Our reliance on the spot market contributes to fluctuations in cash flows from operating activities as a result of its exposure to highly cyclical tanker rates. Any increase or decrease in the average freight rates earned by our vessels in periods subsequent to June 30, 2024, compared with the actual freight rates achieved during the six months ended June 30, 2024, will have a positive or negative comparative impact, respectively, on the amount of cash provided by operating activities.
Net cash used in investing activities
Net cash used in investing activities of $526.1 million in the six months ended June 30, 2024 comprised mainly of payments of $890.0 million towards the Acquisition and capitalized additions of $18.5 million, primarily in respect of upgrades and drydockings. The cash used in investing activities was partially offset by the proceeds of $382.4 million from the sale of five VLCCs and two Suezmax tankers in the period.
Net cash provided by financing activities
Net cash provided in financing activities of $173.0 million in the six months ended June 30, 2024 was primarily due to debt drawdowns of $1,355.0 million, partially offset by debt repayments of $961.1 million and $220.4 million of cash dividends paid.
Debt restrictions
The Company's loan agreements contain loan-to-value clauses, which could require the Company to post additional collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings under each of such agreements decrease below required levels. In addition, the loan agreements contain certain financial covenants, including the requirement to maintain a certain level of free cash, positive working capital and a value adjusted equity covenant. The Company is permitted to satisfy up to 50% of the cash requirement by maintaining a committed undrawn credit facility with a remaining availability of greater than 12 months.
Matters discussed in this report and the documents incorporated by reference may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
Frontline plc. and its subsidiaries, or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this documents, the words "believe," "anticipate," "intend," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect" and similar expressions, terms or phrases may identify forward-looking statements.
The forward-looking statements in this report are based upon various assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to these important factors and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:
•the strength of world economies;
•fluctuations in currencies and interest rates, including central bank policies intended to combat overall inflation and rising interest rates and foreign exchange rates;
•the impact that any discontinuance, modification or other reform or the establishment of alternative
reference rates have on the Company’s floating interest rate debt instruments;
•general market conditions, including fluctuations in charter hire rates and vessel values;
•changes in the supply and demand for vessels comparable to ours and the number of newbuildings under construction;
•the highly cyclical nature of the industry that we operate in;
•the loss of a large customer or significant business relationship;
•changes in worldwide oil production and consumption and storage;
•changes in the Company's operating expenses and cash flows, including bunker prices, dry docking, crew costs and insurance costs;
•planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including dry docking, surveys and upgrades;
•risks associated with any future vessel construction;
•our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions planned;
•our ability to successfully compete for and enter into new time charters or other employment arrangements for our existing vessels after our current time charters expire and our ability to earn income in the spot market;
•availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements;
•availability of skilled crew members other employees and the related labor costs;
•work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;
11
•compliance with governmental, tax, environmental and safety regulation, any non-compliance with U.S. or European Union regulations;
•the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance, or ESG, policies;
•Foreign Corrupt Practices Act of 1977, or FCPA, or other applicable regulations relating to bribery;
•general economic conditions and conditions in the oil industry;
•effects of new products and new technology in our industry, including the potential for technological innovation to reduce the value of our vessels and charter income derived therefrom;
•new environmental regulations and restrictions, whether at a global level stipulated by the International Maritime Organization, and/or imposed by regional or national authorities such as the European Union or individual countries;
•vessel breakdowns and instances of off-hire;
•the impact of an interruption in or failure of our information technology and communications systems, including the impact of cyber-attacks, upon our ability to operate;
•potential conflicts of interest involving members of our board of directors and senior management;
•the failure of counter parties to fully perform their contracts with us;
•changes in credit risk with respect to our counterparties on contracts;
•our dependence on key personnel and our ability to attract, retain and motivate key employees;
•adequacy of insurance coverage;
•our ability to obtain indemnities from customers;
•changes in laws, treaties or regulations;
•the volatility of the price of our ordinary shares;
•our incorporation under the laws of Cyprus and the different rights to relief that may be available compared to other countries, including the United States;
•changes in governmental rules and regulations or actions taken by regulatory authorities;
•Lars H. Barstad: Chief Executive Officer, Frontline Management AS
•business disruptions due to adverse weather, natural disasters or other disasters outside our control; and
•other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission, or the Commission.
