Good day and welcome to the Q3 2018 Frontline Limited Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Robert Macleod, Chief Executive Officer. Please go ahead, sir.

Thanks very much and good morning, and good afternoon, everyone. Thank you very much for dialing into Frontline's earnings call for the third quarter. I will start the call by briefly going through the highlights of the quarter. Following that, Inger will run us through the financials. We will then look at Q3 earnings and I will guide you on our Q4 numbers. We will then move on to the current tanker markets and the outlook. The call will be concluded by taking your questions. So, let's get started and look at the company highlights. Net income for the quarter was $2.2 million. Adjusted for non-cash items we record a loss of $8.4 million. Hemen Holding extended the $275 million facility by 12 months, another indication of the continued strong support of Frontline's largest shareholder. Our results are obviously not where we would have liked them to have been, but given the market conditions we feel it was strong quarter for Frontline, driven by good chartering strategies. We held back ships as we did during the same period in 2017, with a less satisfactory result, but we got it right this time. Our performance thus far in Q4 says that we are on the right track heading into 2019. For the week, the Spot TCE on modern ships was $22,000 in the quarter, which is very close to our cash breakeven. Q4 bookings are at a much better level 74% of the days are booked at $35,000 on the ships under 15 years. With that, I will hand the call to Inger to take us through the financials in detail please.

Thanks, Robert and good morning and good afternoon, ladies and gentlemen. Let's then turn to slides four and five and look at the financial highlights and the income statement. Frontline achieved total operating revenues net of voyage expenses of $89 million and EBITDA adjusted for certain non-cash items of $47 million in the third quarter. Frontline reports the net income of $2.2 million equivalent to $0.01 per share, and a net loss adjusted for certain non-cash items of $8.4 million equivalent to $0.05 per share. The non-cash items this quarter consisted of a $7.2 million gain on the termination of the leases of Front Page, Front Stratus and the Front Serenade, a $1.4 million unrealized gain on marketable securities and a gain on derivatives of $2 million. The third quarter shows an improvement of $19 million against adjusted EBITDA of $28 million and adjusted net loss of $28 million in the second quarter of 2018. This improvement in results in the quarter is mainly explained by an increase in result on time charter basis of $17 million due to the increase in TCE rates in the third quarter compared to the second quarter, but also by a net decrease in expenses of $1.8 million. Let's us take a look at the balance sheet on slide six. Changes to the balance sheet as of the September 30th, from June 30th is primarily relating to a decrease in cash of $47 million explained by net cash used by operating activities of $1.8 million, net cash used for investments of $6.9 million and net cash used for repayment of debt of $38 million, a decrease in vessels of $24 million due to depreciation in the quarter. Further a decrease in vessels on the capital leases by $81 million due to termination of the…

Thank you very much, Inger. Let's turn to slide eight please and we look at the Q3 performance and our Q4 guidance. The spot earnings for the overall VLCC fleet in the quarter were just under $20,000. We have booked 77% at $34,000 in Q4. Our Suezmaxes made 13.5 in Q3, a relatively weak number, but we had many ships repositioned from Asia. Our Q4 bookings are significantly stronger with 65% done at $24,000. On the Afras' we made 43% in Q3, but again our Q4 bookings are strong, with 69% done at $17,000. The boats tradability have outperformed and continue to do so as we wait for the LR2 rates to improve further. As you can see from these figures, tanker rates are improving and we believe that the markets are beginning to rebalance. Let's move to slide nine and we'll have a look at the VLCC fleet growth. At the start of 2018, the global crude oil tanker fleet was expected to grow by 8.3%, with 67 VLCCs scheduled for delivery. So far in 2018, 36 of these have been delivered, this compares to 35 VLCCs reported recycled year-to-date. High stock priced combined with the very weak freight markets drove recycling to a near record pace. We expect the net effect will be virtually zero VLCC fleet growth in 2018. We also expect vessel recycling to continue in 2019, despite the strongest spot market, but at a slower pace than seen in 2018. 20% of the VLCC fleet is over 15 years, 64 of these are scheduled for delivery in 2019 and the current order book equals approximately 14.5% of the global fleet. Let's move on to slide 10 and look at oil price volatility and freight. The price of crude oil has declined significantly since the middle…

[Operator Instructions] We will now take our first question from Mr. Randy Giveans from Jeffries. Please go ahead sir.

