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--Fifty-two percent of quarterly TCE revenues were generated from fixed earnings and included synthetic time charters on VLCCs, which earned an average TCE rate of $45,864 per day
--Net loss attributable to the Company was $8.8 million, or $0.33 per diluted share, compared with net income attributable to the Company of $86.9 million, or $2.81 per diluted share in the same period a year ago
--Continued cost cutting efforts resulted in 16% quarter-over-quarter decline in G&A expense
--OSG's product carrier fleet will be fully double hull following the redelivery of one non-double hull MR product carrier in early August
--Regular quarterly dividend of $0.4375 per share announced June 9, 2009
--Cash generated from operations totaled $184.6 million in the first half of 2009
--With cash and cash equivalents of $571.4 million, remaining 2009 fixed revenue of $156 million and liquidity of $1.8 billion, the Company is well-positioned to weather near-term uncertainty in freight rates
Overseas Shipholding Group, Inc. (NYSE: OSG), a market leader in providing energy transportation services, today reported results for the second quarter and six months ended June 30, 2009.
For the quarter ended June 30, 2009, the Company reported time charter equivalent (TCE(1)) revenues of $248.4 million, a 36% decline from $386.1 million in 2008. The decline in TCE revenues was due to lower daily TCE rates earned by all of the Company's international flag vessel classes (see Spot and Fixed TCE Rates Achieved and Revenue Days later in the press release), offset by a 77 day increase in revenue days. Net loss attributable to the Company (Loss(2)) was $8.8 million, or $0.33 per diluted share, compared with net income attributable to the Company (Earnings(2)) of $86.9 million, or $2.81 per diluted share, in the same period a year ago. Special items that totaled $1.0 million, or $0.04 per diluted share, increased Losses in the second quarter 2009, compared with special items that totaled $14.7 million, or $0.36 per diluted share, that decreased Earnings in the same period a year ago (see discussion later in this press release). Period-over-period diluted EPS reflects the Company's repurchase of 12% of total shares outstanding since June 30, 2008.
Morten Arntzen, President and CEO said, "As we expected, a convergence of events caused tanker markets to deteriorate in the first half of 2009. The global economic contraction led to a sharp decline in world demand for oil, notably in OECD countries, which in turn resulted in significant OPEC production cuts. This situation was exacerbated by an increase in vessel deliveries across our core segments. We expect the trend toward an oversupplied vessel market to moderate as very tight ship finance markets and the weakening financial condition of less well-capitalized ship owners and shipyards result in a contracting tanker orderbook. The single hull phase-out over the next eighteen months will further benefit the economics of the global tanker trading fleet."
Arntzen continued, "For the remainder of 2009, we remain focused on controlling costs and managing projects that can deliver attractive returns in both the short and long-term. The core of our long-term strategy-conservative financial management and balanced growth-remains intact, and we have ample liquidity to manage the turmoil ahead and take advantage of opportunities as they arise."
For the six months ended June 30, 2009, the Company reported TCE revenues of $541.2 million, a 29% decrease from $761.9 million in 2008. The year-over-year decline in TCE revenues was due to lower TCE rates earned across nearly all vessel classes. Earnings for the first six months were $113.0 million, or $4.20 per diluted share, compared with $199.4 million, or $6.42 per diluted share, a year ago. Earnings in the first half of 2009 included special items that increased Earnings by $93.8 million, or $3.49 per diluted share, compared with special items that totaled $15.2 million, or $0.37 per share, that reduced Earnings in the same period a year earlier.
Segment Information
TCE revenues in the second quarter of 2009 for the Crude Oil segment were $128.1 million, a 50% decrease from $254.9 million in the same period of 2008. The decrease was principally due to dramatically lower average spot rates earned across all crude oil vessel classes. Quarter-over-quarter spot charter rates for VLCCs decreased 68% to $32,020 per day, Aframaxes decreased by 70% to $16,757 per day and Panamaxes decreased 47% to $18,776 per day. TCE revenues for the Product Carrier segment were $63.6 million, a decline of $8.0 million, or 11%, from $71.6 million in the year earlier period. The decrease was principally attributable to a 33% decrease in average daily spot TCE rates for medium-range (MR) product carriers to $16,715 per day. TCE revenues for the U.S. Flag segment were $54.7 million, an increase of $3.0 million, or 6%, from $51.7 million in the same quarter last year. The increase was principally due to revenue days associated with four product carriers that delivered subsequent to March 31, 2008 and commenced time charters.
