Link to the complete 2nd Quarter 2015 report: http://hugin.info/201/R/1944533/704570.pdf
Hamilton, Bermuda, August 10, 2015
The second quarter 2015 produced better results than the first quarter 2015. So far in the third quarter, we have secured higher average rates than in the two preceding quarters of the year. In 2Q2015, NAT continued to benefit from both a solid Suezmax tanker market and a top quality fleet (22 vessels in operation in 2Q2015 and 4 vessels expected to be included later in 2015 and thereafter). Cashflow from operations[1] was $ 54.5m, compared with $ 51.0m in 1Q2015. For all of 2014, cashflow from operations was $ 77.7m compared with -$ 11.1m in 2013.
For NAT shareholders, the significant liquidity in the stock continues to be an attractive factor for those investors looking to be able to buy and sell shares related to the crude tanker market. During 2Q2015 more than 1.6 million shares were on average traded daily, equating to more than $ 20m worth of shares changing hands every day.
On July 15, 2015, NAT declared a cash dividend of $ 0.40 per share payable to shareholders of record as of July 29, 2015. The dividend is expected to be paid about August 12, 2015. Since NAT commenced operations in the fall of 1997, the Company has paid a dividend for 72 consecutive quarters, with total dividend payments over the period amounting to $ 46.16 per share, including the dividend to be paid about August 12, 2015.
On July 27, 2015, NAT announced the acquisition of two Suezmax tankers. The vessels were built in 2010. The vessels are expected to join the fleet in September and October this year. The total price was about $ 122 million. NAT does not plan to issue equity to cover commitments for these vessels or its two newbuildings to be delivered in 2016 and 2017. This growth further enhances our dividend and earnings capacity.
During the last year, oil prices have decreased significantly. This has positively impacted the tanker market through increased transportation requirements and lower fuel costs.
Key points to consider:
- Tanker rates achieved on average for 2Q2015 were about $ 38,800 per day per vessel for our trading fleet, as against $ 37,000 per day per vessel achieved in 1Q2015 and $ 12,100 in 2Q2014.
- Earnings per share in 2Q2015 came to $ 0.35 compared with $ 0.31 for 1Q2015 and -$ 0.19 for 2Q2014.
- The balance sheet was strengthened in 2Q2015 as we retained about $ 19m of cashflow from operations during the quarter. The net operating cash flow itself would have allowed for $ 0.61 per share in dividend based on a full payout of cash flow.
- The undrawn part of our credit facility plus net working capital stood at about $ 338m at the end of 2Q2015.
- The two newbuildings for delivery August 2016 and January 2017 are on schedule.
- 13 vessels were vetted (inspected by clients) during 2Q2015. NAT came out with 3.3 observations on average, an excellent result, reflecting the top quality of our fleet.
Nordic American Tankers is very different from other tanker companies.
Nordic American Tankers has an operating model that is sustainable in both a weak and a strong tanker market. Accretive fleet growth, low net 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 operating costs, which is helping to keep our cash-breakeven for NAT below $ 12,000 per day per vessel. Net asset value (NAV) is a measure that is linked to the steel value of each individual ship, which has no relevance when it comes to the valuation of the Nordic American Tankers as an ongoing business.
Financial Information
The Company declared a cash dividend of $ 0.40 on July 15, 2015, which is expected to be paid about August 12, 2015 to shareholders of record as of July 29, 2015. The number of NAT shares outstanding at the time of this report is 89,182,001. At the same time the market capitalization of NAT is about $ 1.3 billion. Quarterly dividend payments will continue to be a central part of our strategy.
The investment in NAO is accounted for using the equity method. This change, which is also reflected in the comparable figures, is due to our strategic long term view of our investment in NAO.
Earnings per share in 2Q2015 was $ 0.35, compared with $ 0.31 for 1Q2015 and -$ 0.19 for 2Q2014.
The Company`s operating cash flow in 2Q2015 was $ 54.5m, compared with $ 51.0m in 1Q2015, and $ 4.3m in 2Q2014.
The appreciation of USD vs NOK had a positive impact on NAT`s G&A cost, of which a substantial part is in Norwegian kroner.
