Frontline plc.

and thank you for standing by. Welcome to the Q1 2026 Frontline PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press power 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press power 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Lars Barset, CEO. Please go ahead.

Thank you. Dear all, I thank you for dialing into Frontline's quarterly earnings call. Unprecedented times springs to mind as we report in Q126, well into the first half of the year. I've been in this industry for more than 20 years, and I did not imagine us in a situation for this duration where the straight-to-formers has been effectively closed. With the opaque and volatile political narrative these days, the frontline team focus on the real, cash-generating business to be done, not speculating too far into the future. We have put the most profitable quarter since 2004 behind us, and are well into a potentially even more rewarding one. I'll get back to how we analyze the situation between the call, And before I give the word to Inger, I'll run through our TCN numbers on slide three in the deck. In the first quarter of 2026, Frontline achieved $103,500 per day on our B2C fleet, $72,400 per day on our SUSEMAC fleet, and $50,700 per day on our LR2 slash AFROMAC fleet. So far in the second quarter of 2026, 82% of our VLCC days are booked at $181,700. 79% of our SUSE max days are booked at $131,300 per day. And 68% of our LA2 slash AFRA max days are booked at $125,000 per day. Six digits across the board. All numbers in this table are on the lowest due to discharge basis with implications of balance base at the end of the quarter. And now let Inger take you through the financial highlights.

Thanks, Lars, and good morning and good afternoon, ladies and gentlemen. We can then turn to slide four and look at the profit statement highlights. We report a profit of $559 million or $2.51 per share and adjusted profit of $344.9 million or $1.55 per share in the first quarter of 2026. The adjusted profit in the first quarter increased by $114.5 million compared with the previous quarter and that was primarily due to an increase in our time charter earnings of 112 million dollars from 424.5 million in the previous quarter to 536.5 million in this quarter. Ship operating expenses increased by 5.9 million from previous quarter and that was mainly due to a decrease in supply rebates of 5.4 million dollars in the quarter administrative expenses excluding the synthetic option revaluation loss of 5.8 million in the first quarter and gain of 0.5 million in the fourth quarter of 25 increased by 8.5 million from the previous quarter and that was primarily due to synthetic option exercises in the first quarter of Then, the adjusted interest expense decreased by 9.8 million from previous quarter and that was due to lower debt and decrease in interest rates and margins. Also, depreciation decreased by 6.2 million from previous quarter due to sales of indices in the period. Income tax expense decreased by 0.6 million from the previous quarter. Let's then look at the balance sheet on slide five. Frontline has a solid balance sheet and strong liquidity of 945 million in cash and cash equivalents, including undrawn amounts of revolver capacity of $473 million, multiple securities and minimum cash requirements, as for the 31st of March 2026. We have no meaningful debt maturities until 2030. Remaining new building commitments at the end of the first quarter was $925 million, which relates to the acquisition of the nine new buildings from affiliates of Heman. The company has secured new building financing of up to $737 million, as set out in the facility. Let's then look at slide 6. Fleet composition, partially given weight and offset. Our fleet consists of 33 field-assist, 21 suspect tankers, and 18 LRQ tankers, has an average age of 7.5 years, and consists of 100% eco-vessels, where over 64% are scrubber fitted. We estimate average cash break-even rates for the next 12 months of approximately $24,300 per day for businesses, $24,300 per day for suspect bankers, and $2,300 per day for the LR2 bankers. That gives a fleet average estimate of about $24,100 per day. This number includes dry dock costs for six wheel to seas, three sewage tankers, and eight energy tankers. The complete average estimate excluding dry dock costs is about $23,000 per day, or $1,100 per day less. The recorded uptakes included dry dock in the first quarter of $11,300 per day for wheel to seas, $9,100 per day for suicide tankers, and $10,900 per day for LRQ tankers. This includes dry dock of four VCCs and three LRQ tankers. And the Q1 26 fleet average uptake excluding dry dock was $8,900 per day. Then let's look at slide 7 and cash generation. Following that, we have been entering into one-year time-sharp agreements, and we have a fleet renewal in the first quarter and also in the second quarter. Spot days for the next 12 months is about 23,700 days. Frontline has substantial cash generation potential with 27,900 earnings days annually. As you can see from this slide, the cash generation potential basis current fleet TCE rates and TCE as of May 22nd, 2026, is $1.5 billion, or approximately $7 per share. That provides a cash flow yield of 18% based on the current share price. If we look at a 30% increase from current spot markets, that will increase the cash generation potential to about $2.1 billion, or $9.51 per share. An equal 30% decrease from current spot markets would decrease the cash generation potential to about $1 billion, or $4.41 per share. With this, I leave the floor to Lasse again.

