Nordic American Tankers Limited (NYSE:NAT) - NAT is well positioned to benefit as market fundamentals improve.
Link to the complete 4th Quarter 2012 report:
Hamilton, Bermuda, February 11, 2013
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.Â Operating cash flow for the fleet
was $17.5 million for 2012. Â During 4Q2012 the operating cash flow was -$1.1
million. Â The transportation sector, which is important for the tanker industry,
shows a very strong development in the Far East. Â As an example, new passenger
car sales in China increased from 3.9 million units in 2005 to 15.4 million in
2012. Â 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. Â 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.Â 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
* 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. Â 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
Growth is a central element of the Nordic American System.Â 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.Â 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
In January 2013, the Board declared a dividend of $0.16 per share for 4Q2012 to
shareholders of record as of January 30, 2013.Â The dividend will be paid on or
about February 13, 2013. At the time of this report there are 54,825,751 shares
Earnings per share was -$0.61 for the fourth quarter, including a $12 million
impairment charge for one of the vessels in our fleet.Â Excluding the
impairment, earnings per share was -$0.39.Â Applying the tests for impairment to
the fleet as a wholeÂ would have resulted in no netÂ 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.Â 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
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.Â This policy
will continue.Â 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. Â 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.Â 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 4(th) 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. Â 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 Company has a fleet of 20 homogenous Suezmax vessels at the time of this
report.Â By way of comparison, in the autumn of 2004, the Company had three
vessels.Â 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.Â Our vessels are in excellent technical condition - a priority
VesselÂ Â Â Â Â Dwt VesselÂ Â Â Â Â Â Dwt
Nordic ApolloÂ Â 159,999 Nordic Hunter 151,400
Nordic Aurora 147,262 Nordic Jupiter 157,411
Nordic Breeze 158,597 Nordic MistralÂ Â 164,236
Nordic Cosmos 159,998 Nordic MoonÂ Â 159,999
Nordic Discovery 153,328 Nordic Passat 164,274
Nordic FighterÂ 153,328 Nordic SaturnÂ 157,332
Nordic FreedomÂ Â Â 163,455 Nordic SpriteÂ 147,188
Nordic GraceÂ 149,921 Nordic VegaÂ 163,000
Nordic Harrier 151,475 Nordic Voyager 149,591
Nordic Hawk 151,475 Nordic Zenith 158,645
Â Â 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
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
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
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.Â 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.Â Interests must be
aligned.Â 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.Â If the market improves, higher earnings
and dividends can be expected.Â Â 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
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
 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.
 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. Â 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. Â 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. Â 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. Â 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.
Scandic American Shipping Ltd
Nordic American Tankers Limited
P.O Box 56, 3201 Sandefjord, Norway
Tel: + 47 33 42 73 00 E-mail: Â firstname.lastname@example.org
Jacob Ellefsen, Manager, Investor Relations & Research, Monaco
Nordic American Tankers Limited
Tel: + 377 93 25 89 07 or + 33Â 678 631Â 959
Rolf Amundsen, Advisor to the Chairman, Norway
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906
Turid M. SÃ¸rensen, EVP & CFO, Norway
Nordic American Tankers Limited
Tel: +47Â 33 42 73 00 or + 47 905 72 927
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223
4th Quarter 2012 Result:
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