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OFFON

FRONTLINE LTD.

(FRO)
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Title: Principal Financial Officer (Form 6-K)

09/01/2021 | 04:12pm EDT
Title: Principal Financial Officer



EXHIBIT 1
FRONTLINE LTD.
As used herein, 'we,' 'us,' 'our', 'Frontline' and 'the Company' all refer to Frontline Ltd. This management's discussion and analysis of financial condition and results of operations should be read together with the discussion included in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2020.
Management's Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2021.

General

As of June 30, 2021, the Company's fleet consisted of 68 vessels, with an aggregate capacity of approximately 12.1 million DWT:

(i)62 vessels owned by the Company (15 VLCCs, 27 Suezmax tankers, 20 LR2/Aframax tankers);
(ii)two VLCCs that are under finance leases; and
(iii)four vessels that are under the Company's commercial management (two Suezmax tankers and two Aframax tankers)
In March 2021, the Company took delivery of the LR2 tanker Front Fusionfrom Shanghai Waigaoqiao Shipbuilding Company Limited ('SWS').

In April 2021, the Company took delivery of the LR2 tanker Front Futurefrom SWS.

In the six months ended June 30, 2021, the Company redelivered two VLCCs to an unrelated third party at the end of the respective charter-in agreements.

In May 2021, the Company entered into an agreement for the acquisition through resale of six latest generation ECO-type VLCC newbuilding contracts. The six VLCCs are currently under construction at the Hyundai Heavy Industries ('HHI') shipyard in South Korea and are being acquired for an aggregate purchase price of $565.8 million, including an estimated $25.7 million in additions and upgrades to the standard specifications. The vessels are designed to operate on different fuels, including Biofuel, have the potential to be converted or retrofitted to consume fuel such as LNG or Ammonia and consequently there is an ability to cut CO2 emissions to zero when technology, logistics and the regulatory framework allows for it. The newbuildings will also be fitted with Exhaust Gas Scrubber technology, high end Anti Fouling systems, equipped with Digital Energy Performance solutions as well as being compliant with specific Exxon Mobile lightering requirements to allow for maximum trading flexibility. We believe the delivery schedule is very attractive with all vessels delivering during 2022 starting in the first quarter.

In June 2021, the Company entered into an agreement to acquire two scrubber fitted, latest generation ECO-type VLCCs built in 2019 at the HHI shipyard in South Korea for a total of $180.0 million. The vessels are scheduled to deliver during the fourth quarter of 2021.

As of June 30, 2021, the Company had entered into fixed rate time charter-out contracts for five Suezmax tankers to a subsidiary of Trafigura Group Pte Ltd ('Trafigura') on three-year time charters commencing in August 2019, at a daily base rate of $28,400 with a 50% profit share above the base rate. As of June 30, 2021, the charters have remaining contractual periods of approximately one year and two months.


Fleet changes
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(number of vessels) Six months ended June 30, 2021 Six months ended June 30, 2020 Year ended December 31, 2020
VLCCs
At start of period 19 19 19
Other acquisitions/newbuilding deliveries - 1 1
Disposal/lease termination - (1) (1)
Chartered-in/redelivered (2) - -
At end of period 17 19 19
Suezmax tankers
At start of period 27 26 26
Chartered-in/redelivered (2) - (10) (10)
Other acquisitions/newbuilding deliveries (2) - 11 11
At end of period 27 27 27
LR2/Aframax tankers
At start of period 18 18 18
Other acquisitions/newbuilding deliveries 2 - -
At end of period 20 18 18
Total
At start of period 64 63 63
Other acquisitions/newbuilding deliveries (2) 2 12 12
Disposal/lease termination - (1) (1)
Chartered-in/redelivered (2) (2) (10) (10)
At end of period 64 64 64

(1) The table above excludes vessels commercially managed on behalf of third parties and related parties and also the vessel previously recorded as an investment in finance lease and sold in 2020.
(2) 10 Suezmax tankers chartered-in from Trafigura have been recorded as owned vessels upon closing of the Acquisition in March 2020.

Tanker Market Update

Global oil consumption averaged 96.7 million barrels per day ('mbpd') during the second quarter of 2021 according to the Energy Information Administration ('EIA'), 2.1 mbpd higher than in the first quarter of 2021. Global oil supply increased by 2.3 mbpd during the second quarter, averaging 94.9 mbpd. World oil balances indicated the continued draw from crude oil inventories during the second quarter, albeit at a slower pace than in the first quarter of the year.

Asset prices have continued to appreciate throughout the second quarter of 2021, fueled by healthy activity in the container markets in addition to firm activity for LNG, LPG and Chemical vessels. Steel plate prices in Korea reached $1,000 per ton in June 2021 according to industry sources, an increase of approximately 37% year to date. New ordering for tankers has been muted throughout the second quarter of 2021, and the overall orderbook in absolute DWT terms continues to be near 25-year lows, not reflecting the size of the oil market nor the age profile of the existing tanker fleet.

According to industry sources, the average age of the VLCC fleet at the end of the second quarter of 2021 was just over 10 years, the oldest average age seen for close to 20 years. This is the great paradox of tankers, considering the tightening regulatory framework the industry faces, the high focus on emissions and the environmental implications of the business we are in. Looking at the asset classes to which Frontline is exposed, namely VLCC, Suezmax and
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LR2 tankers, approximately 7% of the global fleet will be over 20 years of age by the end of 2021. When a tanker vessel is over 20 years of age, it will struggle to find employment with legitimate charterers. In recent months media and research agencies have pointed to US sanctions against Iranian and Venezuelan oil exports bringing about a parallel oil market, where sanctioned crude oil is actively traded. The vessels involved sail outside of the regulatory framework set by IMO, often operating without insurance and disobeying the common safety regulations the rest of the industry embraces. Activities of this sort have regrettably always been a challenge in the shipping industry, but the volume of such activity has previously been negligible. Now, the foregoing activity seems to be taking place on a scale which both severely hurts the demand for freight in the compliant tanker market and distorts the global oil trade, displacing significant volumes of compliant oil.

The outlook for the tanker market continues to look constructive and the fundamental picture has become even more pronounced as few tankers have been ordered and available newbuilding capacity is scarce for the next three years. However, the pace of the recovery in global oil demand and trade is being curtailed by the rapid spread of the Delta variant of Covid-19. We do remain optimistic going forward as the current market conditions for tankers are not sustainable. Frontline is not strangers to challenging markets, and with our fuel-efficient modern fleet we continue to focus on positioning ourselves towards a recovery.

Covid-19 Update

The Delta variant, first materializing in India in the first quarter of 2021, has become the dominant strain of Covid-19 and with it the outlook for crew mobility and safety again looks challenging. Whilst the situation in India initially caused the greatest concern, other countries, such as the Philippines have seen a surge in infections yet again. As a result, the Filipino government has imposed restrictions which impacted our ability to transfer Filipino crew in the second quarter of 2021.

Despite our hopes to the contrary, the third quarter, and indeed the remainder of the year, will be impacted by the pandemic and the challenges will persist for crew changes. Concerns proliferating across the world as a result of the advancement of the Delta variant have reintroduced border closures and restrictions at both national and local levels. Travel and quarantine costs remain high, with pressure on commercial as well as charter flights and new countries imposing inbound and outbound quarantine requirements.

Progress on the vaccination of seafarers has been slow and notable industry bodies have criticized the lack of prioritization of seafarers in most national vaccination programs. However, at the end of the first quarter, we saw positive signs that Covid-19 vaccines would become commercially available to international seafarers. The United States was the first nation to offer the Janssen vaccine to seafarers and our technical department has ensured that crew onboard all vessels that call at any US ports are offered the Janssen vaccine on a voluntary basis, after a thorough risk assessment has been performed.

India, during their worst Delta variant outbreak to date, announced it would prioritize seafarers as frontline workers. In collaboration with our ship managers, we paused most crew changes with Indian nationals to allow as many of them as possible to take up the offer of a vaccine administration. Beginning in the third quarter of this year, the Netherlands and Germany will be the first among European nations to offer seafarers calling at large ports the opportunity to be administered vaccine doses.

We estimate Covid-19 related additional crew change costs, excluding air freight and associated transport costs, of $1.5 million for the third quarter with approximately 930 seafarers due for repatriation.
ESG Update

In July this year the EU commission presented its proposals for updated environmental regulations aimed at reducing emissions by 55% in 2030 compared to 1990 levels (with a goal of 'net zero'by 2050). The proposals will now head to the European Parliament where approval from member states is needed. For shipping, this means a minimum 13% GHG intensity reduction from ship fuels by 2035 (2020 baseline). The maritime sector is now also subject to the EU's Emissions Trading System (ETS), pursuant to which emission allowances are needed. For intra-
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EU voyages, shipping companies are fully responsible for emissions. The liability is reduced to 50% for incoming and outgoing voyages. The ramp-up is gradual, starting with the shipping companies being responsible for 20% of emissions in 2023, and increasing to 100% in 2026.

During the last year, we initiated our energy efficiency project: 'Decarbonization journey towards IMO 2030- 2050'. The purpose of this project is to provide Frontline with a solid understanding of our options, both now and in the near future, on how to further optimize our operations and fleet towards more energy efficient and sustainable operations applying a systematic approach. DNV GL has been appointed to assist us throughout this project. By the end of 2021, we intend to have fully digitalized our ship performance data into our digital monitoring platform Veracity, set targets with associated KPIs on energy efficiency both for the short and long- term and established a strategy on the implementation of alternative fuels.


Results of Operations

Amounts included in the following discussion are derived from our Unaudited Condensed Consolidated Interim Financial Statements for the six months ended June 30, 2021 and June 30, 2020.