Condensed Consolidated Statements of Profit or Loss for the six months ended June 30, 2024 and June 30, 2023
(in thousands of $, except per share data)
單張債券
2024
2023
營業收入及其他營業收入
收入
5
1,134,423
1,010,095
其他經營收入
5
94,229
23,680
(in thousands of $)
1,228,652
1,033,775
營業費用
404,983
315,437
117,345
87,490
行政費用
27,412
24,339
折舊費用
6
171,726
112,642
營業費用總計
721,466
539,908
淨營業收入
507,186
493,867
其他收入（費用）
財務收益
7,874
7,728
財務費用
(144,756)
(77,807)
可變證券投資收益（損失）
815
(23,968)
Q2 2024
9
(920)
4,955
已收到分紅派息
1,283
25,500
淨其他費用
(135,704)
(63,592)
稅前利潤
371,482
430,275
所得稅效益(費用)
(3,089)
25
本期利潤
368,393
430,300
基本和攤薄每股收益
4
$
1.65
$
1.93
附註是這些未經審計的簡明合併財務報表的組成部分。
14
frontline plc
2024年6月30日和2023年6月30日截至六個月的綜合損益簡明綜合利潤表
（以千美元計）
注意
2024
2023
綜合收入
該期間的利潤
368,393
430,300
可能被重新歸類爲損益的項目：
外幣折算收益
446
131
其他綜合收入
446
131
綜合收入
368,839
430,431
附註是這些未經審計的簡明合併財務報表的組成部分。
15
frontline plc
2024年6月30日和2023年12月31日的合併資產負債表
（以千美元計）
單張債券
2024
2023
資產
流動資產
現金及現金等價物
7, 8
359,236
308,322
有價證券
8
8,247
7,432
貿易及其他應收款
8
147,752
124,647
關聯方應收款項
9
21,205
19,292
存貨
148,552
135,161
進行中的航行
137,845
110,061
預付費及應計收益
17,562
15,753
衍生工具應收款
8
5,758
—
其他資產
13,111
7,258
總流動資產
859,268
727,926
非流動資產
Total liabilities and equity
6
5,435,574
4,633,169
租賃資產
1,864
2,236
商譽
112,452
112,452
衍生工具應收款
8
30,790
39,117
投資關聯公司
9
11,467
12,386
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6
—
349,151
其他非流動資產
—
6,329
總資產
6,451,415
5,882,766
負債和股東權益
流動負債
短期借款和長期債務的流動部分
7
455,040
261,999
Adjustments to reconcile profit to net cash provided by operating activities:
1,130
1,104
關聯方應付款
9
54,510
47,719
應付貿易及其他款項
8
111,128
98,232
流動負債合計
621,808
409,054
非流動負債
長期債務
7
3,402,413
3,194,464
關聯公司業績份額
942
1,430
其他，淨
463
472
負債合計
4,025,626
3,605,420
股權
股本
4
222,623
222,623
股票認購應收款項。
604,687
604,687
資本公積
1,004,094
1,004,094
累積其他儲備
861
415
保留盈餘
593,996
445,999
公司普通股股東應占權益合計
2,426,261
2,277,818
非控制權益
(472)
(472)
總股本
2,425,789
2,277,346
負債和股東權益合計
6,451,415
5,882,766
16
附註是這些未經審計的簡明合併財務報表的組成部分。
17
frontline plc
2013年6月30日和2024年6月30日結束的六個月內，彙總的合併現金流量表；
（以千美元計）
單張債券
2024
2023
經營活動產生的現金流量淨額
404,010
553,154
投資活動
ADDITIONAL PAID IN CAPITAL
6
(908,493)
(153,280)
船隻出售收益
5
382,350
142,740
關聯公司貸款償還帶來的現金流入
—
1,388
投資活動產生的淨現金流出
(526,143)
(9,152)
籌資活動
發行債務所得款項
7
1,355,037
259,375
償還債務
7
(961,132)
(356,625)
RETAINED EARNINGS
(462)
(411)
支付現金分紅派息
4
(220,396)
(394,043)
籌集資金的淨現金流量
173,047
(491,704)
現金及現金等價物淨變動額
50,914
52,298
期初現金及現金等價物
308,322
254,525
期末現金及現金等價物餘額
359,236
306,823
附註是這些未經審計的簡明合併財務報表的組成部分。
18
frontline plc
截至2024年6月30日和2023年6月30日的合併簡明綜合股東權益變動表
（以千美元爲單位，除了股份數量）
單張債券
2024
2023
流通股數爲
期初和期末餘額
4
222,622,889
222,622,889
股本
期初和期末餘額
4
222,623
222,623
股票認購應收款項。
期初和期末餘額
604,687
604,687
資本公積
期初和期末餘額
1,004,094
1,004,094
累積其他儲備
期初餘額
415
454
其他綜合收益
446
131
期末餘額
861
585
保留盈餘
期初餘額
445,999
428,513
本期利潤
368,393
430,300
現金股利
4
(220,396)
(394,043)
期末餘額
593,996
464,770
公司股東應占權益總計
2,426,261
2,296,759
非控制權益
期初和期末餘額
(472)
(472)
股東權益總計
2,425,789
2,296,287
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
19
Frontline plc
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
1. BASIS OF PREPARATION
The Unaudited Condensed Consolidated Interim Financial Statements of Frontline plc (“Frontline” or the “Company”) have been prepared on the same basis as the Company’s Audited Consolidated Financial Statements and should be read in conjunction with the Annual Consolidated Financial Statements and accompanying Notes included in the Annual Report on Form 20-F for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 26, 2024. The results of operations for the interim period ended June 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024.
