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November 30, 2022
Dear Shareholders and Investors,
Highlights:
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2) The net profit for 3Q 2022 was $10.0 million or an Earnings per share (EPS) of $0.05. The second quarter saw a net loss of -$4 million and an EPS of -$0.02. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) for 3Q 2022 doubled from the previous quarter and came in with a positive $29.6 million, compared to an EBITDA of $14.2 million in 2Q 2022.
3) As previously announced, the dividend for the third quarter of 2022 will be 5 cents ($0.05) per share and will be payable on December 20, 2022 to shareholders on record as of December 6, 2022. Based on our fourth quarter performance so far, we anticipate the dividend for the fourth quarter could double, compared to the third quarter payout. This dividend is expected to be announced in February 2023 and paid in March 2023.
4) Political uncertainty has always stimulated demand for our ships. Given the geopolitical realities we face now, oil will have to be transported over longer distances than in the past, increasing ton-mile and demand for our tankers.
5) The orderbook for new suezmax tankers scheduled to join the global fleet currently stands at 11 ships (2% of the world suezmax fleet) through 2024. A low orderbook is a leading indicator of improved utilization and earnings for our tankers.
6) The combination of ton-mile expansion and low supply growth is bullish news for our vessels for 2023 and beyond. NAT has 19 one-million barrel suezmax tankers on the water, making money every day, Sundays and Holidays included.
7) The NAT fleet of versatile suezmax tankers offers flexibility in loading and discharging around the world that helps our clients manage their requirements efficiently under quickly changing circumstances.
8) Through careful voyage planning and adjustment of speed of our vessels, the NAT fleet is reducing emissions.
9) NAT has one of the lowest debt levels among publicly listed tanker companies. Our net debt stood at $224 million equal to $11.2 million per ship at September 30, 2022. In the solid tanker market we now see, our debt is reduced by the day. The objective of NAT is to become more or less debt free, which was the case in the past.
10) Financial information for the third quarter of 2022 and for other periods is included in the report attached below.
Our Fleet
As of September 30, 2022 our fleet consisted of 20 well maintained Suezmax tankers with a cargo lifting capacity of 1 million barrels of oil each. We only have Suezmaxes in our fleet. After the sale of “Nordic Cosmos” that was delivered to new owners in October, we have a fleet of 19 Suezmax tankers.
We take extra care to maintain our vessels to the highest standards for the safety of crew, cargo and the environment. The outcome of the inspections of our ships by oil companies (“vetting”) reflect the good quality and maintenance of our fleet.
The main operational challenges during the pandemic and now with the conflict in Ukraine have been related to crews and our work to safeguard our seafarers and our ships. NAT has one of the largest fleets of Suezmax tankers in the world. In a capital intensive industry like ours, careful maintenance of our ships and the timing & financing of expansion are key elements to ensure both our financial stability and our commitment to paying cash dividends.
Results for the third quarter 2022
For the third quarter 2022 the net profit was $10.0 million or an EPS of $0.05. This is a significant improvement compared with the second quarter this year, where we recorded a net loss of -$4.0 million or an EPS of -$0.02. For the third quarter 2021, the net loss was -$44.7 million million or -$0.27 per share.
The average time charter equivalent (TCE) for our fleet during the third quarter of 2022 came in at $27,850 per day per ship, up from the second quarter of $20,080 per day per vessel. The fourth quarter has accelerated and so far, 74% of our spot voyage days have been booked at an average TCE of $54,100 per day per ship. This number is on a discharge-to-discharge basis. We currently have 15 of our nineteen vessels in the spot market.
For detailed information about our statement of operations (P&L), balance sheet, cash flow and reconciliation of certain Non-GAAP financial measures, we refer to the tables on page 5 and 6 of this press release.
Financing
Our Net Debt (total liabilities less current assets) stood at $224.3 million, which equals $11.2 million per ship based on 20 vessels, as of September 30, 2022.
The details of our two financing arrangements are as follows;
1) The total outstanding balance to CLMG/Beal Bank (including current portion of the debt), was $153.0 million as of Sept. 30, 2022. The total outstanding balance to CLMG/Beal Bank as of the date of this report is $130.2 million.
2) The 5 vessels financed through Ocean Yield have as of September 30, 2022 a total outstanding balance of $184.3 million, including current portion of the debt.
Current portion of long term debt is presented in our balance sheet with a total of $46.0 million net of transaction costs. This number includes $20.8 million for expected debt repayment associated with vessels held for sale, current portion of the long term debt related to CLMG/Beal Bank of $11.4 million and $13.8 million related to the Ocean Yield financing. Restricted cash of $13.9 million is related to deposits held for future Drydockings of our vessels, in accordance with our borrowing agreement with Beal Bank/CLMG.
Since the beginning of 2022 and up until mid August, we have utilized gross $33.6 million of the $60 million At-The-Market (“ATM”) registration dated February 14, 2022. We have not utilized the ATM since.
For the third quarter of 2022 a cash dividend of 5 cent ($0.05) per share has been declared. This is our consecutive quarterly dividend number 101. In a rising market for our vessels, a higher dividend can be expected.
Payment of the dividend will be on December 20, 2022, to shareholders of record on December 6, 2022.
World Economy and the Tanker Market
With no quick fix to the geopolitical realities, energy security will continue to take the center stage on the global scene. Commercial oil stocks are still too low for comfort given these circumstances, and demand is showing little signs of easing. Energy security, demand and sanctions will force oil to be transported over longer distances. A key to solving these challenges is shipping, and our versatile and flexible Suezmax oil tankers are fit for this task.
On the supply side the world’s Suezmax fleet (excl. shuttle, product & Jones Act tankers) counted 572 vessels as of September 30, 2022, with only 11 vessels in order (2% of the world suezmax fleet). This is a historically low orderbook by any measure. Out of the 32 conventional Suzmax tankers scheduled for delivery this year, 31 has already been delivered and for the rest of 2022 we see 1 conventional Suezmax tanker for delivery. Only seven suezmax tankers are scheduled to be delivered from the shipyards in 2023 and only three Suezmax tankers are in the orderbooks for 2024.
In addition to this, shipyard capacity has to large extent been booked by bulk, gas and container ships, leaving very limited capacity to build additional Suezmax tankers with quality yards on this side of 2025. This is very good news for the long term market dynamics in our industry.
All of the above are good news for the short- and long term outlook for our tankers. It is our opinion that the tanker markets will continue strong going into the winter.
The supply of tanker tonnage is inelastic in the short-term. When there are too many ships in an area, rates tend to go down. When there is scarcity of ships, rates tend to go up. Short-term spot tanker rates may be expected to be volatile.
Corporate Governance/Conflict of Interests
It is vital to ensure that there is no conflict of interests among shareholders, management, affiliates and related parties. Interests must be aligned. From time to time in the shipping industry, we see that questionable transactions take place which are not in harmony with sound corporate governance principles, both as to transparency and related party aspects. We have zero tolerance for corruption.
Strategy Going Forward
The NAT strategy is built on expanding and maintaining a homogenous and top quality fleet, leveraging on our industry network and close customer relationships with major oil companies and oil traders. We are a dividend company with the objective of having a strong balance sheet and low G&A costs, enabling us to distribute free cash flows to our shareholders.
In an improved market, higher dividends can be expected. Our current fleet of 19 more or less identical vessels is a special feature of NAT that is particularly valuable to our customers. NAT is firmly committed to protecting its underlying earnings and dividend potential. We shall safeguard and further strengthen this position in a deliberate, predictable and transparent way.
Full report
Nordic American Tankers Ltd, press release
