Jens Martin Jensen - Chief Executive Officer of Frontline Management As Inger M. Klemp - Chief Financial Officer and Chief Financial Officer of Frontline Management AS

Jonathan B. Chappell - Evercore Partners Inc., Research Division Fotis Giannakoulis - Morgan Stanley, Research Division Herman Hildan - RS Platou Markets AS, Research Division Joshua Katzeff - Deutsche Bank AG, Research Division Michael Webber - Wells Fargo Securities, LLC, Research Division Martin Korsvold - Pareto Securities AS, Research Division David E. Beard - Iberia Capital Partners, Research Division Randy Laufman - Imperial Capital, LLC, Research Division

Good day, and welcome to the Frontline Q2 2012 Results Presentation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to CEO, Mr. Jens Martin Jensen. Please go ahead, sir.

Thank you. Good morning, good afternoon, and welcome to our Q2 2012 presentation. We will follow our usual program for the presentation with Inger going through the second quarter highlights and main transactions, financial review of the quarter and a brief update of our newbuilding program. After that, I will follow up with some market comments on what we saw in the second quarter and update on where we think the market is at present. So Inger, if you could start, please. Inger M. Klemp: Thank you and good morning and good afternoon, ladies and gentlemen. As Jens said, I will guide you through the highlights and the financial review in the second quarter of 2012 and so far into the third quarter. I would then ask you to move to Slide 4, highlights and transactions. The chartered-in VLCC Hampstead was redelivered on April 22, 2012. And on May 29, 2012, Frontline was allocated 3,546,000 shares in a private placement in Frontline 2012. That was a total placement of the 6 million [indiscernible] shares at subscription price of $3.75 per share. And following this private placement, the company has an ownership of 7.9% in Frontline 2012. In June 2012, Frontline terminated a long-term charter party for the OBO carrier Front Rider. The charter party terminated July 22, and the company paid a cash compensation to Ship Finance of $400,000 for the early termination of the charter. The transaction will reduce obligations under capital leases by $2.4 million, and we recorded an impairment loss of $4.9 million in the second quarter of 2012. In August 2012, Frontline terminated a long-term charter party for the OBO carrier Front Climber. The charter party is expected to terminate late September 2012. The company will make a cash compensation to Ship Finance of approximately $600,000 for the early termination of the charter. The transaction will reduce obligations under capital leases by $1.7 million, and we recorded an impairment loss of $4.2 million in the second quarter of 2012. Then I would like you to move to Slide 5, financial highlights. Frontline reports net loss, excluding vessel impairment losses of $11.2 million, equivalent to a loss per share of $0.14 in the second quarter 2012. Frontline has recorded a vessel impairment loss of $13.1 million in the 3- and 6-month period ended June 30. That is equivalent to a loss per share of $0.17. This loss relates to the 3 OBO vessels: the Front Rider, with $4.9 million; the Front Climber, with $4.2 million; and the Front Driver with $4 million. The losses relating to Front Driver -- sorry, Rider and Climber are the expected losses on the termination of the long-term charter parties in July and September, respectively. Impairment losses are taken when events or changes in circumstances occur that cause the company to believe that future cash flows for an individual vessel will be less than the carrying value and not fully recordable. In such instances, an impairment charge is recognized if the estimate of the undiscounted cash flow is expected to result from the use of the vessel and its eventual disposition is less than the vessel's carrying amount. The net loss, including the vessel impairment loss, was $24.3 million, equivalent to loss per share of $0.31. Frontline announces a net loss, excluding vessel impairment loss, of $4 million for the 6 months ended June 30, equivalent to loss per share of $0.05. The net loss, including vessel impairment loss, was $17 million -- $17.3 million for the 6-month period ended June 30, equivalent to loss per share of $0.22. Frontline will not pay dividends for the second quarter. Then I would like you to move to Slide 6, income statement. Net loss excluding gains and losses in the second quarter of 2012 is about $5 million weaker than in the first quarter of 2012. This decrease can mainly be explained by some items. First, income on time charter basis was about $1 million better in the second quarter than it was in the first