Well, it was another freight feast for Frontline (NYSE:FRO). The situation has changed quite dramatically for Frontline and competitors like Tsakos Energy Navigation (NYSE:TNP) in recent weeks, but let's first review the highlights of the quarter.

Net income hit a record for both the second quarter and first half of the year. Soaring spot rates had a lot to do with that. Time-charter equivalent rates for Suezmax tankers, for example, improved about 40% sequentially, and that includes both spot and period (i.e., contracted, longer-term) rates. Very Large Crude Carriers saw strong rates as well, but the increase was more muted.

As usual, a flurry of financial activity boosted earnings beyond that generated by core operations. In fact, out of $327 million in total operating income, a gain on asset sales contributed nearly 40%. Frontline also recognized a mark-to-market gain on its nearly 5% shareholding in Overseas Shipholding Group (NYSE:OSG).

As to the downdraft in spot rates in recent weeks, Frontline was hard-pressed to identify a main culprit. At one point in the quarter, Iran had been holding oil in 18 VLCCs offshore. The return of a portion of these vessels to the active fleet may have tipped the balance to oversupply. At the same time, U.S. oil demand has dropped to the largest degree in 26 years. Whatever the reasons for the decline, recent VLCC rates have fallen below Frontline's cash breakeven level of $31,400.

Falling spot rates cut Frontline fairly hard, because the firm maintains both high spot exposure and a pretty leveraged balance sheet. Nordic American Tanker (NYSE:NAT), despite being entirely spot-oriented, actually fares better because of its lean balance sheet and consequently lower breakeven rate.

I'm not too worried for Frontline, given its extreme market savvy. Still, I'm much more comfortable with Nordic American's ultra-transparent operating model at this juncture.

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