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    FRO
    Earnings call· Dec 2025(Q4 FY25)

    Frontline Q4 FY25 earnings call FRO

    Feb 27, 2026 Source

    Executive summary

    Frontline Q4 FY25 — Strong TCE Rates Drive Significant Profit Growth and Fleet Renewal

    Frontline reported a robust Q4 FY25, driven by significantly higher TCE rates across its fleet, leading to a substantial increase in adjusted profit. The company is actively renewing its fleet by divesting older vessels and acquiring new eco-VLCC newbuildings, aiming for a 100% eco-vessel fleet. While the tanker market is experiencing extreme volatility fueled by geopolitical factors and index-driven pricing, management believes the fundamentally tight market conditions and aging global fleet provide a strong runway for the next 2-3 years, supporting continued strong shareholder returns.

    Highlights

    5

    • Adjusted profit increased by $188 million QoQ to $230 million or $1.03 per share in Q4 FY25.

    • VLCC TCE rates for Q4 FY25 reached $74,200 per day, with Q1 FY26 bookings at $107,100 per day for 92% of days.

    • Suezmax TCE rates for Q4 FY25 were $53,800 per day, with Q1 FY26 bookings at $76,700 per day for 83% of days.

    • Strong liquidity of $705 million in cash and cash equivalents as of December 31, 2025.

    • Fleet average cash breakeven rate for the next 12 months is estimated at $24,300 per day.

    Concerns

    3

    • The market is experiencing "almost violent moves" and "extreme volatility" due to indices and freight derivatives.

    • Long haul ARPS (arbitrage opportunities) are challenged, with freight from U.S. Gulf to China costing $18 million for a VLCC, equating to $9 per barrel.

    • The order book for tankers is accelerating for 2029 and onwards, potentially raising supply concerns in the future.

    Guidance & targets

    12
    CategoryTargetConfidence
    VLCC Time Charter Equivalent (TCE) Rate
    $107,100 per day
    high materiality
    High
    Suezmax Time Charter Equivalent (TCE) Rate
    $76,700 per day
    medium materiality
    High
    LR2/Aframax Time Charter Equivalent (TCE) Rate
    $62,400 per day
    medium materiality
    High
    Fleet Average Cash Breakeven Rate
    $24,300 per day
    medium materiality
    High
    Spot Base Days
    24,400 days
    low materiality
    High
    Cash Generation Potential
    $2.8 billion
    high materiality
    High
    Cash Generation Potential (30% spot market increase)
    $3.7 billion
    medium materiality
    High
    Cash Generation Potential (30% spot market decrease)
    $1.8 billion
    medium materiality
    High
    Tanker Order Book Growth
    Accelerating
    medium materiality
    High
    Yard Capacity Growth
    Will grow
    low materiality
    High
    Tanker Supply Outlook
    2 to 3 years of a very good runway before the supply could become a worry
    high materiality
    High
    Time Charter Coverage Policy
    Up to 30%
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    VLCC
    Strong performance in Q4 FY25 with significant increase in Q1 FY26 bookings.
    Q4 FY25 TCE Rate: $74,200 per dayQ1 FY26 Booked TCE Rate (92% of days): $107,100 per dayNext 12 months Cash Breakeven Rate: $25,000 per dayQ4 FY25 OpEx (including dry dock): $9,600 per day
    		————
    Suezmax
    Solid performance in Q4 FY25 with strong Q1 FY26 bookings.
    Q4 FY25 TCE Rate: $53,800 per dayQ1 FY26 Booked TCE Rate (83% of days): $76,700 per dayNext 12 months Cash Breakeven Rate: $23,700 per dayQ4 FY25 OpEx (including dry dock): $7,600 per day
    		————
    LR2/Aframax
    Improved performance in Q4 FY25 with significant increase in Q1 FY26 bookings.
    Q4 FY25 TCE Rate: $33,500 per dayQ1 FY26 Booked TCE Rate (67% of days): $62,400 per dayNext 12 months Cash Breakeven Rate: $23,800 per dayQ4 FY25 OpEx (including dry dock): $12,400 per day
    		————

    Operational metrics

    16
    Adjusted Profit
    $230 millionup $188 million QoQ
    Q4 FY25

    Primarily due to an increase in TCE earnings.

