June 14, 2004

Frontline to acquire Pertamina newbuilds

Indonesia's PT Pertamina (Persero) says it has entered into a definitive Sale and Purchase Agreement under which two Frontline-nominated companies will acquire two VLCC newbuildings currently under construction for Pertamina at South Korea's Hyundai Heavy Industries.

More than 40 companies were invited to bid for the newbuilds and other finalists included New York based OSG and India's Essar Shipping.

The ships are being sold for a total of $184 million to Windstar Marine Inc. and Speed Shipping Corp. These are two single purpose companies nominated by Frontline Ltd. in accordance with the terms of reference for the bid. They are presently controlled by Frontline's majority shareholder Hemen Holding Limited.

Hemen has initially backed the transaction financially in order to give the Frontline group the time to structure financing, charter agreement and security package in an optimum way.

It is the intention that during the next six months the ships will ultimately will be taken over by Ship Finance Int. Ltd. Ship Finance will seek to charter the vessels long term to  Frontline.

The Ship Finance take-over is dependent on agreements being reached on financing and long-term charter.

Frontline says it is considering offloading some exposure by using the present strong tanker market to charter the vessel out to third party for short to medium term. This would generate a strong initial cash flow and thereby substantially reduce the risk in the remaining charter period.

CEO of Frontline Management, Oscar Spieler, says that "in the current strong market with more OPEC production to come we feel that this investment is a very attractive opportunity to increase the market exposure at the right time. Compared to ordering ships with delivery in 2007 - 2008 at the same price level we feel this deal has a substantially higher upside and a much better risk profile. If consummated it will create growth in Ship Finance and confirm Frontline's position as the world's largest operator of modern crude oil tankers. Frontline and Ship Finance have no financial exposure to the transaction until financing and charter have been arranged and a purchase has been agreed with Hemen."

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