Frontline plc.

Dear all, thank you for listening in to Frontline's second quarter earnings call. In the second quarter, we had a very untypical spike for VLCC and Susmax towards the end. And this put us in a position to make some extra cash and also to carry some value into the third quarter. Most interestingly, this spike was caused by minor weather delays telling a tale of how narrowly balanced our market is. The macroeconomical headwinds seem to have a very muted impact on our little part of the global macro puzzle, and we'll get to that later in the presentation. I think it's worth mentioning that in the markets like these, Frontline's efficient and transparent platform comes to shine in effectively turning revenues to shareholder returns. Our running cost remains fairly stable, as expressed in our cash break-even levels, and all the incremental income goes straight to the bottom line and back to you shareholders. Before I give the word to Inger, let's look at our TCN numbers on slide three in the deck. In the second quarter, Frontline achieved $64,000 per day on our VLCC fleet, $61,700 per day on our SUSEMAX fleet, and $52,900 per day on our LR2 slash Afromax fleet. I hope you're all fairly comfortable with these numbers, and we are back to a somewhat reverted earnings relationship between our segments, where the VLCC makes the most. We have secured quite firm numbers as we progressed into Q3, with 74% of our VOCC days booked at $53,200 per day, 67% of our SUSEMAX days fixed at $48,800 per day, and 57% of our LR2 slash AFRA days at $40,500 per day. And again to remind you all these numbers are on a load to discharge basis and they will be affected by the amount of ballast days that we end up having towards the end of Q3. Now I'll let Inger take you through the financial highlights.

Thanks Lars and good morning and good afternoon ladies and gentlemen. Let's then turn to slide four profit statement and look at some highlights. In the second quarter of 2023, we recorded the highest second quarter profit since 2008 of 230.7 million or 1.4 cents per share. Adjusted profit came in at 210 million or 0.95 per share. Revenues came in at 513 million. We declare a cash dividend of 80 cents per share for the second quarter of 2017. I will mention that following the transition to IFRS, dry docking costs will be capitalized and subsequently depreciated over the period to the next scheduled dry docking, which is two and a half to five years. In the second quarter, dry docking costs of one million have been capitalized and one vessel was dry docked in this quarter. In addition, I will mention that the company revised the estimated use for life of its vessels from 25 years to 20 years effective January the 1st, 2023. Let's then look at some balance sheet highlights on slide five. The company has no remaining new building commitments as the company took delivery of the two last new buildings from Urkla in some time in January 2023. The company has strong liquidity of 719 million dollars in cash and cash equivalents including undrawn amount of unsecured facility. marketable securities and minimum cash requirements for bank as per the 32 June 2023. And we have a healthy leverage ratio of 51%. Then lastly let's look at the flow potential on slide six. We estimate industry-leading cash break-even rates of 22,700 fleet average, including dry dock cost for eight SUSEMAX tankers in 2023. Four in the third quarter and four in the fourth quarter. The Q223 fleet average bought excluding dry dock was $7,300 per day. We noticed from this Take a graph on the right-hand side. That free cash flow indicates strong potential return. If we assume we have to see TCE rates of $75,000 per day, it's five and a half year historic spread to be able to see for Zeus Max and LRQ tankers. The annual free cash flow potential is $1.4 billion or $6.34 per share, which translates into a free cash flow yield of 36%. With this, I'll leave the word to Lars again.