Total operating revenues, voyage expenses and commissions
(in thousands of $) 2021 2020
Time charter revenues 42,111 76,534
Voyage charter revenues 313,917 708,528
Other income 7,982 13,842
Total operating revenues 364,010 798,904
Voyage expenses and commissions 176,941 209,263

Time charter revenues decreased by $34.4 million in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily due to the redelivery of 11 vessels back to voyage charters partially offset by the income recognized from the five vessels chartered out to Trafigura after the closing of the acquisition of 10 Suezmax Tankers from Trafigura and the delivery of two vessels to time charters.

Voyage charter revenues decreased by $394.6 million in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily due to the decrease in market freight rates, the termination of the leases on one vessel chartered-in from SFL Corporation Ltd. ('SFL') and two vessels chartered-in from a third party, and the delivery of two vessels onto time charters. These factors were partially offset by the delivery of four newbuildings onto voyage charters, since January 1, 2020 and the redelivery of 11 vessels from time charters.

Other income primarily comprises the income earned from the technical and commercial management of related party and third party vessels and newbuilding supervision fees derived from related parties. The decrease in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 was mainly due to a decrease in newbuilding supervision fees as a result of a reduction in the number of newbuildings under management, a reduction in commercial management fees as a result of the termination of three commercial management agreements since January 1, 2020 and a decrease in technical management fees earned as a result of the sale of Seateam Management Pte. Ltd ('Seateam').

Voyage expenses and commissions decreased by $32.3 million in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily due to a decrease in bunker costs due to reduced prices, the termination of the leases of three chartered-in vessels and a decrease in commissions due to reduced market rates. The decrease was partially offset by the delivery of four newbuildings since January 1, 2020 and the net increase of vessels delivered into voyage charters from their previous time charters.


Other operating gains
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(in thousands of $) 2021 2020
Gain on termination of vessel leases - 7,409
Gain on sale of vessel - 12,354
Gain on settlement of claim - 3,422
Gain on pool arrangements 1,048 766
Other gains 85 268
Other operating gains 1,133 24,219

In February 2020, the Company agreed with SFL to terminate the long-term charter for the 2002-built VLCC Front Hakataupon the sale and delivery of the vessel by SFL to an unrelated third party. Frontline received a compensation payment of $3.2 million from SFL for the termination of the current charter and recognized a gain on termination of $7.4 million. The charter with SFL terminated in February 2020.

In March 2020, the Company recorded a $3.4 million gain on settlement of a claim.

In April 2020, the Company sold one VLCC previously recorded as an investment in finance lease at a purchase price of $25.5 million. The vessel was delivered to its buyer in June 2020 and the Company recorded a gain on sale of $12.4 million.

In the six months ended June 30, 2021, the Company recorded a gain on pool arrangements of $1.0 million (2020: gain of $0.8 million) and a further $0.1 million (2020: $0.3 million) in relation to other miscellaneous settlements.


Contingent rental (income) expense
(in thousands of $) 2021 2020
Contingent rental (income) expense (1,624) 8,270

Contingent rental income (expense in 2020) in the six months ended June 30, 2021 relates to the charter party contracts with SFL and was incurred by the Company because the actual profit share payable in the six months ended June 30, 2021 of$0.3 million (2020: $10.4 million) was $1.6 millionless (2020: $8.3 million more) than the amount accrued in the lease obligation payable when the leases were recorded at fair value at the time of the merger with Frontline 2012 Ltd. ('Frontline 2012') in 2015. The increase in contingent rental income is due to a decrease in market rates which has decreased the amount payable to SFL in the six months ended June 30, 2021, partially offset by a reduction in the number of vessels leased from SFL.


Ship operating expenses
(in thousands of $) 2021 2020
Ship operating expenses 88,154 79,831

Ship operating expenses are the direct costs associated with running a vessel and include crew costs, vessel supplies, repairs and maintenance, dry docking expenses, lubricating oils and insurance.

Ship operating expenses increased by $8.3 million in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily due to an increase in vessels which underwent a drydocking in 2021, the delivery of four newbuildings since January 1, 2020 and additional crew costs, across the fleet, as a result of the COVID-19 pandemic. These factors were partially offset by a decrease in ship operating expenses due to the termination of the leases for three vessels chartered-in and the sale of one vessel previously recorded as an investment in finance lease.

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Charter hire expenses
(in thousands of $) 2021 2020
Charter hire expenses 2,593 4,454

In the six month period ended June 30, 2020, the Company chartered-in two VLCCs under operating leases, which were both redelivered at the end of their respective charter-in agreements in the six month period ended June 30, 2021. The decrease in charter hire expense is due to the terminations of the charter-in agreements.


Administrative expenses
(in thousands of $) 2021 2020
Administrative expenses 14,332 20,604

Administrative expenses decreased in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease is mainly due to reduced employee costs as a result of the sale of Seateam, a reduction in costs incurred in the management of related party vessels and a decrease in professional fees charged to the Company.


Depreciation
(in thousands of $) 2021 2020
Depreciation 71,734 66,725

Depreciation increased in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 mainly due to the acquisition of 10 vessels from Trafigura in March 2020, the delivery of four newbuildings since January 1, 2020 and depreciation on additional Exhaust Gas Cleaning Systems ('EGCS') and Ballast Water Treatment Systems ('BWTS') installed on our vessels. These factors were partially offset by a decrease in depreciation due to the redelivery of one vessel chartered-in under finance lease in 2020 and one less day in 2021 due to the leap year in 2020.


Interest income
(in thousands of $) 2021 2020
Interest income 84 597

Interest income in the six months ended June 30, 2021 and the six months ended June 30, 2020 relates to interest received on bank deposits and the shareholder loan to an associate company.


Interest expense
(in thousands of $) 2021 2020
Interest expense (29,414) (40,859)

Interest expense decreased in the six months ended June 30, 2021 by $11.4 million as compared to the six months ended June 30, 2020 primarily due to the scheduled repayment of outstanding debt, repayment of amounts owed under the Company's senior unsecured facility agreement with an affiliate of Hemen Holding Ltd., an affiliate and the Company's largest shareholder ('Hemen'), and the movement in interest rates, partially offset by the additional
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interest expense due to the delivery of four newbuildings and 10 vessels acquired from Trafigura since January 1, 2020.


Share of results of associated company
(in thousands of $) 2021 2020
Share of results of associated company (724) (1,427)

A share of losses of TFG Marine of $0.7 million was recognized in the six months ended June 30, 2021 (2020: income of $1.1 million).

A share of losses of FMS Holdco of $2.6 million was recognized in the six months ended June 30, 2020.


Gain (loss) on marketable securities
(in thousands of $) 2021 2020
Gain (loss) on marketable securities 7,915 (4,542)

In the six months ended June 30, 2021, the Company recognized a gain on marketable securities sold of $7.9 million and an unrealized gain of nil in relation to the marketable securities held at the reporting date (2020: loss of $4.5 million) due to the movement in the fair value of marketable securities for the six months ended June 30, 2021 and the six months ended June 30, 2020, respectively.


Gain (loss) on derivatives
(in thousands of $) 2021 2020
Gain (loss) on derivatives 10,989 (21,746)

The gain on derivatives in the six months ended June 30, 2021 and the loss on derivatives in the six months ended June 30, 2020 relate to interest rate swap agreements as a result of movements in interest rates.

Other non-operating items
(in thousands of $) 2021 2020
Other non-operating items 380 139

Other non-operating items are primarily comprised of dividends received on marketable securities, offset by bank charges.
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Critical Accounting Policies and Estimates

Impairment Assessment of Goodwill

We allocate the cost of acquired companies to identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. Our future operating performance may be affected by potential impairment charges related to goodwill. Goodwill is not amortized, but rather reviewed for impairment annually, or more frequently if impairment indicators arise. The Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass the qualitative assessment in any period and proceed directly to performing the goodwill impairment test. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances. Examples of such events and circumstances include: (i) macroeconomic conditions; (ii) industry and market conditions; (iii) changes in cost factors that may impact earnings and cash flows; (iv) overall financial performance; (v) other entity specific events such as changes in management, strategy, customers or key personnel (vi) other events and (vii) if applicable, changes in the Company's share price, both in absolute terms and relative to peers.

Impairment of goodwill in excess of amounts allocable to identifiable assets and liabilities is determined using a one-step approach, based on a comparison of the fair value of the reporting unit to the book value of its net assets; if the fair value of the reporting unit is lower than the book value of its net assets, then an impairment loss is recognized for the difference. The Company has one reporting unit for the purpose of assessing potential goodwill impairment and has selected September 30 as its annual goodwill impairment testing date. The process of evaluating the potential impairment of goodwill and intangible assets is highly subjective and requires significant judgment at many points during the analysis.

We estimate the fair value of the Company based on its market capitalization plus a control premium, when necessary, and compare this to the carrying value of its net assets. Control premium assumptions require judgment and actual results may differ from assumed or estimated amounts.

The Company's market capitalization at June 30, 2021 was $1,779.2 million (based on a share price of $9.00) compared to its carrying value of approximately $1,613.5 million. As the market capitalization of the Company was above the carrying value, even without considering any control premium, the Company concluded that there was no requirement for an impairment to the carrying value of goodwill.

If our stock price declines, or if our control premium declines, this could result in an impairment of some or all of the $112.5 million of goodwill. Control premium assumptions require judgment and actual results may differ from assumed or estimated amounts. The Company believes that a control premium may be attributable, in part or in whole, to the expected synergies from combining the operations of the Company and an acquirer, particularly in respect of the benefits of operating an enlarged oil tanker fleet and assembled workforce as well as being able to take advantage of an expected reduction in costs from an expansion in scale. Events or circumstances may occur that could negatively impact our stock price, including changes in our anticipated revenues and profits and our ability to execute on our strategies. An impairment could have a material negative effect on our Condensed Consolidated Balance Sheet and Results of Operations.


