Nordic American Tanker (NAT) CEO Sends Letter to Shareholders; Significant Upside, Limited Downside in Current Market; Dividends to Continue

Nordic American Tanker Shipping Ltd. (NYSE: NAT) CEO Herbjorn Hansson sent the following letter to shareholders: "Dear Shareholder, I'd like to update you on our current business and financial position. Nordic American is in an excellent situation in a tanker market that has softened in this third quarter of 2010. Based on its strong balance sheet with no net debt and available liquidity reserves, Nordic American has a significant upside potential and a limited downside. As you know, 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 1997 to mid September this year our total return was about 20% on an annualized basis. The major portion of this return was paid as dividends to our shareholders. The amount of our quarterly dividend per share is above all a reflection of the level of the spot tanker market. Distribution of at least all available operating cashflow as dividends to our shareholders is an important part of our strategy. Including the dividend to be paid in December this year, the Company have paid dividends for 53 consecutive quarters since the autumn of 1997 when NAT commenced operations. Spot tanker markets are often soft during the third quarter of a year. This year has been no exception. At the time of writing the suezmax spot tanker market rates are averaging about $10,000 per day according to the Imarex, a spot tanker market index. Nordic American is well above that level for the quarter. As in the past the spot tanker rates have been volatile and the spot tanker market may turn fast and unpredictably. The spot rates as reported by Imarex may often vary from the actual rates we achieve in the markets. Taking into consideration the present state of the spot tanker markets, we still expect that our dividend for 3Q10 should be well above the level in the third quarter of 2009 which was $0.10 per share. The Company expects to publish its dividend and third quarter 2010 report on November 8, 2010. The record date is expected to be November 22, 2010 and the payment of dividend is expected to take place on or about December 3, 2010. Accretive growth is a key element in our strategy. The Company has grown from 3 vessels in 2004 to 19 suezmax vessels now, including three newbuildings due to be delivered in 2010 and 2011. We expect that the fleet of NAT will reach a minimum of 20 vessels by the end of 2011. We have no plans to tap the equity markets to fund this expansion as the Company has ample financial resources to expand with several more ships with the present balance sheet. If the present soft spot tanker market results in lower vessel prices in the second hand markets, we shall be in a position to acquire further vessels inexpensively compared to historical levels. Such acquisitions should increase the dividend capacity of the Company in the future. The position of NAT is particularly strong when it is compared with companies having a substantial amount of debt on their weak balance sheets. Below is a chart indicating the annual dividend capacity based on a fleet of 20 vessels and 24 vessels respectively, at different spot market rates. The above annual dividend indications are based on 355 income days per vessel per year. The net debt is about $7m per vessel for a 20 vessel fleet and about $16m per vessel for a 24 vessel fleet depending upon the price we pay for new acquisitions. The numbers show the substantial dividend capacity of NAT. In short, NAT is well positioned for further strong fleet growth and increase of dividend capacity. Summing up, the Company's strategic position is as follows: 1. When the tanker markets are firm, very good results and dividends can be expected. 2. When the tanker markets are soft, the results and dividends will be lower - a minus. At the same time the Company may be in a position to buy vessels inexpensively and accretively - a plus that we believe over time outweighs the minus. As you can see, I remain very optimistic about the future of Nordic American. Many shareholders contact us expressing views and recommendations. Please continue contacting us for any questions or comments you may have. My email is herbjorn.hansson@scandicamerican.com."... Read more

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