Frontline plc.

Good morning and good afternoon to anyone or everyone dialing in. Welcome to Frontline's fourth quarter earnings call. We continued our stride through what ended up being a somewhat less exciting market than expected. Towards the end of the third quarter, we actually started to see a recovery in demand for freight as exports volumes grew, which was continued into the fourth quarter. But regretfully, it was not enough to move the needle in the vessel supply and demand equation to make a significant change in rates in absolute terms. So I think we'll just move straight on to the highlights on slide three. In the fourth quarter, Frontline achieved $6,500 per day on our VLCC fleet. $1,200 per day on our SUSEMAX fleet, and $13,900 per day on our LR2-Apramax fleet. So far, in the first quarter of 2022, we have booked 58% of our VLCC days at $21,300 per day, 65% of our SUSEMAX days at $19,600 per day, and 56% of our LR2 slash APRAmax days at $18,800 per day. All numbers in this table are on a low to discharge basis. And I was thinking, in order to make it clear to all listeners how we achieve these numbers when the benchmark indices are reported to show negative numbers, I'd like us to quickly move to slide four. So we've said time over again that Frontline has a large, diverse fleet of modern tankers. And it was kind of made clear to us today in a call this morning that we should elaborate further on this. The thing is, with these indices that are supposed to represent the market performance, these are based on a methodology that is somewhat old-fashioned, because a modern tanker will trade very differently from an older tanker. And the economics of a modern tanker, and if you add the scrubber, is extremely different now with the record-wide spread we have between high-sulfur fuel oil and low-sulfur fuel oil. So the fleet of frontline, the average age is five years. 79% of the fleet are ecovessels, and 54% of the fleet have scrubbers installed. If you look at the diagrams on the right-hand side of this slide, what we've done here is basically to take some benchmark indices that are classified for non-ecovessels, non-eco with scrubbers, ecovessels, pure eco, no scrubber, These are normally the vessels built after 2015, and an eco with scrubber. Based on the average in Q421, you can see on the VOC side that the non-eco, non-scrubber, non-nothing will achieve $5,400,000 per day, according to the index. But an eco with scrubber will achieve a premium of $12,500,000 per day, which is basically created by lower fuel cost. And it goes on on the SUSE, MAXIS, and LR2s. And it's this you need to keep in mind when you look at Frontline as a share. We both have a very modern fleet, and we have very low cash break-even levels. So with that, I'll give the word to RCFO, Inger Klepp.

Thank you, Lars, and good morning and good afternoon, ladies and gentlemen. Then I think we should start or turn to slide five and look at the income statement. Dunbaran achieved total operating revenues, net of wage expenses of $101 million in the fourth quarter and had an adjusted EBITDA of $51 million. We report net income of about $20 million, or $0.10 per share. And adjusted net loss is about $5 million, or $0.02 per share. The adjustments that we have made in this quarter are different items. We have a $5.3 million gain on derivatives. We have a $0.5 million loss on marketable securities, a $5.1 million gain on sale of vessels, the recognition of the distribution from D&K of 13.4 million after tax, and also 1.3 million amortization of acquired time charters. So adjusted net loss then in the fourth quarter decreased by 31.1 million compared with the third quarter. And the decrease was driven by an increase in our time charter equivalent earnings due to the higher TC rates, and also by a reduction in ship operating expenses. This was partly offset by an increase in interest expense and depreciation due to delivery of three vessels in the fourth quarter. Let's then take a look at the balance sheet on slide six. The total balance sheet numbers have increased with about $130 million in the fourth quarter. The balance sheet movements in the quarter are primarily related to the ticking delivery of the LR2 tanker front feature and the VSC front driva and front tausta, in addition to ordinary depth repayments and depreciation. As of December 31st, Frontline has 181 million in cash and cash equivalents, including undrawn amounts under our senior unsecured loan facility. marketable securities and minimum cash requirements. Frontrun's remaining capex, new billing capex of $437.4 million as per December 31st is fully funded by the $390 million in committed debt and also by part of the net cash proceeds of $68.6 million through sale of four LQ tankers. The company has no debt maturities until 2023. Then, please Move to slide seven, cash breakeven and cash generation potential. We estimate average cash cost breakeven rates for 2022 of approximately $22,700 per day for the VCCs, $18,900 per day for the SUSEVAX tankers, and $16,000 per day for the LR2 tankers. The fleet average estimate is about $19,300 per day, and includes dry dock of 16 vessels in 2022, with an impact of $740 per day. The distribution of the 16 vessels is 5 ECCs, 5 Swiss-backed tankers, and 6 ERA-2 tankers. These rates are the all-in daily rates our vessel must earn to cover budgeted operating costs and dry dock, estimated interest expense, TC and bare-bottom tire installments on loans, and G&A expenses. We recorded OPEC expenses in the fourth quarter of $7,600 per day for VLCs, $6,900 per day for SUSEPACs, and $6,100 per day for LR2. And we dry docked one VLC and one SUSEPAC tanker in the fourth quarter. Then, the graph on the right-hand side of the slide shows the free cash flow per share after debt surveys and free cash flow yield basis current fleet and share price of February 16 at alternative TCE base. If we think about the slide that Lars went through on slide four, I think it was, with respect to how our fleet, based on ECO and scrubber adjustments, show a very premium TCE rates, that is also used in this slide. So based on historic Clarkson TCE rates for non-EKO vessels in the period 2000 to 2021, adjusted then for premiums on scrubbers and EKO vessels, Frontline has a free cash flow per share of $2.44 and a free cash flow yield of 32%. The free cash flow yield potential increases, of course, with higher assumed TCE rates and also on a fully delivered basis. With this, I leave the floor to Lars again.