Liquidity and Capital Resources

We operate in a capital intensive industry and have historically financed our purchase of tankers and other capital expenditures through a combination of cash generated from operations, equity capital and borrowings from commercial banks. Our ability to generate adequate cash flows on a short and medium-term basis depends substantially on the trading performance of our vessels in the market. Historically, market rates for charters of our vessels have been volatile. Periodic adjustments to the supply of and demand for oil and product tankers causes the
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industry to be cyclical in nature. We expect continued volatility in market rates for our vessels in the foreseeable future with a consequent effect on our short and medium-term liquidity.

Our funding and treasury activities are conducted within corporate policies to increase investment returns while maintaining appropriate liquidity for our requirements. Cash and cash equivalents are held primarily in U.S. Dollars with some balances held in British Pounds, Euros, Norwegian Kroner and Singapore Dollars.

Our short-term liquidity requirements relate to payment of operating costs (including drydocking), funding working capital requirements, repayment of debt financing, payment of newbuilding installments, payment of upgrading costs in relation to EGCS and BWTS, lease payments for our chartered-in fleet, contingent rental expense and maintaining cash reserves against fluctuations in operating cash flows. Sources of short-term liquidity include cash balances, short-term investments and receipts from our customers. Revenues from time charters are generally received monthly or fortnightly in advance while revenues from voyage charters are received upon completion of the voyage.

As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $140.4 million, and $174.7 million, respectively. As of June 30, 2021, and December 31, 2020, we had restricted cash balances of $1.1 million, and $14.9 million, respectively. Restricted cash as of June 30, 2021 does not include cash balances of $102.8 million (December 2020: $103.5 million), which represents 100% (December 2020: 100%) of the cash required to be maintained by the financial covenants in our loan agreements. The Company is permitted to satisfy up to 50% of the cash requirement by maintaining a committed undrawn credit facility with a remaining availability of greater than 12 months. The Company did not satisfy any of the minimum cash requirement with a committed undrawn credit facility as of June 30, 2021 because the Company's senior unsecured facility agreement with an affiliate of Hemen, is repayable in May 2022. Furthermore, Frontline Shipping Limited ('FSL'), the chartering counterparty with SFL with respect to the remaining two VLCCs leased from them, has agreed to certain dividend restrictions as a result of the amendment of the terms of the long-term charter agreements in May 2015. In order to make or pay any dividend or other distribution to the Company, FSL shall demonstrate a cash buffer of $2.0 million per vessel both prior to and following such payment, and following payment of the next monthly hire due plus any profit share accrued under the agreement. As of June 30, 2021, the cash held by FSL was $5.3 million (December 31, 2020: $15.6 million), and these amounts are included in 'Cash and cash equivalents'.

Our medium and long-term liquidity requirements include funding the equity portion of investments in new or replacement vessels and repayment of bank loans. Additional sources of funding for our medium and long-term liquidity requirements include new loans, refinancing of existing arrangements, equity issues, public and private debt offerings, vessel sales, sale and leaseback arrangements and other asset sales.

As of June 30, 2021, total instalments of $129.7 million had been paid in connection with the Company's remaining newbuilding program, and remaining commitments amounted to $530.7 million, of which we expect $93.3 million to be paid in 2021 and $437.4 million to be paid in 2022.

The Company has entered into forward bunker purchase arrangements for the delivery of 5,000 MT of bunker fuel per month for delivery between October 2020 to December 2021. The contracts oblige the Company to purchase and take delivery of the physical fuel at prices between $325 per MT and $365 per MT. In addition, the Company has entered into a further arrangement for the delivery of 5,000 MT of bunker fuel per month for delivery between January 2021 to December 2021. The contract obliges the Company to purchase and take delivery of the physical fuel at $232 per MT. As of June 30, 2021, the remaining commitments amounted to $17.9 million, all of which is expected to be paid in 2021.

In June 2020, the Company entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC (the 'EDA'), under which the Company may, from time to time, offer and sell its ordinary shares having aggregate sales proceeds of up to $100.0 million. As of June 30, 2021, no sales were made under the EDA.

In February 2021, the Company extended the terms of its senior unsecured revolving credit facility of up to $275.0
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million with an affiliate of Hemen by 12 months to May 2022. In the six months ended June 20, 2021, the Company drew down $101.7 million under the facility to finance installments for the six VLCCs under construction. $113.3 million remains available and undrawn under this facility as of June 30, 2021.

The Company drew down $33.4 million in March 2021 and $33.4 million in April 2021 under its senior secured term loan facility of up to $133.7 million with CEXIM and Sinosure entered into in November 2020 to partially finance the delivery of two LR2 tankers, Front Fusion and Front Future, respectively, from SWS. The facility has a tenor of 12 years, carries an interest rate of LIBOR plus a margin in line with the Company's other loan facilities and has an amortization profile of 17 years counting from delivery date from the yard.

In May 2021, the Company entered into an agreement for the acquisition through resale of six latest generation ECO-type VLCC newbuilding contracts. The six VLCCs are currently under construction at the HHI shipyard in South Korea and are being acquired for an aggregate purchase price of $565.8 million. The vessels are due for delivery during 2022 starting in the first quarter.

In June 2021, the Company entered into an agreement to acquire two scrubber fitted, latest generation ECO-type VLCCs built in 2019 at the HHI shipyard in South Korea for a total of $180.0 million. The vessels are scheduled to deliver during the fourth quarter of 2021.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $130.0 million from DNB Bank ASA ('DNB') to partially finance the acquisition of two of the six resale VLCC newbuilding contracts. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation. Frontline intends to establish long-term financing for the remaining four resale VLCC newbuilding contracts closer to the delivery of the vessels.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $58.5 million from SEB to partially finance the acquisition of one of the two 2019 built VLCCs. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $58.5 million from KFW IPEX-Bank to partially finance the acquisition of one of the two 2019 built VLCCs. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation.

Cash Flows
The following summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2021.

Net cash provided by operating activities
Net cash provided by operating activities in the six months ended June 30, 2021 was $41.2 million compared to $445.5 million in the six months ended June 30, 2020.

The decrease was mainly driven by a decrease in total operating revenues of $434.9 million. The key factors in relation to this were (i) the decrease in market freight rates, (ii) the redelivery of one vessel leased under finance lease in 2020 and two vessels leased under operating leases in 2021, (iii) the redelivery of vessels from time charters to voyage charters with less favorable rate, and (iv) a reduction in administrative income due to a decrease in newbuilding supervision fees and the sale of Seateam. The decrease was partially counterbalanced by a net increase in the fleet primarily as a result of the delivery of the 5 acquired vessels in March 2020 and four newbuildings delivered since January 1, 2020.

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In addition, the cash provided by operating activities was further decreased by $8.3 million, due to increased ship operating expenses and drydocking costs.

The movement in other operating assets and liabilities had a negative impact in cash generated from operating activities by $6.9 million. The movement in working capital balances are impacted by the timing of voyages and in particular the timing of the billing and receipt of freights, and also by the timing of fueling and consumption of fuel on board our vessels.

The decrease in cash provided by operating activities was partially offset by a decrease in voyage expenses of $32.3 million, primarily due to reduced bunker prices and reduced commissions payable and a $11.4 million decrease in interest expense paid in the period.

Our reliance on the spot market contributes to fluctuations in cash flows from operating activities as a result of its exposure to highly cyclical tanker rates. Any increase or decrease in the average freight rates earned by our vessels in periods subsequent to June 30, 2021, compared with the actual freight rates achieved during the six months ended June 30, 2021, will have a positive or negative comparative impact, respectively, on the amount of cash provided by operating activities. We estimate that average daily total cash cost break even TCE rates for the remainder of 2021 will be approximately $21,800, $17,500 and $15,400 for our owned and leased VLCCs, Suezmax tankers, and LR2/Aframax tankers, respectively. These are the daily rates our vessels must earn to cover budgeted operating costs, dry dock expenses, estimated interest expenses, scheduled loan principal repayments, bareboat hire, time charter hire and corporate overhead costs. These rates do not take into account capital expenditures and contingent rental expense.
Net cash used in investing activities
Net cash used in investing activities of $165.5 million in the six months ended June 30, 2021 comprised mainly of capitalized additions of $182.0 million, primarily in respect of the delivery of two newbuildings and the additions related to the eight remaining newbuilding contracts along with EGCS and BWTS upgrade costs. In addition, in April 2021, the Company purchased 55,959 Golden Ocean Ltd. ('Golden Ocean') shares in connection with the exercise of subscription rights in the subsequent offering for $0.4 million. The cash used in investing activities was partially offset by proceeds of $14.1 million from the sale of marketable securities and $2.8 million of proceeds from the sale of Seateam in October 2020.

Net cash provided by financing activities
Net cash provided by financing activities of $76.1 million in the six months ended June 30, 2021 was primarily a result of the drawdown of debt in the amount of $172.0 million in the period. This was partially offset by debt and finance lease repayments of $90.6 million and $3.2 million, respectively. In addition, the company paid $2.1 million in debt fees in relation to the new loan facilities in the period.

Debt restrictions
The Company's loan agreements contain loan-to-value clauses, which could require the Company to post additional collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings under each of such agreements decrease below required levels. In addition, the loan agreements contain certain financial covenants, including the requirement to maintain a certain level of free cash, positive working capital and a value adjusted equity covenant. Restricted cash as of June 30, 2020 does not include cash balances of $102.8 million (December 2020: $103.5 million), which represents 100% (December 2020: 100%) of the cash required to be maintained by the financial covenants in our loan agreements. The Company is permitted to satisfy up to 50% of the cash requirement by maintaining a committed undrawn credit facility with a remaining availability of greater than 12 months. The Company did not satisfy any of the minimum cash requirement with a committed undrawn credit facility as of June 30, 2021 because the Company's senior unsecured facility agreement with an affiliate of Hemen, is repayable in May 2022. These cash amounts are included in 'Cash and cash equivalents'. Failure to comply with any of the covenants in the loan agreements could result in a default, which would permit the lender to accelerate the maturity of the debt and to foreclose upon any collateral securing the debt. Under those circumstances, the Company might not have sufficient funds or other resources to satisfy its obligations.

