Good day, and welcome to the Frontline Ltd. Quarter 3 Results Conference Call. [Operator Instructions] Today's conference is being recorded. At this time, I'd like to turn the conference over to Jens Martin Jensen, CEO. Please go ahead.

Good morning, good afternoon, and welcome to our Q3 presentation. This presentation will follow our usual program with our CFO, Inger Klemp, going through the Q3 highlights and main transactions, financial review of the quarter and an update of our newbuilding program. After that, I will go through some market slides and market developments and where we see things going forward. Before we start the actual presentation, I would like to mention that Q3 was an extremely difficult quarter, and I think must have been the eye the tornado. The ship values almost dropping 50% for 2000-built VLCCs and with one of the leading indexes trailing at negative earnings, a big part of the quarter. This has obviously taken the toll of Frontline, which the Q3 results shows and with the continued weak markets, we see ourselves in a very difficult situation. You could start the presentation Inger, please.

Thanks, Jens, and good morning, and good afternoon, ladies and gentlemen. As Jens said, I will guide you through the highlights and the financial review in the third quarter of 2011 and so far into the fourth quarter. Then we'll end with a run through of the newbuilding program. Then I would like you to move to Slide 4. In September 2011, we agreed with Ship Finance to terminate the long-term charter parties for the single hull VLCCs, Titan Orion, Titan Aries and Ticen Ocean. Ship Finance simultaneously sold the vessels to an unrelated third party. Each charter party will terminate at the time the vessel is delivered to the new owners. At which time, Ship Finance will make compensation payments to the company for its termination of the charter party. Expected compensation amounts and termination dates are $9.4 million in the first quarter of 2011 -- 2012, sorry for Titan Orient. $6.5 million in the fourth quarter of 2012 for Titan Aries. Then, $10.2 million in the third quarter of 2013 for Ticen Ocean. In October and November 2011, Frontline has entered into agreements to sell its 1993- to 1996-built Suezmax tankers Front Fighter, Front Hunter and Front Delta. The sales resulted in a total net cash outflow of approximately $4.2 million after repayment of bank debt and a loss of $76.2 million, which has been included in the impairment loss recorded in the third quarter. Further in October 2011, Frontline agreed with Ship Finance to terminate the long-term charter parties between the companies for the OBO carrier Front Striver. The company made cash compensation to Ship Finance of $8.1 million, and we expect to record a loss of $9.3 million in the fourth quarter of 2011. Obligations on the capital leases will be reduced by $10.7 million. Company…

Thank you, Inger. We are now on Slide 16. I think the average Imarex rates, the TD3 Imarex rates of $35 per day in the third quarter says a lot about the quarter. We did well on a relative basis on the VLCCs, but as Inger mentioned, our earnings in the Suezmaxes was disappointing. I think the easiest way to describe the market situation in Q3 and at present is that there are simply too many ships around. This, combined with reduced crude shipments into America, which have reverted and unusual somewhat dullness, this makes the third quarter one of the worst quarters for a long time in the crude markets. If we go to Slide 17, the development in the VLCC fleet. The orderbook is still there, but we have seen a continued slippage or delays to the deliveries. 48 ships has been delivered up to end of the third quarter versus our perceived number of deliveries of 57. That is a 16% slippage. No VLCCs has been ordered in the quarter, and we still have a very expansive orderbook to manage going forward. I will now work on that. On Page 18, overview of the Suezmax fleet continued its slippage on almost 30%, and this is mainly due to 2 Chinese shipyards, which are still having difficulties in keeping up with deliveries. Again, this is positive for the fleet development, still the orderbook is quite large. If you look at Page 19, we estimate the newbuilding prices for a decent specification VLCC or Suezmax to be around $100 million and about $60 million each. No recent orders has been made but this figure may be slightly less, but I don't think a lot. If we go over to the crude, I mean, we saw the TC rates, the…

[Operator Instructions] We'll take our first question from Jon Chappell from Evercore Partners.

Jens, first thing on the covenants that, you had mentioned in the press release that you've slipped out of compliance briefly in the third quarter, needed to prepay $13.3 million. Could you just remind us what the covenants are on your facilities? And given what asset prices have done that you've seen so far in the fourth quarter, are you anticipating a further cash requirement at year end to remain in compliance with those covenants?

