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HotOtc Featured Company: Frontline Ltd. (FRO) Continues to Offload Solid Quarter over Quarter Dividends

In some markets, the name of the game is management. Write the best contract you can and let others do the work for you. There are an increasing number of companies following this outsourcing model, with most finding it very profitable.

Frontline Ltd., one of the world’s largest crude oil and bulk commodities shipping concerns, operates on the crude oil spot market. It ships crude oil to Europe, the Far East, Caribbean and offshore Louisiana (USA) facilities. The company owns 76 vessels, a fleet composed of Very Large Crude Carriers (VLCC), oil/bulk/ore vessels and Suezmax tankers. The VLCC comprises the majority of the company’s ships, while Suezmax carriers operate primarily in the Atlantic basin and Caribbean.

Frontline Ltd. uses extensive outsourcing for the operation of its activities. Through individual management arrangements, its individual ships are operated with an outsourced company which provides accounting, crew, port supervision and other services that the ships require to make timed and spot-market deliveries. The nature of the spot market makes the utilization of all vessels the primary goal of the company, along with proper supervision of the individual shipping arrangements. There are more than a few companies involved with the individual management of the company’s fleet. Only a few, however, constitute the majority of ship operations. These few include V. Ships (operating from several countries), ITM Germany, and Chevron. Ultimately, it is the responsibility of the company to keep the fleet moving with full loads and little empty time for maximum return.

Per/ship day fees have been rising over the last year, with several shipping companies approaching – and in some cases surpassing – $45,000 per/day. In a certain sense, the spot market reacts to inventory supplies, making the timed shipping business less lucrative then rental. In either case, however, the company has been successful in keeping its fleet on the move and relatively full. The entire crude shipping industry has been posting solid and substantial dividends. This past February, the company declared a $2.00 dividend and has not missed a quarterly dividend in quite some time. Given the company’s position and its structure, there appears to be little standing in the way to prevent dividends and reliable stock price continuation for some time to come.

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