Good day, and welcome to the Frontline Q4 Results Presentation. [Operator Instructions] At this time, I'd like to turn the call over to your host today, Mr. Jens Martin Jensen, CEO; and Ms. Inger M. Klemp, CFO. Please go ahead, gentlemen.

Thank you. Good morning, good afternoon, and welcome to our Q4 presentation. We will follow our usual program for this presentation with our CFO, Inger Klemp, going through the Q4 highlights and main transactions, financial review of the quarter, then update of our newbuilding program. Thereafter, I will talk about what happened, marketwise, in Q4 and say a few words on how we see things going forward. So if you could start, Inger, please?

Thanks, Jens, and good morning and good afternoon, ladies and gentlemen. I will guide you through the highlights and the financial review in the fourth quarter, together with a run-through of the newbuilding program. Moving then to Slide 4. November 2011, for instance, Frontline extended the time charter in agreements of Front Chief, Front Commander and Front Crown for one year from January 2011 at $26,500 per day per vessel. On January 2011, Frontline sold its 2006-built VLCC Front Shanghai. The sale proceeds were $91.2 million. And after repayment of debt, the sale generated $31.5 million in cash. Frontline has, in connection with the sale, agreed to charter back the vessel from the new owner. The duration of the time charter is approximately two years at a rate of $35,000 per day. And delivery to the new owners took place in January 26, 2011. The company expects to record a gain of approximately $6.2 million on delivery of the vessel. And in addition, a gain of $15.2 million will be recognized on a straight-line basis over the period of the time charter. Further in January 2011, Frontline sold all its shares in OSG. The sale generated approximately $46.5 million in cash, and the company expects to record a loss of approximately $3.3 million in the first quarter of 2011 in addition to a loss of $9.4 million recorded in the fourth quarter of 2010 following a market price adjustment of the shares. Further, in February 2011, Frontline has agreed with Ship Finance to terminate the long-term charter parties between the companies for the single hull VLCCs Front Highness and Front Ace. And Ship Finance has simultaneously sold the vessels to unrelated third parties. The termination of the charters is expected to take place in March 2011. Ship Finance will make…

Thank you, Inger. We are now on Slide 16. Despite a continued strong oil demand throughout the quarter and increase in ton-mile cargoes to mainly India and China, we still had a very disappointing quarter rate-wise. A few rate spikes in the quarter was absorbed by higher bunker prices, the long awaited winter market did not materialize and the slow steam effect is now only really starting to show results in the market. Very limited weather and port delays despite a extreme hard winter. Slide 17, VLCC fleet development. 54 VLCCs were delivered in 2010, which is basically a 20% slippage of the intended schedule. We expect the slippage trend to continue in 2011. 2011 is also the year with the most expensive orderbook with an average cost of around USD $140 million per vessel. We expect to see about 55 VLCCs being delivered in 2011. Amazingly, single hull VLCCs are still being traded despite a mandatory phase out in 2010. Interesting to note, rumors of a Greek shipowner converting three VLCC newbuildings into two LNG carriers. Slide 18, Suezmax Fleet. As expected and predicted, we saw almost a 40% slippage in the newbuilding deliveries. However, many vessels was ordered in 2010, and the orderbook is sizable. However, we expect the slippage trend to continue in 2011 with 20% to 25%. Positive for both the VLCC and Suezmax [indiscernible] is that the ordering has stopped for now and that the major Korean shipyards are taking orders in the other segments such as drilling rigs, mass container vessels and [indiscernible] and other LNG boom. If we go to Slide 19. Newbuilding drive rates today for decent specification VLCC is around USD $100 million and for Suezmaxes, around $65 million to $66 million. We do not see any reason why newbuilding prices…

[Operator Instructions] And we'll now move to our first question from Michael Webber from Wells Fargo.

We've seen a fair amount of strength recently, kind of, on the back of some stronger programs heading east or it involves geopolitical risk. And I'm just curious as to what your take is in terms of how long do you think that will last? And do you think that could be enough to maybe prop up Q1 or Q2 TC rates, enough to kind of smooth out this portion of the cycle?

I think the increase in rates we have seen over the last two, three weeks, there’s a few things adding to that, one thing is that I think the effect of the slow steaming is finally coming in. We are seeing that as less ships are coming into the Persian Gulf than anticipated so the tonnage situation is more tight than it used to be. And of course, at the same time, with the situation taking off in Egypt and rising oil prices have maybe made some charters move a little bit earlier in the lifting program, so it looks positive. And of course, what we are seeing now, we are in the March program, and that’s, of course, the last month of Q1. So there will be some positive effect in Q1. And we hope, obviously, the rate will last into Q2 and so both quarters can benefit from that.

