NAT

Business Context and Reporting Period

This Form 6-K filing by Nordic American Tanker Shipping Limited (NAT) covers the period ending February 1, 2005, and includes press releases dated January 26, 2005, and February 1, 2005. The Company reported its fourth-quarter and full-year 2004 results. During this period, NAT completed a strategic transformation from a passive leasing company to an operating company, assuming direct responsibility for crewing and operations of its vessels. This change is expected to alter its US tax classification, potentially reducing the tax rate on qualifying dividends for non-corporate US shareholders from 35% to 15% starting in 2006.

Key Financial Metrics

Dividends: The Board declared a first-quarter 2005 dividend of $1.62 per share, an increase from $1.11 in the preceding quarter and $1.15 in the first quarter of 2004.

Liquidity: The Company maintains a $300 million credit facility established in October 2004, which remains undrawn. The Company repaid all outstanding bank debt in November 2004 using proceeds from a $112 million follow-on public offering.

Material Changes Versus Prior Period

• Revenue Growth: Net voyage revenue for Q4 2004 increased 74.6% compared to Q3 2004, driven by an exceptionally strong spot market for Suezmax tankers with an average Time Charter Equivalent (TCE) of approximately $94,000 per day.
• Profitability: While Q4 Net Income ($8.8m) was lower than Q3 ($10.2m), this was due to one-time non-recurring costs of $10.6 million associated with the transformation to an operating company. Of this, $1.4 million was a cash item and $9.2 million was a non-cash item related to changes in the manager's compensation scheme.
• Fleet Expansion: The fleet doubled from three to six vessels between October 2004 and February 2005. Acquisitions included a 1997-built vessel for $66 million (Nov 2004), a 1998-built vessel (Jan 2005), and a newbuilding expected in March 2005 for $81 million.
• Capital Structure: The Company moved from a debt-laden balance sheet to a debt-free position in 2004, funded by equity issuance. Shareholders' equity more than doubled from $105.7 million in 2003 to $221.9 million in 2004.

Guidance, Outlook, and Risks

Outlook: Management views tanker market dynamics as favorable. The strategy focuses on maintaining a low debt-to-equity ratio and pursuing high dividends. The fleet is balanced with fixed income from bareboat charters and spot market exposure to maintain consistent base cash flow while capturing upside from spot rates.

Strategic Goals: Future projects are designed to be accretive to earnings and dividends per share. The addition of the newbuilding is expected to reduce the average fleet age to 5.7 years.

Risks and Contingencies:

• Market Volatility: Results are subject to fluctuations in charter rates, vessel values, and global oil consumption.
• Operational Costs: Exposure to changes in bunker prices, drydocking, and insurance costs.
• Regulatory and Political: Risks include changes in governmental rules, OPEC production levels, and potential disruption of shipping routes due to accidents or political events.
• Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections due to uncertainties beyond the Company's control.

Key Facts for Investor Verification

• Dividend Sustainability: Verify the ability to maintain the increased dividend of $1.62 per share given the shift to an operating model with higher direct operating expenses.
• Spot Market Exposure: Confirm the current employment status of the three vessels expected to be in the spot market as of February 1, 2005, and the two new vessels expected in March 2005.
• Tax Status: Monitor the official confirmation of the Company's status as a non-Passive Foreign Investment Company (PFIC) for US tax purposes to validate the projected 15% tax rate on dividends.
• Debt-Free Status: Confirm the continued absence of bank debt and the availability of the $300 million credit facility for future growth.
• Non-Recurring Costs: Assess whether the $10.6 million in one-time costs in Q4 2004 represents a complete transition expense or if further restructuring costs are anticipated.