Another quarter, another flurry of activity for Frontline (NYSE:FRO). This crude hauler cuts so many deals, it's a veritable tanker banker.

For one, there was the partial spin-off of Independent Tankers to shareholders. Frontline also invested in both Navig8 and Overseas Shipholding Group (NYSE:OSG). Before the quarter's end, the firm also ordered up four new Very Large Crude Carriers (VLCCs) from a Chinese shipyard, where it has an option on two additional vessels.

There's also a core business here, which benefited from a freight rate fiesta. VLCCs averaged $82,400 in the period, but that figure actually understates the strength of the market. The firm's double-hulled VLCCs trading in the spot market pulled down 27% higher rates than that fleetwide average. The second quarter is looking even better, with modern VLCC rates averaging about $112,000 so far. That's more than double the average rate in Q2 2007.

The tanker supply situation merits a review, because an overabundance of vessels would dampen those dreamy market rates. At the end of the first quarter, there were 486 VLCCs globally, with 184 on order. The phasing out of single-hulled vessels, which pose a greater environmental risk, can offset about two-thirds of those newbuilds. Add conversions to ore carriers and floating production, storage, and offloading vessels, and simple scrapping of old vessels. Finally, consider the shipyard delays being reported by OSG, Excel Maritime (NYSE:EXM), Eagle Bulk Shipping (NASDAQ:EGLE), and now Frontline. While Eagle Bulk isn't experiencing delays in its own newbuild program, there's an industry-wide shipyard squeeze that makes a tanker supply spike look even more improbable.

As with Nordic American Tanker (NYSE:NAT), Frontline (which now commercially manages six of Nordic's ships) is strongly committed to capital return via robust dividend payouts. It's a model that another of John Fredriksen's companies appears to be adopting in the deepwater. Nordic American's cash breakeven level is far lower, providing succor for the skittish. Frontline has financed its way to fantastic profits over the years, and to some, the potential equity upside may outweigh the risks. It's up to you to pick the tanker flavor that matches your risk tolerance.

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