finance, we have absolutely full confidence and the ATM is not linked to this in no shape or form. The ATM is sort of a housekeeping, it's a tool that we had in the past and it's, as we clearly state, it's not something we would even think about using at the current share price.

No, but to answer your question also, I mean, as I referred to, we did recently do a couple of financings in the market. We did the refinancing of this Nordea facility. So we don't really have any concern about not being able to refinance the 500 million facility either. So it's only a matter of trying to resale. maximize or improve the terms as best as possible in a way. But the financing is there, so no problem.

Great. Thank you, Inger. Thanks a lot.

Thank you. And your next question comes from the line of Randy Givens of Jefferies. Please ask your question.

Howdy, Robert and Inger. How are you?

Fine. What about you?

Oh, doing well, doing well. Yeah, a few quick questions here. So for the fourth quarter, you announced a dividend of $0.40 based on the $0.60 EPS, so about 66% of that. First quarter, announced a dividend of $0.70 on EPS of what's called $0.91, around 75% there. Do you have a defined kind of dividend policy going forward? Just trying to think about 2Q and beyond.

Our dividend policy has not changed in a way. We do have a statement on our website which says that we are in a way there to pay broadly the excess cash flow or equal to or close to. And we also, or the board also of course also have the possibility to decide uh to lower it in a way and and what we have to take into account is of course the capex program that we have going on at the at any point in time and any other adjustments which needs to be taken into consideration non-cash items so so i guess that's more or less how it is okay and so for 2q20 should we expect

Similar, at least 50, 60% of kind of EPS there.

Sorry, didn't really get the question there.

For the second quarter, is it fair to expect another 50 or higher, you know, 60% of EPS?

I think for the second quarter, Randy, we'll see what the board comes up to and decides in August. Looking at the history of the company, we're now well above $6 billion paid out since the U.S. listing. And I think the company and the board has no intention to change this history and track record. We want to keep building on it. And looking at the company and looking at where we are in our cash break evens, looking at how we've done on the time challenge recently, and also with our constructive view of the market and with a fleet of an average age just over four years, I think we've got every possibility here to perform well going forward. And looking at track record, I think it's the best way to answer your question.

Okay. And then... Looking at your Afromax LR2s, you know, for most of the first quarter, Afromax crude tanker rates outperformed LR2s. But in April, you know, the crude rates kind of fell off, but LR2s hit all-time highs. So currently, kind of how many of your LR2 products tankers are operating in the crude or dirty trade? And if you can kind of talk to that market a little bit, what has caused that rate spike and then the subsequent kind of rate decline back to maybe 40,000 a day.

Yeah, that's a very good and relevant question. And what you're stating was actually also the case of the second half of 2019. The Afromaxis were outperforming the LR2s, and there were definitely times where I was kicking myself for not having gone dirty on more LR2s. Between the two segments, obviously we have 18 LR2s in total. We're trading 11 clean and 7 dirty, which fortunately now in recent months, the LR2s have sort of clawed back in terms of the earnings, not having looked at the exact numbers, but they're probably going to be not far off being on par with what's happened recently. The LR2 market, I find it very difficult to even comment on how it's been going over the last couple of months. I've never seen anything like it. I would describe the LR2 spike to be more extreme in relative terms than what the VLCC spike was. There's a lot of delays in that segment. In terms of the number of LR2s, the fleet size is only 23%, 24% of the VLCC in terms of numbers. So as soon as you have a lot of ships delayed or held up on storage or poor storage, then you get these delays. these mega spikes. So I think the very, very high rates, as we had on the VLCCs as well, only happen on a handful of fixtures. But over the last month or two, it's been extraordinary. So it's now stabilizing, but still it is at very healthy levels. But it's very, very difficult to predict how this is going to carry on. But it looks like, although there are signs of As I was saying earlier, the demand is coming back, especially in Asia. Then Europe and the U.S. will still be struggling. So you will have ships being forced to store for quite some time.

Sure. And what's your split there for your LR2s in terms of crude versus clean?

11 LR2, 7 Afro.

11 LR2, 7 Afro. Excellent. And then last quick question for the Hemman facility. It looks like you paid down half of that from $120 down to maybe $60 million. Is the plan to repay the remainder during the second quarter?

Yeah, so that's been – we're going from $120 to $60. Further down payments have not been decided, but we will revert on that when that comes up.

