Nordic American Tankers’ 1Q2014 Report (NYSE:NAT) – Cash dividend of $0.23 declared earlier. Strongly improved operating cashflow. Net income positive for the first time in four years.

Link to the complete 1st Quarter 2014 report:

Hamilton, Bermuda, May 12, 2014

Thanks to a strong winter market, 1Q2014 has produced the best results we have seen in several years. The timecharter results of NAT were significantly better in 1Q2014 than in 4Q2013. The short term rates in tanker markets are very volatile. At the time of this report the tanker market has weakened. Nonetheless, there are indications that after the weakness of the past few years a recovery is coming closer. During 1Q2014 we had positive cashflow from operations of $27.1m, compared with $1.9m in 4Q2013 and -$4.9m in 1Q2013.

During 2012 and 2013, when the market was weak, we used the opportunity to have ships in planned drydock for maintenance to ensure continued top technical quality of the vessels. It has been very advantageous to implement the comprehensive drydocking, maintenance and improvement work for many of our ships during a period of low rates, when the cost of time is lower.

Since the beginning of 2012, 15 of our vessels have undergone their required special surveys, certifying their seaworthiness. The technical quality of our fleet ranks with the best in the industry. In 2014 NAT has undertaken two drydockings, which both are completed at the time of this report. Going forward, drydocking costs and off-hire (time out of service) should be significantly reduced and the number of revenue days should increase correspondingly as there are no more scheduled drydockings for 2014. 

As communicated earlier, in November 2013, NAT established Nordic American Offshore (NAO) – a Platform Supply Vessel (PSV) company. At the time of this report we expect the public listing of NAO on the New York Stock Exchange to commence very soon.

On April 2, 2014 NAT declared a cash dividend of $0.23 per share payable to shareholders of record as of May 15, 2014. The dividend is expected to be paid on or about May 27, 2014.

Since NAT commenced operations in the fall of 1997, the Company has paid a dividend 67 times, with total dividend payments over the period amounting to $44.90 per share, including the dividend to be paid in May 2014. In addition, a dividend in kind of $0.13 per share will be distributed to NAT shareholders in the form of NAO shares after the listing of NAO at NYSE.

During November, 2013, the Suezmax market strengthened, and in December the market achieved its highest level since 2010. This lasted into January before the market began to subside. NAT’s strategy meant a number of cargoes were concluded at high levels. The rate increase is an indication of the improved fundamentals of the tanker business.

Key points to consider:

  • Tanker rates achieved on average for 1Q2014 were $26,300 per day per vessel for our trading fleet, as against $14,100 per day achieved in 4Q2013.
  • A stock issue was launched April 7, and closed April 10. The total number of shares issued was 13,800,000, paving the way for further growth. The net proceeds of $113.6m will be reflected in the 2Q2014 accounts.
  • Earnings per share in 1Q2014 was $0.05, compared with -$0.31 in 4Q2013 and -$0.59 in 1Q2013.
  • The undrawn part of the credit facility and net working capital stood at $305m at the end of first quarter.
  • The agreement to transport crude oil for an affiliate of ExxonMobil wordwide is positive.
  • We continue to focus on cost efficiencies – both in administration and onboard our vessels.
  • 15 vessels were vetted (inspected by clients) during 1Q2014. NAT came out with excellent results, reflecting the quality of our fleet.
  • “Financial Vetting”, focus on the financial strength of shipowners, is relevant in the tanker industry. NAT is in good financial health, which is important for our clients.
  • The Company was successful in establishing Nordic American Offshore Ltd. with a $65m investment in November 2013. The private placement of shares was oversubscribed and our investment in NAO is expected to be accretive to shareholders of NAT. Our investment in NAO is already producing results. On May 9 NAO declared its first dividend, of $0.45 per share, yielding a total of about $2.0m for NAT. NAO is expected to be listed on NYSE very soon. NAO owns at this time six platform supply vessels which are serving the offshore oil installations in the North Sea. An agreement has been reached in order for the Ulstein shipyard to build two more Platform Supply Vessels (PSV) of the same type, bringing the PSV fleet of NAO to eight ships. Our investment in NAO was financed via a follow-on offering in November 2013.
  • The Company does not engage in any type of derivatives.

Nordic American Tankers is different from other tanker companies.

Nordic American has an operating model that is sustainable in both a weak and a strong tanker market. Accretive fleet growth and quarterly dividend payments are central elements  of the strategy. NAT has one type of vessel – the Suezmax vessel that can carry one million barrels of oil.  A homogenous fleet reduces our costs, which helps to keep our cash-breakeven down at about $12,000 per day per vessel, which is considered low for the industry.  Net asset value (NAV) is a measure that is linked to the steel value of the ships. NAV has no relevance when it comes to valuation of NAT as an ongoing business.

Financial Information

The Company declared a cash dividend of $0.23 on April 2, 2014, which is expected to be paid on or about May 27, 2014 to shareholders of record as of May 15, 2014. The number of NAT shares outstanding at the time of this report is 89,182,001.

