Nordic American Tankers Limited (NYSE: NAT) - NAT Is Well Positioned to Benefit as Market Fundamentals Improve

Nordic American Tankers Limited (NYSE: NAT) - NAT Is Well Positioned to Benefit 
as Market Fundamentals Improve 
HAMILTON, BERMUDA -- (Marketwire) -- 02/11/13 --  Nordic American
Tankers Limited (NYSE: NAT) 
Link to the complete 4th Quarter 2012 report:
http://hugin.info/201/R/1677024/546797.pdf 
In 2012, NAT improved its relative position within the industry
despite a weak market. By retaining a strong balance sheet throughout
2012, NAT is able to consider expanding its fleet at a time when
tankers are at historically attractive price levels. As announced
last month, NAT is paying a dividend of $0.16 a share for the fourth
quarter 2012. Operating cash flow[1] for the fleet was $17.5 million
for 2012. During 4Q2012 the operating cash flow was -$1.1 million.
The transportation sector, which is important for the tanker
industry, shows a very strong development in the Far East. As an
example, new passenger car sales in China increased from 3.9 million
units in 2005 to 15.4 million in 2012. This is positive for the
tanker industry. 
NAT achieved an average daily rate of $10,700 during 4Q2012. Rates
achieved in the same period last year were around $12,000 per day.
When the market turns, which may happen quickly, the dividend can be
expected to increase. Our fleet is in excellent technical and
operational condition, and NAT has the financial resources to
maintain it that way. We do not compromise on the quality of our
operations. This helps to ensure the loyalty of our clients, which
regularly includes major oil and energy companies. 
The Company will pay the dividend on or about February 13, 2013 to
shareholders of record as of January 30, 2013. Starting in the fall
of 1997, when NAT began its operations, the Company has paid a
quarterly dividend for 62 consecutive quarters. Including the
dividend to be paid in 1Q2013, the total dividend payments over this
period amount to $44.10 per share. 
Key points to consider: 


 
--  Earnings per share in 4Q2012 was -$0.39 excluding an impairment charge
    commented upon later in this report, compared with -$0.44 in 3Q2012
    and -$0.37 in 4Q2011. The impairment charge of $0.22 per share has no
    cash impact. Under a portfolio approach for our homogenous fleet, no
    impairment charge would be required.
    
    
--  The Company has agreed to acquire the Orion Tanker Pool 100% as from
    January 1, 2013 for a payment of about $300,000. We continue to build
    stronger commercial relationships with our clients.
    
    
--  In November 2012, the Company established a new credit facility of
    $430m. This facility will be in place up to November 2017.
    
    
--  We continue to focus on cost efficiency - both in administration and
    onboard our vessels.
    
    
--  Spot rates achieved for 4Q2012 were somewhat weaker than 4Q2011. A
    recovery in the world economy and Asian economic growth can be
    expected to improve vessel demand and rates.
    
    
--  During the quarter the Company agreed to acquire the management
    company Scandic American Shipping Ltd. There will be no change in the
    management of the Company. Following this transaction, the Chairman
    & CEO and his immediate family are the largest shareholders of
    NAT. Their interests are now fully aligned with those of all other
    shareholders.
    
    
--  "Financial Vetting", or focus on the financial strength of shipowners,
    continues to be an important consideration for clients.
    
    
--  We are seeing increased levels of scrapping, curtailing fleet growth.
    
    
--  The Company does not engage in any type of derivatives.
    
    
--  In October 2012, one of our ships was detained in US waters with
    allegations that maritime rules had been violated. We expect this
    matter to be closed soon with small consequences, including 12 days
    offhire (out of service).

