Good day, and thank you for standing by. Welcome to the Q1 2025 Frontline plc Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lars Barstad, CEO. Please go ahead.

Thank you very much dear all. Thank you for dialing into Frontline's quarterly earnings call. It's encouraging to see so many joining us today. Despite all the action around us, both in respect to equity market volatility, changing policies, and global trade negotiations, the tanker market has moved along in an orderly manner. To recap the first quarter of the year, the VLCC were volatile with 3 to 4 exciting rallies and a rising floor. Suezmax and Aframax had a strong finish to the first quarter, whilst LR2s struggled. We are in a situation where the inverse earnings relationship between asset classes seems to be gone and the VLCC is taking the lead. This may also be caused by the fact that incremental export growth is finally coming from compliant sources. So before I give the word to Inger, I'll run through our TCE numbers on Slide 3 in the deck. In the first quarter of 2025, Frontline achieved $37,200 per day on our VLCC fleet, $31,200 per day on our Suezmax fleet, and $22,300 per day on our LR2/Aframax fleet. So far, in the first quarter, 68% of our VLCC days are booked at $56,400 per day, 69% of our Suezmax days are booked at $44,900 per day, and 66% of our LR2/Aframax days are booked at $36,100 per day. Again, all numbers in this table are on a low to discharge basis, with implications of ballast days at the end of the quarter. It is worth mentioning that particularly for our LR2s in Q1, we finished the quarter with quite a few ballast days as we entered Q2. Now I'll let Inger take you through the financial highlights.

Thanks, Lars, and good morning and good afternoon, ladies and gentlemen. Let's then turn to Slide 4 and look at some highlights. We report profit of $33.3 million or $0.15 per share and adjusted profit of $40.4 million or $0.18 per share in this quarter. Adjusted profit in the first quarter decreased by $4.7 million compared with the previous quarter and that was primarily due to a decrease in our time charter earnings from $249 million in the previous quarter to $241 million in the first quarter. This, again, is a result of lower TCE rates, which was also partially offset by fluctuations in other income and expenses. Let’s look at the balance sheet on Slide 5. The balance sheet movements this quarter are related to ordinary items. Frontline has a solid balance sheet and strong liquidity of $805 million in cash and cash equivalents including undrawn amounts of revolver capacity, marketable securities, and cash requirements for banks as of March 31, 2025. We have no meaningful debt maturities until 2030 and no new building commitments. Let's then look at Slide 6. Our fleet consists of 41 VLCCs, 22 Suezmax tankers, and 18 LR2 tankers, with an average age of 6.8 years and consists of 99% ECO vessels, where 56% are scrubber-fitted. We estimate the average cash breakeven rate for the next 12 months of approximately $29,700 per day for VLCCs, $24,300 per day for Suezmax tankers, and $23,300 per day for LR2 tankers with a fleet average estimate of about $26,800 per day. This includes dry dock costs for 10 VLCCs, 2 Suezmax tankers, and 5 LR2 tankers. The Q1 fleet average was $8,300 per day. Lastly, let's look at Slide 7 regarding cash generation. Frontline has substantial cash generation potential with about 30,000 earnings days annually. The cash generation potential based on our current fleet and May 25 forward rates for TD3C for VLCCs, TD20 for Suezmax tankers, and an average of TD25 and TC1 for Aframax and LR2 tankers from the Baltic Exchange as of May 23 is $332 million or $1.49 per share and a 30% increase from the current spot market will increase the potential cash generation by about 100%. With this, I'll leave the word to Lars again.