quarter due to an increase of time charter equivalent rates per day in the second quarter. That was partially offset by a reduction in on high days due to recent stays and lease terminations. Cash sweep expense increased about $3 million this quarter compared with the first quarter due to the increase in time charter equivalents per day in the second quarter. Then ship operating expenses increased by almost $6 million compared with the first quarter, primarily as a result of an increase in drydocking cost of $7.3 million, which was partially offset by a decrease in running cost. We drydocked 5 vessels in the second quarter compared with no vessels in the first quarter. And last item, charter hire expenses decreased by $2 million this quarter, and that is due to the redelivery of the chartered-in VLCC Hampstead, which I talked about earlier. Then I would like you to move to Slide 7, income on time charter basis. Frontline's double-hull VLCC fleet, excluding the vessels on spot index time charters, earned in the spot market approximately $31,700 per day in the second quarter compared with $27,400 per day in the first quarter. Including the vessels on spot index time charters, the VLCC fleet earned $31,500 per day in the second quarter compared then with $25,400 per day in the first quarter. And the average for the whole fleet was about $31,000 per day in the second quarter compared with $25,600 per day in the first quarter. The Suezmax fleet earned in the Orion pool $17,400 per day in the second quarter compared with $19,200 per day in the first quarter. And as a consequence of that, some of the Suezmax vessels traded outside the pool at somewhat lower TCE rates. We earned on average in the spot market approximately $16,200 per day in the second quarter compared with $19,500 per day in the first quarter. The average for the whole Suezmax fleet was also about $16,200 per day in the second quarter compared with $19,500 per day in the first quarter. OBO earned $28,100 per day in this quarter compared with $37,800 per day in the first quarter mainly due to redelivery of vessels on charters. As you see on this chart, that Frontline this quarter has traded better than our peers for VLCC, but the earnings for the Suezmax is very disappointing. Moving then to Slide 8, that's the ship operating expenses and off-hire. As you can see from the slide, we had average OpEx for the fleet of approximately $11,100 per day in the quarter compared to approximately $9,000 per day in the first quarter. A reason for this is that we drydocked 5 vessels in the second quarter compared to no vessels in the first quarter and as you can see from the graph on the upper right-hand side of the slide. As you can see from the graph on the lower hand -- lower right-hand on the slide, off-hire days were 141 in the second quarter compared with 41 in the first quarter. This is mainly then due to this more off-hire days relating to drydock expense in this quarter. We expect that for the third quarter that we will drydock 3 vessels. Then I would like you to move to Slide 9, the balance sheet. The total balance sheet end June 30, 2012, is approximately the same as the end of first quarter of 2012, with only minor changes to the different items. So I will not spend time on walking through this now. Then I would like you to move to Slide 10, the cash cost breakeven rates. The estimated average cash cost breakeven rates for the remainder of 2012 are approximately $23,900 per day for VLCCs and $17,600 per day for Suezmaxes and $12,300 per day for the OBOs. These rates are the daily rates our vessels must earn to cover budgeted operating costs, estimated interest expense, scheduled loan principal repayments, [indiscernible] and corporate overhead costs. Then I would like you to move to Slide 11, newbuilding overview. As for the end of June, 2012 the total number of vessels in Frontline's newbuilding program are 2 Suezmax tankers, which constitute a total contractual cost of about $125 million. We have paid installments of $12.5 million on the newbuilding, and the remaining installments to be paid amount to $112.4 million. We expect payments of approximately $25 million in 2012 and $87 million in 2013. Moving down to Slide 12 and 13, that's the Frontline fleet. The number of vessels in the Frontline fleet as per end of the second quarter is 57 vessels, including the vessels on commercial management and ITCL vessels, and it's compounded by -- sorry, 36 double-hull VLCCs, 2 single-hull VLCCs, 15 double-hull Suezmaxes and 4 OBOs. We have contract coverage of 12% in 2012 and 11% in 2013. The average net TCE rates for the VLCC fleet is about $52,100 per day in '12 and $52,500 per day in 2013. And with this, I'll leave the word to Jens again.