We had a total of 81 days offhire during the quarter, of which 51 were related to drydockings. In 2015 we expect a total of six vessels to be drydocked; ie. three more vessels are scheduled to enter drydock later this year.
As a matter of policy, NAT keeps a strong balance sheet with low net debt and is focusing on keeping a low financial risk. At the end of 2Q2015 the Company had net debt of about $ 105m or about $ 4.4m per vessel.
The table on the right shows our cash flow, stock liquidity and dividend over the last 6 quarters. So far in 2015, the Company has a significantly stronger cashflow than for 2014 as a whole. Liquidity in the stock is high compared with other tanker companies, which is attractive for shareholders.
Link to the graph: http://hugin.info/201/R/1944533/704570.pdf
It is a prerequisite for any expansion of the fleet that our dividend and earnings capacity per share are expected to increase following such a transaction.
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 $ 106m. Net working capital and undrawn amounts of the credit facility amount to $ 338m.
For further details on our financial position for 2Q2015, 1Q2015 and 2Q2014, please see later in this release.
We believe that Nordic American Offshore Ltd. (NAO) will add value to Nordic American Tankers over time. 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 will benefit. Further growth should result in lower costs on a per vessel basis. The investment in NAO is accounted for using the equity method. NAO took delivery of two newbuildings in January 2015. As the vessels were ordered in Norwegian kroner, NAO realized a currency exchange gain of about $ 8m per ship because of the strong U.S. dollar. The reduced level of the oil price has impacted the operations of NAO negatively.
The Fleet
Following our December 2014 order of two Suezmax vessels to be built in Korea and the recently announced acquisition of two Suezmaxes, the Company has a fleet of 26 vessels. 22 vessels are currently on the water. 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 been concluded. Gulf Navigation Holding PJSC (GulfNav) was the other party in the arbitration. NAT was awarded $ 10.2m in the arbitration, plus interest and costs. At this time, the claim has not been received. An agreement has been made with GulfNav where NAT will receive compensation for the claim. According to the agreement NAT shall receive mandatory convertible bonds which swiftly will be converted into GulfNav shares. These shares will be sold in the market over time as market liquidity permits. GulfNav is listed on the DFM stock exchange in Dubai.
NAT is focused on maintaining a top technical quality of the fleet. Our operational performance remains at the forefront of the industry. The inspections during 2Q2015 had an average of 3.3 observations which is an excellent result. NAT`s performance can be considered industry best practice.
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. However, European crude imports have recently shown a rising trend.
Tanker market rates are also affected by newbuildings that enter the markets, increasing the supply of vessels. Scrapping impacts supply in the other direction.
The Suezmax fleet (excl. shuttle tankers) counts 452 vessels at the end of 2Q2015, meaning the fleet has increased by seven vessels this year.
Following a number of orders made in recent months, the current orderbook stands at 78 vessels from now to late 2017. This represents about 17% 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 the remainder of 2015 counts four Suezmax vessels.
So far in 2015 one vessel has been scrapped. In 2014 eight vessels were scrapped, compared with six in 2013 and 21 in 2012.
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/1944533/704570.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.
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 continue our 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 rates do remain low, the Company is in a position to buy secondhand vessels or newbuildings. 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. In an opportunistic way NAT is now assessing investments that will further enhance the position of the Company.
In making an acquisition of vessels or other forms of expansion, our objective is for the Company 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. We shall endeavor to safeguard and further strengthen this position for our shareholders in a deliberate, predictable and transparent way.
We encourage prospective investors interested in the crude tanker sector to consider buying shares in NAT.
Link to the graph: http://hugin.info/201/R/1944533/704570.pdf
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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.
Contacts:
Jacob Ellefsen, VP Research and Investor Relations
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
Herbjørn Hansson, Chairman & CEO
Nordic American Tankers Limited
Tel: +1 866 805 9504 or + 47 901 46 291
Web-site: www.nat.bm
[1] Operating cash flow is a non-GAAP number. Please see later in this announcement for a reconciliation of operating cash flow to income from vessel operations.
2nd Quarter 2015 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#1944533
