Frontline plc.

Good day and thank you for standing by. Welcome to the fourth quarter 2025 Frontline PLC earnings conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 1 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Mr. Lars Bastad, CEO. Please go ahead.

Thank you very much. Dear all, thank you for dialing in to Frontline's quarterly earnings call. In discussions with market actors in recent weeks, a recurring phrase has been heard. People basically saying, what a time to be alive. Frontline has been around through many cycles, but the tanking markets do actually evolve over time. We will argue that we've never been in a cycle like this, where indices and freight derivatives weigh so heavily in the freight pricing mechanism. This fuels almost violent moves as we proceed. For every $200,000 per day fixture done physically, there is an exponential number of contractual obligations that are triggered, giving this market a new dimension and very exciting dynamics. Before I give the word to Inger, I'll run through the TC numbers. So let's move to slide three in the deck. In the fourth quarter of 2025, Frontline achieved $74,200 per day on our VLC fleet, $53,800 per day on our SUSEMAX fleet, and $33,500 per day on our LR2 slash FRMAX fleet. So far in the first quarter of 26, 92% of our VLCC days are booked at $107,100 per day. 83% of our SUSEMAX days is booked at $76,700 per day, and 67% of our LR2 slash AfraMax days are booked at $62,400 per day. Again, all numbers in this table are on a load-to-discharge basis with the implications of balance days at the end of the quarter, this incurs. However, for the VLCCs, there's little mystery left with such a high percentage in the book. I'll now 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 um yeah we report profit of 228 million dollars or one dollar and two cents per share and adjusted profit of 230 million or one dollar and three cents per share in the fourth quarter of 2025. The adjusted profit in this quarter increased by $188 million compared with the previous quarter, and that was primarily due to an increase in our TCE earnings from $248 million in the previous quarter to $424.5 million in this quarter. And that, again, was a consequence of higher TCE rates. We also had some decrease in finance and ship operating expenses, and also some calculations in other income and expenses. Ship operating expenses, in particular, decreased 7.1 million from previous quarter, mainly due to an increase in supply rebates of 7.1 million. Let's then look at the balance sheet. That's slide five. The balance sheet movements this quarter are mainly related to ordinary items and also prepayment of debt under revolving reducing credit facilities. Frontline has a solid balance sheet and strong liquidity of $705 million in cash and cash equivalents. And that includes undrawn amounts of revolver capacity, marketable securities, and also minimum cash requirements in the bag as per December 21, 2025. We have no meaningful debt maturities until 2030. In January 2026, we sold eight of our oldest first-generation EcoVLCC for a total sales price of $831.5 million. And after commissions and repayment of existing debt on the vessels, the transaction is expected to generate net cash proceeds of approximately $477 million. In parallel, we acquired nine latest-generation scrubber fitted EcoVLCC new buildings from affiliate of for an aggregate purchase price of $1,224,000,000. We will pay approximately 25% of the purchase price in the first quarter of 2026, and 75% is due upon delivery of each vessel. The company intends to finance this acquisition with cash and then 60% long-term debt financing. Let's then look at slide six. That's the fleet composition and cash break-even rates and OPEX. Our fleet consists of 41 businesses, 21 Zeus Maxx tankers, and 18 LRQ tankers, has an average age of 7.5 years, and consists of 100% ecovessels, where 57% are scrubber fitted. We estimate average cash break-even rates for the next 12 months of approximately $25,000 per day for VVC, $23,700 per day for SUSEMAC tankers, and $23,800 per day for LR2 tankers. That gives a fleet average estimate of about $24,300 per day. This number includes dry dock cost for five VCCs, two SUSEMAX tankers and eight LR2 tankers. And the fleet average estimate excluding dry dock cost is about $23,300 per day or $1,000 less. We record OPEX including dry dock in the fourth quarter of $9,600 per day for VCCs, $7,600 per day for ASUS MAX tankers, and $12,400 per day for LR2 tankers. This number includes dry dock of T VLCCs and T LR2 tankers. The Q425 fleet average objects excluding dry dock was $7,600 per day. Lastly, let's look at slide seven, cash generation. Following that we entered into one-year time chart of agreements, and we also had fleet renewal in the first quarter, the spot base for the next 12 months is about 24,400 days. Frontline has substantial cash generation potential with 27,700 burning states annually. As you can see from this slide, the cash generation potential basis currency, TCE rates, and TCE as of February 1st, is $2.8 billion, or $12.51 per share, which provides a cash flow yield of 34% basis the current share price. And a 30% increase from this current spot market will increase cash generation potential to $3.7 billion, or $16.84 per share. Likewise, a 30% decrease from current spot market will decrease the cash generation potential to $1.8 billion or $8.19 per share. With this, I leave the word to Lars again.