The Unaudited Condensed Consolidated Interim Financial Statements are prepared in accordance with IAS 34 Interim Financial Reporting. The Unaudited Condensed Consolidated Interim Financial Statements include the assets and liabilities of the Company and its subsidiaries.
These Unaudited Condensed Consolidated Interim Financial Statements were authorized for issue by the Board of Directors on September 27, 2024.
2. USE OF JUDGMENTS AND ESTIMATES
The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.
3. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES
The Unaudited Condensed Consolidated Interim Financial Statements are prepared in accordance with the accounting policies, which are described in the Company's Annual Report on Form 20-F for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on April 26, 2024.
New standards and interpretations
During the current financial period, the Company has adopted all the applicable new and revised Standards and Interpretations that were issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. The following new Standards, Interpretations and Amendments issued by the IASB and the IFRIC are effective for the current financial period:
•Amendments to IAS 1 Presentation of Financial Statements to specify the requirements for classifying liabilities as current or non-current.
The adoption of these amendments had no material effect on the financial statements.
New and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s interim financial statements are disclosed below. The below list includes the new standards and amendments that we believe are the most relevant for the Company:
•In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements, which replaces IAS 1, with a focus on updates to the statement of profit or loss. The new standard is effective for
20
annual reporting periods beginning on or after January 1, 2027 and must be applied retrospectively. The key new concepts introduced in IFRS 18 relate to:
◦the structure of the statement of profit or loss;
◦required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements (that is, management-defined performance measures); and
◦enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general.
•In May 2024, the IASB issued Amendments to the Classification and Measurement of Financial Instruments which amended IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The amendments include clarifying the date of recognition and derecognition of some financial assets and liabilities and new disclosures for certain instruments with contractual terms that can change cash flows. The amendments are effective for annual reporting periods beginning on or after January 1, 2026 and must be applied retrospectively.
The Company is currently assessing the impact of the new and amended standards on its financial statements. The Company has not applied or early adopted any new IFRS requirements that are not yet effective as of June 30, 2024.
4. EARNINGS PER SHARE
The authorized share capital of the Company as of June 30, 2024 was $600,000,000 divided into 600,000,000 shares of $1.00 nominal value each, of which 222,622,889 shares (December 31, 2023: 222,622,889 shares) of $1.00 nominal value each are in issue and fully paid.
The components of the numerator and the denominator in the calculation of basic and diluted earnings per share are as follows for the six months ended June 30, 2024 and June 30, 2023:
(in thousands of $)
2024
2023
Profit for the period
368,393
430,300
(in thousands)
Weighted average number of basic and diluted shares
222,623
222,623
Cash dividends paid per share
$0.99
$1.77
5. REVENUE AND OTHER OPERATING INCOME
Revenues
The lease and non-lease components of our revenues in the six months ended June 30, 2024 were as follows:
(in thousands of $)
Lease
Non-lease
Total
Voyage charter revenues
610,186
483,021
1,093,207
Time charter revenues
26,330
9,340
35,670
Administrative income
—
5,546
5,546
Total revenues
636,516
497,907
1,134,423
The lease and non-lease components of our revenues in the six months ended June 30, 2023 were as follows:
21
(in thousands of $)
Lease
Non-lease
Total
Voyage charter revenues
591,703
379,346
971,049
Time charter revenues
24,374
6,534
30,908
Administrative income
—
8,138
8,138
Total revenues
616,077
394,018
1,010,095
Four LR2 tankers were on fixed rate time charters as of June 30, 2024.
