Business Context and Reporting Period
This Form 6-K filing by Nordic American Tankers Ltd (NAT) reports financial results and operational updates for the fourth quarter of 2011 (ended December 31, 2011) and the full year 2011. The Company operates a fleet of 20 double-hull Suezmax tankers, primarily employed in the spot market. In November 2011, NAT established the Orion tanker pool with Frontline Ltd. On January 24, 2012, the Company closed a stock offering raising $75.9 million to strengthen its capital base.
Key Financial Metrics
- Revenue: Net Voyage Revenue for 4Q2011 was $19.3 million, compared to $11.2 million in 3Q2011 and $20.5 million in 4Q2010. Full-year 2011 revenue was $79.9 million.
- Profitability: Net Loss for 4Q2011 was $17.7 million (EPS -$0.37), an improvement from the $37.7 million loss (EPS -$0.80) in 3Q2011. Full-year 2011 Net Loss was $72.3 million.
- Cash Flow: Operating Cash Flow (non-GAAP) for 4Q2011 was effectively break-even ($0.0 million), improving from -$5.5 million in 3Q2011. Full-year 2011 Operating Cash Flow was $12.7 million. Net cash provided by operating activities for the full year was -$12.2 million.
- Debt and Liquidity: As of the report date, Net Debt was $79.3 million (approx. $4.0 million per vessel). Cash and cash equivalents stood at $24.0 million as of December 31, 2011, with total cash on hand reported as approximately $100 million post-offering. The Company has a $500 million revolving credit facility, with $250 million drawn.
- Dividends: A dividend of $0.30 per share was declared for 4Q2011, marking the 58th consecutive quarter of dividend payments.
Material Changes vs. Prior Period
- Fleet Expansion: The fleet grew from 15 vessels in 4Q2010 to 20 vessels in 4Q2011, a 33% increase, following the delivery of two newbuildings (Nordic Breeze and Nordic Zenith).
- Market Rates: Average gross spot market rates improved to approximately $12,000 per day per ship in 4Q2011, up from $8,000 per day in 3Q2011.
- Arbitration Resolution: The Nordic Galaxy arbitration was largely settled. A $16.2 million compensation offset was received, and the vessel was not added to the fleet. A $1.6 million charge for estimated legal fees was recorded in 4Q2011 G&A.
- Pool Strategy: NAT exited the Gemini pool and joined the Orion tanker pool (50/50 with Frontline) in November 2011.
Guidance, Outlook, and Risks
- Outlook: Management expects 1Q2012 to show improvement over 4Q2011 due to market recovery. The Company aims to maintain a strong balance sheet to capitalize on low second-hand vessel prices for future accretive growth.
- Dividend Policy: NAT maintains a full dividend payout policy, covering dividends from cash on hand. The cash break-even rate is estimated at $11,000 per day per vessel.
- Risks: Key risks include volatility in the spot tanker market, global economic uncertainty (specifically in Europe and the US), bunker price fluctuations, and potential disruption of shipping routes (e.g., piracy in the Gulf of Aden, where one vessel was recently attacked).
- Unusual Items: The 3Q2011 results were significantly impacted by a $16.2 million loss on contract related to the Nordic Galaxy, which is not present in 4Q2011.
Investor Verification Checklist
- Verify the impact of the $75.9 million equity offering on diluted earnings per share and future dividend capacity.
- Confirm the status of the remaining legal fees in the Nordic Galaxy arbitration and any potential future liabilities.
- Monitor the utilization rates and off-hire days of the expanded 20-vessel fleet, particularly the two newbuildings.
- Assess the sustainability of the $0.30 per share dividend given the cash break-even rate of $11,000/day and current spot market volatility.
- Review the terms and utilization of the $500 million revolving credit facility maturing in September 2013.