Thank you very much, Inger. Let's look at Slide 8 and have a discussion on the various market themes. As I mentioned initially, there's been a lot of noise around us. We’ve had paralyzing U.S. policy changes with limited impact on the energy complex so far and for tankers in general, but this is quite worrying for global growth prospects. As we proceed, we will learn how big these impacts may be. There’s been a very positive development on sanctions, both by way of scope widening. Various agencies are literally adding new vessels to the sanction list and new operators on a day-to-day basis. We've also seen a bit more will in enforcing these sanctions. But I think most importantly, there are notable behavioral changes by India and China in their operations concerning OFAC-listed vessels. So far, both Russia and China, as well as India, seem to be shunning vessels that are on the OFAC list. There is some excitement around Russia and the Ukraine ceasefire discussions, as well as a parallel discussion ongoing in respect of a nuclear deal with Iran. Both outcomes could pivotally change the tanker market dynamics. Furthermore, we’re seeing positive movements in OpEx policies. They seem, at least until now, quite eager to return oil to the market, which is positive for compliant tank utilization. I will also touch on demand, supply, and inventory movements. The active trading fleet has stopped growing despite upcoming deliveries in 2025 and 2026. It’s worth noting that vessels either sanctioned or over 20 years old constitute a significant portion of the fleet, making up 25% of the VLCC fleet, 46% of the Suezmax fleet, and 52% of the Aframax/LR2 fleet. A reversal of sanctions could bring material numbers of Suezmax and Aframax returns to the market. We see an increase in demand for non-compliant vessels, particularly in the Russian market, demonstrating how sensitive our market is to sanctions and policy changes. Now let's proceed to Slide 9 to discuss some market logic. The chart on the left illustrates post-COVID developments in oil demand and supply. The EIA's latest forecast suggests that supply and demand could converge around 106 million barrels by the end of 2026. Supply dynamics, fueled by OPEC increases and production growth in Guyana, points towards an oversupply position in the oil markets. Historically, inventory builds and declines correlate strongly with overall tanker market performance. We are currently observing low inventory levels globally. Looking ahead to Slide 10, I’d like to highlight some headlines affecting tankers nowadays. On tariffs, there was a 90-day delay on the enforcement of the Liberation Day tariff, and the tariffs themselves are being eased. On the USTR front, the recent proposal shows a softening stance with key exceptions for oil and energy. A final proposal is expected by the end of May after the recent hearing. So far, the exports from the U.S. remain extensive; oil discharge into the U.S. is not a material exposure for Frontline. Overall, the U.S. accounts for about 17% of the global oil market. Hence, it is not disastrous if the communication from the USTR remains as previously seen. The maximum pressure on Iran remains a key focus, with ongoing negotiations for a nuclear deal. Lifting sanctions remains a red line in this context. In the event of a nuclear deal, 1.4 million to 1.6 million barrels per day of export capacity could grow rapidly, converting those barrels to compliant. Compliant barrels require compliant ships. Many of the vessels engaged in Iranian trade currently have no hope of returning to the compliant market. The compliance market has extremely strict rules and relations around ship selection. Moreover, recent Russian sanctions expansion and ceasefire discussions have been prevalent. There will inevitably be sanctions either lifted or tightened. The EU has incorporated 168 vessels into their sanction list, while the U.K. added around 100 vessels about a week and a half ago. Discussions are also underway regarding reducing the oil price cap from $60 to $50, leading to heightened market excitement. Lastly, I'd like to mention the situation with Venezuela; the capacity to export equity barrels has diminished significantly and is now reliant on a case-by-case basis. This means that exports, which once grew to 800,000 barrels per day in the last cycle, are now going dark. We have also touched upon OFAC compliance in the context of various regions globally, including the Red Sea and potential conflicts there. On the whole, we’re monitoring this situation closely. On Slide 11, I can assert that sanctions do work—not through volume aspects, but by affecting the fleets that carry this oil. The recent expansions of sanctions and the self-sanctioning by countries like China and India have decreased utilization for OFAC-listed vessels, which is promising for our market. A scenario where sanctions are lifted could yield a significant positive impact. Approximately 7 million barrels per day of globally transported oil could be exposed to sanctions; this equates to more than 200 VLCCs worth of transport needs. We anticipate that 1 or possibly 2 of these will transition from sanctioned to compliant statuses over the coming years. Again, sanctions do work, and we observe rising inventories of Iranian crude due to struggles in finding homes for this crude. Let's move to Slide 12 and examine the order book. There have been no material changes since our Q4 report. It's critical to note that there are now more OFAC-listed VLCCs than vessels on order. The same applies to Suezmax, which is somewhat less, but if adjusted for OFAC, the order book becomes almost negligible. Similarly, this logic applies to Aframax and LR2s. The aging situation of LR2 vessels in particular means they lose trading efficiency around age 15, leading to a decrease in their attraction in the market. Finally, moving to Slide 13, I’m glad to assert that we’re seeing pressure building in the market. Oil supply and demand suggests a return to traditional inventory builds with implications for tanker utilization. The demand for compliant tonnage is increasing, supported by widening sanctions. We anticipate muted growth in the active tanker fleet for 2025. Oil demand, set to increase, aligns with the aging fleet, providing a tailwind into ’25 and ’26. However, policy changes continue to introduce uncertainty. We hope to see clearer guidance by the end of this month. Notably, the world oil trade is increasingly being serviced by one of the oldest fleets in over two decades. This contradicts our regulatory goal in the context of carbonization. We believe we have substantial upside, as pointed out by Inger, with a modern fleet ready to service the compliant oil market. Thank you for your attention, and we now open the floor for questions.