Thank you, Inger. We are now on Slide 14. A lot of the positive expectation and factors, which was built up in the first quarter of the year unfortunately fizzled out during the second quarter. Strong newbuildings was delivered due to improved market conditions. Ton mile was reduced, and one of the reasons being that Iranian crude made it to Asia by replacing oil from the Atlantic Basin. And we saw a drop of VLCC liftings from the Persian Gulf in July, due to refinery overhauls in the East and possibly earlier crude stock building from the first quarter. So there's not that many positive factors to mention, only that no VLCCs or Suezmaxes was ordered in the quarter. Now we move to Slide 15, the VLCC fleet. 33 VLCCs were delivered during the first 6 months of the year, which means that the slippage in the VLCC order book delivery has slowed down. We do, however, expect changes to the order book going forward. Slide 16, the Suezmax fleet order book. We also saw an increase in Suezmaxes being delivered. However, there are still deliveries that are behind schedule and we see slippage on the fleet. It will be around 25% that we expect for the rest of the year. On to Slide 17, newbuilding prices and time charter rates. As I mentioned, no recent orders have been placed in the VLCC and Suezmax segments. However, the newbuilding prices is on a soft and falling trend. However, there are still last drilling offshore projects where the yards are chasing, and the large Korean shipyards prefer to take containership orders compared to building large tankers at loss-making prices. We estimate newbuilding prices for good specification VLCC to be in the region of USD $85 million to USD $90 million and for a good-spec Suezmax tanker around $55 million. Time charter rates. Our 3-year VLCC time charter rate is around $25,000 per day, and we estimate the 3-year time charter rate on Suezmaxes to be the region of $20,000 per day. I would like to say that there are not many charters out there actually willing to pay this rate in period [ph], and the real last time charter being done on a VLCC was just below $20,000 per day basis at 2-year period. We'll now go over to Slide 18 and 19, which is headed "How long is this horrible (sic) [horrid] market sustainable?" Probably a better heading would have been or maybe a better phrase, for how long can the owners survive? AG East and AG West returns with their prevailing world-scale market rates and with their prevailing high bunker prices are at historic low levels. The FFA rates are negative territories. However, to use these rates are not a true reflection of the market. If you look at 2 voyage examples, which traditionally have been the most profitable voyages for VLCC, so called cross-traits, fixing [ph] a VLCC from the Persian Gulf to the U.S. Gulf or Caribbean, this will give a negative return of about $2,000 per day. If you then fix the same vessel opening in the U.S. Gulf or Caribbean at prevailing market rates, out again to Singapore, this will give you about $11,000 per day for this voyage. So in total, you will have a round voyage of around 138 days at around $3,400 per day. Of course there's a difference in each ship, but this goes to show an example, and business and rates like this cannot go on for much longer. Now we're at Slide 20, outlook. More on a general comment, what we saw happening in the second quarter and which has continued into the third quarter is an increase in the fleet supply against a reduction in the ton mile situation basically said in a short version. Standstill in order of VLCC and Suezmaxes is positive, but the fleet is still too large. We need tonnage to be scrapped. I think it's safe to say that many owners are now starting to feel the financial squeeze from falling values, collapse on other shipping segments such as bulk containers. No doubt, the rate opportunities will come, but how many owners can react to these? Regarding Frontline and our own situation and outlook, we have continued our strategy of selling older and non-core fleet, and we still have a few more ships to dispose of before end year. We have continued to outperform our peers in the VLCC segment, whereas our Suezmax earnings was slightly disappointing. Despite earnings at below or close to operating cost, we will continue to maintain our fleet to good and acceptable standards. We have reduced our cash breakeven rates following the restructuring end of last year. This gives us some downside protection. However, it also reduces the potential upside should the spot market improve. I think with that, we are ready to take your questions. Thank you.

