Jens Martin Jensen - Chief Executive Officer of Frontline Management AS Inger M. Klemp - Chief Financial Officer and Chief Financial Officer of Frontline Management AS John Fredriksen - Chairman, Chief Executive Officer and President

Taylor Mulherin - Deutsche Bank AG, Research Division Herman Hildan - RS Platou Markets AS, Research Division Michael Webber - Wells Fargo Securities, LLC, Research Division Eirik Haavaldsen - Pareto Securities AS, Research Division Axel Styrman - Nordea Markets, Research Division Randy Laufman - Odeon Capital Group LLC, Research Division Petter Narvestad - Fondsfinans ASA, Research Division John Reardon - Crowell, Weedon & Co.

Good day and welcome to the Q4 2013 Frontline Ltd. Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jens Martin Jensen. Please go ahead, sir.

Thank you. Good morning, good afternoon, and welcome to our Q4 2013 presentation. We will follow our usual program on the presentation with Inger going through the highlights of the quarter and the main transactions. After that, our financial review of the quarter and after that, finally, I'll make some comments on the market and some comments of the present market and our own situation. So Inger if you could start, please? Inger M. Klemp: Thanks, Jens and good morning and good afternoon, ladies and gentlemen. Moving down to Slide 4, highlights and transactions. In October 2013, Frontline agreed to receive [ph] finance to terminate the long-term charter parties for the 1998 and the 1999 builds [ph] we received from Champion and Golden Victory and Ship Finance simultaneously sold these vessels to unrelated to third parties. In October, 2013, Frontline entered into a private private agreement to exchange $25 million of the company's 4.5% convertible bond for an aggregate of about 6.5 million shares and a cash payment of $2.25 million. Frontline issued 1.2 million new shares in the fourth quarter under the ATM [ph] offering announced in June 2013. In January 2014, Frontline increased the amount that may be raised from the ATM from up to $40 million to up to $100 million. And Frontline issued 8.8 million new shares under the ATM offering during January 2014. Moving then to Slide 5, financial highlights and Slide 6, income statement. Frontline reported a net loss of $13 million equivalent to a loss per share of $0.15 in the fourth quarter 2013. This compares with a net loss of $36.4 million and a loss per share of $0.46 for the preceding quarter. The net loss attributable to the company in the fourth quarter includes a net gain of $13.8 million, which was recognized under lease terminations of the [indiscernible] Front Champion and Golden Victory. Further, the net loss includes the loss of $12.7 million, which is recognized on the conversion of the $25 million of the company's convertible bonds into cash and shares. Net loss, excluding then [ph] gain and losses, in the fourth quarter it was about $14 million compared with $29.6 million in the third quarter. The improved result from operation in the fourth quarter compared to the third quarter, is mainly due to a increase in time charter [ph] rates in the fourth quarter compared to the previous quarter, which lead to an increase in the sales of time [ph] charter basis [ph] by $11.1 million, and a decrease in shift operating expenses of $3.8 million compared to third quarter, mainly due to a $1.5 million decrease in dry docking costs and also a decrease in [indiscernible] expenses for the lease terminations and vessel re-deliveries [ph]. Moving then to Slide 7, income on time charter basis [ph]. Frontline's double hull VLCC fleet earned $21,600 per day in the fourth quarter compared with $13,900 per day in the third quarter. The average for the whole VLCC fleet was about $22,400 per day in the fourth quarter compared with $16,100 per day in the third quarter. The Suezmax fleet earned some $12,900 per day the fourth quarter compared with $12,400 per day in the third quarter. Moving down to Slide 8, ship operating expenses and off-hire [ph]. The average OpEx for the fleet in the fourth quarter was approximately $9,000 per day, this compares to approximately $10,000 per day in the third quarter. We dry docked 1 vessel in the fourth quarter compared with 2 vessels in the third quarter, 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 right-hand side of the slide, off-hire days were 11 in the fourth quarter compared with 124 days in the third quarter, as a consequence of less dry docking. And we had no scheduled dry dockings in the first quarter of 2014. Moving then to Slide 9, balance sheet. The total balance sheet, end December 31, 2013 is approximately $41 million less than in September 20, 2013. And this is mainly explained in by that cash decrease by $25 million mainly due to payments made to Japan [ph] for the termination of Golden Victory and Front Champion, of about $11 million; payments of $2.25 million to the bondholders and also some ordinary repayment of capital leases. In addition, restricted cash increased by $9.4 million, due to bi-annual loan and interest payment in ITCL. Vessels and equipment and vessels under capital lease decreased by $23 million, which relates to quarterly depreciation. Long-term debt decreased by $25 million, following exchange of $25 million of the company's 4.5% convertible bond for an aggregate of about 6.5 million shares and a cash payment of $2.25 million. In addition, obligations on the capital leases decreased as the consequence of the lease termination of Golden Victory and Front Champion. Otherwise there is small changes to other balance sheet items this quarter. And moving down to Slide 10, cash cost breakeven. The estimated average cash cost breakeven rates for the remainder of 2014 are approximately $23,100 per day for the VLCC and $18,100 per day for the Suezmaxes. These rates are the daily rates our vessels must earn to cover budgeted operating costs, estimated interest expense, payable [ph] hire and corporate overhead costs. And these breakeven rates excludes CapEx and ITCL vessels. Moving down to Slide 11, newbuilding overview. As of December 31, 2013, Frontline's new building program comprised 2 Suezmax tankers, and the company was committed to make new building installments of approximately $88 million to be paid in 2014. Moving down to Slide 12, the Frontline fleet. The number of vessels in the Frontline fleet currently is 46 vessels, including the vessels we have on commercial management and also the ITCL vessels. And it's compounded by 30 double hull VLCCs and 16 double hull Suezmaxes. And with this, I'd leave it over to Jens again.

