Nordic American Tankers (NYSE: NAT) – The 4th Quarter 2018 report – In an important transaction, NAT has a new financial structure. Markets are positive.
Link to the complete 4th Quarter 2018 report: http://hugin.info/201/R/2235705/880207.pdf
Hamilton, Bermuda, February 19, 2019
With this report we announce our 86th consecutive quarterly distribution. The dividend is 4 cents per share (up from 1 cent in the previous quarter) payable March 15, 2019, to shareholders on record march 1, 2019. It is our objective to increase the dividend as we reap the benefits of stronger tanker market fundamentals.
The Net loss for 4Q2018, (after depreciation, G&A and finance charges), came in at -$10.5 million. This was a substantial improvement from the previous quarter (3Q2018) which saw a Net loss of -$37.9 million. the net operating earnings was $5.4 million for Q42018 and The Adjusted Net Operating earnings was $23.6 million for 4Q2018. In 3Q2018 the Adjusted Net Operating Earnings were $2.1 million. i.e. the 4q2018 was $21.5 million better than the previous quarter. in 4Q2017 the corresponding number was $11.2 million. Later in this report we have included relevant financial information for 4Q2018 and for other periods.
It is important to note that we have concluded a refinancing of the company with csg investment, funded by Beal bank Texas, USA. this refinancing strengthens the position of nat going forward. The new capital structure allows for greater flexibility as regards dividend payments.
The present and the future are the important elements for NAT.
A large volume of nat shares are bought and sold daily.
NAT is working with the largest energy companies in the world, serving them reliably with a top class suezmax fleet of 23 vessels.
The world economy is still strong, with the us and the far east as the driving forces. what is good for the world economy and world trade is good for our business.
NAT is well positioned in the tanker market. The historic average market rate for the last 25 years was about $30,000 per day per Suezmax vessel. Such earnings would give a solid excess cashflow from operations.
We would note that the tce (time charter equivalent) for our vessels in 4Q2018 was $20,100 per day per ship compared to $12,000 in 3Q2018. for a variety of reasons, the reported tce-indices in the market is not a precise measure of our vessels performance. The tce-indices indicate the level of the market.
Tanker markets are volatile but our strategy remains steadfast.
At the time of this report we have covered 70% of the income in 1Q2019 at about $25.000 per day, or more.
Our fleet consists of 23 well maintained Suezmax tankers (all our ships above 15 years of age has a CAP 1 class notation, which above all is related to steel quality) with an aggregate cargo capacity of 23 million barrels of crude oil, illustrating the size of NAT.
The average age of our fleet is about 10,8 years; 10 units were built from 2010 onwards, 13 units were built between 2000 and 2009.
The outcome of the inspections of our ships by oil companies (“vetting”) reflects the good quality of our fleet.
NAT has one of the largest fleet of Suezmax tankers in the world. In a capital intensive industry like ours, timing and financing are the key issues to achieve a sound cost structure.
Our existing revolving credit facility (“RCF”) syndicated by three banks was nearing its final year before maturity and would be classified as short term within this year. NAT has been refinanced at the time of this report.
During the last 18 months, we have reduced our debt under the RCF with about $150 million and we are pleased to have taken out the remaining portion of the RCF through a new $306 million financing announced and concluded on 12 February 2019.
The $306 million senior secured credit agreement is a five-year loan arranged by CSG Investments, Inc., and funded by Beal Bank of Dallas, Texas. This new loan has retired the old RCF in full.
The new credit will see the effective interest be reduced compared to what was paid under the old RCF at the end of 2018. It is also lower than what was indicated to us for the Secured Bond we contemplated in 2018 and the Back-Stop facility that was cancelled in 3Q18. The new loan will amortize as per a 20-year profile with full maturity after 5 years with annual downpayments amounting to 5% of the original loan amount.
The financing will contribute to a competitive cash break-even rate for NAT. More importantly, the new loan allows NAT greater financial flexibility.
With this new US based debt facility, together with the three 2018 newbuildings financed by a leasing arrangement with Ocean Yield, all long term financing is now in place for NAT.
The debt level of NAT has always been among the lowest in the industry. The NAT board has focus on further reducing the debt to a level that NAT maintained a few years ago.
Our net debt at year end stood at $15.5 million per vessel.
For 4Q2018 a cash dividend of $0.04 per share has been declared. NAT has a policy to maximize dividend payments within its financial flexibility. Payment of the dividend is expected to be on or about March 15, 2019, to shareholders of record on March 1, 2019.
In an improved tanker market, higher dividends can be expected.
Nordic American Offshore Ltd. (NYSE: NAO)
NAT owns 13.55% of Nordic American Offshore Ltd. and the NAT Chairman & CEO and his immediate family own 10.87% of NAO.
World Economy and the Tanker Market
The world economy is enjoying its strongest upswing since 2010. What is good for the world economy and world trade is by nature positive for the crude oil tanker business. In addition to the role of major oil companies, large oil traders have become important for the tanker industry.
The world Suezmax fleet (excl. shuttle & product tankers) counts 495 vessels at the end of 4Q2018. The total delivery during 2018 was 28 units. For 2019 we expect 26 vessels, and in 2020 we currently see 16 vessels scheduled for delivery. During 2018, 21 Suezmax vessels were scrapped.
The supply of tanker tonnage is inelastic in the short-term. When there are too many ships in an area, rates tend to go down. When there is scarcity of ships, rates tend to go up. Short-term spot tanker rates may be expected to be volatile.
Corporate Governance/Conflict of Interests
It is vital to ensure that there is no conflict of interests among shareholders, management, affiliates and related parties. Interests must be aligned. From time to time in the shipping industry, we see that questionable transactions take place which are not in harmony with sound corporate governance principles, both as to transparency and related party aspects. We have zero tolerance for corruption.
Organizational development and rejuvenation, partly replacing outgoing personnel
Recently we have employed about 10 shore based staff – most of them in their 30s. They are specialists in business development, strategic thinking , finance, accounting, IT, web, chartering and related matters. Young persons are needed in the further development of NAT in a changing world.
Strategy going forward
The NAT strategy is built on expanding and maintaining a homogenous and top quality fleet, leveraging on our industry network and close customer relationships with big oil. Employment of our ships with big oil is a priority.
A strong balance sheet, combined with a homogenous fleet and economies of scale is giving a low cash break-even level, enabling NAT to distribute free cashflow to our shareholders.
This strategy will benefit in both a strong tanker market and in a weak one. In an improved market, higher dividends can be expected and vice versa.
Our dividend policy should continue to enable us to achieve a competitive cash yield.
Our fleet of 23 more or less identical vessels is a special feature of NAT that is particularly valuable to our customers.
NAT is firmly committed to protecting its underlying earnings and dividend potential. We shall safeguard and further strengthen this position in a deliberate, predictable and transparent way.
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Link to the graph: http://hugin.info/201/R/2235705/880207.pdf
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 worldwide 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.
Gary J. Wolfe
Seward & Kissel LLP
New York, USA
Tel: +1 212 574 1223
Bjørn Giæver, CFO
Nordic American Tankers Limited
Tel: +1 888 755 8391 or +47 91 35 00 91
Herbjørn Hansson, Chairman & CEO
Nordic American Tankers Limited
Tel: +1 866 805 9504 or +47 90 14 62 91
|  Adjusted Net Operating Earnings (Loss) represents Net Operating Earnings or Loss before depreciation and non-cash administrative charges
Please see later in this announcement for a reconciliation of Net Operating Earnings (Loss) to Adjusted Net Operating