Nordic American Tankers Limited (NYSE:NAT) 3Q2014 Report – Cash dividend of $0.14 per share. Sound operational performance for a top quality Suezmax fleet

Link to the complete 3rd Quarter 2014 report:

HAMILTON, Bermuda, Nov. 10, 2014 (GLOBE NEWSWIRE) —

Rates improved in 3Q2014 compared with the preceding quarter and the same quarter last year. This is a reflection of improving fundamentals driven by increased tanker demand and flat supply. During 3Q2014 we had cashflow from operations1 of $21.7m, compared with $4.3m in 2Q2014, and $2.5m in 3Q2013.

On October 7, 2014, NAT declared a cash dividend of $0.14 per share payable to shareholders of record as of October 22, 2014. The dividend was paid November 5, 2014. Since NAT commenced operations in the fall of 1997, the Company has paid a dividend 69 times, with total dividend payments over the period amounting to $45.16 per share, including the dividend paid in November 2014.

In June 2014 the startup company Nordic American Offshore Ltd. (NAO) completed a successful public offering of shares and was listed on the NYSE. NAT participated in the $100m NAO IPO with $5.6m. Following the share distribution of NAO shares to NAT shareholders, NAT owns about 17.1% of NAO. NAT has received a total of $5.7m in dividends from NAO in 2014 including the NAO dividend to be paid on November 21, 2014. Our investment in NAO has a positive impact on NAT in terms of both accounting and cash.

Key points to consider:

  • Tanker rates achieved on average for 3Q2014 were $21,000 per day per vessel for our trading fleet, as against $12,100 per day achieved in 2Q2014.
  • Earnings per share in 3Q2014 were $0.01, compared with -$0.19 in 2Q2014, and -$0.29 for 3Q2013.
  • The undrawn part of our credit facility plus net working capital stood at about $329m at the end of 3Q2014.
  • NAT will receive a dividend of about $1.8m from its investment in NAO on November 21.
  • The Company took delivery of the acquisitions Nordic Sprinter and Nordic Skier in July and August, increasing the fleet to 22 vessels.
  • We continue to focus on cost efficiency – both in administration and onboard our vessels.
  • 16 vessels were vetted (inspected by customers) during 3Q2014. NAT came out with 3.7 observations on average per inspection, an excellent result reflecting the quality of our fleet.

Nordic American Tankers is very different from other tanker companies

Nordic American Tankers 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 each individual ship, and has no relevance when it comes to valuation of NAT as an ongoing business. The key for the Company is to generate returns for its shareholders.

Financial Information

The Company declared a cash dividend of $0.14 on October 7, 2014, which was paid November 5, 2014 to shareholders of record as of October 22, 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. The G&A costs of NAT benefit from resource sharing with NAO. Further growth should result in lower costs on a per vessel basis.

Our shareholding in NAO has been booked as a capital asset. The dividend from the shareholding is credited to the profit and loss account.

Earnings per share in 3Q2014 were $0.01, compared with -$0.19 in 2Q2014,and -$0.29 for 3Q2013.

The Company’s operating cash flow in 3Q2014 was $21.7m, compared with $4.3m in 2Q2014, and $2.5m in 3Q2013.

On August 12, 2014, NAT distributed about $14m worth of stock in NAO to shareholders of NAT, thereby increasing the number of shareholders in NAO to about 35,000.

We are pleased to observe that operating costs for the vessels have decreased following our focus on cost efficiency.

One vessel is expected to enter drydock in 4Q2014 slightly ahead of schedule in order to optimising the trading pattern.

As a matter of policy, NAT 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 3Q2014 the Company had net debt of $105m or $4.8m per vessel.

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

Our primary objective is to enhance total return2 for our shareholders, including maximizing our quarterly dividend.

The Company has in place a non-amortizing credit facility of $430m maturing in November 2017, of which $250m has been drawn. Cash on hand is about $89m. Net working capital and undrawn amounts of the credit facility amount to $329m.

For further details on our financial position for 3Q2014, 2Q2014 and 3Q2013, please see later in this release.

The Fleet

Earlier this year the Company agreed to buy two secondhand vessels. The vessels were delivered to us July 16, 2014 and August 4, 2014. Now the Company has a fleet of 22 vessels. By way of comparison, in the autumn of 2004, the Company had three vessels. Our vessels are in excellent technical condition.

In the arbitration involving the Suezmax vessel Gulf Scandic (now named Nordic Harrier) NAT was awarded $10.2m. Gulf Navigation Holding PJSC (GulfNav) was the other party in the arbitration. At this time, the claim has not been paid to us. We are working to collect the award.

Link to the graph:

Sound Operational Performance and a Top Quality Fleet

NAT is focused on maintaining the technical quality of the fleet, and our operational performance remains at the forefront of the industry. The chart above shows the development in observations per inspection for the year. 3Q2014 inspections had an average of 3.7 observations which is an excellent result. NAT’s performance can be considered industry best practice.

World Economy and the Tanker Market

The development of the world economy affects 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 as we see at the time of this report. 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 fiscal deficits. The economies of the Far East generally show continuing growth, although at a slower pace than before.

Tanker market rates are also affected by newbuildings that enter the markets, increasing the supply of vessels. Scrapping impacts supply in the other direction.

The Suezmax fleet (excl. shuttle tankers) counts 445 vessels at the end of 3Q2014, meaning the fleet has decreased this year.

Following a number of orders made in recent months, the current orderbook stands at 54 vessels from now to mid-2017. This represents about 12% of the Suezmax fleet. In 2009, the orderbook was over 50% of the existing fleet. At the time of this report, the orderbook for the remainder of 2014 counts nine Suezmax vessels. However, we expect the real number of deliveries for the rest of this year to be lower. Five Suezmax vessels were delivered in the first nine months of 2014.

So far this year five vessels have been scrapped. In 2013six Suezmaxes were scrapped compared to 21 in 2012 and eight during the year 2011.

The graph below 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.

Link to the graph:

In the recent past bunker prices have fallen by 25% to 30%, impacting our results positively.

Corporate Governance/Conflict of Interests

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 prospective investors interested in the crude 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 our Annual Report on Form 20-F, and our reports on Form 6-K.

For questions related to this message, please contact Nordic American Tankers Limited.:

Jacob Ellefsen, 
Manager, Investor Relations and Research
Nordic American Tankers Limited
Tel: + 33 678 631 959 or + 377 93 25 89 07 
Rolf Amundsen, Advisor,
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906
Turid M. Sørensen, CFO & EVP
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

For questions related to the newly established separate company, Nordic American Offshore Ltd., please contact:

Tor-Øyvind Bjørkli, Chief Executive Officer
Nordic American Offshore Ltd.
Tel: +47 90 62 70 14 or +47 21 99 24 81
Herbjørn Hansson, Executive Chairman
Nordic American Offshore Ltd.
Tel: +1 866 805 9504 or + 47 901 46 291
Jacob Ellefsen, 
Manager, Investor Relations and Research
Nordic American Offshore Ltd.
Tel: + 33 678 631 959 or + 377 93 25 89 07 
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223

3rd Quarter 2014 Result:

1 Operating cash flow is a non-GAAP number. Please see later in this announcement for a reconciliation of operating cash flow to income from vessel operations.

2 Total Return is defined as stock price plus dividends, assuming dividends are reinvested in the stock