Business Context and Reporting Period
Company: Nordic American Tankers Limited (NAT)
Filing Type: Form 6-K (Press Release)
Reporting Period: Third Quarter ended September 30, 2020
Business Overview: NAT operates a homogeneous fleet of Suezmax crude oil tankers. As of the reporting date, the fleet consists of 23 owned vessels plus 2 newbuildings under contract for delivery in the first half of 2022. The company focuses on the Suezmax market, emphasizing high vessel quality and maintenance standards.
Key Financial Metrics
| Metric | 3Q 2020 | YTD 9M 2020 | YTD 9M 2019 |
|---|---|---|---|
| Net Voyage Revenue | $37.3 million | $217.2 million | $116.6 million |
| Net Income (Loss) | -$10.0 million | $78.7 million | -$23.1 million |
| Earnings Per Share (Basic) | -$0.07 | $0.53 | -$0.16 |
| EBITDA (Non-GAAP) | $15.6 million | N/A | $11.5 million (3Q 2019) |
| Operating Cash Flow (YTD) | N/A | $125.4 million | $46.1 million |
| Cash & Restricted Cash | $70.1 million | $70.1 million | N/A |
| Long-Term Liabilities | $313.3 million | $313.3 million | N/A |
| Net Debt | $255.4 million | $255.4 million | N/A |
Dividends: Declared $0.04 per share for 3Q 2020 (93rd consecutive quarterly dividend). Total dividends paid in 2020 to date: $60 million ($0.41 per share).
Material Changes vs. Prior Period
- Profitability: 3Q 2020 reported a net loss of $10.0 million compared to a net income of $49.2 million in 2Q 2020. This decline was primarily due to scheduled drydockings of several vessels, which reduced income-generating days. However, YTD 2020 net income of $78.7 million represents a significant improvement of approximately $100 million compared to the net loss of $23.1 million in YTD 2019.
- Revenue: Net voyage revenue for 3Q 2020 was $37.3 million, down from $93.8 million in 2Q 2020 due to drydockings, but up from $32.3 million in 3Q 2019.
- Debt Reduction: Total long-term liabilities decreased by over $63 million since year-end 2019, reducing Net Debt to $255.4 million (approx. $11 million per ship).
- Fleet Expansion: The company announced two new Suezmax newbuilding contracts with Samsung Heavy Industries, fully financed, to be delivered in H1 2022.
Guidance, Outlook, and Risks
- Market Outlook: Management views 2020 as a "very good year" overall despite the pandemic's short-term impact. They anticipate positive fundamentals continuing into 2021, citing strong recovery in Asia, the conclusion of the US election, and the potential availability of a vaccine.
- Dividend Policy: Cash dividends remain a priority and are intended to reflect cash earnings. Management expects higher dividends in an improved market.
- Strategy: Focus on maintaining a homogenous, high-quality fleet to leverage economies of scale and ensure a low cash break-even level.
- Risks: Key risks include volatility in spot tanker rates, fluctuations in charter rates and vessel values, bunker price changes, drydocking costs, and potential disruptions to shipping routes due to political events or accidents. The macro-economic effects of the pandemic remain uncertain.
Investor Verification Checklist
- Drydocking Impact: Verify the specific duration and cost of the drydockings that caused the 3Q 2020 net loss and confirm the return-to-service dates for affected vessels.
- Newbuilding Financing: Confirm the terms and interest rates of the financing secured for the two new Suezmax vessels to be delivered in 2022.
- Debt Covenants: Review the covenants associated with the $306 million senior secured credit facility and the $129.5 million Ocean Yield Financing to ensure compliance with current leverage ratios.
- ATM Facility Usage: Monitor the utilization of the new $60 million At-the-Market (ATM) facility filed in October 2020 and its impact on share dilution.
- Dividend Sustainability: Assess whether the current dividend yield (approx. 14% annualized) is sustainable given the volatility in TCE rates and the company's cash flow generation post-drydocking.