FRNT - Fourth Quarter and Full Year 2014 Results

Highlights

• Frontline 2012 reports net income attributable to Frontline 2012 of $23.4 million and earnings per share of $0.10 for the fourth quarter of 2014, excluding goodwill impairment loss of $149.5 million.
• Frontline 2012 reports net income attributable to Frontline 2012 of $234.0 million and earnings per share of $0.95 for the year ended December 31, 2014, excluding goodwill impairment loss of $149.5 million.
• The Company announces a special dividend consisting of 4.1 million AGHL shares.
• Frontline 2012 received $11.1 million in October 2014 in connection with the cancellation of a newbuilding contract and recorded a gain of $2.0 million in the fourth quarter.
• Frontline 2012 took delivery of the first and second LR2 tanker newbuildings, Front Lion and Front Panther, in late September 2014 and January 2015, respectively.
• In December 2014, Frontline 2012 cancelled the newbuilding contract at STX Dalian for Hull D-2174.
• In January 2015, the first two VLGC carriers, Front Mistral and Front Monsoon, were delivered from the ship yard to Avance Gas.
• In January 2015, Frontline 2012 agreed to acquire the 2009-built and 2011-built Suezmax tankers, Front Balder (ex Roxen Star) and Front Brage (ex Chapter Genta), and delivery of these vessels is expected early March.

Fourth Quarter and Full Year 2014 Results  

On September 15, 2014, Frontline 2012 Ltd. (the "Company" or Frontline 2012") closed the first stage of the previously announced transaction with Knightsbridge Shipping Limited ("Knightsbridge"). The Company received 31.0 million shares in Knightsbridge in exchange for 11 Capesize bulk carrier newbuildings and two Newcastlemax newbuildings and currently owns approximately 58 percent of the total shares outstanding in Knightsbridge. The Company has consolidated Knightsbridge as from September 15 as required by U.S. GAAP. The purchase price allocation, and calculation of goodwill, is preliminary and is subject to change. The Company has written off the full amount of goodwill arising on consolidation of $149.5 million following an impairment assessment at December 31, 2014. References in this press release to the Company refer to Frontline 2012 on an unconsolidated basis.

Frontline 2012 announces net income attributable to Frontline 2012 of $23.4 million and earnings per share of $0.10 for the fourth quarter of 2014, excluding a goodwill impairment loss of $149.5 million, compared with net income attributable to Frontline 2012 of $59.5 million and earnings per share of $0.25 in the preceding quarter. Net income attributable to Frontline 2012 in the fourth quarter includes a gain of $2.0 million in connection with the cancellation of the third contract newbuilding contract (D-2173) at Dalian. Net income attributable to Frontline 2012 in the third quarter includes a gain of $31.1 million comprising a gain of $28.9 million in connection with the cancellation of the fourth newbuilding contract (J0028) at Jinhaiwan, a gain of $2.2 million in connection with the cancellation of the second newbuilding contract (D-2172) at Dalian. Net income attributable to Frontline 2012 in the third quarter also includes a gain of $24.4 million, which is included in Share in results and gain on equity interest from associated companies, on the revaluation of the Company's equity interest in Knightsbridge.

The average daily time charter equivalents ("TCEs") earned in the spot and period market in the fourth quarter by the Company's VLCCs and Suezmax tankers were $38,300 and $35,600, respectively, compared with $26,700 and $22,000, respectively, in the preceding quarter. The spot earnings for the Company's VLCC and Suezmax tankers were $39,000 and $35,600, respectively, compared with $24,700 and $22,000, respectively, in the preceding quarter. The daily earnings for the Company's MR product tankers were $19,900 compared with $13,000 in the preceding quarter. The daily earnings for the Company's LR2 tanker in the fourth quarter were $19,200.

Frontline 2012 announces net income attributable to Frontline 2012 of $234.0 million and earnings per share of $0.95 for the year ended December 31, 2014, excluding a goodwill impairment loss of $149.5 million, compared with net income attributable to Frontline 2012 of $69.5 million and earnings per share of $0.31 in the year ended December 31, 2013. Net income attributable to Frontline 2012 in the years ended December 31, 2014 and December 31, 2013 includes gains on newbuilding contracts of $143.8 million and $57.3 million, respectively. Net income attributable to Frontline 2012 in the year ended December 31, 2014 also includes a gain on the sale of shares of $16.9 million.

The average daily time charter equivalents ("TCEs") earned in the spot and period market in the year ended December 31, 2014 by the Company's VLCCs and Suezmax tankers were $32,500 and $24,500, respectively, compared with $22,300 and $14,200 respectively, in the year ended December 31, 2013. The spot earnings for the Company's VLCC and Suezmax tankers were $32,100 and $24,500, respectively, compared with $19,200 and $14,200, respectively, in the year ended December 31, 2013. The daily earnings for the Company's MR product tankers were $16,600 in the year ended December 31, 2014.

