Jonathan Chappell says the New York-quoted
tanker owner will save around $29.6m in annual cash outlays after slashing its
$0.30 per share payout by 47% but believes much more financing will be needed
to “truly expand and modernise” its suezmax stable.
In a client briefing the equity analyst noted
a newbuilding could cost upwards of $56.5m in today’s sale-and-purchase market
while a five-year-old unit might command as much as $40m, citing figures from
Clarkson Research Services.
“As such, a full year of dividend savings cannot even buy
one relatively modern vessel,” he wrote before pointing out that NAT has $180m
worth of firepower left in a credit facility and ended the third-quarter of 2012
with $85m in cash- a figure that probably fell by year-end.
If NAT
were to move forward with the acquisition of new or second-hand tonnage, twos prime targets identified in an announcement filed earlier in the day,
Chappell says it would need to drain the facility, tap cash reserves and unlock
the capital markets.
He
added: “If we assume that NAT draws down
the remainder of its facility and uses half of its forecasted year-end 2012 cash
balance to finance 50% of its fleet growth plans and that it uses 50% of new
equity for the remainder, which may be a stretch as raising $212.5m of new
equity would require issuing 24 million shares – or 46% of the current share count, its total spend could be $425m, or about ten 5-year old ships.
“The
addition of ten vessels would expand the fleet by 50%, though we note that with
ten 1990s-built ships in its fleet at present, this potential expansion may
ultimately prove to just be replacement.”
Given the
shipowner’s exposure to ongoing weakness in suezmax segment, Chappell doesn’t believe
it would have been able to preserve the $0.30 payout in 2013 and declared today's cut
a “prudent step to ensuring that NAT retains enough cash to operate its fleet
through the market trough”.
Orders in the works?
As
TradeWinds has reported, oversupply has taken a toll on suezmaxes trading in
the spot market in recent weeks and Donald Bogden, a researcher at MJLF, believes
the trend is set continue.
“Our near term rate
outlook for the suezmax segment remains neutral as oversupply issues are likely
to persist through 2013 and early 2014,” he wrote in a recent report.
“However, it is important to
highlight overall suezmax spot market ton mile demand is expanding, driven by
growth in emerging economies and non-traditional suezmax trade patterns.
“This growth will
continue to help alleviate adverse impacts to the segment from the decline of
West Africa to North America trade flows benefiting suezmax tanker
utilization.”
Today, suezmaxes were seeing day rate averages of around $13,300, which is far below
bullish 2013 forecasts of $18,000 but right around the $14,000 to $16,000 that some
analysts believe NAT would need to breakeven on vessels financed entirely
with debt.
The insight comes amid talk that NAT may be in the process of lining up orders for
up to four tankers at Samsung Heavy Industries in South Korea following an article printed in the latest digital edition of our weekly newspaper.
Some market
observers believe the tides will have turned by the time the vessels hit the
water as a result of a dramatic shift in trade patterns, diminished supply and heightened demand. Others note that
Unipec’s pool with General Maritime, which has already committed ten suezmaxes to the
venture, is also a good sign for the segment.
