Good day and thank you for standing by. Welcome to the Q4 2023 Frontline plc Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please note that today’s conference is being recorded. I would now like to hand the conference over to your speaker Mr. Lars Barstad, CEO. Please go ahead, sir.

Thank you very much, dear all, and thank you for dialing in to Frontline's fourth quarter earnings call. The last quarter of 2023 did not deliver the full-on crazy, off-the-hinges bull market we all wished for, but still gave us decent returns. We also started to take delivery of VLCCs from Euronav in December, and we are very happy it's all been smooth sailing as they have come under the Frontline flag. I would especially like to praise our project, technical, and operations team that effortlessly and professionally have incorporated these vessels into our fleet, proving our company's very scalable business model. Before I give the word to Inger, let's look at our TCE numbers from Slide 3 in the deck. In the fourth quarter, we achieved approximately $42,300 per day on our VLCC fleet, $45,700 per day on our Suezmax, and $42,900 per day on our LR2/Aframax fleet. Both Suezmax and LR2 markets performed well above the previous quarters as they came to an end. As our press release shows, the full year 2023 came in firmly, as we earned $50,000, $362,600, and $46,800 per day on our VLCCs, Suezmax, and Aframax/LR2 fleet, respectively. We made over $650 million in full year earnings, and this is deemed respectable in some circles. In fact, the best year we've had in 15 years. So far in the first quarter of 2024, 81% of our VLCC days are booked at $55,100 per day, 72% of our Suezmax days at $52,800 per day, and 69% of our LR2/Aframax days at a whopping $67,800 per day. Again, all these numbers in this table are on a load-to-discharge basis, and they will be affected by the number of ballast days we end up having at the end. I'll now let Inger take us through the financial highlights.

Thanks, Lars, and good morning and good afternoon, ladies and gentlemen. Let's turn to Slide 4, profit statement, and look at some highlights. Frontline achieved total operating revenues in the fourth quarter of $207 million and adjusted EBITDA of $198 million in the fourth quarter. We reported a profit of $118.4 million or $0.53 per share, and adjusted profit of $102.2 million or $0.46 per share in this quarter. Adjusted profit in the fourth quarter increased by $21.4 million compared with the third quarter, and that was primarily due to an increase in our TCE earnings due to higher TCE rates, partially offset by fluctuations in other income and expenses. Next, let’s turn to Slide 5 and look at some balance sheet highlights. Frontline has strong liquidity of $416 million in cash and cash equivalents, including the undrawn amount of the senior unsecured revolving credit facility, marketable securities, and minimum cash requirements as of December 31, 2023. We have no remaining newbuilding commitments and no meaningful debt maturities until 2027. Then, let’s turn to Slide 6 and look at fleet competition, cash breakeven, or OpEx. Following the delivery of all the 24 VLCCs acquired from Euronav and the expected sale of the 6 older vessels in the first quarter of 2024, the fleet will consist of 41 VLCCs, 24 Suezmax tankers, and 18 LR2 tankers, with an average age of 5.8 years and consists of 99% ECO vessels; about 57% will be scrubber fitted. We estimate average cash breakeven rates for 2024 of approximately $28,800 per day for VLCCs, $23,700 per day for Suezmax tankers, and $21,200 per day for LR2 tankers, with a fleet average estimate of about $25,700 per day. This takes into account the expected sale of the 6 older vessels and also the 24 VLCCs acquired from Euronav in the first quarter of 2024. The fleet average estimate includes drydock of 4 Suezmax tankers and 5 VLCCs in 2024. We reported OpEx expenses including drydock in the fourth quarter of $9,400 per day per VLCCs, $12,500 per day for Suezmax tankers, and $7,100 per day for LR2 tankers. This includes drydock of six Suezmax tankers and two VLCCs. The Q4 '23 fleet average OpEx, excluding drydock, was $7,300 per day. Next, let's turn to Slide 7 and look at the financing of the acquisition of the 24 VLCCs. When we entered into the agreements with Euronav to acquire the fleet of the 24 ECO vessels, we mentioned in our Q3 '23 presentation that our ambition was to minimize the need for cash from the Hemen shareholder loan through transplant capacity to releverage the existing fleet due to the historically low loan-to-value and/or sale of all the non-ECO vessels. In January and February 2024, we executed this with the agreement to sell 6 older non-ECO vessels and the ongoing process of refinancing the 24 vessels on what we believe are attractive terms, expecting them to generate net cash proceeds of approximately $646 million. This will enable us to fully repay the Hemen shareholder loan and the amount drawn under the $275 million senior unsecured revolving credit facility with an affiliate in relation to the acquisition, and also to maintain our competitive cash breakeven rates. With this, I leave the word to Lars again.

