Replies to post #776 on Nordic American Tankers Ltd (NAT)

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Key point: "One thing we can say for sure after this peak is that the bottom level of this market going forward have been lifted significantly."


Suezmax Tanker Market

After two fantastic weeks for the owners, we see charterers now managing to hold back their cargoes some more. The "panic-fixing" is over, and the market will start to move down towards more sustainable levels. One thing we can say for sure after this peak is that the bottom level of this market going forward have been lifted significantly. We just started Q4,and even though its coming off, it’s going to be really good returns for the owners the rest of the year.

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Chart with Bollinger Bands

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High dividend yield potential moving forward

The charts below highlight NAT’s dividend capacity and yield for 2020. In our $40,000/day scenario, NAT is poised to payout $0.61 in dividends based on earnings for 2020. At the current share price, this implies a forward yield of 14.7%, which exludes the 4Q19 dividend potential discussed earlier.

Each $5,000/day change in spot averages equates to ~$0.13 per
share in 2020 dividend potential. We feel our base case payout of $0.61 per share is conservative and that the share should trade at least to a 10% yield on that figure. Accordingly our target is set at $6, based on a 10% yield on our 2020 dividend forecast.

https://www.nat.bm/wp-content/uploads/2019/10/ffd0493e-b43e-4e22-846c-b48bae9be459.pdf

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NAT Update to Investors

We currently have the strongest tanker market that we have seen in decades. In our fleet of 23 suezmaxes, 21 are in the short term market, providing immediate benefit for NAT. The fourth quarter is building a strong momentum for 2020. We expect this to continue. Political frictions often lead to a stronger tanker market.

As of the date of this report, about 70% of the spot trading days of our fleet for 4Q19 have been booked at an average TCE of $34,000/day. Spot rates are continuing its upward momentum. The Time Charter equivalent (TCE) for our ships for the third quarter came in at $15,900/day, which was better than both the second quarter this year at $14,800/day and the third quarter last year that saw $12,000/day.

Important structural changes stimulating demand for our Suezmax tankers are taking place. New rules by the International Maritime Organization (IMO) coming into force on January 1, 2020 is one change. Oil exports from USA is another important factor. We see increased crude oil volumes and longer sailing distances, creating more transportation work for our vessels.

Investors and lenders are reluctant to inject capital into private companies undertaking speculative ordering of ships –which is not part of a fleet renewal. This limits supply of ships, which is good for tanker owners and increases the attractiveness of NAT as a publicly listed company.

Year-on-year the trend has continued with better earnings in 2019 versus 2018, confirming that the tide for the tanker market has definitely turned.

With this report we announce our 89th consecutive quarterly dividend distribution. The dividend this time is a reflection of third quarter not being materially different from the second quarter. Two (2) cent per share dividend will be payable on December 18, 2019, to shareholders of record December 5, 2019.

A stronger tanker market going forward will form the basis for increased dividend. NAT is a dividend company.

The quality of the NAT fleet is first rate, reflected in the Vetting record of our ships. Vetting is the assessment of oil companies to establish the technical and operational quality of our fleet.

2019 has so far been a busy period for NAT: A sales program of 10 NAT Suezmaxes ended in early 2019. A loan of $306 million was raised via a bank in Dallas, Texas, in order to repay all debt to three Scandinavian lenders, a $40 million ATM (at the market offering) was established in the spring of 2019 – only About $1.3 million of this ATM has been used. Nordic American Offshore has been re-arranged and is now operating as a NYSE listed company under the name of Hermitage offshore services. The Scorpio group is the main shareholder.