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Nordic American Tanker Shipping Ltd. (NAT)-(NYSE:NAT) – Announces Dividend and Earnings in respect of the 2nd Quarter of 2006

Hamilton, Bermuda, July 27, 2006
 
Nordic American Tanker Shipping Limited (the “Company”) today announced its results for the 2nd quarter of 2006. Although weaker than the traditionally strong 1st quarter, the tanker market was solid during the 2nd quarter. A strong summer market continues into the 3rd quarter and the future Imarex quotations indicate expectations of a strong market going forward. The Company has now declared a dividend for 35 consecutive quarters. For the last four quarters including the 2nd quarter of 2006, a total of $5.13 has been paid in dividends which is equal to 16.3% of the average daily share price over the same period. 
 
Highlights:

  • The Board of Directors has declared a dividend of $1.07 per share for the 2nd quarter of 2006.
  • The 2nd quarter 2006 net income was $0.68 per share.
  • The Company’s 9th vessel, the Nordic Jupiter, joined the fleet on April 10th, generating revenues on 81 days of the 2nd quarter.
  • No vessels were in dry dock during the 2nd quarter of 2006.
  • The dividend is expected to be paid on or about August 31st to shareholders of record as of August 16th 2006.
  • Another acquisition was agreed on July 17th, increasing the fleet to 10 vessels.
  • When comparing the 2nd quarter of 2006 with the comparable period last year we see that  important parameters are up, such as earnings per share (+19%), dividend per share (+27%), net income (+51%) and sales (+64%), indicating the growth and solid profitability of the Company.
Dividends per Share, Earnings per Share and Financials:
 
The Board has declared a dividend of $1.07 per share in respect of the 2nd quarter of 2006. This compares to a dividend of $0.84 per share in respect of the 2nd quarter of 2005. The 1st quarter 2006 dividend was $1.58 per share.
 
Net income for the 2nd quarter of 2006 was $14.2m or $0.68 per share (EPS). This compares to a net income of $9.4m or $0.57 per share for the 2nd quarter of 2005. The net income for the 1st quarter of 2006 was $19.1m or $1.07 per share.
 
The earnings per share for the 2nd quarter of 2006 have been impacted by non-cash charges of $0.05 per share in aggregate due to share based compensation and grants under the 2004 Stock Option Plan.
 
Operating cash flow(1) was $23.5m in the 2nd quarter of 2006 compared to $11.2m in the 2nd quarter of 2005. Operating cash flow for the 1st quarter of 2006 was $29.5m.
 
For the 2nd quarter of 2006, operating costs of our vessels and general and administrative costs met our expectations.
 
We believe that our strong balance sheet provides room for further expansion of our fleet which can be expected to take place during 2006. We have $207m available under our $300m revolving credit facility which matures in 2010. There is no repayment obligation during the tenure of the facility, and the Company pays interest only on drawn amounts, and a small commitment fee for available amounts.
 
No vessels were in dry dock during the 2nd quarter of 2006, and there are no vessels scheduled for dry docking during the 3rd quarter of 2006.
 
The table below shows the number of vessel revenue days over the last seven quarters for all the vessels, reflecting the growth of the Company.
 
 
  For further details on our financial results, please see later in this message.
 
The Fleet
 
During the 2nd quarter eight of the Company’s nine vessels were traded in the spot market or on spot related terms, while one vessel remained employed on a long term fixed charter rate.
 
 
 
The Market  
 
The spot market for suezmax tankers softened towards the end of the 1st quarter, and this continued into the first part of the second quarter. According to the spot assessment of the Imarex Tanker Index, which gives an indication of the level of the spot market, rates for modern suezmax tankers were reported below $25,000/day in mid-April. The market strengthened again thereafter, with average earnings for modern suezmax tankers reported in the $40,000 – $50,000/day range during the last part of the quarter.
 
The July 2006 spot market has so far been strong compared with July 2005. While short term spot rates are notoriously difficult to predict, a seasonal downward trend is normally expected in August and September. However, at the time of this report it was possible to sell freight futures for the remainder of the 3rd quarter at a level of $43,000 per day on TCE basis. The freight futures for the 4th quarter were at a level of $58,000 per day on TCE basis, indicating expectations of a strong 4th quarter.
 
