Good day and welcome to the Quarter Four 2015 Frontline Limited Earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Robert McLeod. Please go ahead, sir.

Thank you very much. Good morning and good afternoon. Thank you for calling in to Frontline’s earnings call for the fourth quarter of 2015. It was a very exciting quarter for us both in terms of company events through the merger with Frontline 2012, but it was also another quarter of strong earnings. I will start this call going through the highlights of the quarter, then we will look at the new Frontline post-merger. Following that, Inger will run us through the financials for the quarter. After that, I will guide you on Q1 earnings. Moving on, we’ll look at our time charter cover, the order book, and we’ll also look at the market outlook and going through the risk and bullish factors affecting the tanker markets. We will conclude the call with taking your questions. Let’s get started on Slide 1 please, company highlights in the quarter. We completed the merger with Frontline 2012 on November 30, 2015. The new Frontline achieved a net income of $58.6 million in the fourth quarter. Today, we announced a cash dividend of $0.35 per share for the quarter. As Inger will explain in more detail later, we have reduced our cash breakeven rates further. It leaves us in a great position to produce solid returns on our ships as well as leaving us well placed to face downturns in the markets. Please move to Slide 2, and we will look at the new Frontline. Post-merger, we reached a significant scale with 62 vessels on the water and another 26 to be delivered. We are present in the key tanker markets - VLCC, Suezmax, Aframax, and MRs. In each of the segments, we have achieved critical mass as can be seen on the top right charts. In the Aframax segment, we have chosen…

Thanks Robert, and good morning and good afternoon ladies and gentlemen. I would like you to move to Slide No. 3, financial highlights. While the company was the legal acquirer in this merger, in accordance with the provisions of ASC 805, Frontline 2012 was selected as the acquirer for accounting purposes, and the merger has been accounted for as a reverse acquisition. Consequently, the results of company for the fourth quarter comprise the results of Frontline 2012 for October and November and those of the merged company for the month of December. It is also the company for the year ended December 31, 2015 comprised of results of Frontline 2012 for the period from January through November, and those of the merged company for the month of December. Thus, Frontline reports net income of $58.6 million, equivalent to earnings per share of $0.37 in the fourth quarter. After adjusting for gains, losses, impairment loss on shares, mark-to-market and minority interest, we show a net income from operations of $56.3 million in the fourth quarter, equivalent to $0.36 per share. For the financial year 2015, Frontline reports net income from continuing operations of $255.4 million, equivalent to earnings per share of $1.63. After adjusting for gains and losses, impairment loss on shares, mark-to-market and minority interest, we show a net income from operations of $163.8 million in the financial year 2015, which is equivalent to $1.05. On this basis Frontline has, in line with its policy, declared a dividend of $0.35 per share for the quarter. This represents more than 97% of adjusted earnings for the fourth quarter. The through share price closed at $9.02 on February 26, and the company’s market cap is $1.4 billion. The dividend represents a yield of 15.5%. Then moving to Slide 4, income statement, in…

Thank you very much, Inger. Please turn to Slide 9. I would like to guide you on our spot earnings in Q1. The year started off very strongly, especially on the VLCCs. We saw this as a good opportunity to fix our ships forward; in other words, we took long voyages rather than short. This has proved to be the right strategy and we have locked in 88% of our VLCC trading days at $73,100 per day. On the Suezmaxes, we have done about 63% at $36,700 per day. On the LR2s, we have fewer trading days in the quarter due to the number of vessels TC’ed out, but the number is $26,500 and 72% is covered. The MRs have had a decent start to the year - 88% done at $21,000 per day. However, the tanker markets have corrected downwards over the recent weeks and mild winter and refinery maintenance are contributing factors, but overall demand for tankers remains good. The market will be volatile, like it was in 2015, but we believe that the fundamental outlook of both the crude and products markets are good, and we expect the markets to perform well going forward. Let’s look at Frontline’s time charter cover, please, on Slide 10. The period from 2010 through to the second half of 2014 was a period with over-supply of tankers, and this led to slow earnings. As world oil supply increased significantly heading into 2015, the tanker rates followed. The world oil supply has remained high, and we are in alignment now with strong earnings. Although we are positive to the tanker market outlook, we find it prudent to capture some of this market strength and secure time charter cover forward. At present, 35% of our fleet is chartered out. The six VLCCs we…

[Operator instructions] We are going to take our first question from Fotis Giannakoulis from Morgan Stanley. Please go ahead. Your line is open.

