Frontline (NYSE:FRO) reported its highest quarterly profit and adjusted profit on record for the second quarter of 2026, supported by sharply higher tanker rates and market inefficiencies that management said have tightened effective vessel supply.
The company posted net income of $659.2 million, or $2.96 per share, while adjusted profit totaled $580.2 million, or $2.61 per share. Adjusted profit rose $235.3 million from the prior quarter, primarily reflecting higher time-charter equivalent, or TCE, earnings.
Fleet earnings and bookings
During the second quarter, Frontline achieved average daily TCE rates of $152,700 for its VLCC fleet, $111,400 for Suezmax tankers and $92,400 for LR2/Aframax tankers.
Barstad said that 86% of VLCC days had been booked at $156,900 per day, while 79% of Suezmax days were booked at $117,400 per day. The company’s LR2 fleet had booked 70% of days at $81,000 per day. He noted that the figures were calculated on a load-to-discharge basis, including the effect of ballast days at quarter-end.
Chief Financial Officer Inger Klemp said operating costs, administrative expenses, interest expense and depreciation all declined from the first quarter. Ship operating expenses fell by $4.3 million, which she attributed largely to vessel sales, increased supplier rebates and partially offsetting higher general running costs. Administrative expenses declined by $2.4 million, while adjusted interest expense decreased by $4.8 million because of lower debt and lower interest rates.
Liquidity, financing and fleet profile
Frontline reported $1.2 billion of liquidity as of June 30, including cash, cash equivalents, undrawn revolver capacity, marketable securities and bank minimum-cash requirements. The company said it has no meaningful debt maturities until 2030.
Remaining newbuilding commitments stood at $601.1 million at the end of June and relate to nine newbuildings being acquired from an affiliate of CMN. Frontline has secured up to $737 million in financing for those newbuildings, according to Klemp.
In the second and third quarters, Frontline reduced its weighted-average interest-rate margin by about 52 basis points, to 126 basis points from 178 basis points at the end of the first quarter. The reduction resulted from amendments to existing facilities, refinancings, newbuilding financing and asset sales, Klemp said.
Following delivery of its remaining VLCC newbuildings and the sale of two VLCCs, Frontline expects its fleet to consist of 40 VLCCs, 19 Suezmax tankers and 18 Aframax/LR2 tankers. The fleet has an average age of 6.6 years, is entirely comprised of ECO vessels, and is 69% scrubber-fitted.
- Estimated 12-month VLCC cash break-even rate: $23,800 per day
- Estimated 12-month Suezmax cash break-even rate: $25,700 per day
- Estimated 12-month LR2 cash break-even rate: $22,200 per day
- Fleet-average cash break-even rate: about $23,900 per day
Klemp said the estimates include dry-docking costs for seven VLCCs, seven Suezmaxes and eight LR2s. Excluding dry-docking costs, the fleet-average estimate was about $22,300 per day.
Market disruptions driving vessel inefficiency
Barstad said tanker markets remained elevated amid heightened risks in the Gulf of Oman, Red Sea and Black Sea, as well as renewed activity by the Houthis. He pointed to high-risk premiums on certain trades and said the TD3C benchmark was approaching $600,000 per day, while TD15 was near $100,000 per day.
According to Barstad, crude exports from inside the Strait of Hormuz have declined by 82%, while Chinese crude imports have fallen 35% over the same period. Despite lower volumes, he said the market has experienced a 23% increase in VLCC idling days because of delays and increasingly complex trading patterns.
Management cited growing ship-to-ship transfer activity near Fujairah, Singapore and Malaysia, as well as longer-haul crude movements from the Atlantic Basin to Asia. Barstad said cargoes that historically moved directly from the Middle East to Japan can now require multiple vessel legs and ship-to-ship transfers, increasing ton-mile demand and constraining the effective supply of tankers.
During the question-and-answer session, Barstad said the number of vessels idling outside Oman and along India’s coast had increased as ship-to-ship activity expanded. He said timing uncertainty around transfer operations was contributing to delays for charterers.
Capital allocation and longer-term outlook
Barstad said Frontline’s capital-allocation approach remains focused on paying cash to shareholders rather than materially changing its leverage strategy. The company has used longer-term time charters in the current environment, with Barstad saying the depth of the two- and three-year VLCC charter market has improved since the summer.
He said Frontline could potentially secure several additional three-year charters at prevailing rates, which he said were still below $80,000 per day but approaching that level depending on vessel delivery position. The forward market for the U.S. Gulf-to-Asia TD22 route was trading near $100,000 per day for 2028, according to Barstad.
The company also sold two VLCCs and distributed the proceeds through a special dividend. Barstad said Frontline viewed the sale as a way to capture a premium for vessels that could be useful to buyers seeking control over logistics through the Strait of Hormuz, while Frontline itself was not currently trading into the Arabian Gulf.
Looking ahead, Barstad said the tanker order book remains a concern, with the headline VLCC order book representing about 33.5% of the existing fleet. However, he said the outlook appears more balanced when considering fleet aging: Frontline estimates 578 vessels across its operating segments will approach the 20-year threshold over the next five years, compared with a total order book of about 707 ships.
Barstad said inventory draws, particularly in the U.S. and China, could become a central market issue as winter approaches. He added that the long-term charter market appears increasingly to be pricing in the possibility that current disruptions will persist.
About Frontline (NYSE:FRO)
Frontline Ltd. (NYSE:FRO) is a leading global shipping company specializing in the seaborne transportation of crude oil and petroleum products. The company’s core business activities encompass the ownership and operation of very large crude carriers (VLCCs), Suezmax tankers and Aframax vessels. Through long-term charters, spot market operations and time charters, Frontline provides flexible shipping solutions that cater to a diverse set of energy producers, refiners and trading houses worldwide.
Frontline’s fleet is geared toward high-capacity, ocean-going tankers capable of carrying large volumes of crude oil over intercontinental distances.
