A Tanker's Blank Slate

You could say that Nordic American Tanker (NYSE: NAT  ) started the year with a blank slate. In the fourth quarter, you may recall that rates weren't all that great.

In the first quarter of 2008, Nordic American fielded mighty fine freight rates, about 7% above the average spot rate for the period. An overall robust tanker market helped the firm deliver more than double the operating cash flow of the prior quarter, and a 136% higher dividend. This is typical volatility for the tanker market, which saw similarly strong rates in the comparable period last year.

Nordic American, which carries crude oil for folks like Petrobras (NYSE: PBR  ) , Marathon Oil (NYSE: MRO  ) , and Valero (NYSE: VLO  ) , continues to maintain a lean cost structure. The cash breakeven level for this fleet of a dozen Suezmax tankers stands at $9,500 per day, just like last year. For reference, Nordic earned rates nearly five times that level during the most recent period, and around 2.5 times breakeven in its difficult third quarter.

In addition to bringing the net debt level per vessel down to $8.1 million from $11.7 million last year, Nordic has also consolidated the commercial and technical management of its fleet. Commercial management, overseen by Frontline (NYSE: FRO  ) and Stena, connects tankers with customers. Technical management, which is carried out by V.Ships, takes care of on-deck matters like crew rotation. One early sign of synergies is the huge drop in voyage expenses for the quarter.

Nordic American continues to be one of my favorites among shipping concerns, but if the rate volatility is a put-off, you may want to consider a time charterer like Seaspan (NYSE: SSW  ) . That fellow high-yielder has embraced the exact opposite philosophy, taking on significant debt in exchange for long-term rate certainty. If it's dividends you crave, there's no shortage of intriguing cash creators in the shipping space.

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Fool contributor Toby Shute doesn't claim Nordic heritage, nor does he have a position in any company mentioned. The Motley Fool has a disclosure policy.