Nordic American Tankers' 4Q2016 Report (NYSE:NAT) - NAT performed very well during 4Q2016 and so far is doing even better in 1Q2017, Cash dividend declared for the 78th time since the autumn of 1997.

Press release from Nordic American Tankers


Link to the complete 4th Quarter 2016 report: http://hugin.info/201/R/2076096/780706.pdf

Hamilton, Bermuda, February 6, 2017

2016 was a very good year for NAT in a volatile tanker market. The results for the fourth quarter (TCE $21,600) came out solidly higher than the third quarter (TCE $16,700). So far, 2017 has started at levels (TCE $25,000) well above the fourth quarter. We are now reaping the benefits of increasing our fleet over the last few years.

A key part of our business model is our relentless focus on efficiency and operating costs. It is also a priority to have a low leverage. NAT has the best Total Return[1] for our shareholders. Our annual Total Return (profitability) since 1997 is about 10% p.a. In the same period, the NAT dividend yield is about 11%. Risk management is important for a company in order to be successful in both a strong and a weak market.

In addition to paying a quarterly dividend, we wish to continue building a cash position in order to keep the low debt level when we grow our fleet.

The success of the placement of $120m in the autumn of 2016 was due to our proven business model.
The capital we raised strengthened our company by allowing NAT to enter into agreements with Samsung Heavy Industries Co. Ltd., for the construction of three Suezmax tankers of about 157,000 deadweight tons to be delivered during the second half of 2018. The newbuildings are expected to be financed mostly with proceeds from the offering, cash from operations and with debt.

Growth of a homogenous Suezmax fleet is a key success factor for NAT. The three additional newbuildings will increase the fleet by 10%, enlarging dividend and earnings capacity. We are engaged in transportation of crude oil. NAT has no investments in the dry cargo or container sectors that are facing challenges.

We consider our close dialogue with big oil in the West and in the East as important undertakings. Our services are strongly related to safety for our crew, the environment and our assets.

NAT has a cash break-even rate below $11,000 per day per ship, including financial charges and G&A costs. The operating expenses for our vessels are low; about $8,400 per vessel per day. Operating expenses for all of our vessels are more or less the same. This is above all a result of strict maintenance procedures and a homogenous fleet. The drydocking costs for those of our vessels that are more than 15 years are on average less than $2.0m per vessel which is at the same level as the rest of our fleet.

As expressed earlier, shipbuilding technology for crude oil tankers has not changed much over the last 20 years. Whether a ship has been around five years or fifteen years or longer does not matter as long as they are well maintained.

In the tanker sector, the NAT stock has significant liquidity, allowing investors to buy and sell shares whenever they wish. In 4Q2016 about 2m shares on average were traded daily with an average daily trading value of around $18m per day. The average volume for 2016 for NAT was about 1.7m shares per day.

On January 23, 2017, NAT declared a cash dividend of $0.20 per share for 4Q2016, payable to shareholders of record as of February 10, 2017. Payment of the dividend is expected to be on or about February 24, 2017.

 Some observations:

  • NAT has paid quarterly dividends 78 times of $48.11 per share during the period since 1997.
     
  • Some observers in the industry do not understand that Net Asset Value (NAV), or the steel value of a vessel, is irrelevant when valuing NAT as a going concern.
     
  • Together with our shareholders, our customers are the most important constituency in the Nordic American sphere.
     
  • The recent equity offering of $120m was for expansion beyond the present 30 vessel fleet. In October 2016, NAT announced agreements with Samsung to build three Suezmax newbuildings for delivery in 2018. Including these three newbuildings, we expect that the NAT fleet will consist of minimum 33 vessels. The delivery of our newbuilding MT Nordic Space is expected to take place at the end of February this year.
     
  • The quality of the NAT fleet is at the top as evidenced by our vetting statistics, that is, inspections of our ships by clients. In such vetting processes safety for our crew, the environment and our assets are in focus.
     
  • Generally, a low oil price is positive for the tanker market as it is stimulating the world economy.
     
  • Adjusted Net Operating Earnings[2] (cash surplus) has been as follows: $28.2m for 4Q2016, $21.7m for 3Q2016 and $57.2m for 4Q2015.
     
  • NAT has a credit facility of $500m, maturing in December 2020.
     
  • A homogenous fleet reduces our cash operating costs, which helps to keep our cash break-even rate below $11,000 per day per vessel, including financial charges and G&A costs. 

             

For further accounting information, please see below. Our Annual Report 2015 on Form 20-F contains a large amount of information about NAT. This report was filed with the SEC March 23, 2016 and can be found on our web site www.nat.bm.

