Q3 2002 results November 20, 2002 1
Agenda Introduction Market update outlook Corporate financial status Other 2
24 Suezmaxes 40 + 1 N/B VLCCs Oldest ship from 1990 Average age 6.5 years Industry Average 10.5 years. Percentage double hull tonnage : 71 % - Industry Average 52 % 8 Suezmax OBOs = 17.2 million dwt. or approximately 118 million barrels transport capacity. 3
Main events 2002 Q3 Frontline took delivery of Hakata in beginning of July and Front Stratus in end of August, Two of the drybulk vessels transferred from GOGL to Frontline late March 2002 were sold in July. The net cash effect of the sale being $9 million, The two dry bulk vessels Golden Daisy and Golden Rose were sold in July. This sale reduced the JPY exposure by a further $15 Million. 4
Supply VLCC s / Suezmaxes (No. of vessels) Of which VLCC's ULCC's*) Suezmaxes Building year 200,000+ dw t 320,000 + dw t 120,000-200,000 dw t 1973 or earlier 2 0 1974-75 13 2 11 1976-77 29 10 16 1978-80 12 8 17 1981 or later 371 3 239 Fleet as at November 14, 2002 427 23 283 On order 2002 9 2 6 2003 36 27 2004+ 21 24 Total on order 2001-2006 66 2 57 *) Each ULCC representing an average of 400,000 Dwt Source: P.F.Bassøe 5
Newbuildings versus scrapping candidates VL/ULCC fleet as of November 14, 2002 45 40 35 30 Order No. Vsls Fleet No. Vsls 9 NO. VSLS 25 20 15 10 5 0 1 1 4 9 24 5 3 7 2 4 1 3 1 2 39 41 36 32 32 26 28 26 16 18 19 21 20 13 9 10 11 13 6 1 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 6 Source: P.F. Bassøe
Newbuildings versus scrapping candidates Suezmax fleet as of November 14, 2002 30 25 Order No. Vsls Fleet No. Vsls 6 20 NO VSLS 15 10 5 0 7 4 8 8 8 6 3 1 3 4 3 0 1 4 6 15 7 22 27 13 21 15 9 8 9 11 23 17 20 27 21 2 1 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 7 Source: P.F. Bassøe
The macro trend The expected general economic recovery has been delayed. Tanker rates have improved considerably in the first half of the fourth quarter 2002 due to a seasonal demand increase and more oil going west. We expect the market to stay at reasonable levels over the winter. The fleet balance has proven to be good, which makes one wonder why rates were so bad for so long. 8
OPEC-10: Production vs. quotas (mbd) 29,0 28,0 27,0 26,0 25,0 24,0 23,0 22,0 21,0 Quota Production 20,0 jan.92 jan.93 jan.94 jan.95 jan.96 jan.97 jan.98 jan.99 jan.00 jan.01 jan.02 Source: P.F. Basssøe / IEA 9
FSU OIL MARKET QUARTERLY 1997-2002 NORTH SEA OIL PRODUCTION MONTHLY 1994-2002 MBD 10.0 10.0 MBD 8.0 8.0 8.0 8.0 7.0 7.0 6.0 6.0 6.0 6.0 4.0 4.0 2.0 97.1 98.1 99.1 00.1 01.1 02.1 2.0 5.0 94.1 95.1 96.1 97.1 98.1 99.1 00.1 01.1 02.1 5.0 PRODUCTION DEMAND NET EXPORTS R.S. Platou Economic Research a.s 10
