Frontline (FRO) - Can anyone make a bearish case?

ogarbitrage

ogarbitrage

Full disclosure, I am VERY long FRO. Also long NAT, TNK, and ASC.

Here we have some of the highest day rates in years, longer hauls, low interest rates, crude oil in contango, cheap bunkers, tight capacity, increasing crude oil supply, busy Atlantic product arbitrage, and the prospect of a weakening US export ban. Russia is increasing energy exports 6.6% qoq in Q115 while Saudi, Kuwait, Iran, Iraq, and Azerbaijan are slashing crude prices and China is the primary buyer in the market. What happens when China stops buying and the supply increases steepen the contango? Crude oil spreads will widen and encourage storage on tankers. The Dubai/Oman forward curve is already encouraging storage. This will tighten capacity further to support or lift rates. As rates rise, asset and newbuild values will rise.

Q4 earnings will be great. Q115 earnings will be stellar. Q2 you're too late. If you ever wanted to buy a cheap asset at the birth of it's next great bull cycle, now is your chance.

Can anyone argue the opposite?
 
As far as I've read, the only bearish thing is the debt coming due shortly. I think longer term this could be a $10 stock. I bought 1000 shares a couple months ago. Bought another 1000 today. Back in 2007 this was a $70 stock, but I doubt it could get back to that. Back then shipping rates were somewhere around 200K per day.
 
Thanks for posting. I agree their April debt payment is the biggest issue on the horizon, but I expect them to meet it relatively easily in this earning environment.
 
what's the asset value? their ships are old so if we figure $40 per VLCCf and $25 per Suezmax then asset value is $1.25B which is about where the stock is right now when you figure in debt and share sales. then figure that management will take the opportunity of this spurt to slam another 10 million shares of dilution to pay off convertible.
 
Does anybody have a good free site to see historical tanker rates? Most of what I found on google seemed to either require a subscription or had very limited data

Thanks!
 
billyjoerob said:
those are newbuilds
More...

Crude tanker values soar as earning power of the ships doubles

Newbuild prices record marginal change

Five-year and ten-year VLCC prices increase

Article-132.jpg


The value of a young fleet today will trade premium to value of a new fleet tomorrow in times of great demand. Expect 5 year prices to trade premium to new build contracts by the time global crudes return to backwardation.
 
You must log in or register to reply here.
Back
Top