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Nordic American Tanker Shipping Ltd. (NYSE:NAT) – Announces Dividend and Earnings in Respect of the 4th Quarter of 2006

Hamilton, Bermuda, February 14th, 2007
 
Nordic American Tanker Shipping Limited (the “Company”) today announced its results for the 4th quarter of 2006. In spite of the mild weather in the Western Hemisphere and being lower than the spot market in the 3rd quarter of 2006, the market for our suezmax fleet was still strong during the 4th quarter of 2006.  The Company has now declared a dividend for 37 consecutive quarters. For the last four quarters, including the dividend to be paid in respect of the 4th quarter of 2006, a total of $4.97 has been declared in dividends, which represents 14.9% of the average daily share price over the same period. The market for our vessels so far in 2007 is well above the level achieved in the 4th quarter of 2006.
 
Highlights:
 
  • The Board of Directors has declared a dividend of $1.00 per share in respect of the 4th quarter of 2006.

  • The dividend is expected to be paid on or about March 1st, 2007 to shareholders of record as of February 22nd, 2007.

  • Delivery of the three newly-acquired vessels did not occur until November and December, while the newly-issued shares from our follow-on offering were outstanding as of October 11th. As a result of this timing difference, our dividend and earnings per share were impacted negatively in respect of the fourth quarter of 2006. The one time dilutive effect of this timing difference is approximately $0.17 per share.

  • After taking into account a one time non-cash charge of $3.3 million ($0.14 per share) associated with the follow-on offering in October 2006, net income for the 4th quarter of 2006 was $0.52 per share based on the average number of shares outstanding during the period.

  • The Company closed a follow-on offering on October 11, which provided net proceeds to the Company of $173.1 million based on an offering price of $32.00 per share. The weighted average number of shares outstanding during the 4th quarter of 2006 was 26,276,292.  As of February 14, 2007, there are 26,914,088 shares issued and outstanding, the same share count as at the end of 2006.

  • At the end of the year our fleet consisted of 12 modern double hull suezmax tankers.

  • Following a minor incident, one vessel underwent repair in drydock during the 4th quarter of 2006, resulting in a total of approximately 20 days offhire during the period.
 
 
Dividends per Share, Earnings per Share and Financial Information:
 
Operating cash flow(1) was $26.6 million for the 4th quarter of 2006 compared to $32.8 million for the 4th quarter of 2005. Operating cash flow was $29.7 million for the 3rd quarter of 2006.
 
The Board has declared a dividend of $1.00 per share in respect of the 4th quarter of 2006. This compares with a dividend of $1.88 per share in respect of the 4th quarter of 2005, which was the highest dividend ever paid by the Company. The dividend in respect of the 3rd quarter of 2006 was $1.32 per share.
 
After a one time non-cash charge(2) of $3.3 million associated with the follow-on offering in October 2006, net income for the 4th quarter of 2006 was $13.7 million, or $0.52 per share (EPS). This compares to a net income of $25.1 million or $1.51 per share for the very strong 4th quarter of 2005. In the 3rd quarter of 2006, net income was $20.3 million, or $0.97 per share.
 
Earnings per share for the whole year of 2006 were $3.14 compared to $3.03 for the year 2005. Dividends per share in respect of 2006 were $4.97 compared to $4.47 per share for the year 2005.
 
Our stated policy concerning the calculation of dividend per share in a quarter when an offering has taken place is set forth in footnote 3 later in this release. (3)
 
For the 4th quarter of 2006, operating costs of our vessels and general and administrative costs were largely according to our expectations.  Across the shipping industry there is an upward pressure on vessel operating costs – in particular crewing costs, lubricating oil costs and repair and maintenance costs.
 
The Company is not involved in freight or interest derivatives.
 
We currently estimate that our average cash breakeven for our fleet of twelve vessels is approximately $9,500 per day per vessel. The breakeven rate is the amount of average daily revenues for our vessels which would cover our vessel operating expenses, voyage expenses, if any, cash general and administrative expenses, interest expenses and other financial charges.
 
After the follow-on offering in October 2006 and the delivery of the three vessels during the 4th quarter of 2006, our net debt is approximately $14.5 million per vessel. As of February 14, 2007, we have approximately $326 million undrawn under our $500 million revolving credit facility with maturity in 2010. There is no repayment obligation during the term of the facility, and the Company pays interest only on drawn amounts, and a commitment fee for undrawn amounts. Our strong balance sheet combined with our credit facility provides room for expansion of the fleet.
 
After a minor incident which took place in late September, one of our vessels was in drydock approximately 20 days during the 4th quarter of 2006. None of our other vessels was in dry dock during the 4th quarter of 2006.
 
The table below shows the number of vessel revenue days over the last eight quarters for all our vessels, reflecting the growth of the Company.
 
 
Period
1Q 05
2Q 05
3Q 05
4Q 05
1Q 06
2Q 06
3Q 06
4Q 06
Revenue days
371
549
576
697
720
808
817
919
 
The market capitalization of the Company also reflects the growth of NAT.
 
 
Period
2005
2006
Feb. 12, 2007
Market Capitalization as of December 31, (in millions)
$479.2
$918.7
$1,010.1
 
 
For further details on our financial results, please see later in this release.