Additional Detail on Quarterly Results
Total operating expenses before severance and relocation costs, shipyard contract termination costs and gain/(loss) on disposal of vessels declined 7%, or $22.3 million, to $282.8 million compared with $305.1 million in the corresponding quarter in 2008. Period-over-period changes included:
-- Voyage expenses decreased to $34.3 million, or 19%, from $42.1 million, principally due to lower fuel costs. Lower fuel costs were attributable, in part, to the Suezmaxes moving from the spot market to Suezmax International after June 30, 2008 and the removal of the Overseas Integrity and M 300 from service in the fourth quarter of 2008;
-- Vessel expenses decreased to $69.9 million, or 10%, from $77.8 million principally due to the timing of delivery and stores and spares, reductions in repairs, a reduction in costs related to a fixed rate technical management agreement with DHT Maritime, Inc. and the redelivery of nine older product carriers;
-- Charter hire expenses were relatively flat at $104.6 million from $103.4 million despite a 557 day increase in charter-in days, principally due to lower profit share due to owners;
-- Depreciation and amortization was $44.9 million, a 5% decline from $47.3 million, principally due to two U.S. Flag vessels being classified as held for sale (for which depreciation ceased), the sale of the Overseas Donna in the first quarter of 2009 and the redelivery of four non double hull MR product carriers in December 2008 and January 2009;
-- G&A expenses decreased by $5.4 million, or 16%, to $29.1 million. Lower G&A was due to Companywide cost control efforts that included reductions in compensation and benefits paid to shoreside staff, lower consulting, travel and entertainment and other discretionary expenditures and a favorable change in foreign exchange rates, partially offset by higher legal expenses.
The second quarter Loss was reduced by a $3.0 million tax benefit related to reversals of previously established deferred tax liabilities.
Other items that impacted reported results in the second quarter of 2009 aggregated $1.0 million, or $0.04 per share, and included:
-- $2.4 million, or $0.09 per diluted share, related to a loss on vessel sales;
-- $3.0 million, or $0.11 per diluted share, related to a net loss on other investments;
-- $786,000, or $0.03 per diluted share, related to a positive change in the mark-to-market balance of unrealized freight derivative positions; and
-- $3.7 million, or $0.14 per diluted share, benefit related to the adjustment of previously recorded shipyard contract termination charges.
For more information regarding these items in the current, year-to-date and corresponding historical periods, see "Reconciling Information," which is posted in Webcasts and Presentations in the Investor Relations section of www.osg.com.
Liquidity and Other Key Financial Metrics
Liquidity and Credit Metrics - At June 30, 2009, total equity was $2.0 billion and liquidity, including undrawn bank facilities, was approximately $1.8 billion. Total debt as of June 30, 2009 was $1.4 billion, unchanged from December 31, 2008. Liquidity-adjusted debt to capital(3) was 26.8% as of June 30, 2009, a decrease from 35.5% as of December 31, 2008, adjusted to reflect the reclassification of the noncontrolling interest to equity in accordance with accounting guidance that became effective in 2009.
OSG's disciplined financial strategy, balance sheet strength and superior financial condition has enabled it to be a predominantly unsecured borrower with only 29.2% of net book value of vessels pledged as collateral. OSG has $976 million available in borrowing capacity under its $1.8 billion seven-year unsecured credit facility and $170 million in borrowing capacity under its $200 million secured credit facility. Principal debt repayment obligations are less than $35 million per annum through 2011.
Fixed Revenue - Aggregate future revenues associated with noncancelable time charters as of June 30, 2009, totaled $939.2 million, down from $1.2 billion at June 30, 2008. Fixed revenue for the balance of 2009 totaled $166 million and includes $156 million of time charter revenues and $9 million from time charters entered into by certain of the Company's commercial pools. OSG's share of future revenues from term contracts related to its Gas segment and the Floating Storage Offloading (FSO) project aggregate approximately $1.8 billion. The Company's level of fixed revenue, expected cash generated from operations, including asset sales, and current debt capacity, well exceed its lease, debt, capital and other operating commitments in 2009.
Quarterly Dividend Announced - On June 9, 2009, the Board declared a quarterly dividend of $0.4375 per share to stockholders of record on August 7, 2009, payable on August 27, 2009.
Quarterly Events and Other Activities
OSG continues to execute its balanced growth strategy by expanding and renewing its fleet across multiple market segments; managing the mix of owned and chartered-in assets; trading its fleet in both the spot and time charter markets; and exploring opportunities to add assets to each of its core segments at attractive prices. Chartering-in vessels gives OSG greater flexibility in both contracting and expanding markets through an ability to exercise redelivery, purchase or charter extension options.
On July 29, 2009, OSG announced that it intends to initiate a tender offer for all of the outstanding publicly held common units of OSG America L.P. (OSG America; NYSE: OSP) for $8.00 in cash per unit. The tender offer, expected to commence in late August, will be conditioned upon, among other things, more than 4,003,166 common units being tendered such that OSG would thereupon own at least 80% of the outstanding common units of OSG America. OSG owns 8 million units of the 15 million total common units outstanding.