  
"The Nordic American System" 
It is essential for Nordic American to have an operating model that
is sustainable in both a weak and a strong tanker market, which we
believe differentiates Nordic American from other publicly traded
tanker companies. The Nordic American System is transparent and
predictable. As a general policy, the Company has a conservative risk
profile. Our dividend payments are important for our shareholders,
and at the same time we recognize the need to expand our fleet under
conditions advantageous to the Company. 
NAT maximizes cash flows by employing all of its vessels in the spot
market through the Orion Tanker Pool which increases the efficiency
and utilization of the fleet. The spot market gives better earnings
than the time charter market over time. 
Growth is a
 central element of the Nordic American System. It is
essential that NAT grows accretively, which means that over time our
transportation capacity increases more percentagewise than our share
count. 
Nordic American has one type of vessel only - the Suezmax vessel.
This type of vessel can carry one million barrels of oil. The Suezmax
vessel is highly versatile, able to be utilized on most long-haul
trade routes. A homogenous fleet streamlines operating and
administration costs, which helps keep our cash-breakeven point low. 
The valuation of NAT in the stock market should not be based upon net
asset value (NAV), a measure that only is linked to the steel value
of our ships. NAT has its own ongoing system value with a homogenous
fleet. 
We pay our dividend from cash on hand. NAT has a cash break-even
level of about $12,000 per day per vessel, which we consider low in
the industry. The cash break-even rate is the amount of average daily
revenue our vessels would need to earn in the spot tanker market in
order to cover our vessel operating expenses, cash general and
administrative expenses, interest expense and all other cash charges. 
Financial Information 
In January 2013, the Board declared a dividend of $0.16 per share for
4Q2012 to shareholders of record as of January 30, 2013. The dividend
will be paid on or about February 13, 2013. At the time of this
report there are 54,825,751 shares outstanding. 
Earnings per share was -$0.61 for the fourth quarter, including a $12
million impairment charge for one of the vessels in our fleet.
Excluding the impairment, earnings per share was -$0.39. Applying the
tests for impairment to the fleet as a whole would have resulted in
no net impairment charge. 
The Company's operating cash flow was -$1.1m for 4Q2012, compared
with -$3.2m for 3Q2012 and $0.0m in 4Q2011. Operating cash earnings
per share were -$0.02 in 4Q2012, -$0.06 in 3Q2012 and $0.00 in
4Q2011. For 2012 total operating cash earnings were $17.5 million. 
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. The new non-amortizing
credit facility maturing in the autumn of 2017 creates a good base
for long term planning. 
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 the Orion Tanker Pool 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 a major oil company is the result of a more active
marketing policy. We do business with some of the largest oil
companies in the world on a regular basis. They demand quality both
at sea and onshore. As of January 1, 2013, NAT has agreed to acquire
the remaining 50% of the Orion Tanker Pool which will continue to
produce improved penetration of the market. 
Prices for newbuildings and second hand tankers continue to be low by
historical standards. NAT is in a good position to buy additional
vessels or order new vessels at advantageous prices when the time is
right. Such acquisitions would increase the dividend capacity of the
Company. It is a prerequisite for any expansion of the fleet that our
dividend and earnings capacity per share increase. During 2012 we
have inspected several vessels for possible acquisition purposes. We
are in no rush and we continue to exercise caution in this regard. 
In the 4th quarter 2012, NAT agreed to acquire Scandic American
Shipping Ltd. which was previously owned by the Chairman and CEO for
$25m, of which $17m was paid in stock. The transaction was completed
in January 2013. The main rationale underpinning the acquisition of
Scandic American Shipping Ltd. is above all related to the fact that
NAT has gained full control of all aspects of its operations. Among
other things this relates to technical and commercial management and
alignment of interests.  
Our primary objective is to enhance total return for our
shareholders, including maximizing our quarterly dividend. 
As of December 31, 2012, the Company has net debt of about $7.8m per
vessel. The Company has in place a new non-amortizing credit facility
of $430m, of which $250m has been drawn at this time. Cash on hand is
about $56m. 
The credit facility, which matures in November of 2017, is not
subject to reduction by the lenders and there is no obligation to
repay principal during the term of the facility. The Company pays
interest only on drawn amounts and a commitment fee for undrawn
amounts.  
Our cash breakeven rate is about $12,000 per day per vessel which is
a very low level in the tanker industry.  
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, 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 4Q2012, 3Q2012 and
4Q2011, please see later in this release. 
The Fleet
 The Company has a fleet of 20 homogenous Suezmax 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.
We expect that the expansion process will continue over time and that
more vessels can be expected to be added to our fleet. Our vessels
are employed in the spot market. The average age of our fleet is 11.6
years. Our vessels are in excellent technical condition - a priority
for us. 


