Exhibit 99.1

OSG

 

For Immediate Release

 

OVERSEAS SHIPHOLDING GROUP REPORTS THIRD QUARTER AND YEAR-TO-DATE 2009 RESULTS

 

Highlights

 

 

New York – November 2, 2009 – Overseas Shipholding Group, Inc. (NYSE: OSG), a market leader in providing energy transportation services, today reported results for the third quarter and nine months ended September 30, 2009.

 

For the quarter ended September 30, 2009, the Company reported time charter equivalent (TCE¹) revenues of $207.3 million, a 52% decline from $434.7 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, coupled with a 734 day decrease in revenue days. Average daily TCE rates earned by the Company’s international crude oil tankers declined 65% to $21,204 per day and international product carriers declined 34% to $16,242 per day. The decrease in revenue days was predominantly due to the redelivery of a net 13 vessels quarter-over-quarter. Net loss attributable to the Company (Loss²) was $19.6 million, or $0.73 per diluted share, compared with net income attributable to the Company (Earnings²) of $197.8 million, or $6.69 per diluted share, in the same period a year ago. Special Items, which included vessel write-downs, totaled $6.7 million, or $0.25 per diluted share, reduced the Loss in the third quarter of 2009 (see Special Items later in this press release), compared with Special Items that totaled $54.9 million, or $2.22 per diluted share, that increased Earnings in the same period a year ago. Period-over-period diluted EPS reflects the Company’s repurchase of 6% of total shares outstanding since September 30, 2008.

 

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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.

 

 

Morten Arntzen, President and CEO, said, "As expected, we faced very tough market conditions during the third quarter. Year-over-year contractions in global oil demand and oil production, notably by Saudi Arabia, were exacerbated by continued poor refining environments. New tanker deliveries year-to-date increased vessel supply, which was partially offset by slippage in the tanker orderbook and by use of tankers for storage of both crude oil and refined petroleum products. These elements combined to drive shipping rates down significantly, at times into negative territory. While our quarterly financial results were disappointing on an absolute basis, our relative commercial performance was positive as we again outperformed average rates in the period. We continue to stay focused on tightening our belts with significant quarter-over-quarter reductions in G&A, charter-hire and vessel expenses.”

 

Arntzen concluded, “Although the near-term tanker market looks challenging, our diversified portfolio of modern assets, book of term business, fortress balance sheet and conservative financial management ensures that we will weather this storm and be better positioned than our competitors to benefit from a rebound in the tanker markets."

 

For the nine months ended September 30, 2009, the Company reported TCE revenues of $748.5 million, a 37% decrease from $1.2 billion in 2008. The year-over-year decline in TCE revenues was due to lower TCE rates earned across all international flag vessel classes. Earnings for the first nine months were $93.3 million, or $3.47 per diluted share, compared with Earnings of $397.2 million, or $12.99 per diluted share, a year ago. Earnings in the first nine months of 2009 included Special Items that increased Earnings by $100.5 million, or $3.74 per diluted share, compared with Special Items that totaled $39.5 million, or $1.77 per share, that increased Earnings in the same period a year earlier.

 

The Company’s U.S. Flag fleet includes four single hull product carriers with limited remaining useful lives (two are to be phased out in 2012 and two in 2013) and one 1977-built double hull tanker with a less efficient gas turbine engine. As a result of negative market factors and current recessionary economic conditions, OSG has put three of its four single hull product carriers in lay up for varying amounts of time in 2009 and has evaluated future employment opportunities for the Overseas Diligence, the above mentioned 1977-built tanker, after it completes its service in lightering, which is expected to occur in the first half of 2010. The Company was recently informed that the time charter for the Overseas Philadelphia, a single hull vessel, will be not be extended beyond its current expiry in January 2010. This vessel is required to be phased out by May 2012 and its next special survey is scheduled to occur in the first half of 2010. Accordingly, the Company recorded a charge of $12.5 million to write-down the carrying amount of the Overseas Diligence and Overseas Philadelphia to their estimated fair values as of September 30, 2009.

 

Segment Information

TCE revenues in the third quarter of 2009 for the Crude Oil segment were $99.8 million, a decline of $195.3 million, or 66%, from $295.1 million in the same period of 2008. The decrease was principally due to dramatically lower average spot rates earned across all vessel classes. TCE revenues for the Product Carrier segment were $46.0 million, a decline of $34.6 million, or 43%, from $80.6 million in the year earlier period. The decrease was due to lower average spot rates earned by the LR1s and the medium-range (MR) product carriers and a decrease in revenue days attributable to the redelivery of 13 single hull MRs after September 30, 2008. TCE revenue for the U.S. Flag segment were $59.5 million, an increase of $4.9 million, or 9%, from $54.6 million in the same quarter last year. The increase was principally due to higher time charter rates on charter agreements executed in 2006 for three newbuild product carriers that delivered subsequent to June 30, 2008, partially offset by an increase in out-of-service days attributable to the lay up of four U.S. Flag vessels for all or part of the third quarter. For more detail, see Spot and Fixed TCE Rates Achieved and Revenue Days later in the press release.

 

Additional Detail on Quarterly Results

Total operating expenses before Special Items further described below, declined 15%, or $45.8 million, to $265.7 million compared with $311.5 million in the corresponding quarter in 2008. Period-over-period changes included:

 

 

 

 

Special Items

Other items that increased reported results in the third quarter of 2009 aggregated $6.7 million, or $0.25 per share, and included:

 

 

For a detailed schedule of these special 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 Metrics

 

Liquidity and Credit Metrics as of September 30, 2009 were:

 

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³  Liquitidy is defined as cash plus short-term investments plus Capital Construction Fund plus availability under the Company’s secured and unsecured credit facilities.