Crude Oil
-- The Phoenix Alpha and Phoenix Beta redelivered on May 19 and June 4, respectively. OSG had a 30% interest in the time chartered-in Aframaxes.
-- The C. Dream, a VLCC, and Cape Aspro, an Aframax, redelivered on April 20 and April 24, respectively. OSG had a 15% and 50% interest in the time chartered-in tankers, respectively.
-- The Hellespont-Trinity redelivered on July 31. OSG had a 50% interest in the time chartered-in Suezmax and exercised its option to redeliver the vessel early.
-- The TI Asia and TI Africa, currently being converted to FSO service vessels, are expected to deliver by the end of the third and fourth quarter of 2009, respectively. Upon delivery, the vessels will begin time charter contracts to Maersk Oil Qatar AS. The project is a 50% joint venture between OSG and Euronav NV.
Products
-- OSG modified its product carrier orderbook as it seeks to renew its core MR fleet. Orders were cancelled for two coated Panamax (LR1) tankers that were scheduled to deliver in 2010 and replaced with two MR product carriers delivering in 2011 and one MR bareboat charter newbuild expected to deliver in 2010.
-- The Overseas Reginamar and Overseas Reinemar were sold on May 11 and June 3, respectively. The charterer of the LR1 tankers exercised its purchase options on the vessels, which generated proceeds of approximately $58 million to the Company.
-- Eight non-double hull product carriers redelivered: the Overseas Camar, Overseas Colmar and Overseas Capemar in June, and the Overseas Athens, Overseas Ermar, Overseas Fulmar, Overseas Allenmar and Overseas Primar in July. The Overseas Jamar is expected to redeliver in August. OSG's remaining international flag product carrier fleet is fully double hulled.
-- On July 20, the Overseas Atlantic Pisces delivered. The vessel, a 47,000 dwt MR product carrier, has been time chartered-in for 10 years.
U.S. Flag
-- The Overseas Nikiski delivered on June 11. The vessel, a 46,815 dwt U.S. Flag Jones Act product carrier, is bareboat chartered-in for five years and the Company has extension options for the life of the vessel. The vessel has been chartered-out for three years to Tesoro.
-- The Overseas Integrity and M300 were sold on June 26 and June 22, respectively. The vessels had been held for sale since December 31, 2008.
-- As a result of continuing weak demand levels and low refinery utilization in the Jones Act market, the Overseas Galena Bay was put in lay up in July. The Overseas Puget Sound, previously in lay up, recommenced trading in August for a grain voyage. The Company has three U.S. Flag vessels currently in lay up.
Spot and Fixed TCE Rates Achieved and Revenue Days
The following tables provide a breakdown of TCE rates achieved for the three months ended June 30, 2009 for the International Crude Oil and Product Carrier segments between spot and fixed charter rates and the related revenue days. The Company has entered into FFAs and related bunker swaps as hedges for reducing the volatility of earnings from operating the Company's VLCCs in the spot market. These derivative instruments seek to create synthetic time charters. The impact of these derivatives, which qualify for hedge accounting treatment, are reported together with time charters entered in the physical market under "Fixed Earnings." The information in these tables is based in part on information provided by the pools or commercial joint ventures in which the segment's vessels participate.
Revenue days in the quarter ended June 30, 2009 totaled 9,725 compared with 9,648 in the same period a year earlier. The increase in revenue days compared with a decrease in total vessels period over period was due to an increase in Aframax lightering ships chartered-in on a spot basis and vessels redelivering or sold during the current quarter. A summary fleet list by vessel class can be found in Fleet Information later in this press release. A detailed fleet list is available on www.osg.com.
(1) See Appendix 1 for reconciliation of TCE revenues to shipping revenues and EBITDA to Earnings, which are non-GAAP measures.
(2) Effective January 1, 2009, OSG adopted an accounting standard that changed the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. The new standard required retrospective adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of the new standard will be applied prospectively. The adoption of the new standard did not have a material impact on the Company's financial statements. References to Results, Earnings or Loss refers to Net Income / (Loss) attributable to Overseas Shipholding Group, Inc.
(3) Liquidity-adjusted debt is defined as long-term debt reduced by cash and the Capital Construction Fund.