According to the International Energy Agency (IEA), global oil demand averaged 83.3m barrels per day in the 2nd quarter of 2006, a 1.9% decrease from the 1st quarter of 2006. For the 3rd quarter and the 4th quarter, however, the oil demand is expected to rebound to 84.7m and 86.3m barrels per day, respectively. 
 
IEA expects world oil demand to increase by 1.4% in 2006 to 84.4m barrels per day, and a further 1.8% growth in 2007 to 86.4m barrels per day. This is on the back of a continued robust global economic outlook in particular in North America and Asia. It is estimated that the oil demand in China alone will account for 25-30% of the projected worldwide demand growth in 2006 and 2007. Chinese interests have been investing in production capacity in other regions of the world, including West Africa, and this is expected to have a positive impact on the demand for crude oil tankers.
 
The world’s suezmax fleet stood at 338 vessels at the end of the 2nd quarter 2006, compared with 334 vessels at the end of the 1st quarter 2006. 4 new vessels were delivered during the quarter while no vessels were scrapped. 2 new vessels have been ordered during the 2nd quarter of 2006, and the total suezmax order book stood at 57 vessels at the end of the quarter. At the same time 57 vessels were single hull which are expected to be phased out by 2010.  14 new vessels are expected to be delivered during the second half of 2006 (Source: R.S. Platou Shipbrokers AS).
 
Deliveries of tankers over the next 24 – 36 months from the shipyards can be estimated with a high degree of certainty. The shipyards are expected to operate at more or less full capacity with their present order books, and new orders placed for suezmax tankers are typically for delivery in late 2009 or in 2010.
 
While we expect that short term rates may continue to vary significantly, the supply and demand tanker fundamentals are in the Company’s view positive.
 
Strategy
 
The Company is basing its operations on its unique and successful operating model with a full dividend payout policy together with high spot market exposure and a strong balance sheet. Focus is also on a cost effective management of the company, in order to maintain a low cash break-even level for the vessels.
 
The Company’s exposure to the spot market is based on our analysis showing that the spot market over time can be expected to produce higher revenues on average than the time charter market. With a strong balance sheet, a full dividend payout policy can be maintained without accumulating cash reserves on the balance sheet. A certain amount of term charter coverage is also being contemplated from time to time.
 
The main objective of the Company is to create value for shareholders via a transparent, predictable and simple strategic platform. Growth is also an inherent part of the operating model and further expansion can be expected. The expansion of the Company is bolstering its earnings and dividend capacity.
 
 
 
*****
 
(1) Operating cash flow is a non-GAAP financial term often used by investors to measure financial performance of shipping companies. Operating cash flow represents income from vessel operations before depreciation and non-cash administrative charges. Please see page 5 for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure
 
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
Matters discussed in this press release may constitute forward-looking statements.  The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “will,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.
The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management’s examination of historical operating trends, data contained in our records and other data available from third parties.  Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.  We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the tanker market, as a result of changes in OPEC’s petroleum production levels and world wide oil consumption and storage, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission, including the prospectus and related prospectus supplement, our Annual Report on Form 20-F, and our reports on Form 6-K.
 
 
Contacts:
Scandic American Shipping Ltd 
Manager for:
Nordic American Tanker Shipping Ltd.
P.O Box 56, 3201 Sandefjord, Norway
Tel: + 47 33 42 73 00 E-mail:  nat@scandicamerican.com
Web-site:  www.nat.bm
 
Rolf Amundsen, Investor Relations
Nordic American Tanker Shipping Ltd.
Tel: +1 800 601 9079 or + 47 908 26 906
 
Gary Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223
 
Herbjørn Hansson, Chairman & CEO
Nordic American Tanker Shipping Ltd.
Tel:  +1 866 805 9504 or + 47 901 46 291
 
 
The full press release including tables can be downloaded from the following link:

2nd quarter 2006 Results