Thank you very much, Inge. So let's move to slide eight and look at the current market highlights. So oil demand... seems to be growing healthily outright, but with key focus on non-sanctioned molecules, creating substantial year-on-year changes in trade, as shown on the illustration or the graph on the right-hand side of the slide. We have a very politically laden market environment. We talk about U.S.-India trade, U.S.-Iran-Israel discussions, and U.S.-EU-Ukraine-Russia talks. Venezuelan liberation and further pressure on Russia, in addition to Iran tension, creates strong tailwinds for us operating in a compliant market of oil transportation. We're also in an environment where weakening U.S. dollar is supportive of global oil demand, and the inflationary economic environment is supportive of the commodities in general. Asset prices for ships is appreciating firmly. Order books are building materially in 2029 and onwards. But with the 20-year age cap observed, future supply remains manageable. Let's move to slide nine and look at the flow. Global crude oil in transit continues to be at elevated levels. On the graph on the right, we've added the TV3C Baltic Index, by some referred to as the Dow Jones of the freight markets. And there you can see how sensitive this index seemingly is to the oil trading on the seven seas. In this picture, we see sanctioned crudes moving slower, particularly for the Russian barrels. or being stored particularly for the Iranian barrels. This creates an increased dark fleet utilization and the dark fleet then needs new capacity or attract new capacity into the dark vessel pool. These vessels are pulled out of the compliant fleet. OPEC Middle East exports is growing firmly. but also adds to this increased demand for compliant and approved tonnage. But despite the are you watering faith levels we're facing right now, we see very few charters, in fact none, breaking this 20-year age cap, which supports the case that we've been arguing for years. Strong import growth to Far East and India, contradicting the energy transition narrative, and especially for China. I think people are starting to get familiarized with the energy addition, not transition term. Long-haul ARBs are challenged. And just to explain what an ARB is, that's basically the price difference between one continent to another in respect of oil. which basically, if it's at a wide enough point, a trader or an oil major can make a profit moving the oil over long distances and selling it in a different market. Freight is, of course, a key component in this. And by example, if the freight for a VLCC from US Gulf to China is $18 million, the charter is actually exposed to $9 per barrel freight. And basically this spread between the two oil markets need to accommodate that. This has put some pressure on these ARBs, and we've seen fairly little volume moving from the U.S. to the Far East. But again, if oil needs to move, or when it needs to move, these differentials will just have to price to accommodate that. this spread. The incremental marginal barrel is now compliant. We've also discussed this in previous calls, is that we don't see any kind of fantastic production growth in Iran. We don't see any kind of fantastic production growth coming out of Russia, but we do see compliant oil production and exports growing. The big factor is, of course, OPEC, reversing cuts. But then you have countries like Brazil, Guyana, performing extremely well. And these are the new molecules coming to market, and they need compliant chips. Let's move to slide nine and look a little bit at the fleet development. So the order book continues to grow. We're basically in a market where decades high prices for modern tonnage, if tonnage is even there for sale, that is on the water, meaning that the vessel can trade straight away, is so high that it pushes actors into the yards. Other asset classes, as LNG, containers, brokers, continue to populate yards order books, But we do see tanker ordering accelerating for 2029, especially in China. As the chart on the top right hand indicates, it shows basically the efficiency loss of a vessel as it ages. And the curve starts to dip around 10 years of age and then further deteriorates into almost ignorable when it gets to 20 years. With this in mind, as we move forward and move into 2039, we're going to meet the generations of ships that were delivered around 2010 and onwards. And this is a large population of ships that then again will be 20 years of age and exposed to this deteriorating efficiency curve. With that in mind, although ordering is accelerating, And we have a kind of high amount of shifts expected to come in 2029, and it's basically being added for every day. It's not alarming with this in mind, considering the feed age or the age of the feed and the feed profile. We see that we have two to three years of a very good runway before the supply could become a worry. We also expect going forward that yard capacity will grow, and especially in China. And it's not necessarily new yards, but it's yards that haven't built tankers, or at least not been specialized in tankers, but they're now adding berths in order to cater for this industry. We believe there is another trend that will evolve as we proceed here, considering or assuming this rate environment is sustainable. that Korea and Japan will increase its focus on building tankers in general, and we also see in special as the margins on these contracts start to compete with what they can achieve for containers or LNGC. Let's move into slide 11, where we have the familiar tables. I'm not going to spend too much time on this slide, only to say that in our methodology, and we try to be consistent, we use data that's based on when an IMO number is registered. This means that this statistics will always be a little bit slow to react. The general assumption in the market is that the order book to fleet ratio for VLCC is probably already at 20%. But this will become more and more evident as these contracts are being registered and the IMO numbers are being created. With that, I think we move on to the summary. And I've changed the headline here. So, we also see take the center stage, SUSEmax and Afromax to follow, question mark. It's actually not much of a question mark because the truce maxis are already on the way. And the afromaxis is boiling. We are in a fundamentally tight market condition that yields extreme volatility. Oil demand and supply is developing positively, but especially for compliant molecules. The global tanker fleet age profile and efficiency loss heighten the supply-demand balances, as the prices are on the move, as both spot and period markets support the investment decisions. The volatile political landscape fuels energy insecurity, conditions where tankers tend to thrive. And frontline efficient business models tend to produce material shareholder returns as we proceed. Thank you very much, and with that I'll that will open up for questions.

