Nordic American Tankers Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on June 6, 2018, reports on the first quarter of 2018 (ended March 31, 2018) for Nordic American Tankers Limited (NAT). The Company operates a homogeneous fleet of 33 Suezmax tankers (including three newbuilds) and is the largest Suezmax fleet operator globally. The filing includes a press release dated May 16, 2018, detailing Q1 2018 earnings and dividend declarations.
Key Financial Metrics
| Metric | Q1 2018 | Q4 2017 |
|---|---|---|
| Net Voyage Revenue | $29.6 million | $36.7 million |
| Net Operating Earnings (Loss) | ($10.2 million) | ($143.6 million) |
| Net Loss | ($18.7 million) | ($151.4 million) |
| Adjusted Net Operating Earnings (Cash) | $4.4 million | $11.2 million |
| Time Charter Equivalent (TCE) | $11,200 per day | N/A |
| Net Debt | $266 million | N/A |
| Cash and Cash Equivalents | $36.7 million | $58.4 million |
| Dividend per Share | $0.01 | N/A |
Debt and Liquidity: Net debt stood at approximately $266 million, or $8.9 million per vessel, which management notes is lower than the current scrap value of a Suezmax vessel. The Company maintains a Revolving Credit Facility (RCF) from 2004 and is in compliance with all financial covenants.
Material Changes vs. Prior Period
- Net Loss Improvement: The reported Net Loss improved significantly from ($151.4 million) in Q4 2017 to ($18.7 million) in Q1 2018. The Q4 2017 loss was heavily impacted by non-cash impairment charges of $110.5 million on vessels and $19.0 million on goodwill.
- Operating Performance: Adjusted Net Operating Earnings (cash basis) declined from $11.2 million in Q4 2017 to $4.4 million in Q1 2018, reflecting weaker market rates.
- Revenue Decline: Net Voyage Revenue decreased by approximately 19% compared to the prior quarter, driven by lower TCE rates.
- Dividend Reduction: The quarterly dividend was reduced to $0.01 per share, the 83rd consecutive dividend, reflecting the weak tanker market conditions in Q1 2018.
Guidance, Outlook, and Management Commentary
- Market Outlook: Management views the global economic upswing as positive for the tanker market. They note that the historic average market rate for Suezmax vessels is approximately $30,000 per day, which would generate significant free cash flow.
- Fleet Strategy: The Company is circulating two vessels for sale to adjust the fleet in anticipation of three new vessel deliveries scheduled for July, August, and October 2018.
- Financing: NAT plans to retire its outdated 2004 RCF and replace it with new financing to improve financial flexibility. The recapitalization program is targeted for completion by the end of Q2 2018.
- Dividend Policy: The objective is to return to a dividend level averaging over $2.00 per share annually, contingent on market improvement.
- Risks: Key risks include volatility in spot rates, bunker fuel prices, geopolitical events, and the availability of financing. The Company emphasizes a "zero tolerance" policy for corruption and related-party conflicts.
Investor Verification Checklist
- Verify the status and terms of the planned recapitalization and replacement of the 2004 Revolving Credit Facility.
- Confirm the progress of the sale of the two vessels currently being circulated.
- Monitor the delivery schedule and chartering status of the three newbuilds expected in late 2018.
- Track the TCE rates for Suezmax vessels to assess the feasibility of returning to historical average rates of $30,000 per day.
- Review the Company's compliance with financial covenants under the existing credit facility during the transition period.