[Operator Instructions] We will now take the first question. It comes from Jon Chappell from Evercore Partners. Jonathan B. Chappell - Evercore Partners Inc., Research Division: Jens, in the presentation and then also in Inger's comment, you made mention about how the Suezmax earnings were disappointing. It seems like this is 2 straight quarters now since the Orion pool was formed and after you announced that deal with Exxon. So I was just wondering if you can give a little bit more information about why the Suezmax pool that you're operating in has been disappointing relative to the market and some of your peers.

Well, we think our earnings in the Suezmaxes have been somewhat disappointing and we could have done better. That's seen from our perspective. I believe -- I agree with you when you look at the other reported figures from some of our peers, a slightly better number. Of course, you have to look at the fleet size. Some of the owners that have reported only had 3, 4 ships in the spot market. And I think one of the differences is, of course, also to operate a large fleet, which the Orion pool has 29 ships, in a bad market, this is sometimes not the most advantageous. And that we have seen this unfortunately. No bargaining or pushing power when you're sitting with a big fleet. So I think that's probably the main explanation for that. Jonathan B. Chappell - Evercore Partners Inc., Research Division: Okay. Are there any terms in the Exxon deal? Maybe because you have full utilization with that contract, is there a discount that's applied to kind of market rates that could be leading to the lower-than-expected rates?

I don't really want to comment on that context specifically. Of course, that's a confidential contract. It's a market-based contract, and of course, the values of contracts like that, you get by maximizing earnings and positioning our ships into that. So hopefully, it will be a more valuable tool to have going forward. Jonathan B. Chappell - Evercore Partners Inc., Research Division: Okay. Inger, on the drydockings, you mentioned 5 in the second quarter, 3 in the third quarter. Can you just break that out by asset class, VLCCs or Suezmaxes? Inger M. Klemp: It will be 3 VLCCs in the third quarter. And then in the second quarter, 3 VLCCs, 1...

1 Suezmax and 1 OBO. Inger M. Klemp: 1 OBO and 1 Suezmax, yes. Jonathan B. Chappell - Evercore Partners Inc., Research Division: Got it. And then finally, Jens, if you can just expand on the last comment you made in the earnings release about remaining cautious in this market environment, focusing your resources on the present activities. There's obviously been a lot of noise about Frontline 2012 kind of being the growth vehicle in the Fredriksen Group. But I guess, Mr. Fredriksen said last week that the VLCC market, which, as you just laid out, is dead rotten. So is there any growth prospect outside of the 2 Suezmax newbuildings? Do you see a return of the dividend or are you just kind of hunkering down and trying to make it through this market and maybe late 2013 there'll be some prospects for you to grow the dividend again?

I think our strategy in Frontline is probably what you are seeing in other large tanker companies right now, is to try to dispose of older ships which are not performing or even covering the operating cost, is to dispose of ships where there is potential free asset in [ph], to reduce expensive time travels we have coming in. So that's what we are doing, and that's why, of course, the fleet has been reduced and not built up. At the same time, we believe that asset prices may have a little further to go, so it will be better to wait to purchase ships. And I think the ships that's available for time charter in the market is obviously ships that are not very good performers, and the owners, they would like to put them in time charters instead of having them in the spot market. So I think the opportunities to do something are limited. More and more is coming, and I think we will see more of this in the autumn now when various people are coming back from vacation. And the first call they will have on next Monday will probably be from their bank. So I think there will be more opportunities coming ahead, and that's, of course, what we are monitoring.

