NAT

Nordic American Tankers Ltd. - Form 6-K Summary

Business Context and Reporting Period

This Form 6-K, filed on October 30, 2013, reports on Nordic American Tankers Limited (NAT) for the six months ended June 30, 2013. NAT is a Bermuda-based international tanker company owning and operating a fleet of 20 double-hull Suezmax tankers. During the period, the Company transitioned from cooperative pool arrangements to operating all vessels on the spot market. Significant corporate actions included the full consolidation of Scandic American Shipping Ltd. (the Manager) and Orion Tankers Ltd., and a follow-on equity offering in April 2013.

Key Financial Metrics

Operational Metrics: The Time Charter Equivalent (TCE) rate was approximately $8,600 per day for the six months ended June 30, 2013, compared to $16,900 per day in the prior year period. Off-hire days increased significantly to 429 days in 2013 from 140 days in 2012, largely due to planned drydocking.

Material Changes vs. Prior Period

• Accounting Presentation: Voyage revenue and expenses are now presented on a gross basis for 2013, whereas 2012 figures were primarily presented on a net basis due to cooperative pool arrangements. This change makes direct line-item comparison difficult without adjusting for the gross/net difference.
• Consolidation: The Company acquired 100% of Scandic American Shipping Ltd. and Orion Tankers Ltd. in early 2013. This resulted in a $5.0 million settlement loss and $1.1 million in additional G&A expenses related to share-based compensation acceleration.
• Market Conditions: Net voyage revenue decreased by 53.8% to $27.3 million. This decline was driven by a 49.7% drop in TCE rates and an 8.8% reduction in TCE days due to increased off-hire time.
• Capital Structure: The Company issued 11.2 million shares in April 2013, raising approximately $107.8 million. Long-term debt decreased by $40 million due to repayments on the credit facility.

Guidance, Outlook, and Risks

Outlook: Management notes that the tanker market remains soft, with newbuildings continuing to enter the market. While Suezmax earnings generally remain above operating costs, the broader market has seen periods of negative results. The Company expects fleet expansion to continue over time.

Dividends: The Company declared a dividend of $0.16 per share for the third quarter of 2013, marking the 65th dividend payment in its history.

Risks and Contingencies:

• Arbitration: NAT is in arbitration with Gulf Navigation Company LLC regarding the redelivery condition of the vessel Nordic Harrier in 2011. The Company seeks compensation for drydock expenses but has not reached an agreement.
• Market Volatility: Earnings are highly sensitive to spot market rates, bunker fuel prices, and global oil demand. The filing highlights uncertainty regarding market developments in 2014 due to financial turmoil in Europe and increased U.S. domestic crude production.
• Debt Covenants: The Company must maintain a book equity of no less than $250.0 million and specific loan-to-vessel value ratios under its $430 million credit facility.

Investor Verification Checklist

• Verify the impact of the accounting change from net to gross presentation on year-over-year revenue and expense comparisons.
• Confirm the status and potential financial outcome of the arbitration regarding the Nordic Harrier vessel.
• Monitor the utilization of the $220 million undrawn credit facility and compliance with the $250 million book equity covenant.
• Assess the sustainability of the dividend policy given the reported net loss of $64.1 million for the six-month period.
• Review the integration progress of the newly consolidated subsidiaries (Scandic and Orion) and the associated one-time costs.