Ladies and gentlemen, thank you for standing by, and welcome to the Frontline 2020 Q1 Limited Earnings Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session, at which time, if you do wish to ask a question, you will need to press star one on your telephone keypad and wait for your name to be announced. I must advise you the conference is being recorded today, Wednesday the 20th of May, 2020. I would now like to hand the conference over to our speaker today, Robert Macleod. Thank you, and please go ahead, sir.
Thank you very much. Good morning and good afternoon, everyone. First of all, apologies for the delay in starting the call, which was due to some technical difficulties. First, to kick off the call, I would like to express gratitude towards our shore staff and our crew members for their extraordinary efforts and dedication. They are clearly critical factors to our strong results. Frontline's performance in the first quarter of 2020 was the strongest since 2008, and we have made solid bookings for the second quarter. The year has been extraordinary. Quite a rollercoaster ride, but tanker earnings have been very strong amidst an unprecedented world situation. Let's kick off by moving to slide three, please, and quickly look at the highlights from Q1. Net income of $165.3 million or $0.84 per share, certainly a solid quarter. Adjusted for non-cash items, the net income was $179.3 million.
The $7.1 million profits related to the five profit Suezmaxes are not included in these figures. Frontline declares a $0.70 dividend. The last dividend paid was $0.40 for Q4 of 2019. The VLCCs made around $75,000 in Q1, and we have booked 75% at $92.5 for Q2. Suezmax has made $57,000 in Q1, and we have booked just over 60% of Q2, just shy of $72,000. LR2s made just over $30,000 in Q1 and are just over 50% done of Q2 at around $50,000. On the finance side, we closed the $544 million ICBC facility for the 10 Suezmaxes. Before discussing the tanker markets, I would like to hand the call over to Inger. Please take us through the financials.
Thanks, Robert. Good morning and good afternoon, ladies and gentlemen. Let's then turn to slide four, and then we can look at the income statement. We achieved total operating revenues, net of voyage expenses of $289 million. EBITDA, adjusted for certain non-cash items of $234 million in the first quarter. Frontline reports a net income of $165.3 million, equivalent to $0.84 per share. Net income adjusted for certain non-cash items of $179.3 million, equivalent to $0.91 per share in the first quarter. The net income in the first quarter excludes the $7.1 million of net cash received and accrued profit share in relation to the five charter in and charter out agreements with Trafigura that have been treated as a reduction of the acquisition cost of the vessels instead.
The non-cash items this quarter was net $14 million in total and consisted of $5.4 million unrealized loss on marketable securities, a $15.8 million loss on derivatives, a $1.2 million gain related to our equity method investments, a $1.8 million gain on settlement of claim, and a $4.2 million gain on termination of the lease of Front Hakata. The first quarter shows an increase compared to the fourth quarter of 2019 of $70 million against adjusted EBITDA and an increase of $72 million against adjusted net income. The increase in net income in the first quarter of $72 million is mainly explained by the increase in results on time charter basis due to the higher reported TCE rates in the first quarter compared to the previous quarter. Let us take a look at the balance sheet on slide five.
Changes to the balance sheet as of the end of March 2020 compared to December 31st, 2019, mainly relate to an increase in cash and cash equivalents of $54 million, which is the net effect of CapEx payments, repayment of debts, drawdown of debts, cash flow from operation, and dividend payments. We had an increase in new building of $21 million explained by installments paid in the quarter. We had an increase in vessels of $278 million related to the five vessels on TC out to Trafigura, which we recorded on the balance sheet when closing of the acquisition took place on March 16 this year. We had an increase in short and long-term debts of $484 million due to drawdown on the $544 million facility with ICBCL, offset by repayments this quarter. We had a decrease in short and long-term debt.
I'm sorry, short and long-term obligations under finance leases of $298 million, primarily due to the five Trafigura vessels moved to owned vessels at closing March 16th, 2020. Sorry. We had an increase in equity of $94 million, mainly due to the net income for the quarter offset by cash dividend. Sorry. As of March 31st, 2020, Frontline has $392 million in cash and cash equivalents, including the undrawn amounts under our unsecured loan facility and marketable securities and minimum cash requirements. Our remaining newbuilding CapEx requirements at the end of March amounted to $282 million and related to one Suezmax tanker, which we took delivery of on May 19, and one VLCC expected to be delivered in June 2020. Four LR2 tankers expected to be delivered in January, March, and October 2021 and January 2022 respectively.
