Nordic American Tankers Limited : Nordic American Tankers Ltd. 2Q2013 Report -
NAT continues to improve its relative position in a weak market and has a
strong liquidity reserve. 3Q2013 is expected to show improvement on 2Q2013.
Link to the complete 2nd Quarter 2013 report:
Hamilton, Bermuda, August 12, 2013
In announcing its results for the second quarter of 2013, Nordic American
Tankers Limited ("the Company" or "NAT") emphasizes three key points that
differentiate it from others in the field: its strong financial position, its
dividend policy and its top quality Suezmax tanker fleet.
In July the Company announced a dividend of $0.16 per share for 2Q2013,
identical to the dividend for 1Q2013. The Company will pay the dividend on or
about August 13, 2013 to shareholders of record as of July 31, 2013. The
dividend will be paid from cash on hand. Since NAT commenced operations in the
fall of 1997, a dividend has been paid for 64 consecutive quarters, with total
dividend payments over the period amounting to $44.42 per share including the
dividend to be paid in August.
The Suezmax tanker market has improved significantly at the time of this
report compared with the average for the second quarter. The third quarter of
2013 can be expected to show an improvement on the second quarter.
The underlying fundamentals of the Suezmax tanker sector showimprovement.
Political unrest in Egypt and a smaller difference between the price of oil
produced in the US (WTI) and the Brent crude price are mentioned as factors
leading to higher tanker rates. In 2014 the Suezmax tanker fleet should not
increasevery much, if at all, as ships are scrapped. In fact the Suezmax
fleetstands a good chance of shrinking. Should the current trends in ton
miles (volume carried multiplied by distance travelled) continue, fleet
utilization could grow in 2014.
The closing of the price gap between WTI (oil produced in the US) and Brent
crude (non-US production) tends to stimulate US oil imports and is an example
of how tanker market dynamics may change unexpectedly.
Key points to consider:
*Earnings per share in 2Q2013 was -$0.48 compared with -$0.59 (or -$0.43
excluding non-recurring charges) in 1Q2013 and -$0.15 in 2Q2012.
*NAT's liquidity reserves including cash, the undrawn part of the credit
facility and working capital stood at about $330 million at the end of
*Our agreement with a company in the ExxonMobil group was extended for 2
years - an important vote of confidence from the leading oil company.
*We continue to focus on cost efficiency - both in administration and
onboard our vessels.
*Spot rates achieved for 2Q2013 were weaker than 1Q2013. Second quarter
demand was as usual impacted by refinery maintenance shutdowns. Coupled
with continuing deliveries of new vessels from the shipyards, tanker rates
were under pressure through the quarter.
*NAT started the quarter announcing an equity offering that resulted in net
proceeds to the Company of $102m. It is a clear sign of faith from the
market that the Company was able to complete this transaction at a time of
continued uncertainty for many in the tanker industry.
*"Financial Vetting" and focus on the financial strength of shipowners are
increasingly relevant in the tanker industry.During the quarter we saw
high-profile bankruptcies, with ensuing disruptions of service. With NAT
this is not a concern for charterers.
*Scrapping has been slower than in 2012. However a number of vessels are
approaching their 15 year survey dates. For many owners it may not be
feasible to pass the survey due to being in a weak financial position and
having insufficient maintenance. Following such developments increased
scrapping could incur.
*The Company does not engage in any type of derivatives.
*Economic development in Asia remains stable while in Europe the
uncertainty continues. Developments in the US are always important -
particularly US domestic oil production.
*The Company cancelled at an insignificant cost the agreement to buy a 2013
built Suezmax tanker as the seller failed to deliver the vessel in time.
"The Nordic American System"
Quality in all contexts is very important. Following this linktakes you to an
interview with the NAT Chairman & CEO in June 2013 under the title "QUALITY
COUNTS". This interview highlights our policies in important respects. The
interview was published in the FORUM magazine of Det Norske Veritas ("DNV").
DNV is one of the top classification societies in the world with about 10,000
highly qualified employees.
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. 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 Orion Tanker
Pool which increases the efficiency and utilization of the fleet. In our
experience, the spot market gives better earnings than the time charter market
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. The average age
of our fleet is also an important consideration.
NAT has only one type of vessel - 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
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 and
not to NAT as an ongoing system.
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
The Board has declared a dividend of $0.16 per share for 2Q2013 to
shareholders of record as of July 31, 2013. The dividend will be paid on or
about August 13, 2013. The number of shares outstanding is 66,038,251, of
which 23,000 are shares in treasury.
Earnings per share in 2Q2013 were -$0.48, compared with -$0.59 (or -$0.43
excluding non-recurring charges) in 1Q2013 and -$0.15 in 2Q2012. Bunker costs
of $1.4m for planned offhire vessels are debited to the accounts for 2Q2013.
The Company's operating cash flow was -$10.6m for 2Q2013, compared with
-$4.9m for 1Q2013 and$10.3m in 2Q2012.
We are not satisfied with the results in the present weak environment.
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.