Three Months Ended Jun. 30, 2009 Three Months Ended Jun. 30, 2008
Spot Earnings Fixed Earnings Total Spot Earnings Fixed Earnings Total
Business Unit - Crude Oil
VLCC(1)
Average TCE Rate $32,020 $45,864 $98,747 $73,832
Number of Revenue Days 500 817 1,317 819 609 1,428
Suezmax
Average TCE Rate $23,847 $ -- $61,098 $ --
Number of Revenue Days 221 -- 221 182 -- 182
Aframax
Average TCE Rate $16,757 $37,455 $55,543 $30,235
Number of Revenue Days 989 204 1,193 819 325 1,144
Aframax - Lightering
Average TCE Rate $27,542 $ -- $30,717 $ --
Number of Revenue Days 760 -- 760 656 -- 656
Panamax(2)
Average TCE Rate $18,776 $26,288 $35,625 $26,492
Number of Revenue Days 592 421 1,013 544 452 996
Other Crude Oil Revenue Days 89 -- 89 182 -- 182
Total Crude Oil Revenue Days 3,151 1,442 4,593 3,202 1,386 4,588
Business Unit - Refined Petroleum Products
Aframax (LR2)
Average TCE Rate $21,452 $ -- $ -- $ --
Number of Revenue Days 161 -- 161 -- -- --
Panamax (LR1)
Average TCE Rate $17,470 $19,837 $35,140 $18,625
Number of Revenue Days 364 103 467 182 180 362
Handysize (MR)
Average TCE Rate $16,715 $19,680 $25,131 $20,799
Number of Revenue Days 1,270 1,571 2,841 1,031 1,811 2,842
Total Refined Pet. Products Rev. Days 1,795 1,674 3,469 1,213 1,991 3,204
Business Unit - U.S. Flag
Number of Revenue Days 655 917 1,572 632 951 1,583
Other - Number of Revenue Days -- 91 91 -- 273 273
TOTAL REVENUE DAYS 5,601 4,124 9,725 5,047 4,601 9,648
(1)Excludes ULCCs. The revenue days for the ULCCs are included in Other Crude Oil.
2Includes one vessel performing a bareboat charter-out during the three months ended June 30, 2009 and 2008.
Consolidated Statements of Operations
($ in thousands, except per share amounts) Three Months Ended Six Months Ended
Jun. 30, Jun. 30, Jun. 30, Jun. 30,
2009 2008 2009 2008
Shipping Revenues:
Pool Revenues $105,439 $226,018 $241,843 $449,464
Time and Bareboat Charter Revenues 83,974 90,374 171,343 182,861
Voyage Charter Revenues 93,243 111,832 194,274 206,575
282,656 428,224 607,460 838,900
Operating Expenses:
Voyage Expenses 34,271 42,110 66,286 76,952
Vessel Expenses 69,948 77,785 143,478 150,654
Charter Hire Expenses 104,595 103,368 215,937 194,039
Depreciation and Amortization 44,890 47,315 88,771 94,906
General and Administrative 29,107 34,509 56,407 71,794
Severance and Relocation Costs 148 - 2,317 -
Shipyard Contract Termination Costs (3,670 ) - 32,215 -
(Gain) / Loss on Disposal of Vessels 2,568 (23,686 ) (127,295 ) (23,691 )
Total Operating Expenses 281,857 281,401 478,116 564,654
Income from Vessel Operations 799 146,823 129,344 274,246
Equity in Income of Affiliated Companies 1,116 4,048 3,588 5,377
Operating Income 1,915 150,871 132,932 279,623
Other Income / (Expense) (1,824 ) (46,404 ) 481 (43,435 )
91 104,467 133,413 236,188
Interest Expense 10,903 17,191 22,275 35,554
Income / (Loss) before Federal Income Taxes (10,812 ) 87,276 111,138 200,634
Credit for Federal Income Taxes 2,991 771 4,303 771
Net Income / (Loss) (7,821 ) 88,047 115,441 201,405
Less: Net Income Attributable to the Noncontrolling Interest (973 ) (1,112 ) (2,485 ) (2,035 )
Net Income / (Loss) Attributable to Overseas Shipholding Group, Inc. $(8,794 ) $86,935 $112,956 $199,370
Weighted Average Number of Common Shares Outstanding:
Basic 26,861,081 30,615,359 26,863,462 30,861,429
Diluted 26,861,081 30,895,367 26,869,961 31,072,727
Per Share Amounts:
Basic net income / (loss) attributable to Overseas Shipholding $(.33 ) $2.84 $4.20 $6.46
Group, Inc.
Diluted net income / (loss) attributable to Overseas Shipholding $(.33 ) $2.81 $4.20 $6.42
Group, Inc.
Cash dividends declared $0.88 $0.75 $1.31 $1.06
TCE Revenue by Segment
The following table reflects TCE revenues generated by the Company's three reportable segments for the three and six months ended June 30, 2009 and 2008 and excludes the Company's proportionate share of TCE revenues of affiliated companies. See Appendix 1 for reconciliations of time charter equivalent revenues to shipping revenues.
