Nordic American Tankers's 2Q15 Earnings
Revenue
Nordic American Tankers’s (NAT) revenue in 2Q15 rose to $116 million, compared to $112 million in the prior quarter. It was substantially higher than 2Q14 revenue of $66 million. However, 2Q results are normally seasonally weak.
Revenue growth
In 2Q15, Nordic American Tankers recorded a YoY (year-over-year) growth in revenue of 76%. The company employs its entire fleet in the spot market, and the increase in revenue was purely attributable to higher tanker rates. In 2Q15, the company achieved an average voyage rate of $38,800 per day per vessel against $37,000 in 1Q15 and $12,100 in 2Q14.
Suezmax market
According to management, developments in the world economy, and especially in the US with regard to the oil market, have affected the tanker industry. Recently, with the shale oil revolution, seaborne imports of crude oil into the US have decreased. Those imports are now making their way to Asian countries, which have increased their imports. This has benefited the crude tanker industry, especially the Suezmax vessel, by leaps and bounds. The route from Asia to the Gulf is long and leads to an increase in ton-mile demand for transporting crude oil (DBO). NAT management expects this trend to continue, which benefits the crude tanker industry.
Revenue outlook
NAT stated that so far in the third quarter it has achieved a higher day rate than in the precedingtwo quarters. However, the market rates for Suezmax started to fall in mid-July. According to industry reports, the average industry rates were around $45,000 in July, but have decreased to around $30,000 in August.
The rates have declined due to refinery maintenance and weaker refining margins in Asia, which have impacted demand for crude oil. Revenues for Nordic American Tankers, along with Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), DHT Holdings (DHT), and Euronav (EURN), will be affected due to this decline in the third quarter. However, the rates are expected to climb again in the fourth quarter.
As in the first half of the year, Nordic American Tankers expects three vessels to be dry-docked in the remaining half of the year. This won’t have a major impact on revenues as compared to last quarter. In the next article, we will assess the company’s net revenue, which is impacted by its voyage expenses.
Nordic American Tankers operates all its vessels in the spot market. This helps the company to take advantage of the high tanker rates currently prevailing in the market. However, this strategy also increases risk, as spot rates can be volatile, and revenue visibility is lower.