2009-11-09 07:29:02 -
London, November , 09, 2009
3rd Quarter 2009 Results: hugin.info/201/R/1353507/327857.pdf
Hamilton, Bermuda, November 9, 2009
Introduction and Overview
On or about December 4th NAT will pay a dividend for the 49th
consecutive quarter since the first three vessels were delivered to
the Company in the autumn of 1997 when the Company commenced
operations. Since then a total of $39.89 per share has been paid in
dividend.
We believe that some salient points of this report are as follows:
* The 3rd quarter was down with a corresponding low dividend of
$0.10 per share because of a low freight market.
* There are signs of a positive development in the world economy
and the freight market for the 4th quarter has started on a
positive note compared with 3rd quarter.
* We announced yesterday our agreement to acquire vessel no. 18 -
which will increase the dividend capacity of the Company.
The low spot rates for suezmax tankers during 3Q09 resulted in a
lower dividend payment than in the 2Q09. In this environment, with a
spot market fleet, except for one vessel, the Company can be expected
to reap the benefits of a potential upswing in the tanker market more
or less immediately. The Imarex rates, giving an indication of the
level of the tanker market, were on average $13,000 per day during
3Q09. The Imarex rate for suezmaxes at the time of this report is
$17,846 per day. The average Imarex projected rates for November and
December are about $20,000 per day. It is indicated that the world
economy, as expressed by the GNP development, has bottomed out which
is positive for the tanker business. The Board is optimistic for the
future of the Company and the announcement to acquire vessel no. 18
is a confirmation of this view.
During 2009 NAT has acquired three vessels, and has entered into an
agreement to acquire the fourth, increasing the trading fleet by one
third - from 12 to 16 vessels - since the beginning of the year. The
acquisitions are accretive, increasing the dividend potential of the
Company. The acquisitions have improved our position relative to
competitors which have a tough time in coping with the consequences
of the international financial crisis. We have two newbuildings
coming next year, bringing the trading fleet to 18 vessels. We do
not plan to go to the market to raise capital for the vessels we now
have, the one to be delivered to us by end February 2010 and the two
newbuildings. From the end of 2008 and until August 2010 - a period
of 20 months - the total fleet will have grown from 12 to 18 vessels,
thereby increasing the dividend and earnings potential by 50%.
A full dividend payout policy and a strong balance sheet are central
components of the consistent and transparent strategy of NAT. As in
the past, in order to create value for shareholders, the fleet must
grow faster than the share count over time.
Typically, our dividend follows the level of the spot suezmax tanker
freight market. That is why our dividend is lower in 3Q09 than in
2Q09. However, our policy of paying dividends from operating cash
flow remains the same. Generally, when rates in the suezmax freight
market increase, our dividend can be expected to increase. Therefore,
the Company has the full upside associated with a market improvement.
Going forward, we expect that spot suezmax freight rates may
fluctuate in an unpredictable manner.
The present instability in the financial markets and the lower
freight markets are posing serious issues for debt laden shipping
companies. Some of them have suspended dividends or changed their
dividend policy and they have had to negotiate new terms with the
banks. NAT is staying its course in this environment - having no net
debt. We go forward with a view to retaining what we consider the
exceptionally strong financial situation of the Company - both in
absolute and relative terms - as we believe that is in the best
interests of our shareholders.
Our primary objective is to maximize total return[1] to our
shareholders, including maximizing our quarterly cash dividend.
The Company does not engage in any type of derivatives.
Other Highlights:
* Net income for 3Q09 was -$0.28 per share based on the weighted
average number of shares outstanding during the quarter of
42,204,904, compared to $0.00 per share for 2Q09. Net result from
ongoing operations was -$0.26 per share. To put this into
perspective, due to lower freight markets at the time, net income
was also below zero in 3Q07.
* In 3Q09 total off-hire (out of service) for the Company's fleet
was about 40 days of which planned off-hire was about 15 days.
There are no scheduled dry-dockings for any of the Company's
vessels until 2010 when one vessel is scheduled for dry-docking.
