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Navig8 deal unveiled as Frontline profits boom

Tanker tycoon John Fredriksen's Frontline yesterday revealed further quarterly gains from a busy tonnage sales strategy, as it branched into the product tanker sector with a $20m stake in charterer Navig8, writes ferry Frank.

The world's premier tanker outfit booked a 50% jump in fourth quarter net income, up to $202m from $134m last year.

Frontline said that it expected, the global tanker market to hold at "good levels'; despite rates dropping significantly since December.

Investors showed their confidence in the group with shares in Oslo gaining 5.9%, to close at NKr254. But the company warned that 2008 forecasts for the world economy in general may be "too optimistic" and suggested that strong growth in the Middle East and China may only partially offset a weakening US economy.

Oslo-managed and Bermuda-registered Frontline ended 2007 with post-tax earnings of $574m, up from $516m .the 'previous year and despite a fall in revenue to $1.3bn from $1.59bn.

The very large crude carrier and suezmax specialist pursued a highly profitable asset play strategy last year, booking gains on sales together with securities, of $323m.

That has translated into some generous payouts to shareholders.

Frontline is also making a steady retreat from its exposure to single-hull tonnage, with three of these vessels sold in the fourth quarter and a dozen overall in 2007. The company has now reduced its singlehull exposure to only one suezmax vessel on the spot market.

The strong earnings bulletin also reflects a strengthening spot market for larger crude tanker vessels.

Average daily time charter equivalents for VLCCs rose to $45,700 from $36,000 in the previous quarter, with suezmax vessels also up to $33,100 from $25,000.

Strategic offloading of parts of its portfolio in the present strong shipping markets has brought healthy returns, with its sale of holdings in Dockwise , generating $49m, and $41m coming from its stake in Oslo derivatives exchange Imarex.

Frontline also booked.$16.4m as a compensation package from Ship Finance for the termination of a contract on the suezmax Front Birch, which its partner later sold on.

Yesterday's investment in Navig8 will bring a 15.8% stake in the charterer, which controls around 30 tankers with 1.4m dwt including newbuild orders.

Frontline management said: "The investment should be considered as purely financial, but gives Frontline at the same time a foothold in the clean petroleum product market."

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