 
                                                                           
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 Nordic Harrier (previously named Gulf Scandic) was redelivered to
us in October 2010. The vessel had been operated by the charterers
since the autumn of 2004. The vessel had not been technically
operated according to sound maintenance practices by the charterer.
Therefore, NAT has a claim for drydocking and other costs that the
charterer is obligated to cover under the bareboat charter. As
previously advised, the matter is now in arbitration. We expect it to
be heard in 2013. 
The Company continues to install equipment onboard the vessels to
reduce energy consumption.  
The graph shows the development of bunker prices in $/ton. Based on a
daily bunker consumption of 50 tons, a fall in bunker prices of
$100/ton represents a $5,000 per day saving per vessel. The quantity
and the cost of bunkers consumed are important factors for
establishing the time charter equivalent (TCE).  
Link to the graph: http://hugin.info/201/R/1677024/546797.pdf 
We continue to keep high technical quality of our fleet. Total off
hire (out of service) for 4Q2012 was 206 days for our fleet of which
157 days were planned off hire.  
During 2012, 8 of our vessels were in planned drydock. We have 6
drydockings planned for 2013. In isolation, it is an advantage to
dock a vessel in a period when tanker earnings are low. In the autumn
of 2012 we used extra time in dock to upgrade some of our vessels. 
World Economy and the Tanker Market
 The outlook for the world
economy is uncertain. Seaborne imports of crude oil into the US
decreased over the recent past. We do, however, note that the travel
distances of crude oil coming into the US have increased, meaning
that ton-miles for crude going to the US has seen a small increase.
Going forward, shale oil and tar sand oil projects may impact the US
and Canadian oil sector. These projects are vulnerable to reduced oil
prices. Demand for vessels and accordingly our freight rates are
partly driven by ton-miles, that is to say that not only volumes of
crude, but also the voyage distance affects tanker demand. Moreover,
recent data indicates that ton-miles are showing growth in line with
the fleet development for 2013 as a result not only of economic
recovery but changing trade patterns leading to longer voyages. 
The European economies are making progress in agreeing to uniform
banking terms and financial assistance packages. European economies,
however, continue to run significant deficits and face mounting debt,
while resistance to deficit reduction measures remains strong. The
economies of the Far East generally show continuing growth, although
at a slower pace than before. Annual crude imports into China totaled
a new record high in 2012. 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.  
The graph shows the average yearly spot rates since 2000 as reported
by R.S. Platou Economic Research a.s. Over the period 2000/2012 spot
rates for Suezmax tankers were $30,000 or more per day for eight
years. 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. 
Link to the graph: http://hugin.info/201/R/1677024/546797.pdf 
The Suezmax fleet (excl. shuttle tankers) counts 434 vessels at the
end of 4Q2012, an increase of 25 since the beginning of the year.  
The current orderbook stands as of today at 54 vessels which
represent 13% of the Suezmax fleet. At the time of this report, the
orderbook for 2014 counts only 5 Suezmax vessels. With current
scrapping activity and a lack of new orders there is a good
probability that the Suezmax fleet will shrink in 2014, which is to
our favour. 
Scrapping activity has increased recently. In 2012, 21 Suezmaxes were
scrapped compared to 8 during the year 2011. Given the current market
conditions we expect to see a further increase in the scrapping
activity.  
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. If the market improves, higher earnings and dividends can be
expected. However, if rates remain low, the Company is in a position
to buy vessels - secondhand vessels or newbuildings, inexpensively by
historical standards. Therefore, the Company is able to improve its
relative position in a weak market and is able to reap the benefits
of a stronger economic environment thereafter. Over the recent past
the Company has improved its relative position. 
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: http://hugin.info/201/R/1677024/546797.pdf 
[1] Operating cash flow (a non-GAAP measure) represents income from
vessel operations before depreciation and non-cash administrative
charges. For further information, please see reconciliation on page
8.
 [2] Total Return is defined as stock price plus dividends,
assuming dividends are reinvested in the stock 
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. Declaration of dividends is solely in the
discretion of the Board of Directors and may change from time to
time." 
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,
factors impacting the declaration of dividends, 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. 
Contacts:
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: nat@scandicamerican.com  
Jacob Ellefsen
Manager, Investor Relations & Research, Monaco
Nordic American Tankers Limited
Tel: + 377 93 25 89 07 or + 33 678 631 959 
Rolf Amundsen
Advisor to the Chairman, Norway
 Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906 
Turid M. Sorensen
EVP & CFO, Norway
Nordic American Tankers Limited
Tel: +47 33 42 73 00 or + 47 905 72 927 
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223 
 
 
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