Jon, with respect to the specific covenant, that has not been released by the company, so I cannot really remind you about them. With respect to your second question, as we say in the press release, with the development that we have seen on the asset value so far. We are in a situation that we most likely will bridge some kind of covenants at the end of the year.

Okay. And I mean, just to put a ballpark around, I guess, most covenants are typically 130%, 135%. I mean, is that in the ballpark or are they -- is that way out of whack?

They are lower than that, lower than 130% to 135%.

Okay. Got it. And then when you mentioned on this last slide that you're expecting to run out of cash in Q1 2012, if the market doesn't recover. Is that already taking into account that there's going have to be prepayment on the debt for the covenants? Or is that just based on a strictly operational basis?

We'll take it into account...

We'll take it into account, yes.

Okay. And If we think about some of the remedies, you said, Jens, in your last comments about the newbuilding commitments, they may be challenging. Then you talked about the equity gap in the previous slide, you don't have the financing still for several newbuilds, is it possible that you could walk away from some of your newbuilding contracts to kind of help your liquidity longer term?

Well, so far, we have not been a big believer on walking away and leaving money on the table. We have, in the last 2 years, restructured our newbuilding portfolio. We had canceled earlier 4 Suezmaxes and we have actually reduced the VLCC order book from 6 ships at $135 million each to 5 ships at $105 million. We have a constructive dialogue going on with the shipyards and there could be some more changes going forward.

Okay. And then also, as another potential remedy, I think this was addressed in the last conference call. But you do have these pretty above-market contracts with the Ship Finance, not just from the revenue side, but you also in the structure that was set up 7 years ago agreed to do the operating cost on those ships for $6,500 a day, which is obviously, it cost far more to run the ship right now. Is there any potential to restructure either the cost side or the time charter in side to those Ship Finance contracts?

I think with respect to the, let's say, the details of the solutions to this restructuring, I think we -- while there -- we have in the last, where we have the solution at the table.

Okay. And then final thing is also just after sales, you already mentioned you're redelivering 3 VLs and 1 Suez. When you look at your fleet, obviously you've called most of the single hulls already, has it gone to the point where you may want to dispose some of more modern assets as well?

Well, what we have, I believe, earlier in the year, when the market was under pressure is to try and disinvest in what we call the non-core fleet, that is ship that is in the spot market or single hull and that is some of the older tonnage. So we have sold out some of the OBO carriers, which came off charter, 3 of the single hull or the remaining VLCCs, and now we are working on the older double hull Suezmaxes which in this market, even modern Suezmaxes are making almost less than operating cost and then we have thought this is a better time to sell the ships now.

We'll take our next question from Greg Lewis from Credit Suisse. Gregory Lewis - Crédit Suisse AG, Research Division: I guess, my first question is in thinking about some of the fleet, when we think about some of the VLCCs, I mean, is Frontline simply at a point right now where there are no options for those vessels in terms of looking at conversions into other types of assets? I mean -- or is it something where as part of the solution, it could be Frontline looking to lock up some of its assets on -- whether it's a -- like floating storage contracts, FPSOs or is the money simply not available and it's something where these assets are going to have to be sold?

Well, we have some ships on FSOs, floating storage, which is of course a rather simple operation. And from time to time, we are looking at the FPSO projects. But I think right now, we have capital expenses here required for this and the risk of doing so is not where we want to go right now. As you know, we have done before heavy lift conversions. We have been in the FPSO business. So we have done that before. But I think right now, we are focusing on doing something else with the ships than stepping into that market again. Gregory Lewis - Crédit Suisse AG, Research Division: Okay, great. And then just real quick, in the press release, you mentioned the current market environment and what that means in terms of potentially seeking or restructuring solution. When we think about the current market rate, is that something where -- I mean, the strength in the market, there has been some strength in the market over the last week. I believe spot VLCC rates are now over $20,000 a day. I mean, clearly, that's still below your breakeven levels. But now, is that still a weak market that's going to lead to a potential restructuring or was this sort of weak market, is that sort of sub-$15,000 a day VLCCs?