Thank you, sir. Does that answer your question?

Yep, that's it for me. Thank you so much.

Thank you. And your next question comes from the line of Craig Lewis of BTIG. Please ask your question.

Yes, thank you, and good morning, good afternoon, everybody. You know, Rob, you mentioned... you know, some of the vessels at shipyards that are under construction. You know, clearly some of those are obviously owned by stronger hands. Some of those are owned in weaker hands. You know, it's been an interesting figure adjective to describe the first thus far of 2020. What is kind of the appetite then from potential sellers of tonnage you know, how has that changed or has that changed over the last few weeks as kind of, it looks like now we'll kind of settle into, you know, you know, just a firm solid market, you know, with these around $50,000 a day, you know, we're not seeing those headline $200,000 rates, but still an attractive market. Has that kind of loosened up or caused any more interest or pickup in, you know, maybe not actual physical deals closing, but activity or inquiries, interest in the S&P market?

I mean, you're touching on something very interesting, Greg. I've not seen anything like this. When it comes to S&P, what's happened so far this year has actually amazed me. And the simple example is that normally when the freight market goes to levels where you can write down purchase with more than $10 million or even 15 or 20 in a short span of time. There were periods here where one-year charters would write down a vessel by more than $20 million. Even at that point, we didn't see many transactions. There were ships offered for sale. We did have a look at a few. But it's been a very, very strange market with very few transactions happening. And with the rate correction, which also corrects the write-down potential in the front, then we're now at a very healthy level still, as you described, but we are seeing very little activity. And I'm also of the opinion that even if the yard prices will fall, then the number of deals will be low there as well. Because we mustn't forget that access to finance, as we discussed in the earlier question, and I think frontline access is superior, and it's never a sort of problem or challenge for us. But as an industry, this is more difficult, and this affects it. So, and also, as you're saying, quite a few strong hands sitting and probably happy to sit if they share the same constructive view as we do.

Okay, great. And then just one more for me. You kind of, and I believe it was in the prepared remarks, it might have been the Jonathan's one of his questions, but you talked about vessels going a little bit slower, and that's part of the reason why you decided to delay, you know, some of these scrubber installations. You know, just kind of curious how we should be thinking about that. I mean, clearly, fuel prices are low, so it's not higher fuel prices that are driving slow steaming. I mean, rates are firm, so just kind of, just any kind of color you could give us around why we are seeing slow steaming and maybe what's driving that.

I think slow steaming, congestion, and general delays, it's all, if you look at this, and then some is contango driven, some is driven by lack of space onshore. And all these factors, they build together and they create this oil and water stack, which is up almost 20% this year in terms of how much oil is on the world market. tanker fleet. So going into each individual, I think it's very difficult to sort of see how they affect the overall market. But this oil and water which gathers all the factors I find quite useful. When it comes to the scrubber, then in actual fact, all we've done is that we've decided to leave the scrubber at our factory. only prepare during dry dock, only prepare the ship underwater. So a small investment of less than $100,000. And then when or if the fuel spread then returns, then we can go alongside and put the scrubber on and then start using it. So this spread is obviously very much correlated to the crude flat price. And when it comes up, then the spread will also increase. So time will show, but we thought it was prudent given where rates were when we decided, because this also means that the dry dock time decreases by two weeks. So we thought it was the right decision. We can reverse it, but it looks to be the right, because as you're saying, we're still at pretty good levels here in terms of earnings.

Okay, great. And just really quick following up on that. Do we have any sense and realize it's a moving target? I'm not sure how you have frontline tracks on the average speed of its fleet, but I don't know if we look at it on a month-over-month, week, daily. Is there any sense for how this average speed of the fleet has been trending over however you think about it?

Now, generally, the fleet speed has come down since we started with the EcoSpeed. So that's the speed at which the speed flexibility of the fleet has come down due to the more economic engines with less power. The laden speed, i.e. the speed that we are contracted to perform voyages at, has not changed much. It's the ballast speed that is changing. Generally, it's very simple. It's market slow. You slow down to save some fuel. When it's high, like it's been recently, then you rev up the engine to get to load ports as fast as you can. But in actual fact, over a year, it doesn't make that big a difference. It's a knot or two, but then you look at how many in ballast, and then you look at how many days the ship is laden or in port. So it's an important factor, but it's not a huge factor.

