Frontline Cancels Four VLCCs from STX Offshore
Leading tanker operator Frontline announced Friday that it would terminate contracts for four VLCC newbuilds with STX Offshore & Shipbuilding, which is currently in bankruptcy proceedings. Frontline emphasized the availability of used assets in explaining its decision.
"[Frontline] believes the market will continue to present attractive opportunities, and we will assess on-the-water and resale assets, which are at historically low prices. Frontline's low cash breakeven levels and access to attractively priced capital gives the Company significant operating leverage and positions Frontline to take advantage of price dislocations in the market," the firm said in a statement.
STX released Frontline from all future payment obligations and refunded almost all of Frontline’s $45 million down payment. The total price for the four vessels would have come to roughly $400 million.
Frontline operates over 70 tankers of various types, including 25 VLCCs. All but three are owned vessels.
Analysts Seaport Global expect Frontline to break even in the third quarter and to turn a healthy profit next year.
STX Offshore is in receivership and announced last year that it would lay off one third of its workforce over the course of 2016.
The struggling shipbuilder may soon sell off its STX France subsidiary, which operates a specialty shipyard at Saint-Nazaire for the construction of cruise ships and naval vessels. France holds a 33 percent interest in the yard and has put suitors on notice that it plans to exercise its veto power over bids that do not meet requirements for national security. The yard at Saint-Nazaire is a strategic asset for naval shipbuilding.
The French government-controlled defense contractor DCNS has recently expressed interest in a stake in STX France, but it says that it does not intend to become a majority owner. Damen and Fincantieri are also rumored to be considering a purchase.