John Fredriksen has not lost his appetite for tanker expansion despite Frontline being frustrated in its takeover pursuits this year and the tycoon is shopping with a $2bn war-chest at his fingertips.
Frontline chairman Fredriksen told the Wall Street Journal that he is always looking to buy tankers at a time he is expecting the VLCC market to take a turn for the better.
“We used to be the biggest VLCC owner, but now we are No. 4,” he said in an interview published today.
“I’m looking to invest more than $2bn in acquisitions,” he said, noting he is primarily looking to acquire companies outright rather than buying tankers from rivals.
Frontline knocked on the door at DHT Holdings and is reported to have had an interest in Gener8 this year as it looked to grow and replenish its fleet at a time when asset prices and rates had retreated.
Frontline Management chief executive Robert Hvide Macleod said the company is still on the hunt, but isn’t currently involved in any takeover activity.
Macleod told TradeWinds today that Frontline has used the market turmoil of the past year to boost its fleet at attractive prices, adding six VLCCs while phasing out older ships.
Since 2014, Frontline has taken delivery of 24 new tankers and has one of the most modern fleets in the world, he said.
“We believe the market will offer good opportunities in the future, and our strategy is to continue expanding the fleet through similar value-creating transactions for our shareholders,” Macleod said.
“Our strategy is also supported by our ability to secure attractive financing in the international loan market.”
Macleod says that while a deal with DHT would have been ”a value-creating transaction”, Frontline will not “spend any more time pursuing this”.
“Frontline still believes that the industry should be consolidated further, but given today's market situation we are not currently working on any acquisition opportunities,” he said.
“With Frontline's current position and size, we are in a very strong position to create significant returns to our shareholders."
Frontline’s takeover attempts have come with VLCC asset prices at multi-year lows and with the market also feeling the effects of new OPEC quotas.
However, Fredriksen feels three times as many older tankers will be scrapped this year compared to 2016.
“Around 150 very large crude carriers, or about 20% of the existing fleet, will be scrapped over the next couple of years,” he explained.
“To have a say in the market you have to have size, so I’m looking to buy tankers all the time.”
The billionaire said he is working 17-hours per day to grow his tanker stable and oversee the restructuring of Seadrill.
“It’s hard to answer if it will come out of restructuring, but as long as I back it, we’ll be OK,” said Fredriksen.
“In the past, we’ve dealt with messier situations than Seadrill, but we came through.”
