Business Context and Reporting Period
This Form 6-K filing for Nordic American Tanker Shipping Limited covers the period ending September 30, 2009. The document primarily consists of a letter to shareholders from Chairman and CEO Herbjorn Hansson, dated September 29, 2009. The company operates a fleet of Suezmax tankers and reports as a foreign private issuer under Form 20-F.
Key Financial Metrics and Market Position
- Market Capitalization: Approximately $1.25 billion.
- Fleet Size: 16 Suezmax vessels (including two newbuildings expected in 2010), grown from 3 vessels in 2004.
- Stock Liquidity: Daily trading volume has quadrupled over five years, reaching approximately 800,000 shares per day.
- Total Return (2004–Aug 2009): Approximately 95% (14.3% annualized), including reinvested dividends.
- Cash Break-Even: Estimated below $10,000 per day per vessel (including all cash expenses).
- Balance Sheet: Described as "clean" with significant available liquidity resources.
- Debt: The filing states the company has adequate financial resources to acquire vessels without tapping the equity market; specific debt figures are not provided.
Material Changes and Market Conditions
The tanker market softened in the third quarter of 2009 due to weakened international economic conditions, low oil demand, high inventories, and newbuildings entering the market.
- Spot Rates: The average spot market rate for Suezmax tankers (IMAREX Tanker Index) dropped to $12,932 per day in Q3 2009, compared to $20,569 per day in Q2 2009.
- Operational Costs: The company is shifting some maintenance (ballast tank painting) from traveling squads to shipyards in China to reduce long-term costs. This is treated as Capex.
- Unusual Item: An estimated opportunity loss of approximately $600,000 is expected due to a vessel staying at a yard for maintenance, with most of this impact anticipated in Q4 2009.
Guidance, Outlook, and Risks
- Dividend Policy: The Board remains committed to a full payout dividend policy. Dividends are expected when spot rates exceed the cash break-even of $10,000/day. The next dividend is expected to be paid on or about December 4, 2009.
- Growth Strategy: The company aims for accretive growth by expanding the fleet faster than the number of shares outstanding. Management anticipates potential acquisitions of second-hand vessels at lower prices if the soft market persists.
- Outlook: Management is optimistic about future growth and dividend capacity despite current market volatility. The company does not predict future spot rates.
- Risks: Key risks include volatility in charter rates and vessel values, changes in global oil demand, bunker prices, regulatory changes, piracy, and potential litigation.
- Reporting Schedule: Q3 2009 dividend and earnings are expected to be announced on November 9, 2009.
Investor Verification Checklist
- Verify the Q3 2009 earnings and dividend announcement scheduled for November 9, 2009.
- Confirm the actual impact of the $600,000 opportunity loss on Q4 2009 financial results.
- Monitor spot Suezmax rates to ensure they remain above the $10,000/day cash break-even threshold for dividend sustainability.
- Review the delivery schedule and cost of the two newbuildings expected in 2010.
- Assess the company's liquidity position and any new debt incurred for potential second-hand vessel acquisitions.