Ladies and gentlemen, thank you for standing by, and welcome to the Nordic American Tankers conference call. At this time, all participants are in listen only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. For your information, the conference is being recorded. Now, I would like to hand the conference over to your speaker today, Mr. Herbjørn Hansson, Chairman and CEO. Please go ahead, sir.
Thank you, Mr. Operator. Thank you all our listeners and people joining us. We are very pleased to be together with you. I would like to just mention that my remarks here, they are forward-looking, some of them, about the future performance. These statements are based on our assumptions in light of the information currently available, therefore you should not place any due reliance on them. In these legal comments, I tell you that Nordic American Tankers cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to the press release we have sent you, which can be accessed by visiting the company's website. I'm addressing you from Norway.
We are a company listed on the New York Stock Exchange, one of the largest shipping companies in crude oil tankers in the world. Our ships are traveling all around the world carrying crude oil. I would like to tell you that we had one of the highest liquidity in the stock among all listed shipping companies, stock listed. I noted that compared with another well-known shipping company, we have double the amount of shares being bought and sold every day, because everybody who buys stock with us, they shall easily be able to buy stock, and they shall be able to sell stock. We have a very strong cash position, I would mention, and we have performed better than the so-called consensus. Our results were out the 17th of August, last Monday, I believe, and today we have the 26th.
When it comes to our earnings per share, we're beating the consensus by about 17%. When it comes to net income, we were beating the consensus by 16%. EBITDA, we were beating the consensus by 10%, and EBIT by 7.3%. The point I wish to emphasize is all these parameters were beaten by the performance of Nordic American Tankers. We are now in a very strong position. I've been in this business for quite a few years, since the mid 1970s, both in research, in economics, and in the energy business. I've never seen this company to be in as such a good position as it is today.
I'm sitting here in Sandefjord, Norway, together with some of my friends, and we have also many friends all around the world that are listening in and that I hope will participate in the discussions we are going to have. With these few words, I would like to go onto the first item on the agenda. Item number one, the strong financial and commercial position of NAT. In that connection, I will address the strategy going forward. When it comes to the strong financial and commercial position of NAT, I will say, without reservation, that we are in an excellent shape. That is how I see it from my point of view. Nobody knows, as indicated in my previous remarks, what the future is holding, but I'm very confident on the way forward. There is no question on that.
When it comes to our strategy, I just would like to say the following remarks. We place emphasis on simplicity, transparency, and predictability. Our general position is to underpromise and to overperform. I would like to address a few elements of our strategy. That is point number one, expansion of a homogeneous fleet. We stick to Suezmax vessels, which we are trading all over the world, carrying crude oil. Secondly, we distribute cash flow to shareholders to a large extent, and we place heavy emphasis on dividend. We have been paying dividend for 92 quarters, and we are going to continue on that path as well as we can. Naturally, the dividend, it is a risk management question, really, on the one side, and it has to do with the capital structure of the company.
We have a very strong balance sheet, which is good going forward, and we have also a very close customer relationship. Very close. We do business with Big Oil. I shall come back to that. We maintain a top-quality fleet, as reflected in the so-called vetting activities. We have interests aligned, shareholders, management, and all interests are aligned. We are servicing Big Oil under short-term contract and longer contracts. We are dealing with some of the best companies in the world on the oil side. We have a low cash break-even, including G&A costs, and we leverage our industry network. Some of us were working and doing business in Japan many years ago, contracting ships, ordering ships, after which we moved to a large extent to Korea, and now, as we all know, China has become an aggressive and positive competitor in our business.
That is really my comment on item number one on the agenda, which is our strong financial and commercial position and our strategy going forward. Let me embark on number two on the agenda. Nordic American Tankers, we expect to be a debt-free company in a few years, as in the past. We were a debt-free company 10-15 years ago, simply all the debt was very low. When you have no debt, the shareholders and management and the board can run the company without any "interference" by the banks. We wish to be completely independent of the banks, and that has been and was a very important objective for us, and it will be an objective, and it is still an objective. Whether it will take three years or five years, I wouldn't comment on that, or even more. The direction is very clear.