We estimate approximately $239 million in debt capacity for these newbuildings, whereof we drew down $42 million under a term loan facility with Credit Suisse entered into in November 2019 in May to finance the delivery of Suezmax tanker from [inaudible]. The short-term part or long-term debt includes approximately $310 million debt maturity of the $500 million facility which matures in December 2020. Approximately $40 million debt maturity of the $60.6 million facility which matures in March 2021. We are in the process of refinancing the $500 million facility, and we have signed a term facility with Nordea in May this year in an amount of $50 million to refinance the $40 million maturing in March 2021. In March 2020, as Robert mentioned, we did sign the sale and leaseback agreement with ICBC for $544 million.
In April 2020, we repaid $60 million of our $275 million senior unsecured facility agreement with an affiliate of Hemen. Up to $215 million remains now available under the facility following these two payments. In May, finally, we signed a senior secured term loan facility with Crédit Agricole in an amount of up to $62.5 million to part-finance the VLCC that we have under construction at Hyundai. Let's then take a closer look at cash breakeven rates and OpEx on slide six. We estimate average cash cost breakeven rates for 2020 were approximately $22,000 per day for VLCCs, $18,600 per day for Suezmax tankers, and $15,000 per day for the LR2 tankers. The fleet average is estimated to be about $18,600 per day.
These rates are the all-in daily rates that our vessels must earn to cover the budgeted operating costs and drydock, the estimated interest expenses, time charter and bareboat hire, installments on loans, and D&A expenses. In the graph on the right-hand side of this slide, we have shown incremental cash flow after debt service per year and per share, assuming $10,000 per day, $20,000, $30,000 or $40,000 per day in achieved rates in excess of our cash breakeven rate irrespectively. These numbers include the vessels on time charter out, We are looking at a period of 365 days from April 1st, 2020. As an example, with a fleet average cash cost breakeven rate of $18,600 per day and assuming $30,000 on top, the average fleet TCE rate would be $48,600 per day. Frontline would, in this scenario, generate a cash flow per share after debt service of $3.55.
With this, I leave the word to Robert again.
Perfect. Thank you very much, Inger. Let's move to slide seven, please. The first quarter was certainly a volatile one. As the COVID-19 pandemic swept across the globe, traditional drivers like ton miles and refinery runs were disregarded as a new powerful dynamic emerged. As crude oil imports to China began to decrease, the market turned sharply upwards as expected production cuts did not materialize, and instead Saudi Arabia, Russia, and the UAE increased outputs. In the freight market, we witnessed the busiest chartering period I have seen in my career as charters were scrambling for tonnage. With a rapid decline in global oil consumption due to lockdowns across the globe, oil production was soon well in excess of demand. Under normal circumstances, a drop in demand might lead to lower freight rates. This time it led to a search for places to store.
On ships was one solution. These were not normal circumstances, and the speed and the severity of the drop had an opposite impact on tanker rates as a record increase on oil on water saw freight rates firm significantly. In the chart in the slide, we see how demand has retracted faster than production cuts, implying inventories being built at an unprecedented rate, both on land and water. These moves in the global oil trade have happened very quickly. Freight developments going forward is linked to how fast demand recovers and to what degree and how quickly production returns. This is obviously very hard to predict. I'll get back to this on the final slide, but let's first look at the global fleet capacity. To slide eight, please. The global fleet capacity growth is slowing.
Global tanker fleet growth is a key driver of long-term earnings, and the order book is at a level not seen since 1997. Various factors support our expectation that order books will remain low over the next 24 months. In addition to the historically low order book, it is worth noting that 24% of the old fleet is above 15 years this year. Customers versus modern tonnage is only increasing, and that puts Frontline's fleet in a great position. We also expect vessel off hire to continue to have a material impact on fleet capacities this year as a large number of vessels are due for periodic dry dock, and quite a few of the vessels due have recently been granted short extensions, but this is temporary postponement only. The surveys must be carried out.