Yes, hi Robert, and congratulations for the good quarter. I want to ask you what is going on in this quarter. We have seen rates coming down compared to the peak levels of fourth quarter of 2015. Of course, they are still quite profitable, but this decline has created some concerns, especially last week we saw the activity in the Middle East being weak. We saw some of the vessels that they were closed to enter into floating storage, these deals did not happen. Right is happening right now, and what is your outlook for the rest of this quarter?

Well, to look at it, as I mentioned earlier, the winter is milder and also we have a number of refineries doing maintenance, so these are factors. But I do expect--as I said earlier, you’ll always have volatility in a strong market, and this one, it’s more difficult for me to explain this one than what it was in August-September where you had cuts in Saudi and less out of Iraq. To us, it looks like the volumes are still high, and in quiet periods when activity is low, some older ships are being fixed and you get some pressure on the rates. Last week, we saw very, very few modern ships being fixed out of the Middle East. It was mostly old ships. People get nervous, fix [indiscernible] quickly, and from my experience what we’ve seen in the last couple of weeks, in the normal scenario because I can’t see--I can’t see the volumes [indiscernible], and normally in this scenario you’d see the market come back pretty quickly, and that’s what I expect.

And from what we read from brokers, there haven’t been many charters for loading in the middle, or after the middle of March, which is approaching - it’s right around the corner. Are there any countries that they are withholding the cargoes in hope of higher oil prices, in hope of lower charter rates? Is it Kuwait, is it Iraq, Saudi Arabia? Can you pinpoint where the problem of the last week is exactly?

I think the cargoes have been sold, or been scheduled to the various customers, and I think a reason here is many of the charterers are holding back the volumes. I expect there to be quite a number of cargoes left here, and over the next couple of weeks it will be more active. The simple strategy of holding back cargoes makes the market nervous, rates fall, but at some point you will have to fix a ship to cover your inquiry and thus I expect more activity going forward.

So just in summary, I don’t think that you see any supply cut from the Middle East or any reason to be bearish on time [indiscernible] or bullish on crude prices. Can you explain to us the relationship and how crude prices can impact the oil tanker market?

Well, the crude price is an important factor when looking at oil demand, but in the present price environment, I think the price of oil can move up quite a bit before it gets threatened.

Thank you, Robert. My last question is about your stock price and your capital allocation process. You have a dividend policy of giving effectively all your net income into dividends; however, your stock is trading below its liquidation value and at a quite steep discount. Is there anything that you can do there, potentially allocating some of your capital either through debt or from retained earnings, if possible, in order to buy back your stock?

Fotis, no, I think we will stick to our policy which we have stated with respect to dividend payments. We have no plans of changing that, so that is what we are going to do going forward.

That’s very helpful. Thank you, Inger.

Thank you. We are going to take our next question from Gregory Lewis from Credit Suisse. Please go ahead, your line is open.

Yes, thank you and good afternoon. In the prepared comments in the presentation, it was touched briefly about the financings of the new builds. Clearly given the dividend policy, the balance sheet is going to be the primary source of funding the remaining 26 new builds. Just as we think about that, if you could give us an update - I mean, generally speaking, just looking at the Norwegian banks and even over in Asia, it seems like liquidity is becoming harder to get, harder to access. Just how comfortable are you - I mean, it seems like, hey, we’re willing to wait and see how the market develops and go get our financing closer to delivery, but is there any benefit from just, hey, the market’s open right now, the banks are willing to lend you money, maybe it’s a little bit more expensive today than it might be just carrying that on the balance sheet, but could that be the prudent thing to do, just in case six to 12 months from now the financings aren’t available?