11

As of June 30, 2021, the Company reported net current liabilities of $95.0 million. Short-term debt as of June 30, 2021 includes a $161.7 million debt maturity due on final maturity of the Company's senior unsecured revolving credit facility of up to $275.0 million with an affiliate of Hemen in May 2022, of which the Company drew down $101.7 million to finance installments for the six VLCCs under construction in the second quarter of 2021. In August 2021, the Company obtained financing commitments for three senior secured term loan facilities in a total amount of up to $247.0 million to partially finance the acquisition of the two VLCCs built in 2019 and two of the six resale VLCC newbuilding contracts, which are subject to final documentation. We believe that cash on hand and borrowings under our current and committed credit facilities, along with cash generated from operating activities will be sufficient to fund our requirements for, at least, the twelve months from the date of this interim report.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk
The Company is exposed to the impact of interest rate changes primarily through its floating-rate borrowings that require the Company to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect operating margins, results of operations and ability to service debt. The Company uses interest rate swaps to reduce its exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with its floating-rate debt. The Company is exposed to the risk of credit loss in the event of non-performance by the counterparty to the interest rate swap agreements.

As of June 30, 2021, the Company's outstanding debt, which was at variable interest rates, net of the amount subject to interest rate swap agreements, was $1,514.5 million. Based on this, a one percentage point increase in annual LIBOR interest rates would increase its annual interest expense by approximately $15.1 million, excluding the effects of capitalization of interest.

Currency Risk
The majority of the Company's transactions, assets and liabilities are denominated in U.S. dollars, its functional currency. Certain of its subsidiaries report in British pounds, Norwegian kroner or Singapore dollars and risks of two kinds arise as a result: a transaction risk, that is, the risk that currency fluctuations will have an effect on the value of cash flows; and a translation risk, which is the impact of currency fluctuations in the translation of foreign operations and foreign assets and liabilities into U.S. dollars in the condensed consolidated financial statements.

Inflation
Inflation has only a moderate effect on the Company's expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase operating, voyage, general and administrative, and financing costs.

Interest Rate Swap Agreements
In February 2013, the Company entered into six interest rate swaps with Nordea Bank, of which one remained outstanding as of June 30, 2021, whereby the floating interest rate on an original principal amount of $260.0 million was switched to a fixed rate. In February 2016, the Company entered into an interest rate swap with DNB whereby the floating interest on notional debt of $150.0 million was switched to a fixed rate, with a forward start date of February 2019. In March 2020, the Company entered into three interest rate swaps with DNB whereby the floating interest rate on notional debt totaling $250.0 million was switched to a fixed rate. In April 2020, the Company entered into two interest rate swaps with Nordea Bank whereby the floating interest rate on notional debt totaling $150.0 million was switched to a fixed rate.The fair value of these swaps as of June 30, 2021 was a receivable of $4.6 million (December 2020: nil) and a payable of $10.0million (December 2020: $19.3 million).Credit risk exists to the extent that the counterparty is unable to perform under the contracts, but this risk is considered remote as the counterparty is a bank, which participates in the loan facility to which the interest rate swaps are related. The Company recorded a gain on these interest swaps of $11.0 million in the six months ended June 30, 2021 (six months ended June 30, 2020: loss of $21.7 million).

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
12

Matters discussed in this report and the documents incorporated by reference may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

Frontline Ltd. and its subsidiaries, or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this documents, the words 'believe,' 'anticipate,' 'intend,' 'estimate,' 'forecast,' 'project,' 'plan,' 'potential,' 'will,' 'may,' 'should,' 'expect' and similar expressions, terms or phrases may identify forward-looking statements.

The forward-looking statements in this report are based upon various assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to these important factors and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include

the strength of world economies;
fluctuations in currencies and interest rates;
general market conditions, including fluctuations in charter hire rates and vessel values;
changes in the supply and demand for vessels comparable to ours and the number of newbuildings under construction;
the highly cyclical nature of the industry that we operate in;
the loss of a large customer or significant business relationship;
changes in worldwide oil production and consumption and storage;
changes in the Company's operating expenses, including bunker prices, drydocking, crew costs and insurance costs;
planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys and upgrades;
risks associated with any future vessel construction;
our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions planned;
our ability to renew our time charters when they expire or to enter into new time charters;
availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements;
availability of skilled crew members other employees and the related labor costs;
work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;
compliance with governmental, tax, environmental and safety regulation, any non-compliance with the U.S.;
the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance, or ESG, policies;
Foreign Corrupt Practices Act of 1977, or FCPA, or other applicable regulations relating to bribery;
the impact of the discontinuance of London Interbank Offered Rate, or LIBOR, after 2021 on interest rates of our debt that reference LIBOR;
13

general economic conditions and conditions in the oil industry;
effects of new products and new technology in our industry, including the potential for technological innovation to reduce the value of our vessels and charter income derived therefrom;
vessel breakdowns and instances of off-hire;
the impact of an interruption in or failure of our information technology and communications systems, including the impact of cyber-attacks, upon our ability to operate;
potential conflicts of interest involving members of our board of directors and senior management;
the failure of counter parties to fully perform their contracts with us;
changes in credit risk with respect to our counterparties on contracts;
our dependence on key personnel and our ability to attract, retain and motivate key employees;
adequacy of insurance coverage;
our ability to obtain indemnities from customers;
changes in laws, treaties or regulations;
the volatility of the price of our ordinary shares;
our incorporation under the laws of Bermuda and the different rights to relief that may be available compared to other countries, including the United States;
changes in governmental rules and regulations or actions taken by regulatory authorities;
government requisition of our vessels during a period of war or emergency;
potential liability from pending or future litigation and potential costs due to environmental damage and vessel collisions;
the arrest of our vessels by maritime claimants;
general domestic and international political conditions or events, including 'trade wars';
any further changes in U.S. trade policy that could trigger retaliatory actions by the affected countries;
potential disruption of shipping routes due to accidents, political events, international hostilities and instability, acts by terrorists or acts of piracy on ocean-going vessels;
the impact of adverse weather and natural disasters;
the length and severity of epidemics and pandemics, including the ongoing global outbreak of the novel coronavirus, or COVID-19, and its impact on the demand for seaborne transportation in the tanker sector;
business disruptions due to natural disasters or other disasters outside our control, such as the ongoing COVID-19 pandemic; and
other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission, or the Commission.


We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward looking statements. Please see our Risk Factors in Item 3 of the Company's Annual Report on Form 20-F for the year ended December 31, 2020, filed with the Commission on March 18, 2021 for a more complete discussion of these and other risks and uncertainties.

14

FRONTLINE LTD.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Page
Condensed Consolidated Statements of Operations for the six months ended June 30, 2021 and June 30, 2020 (unaudited)
16
Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30, 2021 and June 30, 2020 (unaudited)
17
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (unaudited)
18
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020 (unaudited)
20
Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2021 and June 30, 2020 (unaudited)
21
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
24


15

Frontline Ltd.
Condensed Consolidated Statements of Operations for the six months ended June 30, 2021 and June 30, 2020
(in thousands of $, except per share data)
2021 2020
Operating revenues
Time charter revenues 42,111 76,534
Voyage charter revenues 313,917 708,528
Other income 7,982 13,842
Total operating revenues 364,010 798,904
Other operating gains 1,133 24,219
Voyage expenses and commissions 176,941 209,263
Contingent rental (income) expense (1,624) 8,270
Ship operating expenses 88,154 79,831
Charter hire expense 2,593 4,454
Administrative expenses 14,332 20,604
Depreciation 71,734 66,725
Total operating expenses 352,130 389,147
Net operating income 13,013 433,976
Other income (expenses)
Interest income 84 597
Interest expense (29,414) (40,859)
Gain (loss) on marketable securities 7,915 (4,542)
Share of results of associated companies (724) (1,427)
Foreign currency exchange loss (17) (1,129)
Gain (loss) on derivatives 10,989 (21,746)
Other non-operating items 380 139
Net other expenses (10,787) (68,967)
Net income before income taxes and non-controlling interest 2,226 365,009
Income tax benefit 38 47
Net income 2,264 365,056
Net income attributable to non-controlling interest - (63)
Net income attributable to the Company 2,264 364,993
Basic earnings per share attributable to the Company $ 0.01 $ 1.89
Diluted earnings per share attributable to the Company $ 0.01 $ 1.85

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

16

Frontline Ltd.
Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30, 2021 and June 30, 2020
(in thousands of $)

2021 2020
Comprehensive income
Net income 2,264 365,056
Foreign currency translation loss (26) (36)
Other comprehensive loss (26) (36)
Comprehensive income 2,238 365,020
Comprehensive income attributable to non-controlling interest - 63
Comprehensive income attributable to the Company 2,238 364,957
Comprehensive income 2,238 365,020