Hey, thanks operator. Good morning, everyone. So quick question on the -- with the Aframax crude trade, so obviously tanker rates in the Aframax on the arise, how many of your LR2 product tankers are operating in the crude trade?

Currently we have 6 out of our 18 owned ships trading dirty.

Okay. And plans for the other 12?

At the moment, we are considering one or two it’s something we look at daily, we don’t have anything in sort of next week or two that can go dirty, but we’re monitoring it constantly. And now the last few weeks the offers have come down a little bit and the other two are showing some improvement. So we don’t have any immediate plans, but it could well happen.

Okay. And then switching over to your investment in Feen Marine, it looks like you’re able to acquire that 20% interest for $6 million. Is there any additional CapEx needed and what is the expected EBITDA generation of this investment in 2019?

We’re not going to comment on the numbers on Feen Marine on this call, we have full focus on building the company and the prospects are looking very, very good, that’s all is coming in and the company is doing well. But we’ll come back on more specific numbers on a later call.

All right. Then I’ll switch over to scrubbers, so you have 20 scrubbers in ordered, which vessels are those going on and are they going on those two new buildings?

Yes, so the two newbuildings will be installed with scrubbers and we didn’t expect these we’re doing eight Suezmaxes and we’re doing four Afras so LR2s, these are ships that are -- we were doing that ships that we’ll be docking in the next 12 to 14 months. So these we’ve decided on and then we’ll look at doing more, we’ve got time. So we’ll at like down the road and being co-invested in primary notes, it gives us flexibility. So we have full flex going forward. But I reckon there will be more orders coming from us.

Sure. And last question, what is the lead time on that? I mean, how early do you have to order it to get it on the vessel?

Generally in the market, it's 12 to 15, but we can go significantly shorter than that given our position in the company.

Sure. All right. Well, I'll turn it over. Thanks so much.

Thank you.

We will now take our next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

Yes. Hi, Robert and thank you. Robert, you show the spectacular fourth quarter performance based on your advance bookings probably the best compared to your peers. Can you tell us if the market has changed the last few days after the discussion of the potential cut from OPEC, are you concerned that this momentum that has started being building in the tanker market might be put on hold, and if that will happen, when do you expect to see the impact on tanker supply demand?

First of all, thanks, Fotis. We are after here with Q3 and we have given a guidance. Obviously we are reporting later than many of our peers or most of our peers, but I think, despite that we are ahead here. So that's positive, so in terms of what's happening in the market, I'll say to start with yes, first they've shown volatility here since May-June and that was the first sort of sign that the tanker market was about to react positively. Down a bit here now, but good volatility. So I think the Afras will do well. The Vs have had a couple of quiet weeks and there has been a big event this week in Dubai. There is lot of market systems have been. So generally a quiet market, but looking at the number of fixtures done for December, I think we've seen a small correction, but there's going to be a lot outstanding. So I think, it would be very interesting next week, but, I mean, the market has held up well under these. So let's see, but I'm optimistic for the balance of the year and going into 2019. On the Suezmax I think it is fair to say, that's the market that’s showing the most strength TD20 which is the rough index has been pretty strong here for the last 12, 13 days, it was up yesterday. And the Black Sea is showing a lot of delays, it's a busy Suezmax market. So that's the most best performing market here. So overall optimistic stabilized it came up quickly and stabilized over the last two, three, four weeks, which is a good sign of a slow strong market. So, I think, this is good reason to be optimistic.

And can you comment about the potential cuts, if this will come, do you think that it will have any impact or this is something that given the strength of the market that will not slowdown the momentum of the tanker market?

