Photo: Frontline Ltd.
OSLO, May 29 (Reuters) – Crude oil tanker firm Frontline posted first-quarter operating profit above expectations on Friday and said it had renegotiated its relationship with chartering firm Ship Finance to strengthen its balance sheet.
Once the world’s biggest crude tanker firm, Frontline has struggled for years despite a restructuring in 2012, but increased demand for transport and storage amid the current oil supply glut has boosted demand.
To reduce its costs, the tanker arm of shipping tycoon John Fredriksen’s sprawling business interests also struck a new deal with Ship Finance, a vessel-owning company leasing out ships, giving the U.S. company a 27.7 percent stake in Frontline and adjusting the way the two split their profits.
Ship Finance, spun off from Frontline in 2004, is also controlled by Fredriksen.
“This agreement significantly strengthens Frontline’s balance sheet and reduces the financial risk. The board and management can now shift the focus from balance sheet restructuring to business development and growth,” the company said in a statement.
Oslo-listed Frontline’s operating profit jumped to $39.5 million in the quarter from $5.6 million a year earlier, beating expectations for $36 million in a Reuters poll of analysts. .
The firm saw its second-quarterly operating profit excluding one-time gains and losses below the first quarter result due to the dry docking of four vessels. It said a positive market development was expected to contribute to second-quarter revenue in line with the first quarter.
Shares in the company traded up 5.1 percent by 0745 GMT, while Oslo’s benchmark index was broadly flat.
Fredriksen owns 26.48 percent of Frontline’s shares through his investment vehicle Hemen Holding. (Reporting by Stine Jacobsen; Editing by Terje Solsvik and David Holmes)
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