In March 2024, the Company entered into a fixed rate time charter-out contract for one VLCC to a third party on a three-year time charter at a daily base rate of $51,500. The time charter commenced in the third quarter of 2024.
In April 2024, the Company entered into a time charter-out contract for one Suezmax tanker to a third party on a three-year time charter at a daily base rate of $32,950 plus 50% profit share.
Other operating income
Other operating income in the six months ended June 30, 2024 and June 30, 2023 was as follows:
(in thousands of $)
2024
2023
Gain on sale of vessels
94,229
21,959
Gain on settlement of claim
—
397
Gain on pool arrangements
—
1,283
Other gains
—
41
Total other operating income
94,229
23,680
In January 2024, the Company announced that it had entered into an agreement to sell its five oldest VLCCs, built in 2009 and 2010, for an aggregate net sales price of $290.0 million. The vessels were delivered to the new owner in the six months ended June 30, 2024. After repayment of existing debt on the vessels, the transaction generated net cash proceeds of approximately $208.0 million, and the Company recorded a gain of $68.6 million in the six months ended June 30, 2024.
In January 2024, the Company entered into an agreement to sell one of its oldest Suezmax tankers, built in 2010, for a net sale price of $45.0 million. The vessel was delivered to the new owner in the six months ended June 30, 2024. After repayment of existing debt on the vessel, the transaction generated net cash proceeds of approximately $32.0 million, and the Company recorded a gain of $11.8 million in the six months ended June 30, 2024.
In March 2024, the Company entered into an agreement to sell one of its oldest Suezmax tankers, built in 2010, for a net sale of $46.9 million. The vessel was delivered to the new owner in the six months ended June 30, 2024. After repayment of existing debt on the vessel, the transaction generated net cash proceeds of approximately $34.0 million, and the Company recorded a gain of $13.8 million in the six months ended June 30, 2024.
In June 2024, the Company entered into an agreement to sell its oldest Suezmax tanker, built in 2010, for a net sale price of $48.5 million. The vessel is expected to be delivered to the new owner during the fourth quarter of 2024. After repayment of existing debt on the vessel, the transaction is expected to generate net cash proceeds of approximately $36.5 million, and the Company expects to record a gain of approximately $18.0 million in the fourth quarter of 2024.
In January 2023, the Company sold one 2009-built VLCC and one 2009-built Suezmax tanker for gross proceeds of $61.0 million and $39.5 million, respectively. The vessels were delivered to new owners in the six months ended June 30, 2023. After repayment of existing debt on the vessels, the transactions generated net cash proceeds of
22
$63.6 million, and the Company recorded a gain of $9.9 million and $2.8 million, respectively, in the six months ended June 30, 2023.
In May 2023, the Company sold one 2010-built Suezmax tanker, for gross proceeds of $44.5 million. The vessel was delivered to the new owner in the six months ended June 30, 2023. After repayment of existing debt on the vessel, the transaction generated net cash proceeds of $28.2 million, and the Company recorded a gain of $9.3 million in the six months ended June 30, 2023.
In the six months ended June 30, 2023, the Company recorded income of $1.3 million related to the pooling arrangement with SFL which terminated in 2023. In the six months ended June 30, 2023, the Company also recorded an arbitration award of $0.4 million in relation to the failed sale of a vessel.
6. VESSELS AND EQUIPMENT
Movements in the six months ended June 30, 2024 were as follows;
(in thousands of $)
Vessels and equipment
Drydock component
Total
Cost
As of December 31, 2023
5,464,799
147,655
5,612,454
Additions
1,235,065
24,809
1,259,874
Disposals
(714,938)
(23,670)
(738,608)
As of June 30, 2024
5,984,926
148,794
6,133,720
Accumulated depreciation
As of December 31, 2023
(890,918)
(88,367)
(979,285)
Charge for the period
(159,985)
(11,369)
(171,354)
Disposals
434,798
17,695
452,493
As of June 30, 2024
(616,105)
(82,041)
(698,146)
Net book value as of June 30, 2024
5,368,821
66,753
5,435,574
Euronav VLCC Acquisition
On October 9, 2023, Frontline entered into a Framework Agreement (the “Framework Agreement”) with Euronav NV ("Euronav"). Pursuant to the Framework Agreement, the Company agreed to purchase 24 VLCCs with an average age of 5.3 years, for an aggregate purchase price of $2,350.0 million from Euronav (the "Acquisition").