The Fleet:
 
Eleven of the Company’s twelve vessels are trading in the spot market or on spot related terms, while one
vessel remains employed on a long term fixed rate charter.
 
The three vessels which we took over in November and December of 2006 produced 111 revenue days in the 4th quarter of 2006. During the 1st quarter of 2007, we have 12 vessels in operation – increasing the revenue days compared with previous quarters.
 
At the end of 2004 the Company had four vessels; at the end of 2005 the Company had eight vessels; and at the turn of the year 2006/2007 the Company had twelve vessels.
 

 
* Scantling draft is the maximum draft at which a vessel complies with the governing strength requirements of classification societies
 
Performing a scheduled 10-year special survey, one vessel was out of service 22 days as from mid-January this year.
 
 
The Market:
 
The average spot market rates, according to the Imarex Tanker Index, were $39,727 per day for modern suezmax tankers during the 4th quarter of 2006 compared with $64,002 per day for the 4th quarter of 2005.   While lower than the 3rd quarter of 2006 the market during the 4th quarter of 2006 was still healthy for our vessels – a situation that has continued into 2007.  The average Imarex Tanker Index was $43,574 per day from January 1 to and including February 12th, 2007.  Short-term spot rates are notoriously difficult to predict. We expect that they may continue to fluctuate significantly. 
 
The world’s suezmax fleet stood at 346 vessels at the end of the 4th quarter of 2006, compared to 324 vessels at the end of the 4th quarter of 2005. Twenty-two new vessels were delivered during 2006 while no vessels were scrapped. The total suezmax order book stood at 123 vessels at the end of the December 2006.  At the same time, 72 vessels were single hull, which are expected to be phased out from the tanker trade by 2010.  Out of the 72 single hull suezmax vessel shipping companies worldwide have decided to convert 17 vessels into purposes other than employment in the tanker sector. (Source: Fearnresearch).
 
Generally, single hull tankers are facing challenges in the market place as the customers prioritize double hull tonnage.  We believe that this development is advantageous for our Company, which owns double hull tankers only.
 
Going forward, deliveries of new tankers from shipyards over the next few years can be estimated with a high degree of certainty. The shipyards are expected to operate at more or less full capacity with their present orderbooks, and new orders placed for suezmax tankers are typically for delivery in 2010 or later.
 
The level of the tanker market ahead is above all dependent on the development of the world economy.
 
Shareholders’ Rights Plan
 
The Board of Directors has adopted a shareholder rights plan designed to enable the Company to protect shareholder interests in the event that an unsolicited attempt is made for a business combination with or takeover of the Company.  The Company believes that the shareholder rights plan should enhance the Board’s negotiating power on behalf of shareholders in the event of a coercive offer or proposal.  The Company is not currently aware of any such offers or proposals, and is adopting the plan as a matter of prudent corporate governance. Several other listed shipping companies have this kind of arrangement in place.
 
The terms of the shareholder rights plan are set forth in a filing that the Company has made with the Securities and Exchange Commission this morning.  Rights under the plan are expected to be issued to shareholders of record as of the close of business on February 27, 2007.
 
Strategy going forward:
 
The operations of the Company are based on its unique and successful operating model which combines a transparent and predictable full dividend payout policy with high spot market exposure and a strong balance sheet. Focus is also on a cost effective management of the Company, both in regard to the operating expenses of the vessels and general & administrative expenses, in order to maintain a low cash break-even level for operations.
 
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 being contemplated from time to time.
 
The main objective of the Company is to maximize its total return(4) for shareholders via a transparent, predictable and simple strategic platform. In our communication with the stock market we encourage investors wishing to have tanker exposure to assess our operating model and to invest in our Company. Growth continues to be 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 per share.
 
* * * * *
 
 
_________________________
(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 8 for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.
 
(2)  The Management Agreement formerly provided that the Manager would receive 1.25% of any gross charterhire paid to us. In order to further align the Manager’s interests with those of the Company, the Manager agreed with us to amend the Management Agreement to eliminate this payment, and we have issued to the Manager restricted common shares equal to 2% of our outstanding common shares. Any time additional common shares are issued, the Manager will receive additional restricted common shares to maintain the number of common shares issued to the Manager at 2% of our total outstanding common shares. These restricted shares are non-transferable for three years from issuance.
 
(3)  Our policy is to declare quarterly dividends to shareholders, substantially equal to our net operating cash flow during the previous quarter after reserves as the Board of Directors may from time to time determine are required, taking into account contingent liabilities, the terms of our Credit Facility, our other cash needs and the requirements of Bermuda law. However, if we declare a dividend in respect of a quarter in which an equity issuance has taken place, we calculate the dividend per share as our net operating cash flow for the quarter (after taking into account the factors described above) divided by the weighted average number of shares over that quarter. Net operating cash flow represents net income plus depreciation and certain non-cash administrative charges. The dividend paid is the calculated dividend per share multiplied by the number of shares outstanding at the end of the quarter.
 
(4)  The total return is based on the change in the price for our common shares plus dividends reinvested in our common shares.
 
 
 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:

4th quarter 2006 Results