We will now take the first question from the line of Sherif Elmaghrabi from BTIG.

First, at a high level, when I look at VLCC fixtures over the last few weeks, activity in the Atlantic has been a bit on the quiet side. Do you think that's a reaction to OFAC's accelerated ramp? And do you have a sense what might drive more long-haul cargoes out of the Atlantic Basin?

Yes, it's a very good question. The economics of U.S. exports is very much an ebb and flow business. We find it difficult to explain the quietness in the U.S. Gulf area as we speak. In general terms, there is quite a bit of tonnage sitting with oil majors and traders. These fixtures won’t really see the market; they will likely be concluded in-house. This could factor into the quietness. Additionally, refinery runs in the U.S. ahead of summer may lessen the demand for exports. Moreover, Canada has increased their exports away from the U.S., which adds to the picture. Conversely, we have seen extremely active flows coming out of Brazil and good volume from Guyana, alongside increased interest from India in lifting West African barrels.

That's great color, Lars. And just one on the operating side. Operating costs were a bit higher sequentially and also year-over-year on a per vessel basis. So could you shed some light on what's driving that?

The ship operating expenses this quarter were more aligned with market rates. The previous quarter was affected by rebates on insurance and supplier, around $4.9 million. The $60.3 million is more in line with what we expect going forward. Regarding administrative expenses, comparisons should adjust for the synthetic option liability discussed in the press release. In Q4, there was a gain of $7.9 million while in Q1, we had a loss of $1.6 million. After adjustments, you would find that the increase in Q1 on administrative expenses is only $2 million. Interest expenses have decreased about $6 million from the previous quarter, leading to a good overall cost development.

Thanks, Inger. I'll turn it over.

Thank you.

We will now take the next question from the line of John Chappell from Evercore ISI.

Thank you. Good afternoon. Lars, regarding your strategy of maintaining high spot market exposure, a 100% dividend payout ratio, and your recent refinancing efforts, it seems as though the business model is not being fully appreciated. Your balance sheet looks strong amidst a positive industry outlook, yet you are trading at a discount to NAV. Do you think there should be a strategic change, perhaps related to leverage, fleet management, or dividend versus buyback strategies to return Frontline to a premium valuation?

That's an excellent question, John. The discount we’re trading at surprises us as well. Relatively speaking, Q4 was disappointing for tanker stocks and we find ourselves with an outflow of shareholders, putting some pressure on our stock. The high short interest in Frontline could mean larger investment banks are operating global shorting strategies that may involve Frontline as a target. Previously, investors were more inclined to price in forward expectations; however, they've adopted a cautious approach now. This may not be due to a flawed strategy on our part, as we remain disciplined in the market. While it's tempting to engage extensively in spot market contracting to secure upside, we are determined to retain that upside due to our firm belief that the market will yield positive returns in the coming years.