Thank you very much, Inger. So let's move to Slide 8 and look at the current market narrative. As you all know, the headlines are covered by the Middle East tension, particularly the situation in Israel and Palestine. Following that, the Red Sea/Aden situation and its ton miles implications, looking at it from a tanking perspective. We're also seeing that the U.S. is increasing the pressure on what's referred to either as the Dark Fleet or the Grey Fleet, and also increasing their focus on potential Russian price cap evasions. It was quite interesting to read earlier in the week that they have analyzed the tanker fleet and found that according to them, the Grey Fleet now consists of 135 VLCCs, 92 Suezmaxes, and 150 Aframaxes. These are vessels involved in dark trading in Iranian barrels, trading to North Korea, and doing all sorts of activities, including the Russian fleet. That's a total of 375 vessels in the segments we operate in. Overall, it's estimated that 700 vessels are involved in some sort of shady activity, which amounts to 8% of the total tanker fleet. These numbers are quite shocking. Another thing that has played a part in the last few months has been the high activity in the contracting market, especially for Suezmaxes and VLCCs, to the point where 2027 is starting to become somewhat tight. Also, an important point to note is that we've been through a long period of OPEC voluntary cuts, particularly driven by Saudi Arabia. This has potentially led non-OPEC production to grow remarkably. Year-on-year, according to the EIA, it has grown by 2.9 million barrels per day. As you listeners would know, most of this OPEC production is not in the Middle East; it's from further afield. This continues to confirm our idea that trading lanes are gradually extending as the U.S., Brazil, and other countries increase their production going forward. In China and Asia, we are still seeing growth. Looking at the charts on this slide, global oil trade has paused a little, as has global oil in transit. However, we do see that oil in transit is on the rise, likely due to the longer ton miles around the Cape of Good Hope, avoiding the Suez Canal. On the bottom three charts, you'll see how the market has been; the volatility has increased. I believe we are or hope we are in a rising territory. Currently, in the VLCCs, it seems we have found a bottom at marginally higher levels. We've seen significant volatility in the markets, particularly so with the current market activity. Let's move to Slide 9 and delve a little bit further into the Red Sea situation. The straits between Yemen and Djibouti are very unsafe for passage. At the start of this conflict, the ships that targeted were predominantly Israel-linked, but attacks are now randomly targeting anyone, even those linked to Russia, which were previously thought to be safe. This creates extremely unsafe conditions for seafarers and for our assets. Traffic through the Suez Canal is now down by 40% to 50%. Some might have expected much more than that, but it’s important to remember that oil coming out of Saudi Arabia, for instance, still passes through the Suez Canal for invoicing purposes. We see now that trade patterns are adjusting to routing around the Cape of Good Hope. This takes time because, fundamentally, price differentials have been based on Suezmax routes. We also see more barrels moving on the VLCC side now, and the product side is favoring larger carriers, which can lift higher volumes. For those who aren't familiar with Suezmax, there are only about 19 of them globally, but they can be modified to allow for entry into certain markets. Continuing with the graphs on this slide, we observe a rapid increase since December in oil tankers routing around the Cape, while Suez Canal traffic has sharply declined since the same period. This shift creates widening trade lanes, meaning more oil is redirected to circumvent the Suez Canal. Moving to Slide 10, we can discuss the order books now. We’ve noted that ordering is on the rise; however, these new orders are not reflected here due to our cautious approach to documenting new orders. In the shipping market, rumors and discussions abound regarding LOIs and options. We've chosen only to log new builds once the IMO number is issued. Thus, you can expect that the order columns for VLCCs and Suezmax will increase. Currently, 15% of the VLCC fleet is around 20 years old. In 2024, 133 VLCCs will turn 20. If you also look at 2004, 2005, and 2007 deliveries, we'll soon have 79 vessels exceeding this 20-year threshold. For Suezmax, we’re seeing a similar trend, with deliveries in 2004, 2005, and 2006 hitting the same age threshold. There’s an impending concern for LR2s, with significant deliveries expected in 2025. On Slide 11, we highlight the development of the VLCC fleet. With current delivery forecasts, we see gradual growth of the fleet beyond 900 vessels. However, when adjusting for vessels turning 20, the trajectory changes significantly. We note average VLCC utilization drops as vessels age. Some clients are reluctant to charter ships older than 15 years, creating a significant challenge for older vessels in the market. Notably, resource logistics in shipping require planning ahead, and current order backlogs may affect deliveries in the coming years. Now, let me wrap it up before we open up for questions on Slide 12. One highlight of our Q4 presentation is the successful completion of long-term financing following our transaction this quarter. This is likely the largest single pure tanker transaction ever completed. We've sold 5 non-ECO VLCCs and one non-ECO Suezmax, enabling significant portions of our fleet to be refinanced competitively without impacting our LTVs significantly. Importantly, we have not issued any new shares. All vessels are delivered, which doubles our VLCC presence and increases our earning days by more than 30%. Every dollar above the breakeven of our fleet of $25,700 per day directly impacts our bottom line positively. Despite a challenging security context in the Red Sea and Gulf of Aden, we're witnessing increased activity in Suezmax and VLCC contracting, while medium-term oil demand remains steady and non-OPEC supply is rising. Frontline's scalable operational platform has adapted well to this fleet expansion, as the positive market growth continues. I also want to emphasize the previously shared earnings averages for oil tankers, which indicate we are approaching something resembling the robust market period from 2004 to 2008. Though it’s noteworthy that the VLCCs have not performed as strongly as they usually do, both 2022 and 2023 have yielded remarkable returns to the tanker industry, and we’re looking forward with confidence into January this year. With that, I will turn it over to the operator for questions.