Well, it's a more compounded scenario. One thing is, of course, the rates that are weak and below our breakeven, but at the same time the pressure of asset prices and then, where you can finance your newbuilding program. It's a combination of those, which we are trying to address and restructure the company, first to be able to operate in this market but also to position ourselves to hopefully be able to be there when the market comes around again. Gregory Lewis - Crédit Suisse AG, Research Division: Okay. So it's -- in other words, rates are one part of it, but in other words, if we sort of hit a floor in asset prices then that probably goes a long way in enabling you to potentially -- should we think about it, if the asset price is stable at these levels, that potentially enables you to avoid doing some sort of capital injection?

Well, I don't want to exclude anything right now. I think, of course, we have seen asset prices falling a lot especially for the older ships, more modern tonnage has also fallen, so it depends. I guess some people are saying that we have seen maybe the floor of some of the older ships but then, I think, we have to follow the development a little bit more close before we finalize our discussions.

We'll take our next question from Justin Yagerman of Deutsche Bank.

This is Josh Katzeff on for Justin. I was wondering if you can maybe help us drill down into Q1 and maybe some of the CapEx or debt repayments that are going or be going on in that quarter. I mean, we saw the full year guidance just with your expectation of potentially running out of cash in Q1, if you could help us a bit better with that.

You mean to break up the number that we gave for 2012?

Yes.

I think as far as I can remember, what we have in the first quarter is approximately $38 million in CapEx.

And then debt repayment, debt/capital lease?

The capital lease is evenly spread doing during the year. It doesn't really vary between quarters. But if you look into the yearly repayment of the capital leases on the 2010, for instance, you have the annual amount which you then can spread evenly on each quarter. The only thing which doesn't exactly spread evenly is in a way the repayment of bank debt. That is a bit less in the first and the -- sorry, it's more in the first and the third quarter, a little bit less in the second and the fourth quarter.

Got it. And I need to know, when I look at your breakeven rates and -- because there have been a bunch of asset sales, the breakeven rates haven't really, I guess, moved that much lower. Should we expect maybe a bigger decline in Q1 as some of these December sales hit? Or are they going to be spread despite all these sales?

I don't think in a way that the breakeven rates will change so much based on the current setup. I mean it will change from quarter-to-quarter if we have more drydockings in one quarter than we have in another one. But apart from that, they will be pretty stable based on the current setup.

Got it. And I guess if you can, Jens, maybe if we could talk about the decision to pull out of the Gemini pool instead of the Orion pool and kind of maybe your expectations for this pool?

I think we have been in the pool, which actually work quite well, and we are very happy with our 2 partners in the -- 2 other partners in the Gemini pool. We were 4 owners in that pool, as you know. But I think, unfortunately, we have come to the conclusion that maybe to be large is not always the big thing and that unfortunately consolidation, I would say, in the Suezmax market had not worked the way we had hoped. We almost had 50 ships in the Gemini pool, and we are still not able to push the market. It just goes to show that, that segment is very diversified. So we'll come to the conclusion that we will maybe try and step back a little bit, and work closely with one of the other pool partners, which is also based in Norway. And try and step back a little bit and see how that works in this market situation. Going forward, this may change, of course. But right now, we have assessed that it's probably better to do that.

Are you going to open up the pool to other partners?

I like begin with, we just want to make the pool work and have as little disruptions to our customers and clients as possible. I would not say that we will not be taking other people in. But in the beginning, we would just like to get the show on the road, so to speak.

We'll take our next question from Omar Nokta from Dahlman Rose.

This is Damien Fortune on for Omar. I just wanted a little bit more clarity on the debt drawdowns that you have available for the 2 VLCCs being delivered in the first half of next year. Would you mind giving quarter-by-quarter the financing that you're going to be drawing down?

Quarter-by-quarter, I'm not sure. But for this fourth quarter, we have been giving you the number of $13.5 million. That's again from the graph. And the remaining part will be during 2012. It could soak from one quarter to another. So it's a -- I don't really think it's any use in trying to flip back in the different quarter.

Okay. And just to clarify, the CapEx, you said was going to be evenly spread over the year for 2012?

No, I didn't say that. I said that the lease repayments will be evenly spread.

I'm sorry. So fair to assume that the CapEx is in, do you have a quarter-by-quarter breakdown for that?