Thank you, Inger. Now we are on Slide 13, market factors. I know it sounds strange to say, when the average earnings for VLCC is there only was around $15,000 to 16,000 a day for the whole of 2013, but the market during the second half of the year was a lot tighter than the results tell and we finally saw that tightness in the market to pave the way for rate hike by the end of November. It was too late to save the quarter and the year overall, but it was a positive sign and a good start for 2014. Ton-mile [ph] has continued to increase and we expect this trend continue. However, as I mentioned before, increasing ballast speeds by 2 knots is the same as the fleet increase of about 10%, so this is a very fine market balance. We are now on Slide 14, the VLCC fleet. The VLCC fleet looked a lot more interesting 6 months ago with a fairly balanced order book, however, approximately 50 VLCCs having been ordered since last summer and especially during the last 3 months, the order book is increasing again and scrapping has slowed down. Suezmax fleet, a very limited order book in the Suezmax segment is really only around 20 vessels at the real order book, however, an unfortunate -- and unfortunately, we expect this number to increase again if all the ongoing discussions taking place with the various shipyards are correct. Now at Slide #16, new building prices and rates. New building prices and rates are increasing and recent orders of VLCCs suggest the price in the region of $97 million. We estimate new building prices for Suezmaxes to be in the region of $67 million. Recent but limited time charter activity for VLCC, short term is around $23,000 a day, which is a bit up and around $18,000 a day for Suezmaxes. Now we're on Slide 17, outlook. There's no doubt we have seen more activity in both the VLCC and Suezmax segments. [indiscernible]either has more cover liftings and also increased ton-mile situation. All positive developments seen from a freight perspective. The negative factors we have seen is increased ballast speeds, which has increased the fleet supply and also the higher new building activity, which we have seen lately. Unfortunately, the slowdown in the LNG [ph] markets, and to some extent, on the offshore markets will likely lead to some of the major Korean shipyards will release the building space for 2016 and the VLCC order book could easily hit 100 ships by this summer. The spot market is very volatile and it requires discipline to maintain market and healthy level . This is all shipowners responsibility, some are doing a better job than others. Frontline, our sales, as mentioned before, we are now down to our core fleet with a minimum number of dry dockings this year. Our spot exposure has certainly turned from a liability into a potential upside. We are continuing to monitor the situation, which is obviously, very market related and we are looking for opportunities to both improve our financial situation and also outlook and position going forward. I think with that, we are ready for your questions. Thank you.