The direction is to become debt-free simply because we are of the firm opinion that this benefit our shareholders, who are our owners. I will embark on the third point on the agenda, which is our customer relationship with Big Oil. Big Oil, by that expression, I'm talking about some of the biggest companies in the world. I'm talking about ExxonMobil. I'm talking about Shell, about British Petroleum. I'm talking about the major Chinese oil companies, PetroChina and others. We do a lot of business with them all over the world. BP, Shell, Exxon, Cepsa, Equinor, not least. Equinor is the state-owned company in Norway, one of the biggest companies in the international shipping site, and they are located in Stavanger and owned 67% by the Norwegian government. We do business with Chevron, our good friend.
Generally speaking, we also do business with Unipec in China. Generally speaking, our desire is to do business with Big Oil because we have experienced over the years that the oil companies are some of the best companies in the world. They started out many years ago in America in, I think it was in Pennsylvania in 1863, so quite a time ago. We had the best relationship and the best cooperation with Big Oil, and that is our objective to continue on that path. They rely on us, and we rely on them, and for which reason we are working closely together with them. Then I will go on to the question of fleet composition, item number four, fleet composition, quality of fleet, and vetting. The question of vetting. Vetting is the same as the mark book you get in school.
The oil companies are looking at our fleet, they're going through in detail our fleet, and give them a rating. We are among the top-rated companies, shipping and crude oil companies in the world. Our vetting performance is 2, and a little bit more than 2.5 observations each vetting. These vetting procedures, they are to a large extent, generally speaking from an industry point of view, supported by OCIMF, the Oil Companies International Marine Forum, consisting of about 112 oil companies located in London. We have a very close and constructive cooperation with OCIMF. When we talk about our business with Big Oil, we are a completely transparent company. We are listed in New York and our Annual Report, or we call it 20-F, I believe, are about 120 pages.
Everything is completely well-known by our friendly competitors and also by our customers and by our friends in the industry. We have nothing to hide. When it comes to number four, fleet composition, which is associated with vetting, we have now 23 ships, and the quality is reflected by the vetting results, as I mentioned. We have about an average age of about 12 years or slightly less, or in that region. We had until recently, two years ago, one year ago, 33 ships, and then we scaled the fleet back a little bit. Now we are down to 23 ships, and I wouldn't be surprised if we would increase the fleet again, because this is a dynamic development.
As from our perspective, also for me, as a quite a large shareholder, I have invested quite a lot in this company, hard cash. We wish, of course, to renew our fleet in due course. That will be a gradual process. We don't announce today that we will order a ship tomorrow. We don't tell people what our next steps are. Whatever we do, dividend will be in focus. Whatever we do, we will do it in the best interest of shareholders. No question. The shareholders can rely on that. In business, you not always succeed, more than 50% of your decisions must be right. Because if you do things wrongly more than 50% of the time, it will be very bad in the longer term. So far so good.
We wish to keep up the quality of the fleet. It's a very accurate position we are working on, and I personally supervise these things in great detail because I believe as the top leader of this organization, it is my responsibility to have a lot of detailed knowledge about the business. I don't take decisions on behalf of others, but I wish to ensure that I understand all questions associated with the business. I would like to go onto item number five, the question of scrubbers. Some time ago, this question was introduced a few years ago, and we saw immediately that this was nothing for us, and we decided clearly and openly, and I would say convincingly, that scrubbers was nothing for us, because we are there to reduce risk. We are not there to increase risk.
I don't need to talk more about that. Let me embark on this next question, which is perhaps the most important question we see today, that is COVID-19. I have, with my colleagues, been to China many, many times doing a lot of business with the big Chinese oil companies, and we are following very closely developments in China on this business, COVID-19, and also in Korea and Japan, as I mentioned to you. I would like to make a general comment. Political uncertainty is often could create good times for the business. We see very clearly, there is no doubt about it, that crude oil is required to stimulate growth and to stimulate welfare. Many people in the world, poor people, they like to have welfare, as some of us in the West have, in America and elsewhere. They will not continue to be poor people.
Those of us who have followed the Far East over, I would say, the last 40 years, we have seen this question of increased welfare at a very close distance. I shall not give you a long speech on that question. I could do it, but this is not the right place to do it. We are following the COVID-19 question very closely. Our main challenge at this time is to ensure that our crews, the working people on the ship. On a typical Suezmax ship, we have about 23 crews, or 24, and we are very concerned for their safety, and we try to change crew according to schedule. That is a challenging situation now because this has to do with the virus and the extent to which the virus is spreading.