We will now take the next question. It comes from Fotis Giannakoulis from Morgan Stanley. Fotis Giannakoulis - Morgan Stanley, Research Division: I would like to ask about your decision to invest again in Frontline 2012 versus using this capital for reducing or buying back your note. Are there any thoughts about taking out this -- the convertible note in the future? Inger M. Klemp: What we are going to do in the future is, of course, is difficult for us to talk about. So obviously, that is a possibility that we will look into that as well, but -- if that can answer your question. Fotis Giannakoulis - Morgan Stanley, Research Division: Can you a little bit elaborate on the investment in Frontline 2012? What are the potential alternatives for Frontline in relation to Frontline 2012? Inger M. Klemp: Frontline 2012, I guess, is -- could be a good investment. So I think we -- you have to look at it as an investment. Fotis Giannakoulis - Morgan Stanley, Research Division: So it's purely an equity investment. Is there any potential of turning into something more strategic given the common sponsorship of the 2 companies? Inger M. Klemp: You have to look at it as an investment as I said, so that's how we view it. Fotis Giannakoulis - Morgan Stanley, Research Division: And in relation to the market, what do you think it will take for this market to turn around? First of all, how long do you think that we are away from the recovery and what are the signs, the signals that you are expecting to see? Is it more scrapping, is it more demand from specific areas? And also if you can comment about the Hurricane Isaac and how do you think that this might be affecting the crude tanker market in particular.

Well, I think what we have all learned -- some people have been in the industry longer than others -- that the crude market is quite a dynamic and changing market. Just as we think everything is good or bad, then something happens. I think if you look at this Isaac typhoon, of course, there will be some disruption. And LOOP terminal has closed down, so there will be some delays for ships coming into there, which could maybe create some good voyages these ships were intended for. So that's of course something you can hope for. You can run into a voyage like that. I don't think that has long-term indications, unfortunately. There, of course, are things going on right now. Like you saw refinery explosions and other things like that, which could create some situations here and there where you could be lucky running into a good voyage. But I think, of course, the overall problem right now is that the fleet is too large to handle the demand which we have there or the oil flowing and then -- unless we see some scrapping or actually really lay-off of ships, which we have not seen so far, I think we need a lot of more positive factors to absorb this fleet. Fotis Giannakoulis - Morgan Stanley, Research Division: And what do you think it is going to take in order to see these vessels being laid up? Why the owners of the vessels are resisting from laying up these vessels?

I think like everybody else, tanker owners are very optimistic people, and we all think the market will be better tomorrow. And there -- so there's a lot of people still hoping that this will happen. But I think in reality is that we have seen over the last 12 or at least 6 months, you have earnings which is below your operating cost, and that's, of course, not very good. So some owners are of course starting to maybe cut their cost a little bit on the maintenance operations, which is not very good, either. So I think there comes a point where people, they find out it's maybe better to sell the ship for scrapping or lay them up and wait for a better market. We need that, that's for sure. Fotis Giannakoulis - Morgan Stanley, Research Division: And my last question is for Inger. If you can please comment about the debt financing market. We've seen that both sectors, the major sectors in shipping, the drybulk and the tankers, are really suffering right now. However, the banks seem to be very accommodating with the ship owners. Have you seen any change in the attitudes of the banks towards the companies that have cash flow difficulties or leverage problems? And do you think that we are close to any change of this attitude that could trigger additional sales in the market and further declines? Inger M. Klemp: I think it hasn't really been a change in the banks' attitude. I think still the banks are supporting their good clients, their core clients, the ones that they really like to support. And they don't support the other ones, anyway. And that has been the story for a long time. So obviously, if clients run into cash flow problems, that probably could lead to something going forward, yes, which also Jens was pointing to just recently.

We will now take the next question. It comes from Herman Hildan from RS Platou Markets. Herman Hildan - RS Platou Markets AS, Research Division: I have 3 questions. The first is on your 2 OBOs earning in excess of $60,000 a day. Obviously, we've seen that the drybulk market has been equally depressed as the tanker market. And I'm just wondering if you could make a comment on the counterparties on those contracts and, call it, how comfortable you are about the counterparty risk.

I think those 2 ships, which have been on for a long time to this particular state-owned client, and we are quite happy with that counterparty risk. Herman Hildan - RS Platou Markets AS, Research Division: Okay. Good. Then the second question, with regards to your 2 Suezmax newbuildings. Obviously, we've seen call it Rongsheng being quite delayed on some of their deliveries. And I'm wondering whether the Suezmax is on track for delivery in February 2013 and May 2013.