[Operator Instructions] Our first question comes from the Justin Yagerman from Deutsche Bank. Taylor Mulherin - Deutsche Bank AG, Research Division: This is Taylor Mulherin on for Justin. So I wanted to ask a question to kind of try and encompass everything that's going on right now around breakeven rates, the current spot market and then your capital needs going forward. So even though the spot market improved somewhat, in -- actually improved materially in Q4, I noticed that the spot rates that you have scored in the press release is still below cash breakeven levels, and I know some of that is timing. But basically what I'm trying to get to is, are you confident enough in these higher rates being sustainable, but that you're sort of willing to sit back and let that drive improved cash flow? Or are you still making plans to alleviate some of the debt burden, through non-market means?

I think if I start with the rate question first, of course, we have seen the market increasing during the middle of the fourth quarter and definitely into this first quarter. So the markets, in a profitable territory right now if you look at breakeven rates, and of course, we all hope that the market would be sustained at this level. We expect those on volatile months ahead, but I think our perception is that 2014 will be better than 2013, if I can say that. I think regarding improving our cash position, this is, of course, something we are monitoring on a daily basis and is, of course, market related. Taylor Mulherin - Deutsche Bank AG, Research Division: Right. And when you know the TD3, or some -- any of those of those benchmark rates, is the level or the rate that you're able to procure pretty close to that? Or there's some discount based on the age of fleet, that sort of thing?

Well, I think the [indiscernible] market is more than the TD3, it's a very triangulated market, and of course, interesting trades, East to West and back and forth. So I think the market has started well in 2014, and I think it -- we could see decent levels, rates this year. Taylor Mulherin - Deutsche Bank AG, Research Division: And then my last one, just around the equity issuances, you obviously have been pretty active in January, and wanted to get a little bit color on the process -- your thought process for the timing of those transactions? When you choose to tap the market? And then I wanted to also ask, is there any potential, I guess you can call it technical hurdles or anything like that, if you wanted to increase the ATM even more than the $100 million that you've already increased it to? Inger M. Klemp: With respect to the timing, I mean it's good, of course, to have a program up and going, which means that you can tap the market when you think there is a window to do that. But with respect to technical issues going forward, I don't think there is because, of course, you can agree to increase the amount going forward as well. But for the time being, I mean we are happy with the amount that is already up and going, in a way.

Our next question comes from Herman Hildan from RS Platou Markets. Herman Hildan - RS Platou Markets AS, Research Division: In your report you write up you had improved financial position, or call it more bullish rate outlook, creates opportunities going forward, what do you mean by opportunities, is that in terms of deep [ph] growth? Inger M. Klemp: In general, we would say that it's creates more options, of course, it's a general situation and that's everything is, of course, better when the market has improved and the financial situation is better for the company. Herman Hildan - RS Platou Markets AS, Research Division: Okay, so you're not thinking about -- or you don't think that to call it necessarily a stronger balance sheet and higher rates will result in growing the Frontline fleet?

It could do that. And I think it's better to operate in the profitable market and what we have been through the last 2 years, so we will not be excluding anything. Herman Hildan - RS Platou Markets AS, Research Division: And kind of just a curiosity, has it been any internal negotiations with Frontline 12 to see if you can buy back the ships that -- initially sold to them, for example, that's a swap between the equity that you own in Frontline and the assets?

That discussion has not taken place yet.

Next question comes from Michael Webber from Wells Fargo. Michael Webber - Wells Fargo Securities, LLC, Research Division: I just a couple of quick questions around the fall on or the convert, I guess the kind of a theme that's Herman was kind of getting at, just in terms of the cash you're bringing on through that expanded -- sorry, the ATM program, how are you prioritizing that cash in terms of termination payments to Ship Finance versus aggregating cash to look at that convert that comes due? How do you guys think about that? Inger M. Klemp: Well, I think it's a bit strange question. I don't think we are in a situation to prioritize anything at the moment. I mean we are servicing our debt obligations to all our creditors, which is Ship Finance and also another owner of 4 vessels, and also then, of course, to convert for bondholders. So which -- we pay, whatever we should pay, that's what we do. Michael Webber - Wells Fargo Securities, LLC, Research Division: Right now it was more just aggregating for maturity, which kind of leads me into my next question, that you do have that convert out there and you've also got the charter and some Ship Finance, which are 2 big drains on cash, and Herman kind of got at a point of potentially acquiring assets or bringing assets back over from Frontline 2012 and, is handling the maturity of the convert something you need to take care of prior to any material, I guess like systemic change in the current form of Frontline? Or could you do that in tandem, or could do it foreign [ph]? How do you -- this is obviously the biggest long term variable.