I think, if you look at the overall growth in supply this year at 3.2 million barrels, it's been tremendous. It's double of what we had at the same time last year. So there's a lot of attention on the OPEC cut, obviously it's negative, obviously it's that we have given 3.25 additional here and some will be taken away from us. So, obviously, the best for the market will be that it doesn't happen. But now let's see what the meeting on December 5th concludes, but if it's $0.5 million, I don't think that's going to sort of turn this market in anyway close to where we're coming from. And it might have a small impact. But I don't think -- and then obviously will be negative. But I don't think it's a huge factor I think the balance in the tanker market, the fundamentals speak for themselves we will see more delays in the worldwide fleet going into winter in Northern Hemisphere. So let's see, but I don't think, it's going to be a showstopper.

And moving to the favorite topic of the year, the IMO 2020 and scrubbers. Can you give us your estimates of how many vessels or what is the percentage of supply that will be removed for scrubber installation? And also if you have a view of the approximately whatever 2 million or 2.5 million barrels of incremental low sulfur fuel oil that will be needed. What kind of impact is going to have on the market? On the one hand, we are going to have the need for more crude rounds for crude tankers, but on the other hand we're going to have more movements of low sulfur fuel. Is this low sulfur fuel all going to go with product carriers and what kind of routes and ton mile impact do you expect to have in overall market?

Let’s take the first one first. Looking at next year, there’s obviously we got ballast water as well. So IMO 2020 there's a lot of ships that will install scrubbers, the engines of scrubbers and the ordering activity after [indiscernible] end June has exploded as we know. So we also know that even if you're doing it concurrently dry docking you will exceed the normal time. So in Q2 and Q3 of 2019, I think we can have a very interesting market, it will be upside down to the norm where a lower capacity will be taken out because of these two factors. And obviously if you do the docking before September 2019 you will get a five year waiver for the ballast water treatment non-U.S., U.S. of course. But a lot will be taken out and that could mean that we will have a very different from the norm where it starts easing off in Q2 and then Q3 being the weak quarter. When it comes to the crude runs. Yes, as you’re saying the demand for crude runs will increase due to the need for more diesel. So that's an overall positive for the market. When it comes to the new trade routes and how this will impact, I think the old traders will have some good times ahead and there'll be more trading and I think there could be some very good margins. But exactly how it's going to play out I'm not going to give you sort of a view on that. So, I simply don't know. But what I can say is that I think it's going to be very positive for the overall market also of course our LR2s will see some new interesting trade routes being the sort of VLCC of the product market. So, I expect that to be much more interesting here in 2019 because we've gone now 26, 27 months without the product market giving any sort of really good earnings. We've had some small spikes here and there, but nothing strong over time.

Thank you, Robert. One last thing, for the company that they do not have scrubbers, do you expect any change in the logistical process of refueling? Do they have -- do they need to make any extra investment in segregating the tanks or to have to spend more time in refueling if fuel is not fully available up at every direction. Is this something that we need to consider?

Yes, obviously that there are certain areas, I think, in the Baltic where we already have these rules and yes we obviously reconfigure bunker tanks and do some things here and there. But I'm sure the ones that I have decided not to go for this. I'm sure that they're planning well ahead. So I'm sure it's going to be sorted and generally, I think, the bunker market here will be very challenging for everyone. We need to start planning it's rather than being a petrol station with one or two grades being offered it's going to be much more complicated. So it's something that sort of bunker planning needs to be taken very seriously and let's put it this way it's one of our top priorities here heading into 2020.

Thank you very much, Robert.

Thank you.

[Operator instructions] We will now take our next question from Magnus Fyhr from Seaport Global. Please go ahead.

Hey, Robert, hey Inger. Just a question on the vessels that you have with Ship Finance, I mean, you've been continuing to sell the older vessels. And, I guess, you sold one after the quarter ended as well. Has your view changed at all there or what should we expect going forward, with the market strengthened here. I guess you have two 2004 builds coming in for the third special survey in 2019.

I mean the other four ship [ph] here we're likely to carry on with them. They still have some earning potential. And then the other ones, I think will be we'll keep on trying to renew. And I think it's fair to say that values have increased on these ships along with most other ships, although, there has been very few transactions. So, I think, if you look at the fleet or the values, they came down on very few transactions. And now we're moving up on few. But four side I would say they are here to stay with us for a while, and we are also planning to put scrubbers on both of those ships.