That delays in the newbuilding program, of course, is a very big shipyard and they can be able to turn things around if they concentrate solely on building our 2 ships. But they have, of course, a lot of other ships on order, so as it looks now, there will be delay to the ships. I cannot say how much, but as it looks now, there will be delays. Herman Hildan - RS Platou Markets AS, Research Division: And also for Frontline 2012, they have 5 VLCCs where the first one was supposed to be delivered end January and it's now close to 7 months delayed. I'm not sure if you can comment on Frontline 2012 and whether those will be canceled. But maybe you can say if you have paid in call it $240 million of cash on those 5 newbuildings before you sold it to Frontline 2012.

I think we will concentrate our questions here to Frontline. But if you can call Inger or myself or send us an e-mail after this presentation, then maybe we can take that separately.

We will now take the next question. It comes from Justin Yagerman from Deutsche Bank. Joshua Katzeff - Deutsche Bank AG, Research Division: It's Josh Katzeff on for Justin. I just want to follow up on the newbuildings and the 2 Suezmaxes. It seems like you guys have a pretty pessimistic outlook for asset values in the near term, and it looks like newbuilding prices have moved down from where you contracted those ships. Is there any thought or possibility for restructuring those contracts? Maybe pushing them out at a lower price or adding another ship in order to lower the price and maybe delay delivery?

Well, we have a pretty long history with Rongsheng, where we have built Suezmaxes before, and we came out pretty okay in that. So I would say we have a good working relationship with Rongsheng, and we have a good dialogue going on. So I think it's always best to find a win-win situation for both parties, so when and if we come to a situation like that, I'm sure we can discuss it with the other. Joshua Katzeff - Deutsche Bank AG, Research Division: Okay. And Jens, you mentioned the current TD3 rates that are published are clearly lower than what owners are actually earning. Can you give us maybe some insight into the actual owner TCE rates? Clearly it's got to be better than the loss of $6,000 to $7,000 a day.

Yes, well, the immer [ph] rates, or spectrum rates are what it's called these days, is of course -- it's a bit of an artificial rate, which is based on world scale input from various ship builders and then put into a formula, and that formula is probably -- the problem right now, that formula of course, which is behind the outcome of these net TCE rates, was that a certain speed in and has bunker prices delivering in other ports, which may be as per the actual voyage. So what we are seeing now, of course, most of us now are going at slower speeds, reducing consumption, which of course, reduce -- improve the results and maybe does other combination voyages. Of course, having a negative freight index is probably more of a psychological thing. It would be nice if the TD3 and TD1 was $100,000 a day. Maybe the spot market would be closer to that. But I think there's a lot of reporting, and of course, we in our own presentation we also mentioned what the forward going rates are. This is basically the only rates which are available. But it's not a reflection to the market. Nobody is trading at minus $25,000 a day. Joshua Katzeff - Deutsche Bank AG, Research Division: But for that standard TD3 voyage, I mean, is that closer to really $5,000 a day, positive?

It depends a little bit, of course, on the voyage itself, and it depends on when you took bunkers. Of course, sometimes you're allotted to a bunker at a low cost. Sometimes you have expensive bunkers, low-cost bunkers. It depends on the speed you can come in at. I would say, of course, for us this varies in Asia. I'm sorry if this is a long reply, but the average per day [ph] you can probably have earnings from anywhere, 0 to maybe $7,000, $8,000 depending a little bit on each ship and the voyage itself.

We will now take the next question from Michael Webber from Wells Fargo. Michael Webber - Wells Fargo Securities, LLC, Research Division: Most of my questions have been asked, but I do want to come back to a couple. And just to kind of piggyback on one of Jon's earlier questions around the state of the VLCC market. You guys, in the past and then in Frontline has both threatened to and actually pulled tankers from the market when rates have been this low, and I think we're at 8 consecutive weeks now with TCEs below 0 -- the published rate, rather. At what point do you guys start making kind of a more public showing of actually pulling your assets from the market trying to raise rates? Or is that something that you feel you can't even do anymore?

