Frontline (NYSE:FRO) reported a sharp jump in profitability in the fourth quarter of 2025 as tanker rates surged, while management highlighted what it described as unusually volatile market dynamics driven by the growing role of freight indices and derivatives in price-setting.
Fourth-quarter results and booked rates
For the fourth quarter of 2025, CEO Lars Barstad said the company achieved time charter equivalent (TCE) earnings of $74,200 per day for its VLCC fleet, $53,800 per day for Suezmax tankers, and $33,500 per day for its LR2/Aframax fleet. He noted the figures are reported on a load-to-discharge basis, which can be influenced by ballast days at quarter end.
- VLCCs: 92% of days booked at $107,100 per day
- Suezmax: 83% booked at $76,700 per day
- LR2/Aframax: 67% booked at $62,400 per day
Profitability, expenses, and liquidity
CFO Inger (last name not provided in the transcript) reported profit of $228 million, or $1.02 per share, and adjusted profit of $230 million, or $1.03 per share, for the fourth quarter. Adjusted profit increased by $188 million versus the prior quarter, driven primarily by higher TCE earnings.
TCE earnings rose to $424.5 million from $248 million in the previous quarter, which the company attributed to higher TCE rates. Frontline also cited lower finance and ship operating expenses and fluctuations in other income and expenses. Ship operating expenses decreased $7.1 million quarter over quarter, which management said was mainly due to an increase in supplier rebates of the same amount.
On the balance sheet, the company said movements were mainly tied to ordinary items and prepayment of debt under revolving credit facilities. Frontline reported $705 million of liquidity as of Dec. 31, 2025, including cash and cash equivalents, undrawn revolver capacity, marketable securities, and minimum cash requirements. Management said the company has no “meaningful” debt maturities until 2030.
VLCC fleet renewal transactions
In January 2026, Frontline said it sold eight of its oldest first-generation Eco VLCCs for $831.5 million. After commissions and repayment of existing debt on the vessels, management expects the sale to generate approximately $477 million of net cash proceeds.
In parallel, the company said it acquired nine “latest generation” scrubber-fitted Eco VLCC newbuildings from an affiliate of Hemen for an aggregate purchase price of $1.224 billion. Frontline expects to pay roughly 25% of the purchase price in the first quarter of 2026, with the remaining 75% due upon delivery of each vessel. The company intends to finance the acquisition with cash and 60% long-term debt financing, according to the CFO.
Fleet profile, break-evens, and cash generation sensitivity
Frontline said its fleet consists of 41 VLCCs, 21 Suezmax tankers, and 18 LR2 tankers, with an average age of 7.5 years. Management said the fleet is 100% Eco vessels and 57% scrubber-fitted.
The company estimated average cash break-even rates for the next 12 months of approximately $25,000 per day for VLCCs, $23,700 per day for Suezmax, and $23,800 per day for LR2 tankers, for a fleet average around $24,300 per day. This estimate includes drydock costs for five VLCCs, two Suezmax tankers, and eight LR2 tankers; excluding drydock costs, the fleet average was estimated at about $23,300 per day.
For the fourth quarter, Frontline recorded operating expenses (including drydock) of $9,600 per day for VLCCs, $7,600 per day for Suezmax, and $12,400 per day for LR2. Excluding drydock, the fleet average OpEx in the quarter was $7,600 per day.
On cash generation, management said the spot days for the next 12 months are about 24,400 days, and the company has about 27,700 earnings days annually. Based on the current fleet, time charter rates, and TCE as of Feb. 27, Frontline estimated “cash generation potential” of $2.8 billion, or $12.51 per share, which it said implies a 34% cash flow yield based on the then-current share price. The company also offered sensitivity scenarios: a 30% increase in the spot market would raise the potential to $3.7 billion ($16.84 per share), while a 30% decrease would reduce it to $1.8 billion ($8.19 per share).
Market outlook: volatility, sanctions, and supply
Barstad argued tanker markets are experiencing “almost violent moves” as freight indices and freight derivatives play an increasingly central role in pricing. He said that for each high-priced physical fixture, a much larger volume of contractual obligations can be triggered in paper markets, amplifying volatility.
In discussing market conditions, he cited healthy oil demand growth with a focus on “non-sanctioned molecules,” and said a politically charged environment—including discussions involving the U.S., India, Iran, Israel, the EU, Ukraine, Russia, and Venezuela—was creating what he called “tailwinds” for compliant oil transportation. Barstad also said a weakening U.S. dollar was supportive of global oil demand and that asset prices for ships are appreciating.
He described elevated crude oil volumes in transit and said sanctioned crude movements were slower or, in Iran’s case, being stored, increasing “dark fleet” utilization and drawing capacity away from the compliant fleet. Barstad added that OPEC Middle East exports were growing and said Frontline was seeing few—if any—charters breaking a 20-year age cap despite high freight rates.
On supply, Barstad said the order book is growing, with tanker ordering accelerating for 2029, particularly in China, as high on-the-water vessel prices push buyers toward shipyards. He also pointed to vessel efficiency loss with age and argued that even with more newbuilds scheduled for 2029 and beyond, the supply outlook is “not alarming” when considering the aging profile of the global fleet. He said Frontline sees “two-three years of a very good runway” before supply could become a concern.
During Q&A, Barstad said a potential catalyst for easing from very high rates could be seasonality, including a likely “summer lull,” though he said the magnitude is difficult to gauge. He also noted China’s inventory levels could lead it to reduce import pace for a period, adding volatility. He described the market structure as increasingly index-driven, with fewer physical cargoes setting prices and a larger amount of exposure tied to index levels, which in turn drives hedging activity and swings in the forward freight agreement (FFA) market.
Asked about strategy on spot versus time charter, Barstad said Frontline’s investor proposition is to deliver spot exposure, though the company may use strong markets to secure revenues. He cited a “golden rule” that the board could be comfortable with time charter coverage up to around 30% under certain conditions, and said Frontline had recently entered one-year time charter agreements to secure some longer-term income. He added the company did not plan to place as much as 50% of exposure on time charter.
On the possibility of sanctions easing for Russia, Barstad said many vessels in the dark fleet are old and would be disqualified due to age, and he noted scrutiny of vessel history can make it difficult for ships involved in illicit trades to re-enter compliant markets. He also said any sanctions-lifting framework could involve national shipping companies, and reiterated that fleet age would be a key issue. On balance sheet positioning, he said Frontline intends to remain levered and that the “point of cash” is to return it to shareholders, while noting debt will naturally be paid down over time.
About Frontline (NYSE:FRO)
Frontline Ltd. (NYSE:FRO) is a leading global shipping company specializing in the seaborne transportation of crude oil and petroleum products. The company’s core business activities encompass the ownership and operation of very large crude carriers (VLCCs), Suezmax tankers and Aframax vessels. Through long-term charters, spot market operations and time charters, Frontline provides flexible shipping solutions that cater to a diverse set of energy producers, refiners and trading houses worldwide.
Frontline’s fleet is geared toward high-capacity, ocean-going tankers capable of carrying large volumes of crude oil over intercontinental distances.
