Today, a few days before Christmas, we wish to give you a brief update on a few pertinent NAT matters. As previously communicated, the fourth quarter of 2016 is turning out well. Our cash break even below $11,000 per ship per day gives an excellent basis for solid cash surpluses.
The 4Q2016 cash results are expected to be about $20,000 (time charter equivalent) per ship per day. The NAT fleet is increasing and our 30th Suezmax tanker is scheduled to be delivered to us mid-February 2017. It has already obtained employment for her maiden voyage. Three more newbuildings will increase the fleet with further 10%, impacting dividend and earnings capacity correspondingly.
We do not have all our ships in the spot market. Some of them are employed on short term and longer term contracts with solid clients. So far, the first quarter of 2017 has started off well with a strong tanker market.
In our reports, we have repeatedly stressed that Net Asset Value (NAV) – the steel value of a ship - is of no relevance in the assessment of the value of NAT as a going concern.
For further details, please see our below letter of November 30, 2016.
NAT has a good future. We are happy to respond to any questions you may have. Meanwhile, we wish you all the best for the Holiday Season!
Chairman & CEO
Nordic American Tankers Ltd.
Below is the Letter to Shareholders:
Nordic American Tankers Limited (NYSE:NAT) – Letter to the Shareholders. Prospects for the fourth quarter of 2016 look good, an improvement on an already positive third quarter of 2016. A low oil price is good for the tanker business.
Hamilton, Bermuda, November 30, 2016
My last shareholder letter was dated August 28, 2016, our successful capital raise of USD 120 m was completed on September 30, and our 3Q report was dated November 11, 2016.
During 3Q2016 we generated a cash surplus that was much higher than our cash break even rate, which is below USD 11,000 per day per ship.
We also expect that the 4Q2016 result will be well above 3Q2016, which had a time charter of USD 16,700 per day per ship on average for our vessels on contracts and on short term employment. A low oil price is good for the tanker business.
Now that we have about 75 % of the available days in 4Q2016 under our belt, we are at about USD 20,000 per day. Our recent stock issue allowed us to contract for three newbuildings to be delivered in 2018, increasing the fleet from 30 to 33 Suezmaxes.
The board, management and our advisors subscribed for a total of $5.3 million of the issue. We eat our own cooking, so to speak, and our goal is the same as it is for all shareholders: to make money on our investment. Growth has been a key success factor of our business model. It’s important for companies to grow and it’s crucial for our future dividend capacity.
Any company must grow – that is a part of capitalism. A company that does not grow is dead. Our recent order for 3 new Suezmax ships at Samsung was concluded at highly attractive terms. A major part of the purchase price is due on delivery. This is a great investment, boosting NAT.
Over the years from 2004 we have grown step by step from 3 to 33 Suezmax ships. We have already increased our fleet by 5 ships this year and will take delivery of our 30th ship in early 2017.
Except for the three newbuildings, all these vessels were funded by existing resources. Our objective is to increase earnings. The acquisitions have to be accretive and increase our earnings power.
The markets for dry cargo vessels and container vessels are difficult. NAT, of course, is not involved in these sectors. There is also now limited access to financing, which prevents some other companies from expanding their fleets. Having access to financing, as we do, is increasingly becoming a competitive advantage.
We welcome all investors to become our shareholders. We are the crude tanker company with the most shareholders in the world. Whether you are a mutual fund, hedge fund, investment advisor or an individual investor, we value you all the same. Our large base of shareholders has made our stock very easy to trade. We can never have too many shareholders and our stock can never be liquid enough.
The Suezmax tanker market has recovered significantly from the time of my last letter, as demonstrated by 4Q2016 results so far.
The low oil price is good for the tanker market and hence for NAT. The demand for oil and its production is growing, which is positive for the transportation of oil. The demand in the Far East is particularly strong, which makes it a promising market for us. Finally, we do not expect that results of the US Presidential election will affect NAT adversely.
Our strategy is to expand with a low level of debt. When we generate cash we prefer to pay it out in dividends. We always stick to our strategy and are not afraid to sail in the opposite direction of the rest of the industry.
We wish to have the strongest balance sheet and the lowest cash break even. I firmly believe that this will give the highest total return to shareholders; the best measure of profitability.
My best wishes to you for a happy new year!
Chairman & CEO
Nordic American Tankers Ltd
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
Press release PDF: http://hugin.info/201/R/2067026/776110.pdf