All of the agreements relating to the Acquisition came into effect in November 2023. In December 2023, the Company took delivery of 11 of the vessels for consideration of $1,112.2 million. The Company had a commitment of $890.0 million for the remaining 13 vessels to be delivered excluding $347.8 million of prepaid consideration as of December 31, 2023. The Company took delivery of the 13 remaining vessels for consideration of $1,237.8 million in the six months ended June 30, 2024.
In the six months ended June 30, 2024, the Company also:
•sold five VLCCs and two Suezmax tankers,
•completed the installation of a ballast water treatment system on one vessel, and
•performed dry docks on eight vessels.
23
7. INTEREST BEARING LOANS AND BORROWINGS
Movements in the Company's interest bearing loans and borrowings in the six months ended June 30, 2024 are summarized as follows:
(in thousands of $)
December 31, 2023
Proceeds
Repayments
Other
June 30, 2024
Floating rate debt
3,279,626
1,355,037
(861,132)
7,672
3,781,203
Fixed rate debt
176,837
—
(100,000)
(587)
76,250
Total debt
3,456,463
1,355,037
(961,132)
7,085
3,857,453
In November 2023, the Company entered into a senior secured term loan facility in an amount of up to $1,410.0 million with a group of our relationship banks to partly finance the Acquisition. The facility has a tenor of five years, carries an interest rate of the Secured Overnight Financing Rate (“SOFR”) plus a margin in line with the Company’s existing loan facilities and has an amortization profile of 20 years commencing on the delivery date from the yard. In December 2023, the Company drew down $891.3 million under the facility to partly finance the Acquisition. Up to $518.7 million remained available and undrawn under the facility as of December 31, 2023 all of which was drawn down to partially finance the remaining 13 vessels delivered as a result of the Acquisition in the six months ended June 30, 2024. The facility is fully drawn down as of June 30, 2024.
In November 2023, the Company entered into a subordinated unsecured shareholder loan in an amount of up to $539.9 million with Hemen Holding Limited ("Hemen"), the Company's largest shareholder, to partly finance the Acquisition (the "Hemen shareholder loan"). The Hemen shareholder loan has a tenor of five years and carries an interest rate of SOFR plus a margin equal to the $1,410.0 million facility, in line with the Company’s existing loan facilities. In December 2023, the Company drew down $235.0 million under the Hemen shareholder loan to partly finance the Acquisition. Up to $304.9 million remained available to be drawn as of December 31, 2023. In January 2024, the Company drew down $60.0 million to partly finance the remaining 13 vessels delivered as a result of the Acquisition in the six months ended June 30, 2024. In June 2024, the Company repaid $147.5 million under the Hemen shareholder loan and no amount remained available to be drawn as of June 30, 2024. In August 2024, the Company repaid the Hemen shareholder loan in full.
In December 2023, the Company drew down $99.7 million under its $275.0 million senior unsecured revolving credit facility with an affiliate of Hemen, to partly finance the Acquisition. In April 2024, the Company repaid $100.0 million under the facility. Up to $200.0 million remains available to be drawn following the repayment.
In February 2024, the Company entered into a secured term loan facility in an amount of up to $94.5 million with KFW Bank to refinance two LR2 tankers. The new facility has a tenor of five years, carries an interest rate of SOFR plus a margin of 180 basis points and has an amortization profile of 20 years commencing on the delivery date from the yard. The refinancing generated net cash proceeds of approximately $38.0 million. The new facility is fully drawn down as of June 30, 2024.
In March 2024, the Company entered into a senior secured term loan facility in an amount of up to $219.6 million with a syndicate of banks to refinance six LR2 tankers. The new facility has a tenor of five years, carries an interest rate of SOFR plus a margin of 180 basis points and has an amortization profile of 18 years commencing on the delivery date from the yard. The refinancing generated net cash proceeds of approximately $101.0 million. The new facility is fully drawn down as of June 30, 2024.
In May 2024, the Company entered into a senior secured term loan facility in an amount of up to $606.7 million with China Exim Bank and DNB, insured by China Export and Credit Insurance Corporation, to refinance eight Suezmax tankers and eight LR2 tankers. The facility has a tenor of approximately nine years, carries an interest rate of SOFR plus a margin in line with the Company’s existing loan facilities and has an amortization profile of approximately 19.7 years commencing on the delivery date from the yard. In June 2024, the Company drew down $306.5 million under the facility. Up to $300.2 million remained available and undrawn as of June 30, 2024, all of
24
which was drawn down in August 2024. The refinancing generated net cash proceeds of approximately $275.0 million, of which $135.3 million was generated in the six months ended June 30, 2024.