Thank you, Inge. Let's move to slide 8 and look at some of the market highlights that we're going to go through in this deck. First of all, I'd like to remind the audience that we've had tightening fundamentals in the bank markets ever since around this time last year, prior to the Middle East conflict. We reached an unprecedented situation after the 28th of February, with the Strait of Hormuz effectively closed. The chart on the top hand right side kind of indicates this. Here you see the year-on-year weekly changes in flows. whereas the Middle East Gulf drops dramatically starting in week 12. The U.S.-Iran on-off peace talks and the tightening, potentially easing, of Iran-related sanctions to get rid of uncertainty on Russia, Russian oil assets, creates a lot of volatility. The market is starting to focus on the potential long-term implications coming from the current situation in the Middle East, And more so, if we can imagine the situation getting solved. We're going to see restocking of inventories, increased strategic storage, especially amongst Asian importers. And we're also going to see higher focus on diversification of oil supply. Now that we've seen how vulnerable you can be being dependent on purely Middle East supply. We also see that order books continue to grow as we stretch into 2030 delivery windows now. As the prices continue to appreciate, as freight market outlook remains firm, and we see a fairly high activity on longer-term time charter markets or contracts. Just want to give you a small little kind of hint on the bottom left-hand side chart. We're basically not only using the TD3C index, which is the Middle East Gulf Loading Index, to China. We're also using the TD15 index outside of the Middle East Gulf, West Africa, to China. Although it looks quite weak only, kind of rewarding us with $100,000 per day, this is four times our cash break in the devils, so it's still very good money. Although we wish we could have made $400,000 per day every day, this is very much a theoretical exercise as the market is right now. Further, if we move to slide 9, I'm going to take you through two fairly complicated slides, but I think needed for this session as we are in the situation we are in. First of all, straight up from this closure, it's very much a VLCC event. This is a big ride for the VLCC. This is where the most volume is listed on VLCC, transporting oil both to the east and to the west. We've seen prior to the closure that the daily tide of fields and seas in this market has been on average 491 vessels. This consists of Leyden, Dry Dock, vessels that are doing cargo ops or other stuff. We have, at any point in time, had stopped balusters east of Suez, and we've always had vessels waiting to load in the Red Sea. Basically, when the straits closed, we had a massive loss of 130 ships that were so-called laden, dry docking or doing cargo ops. This is the dark blue kind of baseline in the chart in the middle here. Then we had an increase of 21 vessels waiting, loading in the Red Sea. This is like daily tied up tonnage, so it shouldn't really be looked at as an absolute number. Then suddenly we had 41 VLCCs laden, loaded with oil, waiting inside the Middle East Gulf. And then you had 55 VLCC equivalents stopped and in Ballast, east of Suez. This brought us back to 480 VLCCs after the Hormuz closed. Basically only a reduction of 11 VLCC equivalents in this extremely severe situation for the the BLCC segment in special. If we move to slide 10 and look at how the flows developed post-closure, we were at 17.7 million barrels per day from various suppliers inside the Middle East Gulf. We lost 5.9 million barrels per day from Saudi, 3.2 from Iraq, almost 2 from UAE, And on it goes. 1.4 from Kuwait and almost a million barrels from Qatar. Well, as we proceeded, we were able to increase the throughput in the pipeline ending up in Fujairah of almost a million barrels per day. Saudi Arabia started to utilize the Yambu pipeline going from the Middle East Gulf out to the Red Sea, increasing by 3.5 million barrels per day. And then the rest of the world has gradually, towards where we are now, increased output by 3.3 million barrels per day. This is basically meaning a net loss of only 6.2 million barrels per day. What we're later going to look at, and we might jump at it straight away, if we move to slide 11, is that even with this effective closure of we have had so large changes in trading patterns that we're actually back to oil kind of traveling over distances, oil on water, pre the Hormuz closure. The long-haul trade has kind of outgrown the loss of the relatively short-haul trade from the Middle East Gulf to the Far East. We've also seen export capacity that we actually didn't know existed, or at least we didn't really focus on it, adding to this volume. We've seen Asia increase their sourcing from virtually all available regions, all of them further afar, fueling this tonnmal and this high utilisation. Despite the volume shortfall then, adjusted for distances, shipping demand is surprisingly robust. Crude on water is recovering fast, and this is important to note. When you look at the real-time picture, you will not record this until after the fact. It takes 30 to 45 days from a barrel is contracted to be freighted before the oil is actually loaded on the ship. This means that it's only in the last three, four weeks we've seen this material happen using the data or using the kind of oil and water data. I have to say, though, and we might actually flip back to slide nine, because this is important. On this chart, you'll see kind of in the middle on the top right-hand side there, there's a number plus 55. These are vessels that are contracted or majorly contracted to players that are not necessarily having the same economical rationale that