Hi, yes. Thanks for taking my question and good morning. This is Ben Mohr on for Amit here at Deutsche Bank. Can you talk about your conviction levels around the FLCC segment now that we're two months into 2023? How do you see the segment for the tanker market shaping up so far? And what's your current thinking about the rest of the year?

Well, we're quite confident. However, short-term trade events might not play into this observation. What we are observing is that the market is tight; it is very tight. However, owners may be competing against each other more aggressively than necessary in this environment. Our position in the market gives us significant insight, and we see that activity is good, though translating that into significantly higher earnings has been a challenge. I used the term 'grind' before, but I believe we are experiencing a firming trend in utilization, and that will continue. Traditionally, seasonal slowdowns occur, followed by upward movements leading into the summer. But it's positive to see how quickly the VLCC market spiked from $35,000 to $90,000 per day and then retraced a bit. This fluctuation showcases the unique dynamics of this market, with significant potential for earnings. Importantly, this year we only expect to receive one VLCC, with 5 to 6 expected the following year. This decline in supply growth has lasted many years, and we are losing numerous vessels to age. Thus, while we're optimistic, it's uncertain whether we will directly jump to a $100,000 per day market or gradually move through $50,000, $60,000, or $70,000; only time will tell.

Thanks. On a follow-up, have we seen developments relating to the ships or do you think there is more to go?

I believe there is more to come. We're already witnessing what used to be Suezmax cargoes now being processed on VLCCs around the Cape of Good Hope. This includes barrels from the Eastern Mediterranean that would typically use Suezmax but are now being consolidated for transportation on VLCCs. I expect VLCC utilization to continue increasing, and I anticipate further upward trends in this space going forward, particularly if the current security situation remains unchanged.

Thank you. We are now going to proceed with our next question. The question comes from the line of Jonathan Chappell from Evercore. Please ask your question. Your line is open.

Thank you. Good afternoon. Inger, you've accomplished a lot in a short period of time, both with modernizing the fleet and executing ambitious financing quickly, which positively avoided changes to the LTV. As we think about 2024 in the market that Lars has described in detail, alongside the cash flow generation anticipated, is there deleveraging you'd like to see post this transaction of the 24 VLCCs, or are the terms favorable enough that you're content allowing the debt to amortize while focusing on potentially aggressive dividends?

Yes, as you've noted, we are comfortable with the current loan-to-value after refinancing. Our approach focuses on ordinary amortization going forward, so we are at ease with maintaining our current LTV of approximately 53.5%. Therefore, we are happy continuing with regular debt amortization in a conventional manner.

