Business Context and Reporting Period
This Form 6-K filing by Nordic American Tankers Limited (NAT) covers the fourth quarter and full year ended December 31, 2015, with the report dated February 17, 2016. NAT operates a homogeneous fleet of Suezmax crude oil tankers, focusing on a strategy of accretive fleet growth, low net debt, and consistent quarterly dividends. The company operates 24 vessels with two newbuildings under construction, targeting delivery in 2016 and 2017.
Key Financial Metrics
| Metric | 4Q 2015 | 3Q 2015 | 4Q 2014 | Full Year 2015 | Full Year 2014 |
|---|---|---|---|---|---|
| Net Voyage Revenue ($000s) | 77,385 | 66,673 | 43,074 | 287,082 | 151,619 |
| Net Operating Gain ($000s) | 34,393 | 29,079 | 3,318 | 128,093 | (4,775) |
| Net Gain ($000s) | 30,154 | 25,831 | (3,677) | 114,627 | (15,739) |
| Operating Cash Flow ($000s) | 57,227 | 49,057 | 24,486 | 211,812 | 77,669 |
| Operating Cash Flow per Share | $0.64 | $0.55 | $0.27 | $2.38 | $0.91 |
| Earnings Per Share (EPS) | $0.34 | $0.29 | -$0.04 | $1.29 | -$0.18 |
| Dividend Per Share | $0.43 | $0.38 | $0.22 | N/A | N/A |
Liquidity and Debt: At the end of 4Q 2015, NAT held approximately $29.9 million in cash and cash equivalents. The company maintains a $500 million non-amortizing credit facility maturing in December 2020, with $330 million drawn. Net debt stood at approximately $230 million, or $8.8 million per vessel. Undrawn credit facility plus net working capital totaled approximately $267 million.
Material Changes vs. Prior Period
- Revenue and Profitability: Net voyage revenue increased 80% year-over-year in 4Q 2015 compared to 4Q 2014, driven by higher spot rates. The company returned to profitability, with a net gain of $30.2 million in 4Q 2015 versus a net loss of $3.7 million in the prior year quarter.
- Cash Flow: Operating cash flow rose 16% sequentially from 3Q 2015 to 4Q 2015 and more than doubled compared to 4Q 2014. Full-year 2015 operating cash flow of $212 million was the strongest in the company's history.
- Market Rates: Average achieved spot rates in 4Q 2015 were approximately $39,800 per day, a significant increase from $35,000 in 3Q 2015 and $24,000 in 4Q 2014.
- Dividends: The dividend per share increased to $0.43 in 4Q 2015 from $0.38 in 3Q 2015 and $0.22 in 4Q 2014, marking the 74th dividend payment since operations began.
Guidance, Outlook, and Risks
Outlook and Strategy: Management expects 1Q 2016 to progress well. The company aims to maintain a flexible strategy that benefits from both strong and weak markets, with a focus on enhancing total shareholder return through dividends and earnings growth. Two newbuildings are on schedule for delivery in 3Q 2016 and 1Q 2017. No equity offerings are planned for the current 26-vessel fleet.
Market Conditions: Low oil prices are viewed as a positive factor for the tanker market by stimulating the global economy. However, the company notes that increased imports to the Far East are offsetting decreased US crude imports. The Suezmax orderbook represents about 21% of the existing fleet, with 39 vessels scheduled for delivery in 2016, though management expects actual deliveries to be lower.
Risks and Contingencies:
- Investment in Affiliate: NAT's investment in Nordic American Offshore Ltd. (NAO) is negatively impacted by low oil prices. The market value of this investment is currently lower than its book value, though management expects this to be temporary.
- Legal: NAT was awarded $10.2 million plus interest and costs in an arbitration case against Gulf Navigation Holding PJSC regarding the vessel Nordic Harrier. The company hopes this matter will be closed.
- Operational: Eight vessels are expected to undergo drydocking in 2016. The company maintains a cash break-even rate below $12,000 per day per vessel.
Key Facts for Investor Verification
- Verify the reconciliation of the non-GAAP "Operating Cash Flow" metric to GAAP net income, as this is a primary performance indicator used by management.
- Confirm the status of the $10.2 million arbitration award against Gulf Navigation Holding PJSC and expected collection timeline.
- Monitor the market value versus book value of the investment in Nordic American Offshore Ltd. (NAO) for potential impairment risks.
- Track the actual delivery schedule of the two newbuildings against the projected 3Q 2016 and 1Q 2017 dates.
- Review the utilization of the $500 million credit facility and the company's ability to service $330 million in drawn debt while maintaining dividend payments.