we as a ship owner would have. These are vessels who do the baseline of oil transportation from the Middle East Gulf to Asia. They're contracted to industrial players like refiners and oil makers. And for these guys, To not have vessels available should this rate open can be an extremely costly affair. These ships are contracted on modest rates. You're talking five-year deals, six-year or seven- or ten-year deals between $35,000 and $45,000 per day, meaning that that's the option premium they pay in order to be able to lift first oil as it comes. And for them, this is logistics. It's not necessarily profit. different from frontline. And of course, hadn't we had this kind of idle fleet, I think the sublime demand picture would have looked a bit different on tankers, especially the LCC. But that's the case, and that's the way it is. And right now we're reaping the benefits of the fact that a relatively large portion of the fleet is unutilized, waiting for something to happen in the Middle East. Let's jump forward again and get into slide number 12. So I mentioned that the order books continue to grow. We're starting to get into kind of territory where you have percentage numbers that start with a three, but still we have this aging of the fleet that is ongoing. If you look at the table on the top left-hand side, the vessels that are currently 15 years or younger, they are going to be 20 years within five years, and that amounts to 45.5% of the current fleet. If you put that in the back of your head and you look at the order book, which for the asset classes we deploy is around 23.2%, then it doesn't look too alarming. The period that the current order book is delivering over is the next three to four years, where kind of the bulk of the vessels, especially we also see on SUSEMAX, are actually coming in 2028. So with this in mind, I'm not saying that the order book is non-existent, but I'm saying that the order book is manageable. Also, I think it's important to note when we look at these charts that the likely outcome or the likely kind of points on the list if there is a peace solution between the U.S. and Iran is going to include sanctions on Iranian oil. This means that the current part of the fleet that is now servicing the Iranian crude, is going to be obsolete. And that amounts to 15% to 17% of the overall uses of it, which overnight are going to become useless. We can move to slide 13 and dig a little bit further into this argument. So we have very strong spot and period markets, in addition to the fundamental backdrop, which I just pointed out. And this keeps ordering activity high. despite the current opaque situation in the Middle East. Tanker ordering is accelerating for 2029, and we are starting to see slots move into the 2030 window, increasing the runway. We're talking about three years, three and a half years, until a new hull can be added to this order book. With the absence of recycling, but the continuous aging of the fleet, the net compliance fleet growth is still manageable where we are now. And mind you, again, we do not see vessels over 20 years being deployed in any market, despite extremely constructive rates. And as I mentioned, the likely endgame of Middle East conflict implies reversal of Iran sanctions, adding to the demand for compliance standards, and potentially triggering the very kind of sought-after wave of recycling. One kind of larger fundamental piece in this picture is that the number of shipyards is still materially lower than what we saw in the 2010-2011 peak, but the consolidation And more recently, efficiency gains put the CTE capacity closer to highs. I'm almost saying this basically to explain how even though the building capacity and the capacity to basically have new tonnage into the market to service future oil transportation demand seems limited, we are actually in the phase where we are going to be able to maintain a fleet that can service oil markets for many years to come. The top right hand side chart shows us basically how the kind of overall net fleet development is looking right now. And it's not alarming by any means. Then let's move into slide 14. I think I'll just start so that you can look at the bottom-hand slide, the bottom-hand chart, because we used that for quite a few quarters now. And mind you, the orange thing at the end there. I mentioned that we, Frontline, have not had a quarter like this since 2004. Look at where we are now year-to-date in 2026. It's quite extraordinary. Yes, there's a certain portion of this index. that is colored by the fact that we have some of the trades that cannot be performed that are being printed at extremely high levels, but still we are in unprecedented times. Fundamentally, tight market conditions, and they were present prior to the Middle East disruptions. The disruption in trade lanes has yielded inefficiency, and new trades, and longer trade lanes have been developing. And we believe this can be a bit sticky, basically due to the energy security part of this. We have continuous muted growth in the compliant tanker feed, and that is still at the core of the case of owning tanker stocks. Asset prices continue to move, and both spot and period markets support investment decisions as we move forward here. The current political environment changes the game, and I repeat myself, we will see a higher focus on energy supply security going forward. Frontline is in center stage with our VLC heavy efficient business model, as hopefully positive outcomes nears. Thank you very much for the attention, and then I'll open up for questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To return your question, please press star 1 and 1 again. One moment for our first question. And this question comes from the line of Sheryl Elmagrabi from BTIG. Please go ahead.

