Frontline may have delayed its third-quarter dividend due to its imminent tie-up with Euronav, but analysts are expecting huge payouts in the future.
DNB Markets is projecting shareholder returns approaching $2bn through to the end of 2024 as tanker markets stay "stronger for longer."
This is dependent on Frontline combining its operations with its Belgian partner to create the world’s biggest crude tanker company.
Dividends could reach 30% of the new entity's market cap, analysts led by Jorgen Lian said.
“The combination agreement with Euronav will limit Frontline’s ability to distribute cash dividends near-term, but Frontline still intends to pay out 80% of Q3 adjusted net profit ($66m) once the tender offer is finalised,” they added.
A similar 80% pay-out ratio for the final three months would translate to $179m, with another $140m in potential fourth-quarter dividends from Euronav, DNB Markets calculates.
“We continue to be bullish on the near-term prospects due to further volume flow disruptions and on the longer-term outlook owing to global oil demand still being in recovery and a record-low orderbook (circa 4% of the fleet),” Lian and his team said.
“These factors should prolong the earnings up-cycle,” the analysts added.
The investment bank, which has a “buy” rating on Frontline’s shares, has however cut Ebitda projections by 3% for 2002, based on the owner’s latest rate guidance and current high and low sulphur fuel price spreads.
Ebitda expectations downgraded
The 2023 and 2024 profit forecasts have been reduced by 2% each.
Frontline’s third-quarter Ebitda of $148m was below analysts’ expectations at $166m.
The company said last week it will be increasing the scrubber capacity of its fleet as markets boom.
The John Fredriksen-controlled owner said additional exhaust cleaner installations are planned on two owned VLCCs to take advantage of much cheaper high-sulphur fuel oil prices.
One vessel will be retrofitted in the remainder of 2022 and the second next year.