In February 2015, the Company estimates average cash breakeven TCE rates for the remainder of 2015 for its VLCCs, Suezmax tankers, MR product tankers and LR2 tankers of approximately $24,400, $27,500, $13,600 and $13,700, respectively.

Fleet Development

The Company took delivery of the first and second LR2 tanker newbuildings, Front Lion and Front Panther, in late September 2014 and January 2015, respectively, at which time these vessels commenced trading in the spot market.

In January 2015, Frontline 2012 agreed to acquire the 2009-built and 2011-built Suezmax tankers, Front Balder (ex Roxen Star) and Front Brage (ex Chapter Genta), and delivery of these vessels is expected early March.

Newbuilding Program

As of December 31, 2014, the Company's newbuilding program, excluding newbuildings agreed to be sold and newbuilding contracts with STX Dalian and STX Korea, comprises 13 LR2 newbuildings and six Suezmax tanker newbuildings. As of December 31, 2014 total installments of approximately $111.2 million have been paid and the remaining installments to be paid amounted to approximately $844.7 million.

The 12 remaining Capesize newbuildings, which the Company has agreed to sell to Knightsbridge with expected closing in March 2015, are recorded as Newbuildings Held for Sale at December 31, 2014.

In January 2015, the first two VLGC carriers, Front Mistral and Front Monsoon, were delivered from the ship yard to Avance Gas Holding Ltd. ("AGHL").

Subsequent to December 31, 2014, the Company has concluded two newbuilding contracts and taken delivery of one newbuilding contract and the Company's newbuiding program currently comprises 20 newbuildings plus four options.

In 2012 and 2013, the Company cancelled all of its five newbuilding contracts at Jinhaiwan ship yard and has received a total refund to date of $296.2 million for four of these contracts, of which $89.8 million has been used to repay debt. The total unpaid claim for the final contract (hull J0106) is $24.4 million.

The Company cancelled the first four MR tanker newbuildings, hulls D2171, D2172, D2173 and D2174, at STX Dalian in May, July, September and December 2014, respectively. We have paid total instalments on these contracts of $34.8 million and have received payments under the refund guarantees for D2172, D2173 and D2174 of $29.7 million, including interest of $4.4 million.

Hull D2171 is still in arbitration. The total outstanding including interest is approximately $11.4 million.

Corporate

On September 15, 2014, Frontline 2012 closed the first stage of the previously announced transaction with Knightsbridge. The Company received 31.0 million shares in Knightsbridge in exchange for 11 Capesize bulk carrier newbuildings and two Newcastlemax newbuildings and currently owns approximately 58 percent of the total shares outstanding in Knightsbridge. The Company has consolidated Knightsbridge as from September 15 as required by U.S. GAAP. The second and final stage of this transaction is expected to close in March 2015 at which time the Company will receive a further 31.0 million shares in Knightsbridge in exchange for 12 Capesize bulk carrier newbuildings.

On October 7, 2014, Knightsbridge and Golden Ocean Group Limited ("Golden Ocean") entered into an agreement and plan of merger (the "Merger Agreement") pursuant to which the two companies have agreed to merge, with Knightsbridge as the surviving legal entity (the "Combined Company"). The Combined Company will be renamed Golden Ocean Group Limited upon completion of the merger. As a result of the expected merger, the Combined Company will become one of the world's leading dry bulk companies with a modern fleet of 72 vessels, of which 34 are newbuildings under construction as of December 31, 2014. The merger is subject to approval by the shareholders of Golden Ocean and Knightsbridge in separate special general meetings to be held on March 26, 2015 and other conditions and the merger is expected to close shortly thereafter. Knightsbridge is expected to issue approximately 61.5 million new shares to the shareholders of Golden Ocean upon completion, at which time it is expected that the Company will de-consolidate Knightsbridge.

242,307,883 ordinary shares were outstanding as of December 31, 2014, and the weighted average number of shares outstanding for the quarter was 242,307,883.

In December 2014, Frontline 2012 entered into an upsized $466.5 million term loan facility agreement financing 10 of its 14 LR2 tankers with a competitive margin and a 20 year repayment profile and in February 2015, Frontline 2012 secured financing for Front Balder and Front Brage with a competitive margin and a 17.5 year repayment profile. Together with low operating costs and administrative expenses, the financing should secure attractive cash cost break even rates for the Company going forward.

The Company announces a distribution of a special dividend consisting of 4.1 million AGHL shares. All shareholders of Frontline 2012, holding 60.74 shares or more, will receive one share in AGHL for every 60.74 shares they hold in Frontline 2012, rounded down to the nearest whole share. The remaining fractional shares will be payable in cash based on the AGHL share price at the Record date. Shareholders holding less than 60.74 shares will also receive the dividend as cash.