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

17

Frontline Ltd.
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020
(in thousands of $)
2021 2020
ASSETS
Current assets
Cash and cash equivalents 140,361 174,721
Restricted cash 1,140 14,928
Marketable securities 2,673 2,639
Marketable securities pledged to creditors - 5,835
Trade accounts receivable, net 46,199 40,974
Related party receivables 14,629 13,255
Other receivables 14,268 22,950
Inventories 73,589 57,858
Voyages in progress 26,601 34,705
Prepaid expenses and accrued income 8,771 7,725
Other current assets 3,419 2,729
Total current assets 331,650 378,319
Long-term assets
Newbuildings 131,174 48,498
Vessels and equipment, net 3,340,987 3,307,144
Vessels and equipment under finance leases, net 49,234 53,518
Right-of-use assets under operating leases 4,527 8,426
Investment in associated company 555 1,279
Goodwill 112,452 112,452
Loan notes receivable 1,388 1,388
Long-term derivative instruments receivable 4,557 -
Other long-term assets 5,058 7,197
Total assets 3,981,582 3,918,221
LIABILITIES AND EQUITY
Current liabilities
Short-term debt and current portion of long-term debt 326,462 167,082
Current portion of obligations under finance leases 7,329 7,810
Current portion of obligations under operating leases 1,173 4,548
Related party payables 29,259 19,853
Trade accounts payable 5,634 7,860
Accrued expenses 36,952 42,529
Derivative instruments payable 9,972 19,261
Other current liabilities 9,898 12,418
Total current liabilities 426,679 281,361
Long-term liabilities
Long-term debt 1,891,438 1,968,924
Obligations under finance leases 45,115 48,467
Obligations under operating leases 3,662 4,177
Other long-term liabilities 1,235 3,739
18

Total liabilities 2,368,129 2,306,668
Commitments and contingencies
Equity
Share capital (197,692,321 shares. 2020: 197,692,321. Par value $1.00)
197,692 197,692
Additional paid in capital 401,683 402,021
Contributed surplus 1,004,094 1,004,094
Accumulated other comprehensive income 174 200
Retained earnings 10,282 8,018
Total equity attributable to the Company 1,613,925 1,612,025
Non-controlling interest (472) (472)
Total equity 1,613,453 1,611,553
Total liabilities and equity 3,981,582 3,918,221

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

19

Frontline Ltd.
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020
(in thousands of $)

2021 2020
Net cash provided by operating activities 41,217 445,508
Additions to newbuildings, vessels and equipment (181,980) (152,846)
Marketable securities acquired (357) -
Investment in associated company - (750)
Net proceeds from sale of vessel - 26,556
Cash inflow from sale of subsidiary 2,813 -
Cash outflow on issuance of loan to associated company - (1,500)
Trafigura asset acquisition - (533,748)
Proceeds from sale of marketable securities 14,074 -
Net cash used in investing activities (165,450) (662,288)
Proceeds from issuance of debt 172,024 650,273
Repayment of long-term debt (90,623) (149,732)
Repayment of finance leases (3,199) (7,984)
Net proceeds from issuance of shares - 5,825
Lease termination compensation receipt - 3,186
Debt fees paid (2,117) (6,074)
Dividends paid - (215,031)
Net cash provided by financing activities 76,085 280,463
Net change in cash and cash equivalents and restricted cash (48,148) 63,683
Cash and cash equivalents and restricted cash at beginning of period 189,649 177,376
Cash and cash equivalents and restricted cash at end of period 141,501 241,059

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

20

Frontline Ltd.
Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2021 and June 30, 2020
21

(in thousands of $, except number of shares)
2021 2020
Number of shares outstanding
Balance at beginning of the period 197,692,321 196,894,321
Shares issued on exercise of options - 798,000
Balance at the end of the period 197,692,321 197,692,321
Share capital
Balance at beginning of the period 197,692 196,894
Shares issued on exercise of options - 798
Balance at the end of the period 197,692 197,692
Additional paid in capital
Balance at beginning of the period 402,021 397,210
Stock compensation expense (338) (216)
Shares issued on exercise of options - 5,027
Balance at end of the period 401,683 402,021
Contributed surplus
Balance at beginning of the period 1,004,094 1,070,688
Cash dividend - (66,594)
Balance at end of the period 1,004,094 1,004,094
Accumulated other comprehensive income
Balance at beginning of the period 200 330
Other comprehensive loss (26) (36)
Balance at end of the period 174 294
Retained earnings (deficit)
Balance at beginning of the period 8,018 (155,146)
Net income attributable to the Company 2,264 364,993
Cash dividend - (148,437)
Balance at end of the period 10,282 61,410
Total equity attributable to the Company 1,613,925 1,665,511
Non-controlling interest
Balance at beginning of the period (472) 232
Net income attributable to non-controlling interest - 63
Balance at end of the period (472) 295
Total equity 1,613,453 1,665,806

22

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
23

Frontline Ltd.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements

1. INTERIM FINANCIAL DATA

The Unaudited Condensed Consolidated Interim Financial Statements of Frontline Ltd. ('Frontline' or the 'Company') have been prepared on the same basis as the Company's Audited Consolidated Financial Statements, except as noted below in Note 2, and, in the opinion of management, include all material adjustments, consisting only of normal recurring adjustments considered necessary for a fair statement of the Company's financial statements, in accordance with accounting principles generally accepted in the United States of America ('US GAAP'). The Unaudited Condensed Consolidated Interim Financial Statements should be read in conjunction with the Annual Consolidated Financial Statements and accompanying Notes included in the Annual Report on Form 20-F for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 18, 2021. The Unaudited Condensed Consolidated Interim Financial Statements do not include all the disclosures required by US GAAP. The results of operations for the interim period ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021. The year-end Condensed Consolidated Balance Sheet was derived from audited financial information, but does not include all disclosures required by US GAAP.

2. ACCOUNTING POLICIES

Basis of accounting
The Unaudited Condensed Consolidated Interim Financial Statements are prepared in accordance with US GAAP. The Unaudited Condensed Consolidated Interim Financial Statements include the assets and liabilities of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated on consolidation.

The Unaudited Condensed Consolidated Interim Financial Statements are prepared in accordance with the accounting policies, which are described in the Company's Annual Report on Form 20-F for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 18, 2021.


3. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU 2020-04 (ASC 848 Reference Rate Reform), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, which clarified the scope of Topic 848 in relation to derivative instruments and contract modifications. The amendments in these updates are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in these updates are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has determined that reference rate reforms will primarily impact its floating rate debt facilities and the interest rate derivatives to which it is a party. We expect to take advantage of the expedients and exceptions for applying GAAP provided by the updates when reference rates currently in use are discontinued and replaced with alternative reference rates.


4. EARNINGS PER SHARE

The components of the numerator and the denominator in the calculation of basic and diluted earnings per share are as follows for the six months ended June 30, 2021 and June 30, 2020:
(in thousands of $) 2021 2020
Net income attributable to the Company 2,264 364,993
24

(in thousands) 2021 2020
Weighted average number of shares 197,692 193,559
Dilutive effect of share options 106 142
Dilutive effect of contingently returnable shares - 4,106
Denominator for diluted earnings per share 197,798 197,807
2021 2020
Cash dividends per share declared - $ 1.10

The impact of stock options using the treasury stock method was dilutive in the six months ended June 30, 2021 as the exercise price was lower than the average share price during the period and, therefore, 105,541 options were included in the denominator in the calculation of diluted earnings per share.

5. OPERATING REVENUES
Certain of our voyage charter contracts contain a lease. Voyage charters contain a lease component if the contract (i) specifies a specific vessel asset; and (ii) has terms that allow the charterer to exercise substantive decision-making rights, which have an economic value to the charterer and therefore allow the charterer to direct how and for what purpose the vessel is used. Voyage charter revenues and expenses are recognized ratably over the estimated length of each voyage, which the Company has assessed commence on loading of the cargo. ASC 842 Leasesprovides a practical expedient for lessors in which the lessor may elect, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for these components as a single component if both of the following are met: (1) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same and (2) the lease component, if accounted for separately, would be classified as an operating lease. When a lessor, we have elected this expedient for our time charter contracts and voyage charter contracts that qualify as leases and thus do not separate the non-lease component, or service element, from the lease. Furthermore, ASC 842 Leasesrequires the Company to account for the combined component in accordance with ASC 606 Revenues from contracts with customersif the non-lease components are the predominant components. The Company has assessed that the lease components were the predominant component for all of its time charter contracts. Furthermore, for certain of its voyage charter contracts the lease components were the predominant components.

The lease and non-lease components of our revenues in the sixmonths ended June 30, 2021 were as follows:

(in thousands of $) Lease Non-lease Total
Time charter revenues 42,111 - 42,111
Voyage charter revenues 23,433 290,484 313,917
Other income - 7,982 7,982
Total 65,544 298,466 364,010

The lease and non-lease components of our revenues in the sixmonths ended June 30, 2020 were as follows:

(in thousands of $) Lease Non-lease Total
Time charter revenues 76,534 - 76,534
Voyage charter revenues 514,343 194,185 708,528
Other income - 13,842 13,842
Total 590,877 208,027 798,904



Certain voyage expenses are capitalized between the previous discharge port, or contract date if later, and the next load port and amortized between load port and discharge port.$5.2 million of contract assets were capitalized in the period ended June 30, 2021 as 'Other current assets', of which $1.9 million was amortized up to June 30, 2021, leaving a remaining balance of $3.3 million as of June 30, 2021. $2.5 million of contract assets were amortized in the six months ended June 30, 2021in relation to voyages in progress at the end of December 31, 2020. No impairment losses were recognized in the period.

As of June 30, 2021 and December 31, 2020, the Company reported the following contract assets in relation to its contracts with customers, including those contracts containing lease components where the non-lease component was the predominant component and the revenues where therefore accounted for under ASC 606:
(in thousands of $) 2021 2020
Voyages in progress 26,601 27,621
Trade accounts receivable 42,745 25,615
Related party receivables 9,509 7,195
Other current assets 3,337 2,527
Total 82,192 62,958

The timing and pattern of revenue recognition under our revenue contracts that have lease and non-lease components is not materially different even when accounted for separately under ASC 842 and ASC 606, respectively.