We are trying to the best of our ability to protect the crew. I would say this is the most important thing that we have on the agenda every day. I personally take a very active role in these processes because of an important managerial principle. I'm no good at blaming others. If something goes wrong, it is my responsibility together with my colleagues, and if somebody is going to shout, they shall shout at me and my board and my colleagues. We are not blaming others. Also, before we go on to Q&A, let me talk a little bit about the USA and China relationship. You have the big triangle, if you wish. That's China, that is America, that's Russia. You are familiar, many of you, with the mountain chain of Ural, as we say in my language. Ural.
East of Ural, there are about 30 to 40 to 50 million Russians. Even further east, there are 1.3 billion Chinese. I'm sure that many of you on this call, you know a lot about China, and I don't know very much about China, although I have been there many times, and we have an excellent relationship with our business associates in China. Interestingly, China, if you look upon this in a historic perspective, China has been ruling, in quotation, the world for the last 2,000 years. It is only the last 200 years that China has not been in the driving seat, if you wish. In a large historical context, this is a short period of time. Some people are saying that China and the United States are at the point where they are adversaries working against each other.
I will not take the side of China, I will not take the side of America, but I'm quite sure about one thing, that the two countries respect each other. I firmly believe that with all due respect for our contacts in Moscow and in Russia, I think that China and America, they are running this show. There's no doubt about it that we wish America to keep a leading role in the world. We wish America to take that role, and it is also in the American heart to have the role, but they feel that this is a little bit expensive for them now. Our links, Nordic American, you can see it from the name. Nordic American have very strong links in America.
On the agenda here, we mentioned a debt-free company. We now have only one big creditor that is in Dallas, Texas. We don't have any mortgage debt with Scandinavian banks, only America. We are dealing with the New York Stock Exchange, and we are dealing with all your rules, and we have performed correctly in all these years that we have been in your country. I think that what we now see, these "tensions" between U.S.A. and China, they may come down more quickly than we anticipate. In the tanker business, political events are many, many times turning matters upside down, and we may see this again.
The operator, with these few words, I don't wish to talk more, but I would like to respond to any question you may have about an industry in which I've been all my life and which I will be hanging in for a long time, I can assure you. I have done a few right things, and I'm hopeful that I shall be able to, together with my board and my colleagues in management, to continue that constructive path that we have been on and that we are on at this time. I mentioned in my speech here the high liquidity of the stock. I compared our liquidity in the stock, which is about $6.7 million shares being traded every day, and we are more than $6.7 million, and we are more than double of other well-known shipping companies.
With us, people can buy stock, they can sell stock. If they like what they see, they can buy, and if they don't like it, they can sell, and if they have other reasons for adjusting their portfolio. With these few words, I refer back to Andrea, our friend from Italy, or Ruth, I forget who is in charge here, and I will manage the Q&A session. Andrea, please.
Thank you. Ladies and gentlemen, we now begin the question-and-answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. We are now taking our first question from the line of Randy Giveans. Please ask your question.
Howdy, Herb. G reat to hear from you. How are you?
Oh, I'm doing excellently. Goes better and better every day. How are you doing? Are you in Houston or in New York?
Yeah. Staying away from Marco and Laura. Yes, we are staying safe down in Houston.
That's good.
Yes, sir. All right. Question. First, you mentioned you paid a dividend for, I think it's 92 consecutive quarters.
Yes.
Quite the streak there. Looking at the dividend, you paid a $0.10 dividend the first quarter, $0.20 dividend the second quarter. I guess around that, what is the calculation for this, or how did you decide on those dividend amounts? We expect NAT to have negative net income in the third quarter. What is your minimum dividend payment going forward?
I started my business in Houston, I can tell you. I could come and visit you and make a speech of one hour to address the questions you are mentioning.
Come on down.
In the first quarter, sir, we paid $0.14. In the second quarter, we paid $0.20.
Right, okay.
We are paying now. Those who buy stock now, they will get $0.20 the 4th of September. You have started calculating our results for the third quarter, I would courageously ask you how many Suezmaxes do you have? Otherwise, you could come and see. That what you are referring to is not what we are seeing. We think that 2020 will be a good year for the tanker business and for Nordic American Tankers. That is point number one. Point number two, 2021 will be a good year for the tanker business. The reason I'm seeing that is you can also, if you study the details, you will see there is a high degree of volatility. A high degree of volatility does indicate a balanced market. I think this is going very well.
