Nordic American Offshore Ltd. (NYSE:NAO) 4Q2014 Dividend and Earnings Report: Dividend of $0.45 declared. New chartering contracts concluded
Link to the complete 4th Quarter 2014 report: http://hugin.info/159489/R/1891292/669710.pdf
HAMILTON, Bermuda, Feb. 3, 2015 (GLOBE NEWSWIRE) — As announced on January 7, 2015, Nordic American Offshore Ltd. (“NAO” or the “Company”) has declared a dividend of $0.45 per share for 4Q2014. This is the same amount as for the previous three quarters. The record date was January 22, 2015 and the payment of dividend is expected to take place on or about February 5, 2015. Since its establishment in late 2013, NAO has paid four dividends totalling $1.80 per share. 2014 was a start-up year for the company, including the relocation of the listing from Oslo OTC to the NYSE June 12, 2014.
The Company’s Platform Supply Vessels (PSVs) have both long-term contracts and spot employment. The rapid fall in the price of oil in recent months is affecting service providers to the oil industry. In the case of PSVs, demand from new projects has fallen. There are on-going comments in the market place whether oil prices have bottomed out.
The main elements of the strategy of NAO are based on the same fundamentals as those of Nordic American Tankers Limited (NYSE:NAT). It is important to note that NAO is a completely independent company. NAO has a total of 23,431,370 shares outstanding of which NAT owns 19.2%.
The Company has ten high-quality PSVs. Eight of these are now in operation, including two newbuildings that were delivered on January 26, 2015. Two more are under construction in Norway for delivery in July and September this year. All our ships are built in the period 2012-2015. Thanks in part to an agreed expansion of our credit facility, the Company have the financial resources to take delivery of its newbuildings on order.
Key points to consider:
- Earnings per share in 4Q2014 were -$0.07, compared with $0.12 in 3Q2014, $0.23 for 2Q2014, $0.10 for 1Q2014 and -$0.01 in the period October 17 to December 31, 2013.
- Net Income came to -$1.7 million in 4Q2014, compared with $2.8 million in 3Q2014, $4.1 million in 2Q2014, $1.7 million in 1Q2014 and $0.0 million in 4Q2013. Operating cash flow1 in 4Q2014 was $2.6 million vs $6.0 million in 3Q2014. The results for 4Q2014 include a foreign exchange cost of $0.9 million. As regards currency, please see the bullet point below.
- The original USD price of our newbuildings was about $44 million. The vessels, however, were ordered in Norwegian Kroner (NOK). As a result of a stronger US dollar the cost of the two 2015 newbuildings delivered in January 2015 is about $36 million per vessel. Given the same exchange rate NOK/USD during 3Q2015, we will realize the same currency exchange gain for the last two ships to be delivered in July and September 2015.
- The Company is in a position to take delivery of the four 2015 newbuildings without issuing further equity.
- The Company had at the end of 4Q2014 no net debt and its credit facility had not been drawn upon.
- In conjunction with the relocation to the NYSE, NAO conducted an IPO that closed on June 12, 2014. The IPO strengthened the Company’s equity by $100 million to finance a significant part of the vessels to be delivered in 2015.
- All our PSVs are in the process of changing the prefix name from “Blue” to “NAO” to strengthen our brand identity.
On January 7, 2015, the Board declared a cash dividend of $0.45 per share for 4Q2014 to shareholders of record as of January 22, 2015. The payment date is on or about February 5, 2015.
Net income for 4Q2014 was -$1.7 million. In March 2014, NAO entered into the UK Tonnage Tax system for its PSVs. At this time, our fleet operates in the North Sea only. The results for 4Q2014 include a foreign exchange cost of $0.9 million. On the two 2015 built vessels delivered in January 2015 there is a realized currency gain of about $8m on each ship because of the strong US dollar. This currency gain will be reflected as a reduction of the price of the vessels. Given the same exchange rate NOK/USD during 3Q2015, we will realize the same currency exchange gain for the last two ships to be delivered in July and September 2015.