Hi, thanks and good afternoon. First, starting with the fixture count, when I look at VLCC fixtures, I see activity out of the U.S. Gulf War West Africa declining slightly from April to May, even though rates have remained very strong. So I'm curious if you're seeing the same thing and if you have an idea of what's going on with fixture activity.

Well, it's kind of this market has kind of moved into very much a stealth mode. So it's, of course, not everything that is seen. But I think kind of from a utilization perspective, you know, if you are an oil trader, you always utilize your own fleet first. And this means that those are fishes that will not be reported in the market, although the volume might remain the same. Secondly, we've seen that kind of the fixing happening out of the U.S. Gulf has been extremely kind of meaning cyclical. It starts with kind of the short-term barrels being fixed on Afromaxis, which we've seen kind of recently. Then suddenly it tricks into Suezmax, bringing the oil to Europe, until suddenly you see dates being kind of confirmed for oil moving into the Far East, which brings the VLTC kind of into the game. And then suddenly the VLTC fades, the Suezmax fades, and we're back on the Afromaxis again. And then it just repeats itself. So, you know, it seems like the US Gold fixtures on the VLCC side happens on a kind of a monthly cycle, and it only happens within a week, week and a half in that month. So I think it's quite difficult to read from fixtures, first of all, because it's very difficult to see all of them. And secondly, because you have this kind of a little bit untypical pattern. You don't have like a kind of a continuous pattern. flow of veal to seas being fixed or a continuous flow of sous-maxes or continuous flow of afromaxes. It basically depends a little bit on the prices of crude and how the ARBs are kind of opening or closing. Of course, with extreme volatile narrative, you know, virtually every Friday we're about to open Hormuz and every Monday it's closed again. This makes this kind of a very difficult playground for even the traders.