I would say that--so you are referring to that it might be that it’s a bit more constrained, the capital that you can get from banks now, but so far at least, we haven’t seen anything to this. We have great support from our banks, both here in Europe and in Asia, so we don’t feel any, let’s say, rush in doing this. But at the same time, I think that we have already been thinking about and preparing for putting this in place, so I probably believe that we will do it a bit earlier than we usually have done before then. But yes, we are confident that we will get it in place, so this is no concern that we have.

Okay, great, and then just one follow-up from me. We mentioned in the presentation about discrimination for 20-year-old vessels, and I understand that does happen but it seems generally in strong markets, which is what seems to be your theme’s base case, I feel like during the last cycle we saw single haul VLCCs coming into the U.S. Gulf of Mexico, and it seems like when rates are good, these certain discriminatory thresholds sort of get pushed to the side. So I’m just kind of curious - as you view 20-year-old VLCCs, do you view their--your base case is that there really is no market for VLCCs once they come over 20 years old, and they just have to go on storage?

Yes, it is virtually impossible to trade and give your customers the options they require. In a very small number of instances, you can go from a named port to a named port, i.e. the deal is 100% done from a load port to a [indiscernible] port, but it’s very, very difficult to trade, and as we see it, they will mostly go onto permanent storage or be converted for other projects. As I said earlier when it comes to the plus-15, it’s also important to look at how rules and regulations are affecting that segment. The oil companies are getting stricter and stricter, and we are--for example, if we have a ship east of Suez, to take that ship west, if she’s over 15, we really have--we really think about it long and hard because in the west especially and then going back east, a 15-plus ship will not be preferred. So I think the aging of the fleet and the requirements and rules and regulations from our customers is a very important factor when looking at the order book and the development of the fleet.

Okay, great, so just one follow-up from me on that. So as we think about VLCCs or, I guess, any tanker at this point, historically they’ve been depreciated at around 25 years. Based on your comments, it sounds like that’s come in to around 15 to 20 years. Is that the right way to think about it?

With respect to the accounting, depreciation on these vessels, I don’t think that will change. I mean, that has been a policy for all the tanker companies for a very long time, and even though the vessels probably move out of trading and move into, let’s say, permanent storage, it’s still a live vessel so it will still be depreciated after that.

Okay, perfect. Thank you guys very much. Have a great day.

We are going to take our next question from Peter Testa from One Investment. Please go ahead, your line is open.

Yes, I just wanted to explore your point about there being a disconnect between asset values and earnings in the short term as, say, a potential opportunity versus significant supply as a potential threat, and just think about how you think about opportunities in the market to behave corporately with those two contrasting statements.

Can you repeat that, please?

Sure. You made the point that there’s a disconnect between asset values and earnings, that asset values are not reflected in the earnings space, and you also talked about significant supply. I’m just trying to think--see if you could help us understand strategically how you’d take advantage, or what you can do to take advantage of opportunities in that market, either with regards to your fleet, with regards to other corporate entities, just thinking about you marry those two issues together when thinking about your strategic and corporate ambitions.

Yeah, sure. So with the fall in asset prices, the returns that you can obtain in the market have improved a lot over the last year or so, so what we’re saying here is that it could create opportunities that you can buy assets out there and get a good return. At the same time, the charter length you can obtain is longer than what it’s been, so you can lock in your earnings. So it’s something that we’re watching to see when the opportunity is right. For the time being, the length of ships for sale is increasing and prices have kept coming off, so it’s all about timing it and we’re watching this closely.

But are there any particular thresholds, or for example do you want to see how the market trades through the higher supply later this year before taking any actions? How do you sort of figure that out?

In an ideal scenario, you would want the time charter market to move--the length to move to three and five years and the asset prices to keep falling, and then sort of lock in a cheap ship against a long charter. So it’s all about timing here, but it depends on how the markets develop over the summer.

Okay, thank you.

We are going to take our next question from Jonathan Staubo from Fearnley. Please go ahead, your line is open.

Hi guys. I was just wondering about your LR2 fleet. With the rates, which was very high for the fourth quarter, was that trading primarily in the dirty markets, and how do you look on this going forward?