SPOT MARKET VOLUMES OUT OF THE BLACK SEA QUARTERLY BY TANKER TYPE SPOT MARKET VOLUMES OUT OF BALTIC QUARTERLY BY TANKER TYPE MBD 1,0 PERCENT 55 MBD 1,0 PERCENT 100 0,8 50 0,8 80 0,6 45 0,6 60 0,4 40 0,4 40 0,2 35 0,2 20 0,0 99.3 4 00.1 2 3 4 01.1 2 3 4 02.1 2 3 30 0,0 99.3 4 00.1 2 3 4 01.1 2 3 4 02.1 2 3 0 AFRAMAX SUEZMAX AFRAMAX MARKET SHARE AFRAMAX SUEZMAX AFRAMAX MARKET SHARE R.S. Platou Economic Research a.s 11
Oil inventories, OECD and US, mb 2 900 Commercial inventories, OECD 1 150 Commercial inventories, US 2 800 5-year high range 1 100 5-year high range 2 700 2001 1 050 2001 2 600 2002 1 000 2002 2 500 950 2 400 5-year low range 900 5-year low range 2 300 Jan Mar Mai Jul Sep Nov Source. P.F. Bassøe / IEA 850 Jan Mar Mai Jul Sep Nov 12
WTI-Brent Source: J.P. Morgan Henry Hub Gas Henry hub gas 12,000 10,000 8,000 6,000 4,000 2,000 0,000 13 jun-00 aug-00 okt-00 des-00 feb-01 apr-01 jun-01 aug-01 okt-01 des-01 feb-02 $/mmbtu apr-02 jun-02 aug-02 okt-02 5,00 4,00 3,00 2,00 1,00 0,00-1,00-2,00 wti-brent $/b Date apr-98 aug-98 des-98 apr-99 aug-99 des-99 mar-00 jul-00 nov-00 mar-01 jul-01 nov-01 mar-02 jul-02 okt-02
Estimated call on OPEC 2002 Avg. 01Q102 Q202 Q302 Q402 Avg. 02 JP Morgan 26,7 26,2 24,8 25,9 26,9 26,0 IEA 26,7 25,6 23,9 25,1 26,2 25,2 US DOE 26,6 26,3 24,2 25,8 25,7 25,5 JP Morgan estimates as of November 15, 2002. IEA and DOE as of November 2002. 14
Estimated call on OPEC 2003 Avg.02 Q103 Q203 Q303 Q403 Avg. 03 JP Morgan 26,0 26,4 25,0 26,2 27,1 26,2 IEA 25,2 24,9 23,7 24,7 25,9 24,8 US DOE 25,5 26,5 24,5 24,9 26,2 25,5 JP Morgan estimates as of November 15, 2002. IEA and DOE as of November 2002. 15
Opec decides VLCC rates R2=0.89 DATA FOR DEC 99 TO OCT 02 (DEC 00 IS EXCLUDED) Source: R.S. Platou 16
Profit & Loss Q3 01 Q3 02 USD million 9M 2002 9M 2001 2001 132,4 82,0 Net operating revenues 269,7 537,8 647,3 18,8-0,6 Gain / loss on sale of vessels -2,9 34,8 35,6 44,5 53,4 Total expenses 135,4 129,3 176,5 106,8 28,0 Operating profit before depreciation (EBITDA) 131,4 443,3 506,5 31,1 34,9 Depreciation 103,6 89,3 121,7 75,6-6,9 Operating profit (EBIT) 27,8 354,1 384,8-36,1-30,2 Financial items -81,9-47,1-33,9 39,5-37,2 Net profit (loss) before min. & taxes -54,1 307,0 350,8 0,3 0,0 Taxes 0,0 0,3 0,4 0,0 Cumulative effect of change in accounting principle 32,3 32,3 39,3-37,2 Net profit (loss) -54,1 339,1 382,7 0,51-0,49 EPS before cumulative effect of change in acc. princ. (USD) -0,71 3,99 4,57 - - Cumulative effect of change in accounting principle - 0,42 0,42 0,51-0,49 EPS -0,71 4,41 4,99 17
Income on time charter basis Q3 01 Q3 02 9M 2002 9M 2001 2001 30 800 16 900 VLCC, spot, T/C and B/B vessels 18 900 47 600 40 800-14 887 VLCC, spot 16 301 - - 25 689 VLCC, T/C and B/B vessels 27 630 23 100 14 300 Suezmax 16 100 34 100 30 700 23 000 13 400 Suezmax OBO 15 500 31 900 28 900 TCEs USD per day 80000 70000 60000 50000 40000 30000 20000 10000 0 Q1 97 Q2 Q3 Q4 Q1 98 Q2 Q3 Q4 Q1 99 Q2 Q3 Q4 Q1 00 Q2 Q3 Q4 Q1 01 Q2 Q3 Q4 Q1 02 Q2 Q3 VLCC Suezmax 18