Of course, we are not talking about the market next week. We don't go by week by week. We are talking about the direction of the company, and the company can essentially go three ways. That's up, that is sideways, and that's down. This company is going up. Those who believe that they are going down, they can take the phone and ask a question and give their rationale. What we know about, we know about the energy business, and we know about our business. That is what we know about. Within the limits of time, I cannot spend too long time on each question, but we are very confident. Anybody could argue, are we wrong? That is essentially what I said earlier during this conversation. If we take more wrong decisions than right decisions, then we go into the big black hole.
We have, over many years, taken the right decisions. We saw it on scrubbers. It was a catastrophe for many people who went for that thing, and we saw it immediately. This was nothing for us. This is the question of being a businessman, which is very difficult to be a businessman. You must think about this and this. It is a very motley, they call it in America, I believe, M-O-T-L-E-Y picture. You have so many dimensions to have in your analysis that it is impossible to predict the future, because if the future was very easy to predict, everybody would have been doing that. That is really our job, is to undertake a professional judgment of the situations as we say it, with simplicity, with transparency, and with predictability.
I'm sorry, I shouldn't go so far, but essentially you were wrong on the dividend numbers and what the future dividend will be. This is a risk management question. A risk management question that has to take balance sheet considerations. We include views on the market. We include all these elements of international politics. I'm sorry, this was a long answer to your specific questions, and please comment further if you have any—
Okay.
—other views. Yes, please.
All right. That was very robust of an answer. I appreciate the color there, I can understand, okay, the minimum dividend payment, that's in flux, maybe there's some nuances around it. I guess, can you just explain the calculation for the prior two dividends? Is it a percentage of net income, a percentage of free cash?
If you will come to my office, I shall give you a speech in economics, and we can spend one hour together about that, because this is a very complicated business, and it is a risk, as I said, it is a risk management question. You cannot easily say this or that, and this number, and this percentage. That's not how business works.
Got it.
I will more than willingly talk about it because it is intellectually an interesting question, but it goes far beyond the scope of this conversation. Thank you.
Got it. Well, once COVID ends, I'll be knocking on your door.
Thank you.
Next question. Looking at your debt, you finished the second quarter with $370 million in total debt.
No, you are wrong. We are wrong. You are wrong.
What's your total debt?
The net debt of our fleet is $11 million per ship. $11 million.
How about gross?
What's that?
The gross amount of your total debt.
But you mentioned it's a question of the Ocean Yield also, whether you include that. We have one creditor. We have one creditor in America, one of the biggest banks in America, owned by one person. The average debt of our fleet is $11 million. Could you, Bjørn, make a comment on the debt side?
I think Randy—
The CFO will make a future comment. I can assure you we will be debt-free, and we shall not ask you, Randy, to borrow money from you.
Got it. Okay. Mr. CFO, please.
Hi, Randy. I think you're right about your total debt number. Yes. What was the question?
Okay, good.
$11 million, is that correct, Bjørn?
Yeah, that's the net debt.
Yeah.
Per ship.
Net debt per ship
Net debt per vessel, $11 million.
If you try to allude that we have a lot of debt, you are wrong.
Got it. I agree with you. If you let me finish here, you do not have a lot of debt. Absolutely not, right. You're under-levered compared to your book value, compared to even the market value of the vessels. With that, with the low leverage, are you thinking about or able to refinance your expensive debt with Beal Bank and Ocean Yield with new bank loans, right at LIBOR plus, I don't know, 300, right?
I said earlier, we are finished with Scandinavian banks. The answer is no.
No.
I expect to be debt-free in, is it three years, four years, five years? You could always argue about the timing, but when we are debt free, we are debt free.
Got it.
We have been that before, and we should come there again. That's how I see it.
Awesome. I'll ask one more quick question, with hoping it doesn't go 10- minutes. During the second quarter, you raised $15 million through the ATM. You issued 2.46 million shares at $6.22 a share. Obviously, a great deal with your share price now at $4.50. What are your plans for this cash, and why not sell more shares with your share price trading well above NAV?
Let me put it like this. We, all of us, are trading above NAV. NAV is not of a big interest to our customers. ExxonMobil, they don't say, "Well, we like that ship because that ship has a low NAV and that ship has a high NAV." That is not how business is working. NAV, we are not scrap dealers. We are not scrap dealers. We have now close to $1 a year in dividend, or slightly less. The stock price is about four and a half or something. Those who believe, as I believe, that we are on a very good platform, they should buy stock. Those who don't like it, they should sell stock. That's how it is, really. That is how we wish to be.
