Nordic American Tankers – still going strong

    NAT is an interesting play at the semi bottom of the cycle. It is a high yielding stock that in our view has been  mispriced earlier, but now is trading at more fair levels. It has paid dividends for 72 consecutive quartes totalling more than 46 $ per share since 1997. The company is faring well because of the low oil prices and announces that rates are even higher in Q3. Those 2 factors will benefit the company in Q3. The dividends for this quarter is 0.4 equivalent to 10% yield. We remain bullish on NAT



    The second quarter 2015 produced better results than the first quarter 2015. So far in the third quarter, we have secured higher average rates than in the two preceding quarters of the year. In 2Q2015, NAT continued to benefit from both a solid Suezmax tanker market and a top quality fleet (22 vessels in operation in 2Q2015 and 4 vessels expected to be included later in 2015 and thereafter). Cashflow from operations[1] was $54.5m, compared with $51.0m in 1Q2015. For all of 2014, cashflow from operations was $77.7m compared with -$11.1m in 2013.

    On July 27, 2015, NAT announced the acquisition of two Suezmax tankers. The vessels were built in 2010. The vessels are expected to join the fleet in September and October this year. The total price was about $122 million. NAT does not plan to issue equity to cover commitments for these vessels or its two newbuildings to be delivered in 2016 and 2017. This growth further enhances our dividend and earnings capacity.

    During the last year, oil prices have decreased significantly. This has positively impacted the tanker market through increased transportation requirements and lower fuel costs.


    Key points to consider:


    • Tanker rates achieved on average for 2Q2015 were about $38,800 per day per vessel for our trading fleet, as against $37,000 per day per vessel achieved in 1Q2015 and $12,100 in 2Q2014.
    • Earnings per share in 2Q2015 came to $0.35 compared with $0.31 for 1Q2015 and -$0.19 for 2Q2014.
    • The balance sheet was strengthened in 2Q2015 as we retained about $19m of cashflow from operations during the quarter. The net operating cash flow itself would have allowed for $0.61 per share in dividend based on a full payout of cash flow. 
    • The undrawn part of our credit facility plus net working capital stood at about $338m at the end of 2Q2015.
    • The two newbuildings for delivery August 2016 and January 2017 are on schedule.
    • 13 vessels were vetted (inspected by clients) during 2Q2015NAT came out with 3.3 observations on average, an excellent result, reflecting the top quality of our fleet.


    Nordic American Tankers is very different from other tanker companies. 


    Nordic American Tankers has an operating model that is sustainable in both a weak and a strong tanker market. Accretive fleet growth, low net debt per vessel and quarterly dividend payments are central elements  of the strategy. NAT has one type of vessel – the Suezmax vessel that can carry one million barrels of oil.  A homogenous fleet reduces our operating costs, which is helping to keep our cash-breakeven for NAT below $12,000 per day per vessel.  Net asset value (NAV) is a measure that is linked to the steel value of each individual shipwhich has no relevance when it comes to the valuation of the Nordic American Tankers as an ongoing business.