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    FRO
    Earnings call· Mar 2026(Q1 FY26)

    Frontline Q1 FY26 earnings call FRO

    May 22, 2026 Source

    Executive summary

    Frontline Q1 FY26 — Strong Profitability Driven by Tanker Market Strength and Strategic Coverage

    Frontline reported its most profitable quarter since 2004, driven by strong tanker market fundamentals and strategic time charter coverage amidst geopolitical disruptions. The company is navigating the complex Middle East situation, which has led to significant trade pattern shifts and increased ton-mile demand, while maintaining a robust balance sheet and substantial cash generation potential. Management is focused on cash generation and selective short-term time charter agreements to mitigate risk.

    Highlights

    5

    • Reported adjusted profit of $44.9 million or $1.55 per share in Q1 FY26, an increase of $114.5 million QoQ.

    • Achieved VLCC TCE of $13,500 per day, Suezmax TCE of $72,400 per day, and LR2/Aframax TCE of $5,700 per day in Q1 FY26.

    • Booked Q2 FY26 VLCC days at $18,700 per day (82% covered), Suezmax at $131,300 per day (9% covered), and LR2/Aframax at $125,000 per day (68% covered).

    • Maintained strong liquidity of $945 million in cash and cash equivalents, including $473 million undrawn revolver capacity as of March 31, 2026.

    • Estimated cash generation potential of $1.5 billion or approximately $7 per share based on current spot rates, providing an 18% cash flow yield.

    Concerns

    3

    • The Middle East conflict has led to an unprecedented situation with the Strait of Hormuz effectively closed, creating market volatility and uncertainty.

    • A significant portion of the VLCC fleet (55 vessels) remains unutilized on standby outside the Arabian Gulf, potentially impacting market dynamics if the Strait reopens.

    • The company faces a net loss of 6.2 million barrels per day in oil supply from the Middle East Gulf due to the conflict, despite increased output from other regions.

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    VLCC fleet
    Achieved strong TCE rates in Q1 FY26 and has significantly higher rates booked for Q2 FY26.
    Q1 FY26 TCE: $13,500 per dayQ2 FY26 Booked TCE (82% covered): $18,700 per day
    		————
    Suezmax fleet
    Reported robust TCE rates in Q1 FY26 with a substantial increase in booked rates for Q2 FY26, albeit with low coverage.
    Q1 FY26 TCE: $72,400 per dayQ2 FY26 Booked TCE (9% covered): $131,300 per day
    		————
    LR2/Aframax fleet
    Reported Q1 FY26 TCE, with a dramatic increase in booked rates for Q2 FY26. The Q1 TCE rate appears unusually low compared to other segments and Q2 booked rates.
    Q1 FY26 TCE: $5,700 per dayQ2 FY26 Booked TCE (68% covered): $125,000 per day
    		————

    Operational metrics

    43
    Adjusted profit
    $44.9 millionincreased by $114.5 million QoQ
    Q1 FY26

    Adjusted profit increased significantly compared to the previous quarter.

    GAAP profit
    $559 million
    Q1 FY26

    Reported GAAP profit for the quarter.

    Time charter earnings
    $536.5 millionincreased by $112 million QoQ
    Q1 FY26

    Primary driver for the increase in adjusted profit.

    Ship operating expenses
    increased by $5.9 millionQoQ
    Q1 FY26

    Increase in operating expenses primarily due to lower supplier rebates.

    Administrative expenses
    increased by $8.5 millionQoQ
    Q1 FY26

    Increase in administrative expenses, excluding synthetic option revaluation.

    Adjusted interest expense
    decreased by $9.8 millionQoQ
    Q1 FY26

    Reduced interest expense due to favorable debt conditions.

    Depreciation
    decreased by $6.2 millionQoQ
    Q1 FY26

    Decrease in depreciation due to sales of assets. 'PCs' is likely an ASR error for 'vessels'. Transcription note: 'PCs' is likely an ASR error for 'vessels'.

    Income tax expense
    decreased by $0.6 millionQoQ
    Q1 FY26

    Decrease in income tax expense.

    Cash and cash equivalents
    $945 million
    as of March 31, 2026

    Strong liquidity position.

    Undrawn revolver capacity
    $473 million
    as of March 31, 2026

    Part of total liquidity.

    Debt maturities
    no meaningful debt maturities
    until 2030

    Indicates a healthy balance sheet with long-term debt structure.

    Fleet size
    33 VLCCs, 21 Suezmax, 18 LR2 tankers
    Q1 FY26

    Composition of the company's fleet.

    Fleet average age
    7.5 years
    Q1 FY26

    Relatively young fleet.

    Eco vessels percentage
    100%
    Q1 FY26

    All vessels are eco-friendly.