Okay, great. Hey, thanks, Inger. Thanks, Rob, for the time.

Thank you. And your next question comes from the line of Omar Nocta of Clarkson's. Please ask your question.

Thank you. Hi, Robert and Inger. You know, Robert, towards the end of your opening remarks, you mentioned floating storage and how some of the Afromaxes have come off that storage, but BLTCs will likely stay a bit longer. You know, from a market color perspective, presumably some of the BLTC charters you entered into had options for floating storage. Can you give a sense? of, you know, the ships that you have on charter, whether they're in floating storage at the moment, or if the charters have exercised the options to do so?

So, it's a good question. Thanks, Omar. And then, firstly, the Afromaxes we've seen, we've seen about 35 million barrels at the peak in Europe. Some of that's been unwound, unwinded. And on the VOCCs, Then we've done charts, I think we've done five or six, between six months and 12 months, and these are time charters. So it's not a – the charters are free to trade the ships as they wish. They're not pure storage charters. So at the moment, we actually – I think we've got one tour that has gone on storage, and we've got one that's about to start storing. But that's it. And then we've got quite a few ships that are more the sort of forced storage where there's lack of knowledge and so forth. But we'll see how it develops here. But what we are hearing is that some Afraxas come free, but on the VLCs, then there are some cargoes here that are likely to store through Q2 and Q3. And remember that, obviously, the traders are, in terms of risk, flat price risk is not something they normally take. What's been happening here is that some cargos have been sold at such heavy discounts, and the contango has been so strong that I would guess that some of them have hedged out the front of the curve, said, next two, three months. And there might be people believing in demand really coming back and the Brent recovering here. So you could see people waiting for this curve to strengthen forward. Because some of the timings on crude purchases were historic in recent weeks.

That's interesting. So it's a good point. So you're talking about the discounts from the Saudis and whatnots. And so it's not just simply looking at the front end of the curve and the back end or the six months. There's also the $5 or $10 discounts up front as well.

Yes, exactly. And that was where you could really realize how tight the freight market was. So there were distressed cargos, and then suddenly someone got a ship that could make the dates in West Africa within the next five days or so, and then discounts of, say, $5 to $10 a barrel were offered. And then you put the recent jump in the flat price into it, then you can see that there are people that have oil floating here, which is deep, deep in the money. And there might be some of them that are willing to take the risk to move even deeper.

Yeah. Okay. And then just how does it work, for instance, if for some reason the contango really does switch and they want to go shorter? Sure. If they want to unwind the floating storage, is there any impact at all on the charter that you have with them?

No, they would still have an obligation to keep the vessel on hire and pay us higher until the earliest delivery date. So what you'd see in that sort of circumstance is that they would then try to trade the ship in the spot market. But many of the guys that have put ships on storage are very familiar with the spot market, having ships themselves. So they would then go from being on storage to being normal spot players. As I mentioned earlier in the presentation, then we thought the peak at, take us back a month, we thought the peak in storage of oil on ships was going to be at a much higher level. What we're hearing now is that we might be close to it at 200 million barrels floating. So the The negative of that is that we are not enjoying the prolonged freight spike that we expected. We expected the crude price to be low and the contagion to be strong for longer than what it was. But on the flip side of that, it means that the crude inventory draw, which everybody's been talking about for the last month or two, being the sort of big animal that would sort of destroy the whole market, that volume will then be less. So... So there's a flip side to the recent drop. And then by that being less, then that means that our return to a more sort of normal freight market will be shorter.

Yeah, thank you. Thanks for that color, Robert. You know, one other question I have is just on the – you referenced earlier the LR2s. You know, 11 are trading clean, 7 are dirty. How do you think about the mix going forward? There was a lot of pressure last year to switch to dirty, and then there was a lot of talk about potentially dirtied LR2s coming back to clean. How do you think about those shifts from here as we think about the next six months, for instance?

It depends on how the market develops here. But generally what we'll do on the dirty ships, then when we have opportunities to clean up in a cheap way, that will be by doing condensate cargos and so forth, then we're likely to take those opportunities. So I don't think there's going to be much change. The 11-7 split we've done for quite some time. And if I was to guess, then I think it's more likely that we'll go clean on one than we'll go dirty on one. But it's all down to how the market develops. And the developments in the market so far this year, it's been a true rollercoaster ride. And there's some mechanics here that are truly remarkable. And this 35 million barrels floating in the North Sea or the continent on AFBUS ships, and then that being unwind. So we just have to pay very close attention, and then we don't have any problems with taking quick decisions on the charging strategy.

