Hamilton, Bermuda, November 16, 2018.
Nordic American Offshore Ltd ("NAO" or the
"Company") owns and operates a fleet of 10 Platform Supply Vessels
(PSV) each averaging approximately 4,000 DWT and with an average
age of about 5 years. Nine of the vessels are actively trading,
primarily engaged in the North Sea offshore market between United
Kingdom and Norway, while one vessel is still laid-up on the west
coast of Norway.
Results for the third quarter 2018 improved compared with the
second quarter 2018. The Net Operating Loss was -$6.0m for 3Q18
compared with -$7.9m for 2Q18 (GAAP measure). The Adjusted Net
Operating Result[1] for 3Q18 was -$1.8m as compared to -$3.5m for
2Q2018.
At the start of 3Q18 we faced a surplus of vessels re-introduced
to the market, from lay-up conditions and from other regions. To
secure utilization for our vessels we shifted from having no
vessels on term charters in July, to having five vessels on shorter
term contracts towards the end of the quarter. Also, at the end of
the quarter the weather helped tighten availability and pushed
rates up. This helped making the third quarter the best quarter in
2018 and September the best month.
Most of the lay-up fleet that was considered
easy to activate, has now been activated and as such, there is a
greater barrier on the supply-side, meaning that rates would need
to see a substantial uplift for the remaining units to be
reactivated. On the demand side, we see increased E&P spending
globally and in the North Sea specifically, with the most notable
being the development of the Johan Sverdrup field. This is the
fifth largest oil discovery in the history of the Oil&Gas
industry in the North Sea. The development of this Giant field and
other projects, along with increased exploration activity will
undoubtably have positive effects on demand for Offshore Supply
vessels in the North Sea going forward. The market may turn quickly
and unexpectedly.
We concentrate on keeping our vessel operating
costs low, while always maintaining our strong commitment to safe
operations. Resent inspections confirm the excellent technical
condition of our fleet. As we expand our fleet, we do not
anticipate that our administrative costs will rise
correspondingly.
The basic features of NAO are similar to the
business model of the NYSE listed tanker company Nordic American
Tankers Limited ("NAT"). NAT holds 16.1% of NAO's common shares.
The Executive Chairman of NAO and his immediate family hold 13.4%
of NAO's common shares. He is also the Chairman & CEO of
NAT.
The weak offshore supply market has put a strain
on our cash liquidity. We are working on a concrete arrangement
that we expect will contribute to the short-term liquidity need. We
pursue a conservative financial strategy, having little or no debt.
This is also our plan going forward. At the end of 3Q18, the net
debt[2] per vessel was $12.2 million. At the end of the quarter our
fleet's market valuation (steel value) was in breach with certain
covenants under our Revolving Credit Facility. Therefore, we
classify the debt as current. We expect this matter to be solved in
early 2019 at the latest.
As for the contemplated canadian Horizon
Maritime business combination, due dilligence processes are still
ongoing.
For further details on our financial position, please see the
financial information reported below and this entire release.
Strategy Going Forward
The main elements of NAO's strategy are based on
a homogenous fleet, low debt, low G&A costs and liquidity in
the stock. NAO has about 35,000 shareholders, mostly in the USA.
Under improved market conditions dividend is a priority.
NAO is committed to protecting its underlying
earnings. We shall endeavor to safeguard and further strengthen
NAO's position in a deliberate, predictable and transparent
way.
We encourage investors interested in the
offshore sector to consider buying shares in NAO. It is expected
that the cash position of NAO should be improved by the concrete
plans we have in hand.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Matters discussed in this press release may
constitute forward-looking statements. The Private Securities
Litigation Reform Act of 1995 provides safe harbor protections for
forward-looking statements in order to encourage companies to
provide prospective information about their business.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, and
underlying assumptions and other statements, which are other than
statements of historical facts.
The Company desires to take advantage of the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 and is including this cautionary statement in
connection with this safe harbor legislation. The words "believe,"
"anticipate," "intend," "estimate," "forecast," "project," "plan,"
"potential," "may," "should," "expect," "pending" and similar
expressions identify forward-looking statements.
The forward-looking statements in this press
release are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without
limitation, our management's examination of historical operating
trends, data contained in our records and other data available from
third parties. Although we believe that these assumptions
were reasonable when made, because these assumptions are inherently
subject to significant uncertainties and contingencies which are
difficult or impossible to predict and are beyond our control, we
cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections. We undertake no
obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise.
Important factors that, in our view, could cause
actual results to differ materially from those discussed in the
forward-looking statements include the strength of world economies
and currencies, general market conditions, including fluctuations
in charter rates and vessel values, changes in demand in the PSV
market, as a result of changes in the general market conditions of
the oil and natural gas industry which influence charter hire rates
and vessel values, demand in platform supply vessels, our operating
expenses, including bunker prices, dry docking and insurance
costs, governmental rules and regulations or actions taken by
regulatory authorities as well as potential liability from pending
or future litigation, general domestic and international political
conditions, potential disruption of shipping routes due to
accidents or political events, the availability of financing and
refinancing, vessel breakdowns and instances of off-hire and other
important factors described from time to time in the reports filed
by the Company with the Securities and Exchange Commission.
Contacts:
Gary J. Wolfe Seward &
Kissel LLP New York, USA Tel: +1 212 574 1223 |
|
Bjørn Giæver, CFO Nordic
American Offshore Ltd Tel: +1 888 755 8391 or +47 91
35 00 91 Herbjørn Hansson, Executive Chairman Nordic American
Offshore Ltd. Tel: +1 866 805 9504 or +47 90 14 62 91 |
|
|
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Web-site: www.nao.bm |
|
[1] Adjusted Net Operating Result represents Net Operating
Result before depreciation and non-cash administrative charges.[2]
Net debt is working capital less long term debt, divided by 10
vessels.
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