The record date for this distribution is March 16, 2015, ex dividend date is March 13, 2015 and the distribution will be made on or about March 25, 2015.

The Market

Crude

The market rate for a VLCC trading on a standard 'TD3' voyage between the Arabian Gulf and Japan in the fourth quarter of 2014 was WS 52, representing an increase of WS 7 points from the third quarter of 2014 and WS 1 point lower than the fourth quarter of 2013. The flat rate decreased by 6.7 percent from 2013 to 2014.

The market rate for a Suezmax trading on a standard 'TD5' voyage between West Africa and Philadelphia in the fourth quarter of 2014 was WS 87, representing an increase of WS 16 points from the third quarter of 2014 and an increase of WS 21 points from the fourth quarter of 2013. The flat rate decreased by 6 percent from 2013 to 2014.

Bunkers at Fujairah averaged $447/mt in the fourth quarter of 2014 compared to $598/mt in the third quarter of 2014. Bunker prices varied between a high of $568/mt on the 1^st of October and a low of $320/mt on December 19^th.

The International Energy Agency's ("IEA") February 2015 report stated an OPEC crude production of 30.5 million barrels per day (mb/d) in the fourth quarter of 2014. This was unchanged from third quarter of 2014.

The IEA estimates that world oil demand averaged 93.5 mb/d in the fourth quarter of 2014, which is an increase of 0.4 mb/d compared to the previous quarter. IEA estimates that world oil demand in 2015 will be 93.4 mb/d, representing an increase of 1.1 percent or 1 mb/d from 2014.

The VLCC fleet totalled 638 vessels at the end of the fourth quarter of 2014, four vessels up from the previous quarter. Five VLCCs were delivered during the quarter, one was removed. The order book counted 82 vessels at the end of the fourth quarter, which represents approximately 13 percent of the VLCC fleet.

The Suezmax fleet totalled 450 vessels at the end of the fourth quarter, same as at the end of the previous quarter. Two vessels were delivered during the quarter whilst two were removed. The order book counted 63 vessels at the end of the fourth quarter, which represents approximately 14 percent of the Suezmax fleet.

Product

The market rate for an MR trading on a standard "TC2" voyage between Rotterdam and New York in the fourth quarter of 2014 was WS 164, representing a increase of WS 67 points from the third quarter of 2014 and a increase of WS 72 points from the fourth quarter of 2013. The flat rate decreased by 5.3 percent from 2013 to 2014.

Bunkers in Rotterdam averaged $417/mt in the fourth quarter of 2014 compared to $561/mt in the third quarter of 2014. Bunker prices varied between a high of $549/mt on the 1^st of October and a low of $299/mt on December the 18^th.

The MR product fleet totalled 1,698 vessels at the end of the fourth quarter of 2014, up from 1,673 vessels at the end of the previous quarter. The order book counted 355 vessels at the end of the fourth quarter, which represents approximately 20 percent of the MR fleet.

The LR2 fleet totalled 232 vessels at the end of the fourth quarter of 2014, up six from the previous quarter. The order book is at 61 vessels at the end of the fourth quarter, which represents approximately 26 percent of the LR2 fleet.

Strategy and Outlook

In October 2014, Knightsbridge and Golden Ocean entered into a Merger Agreement pursuant to which the two companies agreed to merge, with Knightsbridge as the surviving legal entity (the "Combined Company"). The merger is subject to approval by the shareholders of Golden Ocean and Knightsbridge in separate special general meetings to be held on March 26, 2015, and other conditions.  If the shareholders of both companies approve the merger, it is expected to close shortly thereafter.  Frontline 2012 currently owns 46.5 million shares and will receive further 31 million shares in Knightsbridge in March 2015 and intends to distribute all of its 77.5 million shares in the Combined Company to its shareholders after the merger is closed.  Frontline 2012 currently anticipates that the distribution will be made during the second quarter of 2015.

Frontline 2012 will become a pure crude and product tanker company during the second quarter of 2015 following the announced distribution of the special dividend of the AGHL shares in the first quarter of 2015 and the intended distribution of the shares in the Combined Company in the second quarter of 2015. The Board has thus currently full focus on developing the Company's crude and product portfolio, consisting of a sailing fleet of 20 vessels comprising six VLCCs, six Suezmax tankers, six MR tankers and two LR2 tankers and a newbuilding program of 24 newbuilding contracts and options.

The continued positive development in the crude and product tanker market into the first quarter is likely to give an improved operating result (excluding one time gains and losses) in the first quarter.

Forward Looking Statements

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Frontline Ltd's management's examination of historical operating trends. Although Frontline Ltd believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Frontline 2012 cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission.

The Board of Directors
Frontline 2012 Ltd.
Hamilton, Bermuda
February 25, 2015

Questions should be directed to:

Robert Hvide Macleod: Chief Executive Officer, Frontline Management AS
+47 23 11 40 99

Inger M. Klemp: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76