NAT 2020 Form 20-F Summary
Period and scope: Nordic American Tankers Limited’s audited annual report for the fiscal year ended December 31, 2020, filed April 29, 2021. This is an annual filing, not a standalone 2020 Q4 earnings report; most financial figures below are for the full year. Amounts are U.S. dollars unless stated otherwise.
Business context
NAT operates a homogeneous Suezmax crude-oil tanker fleet, with 23 active vessels at year-end and two newbuildings scheduled for 2022 delivery. Most vessels are exposed to the spot market. The company’s business is cyclical and its earnings depend heavily on spot charter rates, oil shipments and fleet utilization.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Voyage revenue | $354.6 million | $317.2 million |
| Net voyage revenue | $233.5 million | $175.5 million |
| TCE rate per day | $31,279 | $21,655 |
| Net operating income | $81.2 million | $32.0 million |
| Net income (loss) | $50.0 million | ($10.4 million) |
| Basic and diluted EPS | $0.34 | ($0.07) |
| Net cash from operating activities | $110.9 million | $52.9 million |
| Cash dividends paid | $67.2 million | $14.3 million |
Voyage revenue rose 11.8%, while net voyage revenue increased 33.1%, reflecting a higher achieved TCE rate. The company said its 2020 TCE improvement partly reflected a late-2019 rate spike realized in early 2020. Voyage expenses fell 14.6%, principally due to lower fuel prices and more time-charter employment. General and administrative expense increased 30.5% to $17.6 million, mainly after a cost-sharing agreement ended and salaries rose. Depreciation increased 6.0% to $67.8 million, partly due to capitalized drydock costs. Interest expense fell 18.0% to $31.5 million, primarily following debt repayments.
Net margin was approximately 14.1% in 2020, versus a net loss in 2019. Operating margin was approximately 22.9%. These are calculated from reported revenue and income figures.
Balance sheet, liquidity and capital commitments
- Year-end cash and cash equivalents were $57.8 million; restricted cash was $4.2 million, for total cash and restricted cash of $62.1 million. Current assets were $99.5 million and current liabilities were $39.7 million.
- Total assets were $974.3 million and shareholders’ equity was $599.1 million. Balance-sheet debt was $356.7 million net of financing costs, comprising $22.1 million current and $334.6 million non-current. The filing reports gross outstanding debt of approximately $366.1 million: $253.9 million under the senior secured facility, including its accordion loan, and $112.2 million financing for three 2018-built vessels.
- Operating cash flow increased to $110.9 million. Investing cash outflow was $17.5 million, including an $11.0 million newbuilding installment; financing cash outflow was $93.1 million, including dividends and debt repayments. Cash and restricted cash increased by $0.4 million.
- The senior secured facility matures in February 2024 and includes floating-rate LIBOR debt, minimum liquidity of $30 million, a maximum loan-to-vessel-value ratio of 70%, and an excess-cash repayment mechanism. The separate 2018-vessel financing has a $20 million minimum-liquidity covenant. NAT reported compliance with its debt covenants at year-end.
- Two newbuildings are scheduled for delivery in the first half of 2022. Remaining contract obligations were $99 million at year-end; financing for up to 80% of the newbuilding price had been arranged but was undrawn at year-end. Total disclosed contractual obligations, including debt, estimated interest, leases and newbuildings, were $566.6 million.
Material changes, outlook and risks
- Market and outlook: Management described 2020 as a year of sharply different market conditions: strong tanker earnings early in the year, supported in part by floating storage, followed by a marked second-half decline as oil demand weakened, production was cut and storage demand eased. Industry-reported average Suezmax earnings were about $50,000 per day in the first half and near operating-cost levels in the second half. Management noted improved indicative spot rates in Q1 2021 versus Q4 2020 and expressed an expectation of increased oil output and tanker demand later in 2021; this was an outlook, not a quantified company earnings forecast.
- Asset valuation: Broker estimates put the fleet’s charter-free fair market value at $647.1 million against vessel carrying value of $861.3 million, a difference of about $214.2 million. NAT recorded no impairment, based on estimated undiscounted vessel cash flows exceeding carrying values. Vessel recoverability was KPMG’s critical audit matter because the cash-flow assessment depends significantly on volatile charter-rate assumptions.
- Dividends and equity issuance: NAT paid $0.45 per share in 2020, totaling $67.2 million. The Board declared a $0.02-per-share Q4 2020 dividend, paid March 30, 2021. The completed $40 million at-the-market program issued 4.2 million shares in 2020 for net proceeds of $20.7 million. Under a new $60 million ATM program, NAT subsequently issued about 3.0 million shares for $10.0 million gross proceeds. Further issuance could dilute shareholders.
- Key risks: Spot-rate and vessel-value volatility; reduced crude shipments and oil demand; COVID-19-related crew-rotation disruption and extra costs; variable interest rates and LIBOR transition; debt refinancing and covenant constraints; fuel and environmental-compliance costs; and potential pollution, casualty, off-hire and counterparty losses. The company reported 13 vessels not yet compliant with the cited updated ballast-water guideline and said compliance costs may be substantial.
- Other disclosures: NAT reported no material claims filed for 2020 or 2019 and no off-balance-sheet arrangements. Management and KPMG reported effective internal control over financial reporting; KPMG issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Review the full audited statements and notes, especially the vessel impairment assumptions and the gap between vessel carrying values and broker estimates.
- Confirm the current debt balance, February 2024 maturity and refinancing plan, covenant headroom, and exposure to variable rates; a 100-basis-point LIBOR increase was estimated to add about $3.8 million to 2020 interest expense.
- Track actual spot-market earnings and utilization against the company’s outlook; industry indicative rates are not the same as NAT’s realized revenue.
- Assess the funding, delivery schedule and remaining cash requirements for the two newbuildings, along with future dilution from the $60 million ATM.
- Evaluate whether dividends remain supportable given market conditions, debt terms, capital needs and Board discretion; the filing does not guarantee future distributions.