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
ExxonMobil is the result of a more active marketing policy. We also do
business with other large oil companies in the world on a regular basis. They
all demand quality both at sea and onshore. NAT now owns 100% of Orion Tankers
Ltd. Orion Tankers will continue to facilitate improved penetration of the
It is a prerequisite for any expansion of the fleet that our dividend and
earnings capacity per share increase. The cancelled vessel purchase should not
be interpreted as a change in the growth plans of the Company.
Our primary objective is to enhance total return for our shareholders,
including maximizing our quarterly dividend.
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. At the end of 2Q2013 the net debt per vessel was $4.4m.
In addition, the Company has in place a non-amortizing credit facility of
$430m, of which $210m has been drawn at this time. Cash on hand is $71.1m.
Our total liquidity reserve amounts to $330 million (cash, working capital +
undrawn amount under the credit facility)
The credit facility, which matures in the 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. This means that our cash breakeven rate
of about $12,000 per day per vessel is significantly lower than that of
companies with high leverage.
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
For further details on our financial position for 2Q2013, 1Q2013 and 2Q2012,
please see later in this release.
The Company has a fleet of 20 vessels at the time of this report. By way of
comparison, in the autumn of 2004, the Company had three vessels. At the end
of 2009 and 2010 we had 15 vessels in operation. Please see the fleet list
below. We expect that the expansion process will continue over time. The
average age of our fleet is 11.6 years. Our vessels are in excellent
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 before the end of 2013
The Company continues to move aggressively in reducing energy consumption on
the vessels. We slow steam whenever possible in order to reduce fuel
The graph shows the development of bunker prices in $/ton. The economics of a
trading tanker are significantly impacted by the cost level of bunker oil.
We have 6 drydockings planned in 2013, of which 4 were undertaken in the first
half of 2013. Typically, average costs for a 10-year docking are $2.0m -
$2.5m and for a 15-year docking are $2.5m - $3.0m. If a vessel needs to be
docked, it is better to do so when tanker earnings are low since timing is
less critical in such a situation. Even though drydocking costs for our
vessels are cheaper in the Far East than at yards west of Suez, the
positioning of vessels can be costly, reducing the time charter equivalent
Link to the graph:http://hugin.info/201/R/1722364/573791.pdf
World Economy and the Tanker Market
The outlook for the world economy is uncertain. Seaborne imports of crude oil
into the US have decreased over the recent past. Going forward, shale oil and
tar sand oil projects may affect the US and Canadian oil sector. The
differential between the Brent Oil price and the WTI (West Texas Intermediate)
has come down recently. This may stimulate imports of crude oil into the US.
In terms of transportation work (ton miles), the reduced imports by the US
are more than outweighed by the increased imports by the Far East. The
European economies are making progress in agreeing to unified 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. Tanker market
rates are also affected by newbuildings that enter the markets, increasing the
supply of vessels. Scrapping impacts supply in the other direction. As a
matter of policy the Company does not attempt to predict future spot rates.
Rates may change quickly, which can lead to increased dividends. NAT is very
well positioned to take advantage of rate change.
Link to the graph:http://hugin.info/201/R/1722364/573791.pdf
The graph above 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. In any analysis of the tanker industry, the
direction of the global economy is always the most important factor.
The Suezmax fleet (excl. shuttle tankers) counts 450 vessels at the end of
2Q2013, an increase of 16 since the beginning of the year. 10 vessels were
delivered during the second quarter and 13 vessels are planned for delivery in
the rest of 2013.
The current orderbook stands at 44 vessels which represents less than 10% of
the Suezmax fleet. At the time of this report, the orderbook for 2014 counts
only 8 Suezmax vessels. This number has increased due to delays on 2013
Scrapping activity has been sluggish so far in 2013. So far this year 2
Suezmaxes have been scrapped compared to 21 in 2012 and 8 during the year
2011. Given the current market condition and the expense of keeping older
vessels in the water we expect to see an 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 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 is able to reap the benefits of a
stronger environment thereafter. Over the recent past the Company has improved
its relative position. In an opportunistic way NAT is now assessing
investments that further builds out 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 provided spot tanker
rates are above our breakeven levels.
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
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/1722364/573791.pdf
 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 9.
 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
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 our Annual
Report on Form 20-F, and our reports on Form 6-K.
Scandic American Shipping Ltd
Nordic American Tankers Limited
P.O Box 56, 3201 Sandefjord, Norway
Tel: + 47 33 42 73 00 E-mail: email@example.com
Jacob Ellefsen, Manager, Investor Relations & Research, Monaco
Nordic American Tankers Limited
Tel: + 377 93 25 89 07 or + 33678 631959
Rolf Amundsen, Advisor, Norway
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906
Turid M. Sørensen, EVP & CFO, Norway
Nordic American Tankers Limited
Tel: +4733 42 73 00 or + 47 905 72 927
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223
2nd Quarter 2013 Result
This announcement is distributed by Thomson Reuters on behalf of Thomson
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of
information contained therein.
Source: Nordic American Tankers Limited via Thomson Reuters ONE
Press spacebar to pause and continue. Press esc to stop.