Reference Date:
7x Vs at USD ~77k/d for 1yr
Yesterday after close, Frontline announced that it has entered into 1 yr TC contracts for 7x of its VLs at a rate of USD 76.9k/d, with commencement from late Jan ’26 to April ’26. While the counterparty is not disclosed, it is fair to assume Sinokor, which continues to build market share. The rate is impressive and marks a new level in the TC market, coming in 7% above recent broker quotes. While these levels were seen during the contango boom during 2020 (with limited liquidity), we really have to go back to the last super cycle (2004-2008) to find similar rates on term contracts.
Consequently, FRO has de-risked a large part of its VLCC exposure at stellar levels, with TC coverage on the VLCC fleet climbing to 8% in Q1/26, 24% in Q2 and Q3/26, 23% in Q4/26 and 15% in Q1/27, from only having one vessel on long-term TC prior to this.
That said, the company retains relatively high spot exposure into what looks set to be a very strong 2026.
Consensus materially lagging
Adjusting for the contracts mechanically, as the rate is more or less bang on our estimate, our EBITDA for 2026 is coming up by a marginal USD 5m (0%) and USD 1m in 2027 (0%). Adj. EPS stays unchanged at USD 4.1/sh (+37% vs. Cons.) in 2026 and USD 4.7/sh in 2027 (+54% vs. Cons.). While our estimates will stay unchanged after the announcement, we do believe that consensus is set to come up significantly going forward to reflect the new TC levels (which should be more in line with us). The current premium of 12% to Q1e NAV and 5.2x ’26 P/E seems like a bargain in our view, while the significant cash generation lifts the 1yr fwd NAV (Q1/27e) to NOK 297/sh when including dividends. The structural shift with 19% of the crude fleet on the sanctions list, combined with positive y-o-y growth in compliant volumes (while sanctioned barrels face further pressure), creates a compelling backdrop for continued market strength and the equities.