All eyes are currently on inventory draws, vessel supply could be a big surprise in the second half of 2020 and into 2021. We watch it very closely. Moving on to the present market and a bit of outlook. Oil demand has been described as destroyed in recent months. We think suppressed describes the situation more accurately, as we believe the decrease in oil demand is temporary. The recent production cuts have been both immediate and real, absolutely no doubts, and have affected the freight levels negatively. On the oil demand, there has been surprises in recent weeks. Chinese gasoline demand above 2019 figures and recent figures from India also shows a sharp recovery in gasoline sales. Not surprisingly, Asia leads the way on demand recovery, whilst the U.S. is likely to recover faster than Europe.
Over to floating storage, we currently estimate around 200 million barrels floating. We might be close to the peak. We expect to see an unwind of floating storage during the balance of 2020. Aframaxes in Europe are likely to be the first ones to unload. Some have already done so, whilst VLCCs are likely to be locked up on a longer structure. It is pure speculation, of course. Given recent news on the demand side, we could see production cuts reverse as early as during second half of 2020. One fact can be stated. Volatility will continue forward, going forward, sorry, very much like the year so far. In conclusion, Frontline enjoys the youngest fleet and lowest break-even level in the history of the company. 2020 is shaping up to be a great year for Frontline and its shareholders.
With that, Operator, I would like to turn over to questions, please.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. That is star and 1 to ask a question and the hash key to cancel. Thank you. Your first question comes from the line of Jon Chappell of Evercore. Please ask your question.
Thank you. Good morning, or good afternoon, and good afternoon, Inger. Three questions for you today. Hopefully, they'll all be relatively quick. Rob, you guys do a great job explaining the accounting on the quarter to date and kind of how that plays out. The 75% that you've done at over $90,000 a day, can you just kind of help us frame what we should be thinking about in the next 25%? Obviously, the market's come down, but there's always these ballast days. If we look at Q1 and we took what you had to date, and then we back into the $74.8, it looks like it was actually negative for the last 17% of the day. I'm not asking for guidance or the exact number, but is it closer to what the Q2 is today? Is it closer to zero? Is it somewhere in between?
Just so we can frame how the second quarter will kind of shake out.
Yeah. Obviously, it's difficult to predict there, but it will be some ballast days at the end of the quarter, which will take it down. It will also be taken down a bit by that the current rates are weaker than what we so far for the 75% has contracted. To give you an exact number or anything, that's difficult or that's not possible in a way. Sorry about that.
Yeah. No, that's okay. Maybe another way to ask it is, the ballast days that you foresee for the rest of Q2, would it be similar to a normal end of quarter? Are there more? Are there less?
It does vary.
Maybe there's a way to frame that.
The number of ballast days do vary between the quarters. For this quarter, it was quite high, actually. It was 390 ballast days for the VLCCs, as an example. That was up from the previous quarter.
Okay. That's helpful. Rob, on the fleet side, obviously something that we're watching very closely and have been very hopeful to set up the next real sustainable recovery, not just the blitz. I heard earlier this week that the Korean yards are becoming a bit desperate. We were hopeful that they would be filled up with LNG carriers from Qatar. We're hearing they're becoming a bit more desperate on the VLCC front. Can you confirm or deny whether you've been hearing from the yards? Then also, Frontline and your larger shareholders specifically have been early on ordering at attractive prices. What's your appetite to order ships today if the Koreans are really becoming aggressive on pricing?
The yards have, over time, have been, I wouldn't say desperate, but the price has come down and we've seen there's virtually been no ordering here lately. When it comes to Frontline and our interest, we have a constructive view of the tanker market in 2020 and 2021. Our interest in the further out in 2022 when there are resales available and other opportunities then, I think that will take the main focus and ordering newbuildings there is not on our radar.
Okay, thanks. Just the last one. I don't think anybody is worried about Frontline's ability to get credit facilities given your relationship with European banks. $310 million is a pretty big chunk at a time where the world is pretty uncertain right now and banks are under pressure. What should we think about as far as the timing of that refinancing ahead of December 2020? How deep are the discussions? The $100 million ATM that you put in the press release, obviously you said you wouldn't do it at today's prices, but is that something you're thinking about putting in place just in case the financing market becomes very difficult in this uncertain time?
