Frontline plc.

Thank you for dialing into Frontline's fourth quarter earnings call. The last quarter of 2023 did not deliver the full-on crazy off-the-hinges bull market we all wished for, but still gave us decent returns. We also started to take delivery of our BLCCs from Euronav in December, and we are very happy it's all been smooth sailing as they have come under the frontline flag. I would especially like to praise our project, technical, and operations teams that effortlessly and professionally have incorporated these vessels into our fleet, proving our company's very scalable business model. Before I give the word to Inger, let's look at our TCE numbers on slide three in the deck. In the fourth quarter, Frontline achieved $42,300 per day on our VOCC fleet, $45,700 per day and $42,900 per day on our LR2 slash Afromax fleet. Both SUSEMAX and LR2 markets performing well above the previous quarters as they came to an end, as the year came to an end. As our press release shows, the full year 2023 came in firmly. as we earned $50,300, $52,600, and $46,800 per day on our VLCC through SMAC and AFROMAC slash LR2 fleets, respectively. I may add, we made over $650 million in full-year profit. And this is deemed respectable in some circles. And it's, in fact, the best year we've had in 15 years. So far in the first quarter of 2024, 81% of our VOCC days are booked at $55,100 per day, 72% of our SUSEMax days at $52,800 per day, and 69% of our LR2 slash AFRAmax days at a whopping $67,800 per day. Again, all these numbers in this table are on a low to discharge basis, and they will be affected by the amount of ballast days we end up having at the end of Q. I'll now let Inge, you can take us through the financial highlights.

Thanks Lars, and good morning and good afternoon ladies and gentlemen. Then let's turn to slide four, profit statement, and look at some highlights. Frontline achieved total operating revenues in the fourth quarter, sorry, operating revenues and the voyage expenses of 257 million and adjusted EBITDA of 198 million in the fourth quarter. We report profit of 118.4 million or 53 cents per share and adjusted profit of 102.2 million or 46 cents per share in this quarter. Adjusted profit in the fourth quarter increased by 21.4 million compared with the third quarter, and that was primarily due to an increase in our TCE earnings due to higher TCE rates, partially offset by fluctuations in other income and expenses. Then I think we should turn to slide five and look at some balance sheet highlights. Frontline has strong liquidity of 416 million in cash and cash equivalents, including undrawn amount of the senior unsecured revolving credit facility, marketable securities and minimum cash requirements as per December 31st, 2023. We have no remaining new building commitments and no meaningful debt maturities until 2027. Then let's turn to slide six. and look at feed composition, cash breakeven, and OPEX. Following the delivery of all the 24 VCCs acquired from Euronav and the expected sale of the six older vessels in the first quarter of 2024, the fleet will consist of 41 VCCs, 24 suspect tankers, and 18 LR2 tankers. We'll have an average age of 5.8 years. and consists of 99% ecovessels, where 57% will be scrubber fitted. We then look at the graph at the right hand side. We estimate the average cash break-even rates for 2024 of approximately $28,800 per day for VLCCs, $23,700 per day for ZeusMax tankers, and $21,200 per day for LR2 tankers. with a fleet average estimate of about $25,700 per day. This takes into account the expected sale of the six older vessels and also the 24 wheel to seas acquired from Euronav in the first quarter of 2024. The fleet average estimate includes dry dock of four Suezmax tankers and five wheel to seas in 2024. where our two SUSEMAX tankers will dry dock in the first quarter of 24, two SUSEMAX tankers and one VLCC in the second quarter, two VLCCs in the third quarter, and then two VLCCs in the fourth quarter. We recorded OPEX expenses, including dry dock in the fourth quarter, of $9,400 per day for VLCCs, $12,500 per day for SUSEMAX tankers, and $7,100 per day for LR2 tankers. This includes dry dock of six SUSEMAX tankers and two wheel CCs. The Q4 23 fleet average OPEX excluding dry dock was $7,300 per day. Then let's turn to slide seven and look at the financing of the acquisition of the 24 wheel CCs. When we entered into the agreements with Euronav to acquire the fleet of the 24 ecovessels and also in our Q3-23 presentation, we said that our ambition was to minimize the need for cash from the Hjelmens shareholder loan through frontline capacity to re-leverage existing fleet due to the historically low loan-to-value and or sale of older non-ecovessels. In January and in February 2024, we executed on this with the agreement to sell six older non-ecovessels and the ongoing process of refinancing 24 vessels on what we believe are attractive terms, expecting them to generate net cash proceeds of approximately $646 million. This will enable us to fully repay the Hammond shareholder loan and the amount drawn under the 275 million senior unsecured revolving credit facility within an affiliate of Hammond. in relation to the acquisition and also to maintain our competitive cash break even rates. With this, I leave the word to Lars again.

