Business Context and Reporting Period
This Form 6-K filing by Nordic American Tankers Ltd (NAT) covers the period ending December 31, 2017, and primarily serves to distribute two key documents: the Second Quarter 2017 Earnings Report (dated August 7, 2017) and the results of the Annual General Meeting (AGM) held on December 12, 2017. NAT operates a homogeneous fleet of 30 Suezmax tankers, focusing on long-term time charters and maintaining a low cash break-even level of approximately $11,500 per day per vessel.
Key Financial Metrics (Q2 2017)
The following metrics reflect the three months ended June 30, 2017, and the six months ended June 30, 2017, as detailed in the attached earnings report.
- Revenue: Net Voyage Revenue was $39.1 million for Q2 2017 and $94.3 million for the six-month period.
- Profitability: The Company reported a Net Operating Loss of $10.3 million for Q2 2017 and a Net Loss of $15.9 million. Basic Earnings Per Share (EPS) was $(0.16) for the quarter.
- Non-GAAP Measure: Adjusted Net Operating Earnings (ANOE) were $15.2 million for Q2 2017, excluding depreciation and non-cash charges.
- Cash Flow: Net cash provided by operating activities was $39.0 million for the six months ended June 30, 2017. Cash and cash equivalents stood at $34.0 million as of June 30, 2017.
- Debt and Liquidity: Long-term debt was $443.5 million as of June 30, 2017. Management stated net debt was approximately $321 million (approx. $10.7 million per vessel) at the end of Q2 2017.
- Operational Metrics: Average Time Charter Equivalent (TCE) for Q2 2017 was approximately $16,100 per day per vessel.
Material Changes Versus Prior Period
Performance in Q2 2017 declined compared to Q1 2017 and the prior year period.
- Revenue Decline: Net Voyage Revenue dropped from $55.2 million in Q1 2017 to $39.1 million in Q2 2017. Compared to Q2 2016, revenue decreased from $61.7 million to $39.1 million.
- Operating Loss: The Company shifted from a Net Operating Earnings of $5.1 million in Q1 2017 to a loss of $10.3 million in Q2 2017. In Q2 2016, the Company had reported Net Operating Earnings of $17.6 million.
- TCE Reduction: Average daily TCE fell from $22,700 in Q1 2017 to $16,100 in Q2 2017.
- Balance Sheet: Cash and cash equivalents decreased significantly from $82.2 million at year-end 2016 to $34.0 million at June 30, 2017, largely due to dividend payments and vessel investments.
Guidance, Outlook, and Corporate Actions
Dividend Policy: NAT declared a Q2 2017 dividend of approximately $0.15 per share, consisting of a $0.05 cash component and a $0.10 distribution of shares in Nordic American Offshore Ltd (NAO). The company maintains a policy of paying quarterly dividends, noting that an average TCE of $30,000 could support a dividend of roughly $2.00 per year.
Capital Structure and Fleet Expansion: Management indicated a desire to diversify the capital structure, potentially including bond financing. NAT is scheduled to take delivery of three new Suezmax vessels in the second half of 2018, with $116 million remaining to be paid at delivery.
AGM Resolutions (Dec 2017): Shareholders approved the election of directors, the appointment of KPMG AS as auditors, and a reduction of the share premium account by approximately $215.4 million to zero to facilitate dividend adjustments under Bermuda law.
Risks: The filing highlights risks related to global economic strength, oil price fluctuations, OPEC production levels, bunker fuel costs, and vessel availability. Management explicitly states they do not predict short-term spot tanker rates due to volatility.
Investor Verification Checklist
- Verify the impact of the $215.4 million share premium reduction on future dividend capacity and balance sheet equity.
- Confirm the financing status and delivery schedule for the three newbuildings due in late 2018.
- Monitor the cash burn rate given the decline in cash equivalents from $82.2 million (Dec 2016) to $34.0 million (June 2017) and the upcoming $116 million vessel payment.
- Assess the sustainability of the dividend policy given the Q2 2017 TCE of $16,100 versus the break-even of $11,500.
- Review the valuation and liquidity of the Nordic American Offshore Ltd (NAO) shares distributed as part of the dividend.