The Company’s operating cash flow was $2.6 million in 4Q2014, compared with $6.0 million for 3Q2014.
The figures show that the 4th quarter results were weaker compared with the previous quarters for this start-up company. While activity in the North Sea has been affected by the decline in the oil price, it is also normal for spot rates to decline at this time of year. A significant increase in the oil price from the present level would most likely result in improved activities in the offshore sector which will benefit our PSVs.
As a matter of policy, the Company focuses on maintaining a strong balance sheet with low net debt, thereby limiting the Company’s financial risk. At the end of 4Q2014, net debt per NAO vessel in operation was zero. At the end of 2014, NAO had in place a non-amortizing credit facility of $60 million up to the end of 2018. The Company has agreed with its lenders to extend the credit facility to 2020 to accommodate the vessels being delivered to us later this year. The scope of the facility is now $150 million.
We concentrate on keeping our vessel operating costs low, while maintaining our strong commitment to safe operations. As we expand our fleet, we do not anticipate that our administrative costs will rise correspondingly.
Our fleet is comprised of ten high-quality PSVs including two newbuildings. We currently have eight vessels in operation, all in the North Sea, operating in the UK and the Norwegian sectors. The vessels may operate in either sector or elsewhere. The significant fuel efficiency of our ships is particularly attractive for our customers.
The Company’s objective is to ensure spot or term employment for the fleet, including for the newbuildings. The specifications of its vessels are by and large the same.
All our PSVs are in the process of changing the prefix name from “Blue” to “NAO” to strengthen our brand identity.
The PSV Market
The market outlook for all PSVs has been affected by the decline in the oil price. At this time of year there is also a seasonal weakness in this market.
PSVs are critical to offshore operations and represent a small part of overall costs. The recent reduction in oil price may affect future offshore exploration activities. At the end of January this year two of our PSVs were each fixed for four months plus options to a major oil company with commencement in February/March 2015. Rates are significantly higher than the present spot market. There are further long term contracts under negotiations.
Several of our vessels are suitable for operations in the Arctic, where drilling activities could expand. In January 2015 the Norwegian government announced about 60 new blocks available for drilling operations in the Barents Sea which is considered an Arctic region. This announcement was very well received by the oil companies. The international political situation represents an uncertainty.
Strategy Going Forward
The main elements of the strategy of NAO are based on the same fundamentals as those of Nordic American Tankers Limited, including dividend policy, low debt, low G&A costs and full transparency.
After an acquisition of vessels or other forms of expansion, the Company should be able to pay a higher dividend per share and produce higher earnings per share than had such an acquisition not taken place.
Our dividend policy is designed to enable us to achieve a competitively priced risk adjusted cash yield and a positive total return over time compared with that of other companies.
NAO is firmly committed to protecting its underlying earnings and dividend potential.
Our Company is well positioned for the future. We shall endeavor to safeguard and further strengthen the position for our shareholders in a deliberate, predictable and transparent way.
We encourage prospective investors interested in the Platform Supply Vessel sector to consider purchasing shares in NAO.
Link to the graph: http://hugin.info/159489/R/1891292/669710.pdf
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.
1 Operating cash flow is a non-GAAP number. Please see later in this announcement for a reconciliation of operating cash flow to income from vessel operations.
2 Total Return is defined as stock price plus dividends, assuming dividends are reinvested in the stock
Jacob Ellefsen, Manager, Investor Relations and Research
Nordic American Offshore Ltd.
Tel: + 33 678 631 959 or + 377 93 25 89 07
Tor-Øyvind Bjørkli, Chief Executive Officer
Nordic American Offshore Ltd.
Tel: +47 90 62 70 14 or +47 21 99 24 81
Gary J. Wolfe
Seward & Kissel LLP, New York, USA
Tel: +1 212 574 1223