In five years' time, and I expect to be here in five years' time, I can tell you, if my health is as good as it is now, and then when we are debt free, if we are in five years, then you and I can meet, Randy, and then I can buy you a beer.
Okay.
Okay, I would suggest that we go on to another question if there is somebody else.
Yep. I'm going to pass it on to someone else and give them a shot.
Oh, that's good. That's very kind of you.
All right. Have a good one, sir.
Thank you.
Thank you. We are now taking our next question from the line of Omar Nokta. Please ask your question.
Hi. Thank you. Hi, Herbjørn. Thanks for the update and overview on things. Randy, I hope you're wearing a mouth guard. Anyway, Herbjørn, you were, I think, quite clear in your plans on becoming a debt-free company here, just like you were in the past, and that seems really achievable over the next three to four years if you just simply use an average somewhere in the mid-20s on the Suezmaxes. Once you're debt free, you can run an ATM now without quote unquote, "interference from the banks." How do you view being debt free in the context of the first item in your strategy, which is the expansion of a homogenous fleet? How do you see those two interplaying?
Yes. We are making good money in the marketplace. What we forget in this discussion very often is that we are making good money in the marketplace, as we have done this first half year. We did excellently based upon a clear strategy. We fixed as many ships as we could, as high as we could, and that was very successful. We will be, and work towards becoming debt free. We have an operating cost of about $8,000 a day, and that is a number that we decide ourselves because we decide the quality. Of course, if we can pick up $30,000 in the marketplace, as we have done recently, there has been a little lull now, but if you can manage $30,000, a lot of cash is coming into the company, and we do have a lot of cash at this time.
Responding to the earlier question, we wish to use that cash to give to our shareholders, including myself, if we can manage. It is a very sensitive objective to do this, and we must think about how we do it and in which way. When it comes to growth renewal, I expect that we will, of course, renew our fleet. We have now, as we speak today, more than $100 million in the bank, and of course, that's a lot of money. It can be used for a lot of things, but we are very careful not to overextend ourselves because we are conservative people, and that is at the bottom of our thinking and at the center of our thinking. We are very conservative. Ship owners all over the world, in my whole career, in my experience, they have been far too speculative.
Other people may wish to have that approach. I don't blame them, because other people, they should run their business as they wish. There is one thing that you should count on here when also renewing the fleet, that is we will be conservative. I can tell you almost every day, but several times a week, people are knocking at our door asking us to buy ships from them. They are doing that, but we sit back, and that is an advantage of sitting in a small town outside Oslo and nobody sees what we are doing. They know it after we have done it. I'm sorry, Omar, I went astray here with my comments. Couldn't you come back to your comments, please?
Yeah. That was helpful. That was helpful and a good overview. I think you did touch on the main question. I think as you think about the fleet renewal, Herbjørn, you sit on several industry boards. Clearly, the key discussion I think going forward is also propulsion. A year ago, there were a lot of questions and uncertainty, though it seemed that maybe LNG was gaining some traction. Here we are a year later. Now there's more talk and uncertainty. There's ammonia, there's hydrogen in the equation. Any thoughts on that? Also, maybe could you give a perspective on how NAT is preparing for some of the upcoming changes to the industry?
Let me take one point which always has been at the core of our thinking. We are not waving the big technological flag. We don't go first because that's not our inclination and not our thinking. Always, we like others to go first, and that is a very cynical approach. We simply would like others to do the mistakes, and when they have done the mistakes, we learn from their mistakes. It's much better to learn from the mistakes of others than your own mistakes, at least if you repeat them all the time. I don't see that LNG is anything for us at this time. Our engines on our ships can burn low sulfur diesel oil and low, what you call it ?
Compliant fuel.
Yeah, we have compliant fuel.
My short question is, we don't wave the technological flag, but we must be very quality-orientated. That is important for us. If people would like us to install all kinds of things, and I say, "Well, it's fine. If you will pay for it, over a certain period of time, we will install it if you pay for it, but we don't install it if you don't pay for it." That is our basic principle. We have a good standing with our big customers, and perhaps the one thing which is most important, they rely on us. What do we have in this company? We have three things. That is ships, and I explained about the vetting. Secondly, we have the people and the staff on board and among our colleagues, and I happen to believe we have the best people out there.