Thank you Inger. So let's go to slide seven and look at what's going on in the current market. So we've just been through a very volatile summer market. Hopefully it's coming to an end. The key themes have been Asia Pacific, continue to pull volume. We're seeing increased supply from what I refer to as new exporters, as you can see on the bottom right-hand side chart. This is United States and Brazil. They're not really new, but they are kind of growing at least. And then Guyana, which is like the added spice to the mix here. OPEC cuts production predominantly around the Middle East. And with the continuous pull from Asia-Pacific, we've seen ton miles increase, and benefiting, we also see ton miles in particular. Year on year, or quarter of Q2 last year versus Q2 this year, demand in the Asia-Pacific region is actually up 1.8 million barrels per day. That's quite significant, considering most of that oil is being freighted on tankers, And it represents about a 5% increase in tonnage or volume for going on shipping. And that those 5% is not taking into account a ton mile effect. We started to see that the Russian price cap started to bite in Q2. I'll come a bit back to that later. We are also seeing refinery margins improving as we move towards the end of maintenance season. And we have the background music of basically every analyst under the sun expecting oil demand to grow by about two million barrels per day for the second half. Let's go to slide eight and I'll go through the Russian price cap and what effects that has had on our markets. So the G7 oil price cap came into effect in December 2022, and it will set up $60 per barrel for Russian crudes. We're using on the bottom left-hand side the euros as a reference oil price, and it's predominantly the quality one discusses around Russian supply. With the price moving above the price cap, it's becoming increasingly complex to freight Russian oil. We've seen various kind of policies amongst owners, whether if they're willing to service the Russian market or not, year to date. But what we have seen now recently is that some of these owners are less lenient to lift Russian barrels, basically because it's very hard to argue you're doing it inside the framework of the current sanctions. These vessels are then returning to the non-Russian market or the plain Manila, Susmax and Afromax markets. And this has put pressure on rates as obviously the capacity then has increased, particularly in these fleet sizes. Product exports have been less. It hasn't yet traded above the price cap. It is actually flirting with the price cap now, where the price cap is actually at $100 for gasoline. Not that gasoline is a big product for Russian exports, but it's a product to represent where it is. And gasoline in Singapore is now trading very close to $100 per barrel. We've seen Russian exports kind of falling quite rapidly due to this. We've lost 1.7 million barrels per day of Russian exports since the peak in April. 400 000 barrels of that is products and we see that the fall there is less pronounced. But 1.3 million barrels per day of crude or fuel oil has been lost during the last five six months. It's going to be very interesting to see how this develops further. We're starting to see analysts arguing for the Russian controlled fleet or the Russian owned fleet struggling to maintain volumes, which is evident looking at the export statistics. The only way they can kind of replace the capacity there now would be to actually go into the non-Russian trading fleet and purchase more assets. There are actually, in fact, fairly high numbers of vessels that's needed, in order for them to maintain their export levels, should they want to do so. They're obviously a part of OPEC+, so the official argument will always be that they're working in line with the OPEC strategy, with the voluntary cuts, but we believe that it can be very interesting to see what happens in both the market for older purchases, the older vessels in the classes we trade, particularly then Afromax and Susmax as this progresses. Let's move to slide nine and look at what's going on in the refinery world. I think it's important, we almost forget because we've had so many black swans and whatnot in the tanker industry for the last few years. But the seasonal summer slowness or softness is in fact caused by the scheduling of refinery maintenance. On the bottom left hand side there we see kind of global refinery outages. These are basically refining volume that's been taken out due to maintenance work. And we see it's a very distinct kind of high in April. And, you know, likewise, there's also a distinct high in September, October, where refineries are shut in basically to do maintenance work so that they can run effectively, either for the summer season or for the winter season. This has, you know, fairly significant effect on demand for oil and also demand for tonnage What we see now is that we're heading in towards kind of on the refinery turnaround side, we're actually fairly low, but we're going, you know, we are going to go into the high turnaround season in September, October. So it's actually, you know, looking at it on face value, it looks, you know, fairly bearish for tank demand. But one has to remember that the tankers are fixed ahead. we'll see now it's being fixed for mid-September and the oil will land you know in the various refining regions by end September if you look at West African crude that's being fixed today will actually land in the beginning of October and in the US Gulf we're actually already fixing for oil that will land in the mid-October so basically it's Over the next few weeks, we will start to see the purchasing managers on behalf of the refineries starting to plan to bring more oil into the refinery as they come out of turnaround. Looking at the refinery margins, they are firming. This is obviously a result of refinery outages, but it's also a fairly strong signal of demand expected to look fairly okay. The diesel margins are leading the pace, and this is typical for the season. The winter season is kind of predominantly a diesel market, at least historically due to heating, whilst the summer market is more a gasoline market due to driving. We had a very mild winter last year in the northern hemisphere, Well, the jury is still out, but will we have that occurring again? Let's move to slide 10, and this should be known to everyone who's been on a front-line call before. Basically the fleets and order books. It's kind of the notable thing to comment on in this quarter is actually the increase in ordering for LR2s. We've seen 50 new LR2 orders being placed in the first half of this year, and that's bringing up the order book to close to 20%. We also use a measure of a 20-year effective lifetime for trading a tanker. This 20-year is actually more like a 15-year for an LR2. LR2s have coated tanks. and the coating in these tanks will kind of lose its quality over years. So the charters are very hesitant to book a clean LR2 above 15 years. If you use that as a measure, about 22.9% of the LR2 fleet, it's going to be above 15 years this year, then the order book actually doesn't really look that worrying. What is worrying is the lack of order books for Veal's disease and SUSEMAX. We have the highest percentage of kind of the population above 20 years we've ever seen. You know, 108 VLCCs will be either be above or past 20 years this year. 85 SUSEMAXs will be above or past 20 years this year. And on the order book side, if you go into the market to book a tanker now, and particularly on the VLCC, you're looking at the second half 2026 delivery. That's three years from now, and it doesn't really add up to the overall expectations of oil demand remaining fairly firm for the next three to four years. So with that, I'm going to move into the summary side on Guide 11. We're very happy to report the highest second quarter profit since 2008, $210 million and a cash dividend of 80 cents per share. In the last four quarters, if my record is correct, Inger, we've paid out $2.72. That's correct, yeah. And, you know, with an average share price during that period of $13.9, that's a 20% yield. So quite impressive, I believe. Asia demand continues to be supportive, and OPEC cuts are driving ton miles. The price cap on Russia crude is starting to bite, and what's going to happen next there. Seasonal refinery maintenance coming to an end, and margins are improving. And this is what we're going to kind of see reflected in particularly the VLC, and then secondly, the SUSEMax markets over the next few weeks. ordering is still muted for the bigger vessels for the one million barrel and the two million barrel vessels but LR2s we've seen a lot of activity in the last couple of months how the big question is obviously how the winter will play out this year but then I think kind of the background music and the absolute biggest question in the tanker industry going forward is represented by the chart at the bottom here The tanker order book has a percent of fleet. I've just taken it from 1996 to show kind of a little bit of the history behind us. We see the dark kind of blue line, which is the product tankers that started to react, but not to any extent so far. And then we see the gray one being the VLCC, which is supposed to be the pipeline of the world on crude oil.