Debt restriction
The Company's loan agreements contain loan-to-value clauses, which could require the Company to post additional collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings under each of such agreements decrease below required levels. In addition, the loan agreements contain certain financial covenants, including the requirement to maintain a certain level of free cash, positive working capital and a value adjusted equity covenant. The Company is permitted to satisfy up to 50% of the cash requirement by maintaining a committed undrawn credit facility with a remaining availability of greater than 12 months. As of June 30, 2024, cash and cash equivalents includes cash balances of $89.8 million (December 31, 2023: $75.4 million), which represents 50% (December 31, 2023: 50%) of the cash required to be maintained by the financial covenants in our loan agreements.
The Company was in compliance with all of the financial covenants contained in the Company's loan agreements as of June 30, 2024 and December 31, 2023.
Assets pledged
(in thousands of $)
June 30, 2024
December 31, 2023
Vessels
5,435,342
4,632,901
8. FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT
Interest rate swap agreements
In February 2016, the Company entered into an interest rate swap with DNB whereby the floating interest on notional debt of $150.0 million was switched to a fixed rate. The contract had a forward start date of February 2019.
In March 2020, the Company entered into three interest rate swaps with DNB whereby the floating interest rate on notional debt totaling $250.0 million was switched to a fixed rate.
In April 2020, the Company entered into two interest rate swaps with Nordea whereby the floating interest rate on notional debt totaling $150.0 million was switched to a fixed rate.
The reference rate for our interest rate swaps is SOFR.
As of June 30, 2024, the Company recorded a derivative instrument receivable of $36.5 million (December 31, 2023: $39.1 million) and no derivative instrument payable (December 31, 2023: nil) in relation to these agreements. The Company recorded a gain on derivatives of $9.8 million in the six months ended June 30, 2024 (six months ended June 30, 2023: gain of $9.2 million) in relation to these agreements.
The interest rate swaps are not designated as hedges and are summarized as of June 30, 2024 as follows:
25
Notional Amount
Inception Date
Maturity Date
Fixed Interest Rate
($000s)
150,000
February 2016
February 2026
2.1970
%
100,000
March 2020
March 2027
0.9750
%
50,000
March 2020
March 2027
0.6000
%
100,000
March 2020
March 2025
0.9000
%
100,000
April 2020
April 2027
0.5970
%
50,000
April 2020
April 2025
0.5000
%
550,000
Fair Values
The carrying value and estimated fair value of the Company's financial assets and liabilities as of June 30, 2024 and December 31, 2023 are as follows:
2024
2023
(in thousands of $)
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial assets measured at fair value through profit or loss
Derivative instruments receivable - non-current
30,790
30,790
39,117
39,117
Derivative instruments receivable - current
5,758
5,758
—
—
Marketable securities
8,247
8,247
7,432
7,432
Financial assets not measured at fair value
Cash and cash equivalents
359,236
359,236
308,322
308,322
Receivables
147,752
147,752
124,647
124,647
Financial liabilities not measured at fair value
Trade and other payables
111,128
111,128
98,232
98,232
Floating rate debt
3,781,203
3,829,759
3,279,626
3,322,347
Fixed rate debt
76,250
78,752
176,837
184,462
The estimated fair value of financial assets and liabilities as of June 30, 2024 are as follows:
(in thousands of $)
Fair Value
Level 1
Level 2
Level 3
Financial assets measured at fair value through profit or loss
Derivative instruments receivable - non-current
30,790
—
30,790
—
Derivative instruments receivable - current
5,758
—
5,758
—
Marketable securities
8,247
8,247
—
—
Financial assets not measured at fair value
Cash and cash equivalents
359,236
359,236
—
—
Financial liabilities not measured at fair value
Floating rate debt
3,829,759
—
3,829,759
—
Fixed rate debt
78,752
—
—
78,752
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Measurement of fair values
Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 1, Level 2 and Level 3 fair values, as well as the significant unobservable inputs that were used.
Financial instruments measured at fair value
Type
Valuation Techniques
Significant unobservable inputs
Interest rate swaps
Fair value was determined based on the present value of the estimated future cash flows.
Not applicable.
Marketable securities
Fair value was determined based on the quoted market prices of the securities.
Not applicable.
