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What Impacted Nordic American Tankers’ Top Line?

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Dec. 4 2020, Updated 10:53 a.m. ET

Nordic’s top line

Nordic American Tankers’ (NAT) revenue in 3Q16 fell to $71 million—compared to $88 million in the previous quarter. Its revenue was 29% lower than its 3Q15 revenue of $102 million.

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What impacted its revenue?

  • Nordic American Tankers operates all of its vessels in the spot market, unlike its peers Frontline (FRO), Teekay Tankers (TNK), Euronav (EURN), Tsakos Energy Navigation (TNP), and DHT Holdings (DHT).
  • Nordic American Tankers’ 100% spot exposure helps the company take advantage of the high tanker rates. However, the strategy also increases the risk because spot rates can be volatile. A fall in the spot rates has a negative impact on the revenue.
  • In the third quarter, Nordic’s revenue was lower despite the addition of Suezmax vessels to its fleet over the year. It was primarily due to a steep fall in industry tanker rates.

Industry tanker rates

Crude tanker rates fell to a three-year low in 3Q16. Seasonality factors were compounded by lower oil production in the Atlantic Basin, which resulted in shorter haul trade routes. Also, lower refinery throughput and tanker fleet growth had a negative impact on tanker rates.

Among the crude tankers, Suezmax vessels were hit the hardest. Nigeria is a key market for Suezmax tankers. In Nigeria, almost 100,000 barrels per day of oil was offline this summer. It equals ~20 Suezmax tankers per month. In August, Suezmax rates fell to as low as $10,000 per day.

Future revenue

We expect Nordic American Tankers to earn better revenues in the fourth quarter compared to the third quarter. Crude tanker rates recovered during the early part of 4Q16. It’s in tandem with a recovery in Nigeria’s oil production. Also, refineries increased the purchase of crude oil ahead of the peak winter demand season.

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