    Adjusted EPS
    $1.03
    Q4 FY25

    Reported on a diluted basis.

    TCE Earnings
    $424.5 millionup from $248 million QoQ
    Q4 FY25

    Consequence of higher TCE rates.

    Ship Operating Expenses
    decreased $7.1 millionQoQ
    Q4 FY25

    Mainly due to an increase in supplier rebates of $7.1 million.

    Ship Operating Expenses (fleet average excluding dry dock)
    $7,600
    Q4 FY25

    Company-wide fleet average.

    Liquidity
    $705 million
    as of December 31, 2025

    Includes cash and cash equivalents, undrawn amounts of revolver capacity, marketable securities, and minimum cash requirements.

    Debt Maturities
    No meaningful debt maturities
    until 2030

    Indicates a strong balance sheet position.

    Fleet Size
    41 VLCCs, 21 Suezmax tankers, 18 LR2 tankers
    Q4 FY25

    Composition of the fleet after recent acquisitions and divestitures.

    Fleet Average Age
    7.5 years
    Q4 FY25

    Average age of the entire fleet.

    Eco Vessels Percentage
    100%
    Q4 FY25

    All vessels in the fleet are eco-friendly.

    Scrubber-fitted Vessels Percentage
    57%
    Q4 FY25

    Percentage of the fleet equipped with scrubbers.

    Fleet Average Cash Breakeven Rate (excluding dry dock)
    $23,300$1,000 less than with dry dock
    Next 12 months

    Fleet average estimate excluding dry dock costs.

    Annual Earnings Days
    27,700
    Annually

    Frontline's total potential earnings days per year.

    Cash Flow Yield
    34%
    Annually

    Based on current share price and cash generation potential.

    VLCC Order Book-to-Fleet Ratio
    probably already at 20%
    Q4 FY25

    General assumption in the market, expected to become more evident as contracts are registered.

    Leverage Strategy
    —
    Long-term

    Company intends to stay levered, with no inclination to delever apart from natural debt paydowns.

    Industry KPIs

    4
    MetricValueDetails
    Realized price differential$74,200 (VLCC), $53,800 (Suezmax), $33,500 (LR2/Aframax)USD per day
    Sanctioned expansion backlogAccelerating
    Cost of supply unit cash cost$24,300USD per day
    FCF shareholder distributions$2.8 billionUSD

    Deals & partnerships

    2
    Not statedSale of 8 oldest first-generation eco-VLCCs.$831.5 million total sales price

    Transaction occurred in January 2026.

    Affiliate of MMAcquisition of 9 latest generation scrubber-fitted eco-VLCC newbuildings.$1.224 billion aggregate purchase price

    Approximately 25% of purchase price payable in Q1 2026, 75% due upon delivery of each vessel.

    Capital programs

    1
    Acquisition of 9 latest generation scrubber-fitted eco-VLCC newbuildingsAcquired$1.224 billion
    Period spend: Approximately 25% of the purchase price in the first quarter of 2026
    Funding: Cash and then 60% long-term debt financings
    Start: Q1 2026

    Benefit: 9 latest generation scrubber-fitted eco-VLCC newbuildings

    Acquired from an affiliate of MM, with payments staggered across Q1 2026 and vessel deliveries.

    Risks & headwinds

    5
    Extreme market volatility and "violent moves" in freight pricingCurrent, ongoing

    exponential number of contractual obligations that are triggered

    Mitigation: Frontline's efficient business model and strategy to provide spot returns, with potential for up to 30% time charter coverage.

    Challenged long haul ARPS (arbitrage opportunities) due to high freight costsCurrent

    VLCC from U.S. Gulf to China is $18 million, the charter is actually exposed to $9 per barrel freight.

    Mitigation: Differentials will have to price to accommodate freight when oil needs to move.

    Accelerating tanker order book for 2029 and onwards2029 and beyond

    Order books are building materially in 2029 and onwards. Order book-to-fleet ratio for VLCC is probably already at 20%.

    Mitigation: Fleet age profile and efficiency loss of older vessels (20-year age cap) will manage future supply; 2-3 years of "runway" before supply becomes a worry. Yard capacity growth in China and potential for Korea/Japan to increase tanker building.