Thank you, Inger. Let's move to slide eight and do a recap on the Q4-21 tank market. As you see the headline there, and we'll start there, oil in transit is approaching the heights of 2018 and 2019. If you look at the graph in bottom, and in particular the dark blue line where you have a red circle, you'll basically see the dots of volume of oil in transit gradually increasing throughout the fourth quarter. Just a small note, if you look at the yellow line on the left-hand side of the chart, that's actually January and preliminary numbers for February, where we are now. Global oil demand was estimated to have averaged 99.7 million barrels per day in Q4. And that's an increase of 1.5 million barrels per day compared to the third quarter. But we continue to draw on inventories, and this to the tune of 1.4 million barrels per day during the fourth quarter, as demand continues to outpace supply. And I'd like to make a comment there, because if we rewind 12 months when I was sitting here having this call, I was being very optimistic, and primarily due to the fact that we were expected to stop drawing on inventories in August, which basically boded for an interesting second half of the year. Well, that hasn't happened, and we've continued to draw way beyond anybody's expectation. Projected demand growth for 2022 will predominantly be non-OECD, if one believes EIA's numbers, and we're going to reach very close to 103 million barrels per day by the end of the year. The current oil price signals tightness in the market. There are production issues, or have been, in Libya, Nigeria, Angola, and overall, the OPEC Plus is over-compliant. This means that when they have kind of pre-decided production levels, they're actually not able to reach them. So basically, the unwinding of the OPEC plus cuts is going much slower than expected. But nevertheless, oil in transit has continuously risen since October 21, and it's now up 20% from lows. And this could be pretty directly equated to tank demand. So basically, tanker utilization is improving. Despite increased activity and these growing volumes, we have yet to reach the turning point for it. So let's move to slide 9 and look at the tank order books. And this is an obvious one. As vessels are delivering and no orders are being placed, the order book is shrinking. And we also have this very unusual situation where 6% of the global VOC fleet is now above 20 years. 2022 is indeed a large delivery year, but by the end of 2022, there will be more than 80 VOCs due for recycling in the same period. And we have a big question mark on net fleet growth in the end. as this plays out. Sue's max, same picture, the 12% of the fleet, or 72 vessels, are either above or passing 20 years in 2022. The LR2 order book is more populated, but again there, 15% of the fleet will pass 15 years. The thing with LR2s is that they're obviously used for lifetime. It's far more than 15 years. But in the clean trade, charters do not prefer a vessel that's older than 15 years to carry a clean cargo, basically due to the fear of contamination. So it means that an LR2 above 15 years will normally move or change to become an Afromax. The VLCCs through SMACS and LR2 order books stand at 8%, 7%, and 13% respectively. And more importantly, meaningful capacity for new tanker orders is now moved out to 2025. Let's move to slide 10 and dig a little bit further into the current fleet composition. And here I've been looking at the tankers that We are exposed to the asset classes that we hold. And as you all know, by 2023, IMO will impose new measures. We like to refer to them as tickets to trade. We're going to get refrigerator ratings on all vessels in the world. And for those of you who've looked at those, it's A, B, C, D, E, which is basically the range. And you need to be C or better in order to get the ticket to trade. The front end's own fleet overall weighted carbon intensity rating is A, based on the 2021 data. But if you look at the chart to the left, you'll see how many ships in the tanker fleet that firstly the ones that are over 20 years are challenged in the first place, 6% of the fleet. If you have the ones that will be efficiency challenged, basically we're facing an EEXI rating, which is below C, you can add another 17%. If you look at the non-ecos that do struggle to trade economically in the current oil price environment, you're getting up to another 29%. CII is mentioned a few times on this chart. And CII is a measure for a vessel's carbon intensity and its average emission per volume transported. A vessel's carbon intensity is important to charters who are going to charter the vessel if they have carbon footprint policies or when they have. This is also a relevant measure when we talk about carbon tax and