Jens Martin Jensen - CEO Inger Klemp - CFO

Jon Chappell - JPMorgan Urs Dur - Lazard Capital Steven Williams - Simon Anders Rosenlund - ABG SC

Welcome to the Frontline Q2 2009 Results Presentation Conference Call. At this time I would like to turn the conference over to Mr. Jens Martin Jensen.

Welcome to Frontline Q2 2009 presentation. The program for this presentation will be that our CFO Inger Klemp will go through the second quarter highlights, thereafter a financial review, update on our newbuildings program. Thereafter I will discuss a little bit about the markets for Q2, where we see things going forward and there should be time for some questions after that. So Inger, you can take it from now. Thank you.

Thanks, Jens. I will quickly run through then the highlights and a financial review in the second quarter 2009 as Jen said. Moving to slide 4; In April 2009 we amended the time charter agreements for Front Lady and Front Highness to bareboat agreements and extended the contracts for one additional year from the single hull phase out date in 2010 to around April 2011 and August 2011, respectively. These vessels will be operated as floating storage units and have ceased to trade as regular tankers. In May, we took delivery of a second newbuilding Front Queen. Further in May 2009 Frontline agreed with two shipyards to cancel four Suezmaxs’ and two VLCC newbuilding contracts representing a total contractual cost of $556 million or 33% of our newbuildings program. Installments already paid on the cancelled newbuildings will be applied to and set-off against the payments on the remaining newbuildings. In May the company has further secured long-term pre and post delivery newbuilding financing representing 70% of the contractual cost of the last two newbuildings being built at Waigaoqiao shipyard. Later of in July, Frontline agreed to terminate a long-term charter party for the single-hull vessel Front Duchess and received a compensation payment of approximately $2.8 million in that respect. Moving to slide 5, let me go quickly through the financial highlights in the second quarter 2009. Frontline reports net income of $28 million, equivalent to an earnings per share of $0.36 in the second quarter of 2009. On this basis we announced a dividend of $0.25 per share for the second quarter. For the six month period ending June 30, 2009, Frontline reported net income of $104 million, equivalent to earnings per share of $1.34. Moving to slide 6, net income in the second quarter is $48 million lower than it was in the first quarter 2009 and the decrease can mainly be explained by firstly a reduction in the contract equivalent rates in the second quarter, compared to the first quarter, which has led to a reduction in income on time charter basis by $60 million. The profit share payable to Ship Finance has increased in the quarter with $6.5 million. Ship operating expenses increased by $2 million compared with the preceding quarter mainly as a consequence of more dry-docking in this quarter. Charterhire expenses have decreased by $7 million in the second quarter compared to the first quarter. Moving to slide 7, the VLCC fleet earned in the spot market approximately $38,700 for double hull and $28,300 for single hull with an average spot earnings of $37,700 per day and the average for the whole fleet was about $38,400 per day in the quarter. The Suezmax fleet earned in the spot market approximately $24,400 per day, for double and $13,100 per day for single hull with an average spot earnings of $23,800 per day and the average for the whole fleet was about $26,800 per day in the quarter. The OBO earned $42,700 per day in the quarter. The TCs then show that Frontline this quarter has traded better than market indexes and competitors with respect to the VLCC and also better than indexes and some other competitors for the Suezmax fleets. The ITC vessels are not included in these numbers. Then moving to slide eight, we have dry-docked four vessels in the second quarter of 2009 which is about the same as in the first quarter. As you can see from the slide, we had average OpEx for the fleet of approximately $10,000 per day in the second quarter 2009, compared to approximately $9,700 per day in the first quarter of 2009. OpEx and off-hire days have been increased compared to the first quarter as a consequence of the fact we had dry-docked more vessels in the quarter. We expect to dry-dock five vessels in the third quarter of 2009. Moving then to slide nine, the total balance sheet is approximately $38 million lower than it was in the first quarter of 2009. Main items explaining the changes are the short-term and long-term restricted cash is $48 million higher than the end of first quarter, mainly due to exchange