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star one, one on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star one and one again. This will take a few moments. And now we're going to take our first question. And it comes to the line of John Chappell from Evercore ISI. Your line is open. Please ask your question.

Good afternoon. Thanks very much. Laura, so many things to ask you, but I'm not going to be greedy. I'll keep it to two. So the first thing is obviously we're in a parabolic situation right now. We've seen this once or twice before, but as you said, the underlying factors seem to be very different this time. But rates don't go to the moon. There's a certain point where there's a ceiling. So what's the catalyst to provide a plateau and maybe a little bit of an easing from here? Is that a geopolitical event? Is it a seasonal event? Is it a sine core event? What takes a little bit of the froth out of the market, which would still be very fantastic rates, but maybe lower than where they're moving this week?

It's an extremely good question. I think the answer is kind of seasonality. There's also, you know, kind of normal seasonality. We're actually not, you know, unused to having fairly, you know, kind of poised markets during this time of the year. Many times due to U.S. refineries going into turnaround, allowing for more barrels to be exported. And so we're kind of, we're actually going into that phase now. So there will be potentially a few more months where we actually can't sustain these rates, depending on how the flows work. But then, you know, there is going to be a summer low, you know, and it's almost inevitable. But whether it's a summer low that moves from $200,000 to $100,000 or, you know, that is almost impossible to gauge. Also, I think one needs to note that, you know, there's one major important in this market being China. And they have built an enormous amount of inventory over the years. They could, for any reason, choose to basically turn down the speed a little bit for a period of time. And this will also create volatility. And I expect this to occur. But it's, of course, extremely impossible or extremely difficult to say when something like that might happen.