Yeah, I definitely get whiplash from the headlines. Sticking with the idea of captive fleets, the presentation mentions 55 VLCCs on standby outside the Arabian Gulf. Do you have a thought on why the NOCs, I'm assuming they're NOCs, might do that rather than participate in alternative trades for the time being?

I think it's obvious I don't know this, but a likely theory is that in the event of an opening, say somebody kind of tweets and a press release is coming out tomorrow saying that now it's all okay, we can travel through, the first vessel that goes through can potentially buy Iraqi oil with a $30 discount to Dubai or Brent. That's $60 million right there. So I think that's the motivation, having the ability to be able to move quickly, to take the first barrels, as opposed to having to call frontline and ask us for a rate. That has huge value. And the alternative is that if they went in to compete with, say, us in the Atlantic market, that vessel would be gone for 70 to 90 days. And then they really have to call us if they need freight out of the Middle East Gulf quickly, kind of. So I think I would assume that's the analysis behind this. And since the cost kind of on holding these vessels is not like a current market cost, it's a time-sharded contract that was agreed years ago, I think the cost to kind of keeping that option is manageable. But of course, you know, What happens tomorrow is impossible to say.

Great call as always. Thank you, Lars. Thank you.

Thank you. Our next question comes from the line of John Campbell from Evercore ISI. Please go ahead.

Close enough. Good afternoon, Lars and Inger. Lars, these slides 9 through 11 are Really fantastic. Um, ton of detail, super interesting. Haven't seen it laid out this way before. My question is if the impact from the fleet on slide nine is only 11 DLCCs and then 10 and 11 kind of net themselves out, like you said, like the loss of volume is obviously negative, but the 10 mile impact is almost a complete offset. It feels like the utilization then overall should be relatively balanced to before the straight close. Yet, you know, rates have obviously been incredibly strong. You have the theoretical ones, but then you also have the real ones as well. So what's the differentiating factor that takes what looks to be a balanced outcome versus three months ago and has put rates into the stratosphere?

I think, again, it's the biggest X-factor, and we didn't see this coming at all, was the amount of vessels that seemingly, for kind of, it's not like obvious economical reasons, sit unutilized. So I think that kind of, you know, the ton miles do amount to a lot. I think people are surprised by the amount of volume. Saudi has been able to ramp up the Jambu loads with. But I don't think you can get away from the fact that we have this kind of, you know, uneconomical, and for different reasons, the part of the fleet that remains unutilized is the biggest kind of factor in here. Because even we did not believe that what's happened or transpired since 28th of February could be bullish VLCC or neutral to VLCC.

Okay. You spoke on slide 13 about the likely endgame, and I think that most people would agree with you that that's most likely, certainly the stock market acts that way. And frontline's always been positioned, you know, obviously to maximize spot market exposure. If we were to consider the other... which is continued and escalated hostilities and maybe a more permanent closure of that waterway. How do you think about how you manage risk in that outcome? Again, I know we have to lean towards the likely outcome and what the market's telling you and the Friday afternoon tweets, but have you thought about managing the fleet or even the balance sheet in a different manner just in case that unlikely tail risk emerges from this unprecedented time?

Yes, we have. And I think although kind of, you know, we've done some more kind of time starter coverage, particularly so on the VLCs kind of during Q1 and also continuing. And I think kind of, you know, the first iteration of that, was basically we looked at unprecedented market prior to the Hormuz closing. So, of course, we didn't know that was going to happen. But what happened in the aftermath is that we've actually continued to secure short-term coverage, like one-year coverage on the VLCCs, to the point where Inger has a table in there. We're closing on 30% of our voyage dates for VLCC for the next 12 months or thereabouts. or at least for the first couple of quarters, being covered by time charter contracts. And we've always kind of communicated this, that our proposition to you as investors is to try and give you a spot exposure. But, of course, at certain points in the curve, we'll try to cover. And that's, of course, to try and prevent ourselves from going bankrupt, should we be wrong. So I think that is, you know, the answer to your question. You know, we could kind of be all spots at this point in time, but we're actually, you know, very close to 30% of our voyage dates on VLCC, which is the most exposed segment, we believe, for a long-term closure in case, you know, nothing is sold there. Yeah, that's great. All right. Thank you, Lars. Really helpful. Thanks, Joel.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone. That is star 1 and 1 to ask a question. We are now going to take our next question. And this one comes from the line of Devin Tsangoi from Teji Investments. Please go ahead.