6. OTHER OPERATING GAINS

Other operating gains for the six months ended June 30, 2021 and June 30, 2020 are as follows:
(in thousands of $) 2021 2020
Gain on termination of vessel lease - 7,409
Gain on sale of vessel - 12,354
Gain on settlement of claim - 3,422
Gain on pool arrangements 1,048 766
Other gains 85 268
Other operating gains 1,133 24,219

In February 2020, the Company agreed with SFL to terminate the long-term charter for the 2002-built VLCC Front Hakataupon the sale and delivery of the vessel by SFL to an unrelated third party. Frontline received a compensation payment of $3.2 million from SFL for the termination of the current charter and recognized a gain on termination of $7.4 million. The charter with SFL terminated in February 2020.

In March 2020, the Company recorded a $3.4 million gain on settlement of a claim.

In April, 2020, the Company sold one VLCC previously recorded as an investment in finance lease at a purchase price of $25.5 million. The vessel was delivered to its buyers in June 2020 and the Company recorded a gain on sale of $12.4 million.

In the six months ended June 30, 2021, the Company recorded a gain on pool arrangements of $1.0 million (2020: gain of $0.8 million) and a further $0.1 million (2020: $0.3 million) in relation to other miscellaneous settlements.

7. RESTRICTED CASH

Restricted cash consists of cash, which may only be used for certain purposes and is held under a contractual arrangement.



Restricted cash as of June 30, 2021 does not include cash balances of $102.8 million (December 2020: $103.5 million), which represents 100% (December 2020: 100%) of the cash required to be maintained by the financial covenants in our loan agreements. The Company is permitted to satisfy up to 50% of the cash requirement by maintaining a committed undrawn credit facility with a remaining availability of greater than 12 months. The Company did not satisfy any of the minimum cash requirement with a committed undrawn credit facility as of June 30, 2021 because the Company's senior unsecured facility agreement with an affiliate of Hemen, is repayable in May 2022. Furthermore, FSL, the chartering counterparty with SFL with respect to the remaining two VLCCs leased from them, has agreed to certain dividend restrictions as a result of the amendment of the terms of the long-term charter agreements in May 2015. In order to make or pay any dividend or other distribution to the Company, FSL shall demonstrate a cash buffer of $2.0 million per vessel both prior to and following such payment, and following payment of the next monthly hire due plus any profit share accrued under the agreement. As of June 30, 2021, the cash held by FSL was $5.3 million (December 31, 2020: $15.6 million), and these cash amounts are included in 'Cash and cash equivalents'.

Our interest rate swaps require us to post cash as collateral based on their fair value. As at June 30, 2021, the restricted cash balance included$1.1 million (December 31, 2020: $13.4 million) in relation to our interest rate swaps. See Note 15 for additional information on our interest rate swaps.


8. MARKETABLE SECURITIES

A summary of the movements in marketable securities for the six months ended June 30, 2021 and the year ended December 31, 2020 is presented in the table below:
(in thousands of $) 2021 2020
Balance at beginning of period 2,639 3,642
Marketable securities acquired 357 -
Proceeds from sale of marketable securities (14,074) -
Unrealized gain (loss) on marketable securities held at period end 34 (2,491)
Gain on sale of marketable securities 7,881 -
Repurchase of marketable securities pledged to creditors 5,836 7,323
Marketable securities pledged to creditors - (5,835)
Balance at end of period 2,673 2,639

Avance Gas
In the six months ended June 30, 2021, the Company recognized an unrealized loss of $0.1 million in relation to the 0.4 million shares held in Avance Gas Holdings Ltd ('Avance Gas').

SFL

In the six months ended June 30, 2021, the Company recognized an unrealized gain of $0.1 million in relation to the 0.1 million shares held in SFL.

Golden Ocean

As of December 31, 2020, the Company held 1,270,657 shares of Golden Ocean, of which 1,260,358 were held as marketable securities pledged to creditors ('the shares'). In December 2020, the Company entered into a forward contract to repurchase the shares in March 2021 for $6.2 million.

In March 2021, the Company repurchased the Golden Ocean shares and subsequently sold them for proceeds of $9.8 million. Simultaneously, the Company entered into a forward contract to repurchase the shares in June 2021 for $9.8 million and received net cash proceeds of $3.6 million in connection therewith, after adjustment for foreign
27

exchange differences. The net cash proceeds were treated as a drawdown of debt in the Condensed Consolidated Statement of Cash Flows.

In June 2021, the Company repurchased the Golden Ocean shares and subsequently sold them for proceeds of $13.4 million. The repurchase of the shares for $9.8 million was treated as a settlement of debt in the Condensed Consolidated Statement of Cash Flows.

In the six months ended June 30, 2021, the Company recognized a gainon marketable securities sold of $7.6 million in relation to the Golden Ocean shares.

In April 2021, the Company purchased 55,959 Golden Ocean shares in connection with the exercise of subscription rights in the subsequent offering for $0.4 million. In June 2021, the Company sold these shares for proceeds of $0.7 million, resulting in a gain on marketable securities sold of $0.3 million in the six months ended June 30, 2021.

In the six months ended June 30, 2021, the Company recognized an unrealized gain of $0.1 million in relation to the 10,299 shares in Golden Ocean still held as of June 30, 2021, none of which were held as marketable securities pledged to creditors as of this date.


9. NEWBUILDINGS

Movements in the six months ended June 30, 2021 are summarized as follows;
(in thousands of $)
Balance at December 31, 2020 48,498
Additions, net 178,715
Interest capitalized 644
Transfer to Vessels and Equipment, net (96,683)
Balance at June 30, 2021 131,174

In the six months ended June 30, 2021, the Company took delivery of two LR2 tanker, Front Fusion andFront Future, from SWS.

As of June 30, 2021, the Company's newbuilding program consisted of two LR2 tankers which are expected to be delivered in September 2021 and November 2021, respectively, and six VLCCs which are expected to be delivered during 2022 starting in Q1.

10. VESSELS AND EQUIPMENT, NET

Movements in the six months ended June 30, 2021 are summarized as follows;
(in thousands of $) Cost Accumulated Depreciation Net Carrying Value
Balance at December 31, 2020 3,867,871 (560,727) 3,307,144
Depreciation (67,451)
Additions to vessels and equipment 4,611
Transfers from Newbuildings 96,683
Balance at June 30, 2021 3,969,165 (628,178) 3,340,987

In the six months ended June 30, 2021, the Company took delivery of two LR2 tankers, Front Fusion and Front Future, from SWS. The Company also completed the installation of EGCSs on one vessel during the period.
28


11. VESSELS AND EQUIPMENT UNDER FINANCE LEASE, NET

As of June 30, 2021, the Company leased in two vessels on long-term time charter from SFL (December 2020: two vessels) which are classified as finance leases.
(in thousands of $) Cost Accumulated Depreciation Net Carrying Value
Balance at December 31, 2020 103,888 (50,370) 53,518
Depreciation - (4,283) -
Balance at June 30, 2021 103,888 (54,653) 49,235

The outstanding obligations under finance leases as of June 30, 2021 are payable as follows:
(in thousands of $)
Year 1 10,946
Year 2 11,705
Year 3 11,737
Year 4 10,946
Year 5 11,706
Thereafter 7,512
Minimum lease payments 64,552
Less: imputed interest (12,108)
Present value of obligations under finance leases 52,444

The outstanding obligations under finance leases as of December 31, 2020 are payable as follows:
(in thousands of $)
2021 11,705
2022 10,946
2023 11,705
2024 10,978
2025 11,705
Thereafter 13,347
Minimum lease payments 70,386
Less: imputed interest (14,109)
Present value of obligations under finance leases 56,277

The Company recognized the following income (expenses) in relation to the amortization of finance lease assets and obligations in the six months ended June 30, 2021 and June 30, 2020:
(in thousands of $) June 30, 2021 June 30, 2020
Depreciation of vessels under finance leases (4,283) (7,282)
Interest expense on obligations under finance leases (2,002) (4,833)
Contingent rental income (expense) 1,624 (8,270)
Gain on termination of vessel lease - 7,409
Total finance lease expense, net (4,661) (12,976)
29


The remaining periods on these leases as of June 30, 2021 was approximately six years (December 31, 2020: six years). The weighted average discount rate in relation to the vessels leased from SFL is 7.5%.


12. OPERATING LEASES

In the six months ended June 30, 2021, the Company redelivered two VLCCs to an unrelated third party at the end of the charter-in agreement that were previously classified as operating leases. The Company has allocated the consideration due under the leases between the lease and non-lease components based upon the estimated standalone price of the services provided by the owner of the vessels, which include the provision of crewing, vessel insurance, repairs and maintenance and lubes. In the six months ended June 30, 2021, the Company has recorded the non-lease component of $1.7 million ($3.3 million in the six months ended June 30, 2020) within ship operating expenses and has recognized the lease component of $2.6 million ($4.5 million in the six months ended June 30, 2020) within charter hire expense within the Condensed Consolidated Statement of Operations.

Furthermore, the Company is committed to make rental payments under operating leases for office premises. Certain of these leases include variable lease elements linked to inflation indices. Such variable payments were estimated on the date of adoption of ASC 842 based on the index at that time and included in the minimum lease payments. In the six months ended June 30, 2021, lease expense of $0.9 million ($1.2 million in the six months ended June 30, 2020) was recorded in Administrative expenses in the Condensed Consolidated Statement of Operations.