* In early October, the Company announced that it had agreed to
acquire a 2002-built double hull suezmax tanker. We expect to
take delivery of this vessel, to be named the Nordic Mistral, by
mid-November 2009. The Company announced yesterday that it has
agreed to acquire an additional 2002 built double hull suezmax
vessel which is expected to be delivered to us by the end of
February 2010. The two newbuildings of the Company are expected
to be delivered in May and August 2010, bringing the trading
fleet to 18 vessels.
Financial Information:
The Board has declared a dividend of $0.10 per share in respect of
3Q09. A dividend of $0.50 per share was declared for 2Q09. The amount
of dividends per share is above all a reflection of the level of the
spot tanker market during the relevant quarter and the number of
shares outstanding. The number of shares outstanding for the third
quarter of 2009 was 42,204,904 - the same number as of the date of
this release.
Net income for 3Q09 was -$11.8m, or -$0.28 per share (EPS) compared
to net income of -$0.1m, or $0.00 per share for 2Q09. One-time
charges and non-cash general and administrative items for 3Q09 equal
$0.02 and $0.03 per share, respectively. Therefore, result from
ongoing operations was -$0.26 per share. Reflecting a weak spot
market in the quarter, the Company's operating cash flow[2] was $3.8m
for 3Q09, compared to $17.0m for 2Q09.
We consider our general and administrative costs per day per ship to
be at a low level. We also continue to have a strong focus on keeping
our vessel operating costs low, while always maintaining our
commitment to safe vessel operations.
We estimate that our average cash breakeven level for our fleet is
below $10,000 per day per vessel. When the freight market is above
this level, the Company can be expected to pay a dividend. The
breakeven rate is the amount of average daily revenues our vessels
would need to earn in the spot market in order to cover our vessel
operating expenses, voyage expenses, if any, cash general and
administrative expenses, interest expense and other financial
charges.
At the time of this report the Company has no net debt and has an
undrawn revolving credit facility of $500 million. The credit
facility, which matures in September 2013, 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.
Assuming no more acquisitions are made until the last of the two
newbuildings are delivered in 2010, the Company can be expected to
have net debt of about $8 million per vessel at that time in addition
to having a substantial reserve in the unused credit facility.
The double hull Suezmax tanker which was delivered to the Company on
July 7, 2009, the Nordic Grace, was financed from cash on hand. The
vessel we agreed to purchase on October 5, 2009, will also be
financed from cash. The same goes for the vessel that the Company has
agreed to acquire and which will be delivered to us by the end of
February 2010.
For further details on our financial position and for other periods
such as 3Q08 and for the nine months ended September 30, 2009 and
September 30, 2008, please see later in this release.
The Fleet:
With the delivery of the Nordic Grace in July, the recently acquired
vessel to be delivered by mid-November this year and the vessel
expected to be delivered to us by end February 2010, 15 of the
Company's 16 existing vessels have employment in two cooperative
arrangements. One vessel remains employed on a long-term fixed rate
charter.
By way of comparison, in the autumn of 2004 the Company had three
vessels; at the end of 2005 the Company had eight vessels; and at the
end of 2006 the Company had 12 vessels. During 2Q09, we had 13
vessels in operation. With the two newbuildings announced in November
2007 and the most recent acquisitions, the Company is expected to
have a fleet of 18 vessels operating from August 2010, assuming no
further acquisitions in the meantime.
Vessel Dwt Employment
Gulf Scandic 151,475 Long term fixed charter
Nordic Hawk 151,475 Spot
Nordic Hunter 151,400 Spot
Nordic Voyager 149,591 Spot
Nordic Fighter 153,328 Spot
Nordic Freedom 163,455 Spot
Nordic Discovery 153,328 Spot
Nordic Saturn 157,332 Spot
Nordic Jupiter 157,411 Spot
Nordic Cosmos 159,998 Spot
Nordic Moon 159,999 Spot
Nordic Apollo 159,999 Spot
Nordic Sprite 147,188 Spot
Nordic Grace 149,921 Spot
Nordic Mistral 164,236 Delivery expected by mid-November 2009
Nordic TBN 164,274 Delivery expected by end February 2010
Nordic Galaxy 163,000 Delivery expected by end May 2010
Nordic Vega 163,000 Delivery expected by end August 2010
Total 2,820,410
No scheduled dry-dockings were undertaken during 3Q09. There are no
further scheduled dry-dockings for our vessels until 2010 when one
dry-docking is expected to take place. During 3Q09, we had in total
25 days of unplanned off-hire and 15 days planned off-hire for our
fleet.