Three Months Ended Jun. 30, Six Months Ended Jun. 30, ($ in thousands) 2009 % of Total 2008 % of Total 2009 % of Total 2008 % of Total International Flag Crude Tankers $128,145 51.6 $254,950 66.0 $288,131 53.3 $503,810 66.1 Product Carriers 63,581 25.6 71,597 18.6 134,766 24.9 138,004 18.1 Other 1,957 0.8 7,887 2.0 3,891 0.7 15,666 2.1 U.S. 54,702 22.0 51,680 13.4 114,386 21.1 104,468 13.7 Total TCE Revenues $248,385 100.0 $386,114 100.0 $541,174 100.0 $761,948 100.0
Income from Vessel Operations by Segment
The following table reflects income from vessel operations for the three and six months ended June 30, 2009 and 2008 accounted for by each reportable segment. Income from vessel operations is before general and administrative expenses, severance and relocation costs, shipyard contract termination costs and gain/(loss) on disposal of vessels.
Three Months Ended Jun. 30, Six Months Ended Jun. 30, ($ in thousands) 2009 % of Total 2008 % of Total 2009 % of Total 2008 % of Total International Flag Crude Tankers $24,990 86.3 $135,345 85.9 $68,950 74.1 $271,850 84.3 Product Carriers (302 ) (1.0 ) 15,972 10.1 11,213 12.1 31,348 9.7 Other (162 ) (.6 ) 2,084 1.3 (372 ) (0.4 ) 4,464 1.4 U.S. 4,426 15.3 4,245 2.7 13,197 14.2 14,687 4.6 Total Income from Vessel Operations $28,952 100.0 $157,646 100.0 $92,988 100.0 $322,349 100.0
Reconciliation of income from vessel operations of the segments to income/(loss) before federal income taxes, including net income attributable to noncontrolling interest, as reported in the consolidated statements of operations follow:
Three Months Ended Jun. 30, Six Months Ended Jun. 30, ($ in thousands) 2009 2008 2009 2008 Total income from vessel operations of all segments $28,952 $157,646 $92,988 $322,349 General and administrative expenses (29,107 ) (34,509 ) (56,407 ) (71,794 ) Severance and relocation costs (148 ) - (2,317 ) - Shipyard contract termination costs 3,670 - (32,215 ) - Gain / (loss) on disposal of vessels (2,568 ) 23,686 127,295 23,691 Consolidated income from vessel operations 799 146,823 129,344 274,246 Equity in income of affiliated companies 1,116 4,048 3,588 5,377 Other income/ (expense) (1,824 ) (46,404 ) 481 (43,435 ) Interest expense (10,903 ) (17,191 ) (22,275 ) (35,554 ) Income / (loss) before federal income taxes ($10,812 ) $87,276 $111,138 $200,634
Consolidated Balance Sheets
($ in thousands) Jun. 30, Dec. 31,
2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $571,362 $343,609
Voyage receivables 160,416 219,500
Other receivables, including federal income taxes recoverable 59,471 64,773
Inventories, prepaid expenses and other current assets 110,079 50,407
Total Current Assets 901,328 678,289
Capital Construction Fund 40,629 48,681
Vessels and other property, less accumulated depreciation 2,602,126 2,683,147
Vessels under capital leases, less accumulated amortization - 1,101
Vessels held for sale - 53,975
Deferred drydock expenditures, net 62,430 79,837
Total Vessels, Deferred Drydock and Other Property 2,664,556 2,818,060
Investments in Affiliated Companies 170,417 98,620
Intangible Assets, less accumulated amortization 102,837 106,585
Goodwill 9,589 9,589
Other Assets 49,383 130,237
Total Assets $3,938,739 $3,890,061
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $191,595 $167,615
Current installments of long-term debt 26,351 26,231
Current obligations under capital leases - 1,092
Total Current Liabilities 217,946 194,938
Long-term Debt 1,342,958 1,396,135
Deferred Gain on Sale and Leaseback of Vessels 121,074 143,948
Deferred Federal Income Taxes and Other Liabilities 263,202 330,407
Equity
Overseas Shipholding Group, Inc., Stockholders' Equity 1,894,561 1,722,867
Noncontrolling Interest 98,998 101,766
Total Equity 1,993,559 1,824,633
Total Liabilities and Equity $3,938,739 $3,890,061
Consolidated Statements of Cash Flows
($ in thousands) Six Months Ended Jun. 30,
2009 2008
Cash Flows from Operating Activities:
Net income $115,441 $201,405
Items included in net income not affecting cash flows:
Depreciation and amortization 88,771 94,906
Amortization of deferred gain on sale and leasebacks (23,037 ) (24,510 )
Deferred compensation relating to restricted stock and stock 6,480 6,104
option grants