Some of that strength, again, was kind of heading east, and I'm just curious as to your take on how sensitive you think some of those cargo programs are to the price of crude as that continues to kind of remain strong? Do you anticipate any headwinds there? Or how do you think about that?

Well, we see that the prices on the tonnage has been quite tight, especially if you look at the first half of March and, of course, the Atlantic basin is quite tight. So I think that -- I think and I hope this market will carry on.

And one more question, and forgive me, I joined the call a little late, I don't know if you touched on it already, but can you give an update on, I guess, the chartering strategy for your OBOs given the relatively weak dry ore market?

Well, we have all our eight OBOs all in the dry cargo. They’ve been there for some years. Five of them are still on long-term charters at very good levels. And then we have three on short-term time charters, which will be coming open April, May already. So of course, we're monitoring the bulk of the capesize market and, specifically, on these ships, of course, best carrying iron ore. And we hope for some strength in that market, but I think we need the market to improve a lot more to be interesting, that's for sure.

But the vessels will stay on the dry side?

They will stay on the dry side, yes.

And now move to our next question, which comes from Jon Chappell from JPMorgan.

There's been some changes. You redelivered the Desh Ujaala to the owners. And then you've also taken the Front Shanghai back on a sale and leaseback. Can you just give us an update on how many vessels you're chartering at the present and what the duration is for those charter-ins?

We talked it in the three...

Yes, we have some ships in from Knightsbridge, of course, two ships, the Kensington and the Hampstead, and we have the three -- Chief, Commander, Crown. And of course, we have the leased vessels also the other leases we have going, the Front Shanghai. So that was so much changes to our portfolio right now. I guess you can say like I said the Desh Ujaala was redelivered, and we have taken the Front Shanghai in on a sale leaseback. So I would say we have managed to get out of some of the more expensive ships we had last year, and I think we're quite comfortable with our Charter portfolio right now.

So you don't expect the charter expense to vary much from the fourth quarter levels?

Well, we would like to charter more if we can find ships around the same level as we did 3,000 ships or below 30,000. So if somebody is listening in there, we are ready to take.

And then the ownership fleet development, your owner or founder and chairman has been pretty public saying that the changing markets are going to be tough for the next couple of years. And your sale of the Front Shanghai looks like you may be taking advantage of some good prices that are still available. What are your views on second-hand prices and as we think about Frontline's fleet development over the next 18 to 24 months, would you think you'd be more of a seller in this market or do you think you'd be more of a buyer if rates bottom out?

I think that the values for modern ships will not fall so much -- I think the older ships, more than 15 years old, are coming under pressure. And I think that the values will fall quite a lot on those. We need to, we want to expand our fleet with modern ships. It could be via further newbuildings, although that is not preferred. Or it could be a block of secondhand ships or modern ships or we can also charter-in more. We want to expand and it will be with modern tonnage.

So the Front Shanghai was just taking advantage of a good opportunity or good price that was available?

Yes, we thought it was a good deal to do.

Would it be fair to say maybe you'd be kind of selling some of your 1990s-built tonnage and replacing that with newer modern tonnage?

In the ideal world, yes.

We'll now move to our next question which comes from Justin Yagerman from Deutsche Bank.

This is Joshua Katzeff on for Justin. Just wanted to touch up on some of the geopolitical risk issues. I guess, how much do you think the previous situation in Egypt and the kind of current situation building in Libya is affecting the spot market?

Well, right now, I don't think it has affected the spot market so much, but of course, it has affected the oil price. Some charters and some oil companies are maybe wondering where the oil price will go and if they should take more oil now. But I don't think it's actually affected the spot market so much yet. But I think there could be more in store, of course. We had the same question here this morning. And of course, people are asking about Libya. Libya, mind bearing that majority of their crude is going to European destinations. So of course, if that has to be replaced by oil from further weighted nations, that will of course have impact on the market. But I think it's too early to say something yet about the impact of the spot market.

I guess I didn't know if there was any sort of psychological impact that...

I think there is a psychological impact, yes. But it's just having that turn into actual activity on the shipping side. Although I don't really think we can say we have seen that yet.

Have you seen any disruptions in loading from Libya?

I will tell you we're going to have a ship loading in two days, and that's of course interesting to see if the ship will load. But so far, we've been told everything is normal, but I guess if you ask me again next week, I can tell you more.