I think we have spent a lot of time in reducing the fleet over the last 12 months, which we have come to a certain point now where we are at the core fleet we want to have. And secondly, to improve our company's situation financially. And of course, we would have to look at both expansion, but also maintaining what we have at present. So we'd not exclude anything I think this is, of course, very market related and what is happening in the spot market. So we're having various scenarios which we are looking at. Michael Webber - Wells Fargo Securities, LLC, Research Division: Okay. And then just to kind of get back to my earlier question around the ATM, so that full ATM when you guys upped to $200 million, the thought process there is purely around, I guess, incremental cash if you wanted to fulfill the new build orders and/or termination payments? Is there no thought process there behind, kind of, building liquidity position to handle the maturity of that convert? Inger M. Klemp: I think this is a bit too early because the convert is not maturing until more than a year from now. So I think... Michael Webber - Wells Fargo Securities, LLC, Research Division: It's an awfully big convert, though. It's a big convert, I mean it's not a year, it's 4 quarters and your breakeven levels are right at where rates are, so it's not a question that's particularly out of line.

No doubt we'll have to work on the next 365 days. Inger M. Klemp: [indiscernible] It's very market related in this situation. So we have to see.

We have another question from Erik Haavaldsen from Pareto Securities. Eirik Haavaldsen - Pareto Securities AS, Research Division: Jens, you mentioned the speed in the fleet, have you seen anything or are you speeding up right now? How are -- I mean as rates stay [indiscernible] 55 and above, where is that leaving the speed in the market in general?

I think we have seen the ballast speed going up, and of course, I must admit we have also speeding up some of our own ships to spread out the fleet coming into, let's say a month, so we don't have too many ships in the first 10 days or middle of 10 days so we, of course, using the speed ourselves also, but I would see the general trend is, of course, in a market like this, is the ballast speed has been going up. Eirik Haavaldsen - Pareto Securities AS, Research Division: And also on this extensive reports of congestion in China, nothing really new, but further delays. Is that also contributing extensively to this reason to market strength?

Yes, positively there's been some SPM problem in Korea, which has helped. There has been some delays loading in Brazil, so no doubt of course, all those things that have positively headed to some tightness to the market, yes. Eirik Haavaldsen - Pareto Securities AS, Research Division: And also when you mentioned 100 new vessels in your order book by this summer, is that all for 2016 do you think? Or is it then going to be into 2017 as well?

Some, few of the VLCC orders have been into '17, but I think still, you will see some of the Korean yards are surprising all of us and come up with quite a lot of extra capacity in '16. So I would say majority has been placed for in '15 and you'll see more '16 deliveries being ordered. Eirik Haavaldsen - Pareto Securities AS, Research Division: So you think there's plenty of slots available for '16 still?

I think so. Eirik Haavaldsen - Pareto Securities AS, Research Division: And then finally, anything you -- with Rongsheng, I mean, they have a bunch of Suezmaxes delivered before yours. You expect them to come?

I think that's -- I can reply, but we're having a discussion with the shipyard now and we hope to come to some sort of solution now. I know that there's a few other ships that coming before us, I'm not aware what they're doing with those, but we're having a discussion with the yard now.

Our next question comes from [indiscernible] from Nordea Markets.

I just have a couple of questions regarding your debt position. So first of all, with regards to your lease liabilities, they came down from $118 million this quarter, is that all related to Golden Victory and Front Champion? Inger M. Klemp: Not all, it was also ordinary repayment on the leases in the quarter. But most of it relates to Golden Victory and Front Champion. Axel Styrman - Nordea Markets, Research Division: So most of it, yes, and then also if I look at your just a long-term debt that you have, and then I net out ITCL share of the debt, it seems like long-term debt has gone up from $70 million, is that correct? Or am I missing something? Inger M. Klemp: [indiscernible] the amount that you're referring to there seems to be equal to the amount that was put on a note to Ship Finance, because when we did this termination of the leases of Front Champion and Golden Victory, we paid partly cash and then the remaining termination payment was predominant notes, which we are paying down on a equal basis as we did with the lease on the vessels in a way. So I guess that's probably what you're referring to? Axel Styrman - Nordea Markets, Research Division: Yes, because it's -- well, is it classified as long-term debt then, in your balance sheet I guess? Inger M. Klemp: Yes, it is. It is long term now.

