Sep. 29, 2009 (Hugin AS) --
Hamilton, Bermuda, September 29, 2009
Dear Shareholder,
It is now time for me to send you a letter summarizing aspects of our
current business and financial position. Nordic American is in an
excellent situation in a tanker market which has declined during the
last few months primarily due to weakened international economic
conditions. Based on its clean balance sheet and available liquidity
resources, Nordic American has a significant upside potential and a
limited downside.
We have made good progress, in particular since 2004 when NAT was
turned into an operating company. I shall review some of the key
elements.
Our goal is to maximize total return to our shareholders. Total
return is defined as the stock price plus dividends, assuming
dividends are reinvested in the stock. From 2004 and up to late
August this year our total return for the period was about 95% or
14.3% on an annualized basis. Throughout this period Nordic American
has kept its full payout dividend policy.
Distribution of available operating cashflow as dividends to our
shareholders is an integral and important part of our strategy. NAT's
Board of Directors is committed to continuing our dividend policy
which remains firmly in place. The amount of our quarterly dividend
per share is primarily a reflection of the level of the spot tanker
market.
Accretive growth is also a key element in our strategy. The Company
has grown from 3 vessels in 2004 to 16 suezmax vessels now, including
two newbuildings expected to be delivered in 2010. At this time the
Company has adequate financial resources to buy more vessels without
tapping the equity market. Our goal is to grow the fleet faster than
the number of shares outstanding. This will provide for accretion to
our dividend per share at any rate level in the spot tanker market
above our cash break-even which is currently below $10,000 per day
per vessel.
In short, Nordic American is well positioned for further strong
growth and increase of dividend capacity.
The market capitalization of the Company has grown considerably over
the years and has now reached approximately $1.25 billion. The
Company has thereby within this 5 year period become the third
largest listed tanker company.
We are also pleased to see that the liquidity in our stock has
quadrupled over the last 5 years as illustrated by the graph. In
1Q04 about 200,000 NAT shares were bought and sold per day. This
number is now about 800,000 shares.
Following this development, Nordic American has also become an
attractive investment alternative for many large institutional
investors.
Spot tanker charter market rates are very volatile. During the third
quarter, the spot tanker markets have been soft, mainly due to low
oil demand, high inventories, seasonal factors and newbuildings from
the yards entering the market. The average spot market rate for
suezmax tankers as reported by the IMAREX Tanker Index has been
$12,932 so far in the third quarter compared with $20,569 per day in
the second quarter. The rates achieved by NAT may well vary from the
IMAREX numbers. The volatility in rates is expected to continue. As a
matter of policy, we do not predict future spot rates.
Including all cash expenses, we estimate that our cash break-even for
our trading fleet is below $10,000 per day per vessel.
