Hamilton, Bermuda, August 30, 2016
Many of you contact us from time to time to learn more about NAT. NAT had a very good first six months of 2016, which were reflected in our 2Q2016 report to shareholders in early August. During May this year we bought four vessels manufactured in Japan. These vessels are already in operation. We have two newbuildings coming from Korea. One of these will be delivered in a weeks’ time and the other one is expected in January 2017. These six ships will be financed from internal resources i.e. we do not plan to issue stock to finance these acquisitions. In a few days NAT will have 29 ships on the water. In January 2017 we shall have a fleet of minimum 30 units. I remind you that a low oil price is positive for a tanker company like NAT, since it stimulates world trade and hence increases the demand for our services.
NAT is not in the speculation business as such. We must perform our job in tanker markets, strong or weak. My experience over decades is that it is impossible to predict the future tanker market, both short term and long term. Our goal is always to be the best crude tanker company in good and bad markets.
Over the years we have prided ourselves to be the crude tanker shipping company with the best balance sheet and lowest cash breakeven. Volatility is a trademark of our business. We have always paid quarterly dividends – 76 times in a row since the autumn of 1997. I have seen a number of market downturns over the years, but we have never been in financial difficulties. Companies, countries and persons get into trouble when they borrow too much. We have kept on growing our fleet. We keep the course.
NAT has the largest shareholder base and has the most liquid crude tanker stock on NYSE. This means our investors can buy and sell NAT stock easily, at any given time.
NAT has a significant earnings potential. Crude tanker shipping is in one of the most volatile markets in the world. When rates are high, say more than $25,000 per day per ship, the quarterly dividends will normally be higher than when rates are lower. Short term rates could go as high as $50,000/$60,000 per day, or even higher. We should not place too much emphasis on short term market changes. As of now, I can see a marginally higher tanker market, which some observers expect to continue and improve further as we enter the autumn.
The average total return since the inception of NAT, has been about 12% per annum. Total return is the stock price plus the dividend reinvested in the stock, a precise expression of profitability. The dividend in relation to the stock price gives the so called cash yield, which for NAT is at about the same level as our total return. We submit these solid numbers, which are not wishes and promises, but facts.
There are many factors that influence day rates (our daily earnings for the ships). You can compare it to predicting the weather. It may be easy to predict the weather tomorrow but it is impossible to do it for weeks, months and years ahead. The market rates are a function of supply and demand for tanker ships. In the short term the supply is inelastic, i.e. if there are too many ships in an area, rates tend to fall. Conversely, rates per day tend to increase when there are too few ships in an area.
My firm priority, together with the Board and management, is to move fast when we see the right transaction. It is very important to be disciplined when the market is hot and be calm when it is not.
I do not have a strong view of where the market is headed in the short-term, but I believe in Warren Buffett’s famous advice, “Be greedy when others are fearful, be fearful when others are greedy.“
Our focus is on cash flow and total return over time. A strong operational track record and a good relationship with our key customers are important. We have the largest oil companies in the world as our clients, both in the West and in the East. We rely on them and they rely on us in our work to provide for crew safety, protection of the environment and of assets.
The current demand for crude is growing every year by 1.2-1.3 million barrels a day and this is expected to continue in the years to come. The US and China are the biggest consumers today. However, Indian oil consumption per capita is 0.15 tons vs. 2.62 tons in the US. If it moves to 0.7 tons (same as Brazil), it would surpass the US in absolute terms. The production of oil is also expected to increase in the years to come, which is positive for the tanker market. This, combined with few new orders for ships being placed today, should be good for our market long term.
My family and I have bought 210,000 NAT shares (price $2.3m) over the last few days as we believe there is a buying opportunity that is producing the basis for a sound long term investment. To raise cash for the payment of my personal taxes here in Norway, we sold some shares earlier. The NAT holding of our family is substantial. We are among the largest shareholders of NAT. As they say in the investment world, we eat our own cooking.
We are optimistic about the future for NAT, and are happy to answer any questions you may have. Meanwhile, enjoy these last days of summer.
Chairman & CEO
Nordic American Tankers Limited
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.
Herbjørn Hansson, Chairman & CEO
Nordic American Tankers Limited
Tel: +1 866 805 9504 or +47 90 14 62 91
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223
Turid M. Sørensen, CFO & EVP
Nordic American Tankers Limited
Tel: +47 33 42 73 00 or +47 90 57 29 27