Thirdly, not least, we have the capital. In America, and I don't know America better than many of you, they know one thing from America for almost decades. If you have a good standing and if you have a good idea, you always find the money. We have 60,000 to 70,000 shareholders, that is perhaps our main assets. If I ask shareholders, we do it like this, they often follow my advice and the advice of this board. That is really how we approach it.
Because I said to a Norwegian banker at one time, quite a big Norwegian bank, I said, "We are dealing with the biggest bank in the world." He said, "Oh, is there anybody who's bigger than us?" "Yes," I said, "The American capital market is bigger than any bank." My experience is that they will always support us provided we act diligently and openly and with integrity. I must admit on this call that I'm a great fan of America, with all the weaknesses in America, but I'm a fan. I started our business and personally in Houston, Texas, as I mentioned. Sorry, Omar, did I respond?
You did. Very good and helpful. I appreciate that, and clearly building a cash position and getting to debt-free, hopefully in the next few years, does allow you to watch others make mistakes before you choose the right system.
Yes.
Good. Thank you.
We learn from others' mistakes. Yes, please.
Yeah. Thanks, everyone.
Anybody else who would like to have a conversation and a question? Now you must be critical. Now it's up to you guys to take action and not say afterwards, "Oh, he was a stupid man." You take it up now. Stand up and say, "I can discuss anything associated with the tanker business." Andrea?
Yes, we are now taking our next question from the line of Jon Chappell. Please ask your question.
Jon Chappell, I've known since March 2005. Okay.
If there's anybody to be critical, it's going to be me. Perfect timing.
Oh, that's good. No excuse. You have been wrong so long time that maybe you will continue on that path. Thank you, Jon.
Oh, it's so fun. Anyway, in your first quarter earnings release, you gave us the second quarter to date rates, and yet that wasn't in your second quarter earnings release. Can you please just give us the quarter to date rates for the third quarter?
As we stand now, and I don't issue guarantees, but we are probably in the region of $30,000.
Okay.
Between, I would say to be more modest, between $25,000 and $30,000.
25 and 30. Okay.
We are doing fine, and our strategy in fixing maximum has been a very good strategy.
I don't own any ships, so I can't say with certainty, but most of the ship brokers are reporting.
You can come here and see. I can spend an hour with you as well. Okay.
Well, I don't think I'd learn by being there. Anyway, have you done a bunch of short-term charters? Do you have any ships that were on floating storage contracts that enabled you to get to $30,000 a day when the market's been in the teens?
Yes. The answer is yes.
Okay.
We have done that, and now there is a little lull in the market now, and they are asking us. We have a few ships sitting as storage, not very many, a few. People are telling me that the market is down, and then I say that's fine. I would say, Shai, a good friend of mine, he always said, "What is down comes up, and what is up comes down." When market is down, many people are afraid that it will not increase, and conversely, when the market is up, they are concerned it will fall. I mentioned earlier, when there is high volatility, that is an indication of a balanced market. I can see one, quote-unquote, danger. If, for whatever reason, they should, quote-unquote, close China and close the Far East, because the Far East is the growth center of the world.
There is no question on that. The Far East, these countries are running the world, and we wrongly believe we are running the world. I believe that the cooperation between the East and West is much better than we see. To predict the future is not easy, and if it had been easy, a lot of other people would have done it. We have such strong links with America that I'm very, very pleased with our cooperation with America. We even have the American flag in our logo. If your customers buy stock in NAT, they can sleep well, and say hello to them for me.
I will. I just have one follow-up question, which ties together something from Randy and something from Omar. It seems that to do all three of them and to make all three of them your top priority, means at a certain point, you get low on capital. How much do the U.S. equity markets and your ability to issue stock play into your plans to continue to pay a robust dividend, get to debt-free, and expand your fleet all within a three-year period?
To become debt-free will not be very difficult if the market is quite strong and balanced going forward. The other part of your question is we will pay dividend. Dividend is a priority, and we have had one basic assumption in our thinking. That is the world goes on. We cannot really plan that the world doesn't go on. That give no meaning. We are following the market every day. I speak to our Chartering Director, Mr. Tomstad, every morning and every evening, and discussing and thinking about maneuvering. I don't get involved in day-to-day chartering, only if there are important questions involving Libya, for instance. Libya, we were the first people who saved refugees in the Mediterranean coming from Libya. We did in September 2013. When we move from the east to the west, I get involved. We had the problems of, what you call them?