I think it's very easy in terms of the backing of the company and Mr. Fredriksen and the access to finance, we have absolutely full confidence. The ATM is not linked to this in no shape or form. The ATM is sort of a housekeeping. It's a tool that we had in the past. As we clearly state, it's not something we would even think about using at the current share price.
No, to answer your question also, as I referred to, we did recently do a couple of financings in the market. We did the refinancing of this Nordea facility. We don't really have any concern about not being able to refinance the $500 million facility either. It's only a matter of trying to, let's say, maximize or improve the terms as best as possible in a way. The financing is there, so no problem.
Great. Thank you, Inger. Thanks, Rob.
Thank you. Your next question comes from the line of Randy Giveans of Jefferies. Please ask your question.
Howdy, Robert and Inger. How are you?
We're fine. What about you?
Oh, doing well. Yeah.
Thank you.
A few quick questions here. For the fourth quarter, you announced a dividend of $0.40 based on the $0.60 EPS. About 66% of that first quarter announced a dividend of $0.70 on EPS of, let's call it $0.91, around 75% there. Do you have a defined kind of dividend policy going forward? Just trying to think about 2Q and beyond.
Our dividend policy has not changed in a way. We do have the statement on our website which says that we are in a way there to pay broadly the excess cash flow or equal to or close to. The board also of course also have the possibility to decide to low risk in a way. What we have to take into account is of course the CapEx program that we have going on at any point in time, and any other adjustments which needs to be taken into consideration, non-cash items. I guess that's more or less how it is.
Okay. For 2Q 2020, should we expect similar, at least 50%-60% of kind of EPS there?
Sorry, didn't really get the question there.
For the second quarter, is it fair to expect another 50% or higher, 60% of EPS?
I think for the second quarter there, Randy, we will see what the board comes up and decides in August. Looking at the history of the company, we are now well above $6 billion paid out since the U.S. listing. I think the company and the board has no intention to change this history and track record. We want to keep building on it. Looking at the company and looking at where we are in our cash break evens, looking at how we have done on the time charters recently, and also with our constructive view of the market, and with a fleet of an average age just over four years, I think we have got every possibility here to perform well going forward. Looking at track record, I think is the best way to answer your question.
Okay. Looking at your Aframax LR2s, for most of the first quarter, Aframax crude tanker rates outperformed LR2s. In April, the crude rates kind of fell off, but LR2s hit all-time highs. Currently, how many of your LR2 products tankers are operating in the crude or dirty trade? If you can kind of talk to that market a little bit, what has caused that rate spike, and then the subsequent rate decline back to maybe $40,000 a day.
Yeah, that's a very good and relevant question. What you're stating was actually also the case for the second half of 2019. The Aframaxes were outperforming the LR2s, and there were definitely times where I was kicking myself for not having gone dirty on more LR2s. Between the two segments, obviously we have 18 LR2s in total. We're trading 11 clean and seven dirty, which fortunately now in recent months, the LR2s have sort of crawled back in terms of the earnings. Not having looked at the exact numbers, but they're probably going to be not far off being on par with what's happened recently. The LR2 market, I find it very difficult to even comment on how it's been going over the last couple of months. I've never seen anything like it.
I would describe the LR2 spike to be more extreme, in relative terms, than what the VLCC spike was. There's a lot of delays in that segment. In terms of number of LR2s, the fleet size is only 23%-24% of the VLCC in terms of numbers. As soon as you have a lot of ships delayed or held up on storage or poor storage, then you get these mega spikes. I think the very, very high rates, as we had on the VLCCs as well, only happen on a handful of fixtures. Over the last month or two, it's been extraordinary. It's now stabilizing, but still, it is at very healthy levels. It's very, very difficult to predict how this is going to carry on.
It looks like, although there are signs of, as I was saying earlier, that the demand is coming back, especially in Asia, then Europe and the U.S. will still be struggling. You will have ships being forced to store for quite some time.
Sure. What's your split there for your Aframax LR2s in terms of crude versus clean?
11 LR2, seven Afra.
11 LR2, seven Afra. Excellent. Last quick question for the Hemen facility. Looks like you paid down half of that from $120 down to maybe $60 million. Is the plan to repay the remainder during the second quarter?