We have another question from Randy Laufman from Odeon Capital. Randy Laufman - Odeon Capital Group LLC, Research Division: First of all, when you -- I just want to clarify, when you talk about your breakeven rates, want to clarify whether that is inclusive of kind of the cash -- or the rate reduction and cash 3 [ph] provisions that Ship Finance put in there couple of years ago, and maybe if you could just update us on where those rate reductions stand, how long that lasts for? And then secondly, I was just going to ask about the new note that you're referring to on the last caller, to Ship Finance that's part of debt, and whether that has any security or guarantees or if that's an unsecured obligation of the parent? Inger M. Klemp: Okay, first on the breakeven rates, they do not include the cash sweep [ph] to Ship Finance. So the 6.5% -- or $6,500 per day reduction in rate are not included there. With respect to the notes to Ship Finance, it's unsecured. Petter Narvestad - Fondsfinans ASA, Research Division: It's unsecured, so it would be fair to pursue [ph] with the convert? Inger M. Klemp: Yes. That is correct. Petter Narvestad - Fondsfinans ASA, Research Division: Okay and just to clarify, going back to the rate reduction, but you said $6,500 is not factored into those breakeven rates... Inger M. Klemp: Not the breakeven rates, no. Petter Narvestad - Fondsfinans ASA, Research Division: Does that mean that the actual cash flow that you're going to get is $6,500 better than whatever the differences of those rates? Or does that mean that you have to give back more cash? Inger M. Klemp: This means that the de-seller rates [ph] that we have to pay according to the reduced rates that we have to Ship Finance today, which is $6,500 per day reduced compared to normal, in a way. If we earn more than that, more than these rates, we do have to pay cash sweep [ph] to Ship Finance. And then that will be in addition to what you see there in the breakeven rates. From the 1st of January 2016, the rates will be increased by the $6,000 -- $ 6,500 per day again to Ship Finance. Then they are back again to normal rates. Petter Narvestad - Fondsfinans ASA, Research Division: That's January 2016 when that rate reduction....? Inger M. Klemp: Yes, that's correct.

We have another question from Katherine Welling from Shipping Watch.

My question is regarding something you said last summer, Jens, about the need to enter restructuring phase of the company. Is the situation wouldn't be better, how is the situation now?

Well, I was about to say thank god the situation is better, but I guess that's not the reply you're looking for. No, of course, our situation which we have stated here is, of course, very market related, the spot market, the rate has improved or break even -- levels have established itself around these levels now. And then we have, of course, been able to provide extra cash to the company by the ATM share. So I think we have done what we said we will do over the last 6 months and this is, of course, a process we will see how the market develops and what we're doing going forward.

Okay, so do you see still it as a risk that you need to enter restructuring phase?

I won't say it's a risk, but it's always there.

All right, but do you have any date or any goal you need to what you need to work to be more safe?

No, I think that -- we'll take the day as it comes, yes.

Also, can I have one more question? Well, you suggested some, I think maybe half a year ago, that the industry needed to scrap more vessels and that the industry might need to establish a fund for this purpose. Have you had any comments on that from some of your -- some partners from the industry?

There a lot of comments, but nobody listened to me, unfortunately, so that didn't come off. We scraped that 2 [ph] ships ourselves, but that was the end of that party, we'll try and come up with a better idea next time.

Great. And then last question, can I ask you about Frontline 2012?

Maybe if you can give me a call separately, and I will try to reply to that.

Okay. I will do that.

Our next question comes from John Reardon from Human Capital. John Reardon - Crowell, Weedon & Co.: Could you talk about China? There's been a lot of talk periodically about Chinese oil demand backing off, and as far as I can see, it doesn't seem to be real, to talk that, there's going to be a decline in demand of oil out of China?

No, I think you're right. This is not declining. It's been continually improving year-by-year and the prediction so far for 2014 that you will also see an increased oil demand and you will see a diversified source of crude coming into China, which will create probably a further ton-mile [ph], what we have seen last year, I think the Chinese positive story is still there.

[Operator Instructions] We have no further questions at this time.

That's good. I would like to say thank you to everybody for dialing in and listening to our presentation. I'd like to thank everybody in the company for their work and efforts during a difficult 2013. Hopefully 2014 will be better. Thank you.

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