Financial instruments not measured at fair value
Type
Valuation Techniques
Significant unobservable inputs
Floating rate debt
Discounted cash flow.
Not applicable.
Fixed rate debt
Discounted cash flow.
Discount rate.
Assets Measured at Fair Value on a Recurring Basis
The fair value (level 2) of interest rate swaps is the present value of the estimated future cash flows that the Company would receive or pay to terminate the agreements at the end of the reporting period, taking into account, as applicable, fixed interest rates on interest rate swaps, current interest rates, forward rate curves and the credit worthiness of both the Company and the derivative counterparty.
Marketable securities are listed equity securities for which the fair value at the end of the period is the aggregate market value based on quoted market prices (level 1).
There were no transfers between these levels in 2024 and 2023.
Financial risk management
In the course of its normal business, the Company is exposed to the following risks:
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.
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Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations if they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Company has entered into several loan facilities whose maturities are spread over different years (see Note 7).
The following are the remaining contractual maturities of financial liabilities:
Contractual cash flows at June 30, 2024
(in thousands of $)
Carrying Value
Total
Less than 1 year
Between 1 and 5 years
More than 5 years
Non derivative financial liabilities
Floating rate debt
3,781,203
3,785,700
409,730
3,114,889
261,081
Fixed rate debt
76,250
75,000
—
75,000
—
Interest on floating rate debt
—
869,599
253,597
566,876
49,126
Interest on fixed rate debt
—
10,951
6,080
4,871
—
Operating lease liabilities
2,072
2,072
1,130
942
—
Trade and other payables
111,128
111,128
111,128
—
—
The Company has secured bank loans that contain loan covenants. A future breach of covenant may require the Company to repay the loan earlier than indicated in the above table. For more details on these covenants, see Note 7.
The carrying values of fixed and floating rate debt include accrued interest as of the reporting date. The interest on floating rate debt is based on the SOFR spot rate as of June 30, 2024. The interest on fixed rate debt is based on the contractual interest rate for the periods presented. It is not expected that the cash flows included in the table above (the maturity analysis) could occur significantly earlier, or at significantly different amounts than stated above.
Capital management
We operate in a capital intensive industry and have historically financed our purchase of tankers and other capital expenditures through a combination of cash generated from operations, equity capital and borrowings from commercial banks. Our ability to generate adequate cash flows on a short and medium term basis depends substantially on the trading performance of our vessels in the market. Our funding and treasury activities are conducted within corporate policies to increase investment returns while maintaining appropriate liquidity for our requirements.
The Company’s objectives when managing capital are to:
•safeguard our ability to continue as a going concern, so that we can continue to provide returns for shareholders and benefits for other stakeholders, and
•maintain an optimal capital structure to reduce the cost of capital.
The Company's loan agreements contain loan-to-value clauses, which could require the Company to post additional collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings under each of such agreements decrease below required levels. In addition, the loan agreements contain certain financial covenants, including the requirement to maintain a certain level of free cash, positive working capital and a value adjusted equity covenant. Failure to comply with any of the covenants in the loan agreements could result in a default, which would permit the lender to accelerate the maturity of the debt and to foreclose upon any collateral securing the debt.
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9. RELATED PARTY TRANSACTIONS AND AFFILIATED COMPANIES
We transact business with the following related parties and affiliated companies, an affiliated company being a company in which Hemen and companies associated with Hemen have significant influence or control: SFL, Seatankers Management Norway AS, Seatankers Management Co. Ltd, Golden Ocean Group Limited ("Golden Ocean"), Alta Trading UK Limited, Archer Limited, Flex LNG Ltd, Avance Gas Holding Ltd. ("Avance Gas"), and Front Ocean Management AS ("Front Ocean Management"). We also own interests in TFG Marine and Clean Marine AS (through our interest in FMS Holdco) which are accounted for as equity method investments.
Summary
A summary of transactions with related parties and affiliated companies for the six months ended June 30, 2024 and 2023 was as follows:
(in thousands of $)
2024
2023
Revenues and other operating income
Seatankers Management Co. Ltd
1,109
1,085
SFL
1,837
3,558
Golden Ocean
748
2,253
Flex LNG Ltd
736
835
Avance Gas
929
1,042
TFG Marine
186
642
Total revenues and other operating income
5,545
9,421
Operating expenses
Front Ocean Management
1,558
1,272
Seatankers Management Norway AS
351
551
Seatankers Management Co. Ltd
215
271
Total operating expenses
2,124
2,094
Other income (expenses)
Shareholder loan facility finance expense
(10,936)
—
Revolving credit facility finance expense
(6,903)
(7,567)
FMS Holdco share of results
711
1,208
TFG Marine share of results
(1,631)
3,747
Total other expenses
(18,759)
(2,612)
Revenues earned from related parties and affiliated companies comprise office rental income, technical and commercial management fees, newbuilding supervision fees, freights, and administrative services. Operating expenses paid to related parties and affiliated companies comprise rental for vessels and office space, support staff costs, and corporate administration.