We believe that Nordic American Offshore will strengthen Nordic American Tankers. We see cost synergies for both NAT and NAO, in particular as regards general and administrative costs. Our $65m investment in NAO has been recorded as a capital asset.

Earnings per share in 1Q2014 was $0.05, compared with -$0.31 in 4Q2013 and -$0.59 in 1Q2013.

The Company’s net operating cash flow in 1Q2014 was $27.1m, compared with $1.9m in 4Q2013 and -$4.9m in 1Q2013.

Since the beginning of 2012, 15 of our vessels have undergone special surveys.  These surveys and dry docking periods have taken place in a weak tanker market. In total we have paid about $40 million for all these dockings.  Since 1Q2012, the average offhire time (out of service) for the ships that have undergone special surveys is about 90 days per ship including positioning time to and from the yard.  In 2014 two of our vessels have been drydocked. In a weak tanker market time is not so costly. There are no more scheduled drydockings for 2014

We continue to concentrate on keeping our vessel operating costs low, while always maintaining our strong commitment to safe operations. We pay special attention to the cost synergies of operating a homogenous fleet that consists only of double hull Suezmax tankers.  As we expand our fleet, we do not anticipate that our administrative costs will rise correspondingly. In a weak tanker market other tanker companies may have challenges in keeping up technical standards as they cannot afford to spend the required funds for operations and maintenance.

As a matter of policy, the Company has always kept a strong balance sheet with low net debt and a focus on limiting the Company’s financial risk.  This policy will continue. At the end of 1Q2014 the net debt per NAT vessel was $6.4m.

The Company is very well placed to take advantage of strong shipping markets, which due to our spot strategy, can be expected to be reflected in increased dividend payouts immediately.

The establishment of our Orion Tanker Pool, our chartering department,  has resulted in a closer relationship with customers and a stronger position in the market place. The previously announced commercial frame agreement with a subsidiary of ExxonMobil was extended for two years in early June 2013. Moreover, as an indication of our quality profile we do business with some of the other largest oil companies in the world on a regular basis. They demand quality both at sea and onshore.

It is a prerequisite for any expansion of the fleet that our dividend and earnings capacity per share increase.

Our primary objective is to enhance total return for our shareholders, including maximizing our quarterly dividend.

The Company has in place a non-amortizing credit facility of $430m, of which $250m has been drawn. Cash on hand is about $80m. Net working capital, undrawn amounts of the credit facility and cash on hand amount to $385m. In addition, the Company has cash on hand of $113.6m from the follow-on offering that closed April 11, 2014.

Our credit facility matures in November 2017. The Company pays interest only on drawn amounts and a commitment fee for undrawn amounts.

The tightened terms of commercial bank financing and higher margins on shipping loans are challenging for shipping companies that are highly leveraged. By having little net debt, and hence a strong balance sheet, NAT is better positioned to navigate the financial seas, and we believe this is in the best interests of our shareholders.

For further details on our financial position for 1Q2014, 4Q2013 and 1Q2013, please see later in this release.

The Fleet

The Company has a fleet of 20 vessels at the time of this report.  By way of comparison, in the autumn of 2004, the Company had three vessels. Please see the fleet list below. Our vessels are in excellent technical condition.

Vessel Dwt Vessel Dwt
Nordic Apollo   159,999 Nordic Hunter 151,400
Nordic Aurora 147,262 Nordic Jupiter 157,411
Nordic Breeze 158,597 Nordic Mistral   164,236
Nordic Cosmos 159,998 Nordic Moon   159,999
Nordic Discovery 153,328 Nordic Passat 164,274
Nordic Fighter  153,328 Nordic Saturn  157,332
Nordic Freedom    163,455 Nordic Sprite  147,188
Nordic Grace  149,921 Nordic Vega  163,000
Nordic Harrier 151,475 Nordic Voyager 149,591
Nordic Hawk 151,475 Nordic Zenith 158,645
Total dwt 3,121,914

The arbitration hearings involving the Suezmax vessel Gulf Scandic (now named Nordic Harrier) have finished. Gulf Navigation Holding PJSC (GulfNav) was the other party in the arbitration. The case relates to the 6 year bareboat charter with GulfNav of the Gulf Scandic covering the period 2004 to 2010.

When the vessel was redelivered to NAT by the charterer in October 2010, it was in very poor technical condition. The vessel had not been operated according to sound maintenance practices by the charterer. NAT had the vessel repaired in the autumn of 2010/spring 2011, and made a claim against GulfNav for costs incurred. A London arbitration panel ruled in favour of NAT at the end of January 2014 and awarded the Company $10.2 million plus direct costs and calculated interest. In the maritime press there have been reports regarding the financial position of GulfNav. The award is due to be paid in cash.

The Company continues to move aggressively in reducing energy consumption on the vessels. We focus on vettings, i.e. technical inspections conducted by our clients. Vessels are subject to strict controls from oil companies before they will charter them. At NAT we have an ongoing focus on compliance with the highest standards both with the oil companies own programs and SIRE (Ship Inspection Report Program). SIRE is an independent standard report used as a risk assessment tool for tankers. The Company is of the opinion that the users of the vessels should cover the significant associated costs for these surveys which the shipping companies must cover today.

