Nordic American Tankers Ltd (NAT) 2008 Q4 法說會逐字稿

We will shine the sector spotlight on shipping today from dry bulk to crude oil tankers. The dry bulk index up nearly 160% so far this year. This is a little bit linked to what we have been talking about, the Baltic Dry Freight Index. Some say it's not a perfect barometer of the economy. Lots of noise in there, but there you get it. And with the drop in crude oil prices, Nordic American Tanker shares have fallen about 12%. Crude, as you can see, is down about 22%. Despite that, NAT, which is the ticker, came out with fourth-quarter earnings this morning, and guess what, they were better than expected.

What is going on here? Joining us on set are our friend Herbjorn Hansson, CEO of Nordic American Tanker, and in Houston Doug Mavrinac, head of Maritime Research at Jefferies. Sorry about that, Doug. Good to have both of you with us, and I'm glad that both of you will be able to interact with each other.

Herbjorn, first of all, I know obviously that the length is not perfect between where crude oil prices are and where shipping rates are, but there is a big issue right now with demand around the world dropping. Is that really the story, or is this a time of great opportunity?

In the short-term, demand is dropping, but you must remember that this is the first time in history that we have a recession in a globalized world. There are very strong forces at work, and we are the highest paying dividend stock on Wall Street, having turned in more than 10% annually in cash dividend yield. And this is a time for opportunity for us because if and when markets are down, many shipowners are in a distressed situation.

They have a lot of debt.

Yes and --

You don't? You have no debt?

No debt at all and we have a strong cash position. We have an unused credit line of $500 million, and it is my firm view that when we reemerge, if you wish from this mess, we will be in a much stronger company having more ships. So I'm optimistic as far as our company is concerned, but of course, you know there may be some muddy waters in the near-term that rates are excellent at this time. And another point, the dry cargo business is a completely different story.

Rates are excellent at this time?

Yes, I would say so. You know, we have --

Even though there is -- demand is down for oil?

Yes, that is true. We have something called Contango, the Contango, you know, and then we use oil tankers for storage, and that means that tankers are withdrawn from the market. That is good for us, and we're talking about substantial amounts.

And secondly, also we see slow steaming, the tankers go more slowly, and when you go down from 15 knots to 13.5 knots, that is a reduction of 10%, which is equivalent to 35 million deadweight tons, which is a huge amount.

I take a much more optimistic view. I believe that you and America and China on the international level will have to drag us from out of this, and you have put a lot of measures in hand, and there is no question these measures will work.

Doug, is Herbjorn the only one in the industry that has this optimism and maybe has the luxury of having it because he does not have debt, or are there others?

Well, I would say that I would agree with everything Mr. Hansson just said. I do think that there will be opportunities in the future. I also think crude oil tanker rates are actually performing quite well right now. Our concern is what happens between now and the time and what causes those opportunities to be had. Rates are very, very good right now, and as Mr. Hansson mentioned, they have been supported by storage that is a result of the Contango in the market.

Our concern is that as inventories continue to build, as OPEC continues to cut creating spare capacity, you begin to see that Contango narrow, and what people are willing to pay to store oil either on ships or to put it into the ground begins to decline, and the daily earnings of these vessels begin to decline. And then the industry really has to deal with the fact that OPEC has cut nearly 4 million barrels a day of production, which should result in a significant decline in crude oil tanker demand.

So I would say that, yes, rates are very good. They are being propped up by the storage trade, and there will be opportunities but it is in our view only after we start seeing rates decline and asset values decline as a result.

All right, Doug. Thank you very much. Appreciate your taking the time and, Herbjorn, you also. Good to see you.