Got it. All right, very good. Thanks, Robert, for that. Appreciate it. Thanks.

Thank you. And your next question comes from the line of George Barman of CL Securities. Please ask your question.

good afternoon thanks for taking my call and congratulations to a great quarter um i've got a couple quick questions on your joint ventures you have one with uh clean marine and then recently in january you did one uh in concert with golden ocean and traffic gora on uh i guess uh fuel supplies uh it looks like each one of those uh added about six hundred thousand dollars as your share of the gains What are your plans for these two investments for the company? Are any of them looking to go public, or what kind of profits do you get out of those?

Thanks for the question. So take the first one on the Clean Marine. We own about one-sixth of the company. It's a scrubber manufacturer. And scrubbers are not being sold at the moment, and that's why we've put our own at the factory and not taking them on the ship. So that all depends on the fuel spread. So the company is looking into alternatives, and we have a brand-new factory that can produce many variable things. So that's being looked at. It's a very small investment for Frontline, and we are a passive shareholder. So no sort of immediate plans there. The JV with Trafagura is a fuel JV, which has started off very successfully. It's securing fuel at the right price and the right quality and the right timing to our ships and also ships in the US. in the industry. So it's been tremendous growth in that company. And I would say that the best sort of IMO 2020 decision we made was certainly joining forces with Trafigura and Golden Ocean to form that company. So we have high hopes for that. And it could be exciting times ahead for that company. But I think what's important for the company and And our system, we keep focusing on delivering, and then as growth comes on, we can put further plans. But there's nothing in the pipeline on either of these two investments.

Okay. Then referring to your current valuation in the stock market, it looks like a lot of the cool transportation companies, shipping companies, tanker companies are sort of afforded a extremely low valuation rather than acquiring new buildings or existing ships in the market. Do you see any opportunities maybe for a combination with other companies that are even less attractively valued than yours?

I know you may... I look for the opportunity and I think if there's any company that can consolidate its front line. We'll see what opportunities come up. But for us, the most important thing is to keep working hard with our modern fleet. We have the big size, and you can see from the Q1 results that we return pretty happy returns to our shareholders here. I think that's going to maintain our focus. And Q2, we made solid bookings. So I think we're in a very good standing. But generally, I agree with you. If you look at the time killer companies in general, they're not being valued as linked to the earnings, it seems.

Yeah, it seems like we need to figure out a way to transport oil via the cloud.

Exactly, right.

Okay, thanks very much and look forward to your future.

Thank you. Thank you. Once again, ladies and gentlemen, if you do wish to ask a question, please press star and one on your telephone keypad. If you wish to cancel the request, please press the hash key. And your next question comes from the line of John Reardon. He's a private investor. Please ask your question.

Good afternoon, Robert and Inger. I was wondering, the recent uptick in demand from China and now India, did that surprise you? Do you think that maybe they were playing catch-up on lower inventories, or do you think that their current appetite is something that's going to happen going forward?

John, thanks for that. It's a very, very good question. It's extremely relevant. Unfortunately, I don't have the answer to it, but I'll make a guess. My guess is that the demand destruction as described was not as deep as the analysts were projecting. and I think the return is coming quick. So it could be, obviously, the data here is, the U.S. data is normally more accurate, but there's a trend, and we're getting it in from various places, and And it looks like Asia is coming back quickly. And the Chinese here on gasoline is encouraging. So it could mean that the fall in demand was not as low and the pickup is indeed a V. But let's see. The oil market has certainly been difficult to predict here lately.

Okay. And in closing, Inger, I detected in your comments that you have a sore throat. And may I suggest a little hot tea with lemon? I think that will help you recover. We need a healthy ink route here.

Thank you very much.

Thank you. There are no further questions at this time. Please continue.

Thank you very much. With that last comment, I think it's a great way to round off. And also to apologize again for the delay in starting. And you might also notice that the quality of the sound on the call here was not as it usually is. So we'll make sure that doesn't happen next time. Thank you, everyone, for calling in. All the very best.

Thank you, ladies and gentlemen. That does conclude the conference for today. Thank you for participating you may now disconnect.