We are pleased to note that the Company has improved its operational performance further. The chart on the right shows our development in observations per inspection for the year. 1Q2014 inspections had an average of just 3.4 observations which is an excellent result, and can be considered industry best practice.

Link to the graph:

World Economy and the Tanker Market

The development of the world economy effects the tanker industry. Seaborne imports of crude oil into the US have decreased over the recent past.  Going forward, shale oil and tar sand oil projects are expected to affect the US and Canadian oil sector. These projects are vulnerable to reduced oil prices. In terms of transportation work (ton miles), the reduced imports to the US are more than outweighed by the increased imports to the Far East. European economies continue to run significant deficits. The economies of the Far East generally show continuing growth, although at a slower pace than before.

The change of government in the Ukraine and Russia’s actions toward Crimea has affected the relationship between Russia and the West. We believe the impact on our business will only be marginal. In all of 2013 we carried three Russian cargoes, two of these were from Kerch in Crimea and another from Novorossiysk on the Russian Black Sea coast.

Tanker market rates are also affected by newbuildings that enter the markets, increasing the supply of vessels. Increased scrapping impacts supply in the other direction. As a matter of policy the Company does not attempt to predict future spot rates. Rates may change quickly, which can lead to increased dividends.

Link to the graph:

The graph above shows the average yearly spot rates since 2000 as reported by R.S. Platou Economic Research a.s. The daily rates as reported by shipbrokers and by Imarex may vary significantly from the actual rates we achieve in the market, but these rates are in general an indication of the level of the market and its direction. In any analysis of the tanker industry, the direction of the global economy is always the most important factor.

The Suezmax fleet (excl. shuttle tankers) counts 449 vessels at the end of 1Q2014, an increase of 2 since the beginning of the year.

The current orderbook stands at 30 vessels from now to late 2016. This represents less than 7% of the Suezmax fleet. In 2009, the orderbook was at over 50% of the existing fleet. At the time of this report, the orderbook for 2014 counts 20 Suezmax vessels. This number has increased in the last quarters due to delays on 2013 deliveries. The Company believes around 10 of the vessels in the orderbook will not deliver, possibly more. This does not preclude new orders being made but the economics are not attractive at this time. Yard capacity is limited until 2016, which should give the market some time to rebalance.

In 2013 six Suezmaxes were scrapped compared to 21 in 2012 and eight during the year 2011.The average age of the vessels scrapped was 22 years.

Corporate Governance/Conflict of Interests

In the fall of 2010 the New York Stock Exchange Commission presented its final report on corporate governance. The Commission achieved consensus on 10 core principles. These principles include a) building long-term sustainable growth in shareholder value for the corporation as the board’s fundamental objective, b) the critical role of management in establishing proper corporate governance, c) good corporate governance should be integrated with the company’s business strategy and objectives and d) transparency for corporations and investors, sound disclosure policies and communication beyond disclosure. We believe the principles presented are essential elements of good corporate governance and the Company is in compliance with these principles.

It is vital for NAT to ensure that there is no conflict of interests among shareholders, management, affiliates and related parties.  Interests must be aligned.  We will work to ensure that transactions with affiliates and/or related parties are transparent.

Strategy going forward

Our objective is to have a strategy that is flexible and has benefits in both a strong tanker market and a weak one.  When the market improves, higher earnings and dividends can be expected.  If rates do remain low, the Company is in a position to buy secondhand vessels or newbuildings, which are inexpensive by historical standards. Therefore, the Company is able to improve its relative position in a weak market and will be able to reap the benefits of stronger markets thereafter. Over the recent past the Company has improved its relative position. In an opportunistic way NAT is now assessing investments that further builds up the position of the Company.

After an acquisition of vessels or other forms of expansion, the Company should be able to pay a higher dividend per share and produce higher earnings per share than had such an acquisition not taken place.

Our dividend policy will continue to enable us to achieve a competitive, risk adjusted cash yield over time compared with that of other tanker companies.

NAT is firmly committed to protecting its underlying earnings and dividend potential.

Our Company is well positioned in this marketplace. We shall endeavor to safeguard and further strengthen this position for our shareholders in a deliberate, predictable and transparent way.

We encourage investors who seek exposure to the tanker sector to consider buying shares in NAT.

* * * * *

Link to the graph:


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.

Scandic American Shipping Ltd 
Manager for:
Nordic American Tankers Limited
P.O Box 56, 3201 Sandefjord, Norway
Tel: + 47 33 42 73 00 E-mail:

Jacob Ellefsen,
Manager, Investor Relations and Research, Monaco
Nordic American Tankers Limited
Tel: + 377 93 25 89 07 or + 33 678 631 959

Rolf Amundsen, Advisor, Norway
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906

Turid M. Sørensen, CFO & EVP, Norway
Nordic American Tankers Limited
Tel: +47 33 42 73 00 or +47 90 57 29 27

Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223

1st Quarter 2014 Result