Well, I think our earnings show that we are using the tools we can and actually outperforming the market. Of course, speed consumption is one thing, taking waiting time as a positive measure, not just taking the first cargo. Those are things we have always done in a high or low market. That, we will continue to do. And then try to be a little bit selective. It makes no sense just to send the ship at full speed now and just taking the market rate. So we stop ships if they're coming from Asia and Singapore to potentially go into West African market instead of going to the Persian Gulf. So I think we try and monitor each ship and our fleet situation and breakdown, and that we'll continue to do that. When will owners stop trading? Of course, it's a bit complicated now. Laying ships off, you will lose all -- major approvals, and then you will have other problems, so it's difficult. It's a difficult thing to do. Michael Webber - Wells Fargo Securities, LLC, Research Division: Right, no, definitely I understand. And if, I guess, coming at it a different way. I mean, what's different about this market relative to markets we've seen in the past, where Frontline has been more vocal about potentially pulling assets from the market in this kind of rate environment?

I think that everybody knows that we are holding pretty firm on the rates and what we want to do, we are not doing negative anymore. Just why should we do that. So I think we are doing that. I agree with you that a bigger consolidation in the market will probably help. But like I mentioned earlier in one of the questions, we before had a big presence in the Suezmax market, and we were not able to pull the market. I think you have to have a pretty large fleet to be able to do anything with the market. Michael Webber - Wells Fargo Securities, LLC, Research Division: Sure. Sure. Fair enough. So as to come back to some, I guess, your all's commentary around your outlook, and it's obviously pretty dour. You look at where the stock's trading and you're at a pretty healthy premium to an NAV that we and some other people have as negative. At what point do you think about potentially raising equity in this environment given the fact that you've got such a negative outlook over the next 2 to -- next few quarters? You mentioned a lot of other companies are kind of the same kind of distress, but you've also seen a lot of those same companies come out and raise equity, trying to shore up their balance sheets. Obviously, you guys have had the restructure. But at what point does that become an option for you guys, also potentially sending the signal that Frontline is a going concern and not being unwound? Inger M. Klemp: I don't really think that there's a sequence of points in time where that becomes an option in a way. I mean, to raise equity is, of course, always an option for a company. I guess, there's a possibility to do that. So among other ways of financing ourselves, that is an option in a way. But for the time being, as you can see our cash position is adequate, and we will just continue to follow that in the future and see what we find the best solution for the future with respect to financing. So that's how it is. Michael Webber - Wells Fargo Securities, LLC, Research Division: All right. Fair enough. Just one more and I'll turn it over. And you can kind of piece this together through some of the Frontline 2012 filings. But can you guys maybe just give some clarity in terms of the actual operational and executive overlap between Frontline and Frontline 2012?

Well, I can say that Frontline is the commercial, technical and I guess, a full-service manager of Frontline 2012. So the VLCCs and Suezmaxes they have in the fleet is being handled by our commercial department. And then with that situation, we were quite happy. We believe in being quite a lean organization. Michael Webber - Wells Fargo Securities, LLC, Research Division: Fair enough. And from an executive perspective?

Well, I think as you have seen the other fleet. Not to talk too much about that, it is of course being diversified. So the situation could change going forward.

[Operator Instructions] We will now take the next question. It comes from Martin Korsvold from Pareto. Martin Korsvold - Pareto Securities AS, Research Division: Regarding these potential Chinese orders, the spectrum of the Chinese mega orders seems to have come a bit to the forefront again recently. What's your view on the likelihood of a big new order from China happening?

That was the same that was mentioned last summer, and then I laughed about it. And now it's come out again, and I've been still laughing about it. All these shipyards I've been mentioning, I've spoken to all of them. None of them have taken one of these orders. Martin Korsvold - Pareto Securities AS, Research Division: Okay. And second on Rongsheng. To which extent has Rongsheng developed sort of a fuel-efficient design i.e., are you looking into the potentials of pushing the 2 Suezmaxes further up in time and perhaps getting a better spec on the vessels?