No. Not apart from what I just mentioned. I think we can leave it with that.

We'll take our next question Justine Fisher from Goldman Sachs.

How much do you think you would have to renegotiate down your rates to Ship Finance in order for those contracts to be sustainable for Frontline?

We can't give a specific information on that. It's, of course, a quite complex deal we have with Ship Finance, but I can't give you any specific details on that.

And this is something that you also expect to complete by December 31 this year?

Well, we have a timeline which we have made, which include a lot of the things that has to fall in place, but we expect and we hope to be finished by this by end of the year.

And is there a threshold that which you would revert to taking an equity infusion from your Hemen Holding? I mean, how long -- if you don't reach an agreement on various other aspects of your financing by December 31, would you then just take the equity infusion? Or how should we think about the timing and the likelihood of that versus your other options?

I think as I said earlier on here, I think that the details surrounding the solutions, they will have to come and to have the solution at the table. I think it's a bit premature here now to discuss timing, what if and what not, if we can't do it, what if? That sort of questions. I think we, first, we have to come up with a solution and then we can discuss.

Okay. And then just one last question, can you remind us as to how the calculation is made to decide whether or not you pay Ship Finance when the charter is terminated or they pay you when a charter is terminated. Just because if there are additional terminations going forward, it would be helpful if we could forecast, which way the payment would go because I think that even in this quarter, there were some that went one way and some that went the other way.

Were you talking about the compensation or whatever we get ? It's the difference between what type of lease termination we're talking about. For instance, these 3 VLCCs, the single hull VLCCs that we terminated now recently, where we, I guess, the compensation from Ship Finance. Those vessels are operating leases today. They were used to be capital leases as long as they were budget deficit and did not have to come to their phase update in 2010, because single hull vessels actually was phased out in 2010 according to the rules. At that point in time, these leases were actually fully repaid to Ship Finance. We have paid down everything. So the only thing we have then was a option to extend the very low rate as you possibly know of $1,000 per day as a variable rate. And that is why Ship Finance has to pay out the cash compensation, when these vessels are then sold today because it's a very valuable option that we hold them.

Okay. And so for other vessels that have not -- where the lease hasn't been terminated like OBO, you would end up paying Ship Finance some sort of termination fee because they're still on the charters that were signed years ago.

That's the most likely situation, yes.

We'll take our next question from Michael Webber from Wells Fargo.

Just wanted to follow up on an earlier question regarding the $140 million in equity you guys have on the newbuilding. It seems like your guys are kind of leaning more towards pushing those out or finding other solution outside of walking away. I guess I'm just curious, how many vessels have actually had steel laid on them there? I think a number -- a couple of 2013 deliveries, with a couple in 2012. And just to kind of, to try and to figure out whether or not you could actually maybe catch a bid for some of those slots. Obviously, they're pretty significant haircut. But is that something we should be thinking about? And then I guess how many have steel laid?

I think what we said in the Q2 presentation, that the newbuilding program at the VLCC building out is 4 to 5 months delayed. So not so much steel has been laid.

Okay, fair enough. In your release, in the strategy and outlook section, you mentioned that certain assets have already been sold. I just want to clarify that you're just referring to the assets that are already mentioned in the release and they're not -- I guess, it's not referencing pending asset sales.

The ones we are mentioning is the one we have already sold, and we have at least 2 more older Suezmaxes, which we are trying to sell during the rest of the year. And of course, when these sales are done, we will report that to the market.

Got you. All right. Now that's helpful. And I guess as another follow-up Ship Finance, and just to be clear, there a number of different, I guess, alternatives in terms of restructuring and restructuring these Ship Finance contracts or one them. Are those conversation actually started yet? And I guess when you guys think about vessel sales and discussions to your lenders, which are obviously ongoing and potential equity, where does the restructuring of those contracts kind of fit within that scheme in terms of kind of palatable options especially considering how important Ship Finance is as a vehicle to kind of be in the entire Fredriksen umbrella.

Well, I think, we are in the same building, and we drink from the same coffee machine. We have a, let's say, discussions about the tanker market in general and our interlock relationship, I think that's a process that is always ongoing. We are selling ships, and we are terminating ship mostly together. So I think we have a constructive dialogue. I can't really say more than that.