Okay, very good. And a question for Inger maybe, you sold a couple of vessels during the third quarter. Looking on the balance sheet and other assets, what were the proceeds for those in current other assets? I mean, there is about $209 million as of quarter-end, how much of that was related to the asset sales?

Magnus, I don't think we sold any vessels. But, of course, Ship Financial sold vessels.

Okay well. And in the…

So we terminated leases, we terminated leases on the Front Page, the Front Serenade and the Front Stratus, three these that released Ship Finance.

Okay. All right, thanks for clarifying that. And just one more question on the balance sheet, I mean, you've been pushing out the maturities all the way to 2020 now and strong expected cash flow from operations near-term. Should we expect you guys to go back to kind of a full payout policy here, or how is the -- has that view changed at all?

I mean, this will be up to the board here to decide, Magnus. But I think given the 18-months of tough market. I think we need to look at this and see how we are structured on and see what we need to pay down and so forth. So I think that should be the first priority.

Okay, very good. Thank you.

Thank you.

[Operator Instructions] We will now take our next question from Mr. Greg Lewis from BTIG. Please go ahead, sir.

Yes, thank you and good afternoon. Robert, you touched on it a little bit, but clearly the Suezmax market has really picked up here over the last few weeks. Could you just provide a little bit of more color around what you are seeing in the market is driving that? And now with -- is there anything we should be thinking about now that Suezmax rates are actually higher than VLCC rates. Is that a sign of maybe VABs coming in and chasing those rates down or just a little bit more so we can understand a little bit more about what's happening in the Suezmax market.

I think, the fact is to look at the volume in West Africa is a definite driver. The amount of Suezmax is going east it's another driver. And both of these trades they are trades that the VLCC can do. But the added flexibility if you come to the East with 1 million barrel ship versus 2 million, there is a lot more ports you can go to as a trade you have much more flexibility. So they've been in high demand the Suezmaxes and that has been a big driver here. And also the Suezmaxes can do the stuff that these can't like loading in the Black Sea. The Black Sea is very, very busy. So overall there is high demand for Suezmaxes they are showing good strength. If you look back two years ago it was not looking fleet wise, it was not looking good with lots of new ships coming in. But that fleet has developed nicely. So I think that's a result of the flexibility and healthy fleet size is the reason why this market is performing. And we are very pleased with this. And obviously we have 18 Suezmaxes and all of them are modern. So we're well positioned. So it's good.

Okay. And then, I mean, I think, you touched on it briefly on weather, but in terms of weather delays that you're seeing with the Suezmax trade, is there any way you can quantify that?

Yes the -- for example Bosporus. So Black Sea there is seeing five to seven days now. And it looks to be increasing. There is not that many delays or much delay in Bosporus which if you go back two years was a huge driver. But generally the delay -- port delays are due to simply Northern Hemisphere heading into winter here there is more. But there's no -- I can’t sort of pinpoint that there's any severe changes there. So it’s pretty normal, but the fleet is running on long voyages from where we are. I hope that whole market is every additional barrel in Atlantic seems to be heading to Asia, which is great for shipping, right. So overall looking good.

Okay. And then just one more for me. I think when you guys instituted the ATM, I think the market was significantly lower, rates were significantly lower. Now that it looks like we've seen or we're seeing this real recovery in the market, how should we be thinking about the ATM over the next couple of quarters?

See we've or all could say it’s a tool in the box and we've not used it. So that's the only comment on that and we'll see how things develop here. But it's a good tool to have.

Okay, guys. Hey, thank you very much for the time.

Thank you, Greg.

We will now take our next question from Mr. Lukas Daul from ABG. Please go ahead sir.

Well, thank you. Good afternoon, Robert and Inger. A question on the OpEx, you've been sort of delivering very well on that front. Looking into 2019 and the dry dockings that you are maybe planning going forward, how should we think about that?

I don't think we're going to see, Lukas. The OpEx I think we always run the cost efficient operation and there’s no -- obviously there'll be some quite a few dry dockings. So maybe some increase there, but nothing significant. So we'll keep folks on running a tight and safe ship.

Okay. And just to confirm what you sort of said previously, you are going to install two of the scrubbers on the SFO vessels.

