NAT

Business Context and Reporting Period

Nordic American Tanker Shipping Limited (NAT) filed this Form 6-K on February 28, 2007, to disseminate a press release issued on February 14, 2007. The filing details the Company's financial results and dividend declaration for the fourth quarter of 2006. NAT operates a fleet of modern double-hull Suezmax tankers, with a strategy focused on high spot market exposure and a full dividend payout policy.

Key Financial Metrics

• Revenue: Net voyage revenue for Q4 2006 was $34.3 million, compared to $37.6 million in Q4 2005. Full-year 2006 net voyage revenue was $135.3 million versus $86.1 million in 2005.
• Profitability: Net income for Q4 2006 was $13.7 million ($0.52 per share), down from $25.1 million ($1.51 per share) in Q4 2005. Full-year 2006 net income was $67.4 million ($3.14 per share) compared to $46.3 million ($3.03 per share) in 2005.
• Cash Flow: Operating cash flow for Q4 2006 was $26.7 million, a decrease from $32.9 million in Q4 2005. Full-year 2006 operating cash flow was $107.1 million.
• Dividends: The Board declared a dividend of $1.00 per share for Q4 2006. Total dividends declared for 2006 were $4.97 per share, compared to $4.47 in 2005.
• Debt and Liquidity: As of February 14, 2007, net debt was approximately $14.5 million per vessel. The Company maintained $326 million in undrawn capacity under a $500 million revolving credit facility maturing in 2010. Cash and cash equivalents at year-end 2006 were $11.7 million.
• Fleet: The fleet consisted of 12 modern double-hull Suezmax tankers at year-end 2006, up from 8 vessels in 2005.

Material Changes vs. Prior Period

• Earnings Decline: Q4 2006 earnings per share ($0.52) were significantly lower than Q4 2005 ($1.51). This was primarily due to a one-time non-cash charge of $3.3 million ($0.14 per share) related to a follow-on offering in October 2006 and a dilutive timing difference of approximately $0.17 per share caused by the late delivery of three new vessels relative to the share issuance date.
• Market Rates: Average spot market rates for modern Suezmax tankers fell to $39,727 per day in Q4 2006 from $64,002 per day in Q4 2005, though rates remained healthy compared to historical lows.
• Dividend Reduction: The Q4 2006 dividend of $1.00 per share was lower than the record $1.88 per share paid in Q4 2005, reflecting the lower operating cash flow and share count adjustments.
• Asset Growth: Total assets increased from $505.8 million in 2005 to $800.2 million in 2006, driven by the acquisition of three new vessels and the follow-on equity offering which raised $173.1 million in net proceeds.

Guidance, Outlook, and Risks

• Outlook: Management noted that market rates in early 2007 were well above Q4 2006 levels, with the Imarex Tanker Index averaging $43,574 per day through February 12, 2007. The Company expects short-term spot rates to continue fluctuating significantly.
• Strategy: NAT continues to pursue a strategy of maximizing total return through a transparent dividend policy and spot market exposure. The Company estimates a cash breakeven of approximately $9,500 per day per vessel.
• Shareholder Rights Plan: The Board adopted a shareholder rights plan to protect against unsolicited takeover attempts, with rights expected to be issued to shareholders of record as of February 27, 2007.
• Risks: Key risks include fluctuations in charter rates, vessel values, bunker prices, and global economic conditions. The Company faces potential disruption from accidents, political events, or regulatory changes. One vessel was off-hire for approximately 20 days in Q4 2006 due to a minor incident, and another was scheduled for a 10-year special survey in early 2007.

Investor Verification Checklist

• Verify the impact of the $3.3 million non-cash charge and the $0.17 dilutive timing effect on Q4 2006 EPS to understand the core operational performance.
• Confirm the current spot market rates for Suezmax tankers against the Company's $9,500 per day cash breakeven estimate.
• Review the terms of the $500 million revolving credit facility and the status of the $326 million undrawn capacity.
• Monitor the status of the vessel undergoing a 10-year special survey and any potential off-hire days in Q1 2007.
• Assess the implications of the newly adopted shareholder rights plan on future M&A activity.