As a follow-up, there have also been asset sales at what seem to be elevated values. Given your operating leverage, is there a chance for you to monetize older vessels now?

Indeed, there are opportunities available. However, we are cautious about engaging with buyers who may want to exploit trades that we don't support. There are also players with growth strategies for the compliant market that see potential in purchasing vessels with 5 to 7 years of lifespan left or for conversion projects. We want to maintain our annual earnings days of 30,000. While we might consider one candidate for divestiture, reducing the fleet is not a material part of our strategy.

Understood. Thank you, Lars.

Thank you, Jon.

We will now take the next question from the line of Omar Nokta from Jefferies.

I have a couple of questions regarding market activity. VLCC rates have improved entering the second quarter compared to the second half of last year, though they don’t seem to jump out at us. From your perspective, given the sanctions, what is your outlook on rate structures today? Are we still waiting for further adjustments, or have we seen all we’re going to regarding sanctions?

I don’t believe we’ve yet seen the full impact. On the OFAC side, as I mentioned earlier, we haven't observed significant month-over-month growth from Middle Eastern OPEC producers. The only notable increase is from Kazakhstan, which may explain OPEC's decision to adjust. Generally, while we have seen numerous barrels transition from sanctioned to compliant sources, the current market is characterized by declining volumes, particularly from Iran. We expect increases in compliant oil exports to satisfy growing demand, particularly as OPEC barrels are reintroduced to the market. This is encouraging for the compliant fleet and supports our major investments in VLCC. Thus, we anticipate a normalized VLCC market in approximately six months.

Thanks, Lars. How do you think summer seasonality will play out this year in light of these dynamics?

The most exciting aspect is that we are likely to see increased actions from the EU or U.S. regarding sanctions in the near future. This is based on either a breakthrough or failure in the nuclear negotiations with Iran or possibly stagnation in ceasefire discussions in Ukraine. We anticipate increased activity in the near term, which could significantly affect our market.

Just a final question for you, Inger. The refinancing of the ’24 VLCCs was completed early. Was the main driver margin reduction, or was it extending the duration?

The primary driver was the margin reduction, with the extension of duration being a beneficial consequence.

Can you provide an overview of the savings realized?

We shifted from a level that wasn’t our norm, going from about 200 basis points to now 170 basis points.

We will now take the next question from the line of Jeffrey Scott from Scott Asset Management.

On Page 6 of the presentation, last quarter stated that 2 VLCCs and 1 Suezmax were expected for drydock in calendar 2025. In today's presentation, this has increased to 10 VLCCs, 2 Suezmax, and 5 LRs. Is this indicative of a heavy maintenance period in the first quarter of 2026?

Yes, you are correct. Two VLCCs were moved from '26 to Q4 of '25, coupled with 10 VLCCs planned for Q1 of '26 due to anticipated maintenance links concerning the age of previous deliveries. Hence, the rise in numbers.

So this indicates heavier maintenance for the first quarter of 2026?

Yes, that's correct.

To add, this is typical guidance following the timing of vessel deliveries. High delivery numbers are often concentrated in the first quarter of the calendar year.

Lars, given that trading OFAC ships appears likely to become more challenging, what do you see as the catalyst for their scrapping?

That's a crucial question. We have a significant issue ahead. Currently, several ships on the OFAC or EU sanction lists number around 600 or 700, complicating their route to recycling due to KYC guidelines. The recycling industry cannot purchase vessels marked by sanctions. This presents a clog in recycling efforts. Guidelines need to be established for exemptions for recycling. It’s critical this topic is addressed by the IMO and similar regulatory bodies, emphasizing its urgency in our discussions. The timeframe for addressing scrapping is concerning due to the bureaucratic processes involved.

Thank you. There are no further questions at this time. I would now like to turn the conference back to Lars Barstad for closing remarks.

Thank you very much for dialing in. Spring is ahead of us, and hopefully, it will also bring a spring in the tanker market as we proceed. Every headline that emerges will be crucial for our markets. Thank you all.

This concludes today's conference call. Thank you for participating. You may now disconnect.