Ship operating expenses (USD/day) Q3 2002 9M 2002 Budget Total Total Total 9 M 2002 2001 2000 1999 VLCC 6 181 6 235 6 283 6 339 6 940 6 828 Suezmax 5 869 5 937 5 560 5 706 5 476 5 976 Suezmax OBO 6 296 5 868 5 973 8 996 6 246 6 385 Drybulk 3 834 4 011 3 715 No. of vessels drydocked or expected to be Ship operating expenses 6 12 000 5 10 000 4 8 000 3 6 000 2 4 000 1 2 000 0 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 0 Q1 99 Q2 99 Q3 99 Q4 99 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 00 00 00 00 01 01 01 01 02 02 02 VLCC Suezmax Suezmax OBO 19
EBITDA 250 200 USD million 150 100 50 0 Q1 99 Q2 Q3 Q4 Q1 00 Q2 Q3 Q4 Q1 01 Q2 Q3 Q4 Q102 Q2 Q3-50 20
Financial items Q3 2001 Q3 2002 USD million 9M 2002 9M 2001 2001 132,4 82,0 Net operating revenues 269,7 537,8 647,3 18,8-0,6 Gain / loss on sale of vessels -2,9 34,8 35,6 44,5 53,4 Total expenses 135,4 129,3 176,5 106,8 28,0 Operating profit before depreciation (EBITDA) 131,4 443,3 506,5 31,1 34,9 Depreciation 103,6 89,3 121,7 75,6-6,9 Operating profit (EBIT) 27,8 354,1 384,8-36,1-30,2 Financial items -81,9-47,1-33,9 39,5-37,2 Net profit (loss) before min. & taxes -54,1 307,0 350,8 0,3 0,0 Taxes 0,0 0,3 0,4 0,0 0,0 Cum. Effect of change in acc. principle 0,0 32,3 32,3 39,3-37,2 Net profit (loss) -54,1 339,1 382,7 FX gain 1.4 2,4 Interest income 7,8-18,2 Interest expense -55,4 Equity SL -15.4-1,4 Share of result in assoc -9,8 Int. swaps - 0.5-17,1 Other financial items -16,4 4,1 Foreign currency gain / loss -8,0 21
Associated companies As at 30.09.02 Debt outstanding Our share Guarantee liability Rasmussen K/S parts nil nil nil Front Tobago (40%) partners OSG and Euronav 14,0 5,6 2,4 Ariake (33%), partner OSG and Euronav 51,5 17,2 4,7 Sakura (33%), partner OSG and Euronav 51,5 17,2 4,7 Ichiban (33%), partner OSG and Euronav 47,8 15,9 5,3 Tanabe (33%), partner OSG and Euronav 50,3 16,7 5,6 Hakata (33%), partner OSG and Euronav 52,5 17,5 5,8 Edinburgh (50,1%), partner OSG 27,6 13,8 4,1 Dundee (50,1%), partner OSG 27,6 13,8 4,1 Golden Fountain (50%) partner Euronav 32,1 16,0 32,1 New Circassia (50%) partners Ropner and Runciman 54,2 27,1 54,2 Pacific Lagoon (50%) partner Euronav 53,8 26,9 53,8 Total = 462,9 187,8 176,9 Yen denominated debt 119,9 Our share 60,0 22
JPY exposure and interest exposure of short term + long term debt and capital leases Yen denom inated debt/capital leases 30.09.2002 30.06.2002 Change Consolidated 133 091 139 689-6 598 Associated companies, our share 59 970 78 274-18 304 Total 193 062 217 963-24 901 Floating debt 30.09.2002 30.06.2002 Change Consolidated 1 059 323 1 057 648 1 675 Associated companies, our share 187 828 191 901-4 074 Total 1 247 151 1 249 549-2 398 Total debt/capital leases 30.09.2002 30.06.2002 Change Consolidated 1 661 526 1 665 998-4 472 Associated companies, our share 187 828 191 901-4 074 Total 1 849 354 1 857 900-8 546 23