rate movements. The book values of vessels are increased to $61million as a consequential delivery of Front Queen and book value of newbuildings is reduced as a consequence of the same. Long-term debt is reduced as a consequence of the net effects of repayments of the long-term debt of $138 million and drawdown on long-term debt of $83 million. Further obligations on the capital leases has decreased to [$50] million as a consequence of the net effect of the increase as a consequence of the exchange rate movements and a reduction due to the repayments in the quarter. ITCL is included in the balance sheet with a total of $585 million of debt and obligations in the capital leased. Debt related to three of the [company’s] Suezmax vessels are not included in the balance sheet with [technical difficulty]. Moving to slide 10. The cash cost breakeven rates are approximately $31,900 per day for VLCCs, $25,200 for Suezmaxes and $26,600 per day for OBO, which is somewhat down from the first quarter. These rates are the daily rates that our vessel must earn to cover the vessels operating costs, estimated interest expenses and scheduled loan principal repayments, variable hire and corporate overhead costs. These rates do not take into account capital expenditures or loan balloon repayments at maturity. Furthermore, Kensington and Hampstead and the five Genmar vessels chartered and the two vessels on bareboat -out not included in the cash costs breakeven rate. Moving to slide 11 and 12; in the second quarter Frontline agreed with two shipyards to cancel four Suezmax and two VLCCs newbuilding contracts, representing a total contractual cost of $556 million or 33% of our newbuilding program. As I mentioned the installments already repaid on the cancelled newbuildings will be applied to set-off against the future payments on remaining newbuildings. Total number of vessels in Frontline’s newbuilding program after the cancellations is four Suezmax tankers and six VLCCs, which constitute the contractual cost of $1 billion. As of June the 30th, 2009, a total of $353 million in installments had been paid on these newbuildings, compared with $393 million at the end of the first quarter which also included installments from Front Queen, which now is delivered in the second quarter 2009. Remaining installments to be paid for the newbuildings as per June the 30th, amounts to $680 million with expected payments of approximately $138 million in 2009, $272 million in 2010, $216 million in 2011, and $54 million in 2012. Moving to slide 13, the company has established long-term pre and post-delivery newbuilding financing, representing 80% of the contractual cost for four of the newbuildings being built at Rongsheng and two other new buildings being built at the Waigaoqiao city shipyard. As of June the 30th, $234 million have been drawn down on this financing and we expected to a further $156 billion distributed between 2009 and 2010. In the second quarter, we’ve established the long-term pre and post-delivery in newbuilding financing, representing 70% of the contractual cost of the last two new buildings being built at Waigaoqiao. These facility is undrawn at the end of the June 2009 and we expect to draw approximately $60 million in 2009 and remaining in 2010. The four VLCCs being built at the Jinhaiwan shipyard are the only vessels in our newbuildings program which are currently unfinanced. These vessels will not be delivered until the second half of 2011 and the first half of 2012. We assumed that obtainable financing in today’s credit market for the unfinanced newbuildings are a minimum $60 million per vessel. Moving to slide 14; In this graph, we have shown the installments to be paid under a newbuilding contract and short-term loans related to the newbuilding contract in the different years and with a total of $760 million in the light blue column. The dark blue column includes established financing, the estimated financing obtainable for the newbuilding contracts not yet financed and fixed contract revenue is about cash cost breakeven base in the different years and with a total of $735 million in the period. Moving slide 15 and 16; the number of vessels in the Frontline fleet is 84 vessels including vessels in commercial management and ITC vessels and its compounded by 39 double hull VLCC’s, 29 double hull Suezmax’s, seven single hull VLCC’s, one single hull Suezmax and eight OBOs. We have a contract coverage of 40% in 2009 and 27% in 2010. The average net TC rate for the total fleet is about 43,300 per day in 2009 and 45,200 per day in 2010. In addition to this fixed rate contractual coverage we also have additional 15% TC coverage on floating income in 2009 and 9% in 2010. With this. I will turn it over to Jens again.

