Shares of oil shipper Nordic American Tankers Limited (NYSE: NAT) shot up by double digits in Monday trading, and currently occupy a berth up 13.4% as of 12:55 p.m. EDT.
The catalyst for the move: This morning, management published an open letter to its “shareholders and investors,” reassuring that its “financial position … has changed much to the better” over the last nine months.
The company is seeing “improvement in the tanker market” today — enough that it no longer sees a need to raise additional debt. What’s more, management says it expects to “immediately reap the benefits of an upswing in the tanker market,” which sounds propitious for the company’s upcoming earnings report, probably due out in August.
Longer term, Nordic American still expects “to retain its expansionary business model that has been rewarding over many years,” but for the time being, it will not be adding to its debt load with a bond offering.
That all sounds like pretty good news. Still, investors should bear in mind that Nordic American Tankers hasn’t earned a profit in more than two years (according to data from S&P Global Market Intelligence). It’s lost money in four of the past five years, in fact, and is expected to lose money again in 2018.
The fact that Nordic American isn’t adding to its debt load, which currently amounts to $385 million (versus a market capitalization of only $307 million), may sound like good news. Still, in the long term, this company needs to pay down that debt to solidify its balance sheet. The first step to doing that is to start earning profits again.
Analysts don’t see that happening before 2019 at the earliest.
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