Okay. All right. That's helpful. Just one more on, I guess, the Gemini pool and you kind of went through your thought process there. In terms of actually pulling those assets out of that pool, should we expect any sort of actual impact on your Q4 rates? And should any impact on your operational results at all?

No. It will be a smooth transition. When we went in to Gemini, it was a very smooth transition, it's very good partners in the pool and we expect that. It maybe a little bit double work for our accountants. But as we'll be exiting the pool in the middle of a quarter, but there should not be any disruption or anything like that to either Gemini or ourselves going forward.

We'll take our next question from Sal Vitale from Sterne Agee. Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: I have a question, just a clarification, I guess, first on the third page of the release under the market section where you, I think, it indicates present market indications are about $12,000 for fourth quarter for VLCCs and about $17,000 for Suezmax. That's a little bit below the current rates as reported by Clarkson. Are you saying that -- is this your forecast for the rest of the quarter? Or could you just provide a little clarification there please?

No. I think we don't normally give a forward guidance. We use certain indexes to describe where the market is on the day when we make this presentation. There's, of course, big fluctuation in oil prices. There's different ways of how people actually calculate the daily returns. We see some do it with a slow steaming, some do it on full bound voyage basis into the Atlantic and back again. I think we're just coming with a snapshot, where we believe the spot market should be right now. It could be a little bit higher but then that's the number we normally put in. Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: Okay. And then I guess, just looking through your slides here and I see what your -- the causes of the current market weakness and you mentioned supply, and you also mentioned reduced imports to the U.S. I guess, if we hold the current supply forecast constant, maybe in terms of -- could you provide any data in terms of how many million barrels a day or number of VLCC trips that -- from, say, the Persian Gulf to the United States. What do we need to see in 2012 to get the market that up to a rate that's, say, above $40,000. And I'm talking about VLCCs here.

You probably need to tie our 50 ships in some kind of employment, so that will be at least 2 million barrels a day increase import long-haul into the America. Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: Okay. And then just the last question. In the press release you made mention of the potential for an equity contribution. And I've read a news release this morning, where it indicated, the potential for as much as $300 million to $350 million equity contribution. So I'm just trying to get a sense, I guess the first question is, what do you think the likelihood is at this point that some equity contribution would need to be made? And then, what it really need to be as much as, say, that $300 million level?

I saw that quote also, I assume that's what you saw on TradeWinds, where actually... Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: Yes, yes, correct.

They quoted my name. I have not spoken to TradeWinds today and I will obviously have to cease my subscription. But we will not -- estimate or come up any guess now, how much we actually will be needing. I think it depends on the -- which solution we are going for and how these alternatives are working out. I think the number mentioned in that newspaper, online newspaper has not been mentioned from us. Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: Okay. so you're saying, you're basically misquoted, and I guess the number would probably be significantly lower than that level?

I would say they have been misquoted since they have not spoken to me. I have not mentioned that number, and I think it's pure speculation from their side. Salvatore Vitale - Sterne Agee & Leach Inc., Research Division: Okay, that's helpful. And then, I guess, what do you -- do you think the number would be something closer to, say, $150 million, $150 million or something less than that?

I can't really say.

It is too early to comment on that. As we have said earlier, I think we need to see the solution first and which direction this will lead to.

We'll take our next question from Fotis Giannakoulis from Morgan Stanley.

I want to ask about your largest bank facility, the $420 million. This is a facility that at the end of last year you had $363 million. After the sale of these vessels, has this facility changed? Has there been any repayments on the outstanding amount? And can you give us, if possible, the current outstanding? And what is the average age of the vessels that are placed as collateral on this loan?

You are specifically asking about -- which facility are you asking about?

I'm asking about your largest bank facility, the $420 million.

Okay. I don't think we can give anymore specificity about that specific, if that's what you're asking. And so apart from what we have given the accounting numbers for the third quarter, where you can see the bank debt towards the total debt of the company. So sorry, about that.

