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.Since its establishment, NAT has pursued a well-tested strategy that is producing high Total Return (i.e. profitability) and dividend yields. 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 a result of strict maintenance procedures. 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. 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 enjoys significant liquidity allowing investor to buy and sell shares whenever they wish. In 3Q2016 about 1.7m shares on average were traded daily with an average daily trading value of around $20m per day. The average volume for the first nine months of 2016 for NAT was about 1.6m shares per day. On October 17, 2016, NAT declared a cash dividend of $0.26 per share for 3Q2016, payable to shareholders of record as of October 27, 2016. Payment of the dividend took place November 10, 2016. In 2Q2016, the dividend was $0.25 per share. Key points to consider:
- NAT has paid quarterly dividends 77 times of $47.91 per share during the period since 1997.
- The low oil price is positive for the tanker market. For the consumer, a reduced oil price can be compared with a tax break, stimulating the economy.
- The recent equity offering of $120m was for the expansion beyond the current 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 construction of our newbuilding for delivery in 1Q2017 is on schedule.
- 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.
- Operating cash flow 2 per share has been as follows: $0.24 for 3Q2016, $0.46 for 2Q2016 and $0.55 for 3Q2015.
- NAT has a credit facility of $500m, maturing in December 2020.
- Net Asset Value (NAV), or the steel value of a vessel, is irrelevant when valuing NAT as a going concern.
- 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.
Earnings per share (EPS) in 3Q2016 were -$0.08. In 2Q2016 and 3Q2015 the EPS were $0.15 and $0.29, respectively. EPS does not take account of financial risk.The Company's operating cash flow in 3Q2016 was $21.7m including the settlement gain of $5.3m with Gulf Navigation. In 2Q2016 and 3Q2015 operating cash flow was $40.7m and $49.1m, respectively. For the whole fleet, we had a total of 126 days offhire during the quarter, of which 99 days were planned offhire. 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 3Q2016, the Company had net debt of about $248m or about $8.5m per vessel. The table on the right shows our operating cash flow, stock liquidity and dividend over the last eight quarters. Liquidity in the stock is high compared with other tanker companies. Link to the graph: http://hugin.info/201/R/2055975/770024.pdf For further information on our financial position for 3Q2016, 2Q2016 and 3Q2015, please see later in this release. 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. 3Q2016 inspections had an average of 2.4 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 3Q2016, following an increase of 20 vessels so far this year.During the years 2014 and 2015, a number of orders were placed with shipyards. The current orderbook of crude tankers stands at 75 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. So far in 2016, there has been a fleet growth of 4.2% with no scrapping of vessels. The graph to the right shows the average yearly spot rates since 2000 as reported by Clarksons Platou. The rates above are an indication of the level of the market and its direction. Link to the graph: http://hugin.info/201/R/2055975/770024.pdf At the time of this report, the market has recovered from the level of 3Q2016. 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. C orporate 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/2055975/770024.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.
|Jan H. A. Moller, Head of Investor Relations & Financial ManagerNordic American Tankers LimitedTel: +1 888 755 8391 or +47 90 11 53 75||Gary J. WolfeSeward & Kissel LLPNew York, USATel: +1 212 574 1223|
|Turid M. Sørensen, CFO & EVPNordic American Tankers LimitedTel: +47 33 42 73 00 or +47 90 57 29 27||Herbjørn Hansson, Chairman & CEONordic American Tankers LimitedTel: +1 866 805 9504 or +47 90 14 62 91|
|Rolf Amundsen, AdvisorNordic American Tankers LimitedTel: +1 800 601 9079 or + 47 908 26 906||Web-site: www.nat.bm|