Financial Information

The Company declared a cash dividend of $0.20 on January 23, 2017, which is expected to be paid on or about February 24, 2017 to shareholders of record as of February 10, 2017. The number of NAT shares outstanding at the time of this report is 101,969,666. In 3Q2016, the dividend was $0.26 per share, including about $0.05 per share created by the one-time settlement with Gulf Navigation.

Earnings per share (EPS) in 4Q2016 were -$0.02. In 3Q2016 and 4Q2015 the EPS were -$0.08 and $0.34, respectively. EPS does not take account of financial risk.

The Company's Adjusted Net Operating Earnings in 4Q2016 was $28.2m. In 3Q2016 and 4Q2015 Adjusted Net Operating Earnings was $21.7m and $57.2m, respectively.

For the whole fleet, we had a total of 180 days offhire during the quarter, of which 159 days were planned offhire.  The average time at the yard during drydocking of our four vessels was on average about 14 days. The offhire statistics are evidently reflecting the high quality of our fleet.

NAT continues to maintain a strong balance sheet with low net debt and is focusing on keeping a low financial risk. At the end of 4Q2016, the Company had net debt of about  $305m or about $10.5m per vessel.

The table on the right shows our Adjusted Net Operating Earnings, stock liquidity and dividend over the last eight quarters. Liquidity in our stock is high compared with other tanker companies.

For further information on our financial position for 4Q2016, 3Q2016 and 4Q2015, please see later in this release.

Link to the graph: http://hugin.info/201/R/2076096/780706.pdf

The Fleet

The Company will have a fleet of 30 trading vessels in early 2017.  By way of comparison, in the autumn of 2004, the Company had three vessels.

NAT is focused on maintaining top technical quality of the fleet. Our operational performance remains at the forefront of the industry. 4Q2016 inspections had an average of 2.3 observations which we consider 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. A low oil price is stimulating the world economy which is positive for the tanker market.

The drybulk and container sectors are weak. Therefore, some owners are unable to expand into the crude tanker sector, which is currently strong. The yard industry is struggling with low orders over the last years. For NAT, a strong balance sheet and access to financing are competitive advantages.

The Suezmax fleet (excl. shuttle tankers) counts 475 vessels at the end of 4Q2016, following an increase of 27 vessels in 2016.

During the years 2014 and 2015, a number of orders were placed with shipyards. In 2016 twelve new ships were ordered at the shipyards including three from NAT. The current orderbook of crude tankers stands at 80 vessels from now to the end of 2018. This represents about 16% of the Suezmax fleet. Slippage and cancellations may take place, thereby reducing the orderbook. In 2016, it was a fleet growth of 6.0% with no scrapping of vessels.

The graph to the below shows the average yearly spot rates since 2000 as reported by Clarksons Platou. The rates are an indication of the level of the market and its direction.

Link to the graph: http://hugin.info/201/R/2076096/780706.pdf

The supply of tanker tonnage is inelastic in the short term. When there are too many ships, rates tend to go down. When there is scarcity of ships, rates tend to go up.

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.  From time to time in the shipping industry, we see that questionable transactions take place which are not in harmony with sound corporate governance principles, both as to transparency and related party aspects.

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.  In an improved market, higher earnings and dividends can be expected. The Company is in a position to reap the benefits of strong markets.

Our dividend policy will continue to enable us to achieve a competitive cash yield.

NAT is firmly committed to protecting its underlying earnings and dividend potential. We shall endeavor to safeguard and further strengthen this position in a deliberate, predictable and transparent way.

Going forward we believe the recent acquisitions of vessels will increase NAT's Total Return.

*****

Link to the graph: http://hugin.info/201/R/2076096/780706.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.

Contacts:  
Jan H. A. Moller,
Head of Investor Relations & Financial Manager
Nordic American Tankers Limited
Tel: +1 888 755 8391 or +47 90 11 53 75

 
Rolf Amundsen, Advisor
Nordic American Tankers Limited
Tel: +1 800 601 9079 or + 47 908 26 906
Turid M. Sørensen, CFO & EVP
Nordic American Tankers Limited
Tel: +47 33 42 73 00 or +47 90 57 29 27

 
Herbjørn Hansson, Chairman & CEO
Nordic American Tankers Limited
Tel: +1 866 805 9504 or +47 90 14 62 91
Gary J. Wolfe
Seward & Kissel LLP
New York, USA
Tel: +1 212 574 1223

 


Web-site:  www.nat.bm
   


[1] Total Return is defined as stock price plus dividends, assuming dividends are reinvested in the stock.

[2] Adjusted Net Operating Earnings is an important dimension in the shipping industry, but it is a non-GAAP measure. Please see later in this announcement for a reconciliation of Adjusted Net Operating Earnings to Net Operating Earnings (Loss).

4th Quarter 2016 Result