Balance sheet - Assets USD million Q3 2002 Q3 2001 2 001 Short term Cash and Bank deposits 84,8 117,4 189,3 Marketable securities 1,0 0,3 1,2 Other current assets 90,1 96,6 87,5 Long term Newbuildings 65,2 101,0 102,8 Vessels and equipment, net 2 562,5 2 502,8 2 514,2 Associated companies 110,3 98,6 109,9 Goodwill 11,9 14,2 14,0 Deferred charges and other assets 6,0 16,9 15,0 Total assets 2 931,9 2 947,6 3 033,8 Trade rec./ Voyages in progress 50.4 Prepayment/inventory 31.4 Other 8.3 Oscilla 8.4 24
Balance sheet - Assets USD million Q3 2002 Q32001 2 001 Short term Cash and cash equivalents 84,8 117,4 189,3 Marketable securities 1,0 0,3 1,2 Other current assets 90,1 96,6 87,5 Long term Newbuildings and vessel purchase option 65,2 101,0 102,8 Vessels and equipment, net 2 562,5 2 502,8 2 514,2 Investment in associated companies 110,3 98,6 109,9 Goodwill 11,9 14,2 14,0 Deferred charges and other long-term ass 6,0 16,9 15,0 Total assets 2 931,9 2 947,6 3 033,8 FL 2,414.1 GOGL 154.5 GOGL includes 2 capes, 1 handy and 1 VL FL Capital lease 201.1 includes 3 VLs GOGL Capital lease 28.8 includes 1 cape 25
Balance sheet - Liabilities USD million Q3 2002 Q3 2001 2 001 Short term Short term interest bearing debt 213,0 223,9 227,6 Other current liabilities 72,4 70,5 87,5 Long term Long term interest bearing debt 1 218,1 1 331,1 1 164,4 Other long term liabilites 252,1 104,0 295,1 Minority 6,1 6,8 Stockholder's equity 1 176,3 1 212,0 1 252,4 Corp loans / cr lines 17.5 Ship mort loans core FL 140.3 GOGL 55.1 Corporate loans 9.0 Ship mort loans core FL 1,147.9 GOGL 61.1 FL capital lease 196.9 GOGL cap lease 21.0 Other 34.2 Total stockholders' equity and liab. 2 931,9 2 947,6 3 033,8 26
Remaining N/B commitments Q4 02 Q1 03 Q2 03 Gross cap. ex 109 0 59 Bank loan 99 0 50 Equity financing 10 0 9 27
Breakeven rates (USD / day) Cash Breakeven P/L Breakeven VLCC 22 150 21 000 Suezmax 14 200 12 800 Suezmax OBO 14 100 14 400 28
Breakeven requirements are very low VLCC TCE versus Cash Breakeven USD/day 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0,000 jan-90 jan-91 jan-92 jan-93 jan-94 jan-95 jan-96 jan-97 jan-98 jan-99 jan-00 jan-01 jan-02 VLCC TCE Cash Breakeven November 2002 Average TCE in the period 29 Source TCE: Clarksons
Breakeven requirements are very low Suezmax TCE versus Cash Breakeven USD/day 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0,000 jan-90 jan-91 jan-92 jan-93 jan-94 jan-95 jan-96 jan-97 jan-98 jan-99 jan-00 jan-01 jan-02 Source TCE: Clarksons Suezmax TCE Cash Breakeven November 2002 Average TCE in the period 30
Appendixes 31
