NAO Announces Financials, Declares Dividend
Nordic American Offshore Ltd. has declared a dividend of $0.45 per share for 3Q2014, as previously announced. This is the same dividend as for the previous two quarters.
The record date is November 7, 2014 and the payment of dividend is expected to take place on or about November 21, 2014. Since its establishment in late 2013 this start-up company has paid 3 dividends totalling $1.35 per share.
To prepare for a NYSE listing and for expansion, NAO had a successful Initial Public Offering (IPO) on the New York Stock Exchange in June 2014, raising net proceeds of around $100 million. NAO started trading June 12, 2014. After the IPO, the shares issued in the November 2013 private placement, which traded on the Oslo OTC market, were exchanged for NYSE traded shares. At the time of this report, the total share count is 23,431,370.
The main elements of the strategy of NAO are based on the same fundamentals as those of Nordic American Tankers Limited (NAT). NAT is currently holding about 4 million shares or 17.1% of NAO.
The Company has ten high-quality Platform Supply Vessels, six in operation and four being built at Norwegian based shipyards. They are built in 2012 and onwards. Two of the newbuildings will be delivered in January 2015, and the other two are expected to be delivered during the third quarter 2015. Including a planned expansion of the credit facility, the Company will have the financial resources to take delivery of its four newbuildings on order, thereby offsetting the dilutive short term impact in sharecount following the June 2014 IPO.
Key points to consider:
- Earnings per share in 3Q2014 were $0.12 compared with $0.23 for 2Q2014 and $0.10 for 1Q2014. The weighted average number of shares was 23,431,370 in 3Q2014 vs 17,620,124 in 2Q2014, affecting results on a per share basis. The Company is in a position to take delivery of the four 2015 newbuildings without issuing further equity.
- Net Income came to $2.8 million in 3Q2014, compared with $4.1 million in 2Q2014 and $1.7 million in 1Q2014. Operating cash flow1 was $6.0 million vs $7.7 million in 2Q2014. Adjusted for a non-recurring one-time cost, operating cash flow was $7.5million and Net Income of $4.3 million in 3Q2014.
- The Company has at the time of this report no net debt and its $60 million credit facility has not been drawn upon.
- The IPO in June 2014 strengthened the equity of the Company by about $100 million.
- Vessels were fully utilized this quarter which is a reflection of the quality and standard of our fleet.
On October 20, 2014 the Board declared a cash dividend of $0.45 per share for 3Q2014 to shareholders of record as of November 7, 2014. The payment date is on or about November 21, 2014.
Net income for 3Q2014 was $2.8 million after a non-recurring cost of $1.5 million. In March 2014, NAO entered into the UK Tonnage Tax system. Following this only minimal taxes are levied on operation. The fleet currently operates in the North Sea only.
The profit and loss (P&L) account for 3Q2014 has been charged with a non-recurring cost of $1.5 million associated with the listing and IPO in New York July, 2014. This one-time success fee, agreed to in 2013, was divided among 28 NAO-related people who contributed to the success of the listing and the IPO process. If it had been charged directly to the equity, there would have been no P&L impact.
The Company's operating cash flow was $6.0 million in 3Q2014, compared with $7.7 million for 2Q2014. Adjusted for the non-recurring costs, operating cash flow was $7.5m in 3Q2014.
The figures show that the 3rd quarter results are in line with the previous quarter.
As a matter of policy, the Company will always focus on maintaining a strong balance sheet with low net debt, thereby limiting the Company's financial risk. At the end of 3Q2014, net debt per NAO vessel in operation was zero. NAO has in place up to the end of 2018 a non-amortizing credit facility of $60 million, which is undrawn at this time.
NAO concentrates on keeping our vessel operating costs low, while always maintaining a strong commitment to safe operations. As the fleet expands, NAO does not anticipate that administrative costs will rise correspondingly.
The fleet is comprised of ten high-quality PSVs including four newbuildings. We currently have six vessels in operation, all in the North Sea, operating in the UK and the Norwegian Sector. The vessels to be delivered next year may operate in either sector or elsewhere. The significant fuel efficiency of our ships is also very attractive for the customers.
The Company's objective is to ensure spot or term employment for the fleet, including for the newbuildings. The specifications of the fleet are by and large of the same nature. NAO will seek to grow the fleet further.
The PSV Market
The Company believes the market outlook for PSVs is positive. Now there is a seasonal weakening in the spot market.
NAO believes that lower oil prices will have limited impact on operations. PSVs are critical to operating offshore and represent a small part of overall costs. The recent reduction in oil price may affect future offshore exploration activities. It should be noted that PSVs are part of the entire life-cycle of an offshore oilfield.
Several vessels are suitable for operations in the Arctic, where drilling activities could expand.