"The Nordic American System"
It is essential for Nordic American to have an operating model that is sustainable in both a weak and a strong tanker market, which we believe differentiates Nordic American from other publicly traded tanker companies. The Nordic American System is transparent and predictable. As a general policy, the Company has a conservative risk profile. Our dividend payments are important for our shareholders, and at the same time we recognize the need to expand our fleet under conditions advantageous to the Company.
NAT maximizes cash flows by employing all of its vessels in the spot market through the Orion Tanker Pool which increases the efficiency and utilization of the fleet. The spot market gives better earnings than the time charter market over time.
Growth is a central element of the Nordic American System. It is essential that NAT grows accretively, which means that over time our transportation capacity increases more percentagewise than our share count.
Nordic American has one type of vessel only - the Suezmax vessel. This type of vessel can carry one million barrels of oil. The Suezmax vessel is highly versatile, able to be utilized on most long-haul trade routes. A homogenous fleet streamlines operating and administration costs, which helps keep our cash-breakeven point low.
The valuation of NAT in the stock market should not be based upon net asset value (NAV), a measure that only is linked to the steel value of our ships. NAT has its own ongoing system value with a homogenous fleet.
We pay our dividend from cash on hand. NAT has a cash break-even level of about $12,000 per day per vessel, which we consider low in the industry. The cash break-even rate is the amount of average daily revenue our vessels would need to earn in the spot tanker market in order to cover our vessel operating expenses, cash general and administrative expenses, interest expense and all other cash charges.
In January 2013, the Board declared a dividend of $0.16 per share for 4Q2012 to shareholders of record as of January 30, 2013. The dividend will be paid on or about February 13, 2013. At the time of this report there are 54,825,751 shares outstanding.
Earnings per share was -$0.61 for the fourth quarter, including a $12 million impairment charge for one of the vessels in our fleet. Excluding the impairment, earnings per share was -$0.39. Applying the tests for impairment to the fleet as a whole would have resulted in no net impairment charge.
The Company's operating cash flow was -$1.1m for 4Q2012, compared with -$3.2m for 3Q2012 and $0.0m in 4Q2011. Operating cash earnings per share were -$0.02 in 4Q2012, -$0.06 in 3Q2012 and $0.00 in 4Q2011. For 2012 total operating cash earnings were $17.5 million.
We continue to concentrate on keeping our vessel operating costs low, while always maintaining our strong commitment to safe operations. We pay special attention to the cost synergies of operating a homogenous fleet that consists only of double hull Suezmax tankers. As we expand our fleet, we do not anticipate that our administrative costs will rise correspondingly. In a weak tanker market other tanker companies may have challenges in keeping up technical standards as they cannot afford to spend the required funds for operations and maintenance.
As a matter of policy, the Company has always kept a strong balance sheet with low net debt and a focus on limiting the Company's financial risk. This policy will continue. The new non-amortizing credit facility maturing in the autumn of 2017 creates a good base for long term planning.
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