Our fleet consists of 23 well maintained Suezmax tankers with a cargo lifting capacity of 1 million barrels of crude oil each. We focus solely on the Suezmax market. We believe Suezmax vessels are more versatile and the one-million-barrel market offers more options in trading than the Very Large Crude Carriers (VLCC) with their two-million-barrel lifting capacity.
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”) reflects the good quality and maintenance of our fleet.
The operations of our Suezmax fleet have not been materially affected by the Covid-19 pandemic. Main challenges have been related to crew changes and we are following guidance issued by health authorities and international shipping trade associations to safeguard our seafarers. The future macro- economic effects of Covid-19 remain uncertain.
NAT has one of the largest fleets of Suezmax tankers in the world. In a capital intensive industry like ours, careful maintenance of our existing fleet and the timing & financing of expansion are key elements to ensure both our financial stability and our commitment to paying cash dividends.
All our vessels are running on IMO compliant fuel and we do not regard installing scrubbers as an alternative of any interest.
Results for the first half and second quarter ending June 30, 2020
For the 2nd quarter of 2020, the net income was positive with $49.1 million or $0.33 per share. This is a further improvement from the 1st quarter of 2020 that saw a net income of $39.5 million or $0.27 per share. The second quarter last year (2019) saw a net loss of $14.9 million or -$0.11 per share.
EBITDA (non-GAAP expression) came in at $73.7 million for the three months ending June 30, 2020, compared to the previous quarter (1Q 2020), which generated an EBITDA of $64.9 million.
Development of our EBITDA and Time Charter Equivalent (TCE) over the last 6 quarters are illustrated below:
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
The current cash position (including restricted cash) of the Company is $144 million or $0.96 per share. The last close of the NAT share before the release of this report was $4.50 per share.
Our Long Term Debt and other non-current liabilities stood at $318.9 million as per June 30, 2020. Our total long term liabilities have been reduced with in excess of $110 million over the last 18 months. Our Net Debt is $256 million or about $11 million per ship.
Our fleet is financed through two financing arrangements;
1) The $306 million 5-year senior secured credit facility entered into on February 12, 2019 with CLMG Corp., funded by Beal Bank of Dallas, Texas. The total outstanding (including current portion of the debt), is $264.7 million as per June 30, 2020. Including extra down payment after 2Q20 reporting of $ 31.9 million the total outstanding amount is expected to be $228.8 million at September 30, 2020.
1) The $129.5 million Ocean Yield Financing was entered into in December 2017 and drawn upon during 2018, to finance three of our vessels. The remaining long term amount under this financing is now $108 million. The total outstanding (including current portion) is $116.1.
Current portion of long term debt includes $44.8 million related to the $306 million 5-year senior secured credit facility and $7.5 million is related to the $129.5 million Vessel Financing.
During the quarter, the Company issued 2,459,083 shares, with gross proceeds of $15.3 million under its $40 million At-the-market Offering (“ATM”). Following this issuance, the Company has a total of 149,689,717 common shares outstanding. No further issuance under the ATM has been conducted at this date. An aggregate of $33.8 million in gross proceeds has been raised under the ATM in total since it was established in March 29, 2019.
Dividend
Cash dividends are a priority.
For the second quarter of 2020 a cash dividend of 20 cents ($0.20) per share was declared on May 20, 2020. This is an increase from the previous quarter when we paid out 14 cents ($0.14) per share.
Payment of the dividend will be on or about September 4, 2020, to shareholders of record on August 28, 2020.
Our dividend will always be a reflection of our cash earnings. A strong tanker market means strong dividends.
World Economy and the Tanker Market
What is good for the world economy and world trade is positive for the crude oil tanker business.
A low oil price is good for the world economy and works as a stimulus for recovery after that last few months of virus lock-downs. We see encouraging signals of improved Asian economies, boding well for the world economy and the tanker markets going forward.
The ordering activity for new ships is muted and the orderbook in percent of the existing tanker fleet has not been lower in decades. This is one of the main reasons for the good tanker market we have seen this year and for our long term optimism. The world’s Suezmax fleet (excl. shuttle, product & Jones Act tankers) counted 522 vessels at the end of June 2020. During the second quarter of 2020, 3 conventional Suezmax vessels were delivered from the shipyards. For the remainder of 2020 we expect to see a total of 13 additions to the world Suezmax fleet (excl. shuttle, product & Jones Act). We currently see 22 conventional Suezmax tankers scheduled for delivery in 2021 and 12 in 2022.
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. Employment of our ships with major oil companies is a priority.
A strong balance sheet, combined with a homogenous fleet and economies of scale is giving a low cash break-even level, enabling NAT to distribute free cashflow to our shareholders.
This strategy will be positive in a strong tanker market. In an improved market, higher dividends can be expected.
Our dividend policy should continue to enable us to achieve a competitive cash yield.
Our fleet of 23 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.
Source: Nordic American Tankers Limited