Thank you very much, Inge. So let's move to slide eight and start to look at the current market narratives. So as you all know, the headlines are colored by the Middle East tension. you know, the situation in Israel and Palestine. And following that, the Red Sea aid situation and its ton miles implications, looking at it from a tanking perspective. We're also seeing that U.S. are increasing the pressure on what's referred to either as the dark fleet or the gray fleet, and also increasing their focus on potential Russian price cap evasion. It was quite interesting to read earlier in the week that they've analyzed the tanker fleet and found that, according to them, the gray fleet now consists of 135 VLCCs, 90 Suez Maxis, and 150 Afro Maxis. These are vessels that are on dark, trading in Iranian barrels, trading to North Korea and doing all sorts of stuff, and including the Russian fleet. That's the 375 vessels in total in the segments that we work in. As a total, all BRS came to 700 vessels involved in some sort of shady activity. That amounts to 8% of the total tanker fleet. So these numbers are quite shocking. Another thing that's kind of, you know, played a part in the last few months has been the high activity in the contracting market. Well, and especially so for SUSEMAX and VOCC. Actually, to the extent where, you know, word on the street now is that 2027 is starting to become somewhat tight. Also, another kind of important thing to note is, you know, we've been through a long period of OPEC voluntary caps. and particularly so by Saudi Arabia. This has maybe or potentially led to non-OPEC production being allowed to grow quite remarkably. Year on year, according to EIA, has grown by 2.9 millibarrels per day. And as your listeners would know, most of this OPEC production is Not in the Middle East, of course, it's further far and connected to the Atlantic Basin. And this continues to kind of confirm our idea that, you know, trading lanes are gradually extending as US, Brazil, Guyana and other countries are able to increase their production going forward. And China and Asia still is where demand growth is happening. Looking at the charts on this slide, So global oil trade has kind of paused a little bit. Also global oil in transit has paused a little bit. But, you know, on kind of more frequent indicators, we do see that in oil in transit is on the rise. And we expect it to be due to the longer ton miles around Cape of Good Hope, avoiding Suez Canal. On the bottom three charts, you'll see how kind of the market's been, the volatility has increased in this market. I like to look at this by drawing a line at the bottom, and I think we are, or hope we are, in what looks like a rising trend territory. And kind of real time, what we're experiencing right now, particularly so in the BLCCs, is that we seem to kind of find the bottom at a marginally higher place that we were before. And also there are indications that volatility is increasing, and particularly so we've seen on the clean markets where the volatility has been violent so far in Q1. Let's move to slide nine and dig a little bit further into the Red Sea situation. So the straits between Yemen and Djibouti is very unsafe for passage. at the start of this kind of conflict or unrest, the ships that were targeted were predominantly Israel-linked. But the attacks are now randomly targeting anyone. And even Russian-linked vessels, which we thought were kind of safe for disruption due to kind of Russia's support for some, you know, to some of these groups, have also been targeted. So I think we should categorize this as a random effect. I'm not a political analyst, but obviously learned a lot over the last months around this conflict. And the Houthi movement is also very fragmented. It's not one uniform group. What we're understanding from the region is that they're also getting support from Somali pirates. So this is like a proper mess, I would say, and creates extremely unsafe conditions for seafarers and also for our assets. So frontline is not destroying trade and will continue on that position as long as the security situation remains as it is. The traffic through Suez Canal is now down 40 to 50 percent. Some might kind of expect it to be far more than that, but you need to remember also an export region. So it means that actually oil coming out of Saudi, for instance, still falls through the Suez Canal because they avoid then this Bab el-Mandeb straits into the Gulf of Aden. We also see now that trade patterns are adjusting to Cape of Good Hope routing. This takes time, because basically ARBs and oil price differentials have been based on Suezmax going through the Suez Canal, will need to be readjusted to basically account for VLCC volumes going around Cape of Good Hope. So we see more barrels already move on the VLCC, and the product side is now, to a greater degree, favoring the big lifters, being LR2s, and even LR3s. And for those listeners that don't know what an LR3 is, it's basically a coated Sue's Max. There are not that many of them in this world, about 19 according to Clarkson, but you can also clean up a Sue's Max in order to get into this market. Just visiting the graphs, if you look at the right-hand side of this slide, You basically see on top, you see oil tankers that are going around. Often you see it's been a kind of a rapid increase since December 2023. And you see the oil tankers in the Yemeni zone, basically not Suez, but more specifically the Bab el-Mandeb straits have fallen sharply since December 2023. What this creates for the tanker industry is widening trade lanes. Basically, more oil is going around the Cape and less oil is going the shortcut via Suez Canal. Let's move to slide 10 and look at the order books. I mentioned in my introduction that this has been one of the big themes for the last few months is that ordering is picking up. All these new orders are not reflected in this slide because we use a very cautious and a conservative approach to new orders because in the shipping market there are rumors and there are LOIs and there are options and there are all sorts of kind of discussion points around new orders. So we have chose to listen to to register kind of new builds when the IMO number is issued. So that's basically what is regarded a confirmed order. So you should expect going forward that particularly on the VLCC and to some extent on the SUSEMAX, these orange columns to increase. But we need to keep in mind that currently in the VLCC fleet, 15% of the existing fleet is above 20 years old. We have 133 VLCCs. that either are or will pass 20 years