Thank you Inger. Q2 was a interesting quarter with earnings, rate structure income basically [zero]. It is around $45,000 for VLCC’s. According to Clarksons, the average VLCC earning in the second quarter was 20,600 and average Suezmax earnings was $20,000. We managed to obtain or maintain a certain number of VLCC’s on storage contracts at rates better than the spot market and other wise our east/west positions were more balanced in the quarter, which resulted in better earnings than what the spot market could provide. Positive factors in the market was that the Asian countries seems to have weathering the financial storm better than the Western world and we see a positive growth in certain countries, mainly of course China which have a huge crude oil import on demand year-on-year. VLCCs, on storage around 45 to 50 VLCCs were utilized on storage during the quarter, which was almost up to 10% of the total fleet, which also put some bottom in the earnings. The OPEC output in July slightly increased from June. All the facts as, which obviously being on the more negative side was a very high volatile, bunker prices almost 200 tons difference in the quarter alone and that’s of course can be seen when you’re burning around 80 tons to 90 tons per day on a VLCC, otherwise slide in worldwide demand and the main thing, no scrapping rates for older tonnage despite many of the single hull ships we’re trading at negative earnings. If we move to slide 18, the VLCC fleet and order book; the best news in the quarter obviously was that no new VLCCs were ordered. At the same time, there are several ongoing talks between owners, banks and shipyards and we expect further voluntary delays of ships from Q4 into Q1, 2010. Hopefully, the owners will then be able to find some finance. On the VLCC fleet, that’s quite a big number of single hull tankers left, around 90 ships are still trading. If the ships disappear within the next 12 months when the phase-out date is due, and we see a slight change in the order book, we could potentially see in a negative fleet growth scenario. So there is some room for, both optimism and hope and maybe surprise in the VLCC fleet going forward. Now we’re at slide 19. On the Suezmax fleet, no Suezmaxs were ordered in the quarter. However, there’s being reported up to four ships ordered during the summer, two for a Swedish owner of [Athena] and two for Greek owner [Saragossa] at a Korean shipyard. If we look at the single hull fleet, its not as big as on the VLCC side but still we have a around 35 single hull ships trading and these ships are also finding it hard, so we hopefully can see a accelerated phase-our of these vessels. What could change the order book going forward on the Suezmax fleet is, of course that many of these ships have been built at so called Greenfield yards in China, where we already have seen a substantial delay and that could change the supply going forward. Slide 20, newbuilding prices and time charter rates; as mentioned nothing has really been ordered lately. Our estimated VLCC prices at current is to be around 100 million and Suezmaxs between 65 million to 70 million. The small dots under the price curves is where Frontline have ordered their ships. If we look at the time charter market slide; the time charter market for VLCC is for three years is around $36,000 per day and for Suezmax it’s around $25,000 a day, but its fair to say that are not many charters queuing up out there today take ships on charter. Slide 21, a little bit about the single hull ships. The single hull tankers mainly of course VLCCs are finding very difficult to trade. Limited trades are available mainly AG/East and also limited number of charters are now accepting single hulls. Today’s returns on AG/East on VLCCs and Suezmaxs are close to zero. So hopefully that would mean accelerated scrapping. During the first six months of 2009, five VLCCs went into storage including our two own, as Inger mentioned before, two VLCCs were scrapped. Five Suezmaxs were scrapped and three VLCCs were converted into bulk conversion. So, ships are disappearing but we need them at a bigger pace. Slide 22, as mentioned earlier storage played quite a huge role in the second quarter and so far continues to do that in the third quarter. We estimated up to around 50 VLCCs are still utilized in storage, of course anything from short to longer period and as seen on the graph on page 22, the oil is still in Contango, three months its around $2.1 dollar, which should still get room for our economy, for oil companies and charterers to use vessels for playing the Contango game. Page 23, China, not only the [bulk-carry] owners can thank China for a lot of these days but also the tanker owners. If you look at the import side in China, year-on-year import increase is 40%. What is good about China is of course they have sourced the oil from basically wherever they can get it and a lot from Latin America and West Africa, which gives a positive ton mileage. If, you look at the refining capacity and going forward estimate the refining capacity in the last year has almost increased by 20% in China, and if we go forward, estimate coming out of China it by 2015, this could be more than 40 million barrels per day. Obviously, 6 million cars were sold in China in the first six months of this year and if those numbers continue throughout the year China will surpass America in car sales during the year. Also the strategic reserves have been built up in China around 5% increase year-on-year and with the new storage facilities being built and the projection, it could be up close to 50% increase from today’s levels. Of course, we do not know when these facilities will be used or will be [filled] but it is a positive sign in the market. If everything is perfect, China can be accountable for almost 60% of the expected tanker growth demand over the next three years. If you look at slide 24, talk a little bit about the outlook. The order book is still [big] for both tankers and Suezmax’s but there could be surprise element in the VLCC fleet with 90 single hull ships still available and if these ships will be phased out earlier than what they have to do on paper, there could be some surprises in the fleet available going forward. Floating storage is an attractive option for owners and charterers and we expect that to continue throughout the year. We also expect to see increase in cancellation and deferred deliveries as the financing for ship owners and newbuildings remains tight. To look a little bit on the world. As mentioned, China has ramped up both import and refining. I think we all agree or at least we hear in the newspapers and televisions daily that part of the world economy seems to have bottomed out. So hopefully we will see some more oil demand going forward. One country that’s supposed to double its production over the next six years and that is Iraq. If you look at our own situation, Inger has mentioned that we have reduced our order book going forward and via cancellations, but still as our fleet gets older, we still need to have a new building program. So it’s just a matter of course on the right timing when we will expand further with new buildings. We have sold the single hull Front Duchess, otherwise we have used the other ships for what we call value-added purposes, floating storage and so on. Finally, we have the potential to be able to basically reduce our fleet by 20% over the next 12 months, if we think that it is the right thing to do, it can be early terminations on a single hull remaining VLCCs. We can redeliver some of the leased ships we have from the KG markets, German owners and we also have some time charter ships, which can be redelivered between October and March this year. Now, we’re ready to take your questions, please.