Rental expense
The future minimum rental payments under the Company's non-cancellable operating leases as of June 30, 2021 are as follows:
(in thousands of $)
Year 1 1,260
Year 2 1,156
Year 3 1,094
Year 4 1,123
Year 5 568
Thereafter -
Total minimum lease payments 5,201
Less: Imputed interest (366)
Present value of operating lease liabilities 4,835

The future minimum rental payments under the Company's non-cancellable operating leases as of December 31, 2020 are as follows:

30

(in thousands of $)
2021 4,705
2022 1,182
2023 1,078
2024 1,107
2025 1,137
Thereafter -
Total minimum lease payments 9,209
Less: Imputed interest (484)
Present value of operating lease liabilities 8,725

Total expense for operating leases was $3.5 million in the six months ended June 30, 2021 (2020: $5.8 million). Total cash paid in respect of operating leases was $3.5 million in the six months ended June 30, 2021 (2020: $5.7 million). The weighted average discount in relation to the operating leases was 3.3% for the six months ended June 30, 2021 (2020: 3.8%) and the weighted average lease term was four years (2020: three years) for the six months ended June 30, 2021.

Rental income
One LR2 tanker and two VLCCs were on fixed rate time charters of December 31, 2020, the terms of which all ended in the six months ended June 30, 2021. In addition, Frontline has chartered-out five vessels to Trafigura, for a period of three years commencing in August 2019, at a daily base rate of $28,400 plus 50% profit share. The minimum future revenues to be received under our fixed rate contracts as of June 30, 2021 are as follows:
(in thousands of $)
Year 1 26,128
Year 2 28,968
Year 3 -
Year 4 -
Year 5 -
Thereafter -
Total minimum lease payments 55,096

Profit share to be earned under our chartering arrangements has been excluded from the minimum future revenues above. Our revenues from these leases have been included within time charter revenues in the Condensed Consolidated Statement of Operations, which solely relates to leasing revenues.

There are no options to extend our operating leases where we are the lessor.

The cost and accumulated depreciation of vessels leased to third parties as of June 30, 2021 were $328.0 million and $15.1 million, respectively, and as of December 31, 2020 were $509.5 million and $49.4 million, respectively.

Contingent rental income
In the six months ended June 30, 2021, the Company recognized profit share income of nil in relation to the five time charters to Trafigura (2020: $6.3 million).




13. DEBT
31


In February 2021, the Company extended the terms of its senior unsecured revolving credit facility of up to $275.0 million with an affiliate of Hemen by 12 months to May 2022. In the six months ended June 30, 2021, the Company drew down $101.7 million under the facility to finance installments for the six VLCCs under construction. $113.3 million remains available and undrawn under this facility as of June 30, 2021.

The Company drew down $33.4 million in March 2021 and $33.4 million in April 2021 under its senior secured term loan facility of up to $133.7 million with CEXIM and Sinosure to partially finance the delivery of two LR2 tankers, Front Fusionand Front Future, respectively, from SWS. The facility has a tenor of 12 years, carries an interest rate of LIBOR plus a margin in line with the Company's other loan facilities and has an amortization profile of 17 years counting from delivery date from the yard.

Golden Ocean shares

As of December 31, 2020, the Company held 1,270,657 shares of Golden Ocean, of which 1,260,358 were held as marketable securities pledged to creditors ('the shares'). In December 2020, the Company entered into a forward contract to repurchase the shares in March 2021 for $6.2 million.

In March 2021, the Company repurchased the Golden Ocean shares and subsequently sold them for the proceeds of $9.8 million. Simultaneously, the Company entered into a forward contract to repurchase the shares in June 2021 for $9.8 millionand received net cash proceeds of $3.6 millionin connection therewith, after adjustment for foreign exchange differences. The net cash proceeds were treated as a drawdown of debt in the Condensed Consolidated Statement of Cash Flows.

In June 2021, the Company repurchased the Golden Ocean shares and subsequently sold them for proceeds of $13.4 million. The repurchase of the shares for $9.8 million was treated as a settlement of debt in the Condensed Consolidated Statement of Cash Flows.

Debt issuance costs

The Company has recorded debt issuance costs (i.e. deferred charges) of $19.7 million as of June 30, 2021 (December 31, 2020: $20.2 million) as a direct deduction from the carrying amount of the related debt.

Assets pledged
(in thousands of $) 2021 2020
Vessels and equipment, net 3,340,562 3,306,863

14. SHARE CAPITAL

The authorized share capital of the Company as of June 30, 2021 is $500,000,000 divided into 500,000,000 shares of $1.00 par value each, of which 197,692,321 shares (December 31, 2020: 197,692,321 shares) of $1.00 par value each are in issue and fully paid.


15. FINANCIAL INSTRUMENTS

Interest rate swap agreements
In February 2013, the Company entered into six interest rate swaps with Nordea Bank, of which one remained outstanding as of June 30, 2021, whereby the floating interest rate on an original principal amount of $260.0 millionwas switched to fixed rate.

In February 2016, the Company entered into an interest rate swap with DNB whereby the floating interest on notional debt of $150.0 million was switched to a fixed rate. The contract had a forward start date of February 2019.
32


In March 2020, the Company entered into three interest rate swaps with DNB whereby the floating interest rate on notional debt totaling $250.0 million was switched to a fixed rate.

In April 2020, the Company entered into two interest rate swaps with Nordea Bank whereby the floating interest rate on notional debt totaling $150.0 million was switched to a fixed rate.

The reference rate for our interest rate swaps is LIBOR.

As of June 30, 2021, the Company recorded a derivative instruments receivable of $4.6 million (December 31, 2020: nil ) and a derivative instruments liability of $10.0 million (December 31, 2020: $19.3 million) in relation to these agreements. The Company recorded a gain on derivatives of $11.0 million in the six months ended June 30, 2021 (six months ended June 30, 2020: loss of $21.7 million) in relation to these agreements.
The interest rate swaps are not designated as hedges and are summarized as of June 30, 2021 as follows:
Notional Amount Inception Date Maturity Date Fixed Interest Rate
($000s)
11,318 September 2014 September 2021 1.9070 %
150,000 February 2016 February 2026 2.1970 %
100,000 March 2020 March 2027 0.9750 %
50,000 March 2020 March 2027 0.6000 %
100,000 March 2020 March 2025 0.9000 %
100,000 April 2020 April 2027 0.5970 %
50,000 April 2020 April 2025 0.5000 %
561,318

Fair Values
The carrying value and estimated fair value of the Company's financial assets and liabilities as of June 30, 2021 and December 31, 2020 are as follows:
2021 2020

(in thousands of $)
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Assets:
Cash and cash equivalents 140,361 140,361 174,721 174,721
Restricted cash 1,140 1,140 14,928 14,928
Marketable securities 2,673 2,673 2,639 2,639
Marketable securities pledged to creditors - - 5,835 5,835
Derivative instruments receivable 4,557 4,557 - -
Liabilities:
Floating rate debt 2,075,867 2,075,867 2,089,930 2,089,930
Fixed rate debt 161,700 160,141 66,251 65,348
Derivative instruments payable 9,972 9,972 19,261 19,261

33

The estimated fair value of financial assets and liabilities as of June 30, 2021 are as follows:

(in thousands of $)
Fair
Value

Level 1

Level 2

Level 3
Assets:
Cash and cash equivalents 140,361 140,361 - -
Restricted cash 1,140 1,140 - -
Marketable securities 2,673 2,673 - -
Derivative instruments receivable 4,557 - 4,557 -
Liabilities:
Floating rate debt 2,075,867 - 2,075,867 -
Fixed rate debt 160,141 - - 160,141
Derivative instruments payable 9,972 - 9,972 -

The estimated fair value of financial assets and liabilities as of December 31, 2020 are as follows:

(in thousands of $)
Fair
Value

Level 1

Level 2

Level 3
Assets:
Cash and cash equivalents 174,721 174,721 - -
Restricted cash 14,928 14,928 - -
Marketable securities 2,639 2,639 - -
Marketable securities pledged to creditors 5,835 5,835 - -
Liabilities:
Floating rate debt 2,089,930 - 2,089,930 -
Fixed rate debt 65,348 - 6,251 59,097
Derivative instruments payable 19,261 - 19,261 -

The following methods and assumptions were used to estimate the fair value of each class of financial instrument;

Cash and cash equivalents - the carrying values in the balance sheet approximate fair value.

Restricted cash - the carrying values in the balance sheet approximate fair value.

Floating rate debt - the fair value of floating rate debt has been determined using level 2 inputs and is considered to be equal to the carrying value since it bears variable interest rates, which are reset on a quarterly basis. Floating rate debt is presented net of deferred financing charges of $19.7 million as of June 30, 2021 (December 2020: $20.2 million) on the Condensed Consolidated Balance Sheet.

Fixed rate debt - short-term debt held with a third party bank has been valued using level 2 inputs, the remaining fixed rate debt has been determined using level 3 inputs being the discounted expected cash flows of the outstanding debt.

Assets Measured at Fair Value on a Nonrecurring Basis
Nonrecurring fair value measurements include a goodwill impairment assessment completed as of June 30, 2021. The impairment test used Level 1 inputs.

Assets Measured at Fair Value on a Recurring Basis
Marketable securities are listed equity securities considered to be available-for-sale securities for which the fair value as at the balance sheet date is their aggregate market value based on quoted market prices (level 1).
34


The fair value (level 2) of derivative interest rate swaps is the present value of the estimated future cash flows that the Company would receive or pay to terminate the agreements at the balance sheet date, taking into account, as applicable, fixed interest rates on interest rate swaps, current interest rates, forward rate curves, current and future bunker prices and the credit worthiness of both the Company and the derivative counterparty.

Concentrations of risk
There is a concentration of credit risk with respect to cash and cash equivalents to the extent that substantially all of the amounts are carried with Skandinaviska Enskilda Banken ('SEB'), HSBC, Royal Bank of Scotland ('RBS'), DNB, Nordea Bank Norge ('Nordea'), Credit Agricole, Credit Suisse AG, Standard Chartered and Citibank N.A.. There is a concentration of credit risk with respect to restricted cash to the extent that substantially all of the amounts are carried with DNB. However, the Company believes this risk is remote.

