Nordic American Tankers is very different from other tanker companies.
Nordic American has an operating model that is sustainable in both a weak and a strong tanker market. Accretive fleet growth, low debt per vessel and quarterly dividend payments are central elements of the strategy. NAT has one type of vessel - the Suezmax vessel that can carry one million barrels of oil. A homogenous fleet reduces our costs, which helps to keep our cash-breakeven down at about $12,000 per day per vessel, which is considered low for the industry. Net asset value (NAV) is a measure that is linked to the steel value of each individual ship, and has no relevance when it comes to valuation of NAT as an ongoing business.
Financial Information
The Company declared a cash dividend of $0.22 on January 9, 2015, which is expected to be paid on or about February 9, 2015 to shareholders of record as of January 22, 2015. The number of NAT shares outstanding at the time of this report is 89,182,001. Dividend payments will continue to be a central part of our strategy.
We believe that Nordic American Offshore will strengthen Nordic American Tankers. We see cost synergies for both NAT and NAO, in particular as regards general and administrative costs. The G&A costs of NAT benefit from resource sharing with NAO which is a completely independent company. As our respective fleets grow both companies benefit. Further growth should result in lower costs on a per vessel basis. Our investment in NAO is valued on a market adjusted basis on our balance sheet and fluctuations in the share price do not impact earnings. NAO took delivery of two newbuildings in January 2015, in which NAO realized a currency exchange gain of about $8m per ship. At the present NOK/USD exchange rate, there is a similar unrealized gain for the two last newbuildings to be delivered in 3Q2015.
Earnings per share in 4Q2014 was $0.01, compared with $0.01 in 3Q2014, and -$0.31 for 4Q2013.
The Company`s operating cash flow in 4Q2014 was $24.5m, compared with $21.7m in 3Q2014,
and $1.9m in 4Q2013.
One vessel was drydocked in 4Q2014. In 2015 we expect 6 vessels to be drydocked.
As a matter of policy, NAT is keeping a strong balance sheet with low net debt and focusing on limiting financial risk. At the end of 4Q2014 the Company had net debt of about $102m or $4.6m per vessel.
It is a prerequisite for any expansion of the fleet that our dividend and earnings capacity per share are expected to increase following such an expansion.
Our primary objective is to enhance total return for our shareholders, including paying a quarterly dividend.
The Company has in place a non-amortizing credit facility of $430m maturing in November 2017, of which $250m has been drawn. Cash on hand is about $100m. Net working capital and undrawn amounts of the credit facility amount to $332m.
For further details on our financial position for 4Q2014, 3Q2014 and 4Q2013, please see later in this release.
The Fleet
In 2014, the Company agreed to buy two secondhand vessels. The vessels were delivered to us July 16, 2014 and August 4, 2014. Following our recent order of two Suezmax vessels to be built in Korea, the Company has a fleet of 24 vessels. By way of comparison, in the autumn of 2004, the Company had three vessels. Our vessels are in excellent technical condition.
The arbitration hearings involving the Suezmax vessel Gulf Scandic (now named Nordic Harrier) have finished. Gulf Navigation Holding PJSC (GulfNav) was the other party in the arbitration. NAT was awarded $10.2m in the arbitration. At this time, the claim has not been received. We are continuing our efforts in order to collect the award.
NAT is focused on maintaining the technical quality of the fleet, and our operational performance remains at the forefront of the industry. The chart shows our development in observations per inspection for the year. 4Q2014 inspections had an average of 3.1 observations which is an excellent result. NAT`s performance can be considered industry best practice.
Link to the graph: http://hugin.info/201/R/1892717/670486.pdf
World Economy and the Tanker Market
The development of the world economy affects the tanker industry. Seaborne imports of crude oil into the US have decreased over the recent past. Going forward, shale oil and tar sand oil projects are expected to affect the US and Canadian oil sector. Some of these projects are vulnerable to reduced oil prices as we see at the time of this report. In terms of transportation work (ton miles), the reduced imports to the US are more than outweighed by the increased imports to the Far East. European economies continue to run significant fiscal deficits. 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. In the last six months bunker prices have fallen by more than 50%, impacting our results positively.
Link to the graph: http://hugin.info/201/R/1892717/670486.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 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.
The Suezmax fleet (excl. shuttle tankers) counts 445 vessels at the end of 4Q2014, meaning the fleet has decreased this year and remains unchanged from the previous quarter.
Following a number of newbuilding orders in recent months, the current orderbook stands at 58 vessels from now to mid-2017. This represents about 12% of the Suezmax fleet. In 2009, the orderbook was at over 50% of the existing fleet. At the time of this report, the orderbook for 2015 counts 14 Suezmax vessels. However, we expect the actual number of deliveries for the rest of this year to be lower.
In 2014 eight vessels were scrapped. In 2013 six Suezmaxes were scrapped compared to 21 in 2012 and eight during the year 2011.
Corporate Governance/Conflict of Interests
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. When the market improves, higher earnings and dividends can be expected. If tanker rates are 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 will be able to reap the benefits of stronger markets thereafter. Over the recent past the Company has improved its relative position. We shall endeavor to safeguard and further strengthen this position for our shareholders in a deliberate, predictable and transparent way. In an opportunistic way NAT is now assessing investments that further builds up 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.
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, being well placed to reap the benefits of a strong tanker market.
We encourage prospective investors interested in the crude tanker sector to consider buying shares in NAT.
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Link to the graph: http://hugin.info/201/R/1892717/670486.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 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, 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.
For questions related to this message, please contact:
Jacob Ellefsen,
Manager, Investor Relations and Research
Nordic American Tankers Limited
Tel: + 33 678 631 959 or + 377 93 25 89 07
Turid M. Sørensen, CFO & EVP
Nordic American Tankers Limited
Tel: +47 33 42 73 00 or +47 90 57 29 27
Rolf Amundsen, Advisor
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223
Web-site: www.nat.bm
4th Quarter 2014 Result
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Nordic American Tankers Limited via GlobeNewswire
HUG#1892717
