Nordic American Tankers' 2Q Report

By Michelle Howard August 11, 2014

Cash dividend of $0.12 and dividend-in-kind of NAO shares declared (worth $0.16/sh). Operational performance remains strong as fundamentals improve.

The strong winter market at the beginning of the year subsided in 2Q2014. Refinery maintenance schedules and geopolitical factors affected our results this quarter in a weaker spring market. However, there are now reaffirmed indications that a recovery may be on the horizon. 3Q2014 has started on a more positive note than 2Q2014. The spikes in rates seen this year are a sign that the crude oil tanker market is becoming more balanced. During 2Q2014 we had cashflow from operations1 of $4.3m, compared with $27.1m in 1Q2014, -$10.6m in 2Q2013 and -$4.9m in 1Q2013.

During 2012 and 2013, when the market was weak, we used the opportunity to place ships in planned drydock for maintenance to ensure the continued top technical quality of our vessels. During drydockings the classification societies certify the seaworthiness of our vessels, giving us confidence that the quality of our vessels ranks with the best in the industry. In 2014, NAT has undertaken two scheduled drydockings, both completed at the time of this report.

In June 2014 Nordic American Offshore Ltd. (NAO) completed a successful public offering of shares and was listed on the NYSE. Subsequently, the shares issued in the NAO November 2013 private placement in Norway were transferred to the NYSE. NAT participated in the NAO NYSE offering with $5.6m. Following the share distribution of NAO shares to NAT shareholders, NAT will own about 17% of NAO. At the time of this release, following the dividend-in-kind distribution to NAT shareholders, NAT has an unrealized gain of about $12m related to the investment in NAO. Our investment in NAO has a positive impact both accountingwise and cashwise.

On July 11, 2014, NAT declared a cash dividend of $0.12 per share payable to NAT shareholders of record as of July 25, 2014. The dividend is expected to be paid on or about August 12, 2014. In addition, as previously communicated, the dividend-in-kind with a value of about $0.16 per share will also be distributed to NAT shareholders in the form of NAO shares at about the same time. Since NAT commenced operations in the fall of 1997, the company has paid a dividend 68 times, with total dividend payments over the period amounting to $45.02 per share, including the dividend to be paid in August 2014.

In June and leading into July the market rebounded as refineries came back on line after scheduled maintenance and the so-called contango returned to the Brent crude market.

Key points to consider:

Tanker rates achieved on average for 2Q2014 were $12,100 per day per vessel for our trading fleet, as against $26,300 per day achieved in 1Q2014.
The company agreed to acquire two additional Suezmax vessels in June, bringing the fleet to 22 vessels. The vessels were delivered to us July 16 and August 4, respectively.
Earnings per share in 2Q2014 was -$0.19, compared with $0.05 in 1Q2014, -$0.48 in 2Q2013 and -$0.59 for 1Q2013.
On April 7, 2014, NAT announced an equity offering that resulted in net proceeds to the company of $113m.
The undrawn part of our credit facility plus net working capital stood at about $387m at the end of 2Q2014.
We continue to focus on cost efficiency - both in administration and onboard our vessels.
13 vessels were vetted (inspected by customers) during 2Q2014. NAT came out with excellent results, reflecting the quality of our fleet.
NAT received a dividend of about $2.0m from its investment in NAO. It is expected that NAO will continue to produce dividends for NAT. NAO also contributes to reducing NAT's general and administrative costs.