Provision / (credit) for deferred federal income taxes (5,109 ) 1,437
Unrealized (gains)/losses on forward freight agreements and bunker (1,869 ) 29,500
swaps
Undistributed earnings of affiliated companies 1,758 379
Other - net 6,511 (5,541 )
Items included in net income related to investing and financing
activities:
Loss on write-down of securities 3,290 6
Gain on disposal of vessels (127,295 ) (23,691 )
Payments for drydocking (14,175 ) (27,613 )
Distributions from subsidiaries to noncontrolling interest owners (5,253 ) (4,168 )
Changes in operating assets and liabilities 139,097 (156,485 )
Net cash provided by operating activities 184,610 91,729
Cash Flows from Investing Activities:
(Purchases) / sales of marketable securities 159 (11,311 )
Expenditures for vessels (181,609 ) (252,260 )
Withdrawals from Capital Construction Fund 8,265 49,830
Proceeds from disposal of vessels 298,844 216,884
Expenditures for other property (2,604 ) (7,207 )
Distributions from affiliated companies - net 14,527 14,226
Shipyard contract termination payments (18,146 ) --
Other - net 2,136 3
Net cash provided by investing activities 121,572 10,165
Cash Flows from Financing Activities:
Purchases of treasury stock (999 ) (57,551 )
Issuance of debt, net of issuance costs -- 59,000
Payments on debt and obligations under capital leases (54,155 ) (366,875 )
Cash dividends paid (23,503 ) (19,385 )
Issuance of common stock upon exercise of stock options 242 398
Other - net (14 ) (377 )
Net cash used in financing activities (78,429 ) (384,790 )
Net increase/(decrease) in cash and cash equivalents 227,753 (282,896 )
Cash and cash equivalents at beginning of year 343,609 502,420
Cash and cash equivalents at end of period $571,362 $219,524
Fleet Information
As of June 30, 2009, OSG's owned, operated and newbuild fleet totaled 138 International Flag and U.S. Flag vessels compared with 156 at June 30, 2008. Fifty-one percent, or 71 vessels, were owned as of June 30, 2009, with the remaining vessels bareboat or time chartered-in. Adjusted for OSG's participation interest in joint ventures and chartered-in vessels, the fleet totaled 130.2 vessels. OSG's newbuild program totaled 26 vessels (15 owned and 11 chartered-in) across its crude oil, product and U.S. Flag lines of business. A detailed fleet list and updates on vessels under construction can be found in the Fleet section on www.osg.com.
Fleet Detail
Vessel Type Vessels Owned Vessels Chartered-in Total at Jun. 30, 2009
Operating Fleet Number Weighted by Number Weighted by Total Vessels Vessels Total
Ownership Ownership Weighted by Dwt
Ownership
VLCC (including ULCC) 8 8.0 9 7.3 17 15.3 5,354,799
Suezmax - - 3 2.5 3 2.5 465,017
Aframax 6 6.0 9 7.4 15 13.4 1,665,933
Panamax 9 9.0 2 2.0 11 11.0 764,083
Lightering 2 2.0 3 2.0 5 4.0 441,772
International Flag Crude Tanker 25 25.0 26 21.2 51 46.2 8,691,604
Aframax (LR2) - - 1 1.0 1 1.0 104,024
Panamax (LR1) 2 2.0 2 2.0 4 4.0 297,374
Handysize(1) (MR) 10 10.0 20 20.0 30 30.0 1,377,901
International Flag Product Carrier 12 12.0 23 23.0 35 35.0 1,779,299
Car Carrier 1 1.0 - - 1 1.0 16,101
Total Int'l Flag Operating Fleet 38 38.0 49 44.2 87 82.2 10,487,004
Handysize 4 4.0 7 7.0 11 11.0 515,025
ATB 7 7.0 - - 7 7.0 204,150
Lightering 3 3.0 - - 3 3.0 115,708
Total U.S. Flag Operating Fleet(2) 14 14.0 7 7.0 21 21.0 834,883
LNG Fleet 4 2.0 - - 4 2.0 864,800 cbm
TOTAL OPERATING FLEET 56 54.0 56 51.2 112 105.2 11,321,887
864,800 cbm
Newbuild/Conversion Fleet
International Flag
VLCC 3 3.0 - - 3 3.0 893,000
FSO 2 1.0 - - 2 1.0 883,548
Panamax (LR1) 4 4.0 - - 4 4.0 294,000
Handysize (MR) 4 4.0 5 5.0 9 9.0 442,350
Chemical Tanker - - 1 1.0 1 1.0 19,900
U.S. Flag
Product Carrier - - 5 5.0 5 5.0 234,075
Lightering ATB 2 2.0 - - 2 2.0 91,112
TOTAL NEWBUILD FLEET 15 14.0 11 11.0 26 25.0 2,857,985
TOTAL OPERATING & NEWBUILD FLEET 71 68.0 67 62.2 138 130.2 14,179,872
864,800 cbm
(1)Includes two owned U.S. Flag Product Carriers that trade internationally with associated revenue included in the Product Carrier segment
(2)Overseas New Orleans, Overseas Puget Sound and OSG 214 were in lay up as of June 30, 2009
Average Age of International Operating Fleet
The table below reflects the average age of the Company's owned International Flag fleet compared with the world fleet.
