Must-know: An overview of Nordic American Tankers (Part 3 of 6)
Nordic American Offshore
In November, 2013, Nordic American Offshore Ltd. (or NAO) was established with a private equity placement of $250 million. NAO which will own and operate platform supply vessels (or PSVs), received $65 million in the placement issue from Nordic American Tankers (NAT) which resulted in a 26 % interest in NAO. One of the major reasons to invest in NAO is to generate higher dividends for NAT shareholders over a period of time.
The formation of NAO is based on the similar business model as NAT. It’s expected to generate clear synergies between the two companies with a major focus on general and administrative costs.
NAT owns ~833,333 warrants with December 2015 maturity. NAT accounts for NAO using the equity method of accounting. Under this method, NAT would be reporting the income on its investment in its income statement. The reported value is based on NAT’s share of NAO assets.
In the first half of 2014, NAO has been further developed with four new building contracts planned for delivery during first three quarters of 2015, at which time NAO would have ten vessels in operation. These platform supply vessels (PSVs) are serving the offshore installations in the North Sea and are all built at the West Coast of Norway. NAO is listed and started trading on the New York Stock Exchange (or NYSE) on June 12, 2014, following an initial public offering (or IPO) that brought in ~$100 million to finance the expansion of the fleet.
From January 1, 2014, Scandic will perform supportive functions for NAO which will generate external revenues for the group. In addition, costs incurred which in prior periods have been fully reimbursed by NAT will be partly reimbursed by NAO from the same date.
In January, 2014, NAT revealed its intention to declare a dividend composed of a portion of the shares that it owns in NAO. This portion should be worth ~$10 million—equivalent to $0.13 per NAT share. On May 9, 2014, NAO declared its first dividend of $0.45 per share, yielding a total of ~$2 million for NAT.
The company has peers like DHT Holdings Inc. (or DHT), Teekay Tankers Ltd. (TNK), Navios Maritime Acquisition (NNA), and Tsakos Energy Navigation Ltd. (TNP). The Guggenheim Shipping ETF (SEA) tracks these companies.
Let’s move on to see how the company growth is supported by NAT financials and vessel quality.
Browse this series on Market Realist:
- Part 1 - Overview: Nordic American Tankers
- Part 2 - Why a unique business model supporting high dividend growth
- Part 4 - Why strong financials and vessel quality support company growth
- Investment & Company Information