Just wanted to touch on slow steaming. How widespread has that been? Is there any chance that the slow steaming, which will be VLCCs, can start to happen on the laden voyage and not just the ballast?

Well, of course, what we are doing and other owners are doing is, of course, try to also slow steam on the ballast leg which means speed of around nine to 10 knots in ballast. And if you look at our modern VLCCs, we can go 10 knots or 25 tops, which is of course quite fantastic for a VLCC. And the bunker price is around 600, that's a huge saving. On the laden legs, we are, of course, trying to discuss with the charterers if there's any possibility of a lower speed, but so far we have seen that they prefer to maintain the 13 or 13 1/2 knot speed, but that's, of course, a discussion, a negotiation we were having always.

Has there been any kind of early pushback on that? Is that something that you expect to be able to push through?

I think, normally, a ship owner gets the terms when the market is high. So we can hope for a very high shipping market. And then of course we can change some of the chartering terms. But so far, we have not really been able to push that through.

I guess with regard to chartering and spot and GC mix, you guys have previously mentioned kind of maybe a 30% or 40% time charter coverage target. Is that still what we should be looking for?

There was some confusion, I think it was last quarter or the quarter before, about our charter coverage. I think what we would like to have is our fixed cover which is only 22%. We have total 38% cover this year but 16% is a floating arrangement. But we would like to increase our fixed time charter cover input when the timing is right. It does not have to be up to 30%, but maybe two or three more ships, we would like to affix some time charter cover. So of course, we hope that the TC market will improve, and we can do that over the next few months.

We'll now move to our next question from Fotis Giannakoulis from Morgan Stanley.

I want to ask you, you can describe the very challenging environment for the next couple of years for timeshares. And although we haven't seen any problems with the charters in general in the Tanker market, they are considered stronger than the other sectors. Do you think that this is a topic that we should start focusing slowly? And how shall we think the charter risk among the tanker companies…

I think on the crude oil, chartering side, we have not seen, if any, VLCCs options of default on charters. I don't think that will change. I think the Crude segment is quite wealthy. And of course, you have the large oil companies kind of undersubscribing the activities. So we don't see much risk of charter default on the crude side. Of course, we have exposure in our company on the OBOs on the dry side, but five of them are also substantial state-owned Chinese companies, so we're quite confident with that. But I don't think there will be any major fallout on the crude chartering side.

Do you owe those particular companies in the private sector probably facing significant funding issues that might create defaults among owners?

Well, that's a lot of talk of, course. The last casualty, the bigger ones has, of course, been Korea line, with protection of courtship situation in Korea. They have a few VLCCs. So it's, of course, interesting to see where they will end up. I guess the banks have been quite listening to the shipowners for the last two years and see how they will tackle the crisis in 2009 and 2010. Maybe the banks will be putting their thumbscrews on a little bit more this year and trying to push some owners to do something. But then we haven't really seen any distress as I slightly mentioned before so far.

I want to ask you, given the current environment and how do you view the different segments within the asset classes, mainly between the Suezmax and VLCCs, both segments, they are facing a large growth of capacity. But what do you think in an environment which is weak in general is the best vessel to navigate the current storm?

Well, I wish I knew, but I would say if you look at the buying appetite out there, if you put a VLCC out in the market for sale at $100 million, you'll probably have very few buyers, if any. If you put the price down to $95 million, maybe you'll have one or two. If you put it down to $90 million, maybe there'll be 10. I think there's buying appetite out there. And of course there's a lot of shipowners and companies who have made money over the last 10 years, and they're willing to reinvest in shipping. So it’s just about to find the right level and you'll see people stepping in, both VLCCs and Suezmaxes. But I think it will be a modern ship. I think the older ships will have a difficult time in the years ahead.

And my last question is -- it has to do regarding the trading pattern. If you see any impact of a big spread between WTI and the other seaboard crews? And how does this impact the trading and, particularly, U.S. imports?

That's of course a big question. I think, of course, the biggest factor to the VLCC market now is, of course, the demand pickup in America. Of course, I think everybody's commenting on the big gap between the VTI and the brink, but I think it's probably better to concentrate on the more underlying demand side from America. And if we get that going again, I think the Tanker market will level up a lot better. I think it's difficult to reply to your specific question better than that.

We'll now move to our next question from Sal Vitale from Sterne Agee.

I think you said that part of the market strength of the last couple of weeks, especially on the AG East routes is the turmoil in the Middle East bumping some charters to I guess move up their oil imports. So is it possible if there's more of a stabilization in the situation in the Middle East, say, over the next few weeks that we see some of that given back, so that the market rate goes down a little bit to account for that, a reversal of that, I guess.