Yeah. We're going from 120 to 60. Further down payments have not been decided, but we will revert on that when that comes up.
Thank you, sir. Does that answer your question?
Yep. That's it for me. Thank you so much.
Thank you. Your next question comes from the line of Greg Lewis of BTIG. Please ask your question.
Yes. Thank you and good morning, good afternoon, everybody. Rob, you mentioned some of the vessels at shipyards that are under construction. Clearly, some of those are obviously owned by stronger hands, some of those are owned in weaker hands. It's been an interesting, pick your adjective, to describe the first thus far of 2020. What is kind of the appetite then from potential sellers of tonnage? How has that changed or has that changed over the last few weeks as kind of, it looks like now we've kind of settled into just a firm, solid market with these around $50,000 a day. We're not seeing those headline $200,000 rates, but still an attractive market. Has that kind of loosened up or caused any more interest or pickup in maybe not actual physical deals closing, but activity or inquiries interest in the S&P market?
You're touching on something very interesting, Craig. I've not seen anything like this. When it comes to S&P, what's happened so far this year has actually amazed me. The simple example is that normally when the freight market goes to levels where you can write down a purchase with more than $10 million or even 15 or 20 in a short span of time, there were periods there where one-year charters would write down a vessel by more than $20 million. Even at that point, we didn't see many transactions. There were ships offered for sale. We did have a look at a few. It's been a very strange market with very few things or transactions happening.
With the rate correction, which also corrects the write-down potential in the front, then we're now at very healthy levels still, as you described, but we are seeing very little activity. I'm also of the opinion that even if the yard prices will fall, then the number of deals will be low there as well. We mustn't forget that access to finance, as we discussed in the earlier question, and I think Frontline's access is superior, and it's never a problem or challenge for us. As an industry, this is more difficult, and this affects it. Also, as you say, quite a few strong hands sitting and probably happy to sit, if they share the same constructive view as we do.
Okay, great. Just one more from me. You kind of, I believe it was in the prepared remarks, might have been the Jonathan's one of his question, you talked about vessels going a little bit slower, and that's part of the reason why you decided to delay some of these scrubber installations. Just curious how we should be thinking about that. Clearly, fuel prices are low, it's not higher fuel prices that are driving slow steaming. Rates are firm. Just any kind of color you could give us around why we are still seeing slow steaming and maybe what's driving that.
I think slow steaming, congestion, and general delays, and then some is contango-driven, some is driven by lack of space onshore. All these factors, they build together, and they create this oil and water stat, which is up almost 20% this year in terms of how much oil is on the world tanker fleet. Going into each individual, I think it's very difficult to see how they affect the overall market. This oil and water, which gathers all the factors, I find quite useful. When it comes to the scrubber, then in actual fact, all we've done is that we've decided to leave the scrubber at our factory, only prepare during dry dock, only prepare the ship underwater. A small investment of less than $100,000.
When or if the fuel spread then returns, then we can go alongside and put the scrubber on and then start using it. The spread is obviously very much correlated to the crude flat price. When that comes up, then the spread will also increase. Time will show, but we thought it was prudent given where rates were when we decided, because this also means that the dry dock time decreases by two weeks. We thought it was the right decision. We can reverse it, but it looks to be the right, because as you're saying, we're still at pretty good levels here in terms of earnings.
Okay, great. Just really quick following up on that, do we have any sense and realize it's a moving target? I'm not sure how you, how Frontline tracks on the average speed of its fleet, but I don't know if we look at it on a month-over-month, week, daily. Is there any sense for how this average speed of the fleet has been trending over however you think about it?
No. Generally, the fleet speed has come down since we started with the eco speed. That's the speed flexibility of the fleet's come down due to the more economic engine with less power. The laden speed, i.e., the speed that we are contracted to perform voyages at, has not changed much. It's the ballast speed that is changing. Generally it's very simple. If the market is slow, you slow down to save some fuel. When it's high, like it's been recently, you rev up the engine to get to load ports as fast as you can. In actual fact, over a year, it doesn't make that big a difference. It's a knot or two, but then you look at how many on in ballast, and then you look at how many days the ship is laden or in port.
It's an important factor, but it's not a huge factor.