Income on time charter basis Q3 01 Q3 02 USD'000s 9M 2002 9M 2001 2 001 50 035 31 093 VLCC, spot 89 084 214 353 243 886-11 920 VLCC, T/C and B/B vessels 44 540 - - 42 073 26 919 Suezmax 89 402 181 590 220 787 16 133 9 620 Suezmax OBO 33 289 65 372 79 435 Q3 01 Q3 02 Trading days minus off hire 9M 2002 9M 2001 2 001 1 625 2 089 VLCC, spot 5 465 4 504 5 973-464 VLCC, T/C vessels 1 612 - - 1 818 1 885 Suezmax 5 559 5 324 7 195 703 718 Suezmax OBO 2 141 2 052 2 746 32
Total expenses Q3 2001 Q3 2002 USD million 9M 2002 9M 2001 2001 32,2 29,0 Ship operating expenses 86,4 89,6 121,5 10,5 19,7 Charterhire expenses 39,3 31,5 41,9 1,8 4,7 Administrative expenses 9,7 8,1 13,2 Increased w ith 4 BP vessels from Q3 33
Off balance sheet vessels Front Century Front Champion Front Warrior Golden Victory 34
Estimated oil demand/supply 2002 Avg. 01 Q102 Q202 Q302 Q402 Avg. 02 Demand* 76,4 76,9 75,6 76,5 78,0 76,8 Supply* 76,9 75,8 75,4 76,2 77,9 76,4 *)Based on JP Morgan estimates as of November 15, 2002 35
Estimated oil demand/supply 2003 Avg. 02 Q103 Q203 Q303 Q403 Avg. 03 Demand* 76,8 77,8 76,3 77,5 78,7 77,6 Supply* 76,4 77,8 77,2 77,8 78,4 77,8 *)Based on JP Morgan estimates as of November 15, 2002 36
Oil production Change 2000 2001 2002 2000-2002 Canada 2,68 2,74 2,85 0,17 Mexico 3,45 3,56 3,59 0,14 USA 8,11 8,05 8,10 Argentina 0,82 0,82 0,80 Brazil 1,50 1,58 1,77 0,27 Colombia 0,71 0,63 0,59-0,12 Ecuador 0,41 0,42 0,39 Denmark 0,37 0,35 0,37 Norway 3,35 3,42 3,31 UK 2,60 2,45 2,42-0,18 Oman 0,96 0,96 0,90 Syria 0,54 0,55 0,53 Yemen 0,54 0,46 0,46 Australia 0,82 0,73 0,72-0,1 Brunei 0,20 0,20 0,19 China 3,25 3,31 3,38 India 0,79 0,78 0,76 Malaysia 0,81 0,79 0,80 Vietnam 0,32 0,35 0,32 Angola 0,75 0,73 0,90 0,15 Egypt 0,80 0,76 0,73 Gabon 0,33 0,30 0,29 Total 34,11 33,94 34,17 Other / smaller prod 2,40 2,44 Refinery proc gain 1,76 1,79 Non OPEC supply ex FSU 38,10 38,40 37
Oil production Change 2000 2001 2002 2000-2002 Russia 6,54 7,05 7,59 1,05 Kazakhstan 0,75 0,83 0,95 0,2 Other FSU 0,75 0,77 0,79 FSU 8,04 8,65 9,33 OPEC NGL / Condensate 2,90 3,00 Call on OPEC crude 26,70 26,00 Stockbuild 0,50-0,40 OPEC crude 27,20 25,50 38
Difference in TCE old/modern VLCCs Needed daily cash to cover expenses: Daily op ex 8000 D/D res / upgrading (USD 2 million per 2.5 years) 2200 Cash cover 10200 TC modern VLCC 21000 - difference extra speed / consumption TT -9000 - tech offhire 20 days extra -700 - commercial offhire 50 days -1700 Effective TC old TT 9600 39
132 VLCC fleet development (year-on-year growth) 130 128 126 124 122 120 118 116 nov.99 feb.00 mai.00 aug.00 nov.00 feb.01 Source: P.F. Bassøe mai.01 aug.01 nov.01 feb.02 mai.02 aug.02 nov.02 40
43,0 Suezmax fleet development (year-on-year growth) 42,5 42,0 41,5 41,0 40,5 40,0 39,5 39,0 38,5 38,0 nov.99 feb.00 mai.00 aug.00 nov.00 feb.01 mai.01 aug.01 nov.01 feb.02 mai.02 aug.02 nov.02 Source: P.F. Bassøe 41