in 2024. If you also look at the generations we're kind of moving into here, so 29 we also see were built in 2004, i.e. becoming 20 years this year, and 31 we also see delivered in 2005, becoming 20 years next year. So a total of 60 vessels just this year and next year are passing this 20-year threshold. If you add 2007 deliveries as well, you get to 79 or close to 80 vessels. That will increase these pink negative columns in the chart, in how we portray it. StuSMAX, more or less the same picture. We're hitting these generations where you have deliveries of 25, 23, 25 vessels, respectively in 2004, 2005, and 2006. So you're basically up to the same numbers as the VLCC, 73 vessels that over the next three years will pass this magical threshold of 20 years. For the LR2s, that's where we kind of potentially could be worried about the order books and actually quite a significant amount of vessels looking to be delivered in 2025. Well, again, have a look at the left-hand side of that graph and look at And also consider the fact that an LR2 becomes less effective as a product carrier when it reaches the age of 15. And look at the generations we're hitting now from 2008, 2009, and 2010 builds. There's actually more than 92 LR2s that will pass the 15-year threshold over the next three years. Let's dig a little bit further into this because this is, after all, what I kind of regard as a supply story rather than a demand story. in the period from 2004 until 2008. This kind of what we hope to be a prolongable market is more related to supply. So let's move to slide 11. And here at the top, we're putting the highlight on the VLCC. So if you basically look at the VLCC fleet development as is expected with the current deliveries that are kind of confirmed in the order book, we see a gradual kind of increase of the fleet up to 900 vessels or above 900 vessels. If you adjust for the vessels that are turning 20 years, you get a completely different curve. Some of you might have seen us using this chart before. Here it's just updated. And then what implications does this have? Yeah, so if you look at the chart on the top right-hand side, you'll see an average VLCC utilization. A VLCC So it's more half the time and then ballasting the other half of the time, but then you need to deduct some more utilization for positioning, you know, doing bunkering operations, all the other stuff that you do that is not really related to the voyage and also some waiting time to load cargoes. So you get kind of a close to 50-50 laden ballast ratio. But when you look at this for the various generations of ships, you see that already from 17-year-olds, the utilization of the VLCC starts to diminish. Some charters have a hard stop at 15 years. This is namely the Chinese, for instance. Others are starting to be hesitant or would rather prefer a modern ship when they're facing a ship that's 17, 18, or 19 years. And obviously from 20 years, you're taking away most of your clients. And this So even though the ships actually survive longer than 20 years, the utilization is falling. Another interesting chart, which is more general overall for tankers, looking at the left-hand side, and it's kind of an observation we wanted to show this time, is that if you plot all the orders that's being placed, look at the time from ordering until delivery, you'll see that there is a linear, like a growing trend or high, you know, the trend is kind of the lead times are getting longer. Specifically so for the tankers, which is the blue dotted line. You know, in December 2020, it was, you know, on average, 1.8 years from the order was placed until the ship was delivered. Now we're actually closing in on three years. This is a big change. And also you need to keep that in the back of your head, considering the orders being placed now. There are large order backlogs, but not so much for tankers, which the bottom right-hand chart is showing you. So basically, most of the deliveries that are coming in 2024 and 2025 are related to bulkies and containers. And crew tank is just a very, very small portion of the overall deliveries coming in. kind of deliveries of some magnitude looking at the crude oil tank use. So with that, let me wrap it up before we open up for questions on slide 12. So I think kind of the highlight of our presentation for Q4 is that we delivered on the long-term financing of the 2.4 billion asset transaction we did in Q4. And mind you guys, this is probably the largest single pure tanker deal ever concluded. We've sold five non-ECO VLCCs and one non-ECO SUSEMAX, as we indicated in the last quarter. And Inger has managed to refinance a significant part of our fleet at very competitive terms. And without really moving the needle too much on our LTVs, we're obviously being helped a little bit by the prices rising during the period as well. And I think more importantly to you who are listening in here, we have not printed one single share. So all vessels are delivered, and this doubles our VLCC footprint and increases our earning base by more than 30%. And I'd like to remind you earlier in the presentation where Inger explained our average cash break even of a fleet wide is $25,700 per day. Every dollar above that number hits the bottom line. We have obviously a great security situation in the Red Sea Gulf of Aden. And this seems to be adding to ton miles and it benefits the larger carriers that are offering greater economies of scale, basically because they can lift larger volumes. We are seeing increased activity in contracting, especially for Susmax and the LCC, but it's actually so that the fleet age composition in the tanker fleet demands this. Otherwise, short and medium-term oil demand remains firm, and non-OPEC supply is growing. And then again, frontline scalable operational platform has digested this fleet expansion quite easily as the market's positive grind continues. And I also think it's important to put your eyes on the bottom chart here at this summary. These are kind of the earnings averages, weighted earnings averages for all tankers. quite far back. And we do expect that we are nearing or potentially already in something that resembles the 2004 to 2008 period. And at least in the numbers, although you get kind of fooled a bit by the fact that the VLCCs are not performing, or at least not performing as prominently as they normally would do, we have actually had both 2022 and 2023 have given remarkable returns to the tanker industry. And we're looking quite okay coming into January this year. And with that, I will open up or ask the operator to open up for questions.