Yeah, definitely. Thanks for that. The other one is also maybe a bit difficult, but it's just something I've been wondering about. Nobody's done what your Korean friends are doing right now for seemingly 50 years, and that includes your shareholder, who many people probably would have anticipated would have been the one to try this. Why hasn't anyone tried to corner the VLCC market in the past? And Where could it go spectacularly wrong for them? You know, just what are the risks, I guess? And I guess the final thing is how do you position frontline so that you're not affected by if it does go spectacularly wrong for this player?

Yeah, no, it's a good question. And you're right, it hasn't really been done in a material manner in the tanke market for as long as I can remember. There is a parallel story from the mid-2000s involving a certain person from Taiwan, but this was in the dry bulk space. But the key to his success in dry and the potential key to the success that the Korean actor might have is actually that you go in a market that is already fundamentally tight. And then you don't need much to weigh it, kind of, or to slow the supply side of factory capacity before you get these violent moves. And also, as most people are familiar with, if you look at how freight prices just empirically, you know, the minute you go from 90% utilization to 95, you know, how freight prices, the moves are exponential. That would be my explanation to why this is possible. I'm not going to comment on why Mr. Frederiksen hasn't looked at this, but the thing is we are a stock-listed public company. This is, of course, easier to do if you are a private entrepreneur in this market and, of course, willing to risk a substantial amount of money in such a game. where it can go wrong in these situations and we've seen them before potentially to a smaller scale it ends up being it's almost like a game of chicken who can hold the longest so this is what makes me extremely excited over the months to come and the summer and so forth because we'll see some very interesting dynamics kind of come to play. But one thing I'm 100% certain of is that there will be volatility.

That's all very helpful. Thank you, Lars.

Thank you. Now we're going to take our next question. And the next question comes in the line of Sharif Al Maghrabi from BTIG. Your line is open. Please ask your question.

Hey, good afternoon. It seems like charterers are seeing what you're seeing and willing to take more ships on term. Would you say that's the case and the TC market's more active, or is it just that rates have risen to a level that ship owners are more comfortable with?

No, I think as I kind of touched upon in the introduction today is that, you know, this market has evolved quite a lot in the last 20, 25 years. And if you, by example, if you look at the Middle East market, for instance, for VLCC, you know, transport from, you know, plain vanilla from Middle East to Asia, you know, this market used to have a lot of physical liquidity. What happened over the years is that more and more actors are using the index itself to price the freight, so basically doing contracts, floating contracts, that prices off the Baltic index quote, to the point where actually very little liquidity is actually transacted in the market. So, you know, price visibility has been quite difficult actually sometimes. To do a parallel, you know, for every barrel, physical barrel of Brent oil that is produced, you know, it trades tenfold on paper. And we've seen a little bit of the same kind of tendency or trend in freight. And this, you know, this becomes a problem then if everybody are kind of pricing their freight of an index that runs out of control. And then suddenly you need to hedge and then you need to access the paper market or you need to buy back hedges for the guys who have taken ships on Townsharker and basically hedged the, you know, parts of the curve in that exposure and so forth. And you end up with a very vibrant FFA market, which every FFA broker today would, you know, would testify to. And you get these kind of ebb and flows out on the curve from panic to some sort of quiet until the panic kicks in again. So, because over the last couple of weeks, we've seen, you know, you see the index. It's just relentlessly printing what is physically actually being done. But it's not like 10 cargoes are fixed a day. It's two to three cargoes may be fixed a day. But the amount of pricing exposure around that quote is enormous. And this triggers kind of this almost like self-propelled move going forward. But I think it's important to note this is, you know, this is not manipulation. The market is fundamentally extremely tight. But, of course, you could argue that maybe freight rates are moving ahead basically due to this tightness, you know, as the panic ebbs and flows.

That's very interesting. Something else that I thought was interesting And was your comments specifically about new tanker yard capacity coming online? And so I apologize if you've mentioned this and I missed it, but do you have a sense of what the turnaround time on these projects might be and when first ships might hit the water?