I guess that was part of my reply you're referring to. I said I don't think the Middle East crisis has actually spurred the market. I think what has spurred the market is, first of all, slow steaming is finally taking effect on the fleet, these ships have arrived in the Persian Gulf. Secondly, the Atlantic market was stronger than the East market, so you have seen many VLCCs [indiscernible] into the Atlantic basin and loading cargoes out of there to the East. So you suddenly see a tightness of positions in the Persian Gulf. I think that was what spurred the market first. Subsequently, of course, you have the Middle East crisis, where it's maybe more guess work, but at least that's what we hear, that maybe some oil companies have increased their lifting program a little bit to try and take some more oil right now. But I think the fundamental increase in the rate has been because that has -- the tonnage has been spread out and you have seen less ships in the Persian Gulf.

And then just shifting gears to the floating storage side. In the presentation, I don't believe there was any indication of what the current capacity that's tied up in floating storage. Do you have a guesstimate of where [indiscernible] could be right now?

Not really. We have a few ships, but I don't have an overview right now of what is tied up. We have some of our ships being used for holding brands. Of course, we have seen ships coming to loop being held back, if you can call that floating storage or just delayed discharging. But I think the distinction of what is actually floating storage or, let’s say, just waiting for only to discharge. We haven't made that distinction.

And do you think that floating storage could be a driver, given that a much lower percentage of the total global fleet is used in floating storage now? Could that be something that ramps up over the next few months?

Well, hopefully, we saw a cross-load that floating storage did in the second quarter last year where we had almost 50 VLCCs being tied up in floating storage. And of course, if that come back, if you see a more contango situation in the oil, yes, that would, of course, have a very positive impact.

I'm just looking at what the current dividend, the $0.10 is as a percentage of, say, your cash flow, and it's about under 20%, let’s call it about 18%. And I know you don't have any specific driver of what your dividend that you establish is, but if I look at historically, let’s say, third quarter 2009, I think the loss in that quarter was about $0.10 or about $0.11, and the dividend was about $0.15 at that point. So if I look at the $0.10, is there anything – I mean, are you just being extra cautious in terms of conserving cash? Or should we read into that at all? And going forward, if that loss starts to be mitigated, if you report a smaller loss or even a profit in the first quarter and second quarter, how should we be looking at what the dividend could be?

I should just refer to there is no specific rule percentage-wise of cash flow that we have no payout, if that's what you mean. So I don't think you should put too much into that kind of mathematical comparisons, which you are doing there. So, there.

But just directionally, should we think of that $0.10 coming up over the next couple of quarters?

No, I don't think you should depend anything into the future based on what we have done now. I mean, we always have to evaluate what we have earned in the cash situation at the time that we are deciding what dividend to pay. And that will, of course, be difficult for us to know what will be the future.

[Operator Instructions] We'll now move to our next question from Glenn Lodden from DnB NOR.

I was just wondering because in the report, you touched upon the background for your divestment in OSG pointing to both the lack of consolidation possibilities, as well as OSG's possible financing needs. So I was just wondering, would you look at the investment differently if there were better possibilities for consolidation talks. Or would the financial aspects of OSG still make you sell the stake?

I think you almost replied that yourself. I think, of course, had the investment turned out differently then I think we would not have been writing those seven lines in our press release. So I think what we said is pretty much how we feel about that.

We'll now move to our next question from Peter Kendall from Southwest Securities.

A rather specific question about the Antares Voyager, which is one of the two VLCCs contained in the Golden State petroleum bond deal. I know that on December 15 of last year, you obtained bondholder approval to either spot charter or sell the vessel, and I was hoping to hear a progress report on how that activity is coming along.

Yes, you're absolutely right. We had several buyers inspecting the ship end of December. Unfortunately, the offers received, we did not believe were in line with where the market should be, so the vessel was not sold. And now she's trading in the spot market. Hopefully, with the market improvement, which we are having now, we will see interest and prices firming up and we'll be, let's say, ready for a second round of selling the vessel.

Has it generated any revenue then since December 15 on the spot market?

Not a lot.

Where is the vessel right now?

She is on the way to Asia to discharge.

[Operator Instructions] And it appears we have no further questions at this time.

Okay, then I would like to say thank you for everybody for dialing in and listening to our presentation. I would like to thank everybody in the company for dedicated work in 2010. Thank you. Bye.