Okay, great. Hey, thanks Inger. Thanks, Rob, for the time.
Thank you. Your next question comes from the line of Omar Nokta of Clarksons. Please ask your question.
Thank you. Hi, Robert and Inger. Robert, towards the end of your opening remarks, you mentioned floating storage and how some of the Aframaxes have come off that storage, but VLCCs will likely stay a bit longer. From a market color perspective, presumably some of the VLCC charters you entered into had options for floating storage. Can you give a sense of the ships that you have on charter, whether they're in floating storage at the moment or if the charters have exercised options to do so?
It's a good question. Thanks, Omar. First, the Aframaxes we've seen about 35 million barrels at the peak in Europe. Some of that's been unwinded. On the VLCCs, then we've done charters, I think we've done five or six between six months and 12 months. These are time charters, so the charters are free to trade the ships as they wish. They're not pure storage charters. At the moment, I think we've got one Suezmax that has gone on storage, and we've got one that's about to start storing. That's it. We've got quite a few ships that are more the sort of forced storage where there's lack of tonnage and so forth. We'll see how it develops here.
What we are hearing is that some of our cargoes come free, but on the VLCCs, then there are some cargoes here that are likely to store through Q2 and Q3. Remember that, obviously, the traders are, in terms of risk here, flat price risk is not something they normally take. What's been happening here is that some cargoes have been sold at such heavy discounts, and the contango has been so strong that I would guess that some of them have hedged out the front of the curve, say the next two, three months. There might be people believing in demand really coming back and the Brent recovering here. You could see people waiting and for this curve to strengthen forward, because some of the timings on crude purchases were historic in recent weeks.
That's interesting. It's a good point. You're talking about the discounts from the Saudis and whatnot. It's not just simply looking at the front end of the curve and the back end of the six months. There's also the $5 or $10 discounts up front as well.
Yes, exactly. That was where you could really realize how tight the freight market was. There were distressed cargoes, and then suddenly someone got a ship that could make the dates in West Africa within the next five days or so, and then discounts of, as I say, five to $10 a barrel were offered. Then you put the recent jump in the flat price into it, then you can see that there are people that have oil floating here, which is deep in the money. There might be some of them that are willing to take the risk to move even deeper.
Yeah. Okay. Just how does it work, for instance, if for some reason the contango really does switch and they want to go shorter? If they want to unwind the floating storage, is there any impact at all on the charter that you have with them?
No, they would still have an obligation to keep the vessel on hire and pay us hire until the earliest redelivery date. What you'd see in that sort of circumstance is that they would then try to trade the ship in the spot market. Many of the guys that have put ships on storage are very familiar with the spot market having ships themselves. They would then go from being on storage to being normal spot players.
Yeah. Okay.
As I mentioned earlier in the presentation. Go back a month. We thought the peak in storage of oil on ships was going to be at a much higher level. What we're hearing now is that we might be close to it at 200 million barrels floating. The negative of that is that we are not enjoying the prolonged freight spike that we expected. We expect the crude price to be low and the contango to be strong for longer than what it was. On the flip side of that, it means that the crude inventory draw, which everybody's been talking about for the last month or two, being the sort of big animal that would sort of destroy the whole market, that volume will then be less. There's a flip side to the recent drop.
By that being less, then that means that our return to a more sort of normal freight market will be shorter.
Yeah. Thanks. Good. Thanks for that color, Robert. One other question I had is just on the, you referenced earlier the LR2s, 11 are trading clean, 7 are dirty. How are you thinking about the mix going forward? There was a lot of pressure last year to switch to dirty, there was a lot of talk about potentially dirty LR2s coming back to clean. How do you think about those ships from here, as we think about the next six months, for instance?
It depends on how the market develops here. Generally what we'll do on the dirty ships, then when we have opportunities to clean up in a cheap way, that will be by doing condensate cargoes and so forth, then we're likely to take those opportunities. I don't think there's going to be much change. The 11/7 split we've done for quite some time, and if I was to guess, then I think it's more likely that we'll go clean on one, and we'll go dirty on one. It's all down to how the market develops. The developments in the market so far this year, it's been a true roller coaster ride, and there's some mechanics here that are truly remarkable. This 35 million barrels floating in the North Sea or the continent, on Afras, and then being unwind.