    Scrubber-fitted vessels percentage
    64%
    Q1 FY26

    Majority of the fleet is equipped with scrubbers.

    Cash breakeven rate
    $24,300 per day
    next 12 months

    Estimated cash breakeven rate for VLCCs.

    Cash breakeven rate
    $24,300 per day
    next 12 months

    Estimated cash breakeven rate for Suezmax tankers.

    Cash breakeven rate
    $2,600 per day
    next 12 months

    Estimated cash breakeven rate for LR2 tankers. Transcription note: This figure appears unusually low compared to other segments and the fleet average, suggesting a potential ASR error.

    Fleet average cash breakeven rate
    $24,000 per day
    next 12 months

    Overall estimated cash breakeven rate for the fleet.

    Fleet average cash breakeven rate excluding dry dock
    $23,000 per day$1,100 per day less
    next 12 months

    Cash breakeven rate without dry dock expenses.

    OpEx including dry dock
    $11,300 per day
    Q1 FY26

    Operating expenses for VLCCs.

    OpEx including dry dock
    $9,100 per day
    Q1 FY26

    Operating expenses for Suezmax tankers.

    OpEx including dry dock
    $10,900 per day
    Q1 FY26

    Operating expenses for LR2 tankers.

    Fleet average OpEx excluding dry dock
    $8,090 per day
    Q1 FY26

    Overall fleet operating expenses excluding dry dock costs.

    Spot days
    23,700 days
    next 12 months

    Number of spot days available for the fleet.

    Cash generation potential
    $1.5 billion18% cash flow yield
    Annual

    Substantial cash generation potential based on current market conditions.

    Cash generation potential (+30% spot market)
    $2.1 billion
    Annual

    Potential cash generation with a 30% increase in spot market rates.

    Cash generation potential (-30% spot market)
    $1 billion
    Annual

    Potential cash generation with a 30% decrease in spot market rates.

    Order book percentage
    23.2%
    Current

    Order book is manageable given the aging fleet, with bulk of deliveries in 2028.

    Fleet aging (15 years or younger)
    45.5%
    Current

    Significant portion of the fleet will reach 20 years of age soon.

    VLCC fleet servicing Iranian crude
    15% to 17%
    Current

    This portion of the fleet could become obsolete if Iran sanctions are reversed.

    VLCC time charter coverage
    close to 30%
    next couple of quarters

    Strategic coverage to mitigate risk in the most exposed segment.

    Middle East Gulf daily vessel total (pre-closure)
    491 vessels
    prior to Hormuz closure

    Baseline number of vessels in the Middle East Gulf.

    VLCCs lost from active service (post-closure)
    130 ships
    post-Hormuz closure

    Massive loss of active tonnage due to the Strait closure.

    VLCCs waiting loading in Red Sea (post-closure)
    21 vessels
    post-Hormuz closure

    Number of VLCCs tied up waiting to load.

    VLCCs laden with oil waiting in Middle East Gulf (post-closure)
    41 VLCCs
    post-Hormuz closure

    Number of VLCCs laden with oil waiting inside the Middle East Gulf.

    VLCC equivalents stopped/in ballast East of Suez (post-closure)
    55 VLCC equivalents
    post-Hormuz closure

    Unutilized VLCCs on standby.

    Net reduction in VLCC equivalents (post-closure)
    11 VLCC equivalents
    post-Hormuz closure

    Overall net reduction in active VLCCs despite severe situation.

    Middle East Gulf oil supply (pre-closure)
    17.7 million barrels per day
    pre-Hormuz closure

    Baseline oil supply from the Middle East Gulf.

    Net loss of oil supply (post-closure)
    6.2 million barrels per day
    post-Hormuz closure

    Net reduction in oil supply after accounting for increased output elsewhere.

    Saudi Yanbu pipeline increase
    3.5 million barrels per day
    post-Hormuz closure

    Increased throughput from Saudi Arabia's pipeline to the Red Sea.

    UAE Fujeirah pipeline increase
    almost 1 million barrels per day
    post-Hormuz closure

    Increased throughput from UAE's pipeline.

    Rest of world output increase
    3.3 million barrels per day
    post-Hormuz closure

    Additional oil output from other global regions.

    Orderbook & backlog

    1
    Newbuilding commitments$925 millionend of Q1 FY26

    Relates to the acquisition of 9 newbuildings from affiliates of Hemen.

    Deals & partnerships

    1
    Affiliates of HemenAcquisition of 9 newbuilding vessels$925 million (remaining commitment)

    The remaining newbuilding commitments at the end of Q1 FY26 relate to the acquisition of 9 newbuildings.

    Capital programs

    1
    9 Newbuilding Acquisitionsunderway$925 million
    Funding: new building financing of up to $737 million

    Benefit: 9 newbuildings

    Remaining commitments for the acquisition of 9 newbuildings from affiliates of Hemen, with significant financing secured.

