“So far in the third quarter, we have secured higher average rates than in the two preceding quarters of the year. In 2Q15, NAT continued to benefit from both a solid Suezmax tanker market and a top quality fleet (22 vessels in operation in and four vessels expected to be included later in 2015 and thereafter),” he said.
Cash flow from operations was $54.5 mill, compared with $51 mill in 1Q15. For the whole of 2014, cash flow from operations was $77.7 mill, compared with a negative $11.1 mill in 2013.
On 27th July, 2015, NAT announced the acquisition of two 2010-built Suezmaxes. They are expected to join the fleet in September and October of this year. The total price was about $122 mill. NAT does not plan to issue equity to cover commitments for these vessels or for its two newbuildings to be delivered in 2016 and 2017, the company said.
NAT’s tanker rates achieved on average about $38,800 per day per vessel in 2Q15 on the spot market, as against $37,000 per day achieved in 1Q15 and $12,100 per day per vessel in 2Q14.
The balance sheet was strengthened by retaining about $19 mill of cash flow from operations during 2Q15, while the undrawn part of the credit facility, plus net working capital, stood at about $338 mill at the end of 2Q15, NAT said.
Some 13 vessels were vetted by clients during 2Q15. NAT came out with 3.3 observations on average, which the company claimed was an excellent result, reflecting the top quality of the fleet.
Hansson explained that NAT has an operating model that is sustainable in both a weak and a strong tanker market. Accretive fleet growth, low net debt per vessel and quarterly dividend payments are central elements of this strategy. A homogenous fleet of Suezmaxes reduces operating costs, which helped to keep the cash-breakeven below $12,000 per day per vessel.
The appreciation of US dollar versus the Norwegian Kroner had a positive impact on NAT's G&A cost, of which a substantial part is in Norwegian currency.
As a matter of policy, NAT keeps a strong balance sheet with low net debt and focuses on keeping a low financial risk. At the end of 2Q15, the company had net debt of about $105 mill or about $4.4 mill per vessel.
Elsewhere, the arbitration hearings involving the Suezmax ‘Gulf Scandic’ (since renamed ‘Nordic Harrier’) have been concluded. Gulf Navigation Holding (GulfNav) was the other party in the arbitration.
In the arbitration, NAT was awarded $10.2 mill, plus interest and costs. An agreement has since been signed with GulfNav whereby NAT will receive compensation for the claim by way of mandatory convertible bonds (MCBs), which will swiftly be converted into GulfNav shares. These shares will be sold in the market over time as liquidity permits. GulfNav is listed on the DFM stock exchange in Dubai.
GulfNav will issue the MCBs with a face value of Dh37.34 mill as full and final settlement for claims made by NAT. The bonds will be issued prior to 20th August, subject to approval from the UAE Department of Economic Development and the Securities and Commodities Authority.