(Operator Instructions). We will take our first question from Jon Chappell from JPMorgan. Jon Chappell - JPMorgan: Very impressive second quarter rates especially in your VLCCs. I’m just trying to figure out; you mentioned in your comments that your east/west balance of fleet deployment, definitely helped your rate versus maybe the Clarkston’s index, but also how many of your open days were on a maybe short-term including storage or just real short-term contracts, 30 to 60 days, that were rates that were much higher than what the spot markets were showing?

We had around eight of our VLCCs on storage business during the second quarter at rates higher than the spot market. Anything from 22 to 60 days and that’s helped out and as you mentioned we had managed to position quite a number of ships, where we could do some Transatlantic business and Northern European business, the US Gulf, which is giving better return than the usual AG/East. Jon Chappell - JPMorgan: On page 16 of the slide presentation where it shows your time charter coverage, that only includes the longer term contracts not the 22 to 60 days storage contracts?

That’s correct. What we define is time charter is more than six months. Jon Chappell - JPMorgan: Okay. So now that we’re two months into the third quarter, is that a VLCC number from the second quarter, is that similar, higher, lower for the third quarter short-term storage?

We don’t normally give any predictions going forward, but of course the present market is definitely more challenging than what the second quarter was. Jon Chappell - JPMorgan: Okay. That’s fair. Two other short real quick questions, on page 7 where you lay out the rates say on your fleet, I am just having a little bit of problem understanding how the Suezmax hull fleet rate was 26,800 a day where all the components of that were actually less than that number. So if the double hulls are 24,400 and the single hulls are 13,100 how is the whole fleet average higher than all those other numbers?

That’s due to the contract coverage. We have vessels on contract.

The ships on time charter are not mentioned here, this is the spot earnings ships. Jon Chappell - JPMorgan: I understand thanks, and one last one. The profit sharing reported in the income statement for the second quarter was about eight million. Ship Finance reported last week, it was they reported five million. What is the discrepancy in those two numbers?

Well I must say, I cannot comment on Ship Finance’s numbers.

Our numbers are correct. Jon Chappell - JPMorgan: Okay. So they potentially had higher profit share.

(Operator Instructions). We will take our next question from Urs Dur from Lazard Capital. Urs Dur - Lazard Capital: Actually, I apologize. Jon got my question. Very informative presentation, thank you very much.

(Operator Instructions). We will take our next question from [Steven Williams from Simon]. Please go ahead. Steven Williams - Simon: Good afternoon. We heard quite a few times about the potential for a lot of new builds planning to get canceled. When do you think that will actually become firmly apparent? When will we definitely tonnage on new vessels, clearly being canceled?

I think there are a lot of discussions going on right now and, of course this is for most of the discussion between the owner and shipyard, but obviously the shipyard will probably have similar discussion with these banks and see how much support they can get. So, I think it will be a combination of how long can you survive in a tanker market like this and if you can’t get financed and then you will probably have to travel out and see your shipyard and try and either cancel or get some kind of delays. So, I think we know that quite many of the discussions going on, but I think you will probably see more of this during the autumn and winter of this year.

[Operator Instructions]. We will take our next our next question from Anders Rosenlund from ABG SC. Please go ahead. Anders Rosenlund - ABG SC: What’s the minimum cash balance you can have, and not including restricted cash but the 121? How low could that go?

I guess zero. I guess it’s impossible to answer that question. It really depends on the situation going forward in a way. So theoretically you can of course have zero if you earn a lot of money going forward. Anders Rosenlund -- ABGSC: Is there -- I’m sorry.

No, no. that’s fine. Anders Rosenlund -- ABGSC: Is any of this cash tied up anyway?

This 121 which you are referring to on the balance sheet, this is free cash, which is not tied up anywhere. The cash which is tied up is the restricted cash.

As we have no further questions I would like to turn the call back over to you, Mr. Jens Martin Jensen for any additional or closing remarks.

I’d just like to say thank you for everybody to listening to our presentation and dialing in and I’d like to say thank you for everybody in Frontline for contribution in the second quarter. Thank you.

That will conclude today’s conference call. Thank you for your participation ladies and gentlemen.