It was, as we are in Q1 on the guide, it’s on few vessel days. I think overall, we’re talking 120, 130 days, so a ship and a half, and the ships were trading clean only. The market was strong where you took gasol and jet fuel from Asia to Europe and then you’d bring naphtha back, so you’d have a laden leg both ways and things were--yeah, it was a strong market. And what we did during this strong market was to secure employment forward. The strong market gave opportunity to do two-year charters, and we did just that.

Perfect, thanks a lot. That’s it for me.

Thank you. We are going to take our next question from Mike Webber from Wells Fargo. Please go ahead, your line is open.

Hey, good morning guys. How are you?

Hi Mike.

We’re fine, thanks.

Robert, a lot of this has already been touched on, but I do want to touch on storage and I guess first on asset values. We saw a print, I guess it was a day or two ago, with a 5-year-old V going for around $75 million, and that disconnect between earnings and asset values actually just continuing, actually widening still, which is a bit surprising, at least at some level. I’m just curious - I guess when you think about strategic options here and platforms across the space and your ability continue consolidating the tanker space, do you see some of the value proposition that might be presented by platforms trading below kind of street NAV? Do you see that getting eroded right now, or do you have--when you guys look across platforms right now and then things that are trading at 0.5 or 0.6 times NAV, how much--I guess, given the disconnect, how much certainty do you put into that price NAV multiple in terms of where the true value will actually end up landing? I’m just curious how you think about that specifically within this kind of environment.

I think with the ships in this--as you say, $75 million just done, and there is pressure, but overall I think the focus will go from NAV over to looking at earnings as well. What’s happened over the last six months is the number of ships for sale have increased, the crisis in other parts of the industry which has led to this and people want to sell out of a good market to use that cash elsewhere. So it keeps putting pressure on--but when it comes to the pricing here, I think the pricing in general and how the platforms are priced, I think after what we’ve seen so far this year, I wouldn’t be surprised if that takes back some of what’s lost.

Sure. Maybe just kind of coming at that a different way, when I think about the current asset curve, how close to a clearing point do you think we are for all those vessels that are for sale here? I mean, with assets coming down now kind of well below mid-cycle levels--well below mid-cycle levels at this point, how close do you think we are to that market actually finding a clearing mechanism?

I am surprised we’re as low as we are now, but at the same time, there are incredibly few buyers out there, so I’m not going to say that we’ve reached a floor but I don’t think we’re far from it. It’s a very, very tough call because to be very frank, I didn’t expect us to come down to this level given the strength of the market and the strong outlook.

Got you, okay. That’s helpful. I wanted to touch on floating storage. I think you already kind of highlighted the crude already, and it certainly seems like the pipeline [indiscernible] kind of narrowed the Brent time spread a bit. I guess when you think about that, do you think that’s--one, has that materially hurt the potential for floating storage, at least through the end of March when they can get that fixed, and then I guess maybe on the flipside when we think about product, we’re already seeing record inventory levels but [indiscernible] certainly [indiscernible] kind of continued float storage on the product side, I’m just curious as to whether the focus should really be on floating storage for product as opposed to crude at this point.

I think on the products, what we’re seeing is that--well, basically we’re seeing that gasoline has extremely good demand whilst diesel is the product that’s suffering, and this when you refine a barrel then around 38 to 40% is diesel whilst looking at gasoline, looking at China for example where you have very high demand of 7% [indiscernible] to this year. So diesel, I would expect there could be some storage, but it’s difficult to call this of course because the forward pricing changes all the time. Looking at crude, for example, the change in the contango is every day we’re moving, so it’s flattening out in a very low oil price environment. So all this, as I said, I’m not an oil trader and even if I was, it would be a difficult one to call going forward.

Right, fair enough. Just one more for me and I’ll turn it over. Inger, you mentioned in an earlier answer that you thought the financing markets are still there for you guys in terms of the order book. I’m just curious if you have had any preliminary conversations, whether you’re seeing any sort of change in advance ratios or terms, or if there’s any kind of nuanced detail you can give us, just to give us a sense of how that market is evolving if it’s not shut at this point.