So it's 2029. So a yard that is now marketing kind of a new birth that they're going to build, but it's not like a green field because the yard exists. It is there. But they're just kind of introducing a new birth that can say accommodate the build. That is 2029, so three years.

Got it. Lars, thank you for your time. Thank you.

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad. And now we're going to take our next question. And it comes from Devan Sangoi from Tech Investments. Your line is open, please ask your question.

Hi, Lars. I just want to ask you, what will be your strategy on spot versus time charter as you go through this interesting times? And that's my first question.

Yeah, no, and it's a good question. As we said before, you know, we kind of, you know, our proposition to our investors is, of course, to give you spot returns. So basically, you don't have to buy a ship. You can just buy frontline. But, you know, at times, we will choose to use elevated markets to try and secure revenues. We've also kind of, we don't have a fixed policy or anything, but we have like a golden rule of one-third. So in theory, you know, our board would be comfortable under certain conditions that we get up to, you know, time charter coverage of 30%. We're, of course, in, you know, as you've seen from the stuff we did, you know, we reported the seven one-year time charters. In the report today, we also reported another one that was done like a week later. So we are in these modus operandi to try and secure some longer-term income. But we are so constructive about this market that we're not really engaging yet, at least in the longer term, because we actually do believe that there is still some some to go for the longer term contract. But they're also appreciating quickly. So, you know, I'm not going to exclude anything. But you will not find frontline in a situation where we've put, you know, 50% of our exposure out on time charger because that's not really what our investors are after, we believe. Sure.

And so I see the dark flick which we've been struggling and finally it's coming with sanctions and whatever was needed to be done is being done now. In this, though the probability is 50%, if Russian crude oil and if the war stops and the sanctions are lifted, it's also going to get into a compliant fleet. Do you foresee in such scenario what will happen to the market?

Yeah, so if you ask me this in like... September 2022, I would have said it would be, you know, like an immediate kind of bearish kind of proposition. But so much time has passed. And, you know, if the Russian barrel becomes a compliant barrel, you know, kind of you'll probably get half of the capacity back into the compliant on the shipping side, into the compliant fold. But the other half will either be, or will actually be disqualified basically due to age. And this is the same for the Iranian, the fleet servicing the Iranian oil. You know, it's a lot of ships, yes, but these are ships that were supposed to be recycled years ago, basically due to age. So very few of them are actually going to come back into kind of compliant trade. And also the scrutiny in the compliance markets ship's history is extremely kind of tough. So it's not very easy to kind of whitewash a tanker that's been involved in illicit trades. But one point I need to make, you know, we've actually seen this before when sanctions were eased towards Iran in 2016. They have a national fleet, a national tanker company, NITC. And, of course, any part of a sanctions-lifting kind of solution will also involve nationally controlled shipping companies. So for Russia, that would be SOCOMFLOT and potentially others. But, again, you know, just analyzing those fleets' age is the problem. So, actually, we would welcome these molecules into the compliance fold. Sure.

And the last problem is that if this sustains, and obviously you do the best to make the auto, the cash becomes a cash file. Obviously, you're paying out large part of it. But do you think at what point in time you will start deleveraging balance sheet or you will stay levered?

No, our intention is to stay levered because for every share you buy in frontline, you get like a 1.4 ship exposure equivalent basically due to our leverage. So we still believe that's the model. And obviously I can't rule anything out, but we have no inclination to de-lever apart from what actually happens when you pay down debt. So the point of cash is actually going to you guys.

Okay. Congratulations and all the best for the future.

Thank you very much. Thank you. Dear participants, just a quick reminder, if you would like to ask a question, please press star, one, one. Dear speakers, there are no further questions for today. I would now like to hand the conference over to our speaker, Lars Badstad, for any closing remarks.

Thank you very much for listening in, and I hope you are as excited as I am to what the future is going to bring. I think it's the tanker market's turn now, so let's enjoy the ride. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.