Nordic American Offshore Ltd. (NYSE:NAO) – 1Q2017 Dividend and Earnings Report
Link to the complete 1st Quarter 2017 report: http://hugin.info/159489/R/2100913/796446.pdf
Hamilton, Bermuda, May 2, 2017.
Nordic American Offshore closed a follow-on offering March 1, 2017, strengthening the Company by about $48.8 million in cash. The main objectives of the offering were to strengthen NAO financially and position NAO for further expansion. The Executive Chairman of NAO, Herbjørn Hansson and other senior executives subscribed for shares in the offering.
Access to financing and strong relationship with our banks have proven to be a competitive advantage for NAO. As the stock price has fallen below $1.00, we consider a reverse stock split, if it should turn out to be required. There is no urgency on this matter.
During the first quarter we have had periods with higher rates not achieved in more than a year. However, it is early to anticipate a recovery as vessels are still in lay-up.
NAO has ten high-quality Platform Supply Vessels (PSVs) built in Norway in the period 2012-2016. At the end of the quarter seven of our ten vessels are in operation. We continue to focus on developing our relationship with our clients.
The basic features of NAO are similar to the successful business model of the NYSE listed Nordic American Tankers Limited (NAT).
The Board has declared a dividend of $0.02 per share for 1Q2017 to shareholders of record as of May 17, 2017. The payment of the dividend is expected to take place on or about June 1, 2017. Following the offering, which strengthened NAO significantly, and increased number of shares, the dividend to be paid out has in effect increased. Since its original establishment in late 2013, NAO has paid dividends for 13 consecutive quarters, totaling $2.61 per share, including the dividend to be paid on or about June 1, 2017.
NAO sees opportunities to grow the Company. While the North Sea is at the present time the key geographical market area for NAO, NAO may expand into other geographical areas internationally – the potential is substantial.
Key points to consider:
- NAO completed a follow-on offering March 1, 2017, strengthening NAO with about $48.8 million.
- Earnings per share (EPS) has been: -$0.25 for 1Q2017, -$0.48 for 4Q2016 and -$0.30 for 1Q2016. Net Loss has been: -$8.5m for 1Q2017, -$9.8m for 4Q2016 and -$6.3m for 1Q2016.
- EPS does not take into account financial risk, i.e., the debt level of a company. NAO had at the end of 1Q2017 total net debt of $88.7m for its ten vessel fleet, or about $8.9m per vessel. The credit facility of $150m has been drawn by $137m and matures in March 2020.
- Adjusted Net Operating Earnings (Loss) has been: -$3.2m for 1Q2017, -$4.3m for 4Q2016 and -$2.2m for 1Q2016.
- NAO has a low cash breakeven level of about $11,500 per day per trading vessel, including financing and G&A costs.
The Board has declared a cash dividend of $0.02 per share for 1Q2017 to shareholders of record as of May 17, 2017. The payment date is on or about June 1, 2017. NAO has about 35,000 shareholders.
Net Loss (accounting loss) was -$8.5m in 1Q2017. In 4Q2016 and 1Q2016 the comparable figures were -$9.8m and -$6.3m, respectively.
The Company’s Adjusted Net Operating Earnings (Loss) were -$3.2m in 1Q2017. In 4Q2016 and 1Q2016 Adjusting Net Operating Earnings (Loss) was -$4.3m and -$2.2m, respectively.
At the end of 1Q2017, the net debt per vessel was $8.9m. NAO has in place until early 2020 a non-amortizing credit facility of $150m. Several service companies in our sector are in a difficult financial position while NAO was able recently to strengthen the Company with new equity. After the successful equity offering, NAO has the ability to expand and we see opportunities going forward.
We concentrate on keeping our vessel operating costs low, while always maintaining our strong commitment to safe operations. As we expand our fleet, we do not anticipate that our administrative costs will rise correspondingly.
For further details on our financial position for 1Q2017, 4Q2016 and 1Q2016, please see later in this release. Our 2016 Annual Report (Form 20-F) contains a large amount of information about NAO. This report was filed with the SEC April 24, 2017 and can be found on our web site www.nao.bm.
Our fleet is comprised of ten high-quality PSVs. All our active trading vessels operate in the UK and in the Norwegian sectors of the North Sea. The vessels may operate in either sector or elsewhere. We believe the significant fuel efficiency, and corresponding low emissions of our ships are attractive features.
The Company’s objective is to ensure spot or term employment for the fleet. The specifications of NAOs vessels are by and large the same.
Strategy Going Forward
The main elements of NAO’s strategy are based on quarterly dividends, low G&A costs, liquidity in the stock and full transparency. Growth of the fleet is a central part of our strategy.
Our dividend policy has the objective to achieve a competitive cash yield and a positive Total Return over time.
NAO is firmly committed to protecting its underlying earnings, dividend potential and strong balance sheet.
We shall endeavor to safeguard and further strengthen NAO’s position in a deliberate, predictable and transparent way.
We encourage prospective investors interested in the Offshore Supply Vessel sector to consider buying shares in NAO.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.
The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the PSV market, as a result of changes in the general market conditions of the oil and natural gas industry which influence charter hire rates and vessel values, demand in platform supply vessels, our operating expenses, including bunker prices, dry docking and insurance costs, governmental rules and regulations or actions taken by regulatory authorities as well as potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, the availability of financing and refinancing, vessel breakdowns and instances of off-hire and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.
| Herbjørn Hansson, Chairman
Nordic American Offshore Ltd.
Tel: +1 866 805 9504 or +47 90 14 62 91
| Turid M. Sørensen, CFO
Nordic American Offshore Ltd.
Tel: +47 33 42 73 00 or +47 90 57 29 27
| Marianne Lie, Executive Vice Chair
Nordic American Offshore Ltd.
Tel.: +47 91 64 55 06
| Gary J. Wolfe
Seward & Kissel LLP
New York, USA
Tel: +1 212 574 1223
 Adjusted Net Operating Earnings is an important dimension in the shipping industry, but it is a non-GAAP measure. Please see later in this announcement for a reconciliation of Adjusted Net Operating Earnings to Net Operating Earnings (Loss).
 Total Return is defined as stock price plus dividends, assuming dividends are reinvested in the stock.