The one comment I can give is that based on the discussions we have had lately, my impression is that we are not in a situation that we are looking at any kind of, let’s say, [indiscernible] terms than we have already done, so I am positive with respect to that going forward, no problem at all.

Okay, that’s helpful. Guys, thanks for the time.

Thank you.

We are going to take our next question from Amit Mehrotra from Deutsche Bank. Please go ahead, your line is open.

Yes, thank you very much. Afternoon, everybody. So just had a follow-up on the previous commentary. Everyone, I guess including us, has been talking about the disconnect between public equity values and net asset values, and it’s sort of been the drumbeat for over a year now. But the question is, what do you think the chances are that the market actually maybe has it right and we are wrong? Obviously it’s all related to spot and time charter rates over time, and Michael noted the VLCC second-hand deal that was down at a slightly lower level than maybe we would have thought even a week prior. So the question is really at the end of the day, is there increased concern or fear out there for crude tanker ship owners, and if so, could we actually see maybe a small leg down in asset values from where we are today in time charter rates, and just maybe an overall re-rating of the market based on sort of where owners’ sentiment is at this point?

I think these various markets are all connected, so you have the spot market, you have the time charter market, and then you have the asset values. The asset values have been disconnected from the two others for reasons we talked about earlier. So I think the place to start if you’re looking forward and what owners think about the market, for us, we have a strong outlook view on the market. We’ll remain in a high supply environment of crude oil, i.e. high demand of tankers. We’ll have the--the delays will be high as they are now and even increasing, because we don’t think that investing in the infrastructure in ports around the world is going to happen overnight, so we think we are heading into a much, much better period than what we have in the previous five. We think that the Asian--in terms of the yards, obviously there’s unlimited capacity, but with the number of ships for sale here and the values where they are now, and the returns available that this gives, we expect the second-hand market will have to have much more transactions and activity before we start ordering more ships. This means that if you look at the graph I presented earlier on the order book, then this could make 2018 and 2019 quite interesting with the number of ships that hit the 20-year mark then, and suddenly the whole situation in terms of oversupply of tonnage, which is what everybody is concerned about, of course, the outlook is not that bad. So in short, that’s where we are, and we are optimistic here going forward.

Okay, and then just in your previous comment when you said that there are very few buyers out there, just wanted to get a little bit more color on that because the market is obviously very fragmented, and I think obviously you guys have a better view on it in terms of what the individual owner is thinking. Are there no buyers because--or few buyers because owners don’t want to essentially put equity capital at risk in the current environment for several different reasons, or is that they can’t find a partner unless you’re sort of this really large, well capitalized player to actually sort of give you some financing to be a bigger player in the market?

I think all you mentioned there are important factors, but also you’re looking at a market here that’s been coming off every month for the last 15, 16 months, so there’s a downward trend and what could well be the case is that suddenly we start seeing a floor, and then the activity comes back. But it depends how much capital is available to go in and what people’s belief is going forward.

Okay. One last question from me. I appreciated your remarks on the market - I thought they were pretty fair and balanced with respect to your comments about 100 ships or actually a little less than 100 new VLCCs and Suezmaxes that are hitting the water by the end of next year. It seems like most companies and investors are still very bullish on the market, and that sort of bullishness is, I guess, underpinned by the demand side of the equation. I just wanted to ask you more about that, because last year was, I guess for the demand side, sort of a Goldilocks period particularly given the pull from the refineries vis-à-vis margins and what those looked like last year, and what they look like now. So to be able to absorb all that incremental supply starting in the back half of this year, I’ve got to assume demand, the thesis is that the demand stays strong or even gets stronger as we progress through this year. Is that sort of the view that you think you have to take in order to be more positive on the market relative to sort of last year’s very, very strong demand environment?

I think demand will keep performing. Back to what I said on gasoline earlier - a strong driver and I think the EA had a projection of 1.2 million barrels for this year. We think it will be better than that - we think it will be about 1.5, and this obviously is an important factor. It’s one of the main reasons why we think the market will be good going forward.

Okay, great. Thanks a lot. Appreciate it.

Thank you.

We are going to take our next question from Charles Rupinski from Seaport Global.

