Jonathan Chappell says the New York-quotedtanker 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 neededto “truly expand and modernise” its suezmax stable.

In a client briefing the equity analyst noteda newbuilding could cost upwards of $56.5m in today’s sale-and-purchase marketwhile a five-year-old unit might command as much as $40m, citing figures fromClarkson Research Services.

“As such, a full year of dividend savings cannot even buyone relatively modern vessel,” he wrote before pointing out that NAT has $180mworth of firepower left in a credit facility and ended the third-quarter of 2012with $85m in cash- a figure that probably fell by year-end.

If NATwere 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 unlockthe capital markets.

Headded: “If we assume that NAT draws downthe remainder of its facility and uses half of its forecasted year-end 2012 cashbalance to finance 50% of its fleet growth plans and that it uses 50% of newequity for the remainder, which may be a stretch as raising $212.5m of newequity 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.

“Theaddition of ten vessels would expand the fleet by 50%, though we note that withten 1990s-built ships in its fleet at present, this potential expansion mayultimately prove to just be replacement.”

Given theshipowner’s exposure to ongoing weakness in suezmax segment, Chappell doesn’t believeit would have been able to preserve the $0.30 payout in 2013 and declared today's cuta “prudent step to ensuring that NAT retains enough cash to operate its fleetthrough the market trough”.

Orders in the works?

AsTradeWinds has reported, oversupply has taken a toll on suezmaxes trading inthe spot market in recent weeks and Donald Bogden, a researcher at MJLF, believesthe trend is set continue.

“Our near term rateoutlook for the suezmax segment remains neutral as oversupply issues are likelyto persist through 2013 and early 2014,” he wrote in a recent report.

“However, it is important tohighlight overall suezmax spot market ton mile demand is expanding, driven bygrowth in emerging economies and non-traditional suezmax trade patterns.

“This growth willcontinue to help alleviate adverse impacts to the segment from the decline ofWest Africa to North America trade flows benefiting suezmax tankerutilization.”

Today, suezmaxes were seeing day rate averages of around $13,300, which is far belowbullish 2013 forecasts of $18,000 but right around the $14,000 to $16,000 that someanalysts believe NAT would need to breakeven on vessels financed entirelywith debt.

The insight comes amid talk that NAT may be in the process of lining up orders forup to four tankers at Samsung Heavy Industries in South Korea following an article printed in the latest digital edition of our weekly newspaper.

Some marketobservers believe the tides will have turned by the time the vessels hit thewater as a result of a dramatic shift in trade patterns, diminished supply and heightened demand. Others note thatUnipec’s pool with General Maritime, which has already committed ten suezmaxes to theventure, is also a good sign for the segment.