Business Context and Reporting Period
This Form 6-K filing by Nordic American Tanker Shipping Limited (NAT) covers the month of April 2010, with the report dated April 13, 2010. The filing primarily serves to disclose a material event: a preliminary agreement to expand the company's fleet through new vessel construction.
Key Financial Metrics and Fleet Status
- Newbuild Agreement: Entered into a preliminary agreement with Samsung Heavy Industries to build two Suezmax tankers (158,000 deadweight tons each).
- Cost: Purchase prices are set at $64.5 million and $65.0 million respectively.
- Payment Terms: Approximately 50% payable upon signing definitive contracts; the balance payable upon delivery.
- Delivery Schedule: Vessels scheduled for delivery in the third and fourth quarters of 2011.
- Financing: Acquisitions will be financed by the Company's internal resources. No follow-on equity offering is planned for these specific vessels.
- Fleet Growth: The fleet is projected to grow from 12 trading Suezmax tankers (January 2009) to 20 vessels by the end of 2011, representing a 67% increase over 36 months.
- Share Count: Expected to increase by approximately 36% over the same period, assuming no further acquisitions or equity offerings.
Material Changes and Strategic Outlook
The primary material change is the commitment to organic fleet expansion. Management views this as a step to increase dividend capacity and bolster earnings potential. The definitive contracts are expected to be signed in late April or early May 2010. The Company maintains a "full pay out" dividend policy.
Risks and Contingencies
The filing includes a cautionary statement regarding forward-looking statements. Key risks that could cause actual results to differ from projections include:
- Fluctuations in charter rates and vessel values.
- Changes in global oil demand, OPEC production levels, and world economies.
- Increases in operating expenses, including bunker prices, drydocking, and insurance.
- Availability of financing and regulatory changes.
- Political conditions, shipping route disruptions, and vessel breakdowns.
Investor Verification Checklist
- Confirm the signing of definitive contracts with Samsung Heavy Industries in late April or early May 2010.
- Verify the Company's liquidity position to ensure it can fund the ~$130 million total cost without external equity.
- Monitor the actual delivery dates of the two new vessels against the Q3/Q4 2011 schedule.
- Track the impact of the 36% share count increase on earnings per share (EPS) and dividend per share.
- Review subsequent filings for any changes to the "full pay out" dividend policy in light of the capital expenditure.