Pirates. We have barbed wire on our ships, and we have armed guards on our ships, and we go through many times the Persian Gulf between Iran and the other country there, via the Strait of Hormuz. We are used to handling risk. The Strait of Hormuz, it's 29 nautical miles. We go there very often. We are used to handling these risks, which also has to do with the capital. Coming back to your question, dividend is a priority. To issue stock in the equity market is not at all a priority, and we are always looking around the next corner and looking for a better market. Of course, the trouble with ship owners is always they are overly optimistic. We try to curtail our optimism. We try to do that.
We literally speaking, try to be sober and I have a lot of cash in this company, and I cannot afford to go bankrupt. That's why I'm so very careful in this. Sorry, Jonathan, that I didn't respond more clearly.
No, that's okay,
The dividend is priority.
Understood. I'll let others have questions.
Andrea.
Thank you. Thanks.
A pleasure. Pleasure that you could join. Andrea, anybody else?
We are now taking our next question from the line of Jeffrey Scott. Please ask your question.
Good afternoon. Thanks for taking my question. I really want to explore the thinking behind your willingness to spend money on special surveys for the 12 ladies you have that are over 15 years old. A special survey at 17 and a half requires, about my calculation, about $4,000 a day of incremental revenue to pay for it. Given where day rates are now, what is your thinking about going through special surveys on that older part of the fleet?
I don't know if you saw Exxon just scrapped the ship, which were 38 years of age, ExxonMobil. When we focus a lot on customers, you cannot run a business without customers. When the ships are good enough for ExxonMobil, Shell, and BP, they are good enough for us, I can assure you. The only thing that is too old is probably the Chairman. Somebody is saying that the Chairman of Nordic American is too old, we don't need to have a discussion on that. These calculations you mentioned, they're very theoretical. I summarize it, when the best companies in the world, Equinor, Total, and others say they are fine, it's fine. They also comply with our requests. To draw these lines in the sand or wherever, doesn't give you anywhere to go. We are extremely quality-orientated.
One of the biggest companies in Scandinavia is Stena Line in Sweden. They scrapped one of their ferries carrying people, and the ferry was 40 years of age. They carried people in a vessel that was 40 years. We must be able to carry crude oil in a ship, which is 15 years of age. If we had felt uneasy about a ship which is 15 years or three years, or 15 years or 20 years, we wouldn't have been running this business. I remember we had one of the top insurance experts in the world participating in our board. We had a competitor, we submitted a proposal for a ship that were about 15 years or slightly less.
The other guy, he had a ship which were three years, and somebody said, "It's obvious they will take this, which is three years, this ship." I said, "You must remember that the owner is sitting in jail." It is a question, what I said earlier, the quality of people and the quality of assets and the access to money. I'm not concerned about the age of a ship, but of course, the renewal of the fleet is always on the agenda. No question. It will be properly on the agenda. This is market related. When the market is strong, many people have forgotten what I mentioned about age.
The Nordic Sirius, for example, turns 20 years old on October 19th, so we're talking less than two months, and she's sitting now off the coast of China. Are you saying that you will pay for a special survey for her and get her going for another two and a half years?
Absolutely. No question.
The same thing would be true for the Pollux?
The same thing will be true for the Shannon. You should become a ship owner.
All right. I own some of your stock, so I am a ship owner.
That's good for you. That's good for you. We have paid $50 in dividend over the last years, $9 the last 10 years. Anyhow, to be very serious, I cannot argue with people about age, but I argue with people about customers.
Okay.
When Big Oil are saying this is good, and it is the same in our judgment, you can say a lot about us, but we are not stupid. We don't wish to give all the money to ship brokers, I can tell you.
Okay. Forget about the absolute age. Let's talk about the ship performance. The fuel consumption on the 20-year-old ship is substantially higher than the fuel consumption on a new ship. Is that not correct?
That may not be the case because you must remember, are you in ballast? Are you in laden condition? That is very important, how fast do you go? How fast do you go? When you are in ballast, many ships go down to 10 knots. This difference between a newer ship and a not such a new ship, it's becoming smaller and smaller. Of course, it is a consideration. Normally speaking, it's not that big. The difference is not that large as many people think. It's not. That is our experience. We have the cost picture for each individual ship. I would say, and if somebody would correct me, the difference could be three tons, four tons at a very low speed. Yeah, at a very low speed.
