Nordic American Tankers Limited (NYSE: NAT) — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; quarterly financial results are not clearly provided. Amounts below are in U.S. dollars unless stated otherwise.
Business context
NAT owns and operates Suezmax crude oil tankers, with a 19-vessel fleet at year-end. Most vessels trade in the spot market, exposing results to volatile freight rates. Two newbuildings delivered in May and June 2022 began six-year time charters; two other vessels had time charters due to expire in late 2023. The company sold five older vessels during 2022.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Voyage revenue | $339.3 million | $191.1 million |
| Net voyage revenue (revenue less voyage expenses) | $168.8 million | $62.8 million |
| Time Charter Equivalent (TCE) rate per day | $24,725 | $8,043 |
| Operating income (loss) | $41.9 million | $(144.5) million |
| Net income (loss) | $15.1 million | $(171.3) million |
| Basic and diluted EPS | $0.07 | $(1.05) |
| Cash from operating activities | $24.1 million | $(44.5) million |
| Cash, cash equivalents and restricted cash | $63.3 million | $44.6 million |
| Shareholders’ equity | $540.0 million | $498.2 million |
Net voyage revenue was 49.8% of voyage revenue, operating income was 12.3%, and net income was 4.5% of voyage revenue in 2022. These percentages are calculated from reported figures.
At December 31, 2022, total assets were $879.9 million. Cash and cash equivalents were $59.6 million, with an additional $3.7 million restricted for vessel drydocking and capital needs. Current assets were $142.7 million and current liabilities were $72.4 million. Debt consisted of $39.7 million current and $266.3 million long-term on the balance sheet; reported facility principal outstanding was approximately $310.0 million before deferred financing costs. The company reported covenant compliance at year-end.
Dividends distributed in 2022 totaled $22.7 million, or $0.11 per share for the four quarters. A $0.15-per-share fourth-quarter 2022 dividend was declared in February 2023 and paid March 28, 2023, totaling $31.3 million.
Material changes versus prior year
- Voyage revenue rose 77.6%, while net voyage revenue increased 168.8%; TCE per day increased 207.4%. Management attributed the improvement primarily to stronger tanker rates, partly offset by fewer TCE days.
- Operating results returned to profit from a large 2021 loss. The prior-year loss included $60.3 million of vessel impairment charges; 2022 impairment was $0.3 million.
- Five vessels were sold and two newbuildings delivered, leaving the fleet three vessels smaller net. Vessel operating expenses fell 6.3%; depreciation fell 26.2%.
- Fuel and commission costs contributed to voyage expenses rising 32.9%. General and administrative expenses increased 20.3%, while interest expense rose 2.6% amid higher floating rates and new vessel financing.
- Operating cash flow improved from $(44.5) million to $24.1 million. Financing cash flow included $49.1 million of share issuance proceeds, $88.0 million of new vessel financing, $93.9 million of borrowing repayments, and $22.7 million of dividends.
- Gross shares outstanding increased from 183.7 million to 208.8 million, including 14.3 million shares issued through the 2022 ATM program.
Outlook, risks and unusual items
- Management said strong freight rates in late 2022 and early 2023 supported positive operating cash flow and expected additional repayments during 2023 under the facility’s excess-cash mechanism. It expected to repay the 2019 senior secured facility and accordion loan, which mature in February 2024, from operating cash flow, subject to market conditions and sensitivities; refinancing, maturity extension, vessel sales or ATM issuance were identified as alternatives.
- Management cited a low Suezmax orderbook and anticipated demand support from the reopening of Asian economies. However, it also reported that indicated average Suezmax earnings declined from $81,281 per day in Q4 2022 to $73,942 in Q1 2023. These are market indicators, not NAT’s reported realized quarterly TCE rates.
- The business remains highly exposed to spot rates, oil shipment volumes, fuel prices, vessel values, interest rates, operating costs, seasonality, geopolitical events and sanctions, including developments related to Russia and Ukraine. Environmental rules, including emissions and ballast-water requirements, may add costs.
- The 2019 facility has a $30 million minimum-liquidity covenant and a maximum 70% loan-to-vessel-value ratio. Management reported compliance at year-end; the facility’s maturity and variable-rate exposure remain key financing considerations. The filing reports $18.2 million of facility repayments after year-end through April 27, 2023, leaving $111.0 million outstanding.
- The company recorded a $6.0 million gain on vessel disposals in 2022, mainly related to the last vessel sold in October. Broker estimates placed the fleet’s fair market value at $955.0 million versus a $735.1 million carrying value; these estimates are inherently uncertain. No fleet impairment indicators were identified at year-end.
- The 2021 material weakness relating to manual consolidation journal entries was reported as remediated in 2022. Management and the auditor concluded internal control over financial reporting was effective at December 31, 2022. The auditor issued an unqualified opinion on the financial statements.
- No material claims were reported for 2022 or 2021, and management said it knew of no lawsuit expected to materially affect financial position, results or liquidity. The filing states there were no off-balance-sheet arrangements considered material.
Important facts for investors to verify
- Whether spot freight rates and NAT’s realized TCE rates sustain cash generation sufficient for dividends and the February 2024 facility maturity.
- Updated debt balances, refinancing or extension terms, covenant headroom, and the effect of floating rates and benchmark-rate transitions.
- Future ATM share issuance, dilution, and whether dividend payments remain supported by cash generation and financing covenants.
- Fleet condition, drydocking and regulatory compliance costs, vessel values, and assumptions underlying the broker valuations and impairment assessment.
- Exposure to sanctioned trades and counterparties, customer receivable concentration, and the execution and cost implications of emissions and ballast-water rules.