16. RELATED PARTY TRANSACTIONS

We transact business with the following related parties, being companies in which Hemen and companies associated with Hemen have a significant interest: SFL, Seadrill Limited, Seatankers Management Norway AS, Seatankers Management Co. Ltd, Golden Ocean, Alta Trading UK Limited (formerly known as Arcadia Petroleum Limited), Archer Limited, Flex LNG Ltd, and Avance Gas. We also own interests in TFG Marine and Clean Marine AS (through our interest in FMS Holdco) which are accounted for as equity method investments.

SFL Transactions
As of June 30, 2021, the Company held two vessels under finance leases, which are leased from SFL. The remaining periods on these leases as of June 30, 2021 was approximately six years.

A summary of leasing transactions with SFL in the six months ended June 30, 2021 and June 30, 2020 are as follows;
(in thousands of $) 2021 2020
Charter hire payable (principal and interest) 3,942 4,360
Lease interest expense 2,002 2,455
Contingent rental (income) expense (1,624) 8,270
Remaining lease obligation 52,444 59,974

Contingent rental income in 2021 (expense in 2020) is due to the fact that the actual profit share expense earned by SFL in the six months ended June 30, 2021 of $0.3 million (six months ended June 30, 2020: $10.4 million) was $1.6 million less (six months ended June 30, 2020: $8.3 million more) than the amount accrued in the lease obligation payable when the leases were recorded at fair value at the time of the merger between the Company and Frontline 2012.

In January 2014, the Company commenced a pooling arrangement with SFL, between two of its Suezmax tankers Front Odinand Front Njord and two SFL vessels Glorycrown andEverbright. The Company recognized an income of $1.0 million in the six months ended June 30, 2021 in relation to this pooling arrangement (six months ended June 30, 2020: income of $0.7 million).

Transactions with associated companies

A share of losses of TFG Marine of $0.7 million was recognized in the six months ended June 30, 2021. The Company also entered into a bunker supply arrangement with TFG Marine, under which it has paid $107.8 million to TFG Marine in the six months ended June 30, 2021 and $14.0 million remained due as of June 30, 2021. The Company has also agreed to provide a $50.0 million guarantee in respect of the performance of its subsidiaries, and two subsidiaries of an affiliate of Hemen, under a bunker supply arrangement with TFG Marine. As of June 30, 2021 there are no exposures under this guarantee. In addition, should TFG Marine be required to provide a parent
35

company guarantee to its bunker suppliers or finance providers then for any guarantee that is provided by the Trafigura Group and becomes payable Frontline shall pay a pro-rata amount based on its share of the equity in TFG Marine. The maximum liability under this guarantee is $6.0 million and there are no amounts payable under this guarantee as of June 30, 2021.

Transactions with other affiliates of Hemen
In the six months ended June 30, 2021, the Company extended the terms of its senior unsecured revolving credit facility of up to $275.0 million with an affiliate of Hemen by 12 months to May 2022. The Company recognized interest expense of $2.3 million in the six months ended June 30, 2021 (six months ended June 30, 2020: $2.8 million). $113.3 million remains available and undrawn under this facility as of June 30, 2021.

In the six months ended June 30, 2021, the Company chartered four of its vessels to an affiliate of Hemen, of which one was a time charter with an initial term of 8 months. The Company recognized revenue of $1.0 million in relation to these charters in the six months ended June 30, 2021.

A summary of net amounts earned from (paid to) related parties in the six months ended June 30, 2021 and June 30, 2020 are as follows:
(in thousands of $) 2021 2020
Seatankers Management Co. Ltd 1,641 6,037
SFL 2,668 2,206
Golden Ocean 2,409 3,311
Flex LNG Ltd 929 635
Seatankers Management Norway AS (344) (248)
Seadrill Limited 137 133
Archer Limited 74 225
Alta Trading UK Limited 1,018 23,558
Avance Gas 1,207 335
TFG Marine 386 -
Other related parties 90 76

Amounts earned from related parties comprise office rental income, technical and commercial management fees, newbuilding supervision fees, freights, corporate and administrative services income and interest income. Amounts paid to related parties comprise primarily rental for office space and the provision of other administrative services and guarantee fees.

Related party balances
A summary of balances due from related parties as of June 30, 2021 and December 31, 2020 is as follows:
36

(in thousands of $) 2021 2020
SFL 3,549 4,835
Seatankers Management Co. Ltd 4,722 3,578
Archer Limited 43 88
Alta Trading UK Limited - 1,263
Golden Ocean 4,240 2,336
Seadrill Limited 501 25
Flex LNG Ltd 356 366
Avance Gas 842 540
TFG Marine 183 16
Other related parties 193 208
14,629 13,255

A summary of balances due to related parties as of June 30, 2021 and December 31, 2020 is as follows:
(in thousands of $) 2021 2020
SFL 5,857 8,978
Seatankers Management Co. Ltd 5,573 3,147
Avance Gas 723 176
Flex LNG Ltd 491 143
Golden Ocean 2,594 2,040
TFG Marine 14,021 5,369
29,259 19,853

See also Note 11, Note 13 and Note 17 for details regarding related party transactions and balances.

37

17. COMMITMENTS AND CONTINGENCIES

The Company insures the legal liability risks for its shipping activities with mutual protection and indemnity associations, who are members of the International Group of P&I Clubs. As a member of these mutual associations, the Company is subject to calls payable to the associations based on the Company's claims record in addition to the claims records of all other members of the associations. A contingent liability exists to the extent that the claims records of the members of the associations in the aggregate show significant deterioration, which result in additional calls on the members.

As of June 30, 2021, the Company's newbuilding program consisted of two LR2 tankers; which are expected to be delivered in September and November 2021, respectively, and six VLCCs which are expected to be delivered during 2022 starting in the first quarter.

As of June 30, 2021, total instalments of $129.7 million had been paid in connection with the Company's remaining newbuilding program, and remaining commitments amounted to $530.7 million, of which we expect $93.3 million to be paid in 2021 and $437.4 million to be paid in 2022.

The Company had entered into forward bunker purchase arrangements for the delivery of 5,000 MT of bunker fuel per month for delivery between October 2020 to December 2021. The contracts oblige the Company to purchase and take delivery of the fixed quantity of physical fuel at prices between $325 per MT and $365 per MT. In addition, the Company has entered into a further arrangement for the delivery of 5,000 MT of bunker fuel per month for delivery between January 2021 to December 2021. The contract obliges the Company to purchase and take delivery of the physical fuel at $232 per MT. As of June 30, 2021, the remaining commitments amounted to $17.9 million, all of which is expected to be paid in 2021.

As of June 30, 2021, the Company has agreed to provide a $50.0 million guarantee in respect of the performance of its subsidiaries, and two subsidiaries of an affiliate of Hemen, under a bunker supply arrangement with TFG Marine. As at June 30, 2021 there are no amounts payable under this guarantee. In addition, should TFG Marine be required to provide a parent company guarantee to its bunker suppliers or finance providers then for any guarantee that is provided by the Trafigura Group and becomes payable Frontline shall pay a pro rata amount based on its share of the equity in TFG Marine. The maximum liability under this guarantee is $6.0 million and there are no amounts are payable under this guarantee as of June 30, 2021. See Note 13. for further details.

In June 2021, the Company entered into an agreement to acquire two scrubber fitted, latest generation ECO-type VLCCs built in 2019 at the HHI shipyard in South Korea for a total of $180.0 million. The vessels are scheduled to deliver during the fourth quarter of 2021.

The Company is a party, as plaintiff or defendant, to several lawsuits in various jurisdictions for unpaid charter hire, demurrage, damages, off-hire and other claims and commercial disputes arising from the operation of its vessels, in the ordinary course of business or in connection with its acquisition activities. The Company believes that the resolution of such claims will not have a material adverse effect on the Company's operations or financial condition individually and in the aggregate.


38

18. SUBSEQUENT EVENTS

In July 2021, the Company issued 339,000 ordinary shares under its share option scheme at a strike price of $5.70 per share. The shares were issued to John Fredriksen (198,000 shares), Inger M. Klemp (120,000 shares), and Ola Lorentzon (21,000 shares). Following such issuance, Frontline has an issued share capital of $198,031,321 divided into 198,031,321 ordinary shares.

In July 2021, the Company paid deposits of $18.0 million towards the total purchase price of $180.0 million for the two 2019 built VLCCs.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $130.0 million from DNB to partially finance the acquisition of two of the six resale VLCC newbuilding contracts. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $58.5 million from SEB to partially finance the acquisition of one of the two 2019 built VLCCs. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation.

In August 2021, the Company obtained a financing commitment for a senior secured term loan facility in an amount of up to $58.5 million from KFW IPEX-Bank to partially finance the acquisition of one of the two 2019 built VLCCs. The facility will have a tenor of 5 years, carry an interest rate of LIBOR plus a margin of 170 basis points and will have an amortization profile of 20 years counting from delivery date from the yard. The facility is subject to final documentation.
39

Disclaimer

Frontline Ltd. published this content on 01 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 September 2021 20:11:04 UTC.


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Sales 2021 388 M - -
Net income 2021 -5,31 M - -
Net Debt 2021 2 169 M - -
P/E ratio 2021 -63,9x
Yield 2021 0,43%
Capitalization 1 836 M 1 836 M -
EV / Sales 2021 10,3x
EV / Sales 2022 5,89x
Nbr of Employees 84
Free-Float 53,9%
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Lars H. Barstad Chief Executive Officer
John Fredriksen Chairman & President
Inger Marie Klemp Chief Financial Officer
Ola Lorentzon Independent Director
James O'Shaughnessy Independent Director
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