Frontline Oil (NYSE:FTO) Enters Sale Leaseback of Front Shanghai

The announced sale leaseback of VLCC Front Shanghai by Frontline Oil Corp. (NYSE:FTO), while viewed as good for liquidity, in the long-term could hinder NAV and cash flow.

FBR Capital said, "Overall, we believe Frontline received a fair price for the vessel. However, the liquidity the transaction provides today comes at the expense of limiting the long-term upside to cash flow and NAV from an improvement in the tanker market."

"In conjunction with the sale of the Front Shanghai, Frontline agreed to charter back the ship from the new owner at a rate of $35,000 per day. This compares to a Clarkson's quote of $36,500 per day for a 3-year time charter. The duration of the time charter is expected to be two years."

FBR maintains an "Outperform" rating on Frontline Oil, which closed Monday at $18.33, up $0.32, or 1.78 percent.