Nordic American Tankers - Losses to shrink further; higher dividend and asset prices to support uptrend

Losses to shrink further; higher dividend and asset prices to support uptrend
Nordic American Tankers (NAT) recently announced its 1Q21 results which were in line with our expectations. The company’s TCE revenue moved up by 15.5% QoQ on the back of higher spot TCE rates, better fleet utilisation, improving oil demand as well as the blockage at the Suez Canal in late March. However, NAT’s topline fell by 63.7% YoY and its TCE revenue nosedived by 78.2% YoY during
the quarter. Realised TCE rates of the company’s Suezmaxes plunged by 78.7% YoY to USD 9,400pd from USD 44,100pd in 1Q20 when the sudden demand destruction of fossil fuels led to a surge in the demand and earnings of oil tankers on the back of higher demand for floating storage. The slump in spot TCE rates of crude carriers was primarily due to the ongoing impact of the pandemic on shipping
demand for crude oil, ample supply of vessels on key trading routes and continued inventory drawdown.

Rates for mid-size oil tankers improved in late March 2021 on account of the blockage at the Suez Canal, but eased when the canal reopened in a week. Operating expenses slide by 3.5% YoY to USD 37.2mn mainly due to slightly lower vessel operating expenses coupled with reduced general and administrative expenses. The company reported a negative EBITDA of USD 1.3mn during the quarter
compared with an elevated EBIDTA of USD 64.7mn a year ago. NAT reported a net loss of USD 25mn in 1Q21 compared with a higher net profit of USD 39.5mn in 1Q20 which translates to a loss of USD 0.16 per share compared with an EPS of USD 0.27 in 1Q20. NAT’s losses reduced by 12.6% QoQ, and we estimate the losses to shrink further over the next three quarters. We project net profits from 1Q22
on the back of recovering oil consumption and trade which will support the growth in earning potential of oil tankers over the next one year. Moreover, we believe the increase in dividend payment over the next two years and potential increase in asset prices will support an uptrend in NAT’s share prices.