Nordic American Tankers Limited - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on October 1, 2021, presents the unaudited condensed financial statements and management discussion for the six months ended June 30, 2021. Nordic American Tankers Limited (NAT) is a Bermuda-based international tanker company operating a homogeneous fleet of 25 Suezmax crude oil tankers (23 active vessels and 2 newbuildings under construction). The fleet is predominantly employed in the spot market, with one vessel on a longer-term time charter.
Key Financial Metrics
| Metric (USD '000) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 |
|---|---|---|
| Voyage Revenue | 100,393 | 254,733 |
| Net Operating Income (Loss) | (40,142) | 105,281 |
| Net Income (Loss) | (53,718) | 88,716 |
| Net Cash from Operating Activities | (20,925) | 118,251 |
| Time Charter Equivalent (TCE) Rate | $8,771 per day | $45,800 per day |
| Total Debt Outstanding | $353.8 million | $366.1 million (approx.) |
| Cash, Cash Equivalents & Restricted Cash | $42.6 million | $62.0 million |
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenue decreased by 60.6% to $100.4 million, driven by a sharp drop in Suezmax market rates. The average TCE rate fell 80.9% to $8,771 per day compared to $45,800 in the prior year.
- Profitability Reversal: The company reported a net loss of $53.7 million, a significant swing from the $88.7 million net income recorded in the same period of 2020. Net operating income turned negative at $(40.1) million.
- Cost Management: Voyage expenses decreased by 13.3% to $64.8 million due to lower bunker costs and commissions. General and administrative expenses dropped 16.8% to $7.2 million.
- Cash Flow: Operating cash flow swung from a positive $118.3 million in 2020 to a negative $20.9 million in 2021, reflecting the severe market downturn.
Outlook, Risks, and Recent Developments
- Liquidity Concerns: Management identified a potential cash shortfall in scenarios where freight rates remain below the cash break-even level. To mitigate this, the company launched a new $60 million At-the-Market (ATM) equity offering on September 29, 2021.
- Asset Disposal: The company announced plans to sell at least two vintage vessels (built in 2000 and 2002) to capitalize on attractive second-hand prices. An agreement for one vessel was reached but not consummated as of the report date.
- Dividends: A quarterly dividend of $0.01 per share was declared on August 30, 2021, payable October 14, 2021.
- Debt Covenants: The company remains in compliance with financial covenants, including minimum liquidity requirements of $30.0 million under its senior credit facility.
- Newbuildings: Two Suezmax newbuildings are under construction for delivery in 2022. As of September 10, 2021, the second installment of $11.0 million was paid, and remaining commitments are fully financed.
Investor Verification Checklist
- Verify the status of the pending sale of the two vintage vessels and the expected proceeds versus book value.
- Monitor the utilization of the new $60 million ATM program and its impact on share dilution.
- Track Suezmax spot rates to assess the risk of the identified potential cash shortfall.
- Confirm compliance with the $30 million minimum liquidity covenant under the 2019 Senior Secured Credit Facility.
- Review the timeline and financing status for the two newbuildings scheduled for 2022 delivery.