Nordic American Tankers (NYSE NAT) - The 3rd Quarter 2017 report
Link to the complete 3rd Quarter 2017 report:
Hamilton, Bermuda, November 3, 2017
Nordic American Tankers today reported unaudited results for the three months ended September 30, 2017:
On October 19, 2017, we announced our 81st consecutive quarterly dividend distribution. As expected, the 3rd quarter of 2017 proved challenging. As previously announced, earnings on our ships were lower than in the preceding quarters. The TCE (timecharter equivalent) for 3Q2017 was $10,600 per day per ship. During the quarter we had eight vessels in scheduled drydocking. This concludes our drydocking program for 2017. At this point in the 4th quarter, we see a strengthening of tanker rates with recent fixtures at $20,000 per day. The tanker environment may change quickly and unexpectedly, up or down.
NAT is financially sound. We are in the process of making the capital structure of NAT even more efficient in order to retain our flexibility and to further grow the Company. Our net debt at the end of 3Q2017 stood at about $341.5m equal to about $11.4m per vessel, which is among the lowest in the industry.
We have signed the main terms with a major financial institution for a full financing arrangement of our three newbuildings for delivery in June, August and October 2018, respectively. We expect to be able to announce the final agreement later this month.
During the third quarter, we signed four Time Charter contracts with major oil companies. The contracts have various durations, up to two years, with floor rates above our cash break-even and profit sharing mechanisms, securing employment for these ships while maintaining potential upside benefits.
NAT enjoys a significant upside potential when the market improves. The historic average market rate for the last 25 years was about $30,000 per day per Suezmax vessel. Such earnings could give the basis for a dividend of about $2.00 per share per year, provided full pay-out. This would create a solid dividend yield. As of today, a $2.00 annual dividend would represent a yield north of 40%.
Recently, we have seen comprehensive discussions about the new sulphur requirements for bunker consumption on ships to be in effect from 2020. Our 33 Suezmax tankers are fully compliant to run on 0.10% sulphur content or less. Such low sulphur fuel is available in the market. Therefore, going forward we do not see that this new requirement is an issue for NAT.
The Net result for 3Q2017, (after depreciation and finance charges), was -$34.3m . In 2Q2017 the Net result was -$15.9m. The Adjusted Net Operating Loss was -$0.7m (Ebitda) for 3Q2017. In 2Q2017 the Adjusted Net Operating Earnings were $15.2m .
We continue our unbroken practice of paying dividends. Tanker markets are volatile but our strategy remains steadfast.
Later in this report we have included all relevant accounting numbers for 3Q2017 and for other periods.
Our fleet consists of 33 (including 3 newbuilds) well maintained Suezmax tankers (all ships with CAP 1 class notation, which above all is related to steel quality) with an aggregate cargo capacity of 33 million barrels of crude oil, equivalent to one third of the world's daily oil consumption. This illustrates the size of NAT.
The average age of our fleet is about 12 years, and the individual vessels are evenly spread across the decades; 10 units (including our 3 newbuilds) built from 2010 onwards, 13 units built between 2000 and 2009 and the remaining 10 built in the late 1990s. This is a balanced portfolio of vessels.
The outcome of the inspections of our ships by oil companies ("vetting") reflects the good quality of our fleet.
Having the largest fleet of Suezmax tankers in the world, we focus on renewal and growth. In a capital intensive industry like ours, timing and financing are the key issues to achieve a sound cost structure. We will consider growth and renewal through acquisitions and newbuilds, as we have done in the past.
NAT is scheduled to take delivery of its three Suezmax newbuilds in June, August and October of 2018, respectively. 30% of the building price was paid cash on contract signature in October 2016. The remaining 70% will be financed through a financing arrangement with a major international financial institution. We have agreed main terms and are in the final documentation stages for this financing.
The above mentioned financing is part of our strategy to explore alternative sources of funding to make our capital structure more efficient.
For 3Q2017 a cash dividend of $0.03 per share has been declared. Payment of the dividend is expected to be on or about December 5, 2017, to shareholders of record on November 13, 2017.
In an improved tanker market, higher dividends can be expected.
Nordic American Offshore Ltd. (NYSE: NAO)
NAT owns 16.1% of Nordic American Offshore Ltd. and the NAT Chairman & CEO and his immediate family own 13.4% of NAO.
World Economy and the Tanker Market