Business context and reporting period
Nordic American Tankers Limited (NYSE: NAT) filed this Form 20-F for the fiscal year ended December 31, 2021. It is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide a complete set of Q4-only financial results. NAT operates a predominantly spot-market fleet of Suezmax crude oil tankers. At year-end it reported 24 vessels, including two newbuildings under construction; one vessel was sold in November 2021.
Key financial metrics
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Voyage revenue | $191.1 million | $354.6 million |
| Net voyage revenue | $62.8 million | $233.5 million |
| TCE rate per day | $8,043 | $31,279 |
| Net operating income (loss) | $(144.5) million | $81.2 million |
| Net income (loss) | $(171.3) million | $50.0 million |
| Basic and diluted EPS | $(1.05) | $0.34 |
| Cash flow from operations | $(44.5) million | $110.9 million |
| Cash and cash equivalents at year-end | $34.7 million | $57.8 million |
| Restricted cash at year-end | $9.9 million | $4.2 million |
| Total assets at year-end | $851.2 million | $974.3 million |
| Debt on balance sheet, current and long-term | $321.0 million | $356.7 million |
| Total shareholders’ equity | $498.2 million | $599.1 million |
| Cash dividends declared per share | $0.06 | $0.45 |
Margins were pressured by the collapse in tanker rates: net voyage revenue was approximately 32.9% of voyage revenue in 2021, versus 65.8% in 2020. The filing reports a $60.3 million vessel impairment charge in 2021, comprising $51.4 million for five older vessels and $8.9 million for a vessel classified as held for sale. Interest expense was $26.4 million, down from $31.5 million. A 100-basis-point increase in LIBOR would have increased 2021 interest expense by approximately $3.5 million.
Material changes versus the prior comparable period
- Voyage revenue fell 46.1%; net voyage revenue declined 73.1%, primarily because the TCE rate fell 74.3% while total TCE days rose 4.6%.
- Operating results moved from $81.2 million of operating income and $50.0 million of net income in 2020 to substantial losses in 2021, reflecting sharply lower earnings and the impairment charge.
- Operating cash flow swung from $110.9 million provided in 2020 to $44.5 million used in 2021. Financing cash flow was $30.5 million provided, including $80.1 million of common-share issuance proceeds; cash, cash equivalents and restricted cash declined by $17.4 million.
- Debt was repaid during 2021, but common shares outstanding increased from 151.4 million to 183.7 million, largely through at-the-market offerings.
- Annual dividends declined to $0.06 per share from $0.45. The $0.01-per-share Q4 2021 dividend was paid in March 2022.
Outlook, risks and unusual items
Management reported that Suezmax markets improved in early 2022: indicative average earnings rose from $10,547 per day in Q4 2021 to $16,666 per day in Q1 2022. Management expected further market improvement, citing low oil inventories, potential longer-haul sourcing and expected increases in oil production, but emphasized uncertainty and did not provide firm earnings guidance. The two newbuildings, scheduled for delivery in May and June 2022, were contracted on six-year time charters.
Liquidity warrants attention. NAT reported compliance with debt covenants at December 31, 2021, including a $30 million minimum-liquidity covenant, and described that covenant as its most sensitive. Management’s downside scenario—freight rates remaining at 2021 levels—showed a cash shortfall over the following 12 months exceeding the remaining availability of the $60 million 2022 ATM program. Potential responses included vessel sales, further ATM issuance or additional borrowing. After year-end, three vessels were sold for $46.4 million gross, with $43.8 million used to repay debt; the company also reported subsequent debt repayments and additional share issuance. The 2019 senior secured facility matures in February 2024 and bears floating-rate interest; the filing also discusses the transition away from LIBOR.
Other notable risks include dependence on volatile spot charter rates, fuel and operating costs, vessel values and impairment estimates, refinancing and covenant requirements, environmental compliance costs, and effects of COVID-19 and geopolitical developments. The company disclosed a material weakness in internal control over financial reporting involving review and communication of a manual consolidation journal entry related to vessel impairment. Management had not completed remediation by the report date, and KPMG issued an adverse opinion on internal control; KPMG separately gave an unqualified opinion on the financial statements. Management said the financial statements fairly present the company’s results under U.S. GAAP.
The filing reports no material claims filed in 2021 or 2020 and says management did not expect pending or threatened proceedings to materially affect financial position, while noting they could affect results in a given year. It also reports that nine vessels did not comply with updated ballast-water guidelines at the time described, potentially requiring substantial compliance expenditure.
Most important facts for investors to verify
- Whether higher 2022 charter rates persisted and translated into recognized voyage revenue and operating cash flow, given voyage timing and the company’s spot-market exposure.
- Current liquidity, covenant headroom, debt balances and refinancing plans for the facility maturing in February 2024; distinguish unrestricted cash from restricted cash.
- Cash needs and financing for the two newbuildings, their delivery status and performance under the six-year time charters.
- Share dilution from ATM programs and the effect of vessel-sale proceeds and debt repayments on leverage and liquidity.
- Progress in remediating the material weakness and whether controls over impairment judgments and consolidation entries are operating effectively.
- Vessel impairment assumptions and carrying values, especially for older vessels, alongside actual sale prices and market valuations.
- Dividend sustainability in light of cash generation, debt covenants, board discretion and Bermuda-law requirements.