Well, this is already a improved specification from what we originally -- or the first ships we bid at Rongsheng. This is not with the most latest eco engine type, which is unfortunately not possible to re-engine these ships due to the hull form and the large body of the ship. But of course, Rongsheng, like other yards, have also developed new designs. And I think all shipyards are doing that at a rapid speed now. I think they have to do that to get new orders.

We will now take the next question. It comes from David Beard from Iberia. David E. Beard - Iberia Capital Partners, Research Division: Two questions for you. One, just housekeeping. If rates stay here, can you give a sense of where the cash sweep payments may drop to? Inger M. Klemp: If rates stay the same, is that what you're saying? David E. Beard - Iberia Capital Partners, Research Division: Yes. Inger M. Klemp: Just the same as what?

We, of course, have a minimum rate we have to pay Ship Finance. Inger M. Klemp: The cash we pay to Ship Finance, which is primarily the cash we have reported we are paying. That is the $6,500 per day, which we reduced the rate with down to this new level. So if we earned, let's say, the full of that $6,500, we will pay the full amount. And if we earn less, we pay proportionately out of that. So you have to in a way look at the Ship Finance rates. They are common knowledge in the market. And just look at the new rates in a way, and then you will have answer. David E. Beard - Iberia Capital Partners, Research Division: Okay. And then the second question, given your cash balances and it sounds like you don't like to raise any equity, what would be your capacity to purchase ships?

I think that, of course, as the prices have gone down a lot, and you can probably get some flexible deals if you start buying from the banks. So it's difficult to say that you can buy so and so many ships for this amount. I think that, of course, everybody would like to buy a ship using as little money as possible and trying to get some finance attached from either the bank or, let's say, a low combination of debt. So it's difficult to say how much you can do with a certain amount of cash, but I think it's safe to say you can do more with that today than you could 2 years ago.

[Operator Instructions] We will now take the next question. It comes from Randy Laufman from Imperial Capital. Randy Laufman - Imperial Capital, LLC, Research Division: Just a couple of things. First of all, in regards to the cash repayments. Are those -- what's the dynamics with those payments? Are they made as those cash sweeps are generated in the current quarter? Or are they delayed to a future period? Can you just give us an update on that? Inger M. Klemp: Yes, they are delayed to a future period. They are paid at the same basis as a profit-sharing, which you always have arrangements for. And that's -- we pay it the following year, in the first quarter the following year for the year before in a way, if you see what I mean. Randy Laufman - Imperial Capital, LLC, Research Division: Okay, great. And then secondly, I wanted to just touch on a previous question about the commercial and technical management. If you could just comment on how you view that part of your business going forward and if you think that there's potential growth there to provide more management services to other companies and other fleets. And also if you could comment on the future of Frontline 2012's fleet and whether they are going to look to do their own management going forward and what that means for Frontline.

If we just take about Frontline. We offer commercial and technical services to a few companies. Majority of them are related to our group, so to speak. We have in the past offered commercial management services to independent companies, and of course, we are willing to look at that if it's a compatible fleet to what we are doing. If that's the way of consolidating the market, we can for sure look at that. Like I mentioned before, we do all -- full services for Frontline 2012, and we will continue to do that for the time being. I think that's all I can say about Frontline 2012. Randy Laufman - Imperial Capital, LLC, Research Division: Okay. Can you provide us any details as to the economics behind these management contracts, the fees, or any type of cash flow generated from these management contracts?

Well, some of them are actual cost plus a little bit profit on top. Some of them are usual management contracts, which you are probably aware of. Basically, at daily fee, so it's difficult. They obviously contribute something to the company. Otherwise, we wouldn't do it. But it depends on each owner who wants this service.

That will conclude today's Q&A session. I would now like to turn the call back to Mr. Jens for any additional or closing remarks.

I would just like to say thank you for everybody dialing in and listening to our presentation. And I would like to thank everybody in Frontline for good work and efforts during the first months of this year. Thank you for dialing in. Thank you.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.