Hi, Lars. I just want to ask you two questions. First one is that we've seen a lot of countries have used the reserves, you know, crude reserves, what they had because of the disruption. And if they have to go back to the previous reserves, previous to this war and growth of funds, how the demand will shape up even if the war is over?

Well, kind of, you know, this is the big, and if I go through your question correctly, you're asking basically how will this market look when it normalizes, right? Yeah, yes, yes. Yeah. So, in our world, and of course we lean on Anders that actually knows this properly, I don't think we'll see kind of a Middle East exports resume to levels prior to the closure anytime soon. I think that will take time. You will have an initial kind of flow of oil coming out. First of all, the vessels that are already laden. Secondly, kind of barrels that sit in tanks inside the Gulf currently. And then new production is going to be coming on. For some other exporters, this is, of course, a liquidity thing. So they want to get as much oil into the market sold and get some cash as soon as possible. At the same time, you'll also have this, what we believe, high probability of Iranian crude also being a compliant crude when this happens. And mind you, that's 1.5 to 2 million barrels there as well coming from Iran that needs compliant tonnage. But as we move forward here, I think if I was a refinery in the Asian Asia or a short kind of oil entity in Asia, I would kind of, the minute I filled up my inventories, I would start to basically spread my risk on how I procure oil going forward. So I think that could kind of create a more long-term situation where we see kind of these longer, old-school turnouts become more and more stable as we proceed. So kind of the opening scenario, I think it's very difficult to paint a bleak picture for tankers. There could also be, you know, the possibility to paint a quite bullish picture for oil price, basically, because you need all this inventory build. You will not get production back overnight, And, you know, there will be kind of a bit of a shortness on oil as well going forward. But I think the point that we cannot get away from is that this whole situation, which has now lasted for 12 weeks or whatever, compounding, is also a huge kind of push for energy diversification by way of looking at other kind of energy sources like, you know, nuclear, wind, gas, what have you. Maybe not gas, but at least solar, though. So this is actually a push towards long-term energy transition. But I think that's five years out. It's not something that we need to think about right now. But I think a short-term scenario is how I describe it.

And Lars, the other thing is that India contracted today from Venezuela. And after this war is over, the 20%, which is a huge dependence of a lot of countries, especially India, China, which is, you know, taking it from Middle East, they would like to diversify. Does that permanently change the 10-mile demand and the 10-mile travel for the ships, especially the large ones?

Yeah, I believe so. And I think this is also the root cause for some of the interest we're seeing from kind of these Asian industrial players that they actually are trying to access the time shutter market, taking ships for delivery in 27, 28 and 29. So I think that's kind of the long game in this. That they are there to try and commit themselves for oil supply contracts from Latin America, West Africa and U.S. and then basically need to secure tonnage against those contracts.

So does it mean still FY29, calendar year 29, you're going to have a very strong or a stable high rate scenario?

I think that's impossible to say, to be quite honest. You know, we see that the freight markets and the period markets are vaccinated. So, you know, kind of a year contract for a vessel delivering fairly soon is around $120,000 per day. The minute you do a two-year contract, you talk about 90, three-year contract 75, 76. And then if you kind of go out and do a five-year deal for delivery 2029, you're down in the 40s. so so so it's um okay yeah thanks a lot all the best thank you thank you there are no further questions for today i will now hand the call back to mr lars barstad for closing remarks yeah again thank you very much for for listening in um it's uh quite a hectic political landscape we're working under but the rest is short Frontline are focused on trying to collect cash as we proceed here, and it looks pretty okay for now. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.