Okay, great. And then Lars, I asked you this three months ago, and then you went ahead and sold 6 of your oldest vessels. How do you feel about the remaining older vessels in the fleet? Is there still a decent arbitrage opportunity for monetizing some of your older non-ECO ships, or are you content to hold with your fleet, entering a multi-year period of strength?

I’d say we’re quite content with our current positioning. While you can call it an arbitrage, there are substantial risks tied to the elevated prices we're observing in secondhand tonnage. The book values indicate we’re at an inflated point. While I can’t entirely exclude options, we are generally satisfied with our current fleet composition.

Thank you. We are now going to proceed with our next question. The question comes from the line of Greg Lewis from BTIG. Please ask your question. Your line is open.

Yes. Hey, thank you and good afternoon, everybody. Thanks for taking my question. Lars, I was hoping you could discuss the dynamics surrounding the new build market. I mean, we saw a competitor order a couple of vessels last week. Can you share your thoughts and highlight the outlook for the order book moving forward?

That’s a great question. Currently, due to the cost of capital and long lead times, the delivered prices are significantly higher than the list prices. I’ve noted that one of our competitors has placed several substantial orders recently at historically high numbers. The dynamics in shipping can be somewhat unpredictable; when one entity establishes a new benchmark, others may quickly follow. The new build market has been more muted lately, particularly for larger vessels. It’s almost a competition to set new levels for Korean and Chinese builds. We’ve seen a good number of transactions occurring at the new build prices of approximately $115 to $130 million. While we observe these trends, we haven’t taken an active role in new builds as our focus has drawn elsewhere in the past quarter and a half.

Okay, great. You also mentioned the Dark Fleet or shadow fleet. Realizing you have access to more data than we do, is there any way to discern the subsectors within that fleet? I understand there are about 700 vessels. Can you provide any insights on the types of vessels involved? Many are curious whether these vessels could face permanent utilization constraints regardless of market conditions.

To start, you can assume that every ship above 20 years is likely to be part of the Dark or Grey Fleet, alongside very few exceptions. However, this doesn’t entirely sum up to 700 ships; we must also include those vessels that are around 17.5 years old. While we can cite that shipping is currently profitable, it is important to mention that maintaining older vessels can come with substantial costs. As the price of maintaining these aging vessels increases, operators often consider their remaining effective lifespan. U.S. authorities have been making strong strides in penalizing activities connected to these shadow fleets. However, identifying ships can be straightforward because they're often no longer classified for normal trading. The real question is when we will see an uptick in scrapping since we have yet to witness significant activity in this area.

Okay, super helpful. Thank you for the time, everybody.

We are now going to proceed with our next question. The question comes from the line of Sam Bland from J.P. Morgan. Please ask your question. Your line is open.

Thanks for taking my question. First off, when examining the order book on Slide 10, the high percentage for LR2s caught my attention. How should we interpret this figure? Should we consider LR2s separately or in conjunction with Aframax, given possible operational synergies?

That’s a good question, Sam. We have been uncertain regarding this for a while. The Aframax order book for non-coated tankers is virtually negligible. Consequently, we’ve chosen to focus solely on LR2s. The aging fleet is a critical consideration as 15 years is typically the threshold for preferences among charterers, particularly regarding quality assurance. Essentially, LR2 vessels that transition out of the fleet will join the Aframax fleet. As such, our approach has concentrated primarily on LR2s, with the current trading environment showing 80% of the LR2 fleet operating optimally.

Understood. You also previously commented that rates near the Red Sea may require a 'reset' to reflect new trading patterns. Do you believe that disruptions tied to the Red Sea have yet to be incorporated into current rates?

Yes, you’re right; I wasn’t as clear as I could have been. Essentially, when trading routes adjust due to the inability to pass through the Suez Canal, freight costs will inevitably increase. This can lead to an initial uncertainty in freight pricing until all market players adjust to the modified trading dynamics. Only with time can we reconcile these differences in logistics and freight pricing. Demand and supply factors also must align carefully, and this process takes time. However, I believe there will be solid growth for larger ships soon.

Thank you.

Thank you.

Thank you. We have no further questions at this time. I will now hand back to you for closing remarks. Thank you.

Thank you very much for dialing in. It's an exciting market we're in, maybe too exciting at times. Again, I want to highlight that we are gradually moving in the right direction, and signs indicate that volatility will persist. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.