John Fredriksen's Frontline still believes tanker fundamentals are pointing to a firm recovery, but top executives remain concerned over Covid-19 spikes in Asia.
The Oslo- and New York-listed shipowner maintained profitability in the first quarter, logging net earnings of $28.9m, down from $165.3m in last year's booming markets.
Revenue from the 68 ships crashed to $194m from $412m year-on-year.
Interim chief executive Lars Barstad said: "Despite challenging market conditions during the first quarter of 2021, Frontline manages to deliver a solid result."
He added this reflected a business model focused on efficiency, quality and cost throughout the organisation.
"Frontline's modern fleet allows for an agile approach to how we trade our ships, yielding returns above the key benchmarks," the boss said.
Concerns remain
But he added that the industry is "not out of the woods" yet with regards to freight demand, and the recent Covid-19 situation in Asia is a concern.
"We are seeing promising oil demand figures from Europe, US, and China and Opec, EIA, and IEA maintain their very firm demand growth expectations for the second half of 2021, but short-term the freight market continues to be challenged," Barstad said.
Despite the profit, Frontline is not paying a dividend.
The board said it had decided to use its discretion due to the uncertain and evolving nature of near-term expectations.
But the company said tanker market's outlook still looks "constructive".
Chinese strength
"The recent increase in Covid-19 infections and recent lock downs in parts of Asia, and in particular India is a concern, but [seems] to be countered by continued positive developments in China, and the gradual opening of Covid-19 related lockdowns in the western hemisphere, in particular in the US," the shipowner added.
Frontline's VLCCs averaged time charter equivalent (TCE) earnings of $19,000 per day in the quarter, against $17,200 in the final three months of 2020.
Suezmaxes achieved $15,200 per day, up from $9,800, and LR2s earned $12,000, down from $12,500 in the fourth quarter.
For the second quarter of this year, spot TCE rates are $18,100 per day for 70% of contracted VLCC days.
For suezmaxes this figure is $13,600 per day for 63% of fleet days, and LR2s are at $14,200 contracted for 59% of vessel days.
"We expect the spot TCEs for the full second quarter of 2021 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of the second quarter as well as current freight rates," Frontline warned.
Ebitda of $58m was ahead of Fearnley Securities' estimate as both VLCC and suezmax spot performance was "strong" in the quarter, the investment bank said.
"Compared to the peer group, we estimate an 11% outperformance on the VLCCs and 20% on the suezmax – albeit over the last six quarters we estimate that the outperformance has been circa 5% on average," Fearnleys added.
The investment bank's analysts believe the summer and parts of the third quarter could end up below its expectations, but they are expecting a strong end to the year, and a "very strong" 2022 with VLCC earnings at $60,000 per day.