Vessel Class Average Age of Average Age of Average Age of
OSG's Owned Fleet at 6/30/09 OSG's Owned Fleet at 6/30/08 World Fleet at 7/1/09*
VLCC (including ULCC) 8.6 years 7.4 years 8.2 years
Aframax 7.5 years 9.0 years 8.1 years
Panamax** 5.9 years 4.8 years 7.7 years
Handysize 6.9 years 5.9 years 8.3 years
*Source: Clarkson database as of July 1, 2009.
**Includes Panamax tankers that trade crude oil and refined petroleum products.
Off Hire and Scheduled Drydock
In addition to regular inspections by OSG personnel, all vessels are subject to periodic drydock, special survey and other scheduled maintenance. The table below sets forth actual days off hire for the second quarter of 2009 and anticipated days off hire for the above-mentioned events by class for the remainder of 2009.
Actual Days Off Hire Projected Days Off Hire
Q209 Q309 Q409
Trade - Crude Oil
VLCC (including ULCC) 51 20 42
Suezmax 1 6 4
Aframax 30 97 58
Panamax 27 7 5
Trade - Refined Petroleum Products
Aframax (LR2) 1 - -
Panamax (LR1) - 6 5
Handysize (MR) 191 52 45
Trade - U.S. Flag
Product Carrier 10 10 45
ATB 3 50 43
Other 1 - 1
Total 315 248 248
Second quarter 2009 excludes 424 days associated with three U.S. Flag vessels in lay up: the Overseas Integrity and M 300 (sold in late June 2009) and the Overseas Puget Sound. Projected off hire days exclude 306 days (Q309) and 343 days (Q409) associated with U.S. Flag vessels expected to be in lay up.
Appendix 1 - Reconciliation to Non-GAAP Financial Information
TCE Reconciliation
Reconciliation of time charter equivalent revenues of the segments to shipping revenues as reported in the consolidated statements of operations follow:
Three Months Ended Jun. 30, Six Months Ended Jun. 30, ($ in thousands) 2009 2008 2009 2008 Time charter equivalent revenues $248,385 $386,114 $541,174 $761,948 Add: Voyage Expenses 34,271 42,110 66,286 76,952 Shipping revenues $282,656 $428,224 $607,460 $838,900
Consistent with general practice in the shipping industry, the Company uses time charter equivalent revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. Time charter equivalent revenues, a non-GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance.
EBITDA Reconciliation
The following table shows reconciliations of net income / (loss) attributable to the Company as reflected in the consolidated statements of operations, to EBITDA:
Three Months Ended Jun. 30, Six Months Ended Jun. 30, ($ in thousands) 2009 2008 2009 2008 Net income / (loss) attributable to OSG ($8,794 ) $86,935 $112,956 $199,370 Credit for income taxes (2,991 ) (771 ) (4,303 ) (771 ) Interest expense 10,903 17,191 22,275 35,554 Depreciation and amortization 44,890 47,315 88,771 94,906 EBITDA $44,008 $150,670 $219,699 $329,059
EBITDA represents operating earnings excluding net income attributable to the noncontrolling interest, which is before interest expense and income taxes, plus other income and depreciation and amortization expense. EBITDA is presented to provide investors with meaningful additional information that management uses to monitor ongoing operating results and evaluate trends over comparative periods. EBITDA should not be considered a substitute for net income attributable to the Company or cash flow from operating activities prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. While EBITDA is frequently used as a measure of operating results and performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
Appendix 2 - Capital Expenditures
The following table presents information with respect to OSG's capital expenditures for the three and six months ended June 30, 2009 and 2008:
Three Months Ended Jun. 30, Six Months Ended Jun. 30,
($ in thousands) 2009 2008 2009 2008
Expenditures for vessels $109,617 $107,818 $181,609 $252,260
Investments in and advances to affiliated companies 29,369 4,551 47,059 5,734
Payments for drydockings 8,255 11,555 14,175 27,613
$147,241 $123,924 $242,843 $285,607
Appendix 3 - Third Quarter 2009 TCE Rates
The Company has achieved the following average estimated TCE rates for the third quarter of 2009 for the percentage of days booked for vessels operating through July 24, 2009. The information is based in part on data provided by the pools or commercial joint ventures in which the vessels participate. All numbers provided are estimates and may be adjusted for a number of reasons, including the timing of any vessel acquisitions or disposals and the timing and length of drydocks and repairs. In addition, information presented for VLCCs as fixed includes management's expectations with respect to the synthetic time charters entered into by the Company.
