Frontline NYSE: FRO reported what Chief Executive Officer Lars Barstad called the company’s most profitable quarter since 2004, as tanker markets were reshaped by the effective closure of the Strait of Hormuz and shifting global oil trade patterns.
Speaking on the company’s first-quarter 2026 earnings call, Barstad said the industry is operating in “unprecedented times,” noting that he did not expect a situation in which the Strait of Hormuz would remain effectively closed for this duration. He said Frontline is focused on “the real cash-generating business to be done” rather than speculating too far into the future.
“We have put the most profitable quarter since 2004 behind us and are well into a potentially even more rewarding one,” Barstad said.
First-quarter earnings rise on higher charter income
Chief Financial Officer Inger Klemp said Frontline reported profit of $559 million, or $2.51 per share, for the first quarter of 2026. Adjusted profit was $344.9 million, or $1.55 per share.
Klemp said adjusted profit increased by $114.5 million from the prior quarter, primarily because time charter earnings rose by $112 million, to $536.5 million from $424.5 million in the fourth quarter of 2025.
Ship operating expenses increased by $5.9 million from the prior quarter, mainly due to a decrease in supplier rebates of $5.4 million. Administrative expenses, excluding synthetic option revaluation effects, rose by $8.5 million, primarily due to synthetic option exercises in the quarter.
Adjusted interest expense declined by $9.8 million from the previous quarter, which Klemp attributed to lower debt, lower interest rates and lower margins. Depreciation declined by $6.2 million due to sales of VLCCs during the period, while income tax expense decreased by $0.6 million.
Second-quarter bookings show six-figure rates across fleet segments
Barstad said Frontline achieved average time charter equivalent rates in the first quarter of $103,500 per day for its VLCC fleet, $72,400 per day for its Suezmax fleet and $50,700 per day for its LR2/Aframax fleet.
For the second quarter of 2026 to date, he said 82% of VLCC days had been booked at $181,700 per day, 79% of Suezmax days at $131,300 per day and 68% of LR2/Aframax days at $125,000 per day.
“Six digits across the board,” Barstad said, adding that the figures were calculated on a loaded-to-discharge basis, with implications for ballast days at the end of the quarter.
Klemp said Frontline had $945 million in liquidity as of March 31, 2026, including cash and cash equivalents, undrawn revolver capacity of $473 million, marketable securities and minimum cash requirements. She said the company has no meaningful debt maturities until 2030.
Remaining newbuilding commitments at the end of the quarter were $925 million, related to the acquisition of nine newbuildings from affiliates of Hemen. Klemp said Frontline has secured newbuilding financing of up to $737 million, as outlined in the company’s press release.
Fleet remains VLCC-heavy as company outlines cash generation potential
Frontline’s fleet consists of 33 VLCCs, 21 Suezmax tankers and 18 LR2 tankers, with an average age of 7.5 years. Klemp said the fleet is 100% ECO, and more than 54% is scrubber fitted.
The company estimated average cash break-even rates for the next 12 months of approximately $24,300 per day for VLCCs, $24,300 per day for Suezmax tankers and $23,600 per day for LR2 tankers, for a fleet average of about $24,100 per day. Excluding dry dock costs, the fleet average estimate is about $23,000 per day.
Klemp said Frontline has approximately 23,700 spot days over the next 12 months and 27,900 earning days annually. Based on the current fleet, time charter rates and time charter equivalent rates as of May 22, 2026, she said the company’s cash generation potential is $1.5 billion, or about $7 per share.
She said that would represent an 18% cash yield based on the current share price. A 30% increase from current spot markets would lift cash generation potential to about $2.1 billion, or $9.51 per share, while a 30% decrease would reduce it to about $1 billion, or $4.41 per share.
Hormuz disruption changes trade flows and tanker utilization
Barstad said tanker market fundamentals had been tightening since around the same time last year, before the latest Middle East conflict. He said the effective closure of the Strait of Hormuz created an “unprecedented situation,” particularly for VLCCs.
He described the Hormuz closure as “very much a VLCC event,” because of the large volumes typically moved through the region on VLCCs. Barstad said Frontline’s analysis showed that, despite severe disruption, the net reduction in VLCC equivalents tied up in the market was only about 11 vessels. He attributed part of the market strength to a group of VLCCs remaining idle or on standby, often under longer-term contracts with industrial players such as refiners and oil majors.
Barstad said these ships may be held in reserve so charterers can move quickly if the strait reopens and oil becomes available from the Middle East Gulf. He said the economics for those industrial players differ from those of a shipowner such as Frontline, because the vessels are part of logistics planning rather than spot-market profit maximization.
Frontline also said oil flows have shifted. Barstad said volumes from the Middle East Gulf fell sharply, but some of the loss was offset by increased throughput through alternative routes, including the UAE pipeline to Fujairah and Saudi Arabia’s pipeline to Yanbu, as well as higher output from the rest of the world.
He said longer-haul trades have helped offset the loss of shorter-haul Middle East Gulf-to-Far East voyages, supporting ton-mile demand. Asian importers have increased sourcing from more distant regions, which Barstad said has made shipping demand “surprisingly robust” despite the volume shortfall.
Order book grows, but Frontline calls fleet growth manageable
Barstad said tanker order books continue to grow, with deliveries extending into 2030, but he characterized the situation as manageable in the context of fleet aging. He said 45.5% of the current fleet that is 15 years or younger will reach 20 years of age within five years, while the order book for Frontline’s vessel classes is around 23.2%.
He also said a potential resolution involving Iran could affect tanker demand if Iranian crude becomes compliant and requires compliant tonnage. Barstad said a portion of the fleet currently servicing Iranian crude could become obsolete under such a scenario.
During the question-and-answer session, Barstad said Frontline has added short-term coverage, particularly on VLCCs, through one-year time charter agreements. He said the company is approaching 30% coverage of VLCC voyage days for the next 12 months or for the first couple of quarters.
Barstad said Frontline’s investor proposition remains centered on spot exposure, but added that the company will take coverage “at certain points in the curve” to manage downside risk.
In closing remarks, Barstad said Frontline is operating in “quite a hectic political landscape” but remains focused on collecting cash as the market develops. “It looks pretty okay for now,” he said.
About Frontline NYSE: FRO
Frontline Ltd. NYSE: FRO is a leading global shipping company specializing in the seaborne transportation of crude oil and petroleum products. The company's core business activities encompass the ownership and operation of very large crude carriers (VLCCs), Suezmax tankers and Aframax vessels. Through long-term charters, spot market operations and time charters, Frontline provides flexible shipping solutions that cater to a diverse set of energy producers, refiners and trading houses worldwide.
Frontline's fleet is geared toward high-capacity, ocean-going tankers capable of carrying large volumes of crude oil over intercontinental distances.
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