    Potential for a "summer lull" in tanker ratesSummer months

    moves from $200,000 a day to 100 (hypothetical)

    Mitigation: Inherent seasonality, but the magnitude is uncertain. Market is fundamentally tight.

    Major importer (China) potentially reducing inventoryUnspecified

    Not quantified, but would "create volatility."

    Mitigation: Acknowledged as a potential source of volatility.

    What to watch in Q1 FY26

    5

    VLCC TCE Rate

    Q1 FY26 results
    Current$107,100 per day (92% booked for Q1 FY26)
    TargetSustained high rates or further increase

    Why it matters

    VLCC rates are a primary driver of Frontline's profitability and a key indicator of market strength.

    So far, in the first quarter '26, 92% of our VLCC days are booked at 107,100 per day.

    Q&A highlights

    7

    What factors could lead to a plateau or easing of the current parabolic tanker rates, and what would be the drivers (geopolitical, seasonal, etc.)?

    Lars Barstad indicated that seasonality, particularly a potential summer lull, is the most likely catalyst for a plateau or easing of rates. He also mentioned that China, as a major importer, could choose to reduce inventory, creating volatility. He noted that it's difficult to gauge if a summer lull would mean rates drop from $200,000 to $100,000 per day.

    “But whether if it's a summer lull that moves from $200,000 a day to 100 or that is almost impossible to gauge.”

    asked by John Chappell · answered by Lars Barstad

    2 min read6 chapters

    Detailed Narrative

    01

    Market Dynamics and Volatility

    The tanker market is experiencing unprecedented🌐 volatility, driven by the heavy influence of indices and freight derivatives on pricing. This leads to "almost violent moves" as contractual obligations are triggered by physical fixtures, creating exponential effects. The market is fundamentally tight, but this mechanism can cause freight rates to move ahead of underlying physical activity, creating a very vibrant FFA market.

    02

    Fleet Renewal and Modernization

    Frontline is actively modernizing its fleet. In January 2026, the company sold 8 older first-generation eco-VLCCs for $831.5 million, generating net cash proceeds of approximately $477 million. Simultaneously, it acquired 9 latest-generation scrubber-fitted eco-VLCC newbuildings for an aggregate purchase price of $1.224 billion, with 25% payable in Q1 2026 and the remainder upon delivery. This strategy aims to maintain a 100% eco-vessel fleet, with 57% scrubber-fitted.

    03

    Oil Demand and Trade Shifts

    Global oil demand is growing healthily, with a key focus on non-sanctioned molecules. This creates substantial year-on-year changes in trade patterns, such as increased U.S.-India and U.S.-EU trade. Geopolitical tensions and pressure on Russia and Iran create strong tailwinds for compliant oil transportation, increasing demand for compliant tonnage. The weakening U.S. dollar and inflationary environment are also supportive of global oil demand and commodities.

    04

    Fleet Age Profile and Supply Outlook

    The global tanker fleet's age profile and efficiency loss are tightening supply-demand balances. While the order book is accelerating for 2029 and beyond, particularly in China, management views this as manageable. Many vessels delivered around 2010 will reach 20 years of age by 2029, facing deteriorating efficiency curves. Frontline anticipates 2-3 years of strong market conditions before supply becomes a significant concern.

    05

    Cash Generation and Capital Allocation

    Frontline reported substantial cash generation potential, estimated at $2.8 billion annually or $12.51 per share, representing a 34% cash flow yield. The company's strategy is to remain leveraged to maximize shareholder exposure to shipping assets, with no inclination to delever beyond natural debt paydowns. The company aims to provide spot returns to investors but may secure up to 30% of its exposure on time charters under certain conditions.

    06

    Impact of Dark Fleet and Sanctions

    The "dark fleet" (vessels carrying sanctioned crude) moving slower or being stored creates increased utilization for these vessels, pulling capacity from the compliant fleet. If sanctioned barrels (e.g., Russian) were to become compliant, approximately half of the dark fleet capacity might return to compliant trade, but the other half would be disqualified due to age or inability to "whitewash" their history. Management would welcome compliant molecules into the fold.

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