Third Quarter Revenue Days Vessel Class and Charter Type Average TCE Rate Fixed as of 7/24/09 Open as of 7/24/09 Total % Days Booked Business Unit - Crude Oil VLCC - Spot $25,000 290 191 480 60 % VLCC - Fixed $40,000 538 352 890 60 % Suezmax - Spot $17,500 101 116 217 46 % Aframax - Spot $15,000 257 650 907 28 % Aframax - Fixed $35,500 195 -- 195 100 % Aframax Lightering - Spot $25,000 273 465 738 37 % Panamax - Spot $16,000 301 276 577 52 % Panamax - Time $26,000 368 -- 368 100 % Business Unit - Refined Petroleum Products Panamax (LR1) - Spot $15,500 141 227 368 38 % Handysize (MR) - Spot $12,000 444 839 1,283 35 % Handysize (MR)- Time $21,000 1,083 -- 1,083 100 % Business Unit - U.S. Flag Product Carrier - Time $44,500 739 -- 739 100 % ATB - Spot $29,000 43 279 322 13 % ATB - Time $31,500 184 -- 184 100 %
Appendix 4 - 2009 Fixed TCE Rates
The following table shows average estimated TCE rates and associated days booked for the fourth quarter 2009 as of July 24, 2009.
Fixed Rates and
Revenue Days
Q409
Business Unit - Crude Oil
Aframax
Average TCE Rate $29,500
Number of Revenue Days 35
Panamax(1)
Average TCE Rate $25,500
Number of Revenue Days 318
Business Unit - Refined Petroleum Products
Handysize (MR)
Average TCE Rate $21,000
Number of Revenue Days 1,005
Business Unit - U.S. Flag
Product Carrier
Average TCE Rate $44,500
Number of Revenue Days 736
ATB
Average TCE Rate $32,000
Number of Revenue Days 153
(1)Includes one vessel on bareboat charter.
Due to the recent high volatility in both freight rates and bunker rates and due to short-term differences between pool earnings and FFA settlements, quarterly average synthetic TCE rates for VLCCs are not provided since actual TCE rates achieved for these synthetic time charters may differ, possibly substantially, from the expected rates.
Conference Call Information
OSG has scheduled a conference call for today at 11:00 a.m. ET. Call-in information is (800) 762-8779 (domestic) and (480) 248-5081 (international). The conference call and supporting presentation can also be accessed by webcast, which will be available at www.osg.com in the Investor Relations Webcasts and Presentations section. Additionally, a replay of the call will be available by telephone until August 12, 2009; the number for the replay is (800) 406-7325 (domestic) and (303) 590-3030 (international). The passcode for the replay is 4097787.
About OSG
Overseas Shipholding Group, Inc. (NYSE: OSG), a Dow Jones Transportation Index company, is one of the largest publicly traded tanker companies in the world. As a market leader in global energy transportation services for crude oil, petroleum products and gas in the U.S. and International Flag markets, OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world's most customer-focused marine transportation companies and is headquartered in New York City, NY. More information is available at www.osg.com.
Forward-Looking Statements
This release contains forward-looking statements regarding the Company's prospects, including the outlook for tanker and articulated tug barge markets, changing oil trading patterns, anticipated levels of newbuilding and scrapping, prospects for certain strategic alliances and investments, estimated TCE rates achieved for the third quarter of 2009 and estimated TCE rates for the fourth quarter of 2009, projected scheduled drydock and off hire days for the third and fourth quarters of 2009, projected locked-in charter revenue and locked-in time charter days, timely delivery of newbuildings in accordance with contractual terms, OSG's intention to tender for the outstanding common units of OSG America, prospects of OSG's strategy of being a market leader in the segments in which it competes and the forecast of world economic activity and oil demand. These statements are based on certain assumptions made by OSG based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of OSG, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors, risks and uncertainties that could cause actual results to differ from the expectations reflected in these forward-looking statements are described in the Company's Annual Report for 2008 on Form 10-K and those risks discussed in the other reports OSG files with the Securities and Exchange Commission.
SOURCE: Overseas Shipholding Group, Inc.
OSG Ship Management, Inc. Jennifer L. Schlueter, +1-212-578-1699 Vice President Corporate Communications and Investor Relations
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