We just have to pay very close attention, and then we don't have any problems with taking quick decisions on the chartering strategy.
Got it. All right. Very good. Thanks, Robert, for that. Appreciate it.
Thanks.
Thank you. Your next question comes from the line of George Burmann of CL Securities. Please ask your question.
Good afternoon. Thanks for taking my call. Congratulations to a great quarter. I've got a couple quick questions on your joint ventures. You have one with Clean Marine. Then recently in January, you did one in concert with Golden Ocean and Trafigura on, I guess, fuel supplies. It looks like each one of those added about $600,000 as your share of the gains. What are your plans for these two investments for the company? Are any of them looking to go public, or what kind of profits do you get out of those?
Thanks for the questions. Take the first one on the Clean Marine. We own about one-sixth of the company. It's a scrubber manufacturer. Scrubbers are not being sold at the moment, and that's why we've put our own at the factory, not taking them on the ships. That all depends on the fuel spread. The company's looking into alternatives, and we have a brand new factory that can produce many variable things. That's being looked at. It's a very small investment for Frontline, and we are a passive shareholder. No immediate plans there. The JV with Trafigura is a fuel JV, which has started off very successfully. It's securing fuel at the right price and the right quality and the right timing to our ships and also ships in the industry. It's been tremendous growth in that company.
I would say that's the best sort of IMO 2020 decision we made, was certainly joining forces with Trafigura, and Golden Ocean to form that company. We have high hopes for that, and it could be exciting times ahead for that company. I think what's important for the company, and us, is that we keep focusing on delivering, and then as growth comes on, we can put further plans. There's nothing in the pipeline on either of these two investments.
Okay. Referring to your current valuation in the stock market, it looks like a lot of the crude transportation companies, shipping companies, tanker companies are sort of afforded a extremely low valuation. Rather than acquiring new buildings or existing ships in the market, do you see any opportunities, maybe for a combination with other companies that are even less attractively valued than yours?
Yeah. We've looked for the few of the opportunities, and I think if there's any company that can consolidate, it's Frontline. We'll see what opportunities come up. For us, the most important thing is to keep working hard with our modern fleet. We have the big size, and you can see from the Q1 results that we return pretty happy returns to our shareholders here. I think that's going to be maintain our focus. Q2, we made solid bookings, so I think we're in a very good standing. Generally, I agree with you. If you look at the tanker companies in general, they're not being valued as linked to the earnings, it seems.
Yeah. It seems like we need to figure out a way to transport our oil via the cloud.
Exactly. Right.
Okay. Thanks very much, and look forward to your future.
Thank you.
Thank you. Once again, ladies and gentlemen, if you do wish to ask a question, please press star and one on your telephone keypad. If you wish to cancel the request, please press the hash key. Your next question comes from the line of John Reardon, he is a private investor. Please ask your question.
Good afternoon, Robert and Inger. I was wondering, the recent uptick in demand from China and now India, did that surprise you? Do you think that maybe they were playing catch up on lower inventories, or do you think that their current appetite is something that's going to happen going forward?
John, thanks for that. It's a very good question. It's extremely relevant, and unfortunately, I don't have the answer to it. I'll make a guess. My guess is that the demand destruction as described was not as deep as the analysts were projecting, and I think the return is coming quick. It could be, obviously, the U.S. data is normally more accurate. There's a trend, and we're getting it in from various places. It looks like Asia is coming back quickly, and the Chinese here on gasoline is encouraging. It could mean that the fall in demand was not as low and the pickup is indeed a V. Let's see. The oil market has certainly been difficult to predict here lately.
Okay. In closing, Inger, I detected in your comments that you have a sore throat. May I suggest a little hot tea with lemon? I think that'll help you recover. We need a healthy Inger out here.
Thank you very much.
Thank you. There are no further questions at this time. Please continue.
Thank you very much. I mean, with that last comment, I think it's a great way to round off. Also to apologize again for the delay in starting. You might also notice that the quality of the sound on the call here was not as it usually is. We'll make sure that doesn't happen next time. Thank you everyone for calling in. All the very best.
Thank you, ladies and gentlemen. That does conclude the conference for today. Thank you for participating. You may now disconnect.