Yes.

Okay. Which vintage is that, can you say that?

The Front Energy and the Front Force. So when we started looking at scrubbers in economics we thought these were going to be right at the back of the line of candidates. But it didn't take long to see that the 04 with the high consumption is actually where you are likely to see the quickest payback. So we're going do the upgrade on those two for sure.

All right, thank you.

Thanks.

We will now take our next question from Mr. Greg Wasikowski from Wells Fargo. Please go ahead.

Hey guys, I am jumping on for Mike here. Apologies if anything has been covered earlier, we had some connection issues during your prepared remarks. But just starting with those scrubbers real quick, for your second round can you remind us how many of those were done through your fixed price options and then how many do you have remaining?

We have done -- okay, how we -- all the ones we declared were at the fixed price and I believe we are full. It’s actually six or eight left.

Okay, thanks. And then going off on what I think Fotis, brought it up for your order Vs, when you're thinking about that strategy over the next couple years on what to do with those. Does the prospect for floating storage driven by IMO 2020 factor into that decision? And just what are your thoughts around the potential for floating storage there?

I think, at the moment we are worldwide, we're at the minimum, on the interim fleet we are at the minimum when it comes to floating storage. It's the blending, it's the storage that will always be there now, the only change we've had there is obviously Iranian fleet that's partly gone back on storage due to the obvious local storage requirements. On the -- what's going to happen into 2020, I think it's very easy to put forward an argument that there will be more storage, but time will tell. I'm obviously hoping that we're going to see a scenario that we did in the Q1 of 2015 where suddenly the old ships were worth a lot and lots went on storage. We have like 10% worldwide feet. But obviously you need it an oil market that goes into very steep contango obviously there is other that could be blending and various things coming in as well. But all I can say is, I don't have the answer, but I can say that the storage on ships will not decline from where we are now. It will increase and hopefully 2020 will be a trigger for the various reasons, but only time will tell.

Fair enough. All right, thank you, that's it for me.

[Operator Instructions] We will now take our next question from Mr. Randy Giveans from Jefferies. Please go ahead, sir.

Thanks, operator. One more quick follow-up question. So with the spot rate improvement, have you seen a market improvement in the time charter rates one year, maybe three year? And if so, any thoughts on securing some of those now that they're pretty far well above your cash flow, kind of breakeven levels?

Good question, Randy, it's very relevant. If you look at the last 18 months, there actually been no market. There has been -- you can do a one year deal maybe 18 months but no one's willing to take three year deals. And we've seen now a spark more -- not a spark, more activity and real interest, especially if you can deliver ship with a scrubber. So it's something we monitor, I mean, the VLCCs in a three year deal is heading it quickly to the high-30s. The Suezmaxes of three years is where again with scrubber about 27.5 I'd say and there could well be some upside on those rates. And the Afras are probably on the 22, 22.5, 23 for three years and also on the move. So we've gone here from not having a market and if you had to sort of forces it you getting a deal, you'd be locking in probably 3,000 to 5,000 below your daily costs. So at least $1 million loss per year. Whilst now on our very low breakeven, so we can lock in some decent return forward. So we monitor, we don't have a sort of a percentage targets or anything like that. But going back to end of 2017 we had 28% of our fleet on time charter, 2017 was a year where we, I'd say we only loss given the bad market, we actually ended up losing $4.4 million over the year. And that was very much down to the charters we've taken with the other two charters giving us about $40 million or saving us $40 million in loss. So we will look at it going forward. We don't have any sort of immediate plans of doing anything. But it's something we always monitor. And I'm very glad to say finally there is a market.

Yes, absolutely. And just to be clear, you only have one vessel right now on any kind of time charter, right?

Correct. We got one ship out LR2, 17 free and it's expiring in about three months' time.

Yes. All right, thank you again.

[Operator Instructions] There are no further questions at this time. Mr. Macleod, I would like to hand the call back to you for any additional or closing remarks.

Okay. Thank you very much and thank you everyone for calling in. And apologies for the problems we had with the Q&A session on our last call. So but very good, we can make it up with to answer your questions here today. So have a good weekend and thank you very much again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.