At 10 knots.
Would you say that, [Scott]?
Yeah. At 10 knots, 10 miles.
Yeah, 10 miles. When you go 10 knots. Again, it is a question also, Scott, whether you have invested $60 million or whether you have invested $15 million or $20 million. That's a big difference. The main point is the quality. We never compromise on quality, and Big Oil, they never compromise on quality. We will never do that either. Sorry about that.
Okay. I'll leave it to somebody else. Thank you.
Thank you, Scott. Anybody else, Andrea, who would like to be given a crash course in tanker economics?
Yes, we have another question coming from the line of [Joshua Dunoff]. Please ask your question.
Josh.
Yes, hello. Can you hear me?
Yes.
Okay. Earlier you had mentioned that the American capital markets are very important to this business.
Yes.
Given the dividend as a percentage of the stock price, it doesn't seem as though the American capital markets are valuing the shares adequately. That being said, would you not think it would be in the best interest of the company to retire shares at this time?
The question is how the stock is rated compared with the scrap value, if you wish. I have, over the years, had a policy, we have had a policy, we don't comment on the stock market and the stock price. The stock price is the stock price. If I say they value it too lowly. We have seen now recently that some of my colleagues have bought stock in the company, and my son, who is a member of the board, he has bought stock in the company. Theoretically, if you should buy back stock, then it means that the stock price is below the so-called steel value. Again, it is the quality of the ship and not the steel value. I don't know if anybody would like to say more about this. It would be wrong to buy back stock at this time, from our view.
The main, I would say, grievance and criticism, unfounded in my view, is some people have said, "Well, your stock is too highly priced." I said, "Oh, that's bad. What shall we do about a too highly priced stock? Shall we ask shareholders to ask them what they say about that?" If the stock is too highly priced, then our response is fine. We can live with that. We can live very well with that. The underlying premise here is how we treat dividend and how we treat the capital structure question. It wouldn't be right, as we understand it now, to buy back stock at this time. If somebody could write me a memo of a half a page or one page and tell me why, then I will read the memo with great interest.
Okay.
Thank you. Andrea, any more wishing to ask questions?
Yes, we have another question coming from the line of [Harold Rippy]. Please ask your question.
Harold.
Hello, how are you doing? Can you hear me?
Yes.
Okay. I was wanting to know about as you go to expand the fleet, are you planning to do that by issuing shares or by doing it through cash flow, mostly?
Well, it's a difficult question, we will prioritize cash flow. My experience is, and our experience, it can go very, very fast. We have seen it now. Some time ago, one year ago, the cash was $67 million, and recently it was $145 million. It can go very, very fast. The answer is, you cannot give a precise answer at all, but we wish to expand the fleet at the right time, with the right money, in a way that is beneficial for the company and its shareholders, without, I would say, jeopardizing our desire and our focus on paying dividend. That is a kind of main thing for us. As one friend of mine said, "The biggest room in the world is a room for improvement." If any of you have good suggestions, send me a note. Anybody else here?
Thank you very much. That got the answer. I do like to see the ships be bought with cash flow and not dilute the shareholder value. Thank you very much.
Thank you. Anybody else, Andrea?
There are no other questions on the line at the moment. If you wish to ask a question, please press star one.
Nobody asked that question. You answered that right.
Well, I would, Andrea and dear listeners, say thank you for joining us. It was a great pleasure to be with us. If you feel that I said something wrong, send me a note and don't be too hard on me. We are always trying to do the best, and the question is whether the best is good enough. You never know that. I have a great admiration for America, and that admiration I will keep irrespective of Trump or anybody else. Again, to be a businessman is quite a hard job, I can tell you, and you know that yourself. Because I feel a very tough responsibility, I feel a responsibility now for our crew that I mentioned, but I also feel a strong responsibility for our owners.
I can assure you in concluding, this company is in great shape, and I disagree strongly with anybody alluding the opposite view. Thank you very much, Andrea. Thank you very much, my friends. How many people did we have in here, Andrea?
Yes, we had 126 people.
Okay, that's fine. Thank you very much for joining us, and we keep in touch. Thank you.
Ladies and gentlemen, this concludes the call for today. Thank you for participating. You may all disconnect.