Frontline locks four VLCCs in term charters
Frontline secured multi-year charters for four VLCCs at rates up to $120,000 daily, a major shift towards long-term cover in a strong market.
Frontline has fixed four Very Large Crude Carriers (VLCCs) on term charters, securing daily rates as high as $120,000. The John Fredriksen-backed tanker giant arranged the deals to lock in earnings at levels it says are rarely seen in the sector.
The company fixed two newly delivered VLCCs for one year each at $120,000 per day. These ships joined the fleet in June and July. It also secured employment for two older vessels built in 2016, starting from August. One was fixed for two years at an average of $90,000 per day, while the other landed a three-year charter at an average of $75,000 per day. The charterers were not named.
| Ship Type / Build Year | Charter Duration | Average Daily Rate |
|---|---|---|
| Newly delivered VLCC | 1 year | $120,000 |
| Newly delivered VLCC | 1 year | $120,000 |
| 2016-built VLCC | 2 years | $90,000 |
| 2016-built VLCC | 3 years | $75,000 |
On a simple day-rate basis, the minimum periods for these four fixtures represent roughly $235 million in gross contracted hire. This activity is part of a major shift towards period cover for Frontline in 2024. The company's recent fixtures show a clear strategy of securing forward revenue.
Market Context and Strategy
The new charters were struck into an even stronger market than earlier deals. According to the source, Splash, Frontline had fixed seven VLCCs for one year at an average of $76,900 per day back in January. At that time, chief executive Lars Barstad described those levels as rates not seen for decades.
Current spot market performance underscores the strength. Frontline's VLCCs earned an average of $152,700 per day in the spot market during the second quarter. Furthermore, 86% of available third-quarter VLCC days have so far been covered at $156,900 per day. Barstad said the company has increased its focus on securing revenue visibility at historically high levels. Analysts tracking the stats for this trade lane will note the premium for term cover compared to earlier this year.
Financial Performance and Asset Sales
The charter update accompanied Frontline's strongest quarterly financial results on record. Its second-quarter profit reached $659.2 million. The company has also moved to monetise high asset values. In July, it agreed to sell two VLCCs built in 2017 for a total of $270 million.
This series of fixtures provides substantial earnings cover for part of the company's squad of vessels. The deals lock in revenue from a portion of its fleet well into the future, even as spot rates remain elevated. The strategic shift towards term employment, as reported by the source, is now a defining feature of Frontline's operations in the current market cycle.
