NAT

Business Context and Reporting Period

Company: Nordic American Tanker Shipping Limited (NYSE: NAT)
Filing Type: Form 6-K (Press Release)
Reporting Period: Fourth Quarter ended December 31, 2007 (Announced February 12, 2008)
Business Overview: The Company operates a fleet of 12 double-hull Suezmax tankers, with 11 employed in the spot market and one on a long-term fixed charter. The fleet is set to expand to 14 vessels with two newbuildings scheduled for delivery in late 2009 and April 2010.

Key Financial Metrics

Liquidity and Debt:

• Net Debt: Approximately $92.2 million total ($7.7 million per vessel) as of Q4 2007.
• Credit Facility: $500 million revolving credit facility maturing in 2010; $394 million undrawn.
• Cash Breakeven: Estimated at approximately $9,800 per day per vessel for the fleet of 12 trading vessels.

Material Changes vs. Prior Period

• Profitability Improvement: The Company returned to profitability in Q4 2007 ($1.7 million net income) compared to a net loss of $1.2 million in Q3 2007. This improvement was driven by a turnaround in the spot tanker market starting in early December 2007.
• Revenue Growth: Net voyage revenue increased 11.5% quarter-over-quarter from $24.1 million to $26.9 million.
• Dividend Increase: The Board declared a dividend of $0.50 per share for Q4 2007, an increase from $0.40 in Q3 2007, reflecting improved operating cash flow.
• One-Time Costs: Q4 2007 results were reduced by approximately $0.16 per share due to one-time costs, including $0.07 per share for loss of income during drydocking/repairs and $0.09 per share in non-cash pension costs related to the CEO's pension arrangement.

Outlook, Risks, and Management Commentary

Market Outlook: Management expects 2008 to be another good year, contingent on avoiding a significantly weakened global economy. Freight rates are expected to fluctuate significantly. The Company notes that instability in financial markets has not yet impacted crude oil trade flows.

Strategic Initiatives:

• Operational Consolidation: Commercial operations have been consolidated with Frontline Ltd. and the Stena group, and technical operations are managed by V.Ships Norway AS. This is expected to generate cost synergies.
• Fleet Expansion: Two newbuildings are under construction. A $18 million deposit was paid in November 2007. Financing for these vessels is not expected to impact dividends prior to delivery.
• Dividend Policy: The Company maintains a full dividend payout policy, aiming for growth that is accretive to shareholders.

Risks and Contingencies:

• Market Volatility: Results are highly dependent on spot market rates, which are volatile.
• Off-Hire: One vessel underwent a 10-year special survey and steel replacement in Q4 2007, resulting in 80 days of lost income. Another vessel is scheduled for drydock in Q1 2008 with an expected loss of 25 income days.
• Cost Pressures: Upward pressure on operating costs, particularly crewing, lubricating oil, and repairs.
• Regulatory/Environmental: Phasing out of single-hull tankers by 2010 is viewed as advantageous for the Company's double-hull fleet.

Investor Verification Checklist

• Dividend Sustainability: Verify if the $0.50 dividend is sustainable given the volatility of spot rates and the upcoming drydocking schedule in Q1 2008.
• One-Time Adjustments: Confirm the impact of the $2.7 million non-cash pension cost and drydocking losses on the true operating performance of the quarter.
• Debt Covenants: Review the terms of the $500 million credit facility to ensure no covenants are at risk given the current net debt levels.
• Newbuilding Progress: Monitor the $18 million deposit and future payment schedule for the two newbuildings to ensure no unexpected capital calls.
• Operational Synergies: Assess the actual cost savings realized from the consolidation of commercial and technical operations with Frontline and V.Ships.