the potential of shipping entering the European ETS training program. So basically, I think we all can agree that the global fleet of DLCC, SUSEMex and LR2s is somewhat challenged over the next few years. The most efficient measure you can apply in order to reduce your CII, as in carbon intensity, is speed. So basically speeding down will reduce your carbon footprint. But to deal with EXI, you would actually need to do physical work on your vessel. you will basically need to cap its ability to produce power, which ends up reducing speed as well. And it's important to note that at the front line fleet, we don't foresee any challenges with regards to maintaining the IMO projectory until at least 2025. So next. Let's move to slide 11. And thank you, recycling. This is basically a bit that's been missing in our market for a while. But with record high recycling steel prices, activity is finally looking to accelerate. The last two big recycling years were 2017 and 2018. Now, in 2021, we actually have seen 2.3% of the overall tanker fleet above 10,000 dead weight, which is basically a measure for the carrying capacity of the tanker fleet, being reduced by 2.3%. And we believe this trend will have to continue. The aging fleet is severely challenged in the compliant spot markets, and alternative use or opportunities for older tankers And this is typically for storage or conversion. It's virtually nonexisting. If you look at the bottom graph there, recycling steel prices, I, in fact, tried to find longer history to see if we've ever been at these levels. And I simply couldn't find it, at least in the history I could access. So we believe this combination of the regulatory challenges which I described on the previous slide. The very challenging market for non-eco vessels and the recycled steel price should produce a positive outcome for a tanker element. Let's move to slide 12 and look at frontline and how we are addressing the ESG. As I think I mentioned a few quarters back, Frontline started its project, which we call the decarbonization journey towards IMO 2013-2050. We started that in 2019 already. And the first thing we did, which we refer to as the veracity platform, was basically to find out where are we now. And this includes digitalization. This includes making us able to record live from every vessel we control and feed that into a database where we can analyze not only carbon, but also the speed and consumption and incidents from all our vessels, basically to find out where we are. When we had that in 2020, we started to plan for how do we prove it. Well, we have in the first place one of the youngest and most energy efficient fleet in and we're obviously at all times in compliance with increasing regulations, and we're making strategic initiatives towards decarbonization. We've, amongst other things, done successful trials of low-carbon marine biofuel. Frontline targets to reduce our carbon emissions by 3% per year, which equates to about 55,000 metric tons. The thing is, why this actually works is that it also automatically gives us an increased earning potential. And I don't think I need to go into depth that we actually, you know, we do share the UN Sustainable Development Goals and the CFER's well-being. We publish our ESG report, obviously, every year, which I encourage all the listeners to have a look at. We also, of course, do what we refer to as sustainability accounting, following the SASB principles. So let's move to slide 13 and try to sum it up. So demand and supply of oil continues to rise. The Omicron version seems to have a far more modest impact than we could have feared. Tanker markets have, in fact, recovered since Q321, but obviously to a modest degree, far too modest for our liking. And we're still challenged by oil supply not fully at pre-pandemic levels. Tanker recycling, as I mentioned in this presentation, is finally starting to make an impact on the vessel supply. And there is a lot of moving parts in addition. We've seen US SPR releases. There is now discussions about the OPEC strategy going forward. And we have the Iranian nuclear talks. So there's a lot of moving parts. Oil in transit continues to rise. Energy prices are at record highs. And oil is now flirting with 100 barrels per day. And how that's going to affect what I mentioned just now. with regards to the SPR releases, with regards to OPEC strategy, and with regards to the OPEC nuclear talks, sorry, the Iranian nuclear talks, is creating some very interesting dynamics. And last but not the least, Frontline's financial commitments are fully funded. And we've done so with a reduced overall financing cost. And we think we're well positioned as the story of this market unfolds. With that, I think we'll open this call for questions.