Nordic American Tankers Limited (NYSE:NAT) - Letter to the Shareholders. Prospects for the fourth quarter of 2016 look good, an improvement on an already positive third quarter of 2016. A low oil price is good for the tanker business.
Hamilton, Bermuda, November 30, 2016
Dear shareholders,
My last shareholder letter was dated August 28, 2016, our successful capital raise of USD 120 m was completed on September 30, and our 3Q report was dated November 10, 2016.
During 3Q2016 we generated a cash surplus that was much higher than our cash break even rate, which is below USD 11,000 per day per ship.
We also expect that the 4Q2016 result will be well above 3Q2016, which had a time charter of USD 16,700 per day per ship on average for our vessels on contracts and on short term employment.
Now that we have about 75 % of the available days in 4Q2016 under our belt, we are at about USD 20,000 per day. Our recent stock issue allowed us to contract for three new ships to be delivered in 2018, increasing the fleet from 30 to 33 Suezmaxes.
The board, management and our advisors subscribed for a total of $5.3 million of the issue. We eat our own cooking, so to speak, and our goal is the same as it is for all shareholders: to make money on our investment. Growth has been a key success factor of our business model. It's important for companies to grow and it's crucial for our future dividend capacity.
Any company must grow - that is a part of capitalism. A company that does not grow is dead. Our recent order for 3 new Suezmax ships at Samsung was concluded at highly attractive terms. A major part of the purchase price is due on delivery. This is a great investment, boosting NAT.
Over the years from 2004 we have grown step by step from 3 to 33 Suezmax ships. We have already increased our fleet by 5 ships this year and will take delivery of our 30th ship in early 2017.
Except for the three new ships, all these vessels were funded by existing resources. Our objective is to increase earnings. The acquisitions have to be accretive and increase our earnings power.
The markets for dry cargo vessels and container vessels are difficult. NAT, of course, is not involved in these sectors. There is also now limited access to financing, which prevents some other companies from expanding their fleets. Having access to financing, as we do, is increasingly becoming a competitive advantage.
We welcome all investors to become our shareholders. We are the crude tanker company with the most shareholders in the world. Whether you are a mutual fund, hedge fund, investment advisor or an individual investor, we value you all the same. Our large base of shareholders has made our stock very easy to trade. We can never have too many shareholders and our stock can never be liquid enough.
The Suezmax tanker market has recovered significantly from the time of my last letter, as demonstrated by 4Q2016 results so far.
The low oil price is good for the tanker market and hence for NAT. The demand for oil and its production is growing, which is positive for the transportation of oil. The demand in the Far East is particularly strong, which makes it a promising market for us.
Finally, we do not expect that results of the US Presidential election will affect NAT adversely.
Our strategy is to expand with a low level of debt. When we generate cash we prefer to pay it out in dividends. We always stick to our strategy and are not afraid to sail in the opposite direction of the rest of the industry.
We wish to have the strongest balance sheet and the lowest cash break even. I firmly believe that this will give the highest total return to shareholders; the best measure of profitability.
My best wishes to you for a happy new year!
Kind regards
Herbjørn Hansson
Chairman & CEO
Nordic American Tankers Ltd
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