Good morning and thank you for taking my question. Just wanted to ask--I appreciate all the color on the macro. I had just one follow-up call on the macro on storage and potentially vessel speeds. I’m wondering what you’re seeing in terms of vessel speeds and whether they’ve been speeding up much lately or not in terms of the fact that we’ve had a bit of a glut, and it has sort of been a headwind as far as not having vessel speeds move faster. The second question is are you seeing any inquiries for storage, or at least some rumblings about storage in the U.S. Gulf either for contango, which is WTI contango, or potentially just because there’s an overflow of land--or sorry, less land storage available in the U.S., and what logistical issues would be there? That’s the main questions, thanks.

To take the speed first, the speed of the fleet went down--it headed down certainly in August-September ’15, it went down, but it was quickly put up and we’ve stayed at normal speeds since then. I think there might be some slowing down coming up, but we haven’t done it yet. The recent fall is very recent, and as you can still see from our fixtures in Q1, we’re fixed forward here, so we’re performing voyages at agreed prices--at agreed speeds. So no change there, but that could come up. One comment about speed which I think is worth mentioning, is that as we get the new buildings delivered, the new buildings that we get on service here are ships with eco engines, which also will have slightly lower speed capacity, so as the fleet now renews you will see that the flexibility in the average speed is dropping. It’s only slightly, but I thought I’d make the comment. When it comes to storage, I haven’t seen any specific in terms of U.S. Gulf, more inquiries, so I can’t give you a good answer there. But what I can say is when it comes to storing there and going into ports, it’s more difficult in the bigger ships. It’s a big market for the Aframaxes in terms of lightering and bringing cargoes in or out, so that’s where that is.

Great, well very helpful, and thanks for the color. Thank you very much.

Thank you.

Thank you. We are going to take our next question from Peter Testa from One Investment. Please go ahead, your line is open.

Hi, thank you. I just had two follow-ups on the demand side, just to get your view on two maybe [indiscernible] subjects. First is on Iran, and as the Iranian transport mix works its way into the market, how you feel that matures as, for example, they look to transport oil to Amsterdam and so on, how you think that matures as a source of tanker demand from the initial appearance in the market. The second is following your comment on the two-way flow the market expects to develop out of the U.S., just some sort of context how you see that building as a demand source through the year, based upon your analysis.

Yes, so to take Iran first, in terms of the volumes, pre-sanctions being lifted, they had production of about 2.8 million barrels a day. Their domestic refineries consume about 1.8, so there’s a million barrels left to export, which they did on their own ships. Now, post-sanctions the volume available in 2016 looks to be somewhere between--to us at least, somewhere between 1.5 to 2 million barrels. When it comes to Frontline, we have not lifted anything yet. There are still--in terms of insurance and payments, there are still some outstandings, and we expect that to be in place within two to three months. Again, that could change, but two to three months is our estimate. What we think is at this port in place, we think the--with their fleet, with the number of ships they have on storage which they will have to remain on storage because they don’t have the land facilities, we expect the chartering requirements from Iran to then increase and for them to fix international tonnage in and then, in other words, take out capacity from the tanker fleet. When it comes to the U.S., it’s more difficult in terms of volumes. As I said earlier, they are--they’re net short, so any exports would then need to be replaced by an import, and we’re seeing the light crude going out. Europe’s been a destination along with Latin America, and as we saw in the summer of ’15, which held the VLCC market at good levels, the imports from the Middle East are high and I think that could be the replacement barrel.

Okay, but when you put together your own view on tanker demand, do you have a thought you could add in terms of how you think that U.S. mix development will help it, or a range of scenarios that you’re working with?

I think it’s more we’re looking at a ton-mile effect, and this is obviously a positive factor.

Sure, okay, but nothing to quantify in your view?

I can’t give you a percentage because it’s early days, and these volumes, because of how the oil trading world works, things change and it’s difficult to quantify it.

Of course, okay. Thank you.

Thank you. There are no further questions.

Okay, thank you very much. We appreciate the high number of callers on this earnings call. Thank you very much for calling in, and I would also like to take the opportunity to thank everyone at Frontline for their great efforts. Thank you very much everyone.