Nordic American Tankers 2Q 2013 Report
In announcing its results for the second quarter of 2013, Nordic American Tankers Limited (NAT) emphasized three key points that differentiate it from others in the field: its strong financial position, its dividend policy and its top quality Suezmax tanker fleet.
In July, the company announced a dividend of $0.16 per share for 2Q2013, identical to the dividend for 1Q2013. The company will pay the dividend on or about August 13, 2013 to shareholders of record as of July 31, 2013. The dividend will be paid from cash on hand. Since NAT commenced operations in the fall of 1997, a dividend has been paid for 64 consecutive quarters, with total dividend payments over the period amounting to $44.42 per share including the dividend to be paid in August.
The Suezmax tanker market has improved significantly at the time of this report compared with the average for the second quarter. The third quarter of 2013 can be expected to show an improvement on the second quarter.
The underlying fundamentals of the Suezmax tanker sector show improvement. Political unrest in Egypt and a smaller difference between the price of oil produced in the U.S. (WTI) and the Brent crude price are mentioned as factors leading to higher tanker rates. In 2014 the Suezmax tanker fleet should not increase very much, if at all, as ships are scrapped. In fact the Suezmax fleet stands a good chance of shrinking. Should the current trends in ton miles (volume carried multiplied by distance travelled) continue, fleet utilization could grow in 2014.
The closing of the price gap between WTI (oil produced in the U.S.) and Brent crude (non-U.S. production) tends to stimulate U.S. oil imports and is an example of how tanker market dynamics may change unexpectedly.
Key points to consider:
• Earnings per share in 2Q2013 was -$0.48 compared with -$0.59 (or -$0.43 excluding non-recurring charges) in 1Q2013 and -$0.15 in 2Q2012.
• NAT's liquidity reserves including cash, the undrawn part of the credit facility and working capital stood at about $330 million at the end of second quarter.
• Our agreement with a company in the ExxonMobil group was extended for 2 years - an important vote of confidence from theleading oil company.
• We continue to focus on cost efficiency - both in administration and onboard our vessels.
• Spot rates achieved for 2Q2013 were weaker than 1Q2013. Second quarter demand was as usual impacted by refinery maintenance shutdowns. Coupled with continuing deliveries of new vessels from the shipyards, tanker rates were under pressure through the quarter.
• NAT started the quarter announcing an equity offering that resulted in net proceeds to the Company of $102m. It is a clear sign of faith from the market that the Company was able to complete this transaction at a time of continued uncertainty for many in the tanker industry.
• "Financial Vetting" and focus on the financial strength of shipowners are increasingly relevant in the tanker industry. During the quarter we saw high-profile bankruptcies, with ensuing disruptions of service. With NAT this is not a concern for charterers.
• Scrapping has been slower than in 2012. However a number of vessels are approaching their 15 year survey dates. For many owners it may not be feasible to pass the survey due to being in a weak financial position and having insufficient maintenance. Following such developments increased scrapping could incur.
• The Company does not engage in any type of derivatives.
• Economic development in Asia remains stable while in Europe the uncertainty continues. Developments in the US are always important - particularly US domestic oil production.
• The Company cancelled at an insignificant cost the agreement to buy a 2013 built Suezmax tanker as the seller failed to deliver the vessel in time