Financial Instability and the Tanker Market:
In our quarterly reports to shareholders we have often stressed the
significance of the development of the world economy for the tanker
industry. Presently, the world economy shows a significant
contraction of demand. This downturn influenced the suezmax tanker
market during the 3Q09. Exports of oil from OPEC to the West have
declined over the last few months, reducing demand for tanker
vessels.
For NAT a lower freight tanker market can be expected to result in a
lower dividend. If a lower freight market results in lower vessel
prices - such a development would be an advantage for the Company
because we would be in a position to acquire additional vessels
inexpensively compared to historic levels. The four acquisitions so
far in 2009 reflect the ability of the Company to grow accretively;
they will allow the Company to pay a higher dividend than if they had
not taken place. This is so irrespective of the level of the suezmax
spot tanker market, as long as the freight level is above the
Company's low cash break-even for its fleet as a whole.
While the recession internationally is reducing the demand for
transportation capacity, the demand side for tankers to some extent
continues to be impacted positively by the use of tankers for
storage.
On the supply side, we now see clearly that the current financial
upheaval may delay deliveries of newbuildings and may also lead to
the cancellation of newbuilding orders.
The average daily rate for our spot vessels was $14,075 per day net
to us during 3Q09 compared with $26,300 per day for 2Q09.
Spot market rates for suezmax tankers are very volatile. The average
spot market rate for modern suezmax tankers as reported by Imarex was
$13,012 per day in 3Q09 compared to $20,569 per day during 2Q09. The
Imarex rate at the time of this report is $17,846 per day.
The graph shows the average yearly spot rates since 2000 as reported
by R.S. Platou Economic Research a.s. The rates as reported by
shipbrokers and by Imarex may vary from the actual rates we achieve
in the market.
We believe it is an advantage for the Company to have its spot
vessels in two cooperative arrangements which in total have more than
50 suezmax vessels under commercial management.
Strategy going forward:
We believe that the operating model of the Company works to the
benefit of our shareholders.
The serious financial turmoil may represent attractive opportunities
for our Company.
The Company essentially has the following strategic position going
forward: If the market is firm, very good results and dividend can be
expected.
In a weaker market, the dividend will be lower which is a minus.
However, if rates are down for a while, the Company is in a position
to buy ships inexpensively and accretively which is a plus. This plus
can be expected to be much larger than the minus. Several of our
listed competitors have significant net debt which could make it
difficult for them to buy vessels in a weak market. In this way, the
Company has covered both scenarios. Typically, the level of the spot
market rates may change very fast.
Our policy is to grow when it is profitable and accretive to do so;
that is, after an acquisition of vessels or other forms of expansion,
the Company should be able pay a higher dividend per share and
produce higher earnings per share than before such an event before
taking into account any change in the spot rates. We believe that the
acquisitions this year are examples of such accretive transactions.
We believe that our full dividend payout policy will continue to
enable us to achieve a competitive cash yield compared with that of
other shipping companies.
We encourage investors wishing to have exposure to the tanker sector
to assess our model and invest in our Company.
In the midst of the international financial instability, our Company
is well positioned. To the best of our ability we shall endeavor to
safeguard and further strengthen this position.
* * * * *
[1] Total Return is defined as stock price plus dividends, assuming
dividends are reinvested in the stock
[2] Operating cash flow is a non-GAAP member. Please see later in
this announcement for a reconciliation of operating cash flow to
income from vessel operations.
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," "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-hire, failure on the part of
a seller to complete a sale to us 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:
Scandic American Shipping Ltd
Manager for:
Nordic American Tanker Shipping Limited
P.O Box 56, 3201 Sandefjord, Norway
Tel: + 47 33 42 73 00 E-mail: nat@scandicamerican.com
Rolf Amundsen, Investor Relations
Nordic American Tanker Shipping 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
Turid M. Sørensen, CFO
Nordic American Tanker Shipping Limited
Tel: + 47 33 42 73 00 or + 47 905 72 927
Herbjørn Hansson, Chairman and Chief Executive Officer
Nordic American Tanker Shipping Limited
Tel: +1 866 805 9504 or + 47 901 46 291
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