Business Context and Reporting Period
This Form 6-K, filed on November 26, 2019, by Nordic American Tankers Limited (NAT), incorporates a press release dated November 25, 2019, detailing financial results for the third quarter and nine months ended September 30, 2019. NAT operates a homogeneous fleet of 23 Suezmax tankers with an average age of 11 years. The company operates in a capital-intensive industry focused on crude oil transportation, emphasizing fleet quality, low debt, and dividend distribution.
Key Financial Metrics
| Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 |
|---|---|---|---|
| Net Voyage Revenue | $116.6 million | $79.8 million | $32.3 million |
| Net Operating Earnings (Loss) | $10.5 million | ($44.0 million) | ($2.9 million) |
| Net Loss | ($23.1 million) | ($84.8 million) | ($13.7 million) |
| Adjusted Net Operating Earnings | $31.0 million (TTM) | N/A | $13.1 million |
| Cash from Operating Activities | $46.1 million | ($25.4 million) | N/A |
| Total Debt (Current + Long-term) | $404.9 million | $419.0 million | N/A |
| Cash and Cash Equivalents | $37.3 million | $45.5 million | N/A |
| Restricted Cash | $10.9 million | $0 | N/A |
| Time Charter Equivalent (TCE) | $15,900/day (3Q19) | $12,000/day (3Q18) | N/A |
Material Changes vs. Prior Period
- Profitability Improvement: The net loss for the first nine months of 2019 narrowed significantly to $23.1 million compared to $84.8 million in the same period of 2018. Net Operating Earnings turned positive at $10.5 million, reversing a $44.0 million loss in 2018.
- Revenue Growth: Net Voyage Revenue increased by approximately 46% year-over-year, driven by higher spot rates and improved market conditions.
- Operational Efficiency: The Time Charter Equivalent (TCE) for the third quarter rose to $15,900/day, up from $12,000/day in Q3 2018 and $14,800/day in Q2 2019.
- Debt Restructuring: In early 2019, the company raised a $306 million loan to repay all debt to three Scandinavian lenders, consolidating financing into a new facility with CLMG Corp. and Ocean Yield financing.
- Cash Flow: Operating cash flow swung from a $25.4 million outflow in the prior year to a $46.1 million inflow in the current period.
Guidance, Outlook, and Management Commentary
- Market Outlook: Management describes the current environment as the "strongest tanker market seen in decades," citing political frictions and IMO regulations effective January 1, 2020, as demand stimulants. Approximately 70% of spot trading days for Q4 2019 were booked at an average TCE of $34,000/day.
- Dividend Policy: NAT declared its 89th consecutive quarterly dividend of $0.02 per share, payable December 18, 2019. Management expects higher dividends in an improved market.
- Strategy: The company maintains a strategy of a homogenous fleet, low debt, and high dividend yield. There are no speculative ship orders; expansion is limited to maintaining fleet quality.
- Risks: Forward-looking statements highlight risks including fluctuations in charter rates, bunker prices, geopolitical events, and regulatory changes. The filing notes that short-term spot rates may remain volatile.
Investor Verification Checklist
- Verify the sustainability of the Q4 2019 booking rate of $34,000/day TCE against actual Q4 performance.
- Confirm the impact of the new $306 million credit facility on future interest expenses and debt maturity profiles.
- Monitor the utilization of the $40 million At-The-Market (ATM) offering, of which only $1.3 million has been used to date.
- Assess the effect of IMO 2020 regulations on operational costs and fleet efficiency.
- Review the reconciliation of Non-GAAP measures, specifically Adjusted Net Operating Earnings, to understand cash generation capabilities versus GAAP net loss.