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Nordic American Tanker Shipping Announces Dividend for the 50th Consecutive Quarter |
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Saturday, 13 February 2010 |
 On or about March 5th NAT will pay a dividend for the 50th consecutive quarter since the first three vessels were delivered to the Company in the autumn of 1997 when the Company commenced operations.
Including the dividend for 4Q09 the total dividend payment amounts to
$40.14 per share. Following a strengthening of the spot market the
dividend for 4Q09 was $0.25 per share compared to $0.10 for 3Q09.
Some salient points of this report are as follows:
-- The level of the spot tanker market was higher during 4Q09 than
during 3Q09. The spot tanker market for the 1Q10 has started on a
positive note compared with 4Q09. There are indications that the world
economy has bottomed out which is positive for the tanker business.
-- Earnings per share in 4Q09 was -$0.10 as against -$0.28 in 3Q09.
Dividend per share was $0.25 in 4Q09 compared to $0.10 during 3Q09.
-- On October 5th 2009, the Company announced that it had agreed to
acquire a 2002-built double hull suezmax tanker which was delivered to
the Company November 17th 2009.
-- On November 8th the Company announced that it had agreed to acquire
an additional double hull suezmax tanker which we expect will be
delivered to the Company by the end of February 2010.
-- On January 22nd 2010 we priced a follow-on offering which is expected
to enable the Company to increase its fleet and the dividend capacity.
The proceeds to the Company from the follow-on offering was $137m before
cash offering costs.
-- The Company has no net debt
Operating its fleet in the spot market, except for one vessel, the
Company is in a position to reap the benefits of a potential upswing in
the tanker market.
During 2009, NAT agreed to acquire four vessels. Three of those vessels
have been delivered to the Company and the fourth vessel is scheduled to
be delivered by the end of February 2010. The acquisitions are
accretive, and are also increasing the dividend potential of the
Company. The acquisitions have improved our position relative to
competitors who, in our view, have had a tough time in coping with the
consequences of the international financial crisis.
We have two newbuildings coming in 2010, bringing the trading fleet to
18 vessels.
As in the past, in order to create value for shareholders, the fleet
must grow faster than the share count over time. As an example, the
follow-on offering which was closed January 27, 2010 increased the
Company's share count by about 10%. This will enable the Company to
increase its fleet by about 22%, assuming an increase from 18 to 22
vessels. This is an example of accretion while recognizing that the net
debt is expected to be slightly higher after such prospective
acquisitions.
Typically, our dividend follows the level of the spot suezmax tanker
freight market. That is why our dividend was higher in 4Q09 than in
3Q09. Generally, when spot 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 is 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
preserving what we consider the 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.
After adjusting for non-recurring charges in 4Q09, net income from
continuing operations was -$0.06 per share. The spot tanker market for
suezmax vessels in 2010 has started out well above the level we saw in
4Q09.
In 4Q09 total off-hire (time out of service) for the Company's fleet was
about 64 days of which planned off-hire was about 40 days. In 2010 one
vessel is scheduled for dry-docking which we expect will take place in
the first quarter.
Financial Information:
The Board has declared a dividend of $0.25 per share to shareholders on
record as of February 23, 2010 for 4Q09. A dividend of $0.10 per share
was declared for 3Q09. 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 fourth quarter of 2009 was 42,204,904. After the
follow-on offering in January this year the number of outstanding shares
is 46,898,782.
Net income for 4Q09 was -$4.3m, or -$0.10 per share (EPS), compared to
net income of -$11.8 million or -$0.28 per share for 3Q09. One-time
charges in 4Q09 are $1.7m or $0.04 per share. Therefore, income from
ongoing operations was -$0.06 per share.
Reflecting a stronger spot market in the quarter, the Company's
operating cash flow was $10.5m for 4Q09, compared to $3.8 million for
3Q09.
The follow-on offering of 4.6 million shares which was priced January
22nd and closed January 27th produced proceeds of $137 million before
cash offering costs. This offering will enable the Company to acquire
more vessels without going to the equity market.
We consider our general and administrative costs per day per ship to be
at a low level. We also continue to concentrate 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.
For further details on our financial position and for other periods such
as 4Q08 and for the twelve months ended December 31, 2009 and December
31, 2008, please see later in this release.
No scheduled dry-dockings were undertaken during 4Q09 except for one
vessel that underwent ballast tank maintenance work at a Chinese yard.
Typically, this type of work is often carried through while the vessels
are trading or during planned drydockings of vessels. However, because
of the low tanker market last October we decided to do the work at a
shipyard with very good results. In 1Q10, one dry-docking is expected to
take place. During 4Q09, we had in total 24 days of unplanned off-hire
and 40 days of planned off- hire (tank maintenance work) 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, there are some bright spots on the horizon for the
world economy. The decrease in exports of oil from OPEC to the West
seems to have bottomed out. We consider this to be good news for the
tanker markets.
For NAT, an improved freight tanker market can be expected to result in a
higher dividend. However, as a matter of policy the Company does not
predict future spot rates.
The recession is reducing the demand for transportation capacity
internationally. 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
situation for many shipping companies has led to delayed deliveries of
newbuildings and to cancellation of newbuilding orders.
The average daily rate for our spot vessels was $18,700 per day net to
us during 4Q09 compared with $14,075 per day for 3Q09 after adjustment
of one time charges and accounting for lost time.
Spot market rates for suezmax tankers are very volatile. The average
spot market rate for modern suezmax tankers as reported by Imarex was
$23,682 per day in 4Q09 compared to $13,012 per day during 3Q09. The
average Imarex rate so far in 1Q10 is $41,592 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.
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 has a sustainable strategy when the spot market is strong
and also in a weaker market environment. Thus, 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 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.
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 had such an acquisition not taken place.
We believe that the acquisitions this past 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.
Source: Nordic American Tanker Shipping Ltd.
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