    Risks & headwinds

    4
    Middle East conflict and Strait of Hormuz closureOngoing

    Net loss of 6.2 million barrels per day in oil supply from Middle East Gulf; 55 VLCC equivalents on standby

    Mitigation: Strategic time charter coverage for VLCCs (close to 30% of voyage days); market adaptation through longer ton-miles and diversified sourcing.

    Unutilized VLCC fleet re-entryUncertain, upon potential reopening of Strait of Hormuz

    55 VLCC equivalents on standby outside Arabian Gulf

    Mitigation: Management acknowledges this as a factor, but no explicit mitigation strategy stated beyond current market dynamics.

    Potential lifting of Iran sanctionsUncertain

    15% to 17% of overall VLCC fleet currently servicing Iranian crude could become obsolete

    Mitigation: Could also trigger a wave of recycling and add demand for compliant tonnage.

    Backwardated period marketsLonger term

    1-year contract for soon-to-deliver vessel ~$120,000/day; 2-year ~$90,000/day; 3-year ~$756 million (likely ASR error for $75,000-$76,000); 5-year for 2029 delivery in the $40,000s

    Mitigation: Selective short-term time charter coverage to balance spot exposure with some stability.

    What to watch in Q2 FY26

    5

    VLCC TCE rates

    Next quarter (Q2 FY26 results)
    Current$13,500 per day (Q1 FY26)
    TargetAbove $18,700 per day (Q2 FY26 booked rate)

    Why it matters

    VLCCs are a significant portion of Frontline's fleet, and their performance is a key driver of overall profitability. The Q2 booked rate is significantly higher than Q1.

    In the first quarter of 2026, from plan achieved $13,500 per day on our VLCC fleet... So far in the second quarter of 2026, 82% of our VLCC days are booked at $18,700

    Q&A highlights

    6

    Why is VLCC fixture activity declining from April to May despite strong rates?

    Lars Barstad explained that the market is opaque, with many fixtures not reported, especially those by oil traders using their own fleets. He also noted the cyclical nature of U.S. Gulf fixtures for VLCCs, happening only within a 1-1.5 week window each month, depending on crude prices and arbitrage opportunities, making it difficult to read from reported fixtures.

    “it's very difficult to read from fixtures first of all, because it's very difficult to see all of them. And secondly, because you have this kind of a little bit untypical pattern.”

    asked by Sherif Elmaghrabi · answered by Lars Barstad

    2 min read6 chapters

    Detailed Narrative

    01

    Impact of Middle East Conflict

    The Strait of Hormuz closure has significantly impacted the tanker market, particularly VLCCs, leading to unprecedented🌐 conditions. Despite a net loss of 6.2 million barrels per day from the Middle East Gulf, the market has adapted through increased throughput from alternative pipelines (Yanbu, Fujeirah) and higher output from other global regions. This has surprisingly maintained robust shipping demand due to longer ton-miles.

    02

    VLCC Fleet Dynamics

    The closure of Hormuz has resulted in a 'massive loss of 130 ships' from active service, but also an increase of 55 VLCC equivalents on standby outside the Arabian Gulf. This unutilized fleet, often contracted by industrial players for logistics rather than profit, acts as a buffer, preventing a more severe supply-demand imbalance if it were to compete in the spot market.

    03

    Ton-Mile Demand & Energy Security

    Even with volume shortfalls, adjusted for distances, shipping demand remains strong as oil travels longer routes. Asia has diversified sourcing from various regions, fueling ton-mile growth. The current geopolitical environment is driving a higher focus on energy supply security, which is expected to make these longer trade lanes more sticky.

    04

    Order Book & Fleet Aging

    The tanker order book is growing, with slots extending into 2030, but the net compliant fleet growth is considered manageable. A significant portion of the current fleet (45.5% of vessels 15 years or younger) will reach 20 years within five years. The potential lifting of Iran sanctions could render 15-17% of the VLCC fleet obsolete, potentially triggering recycling.

    05

    Market Outlook & Frontline Positioning

    Frontline achieved its most profitable quarter since 2004, benefiting from fundamentally tight market conditions that existed even before the Middle East disruptions. The company's VLCC-heavy, efficient business model is well-positioned, with management focused on cash generation and selective short-term time charter coverage to capitalize on the strong market.

    06

    Time Charter Strategy

    While Frontline typically maximizes spot market exposure, the company has secured short-term time charter covers, particularly for VLCCs, reaching close to 30% of voyage days for the next couple of quarters. This strategy, while providing a 'small exposure,' aims to prevent excessive risk in a volatile market and acts as a hedge against adverse scenarios.

    AI-generated summary of the company’s earnings call. Not investment advice.