Frontline turns higher after reporting mixed Q2; offloads oldest suezmax

Frontline (NYSE:FRO) +1.2% in Friday's trading, pushing into positive territory after reporting mixed Q2 results, with adjusted earnings missing estimates and revenues that topped expectations, while also expecting spot time charter equivalent earnings for Q3 to come in below spot TCEs currently contracted due to the impact of ballast days during Q3.

Q2 profit of $77.5M, or $0.35/share, fell 59% from $0.84/share in the year-earlier quarter but gained from $0.15/share in Q1, while revenues of $480.1M fell 14% from $556M a year ago but gained 12% from $427.9M in Q1.

Q2 average daily spot time charter equivalent earnings of $43,100 for VLCCs, $38,900 for Suezmax tankers, and $29,300 for LR2/Aframax tankers, with total TCE earnings rising to $283M from $241M in Q1.

The company also announced an agreement to sell its oldest Suezmax tanker, built in 2011, to an undisclosed buyer for $36.4M, which is expected to generate $23.7M in Q3 net cash proceeds and a $6M gain from the sale.

As of the end of Q2, Frontline's (NYSE:FRO) fleet totaled 81 vessels with an average age of 7.1 years, including 22 suezmaxes.

Q3 "rate bookings exclude ballasting days and hence the full TCE for the quarter will be lower, though the bookings screens soft regardless," Fearnley analysts Fredrik Dybwad and Nils Thommesen said in a note, forecasting Q3 earnings coming in ~$0.30/share vs. $0.41/share consensus.

"With the cat out of the bag and rates gaining momentum on the tail-end of 3Q and into Q4, we believe a potential negative reaction in the share price in the coming days [is] an enticing opportunity ahead of what likely will be a much better Q4," the Fearnley analysts wrote.