Nordic American Offshore Ltd. (NAO) executive chairman, Herbjørn Hansson, has increased his ownership in the company, purchasing an additional 50,000 NAO shares with his son, Alexander, yesterday at about $7.83 per share.
In a letter to NAO shareholders, Hansson shared thoughts on the progress the company has made since first being listed on the New York Stock Exchange (NYSE) in June 2014, entering the Platform Supply Vessel (PSV) market against high, stable oil prices and record investment levels in the offshore segment.
“Currently the market for our vessels is turbulent - the decline in oil price has led to reductions in exploration activity in the North Sea, in turn lowering the number of working oil rigs and the demand for PSVs,” Hansson said, but added the he believes there’s reason for NAO to have an optimistic outlook, despite market instability.
“Five vessels in our eight vessel fleet are currently employed on contracts, up from three last quarter. Three of our vessels are operating in the spot market. At the time of this letter to you, we enter a period of greater visibility on earnings and security in the current challenging environment. We have achieved in excess of 80% utilization which is a sound performance in the current market conditions. Rates for the spot ships have been reduced this year as a consequence of the low oil prices.”
Another reason for the positive outlook, Hansson said NAO has recently contracted two vessels to Statoil to assist on the Polarled project, securing employment for those vessels for several months going forward.
Additionally, Hansson noted that NAO’s two vessels delivered from Ulstein’s Norwegian yard earlier this year were ordered in Norwegian Kroner, leading to a realized currency gain of about $8 million per vessels, actually reducing the USD price from about $44 million to about $36 million. NAO will thus see an economic advantage of about $32 million spread across four vessels delivered in 2015. “Our positioning by ordering the vessels in NOK and reaping the benefits of a stronger dollar, has indeed given our shareholders an extra economic benefit,” Hansson said.
“The low oil price continues to put pressure on our industry. The fundamentals in the oil market suggest an improved balance between supply and demand for crude oil in the second half of this year. When Brent crude prices return to the $60 - $80 range per barrel we expect to see renewed activity in our market, and improved demand for our vessels.”
“In our 2014 start-up year we declared total dividends of $1.80 per share,” Hansson said. “Going forward we will review the dividend on a quarterly basis in the same way as Nordic American Tankers (NAT) has done in the past. NAO basically employs the same strategy as NAT. A strong balance sheet and low cost breakeven are the key elements of our robust long-term performance. We expect to continue to pay a dividend going forward - although, for the time being, at a lower level than for the previous quarters when the dividend was $0.45 per share.”