Okay, that's fine. Also you mentioned earlier that you are in the process of finding buyers for 2 of your Suezmaxes. I understand that you have right now 5 Suezmaxes, which are above 15 years old and there are also some VLCCs mainly on operating leases. Are there any chance or any thought of a disposal or termination of the contracts for the remaining older assets? And in these assets, who has the option? Would you be able to sell these assets or disposed these assets without consent of Ship Finance? Or is this something that will have to be a mutual agreement.

As mentioned in the press release, we have already sold 3 older Suezmaxes, the Front Fighter, Front Hunter and Front Delta. These are entirely owned by Frontline. We have 2 more Suezmaxes around the same age, which we are trying to sell. They are on our books, owned by us. So we don't have to have any consent to sell those. We don't have any other VLCCs out for sale now at present.

Including the ones that are in operating leases?

I'm not sure. Which ship you are referring to?

I'm talking about the Kensington and the Hampstead?

Well, the Kensington and the Hampstead, yes, they are owned by Knightsbridge, which we are the commercial managers for. I don't think they have made up their mind and I expect that they want to sell those ships. One of those ships is chartered to us and the other one is in the spot market. I don't think they have decided to sell those.

Okay. And can I ask you, is there on your convertible debt, the $225 million convert. Is there a flexibility from the company to buy back this debt or part of it?

What do you mean by flexibility?

I mean, if you have the option to redeem this bond?

There's always the possibility that we can buy back bonds in the market, if that's what you mean. Everyone can do that.

Okay. And I assume this is something that you might be considering or it might be a part of the entire restructuring process that you are evaluating right now, is that correct?

Every possibilities are alternative, if that's what you would like to hear. But we have nothing to discuss in detail here now.

We'll take our next question from David Epstein from CRT Capital.

I wanted to know if the delays at the shipyards potentially give you any sort of out from your commitments.

Well, if the delays are much more extensive than the ones I mentioned, of course, there's always a possibility. But not at present, no.

Okay. And then just a macro question, do you have a view on what particular demand driver there might be sort of waiting in the wings other than the oil curve driving some offshore storage that might pick up the mantle from declining demand from the U.S. because we're producing more in the U.S.?

I think, of course, the biggest issue right now is, of course, the weak economic situation in America, if I may say so, and in some European countries as well. And we need that to be stabilize. Of course, these various pipeline discussion in America, are not going from Canada to States. That could, of course, change the tanker market. We have seen very strong oil demand from China, which is continuing. We have some of the big economies in Asia still going ahead. Of course, we have Brazil, which has a huge oil program as well. And if this will go long haul or where it will go, it remains to be seen. There's, of course, speculation, there will be a big storage farm off Brazil for all this oil, they will not bring ashore. So there's various thing that can happen in the market. But for sure, something needs to happen to absorb the oil supplier ships. But it's difficult to say right now, which of these potential triggers it can be.

So the Canadian pipeline don't happen, that just sort of allows us to maintain the status quo, correct? And for any reason they do happen, that's potential downside, all else equal?

Well, I guess, the best thing that could happen to the tanker market is that they build this pipeline over to the West Coast and then they put the oil to China. But that will probably be unlikely. But I'm sure that other domestic production in America can cover this. So there could be a status quo, yes.

[Operator Instructions] We'll take our next question from Robert Wright from Financial Times.

It's a fairly simple question. I'm sure a lot of people when they saw the reference to Hemen Holdings in the release will have thought of a way that Hemen Holdings stepped in, in early 2009 with Golden Ocean. Would you anticipate that any deal would have similarities to what Hammond Holdings did with Golden Ocean at that time? Or do you think there are significant differences?

I think -- I can't really comment on the Golden Ocean scenario. But I can, of course, say that Hammond Holding has been building up Frontline from scratch to a period, which is not so much dissimilar to where we are now in the low market and the consolidation was done on buildup. That is probably what Hammond has foreseen, that this could be an interesting scenario again. But of course, right now, you have to show up the company and see where we are going from here.

There are no further questions in the queue. That will conclude today's question-and-answer session. I'd now like to turn the call back over to Jens Martin Jensen for any additional or closing remarks.

I would like to say thank you for everybody to dialing in and listening to our presentation. Obviously, we have some interesting times ahead and I'm looking forward to our next presentation, where we can discuss what happen. At the same time, I would like to thank everybody in Frontline for their good work in a very difficult quarter. Thank you.

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