Related party and affiliated company balances
A summary of balances due from related parties and affiliated companies as of June 30, 2024 and December 31, 2023 was as follows:
29
(in thousands of $)
June 30, 2024
December 31, 2023
SFL
4,515
4,652
Seatankers Management Co. Ltd
1,859
726
Golden Ocean
11,743
11,147
Alta Trading UK Limited
—
8
Flex LNG Ltd
430
455
TFG Marine
1,479
1,117
Avance Gas
1,068
1,080
Other related parties and affiliated companies
111
107
Related party and affiliated company receivables
21,205
19,292
Balances due from related parties and affiliated companies are primarily derived from newbuilding supervision fees, technical and commercial management fees, and recharges for administrative services.
A summary of balances due to related parties and affiliated companies at June 30, 2024 and December 31, 2023 was as follows:
(in thousands of $)
June 30, 2024
December 31, 2023
SFL
7,773
6,407
Seatankers Management Co. Ltd
448
337
Golden Ocean
17,211
13,837
Flex LNG Ltd
512
549
TFG Marine
27,922
25,956
Front Ocean Management
11
71
Avance Gas
633
562
Related party and affiliated company payables
54,510
47,719
Shareholder loan facility
147,500
235,000
Revolving credit facility
75,000
175,000
Total due to related parties and affiliated companies
277,010
457,719
Related party and affiliated company payables are primarily for bunker purchases, supplier rebates, loan interest and corporate administration fees.
Transactions with associated companies
A share of losses of TFG Marine of $1.6 million was recognized in the six months ended June 30, 2024 (2023: profit of $3.7 million). The Company also entered into a bunker supply arrangement with TFG Marine, under which it has paid $291.2 million to TFG Marine in the six months ended June 30, 2024 (2023: $193.1 million) and $27.9 million remained due as of June 30, 2024 (December 31, 2023: $26.0 million).
A share of profits of FMS Holdco of $0.7 million was recognized in the six months ended June 30, 2024 (2023: $1.2 million).
Transactions with key management personnel
The total amount of the remuneration earned by all directors and key management personnel for their services in the six months ended June 30, 2024 and 2023 was as follows:
30
(in thousands of $)
2024
2023
Total remuneration
5,416
2,316
of which:
Paid in capacity as directors
2,440
996
Other remuneration
2,976
1,320
The directors annually review the remuneration of the members of key management personnel. Directors' fees are approved annually at the Annual General Meeting. No pensions were paid to directors or past directors. No compensation was paid to directors or past directors in respect of loss of office. Total remuneration consists of a fixed and a variable component and can be summarized as follows:
(in thousands of $)
2024
2023
Total fixed remuneration
464
419
of which:
Cost of pension
15
11
Total variable remuneration
4,952
1,898
of which:
Share based payments
2,976
2,005
10. COMMITMENTS AND CONTINGENCIES
In June 2024, the Company attended an introductory hearing before the Enterprise Court in Antwerp, Belgium, in response to a summons received from certain funds managed by FourWorld Capital Management LLC (“FourWorld”) in connection with their claims pertaining to the integrated solution for the strategic and structural deadlock within Euronav announced on October 9, 2023, and Euronav’s acquisition of CMB.TECH NV. FourWorld claims that the transactions should be rescinded and in addition has requested the court to order Compagnie Maritime Belge NV and Frontline to pay damages in an amount to be determined in the course of the proceedings. A procedural calendar has been agreed and the case is scheduled for oral court pleadings in May 2026, after which a judgment will be rendered. The Company finds the claims to be without merit and intends to vigorously defend against them.
11. SUBSEQUENT EVENTS
In August 2024, the Board of Directors declared a dividend of $0.62 per share for the second quarter of 2024 and the dividend is scheduled to be paid on or about September 30, 2024.
Refer to Note 5 and Note 7 for details of other transactions that have concluded subsequent to June 30, 2024 pertaining to sales of vessels, time charter-out contracts and debt.