Business Context and Reporting Period
This Form 6-K filing by Nordic American Tankers Ltd (NAT) covers the fourth quarter and the twelve months ended December 31, 2019. The report was issued on February 18, 2020, and signed on February 25, 2020. NAT operates a homogeneous fleet of 23 Suezmax tankers, focusing on crude oil transportation. The company reported a return to profitability in Q4 2019 following losses in the prior three quarters.
Key Financial Metrics
| Metric | Q4 2019 | Q4 2018 | Full Year 2019 | Full Year 2018 |
|---|---|---|---|---|
| Net Voyage Revenue | $58.8M | $44.2M | $175.5M | $124.0M |
| Net Operating Earnings | $21.5M | $5.4M | $32.0M | ($38.6M) |
| Net Profit (Loss) | $12.7M | ($10.5M) | ($10.4M) | ($95.3M) |
| EPS (Basic) | $0.09 | ($0.07) | ($0.07) | ($0.67) |
| Operating Cash Flow (12mo) | $52.9M (2019) vs ($16.1M) (2018) | |||
| Long-Term Debt | $376.3M (as of Feb 2020) | |||
| Debt to Total Assets | ~37% | |||
| Cash & Equivalents | $48.8M (Dec 31, 2019) |
Operational Metrics: Average Time Charter Equivalent (TCE) for Q4 2019 was $31,700 per day. Operating costs were approximately $8,000 per day per ship. In Q1 2020, 70% of trading days were booked at an average TCE of $53,000 per day.
Material Changes vs. Prior Period
- Profitability Turnaround: Q4 2019 net profit of $12.7M represents a significant improvement from a net loss of $13.7M in Q3 2019 and a net loss of $10.5M in Q4 2018.
- Annual Performance: Full-year 2019 net loss narrowed to $10.4M compared to a $95.3M loss in 2018, driven by higher voyage revenues and lower impairment charges.
- Dividend Increase: The quarterly dividend increased to $0.07 per share for Q4 2019, up from $0.02 in Q3 2019, marking the 90th consecutive quarterly dividend.
- Debt Reduction: Long-term debt was reduced by approximately $20 million since the Q3 2019 report. Proceeds from an At-the-Market (ATM) offering ($17.3M) were used to retire deferred compensation liabilities.
- Balance Sheet: Total assets decreased slightly to $1.03 billion from $1.07 billion in 2018, primarily due to depreciation and vessel disposals in the prior year.
Guidance, Outlook, and Risks
Outlook: Management views the 2020 outlook as solid, citing a strong base created by IMO 2020 regulations and muted ship supply. The company expects increased dividends in an improved market. Early 2020 booking rates ($53,000/day TCE) are significantly higher than Q4 2019 averages.
Risks and Contingencies:
- Coronavirus: Management acknowledges the virus could have a negative short-term impact on the global economy and energy demand, though logistical inefficiencies might increase demand for shipping.
- Market Volatility: Short-term spot rates remain volatile. The company notes that supply of tanker tonnage is inelastic in the short term.
- Geopolitics: Trade negotiations (US/China) and Middle East tensions are monitored, though currently viewed as less immediate threats than the pandemic.
Investor Verification Checklist
- Verify the sustainability of the Q1 2020 TCE rate of $53,000/day against the backdrop of the coronavirus pandemic.
- Confirm the timeline for the retirement of the remaining deferred compensation liabilities in Q1 2020.
- Monitor the impact of the $12.8M restricted cash deposit for future drydocking on liquidity.
- Assess the company's ability to maintain the increased $0.07 dividend if spot rates revert to Q4 2019 levels ($31,700/day).
- Review the specific terms of the $306M credit facility with CLMG Corp. regarding covenants and interest rates.