Nordic American Tankers Ltd. 2Q2013 Report -- NAT Continues to Improve Its Relative Position in a Weak Market and Has a Strong

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. 
HAMILTON, BERMUDA -- (Marketwired) -- 08/12/13 --  Nordic American
Tankers Limited (NYSE: NAT) 
Link to the complete 2nd Quarter 2013 report: 
http://hugin.info/201/R/1722364/573791.pdf  
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 show
improvement. 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 increase very much, if at
all, as ships are scrapped. In fact the Suezmax fleet stands 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 second quarter.
    
    
--  Our agreement with a company in the ExxonMobil group was extended for
    2 years - an important vote of confidence from theleading 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 link
(http://hugin.info/201/R/1722364/573792.pdf) takes 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 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. 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 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 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 other charges. 
Financial Information
 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[1] 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 market. 
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[2] 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 shareholders. 
For further details on our financial position for 2Q2013, 1Q2013 and
2Q2012, please see later in this release. 
The Fleet
 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 technical
condition. 


 
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 consumption. 
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 (TCE)
income. 
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 deliveries. 
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 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/1722364/573791.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
9.
 [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 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, 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 
2nd Quarter 2013 Result: http://hugin.info/201/R/1722364/573791.pdf 
 
 
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