4  Liquidity-adjusted debt is defined as long-term debt reduced by cash, short-term investments and the Capital Construction Fund.

 

 

Fixed Revenue - Aggregate future revenues associated with noncancelable time charters as of September 30, 2009, totaled $859.6 million, down from $1.1 billion at September 30, 2008. Fixed revenue for the balance of 2009 totaled $79.7 million and includes $75.9 million of time charter revenues and $3.9 million from time charters entered into by certain of the Company’s commercial pools. The Company’s level of fixed revenue, expected cash generated from operations and current debt capacity well exceed its lease, debt, capital and other operating commitments for the remainder of 2009 and for 2010.

 

Quarterly Dividend Announced - On September 16, 2009, the Board declared a quarterly dividend of $0.4375 per share to stockholders of record on November 9, 2009, payable on November 24, 2009.

 

Quarterly Events and Other Activities

 

New Credit Facility - During the quarter, OSG entered into a $389 million, 12-year secured facility with The Export-Import Bank of China, borrowings under which three VLCC and two Aframax crude oil tankers constructed in China are financed. During September, the Company borrowed $299 million on the facility.

 

Update on Tender Offer for OSG America L.P. - On September 24, 2009, OSG announced an increase in the price it will offer to pay for all of the outstanding publicly held common units of OSG America L.P. (OSG America; NYSE: OSP) to $10.25 in cash per unit. The tender offer is expected to commence the first week of November after all necessary documentation is completed.

 

Delivery of FSO Vessels Delayed - Delivery to Maersk Oil Qatar AS (MOQ) under service contracts of the FSO Africa and FSO Asia, two ULCCs being converted to Floating Storage and Offloading (FSO) service vessels, has been delayed. The vessels are owned by joint ventures in which OSG and Euronav N.V. (Euronext Brussels: EURN) each has a 50% interest. The joint venture owner of the FSO Asia has notified MOQ that the FSO Asia will begin providing FSO services on November 11, 2009, before the November 19, 2009 cancellation date after which MOQ has the right to terminate both the FSO Asia and the FSO Africa service contracts. The FSO Africa is expected to deliver to MOQ in the first two months of 2010. Under the terms of the service contracts, if the conversion of the FSO Africa is not completed and the FSO Africa does not begin providing FSO services to MOQ by January 19, 2010 (the “Africa Cancellation Date”), MOQ has the right to terminate both the FSO Africa and the FSO Asia service contracts. It is uncertain whether the conversion of the FSO Africa will be completed and the vessel will be able to begin providing FSO services to MOQ by the Africa Cancellation Date. MOQ has notified the joint venture partners that MOQ reserves all of its rights if the FSO Africa does not begin providing services by the Africa Cancellation Date.

 

Management believes that both the FSO Asia and the FSO Africa are critical to MOQ’s multi-billion dollar expansion on the Al Shaheen field and that MOQ is unlikely to exercise its rights to terminate either or both of the service contracts if the FSO Africa does not begin providing FSO services by the Africa Cancellation Date. However, no assurance can be given that the FSO Africa will begin providing FSO services by the Africa Cancellation Date, or that in any such event, MOQ will not exercise its rights to terminate either or both service contracts or request changes to contract terms.

 

Crude Oil

 

 

 

Products

 

 

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provide a breakdown of TCE rates achieved for the three months ended September 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 September 30, 2009 totaled 9,238 compared with 9,972 in the same period a year earlier. A summary fleet list by vessel class can be found later in this press release.

 

¹Excludes 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 September 30, 2009 and 2008.

 

 

Consolidated Statements of Operations

 

 

 

TCE Revenue by Segment

The following table reflects TCE revenues generated by the Company’s three reportable segments for the three
and nine months ended September 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.

 

Income from Vessel Operations by Segment

The following table reflects income from vessel operations for the three and nine months ended September 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.

 

 

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:

 

 

Consolidated Balance Sheets

 

 

Consolidated Statements of Cash Flows

 

 

Fleet Information

As of September 30, 2009, OSG’s owned, operated and newbuild fleet totaled 128 International Flag and U.S. Flag vessels compared with 156 at September 30, 2008. Fifty-six percent, or 72 vessels, were owned as of September 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 121.3 vessels. OSG’s newbuild program totaled 26 vessels (16 owned and 10 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

 

¹Includes two owned U.S. Flag product carriers that trade internationally with associated revenue included in the Product Carrier segment

²Overseas New Orleans and OSG 214 were in lay up as of September 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.

 

 

*Source: Clarkson database as of October 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 third quarter of 2009 and anticipated days off hire for the above-mentioned events by class for the fourth quarter of 2009.

 

 

 

Third quarter 2009 excludes 284 days associated with four U.S. Flag vessels in lay up: the OSG 214, Overseas Galena Bay, Overseas Puget Sound and Overseas New Orleans. Projected off hire days exclude 344 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:

 

 

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:

 

 

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/(loss) 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 nine months ended September 30, 2009 and 2008:

 

 

 

 

Appendix 3 – Fourth Quarter 2009 TCE Rates

The Company has achieved the following average estimated TCE rates for the fourth quarter of 2009 for the percentage of days booked for vessels operating through October 23, 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. 

 

 

 

 

 

Appendix 4 – 2010 Fixed TCE Rates

The following table shows average estimated TCE rates and associated days booked for 2010 as of October 23, 2009.

 

¹Includes one vessel on bareboat charter.

 

 

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Conference Call Information

OSG has scheduled a conference call for today at 11:00 a.m. ET. Call-in information is (877) 941-8416 (domestic) and (480) 629-9808 (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 November 9, 2009; the number for the replay is (800) 406-7325 (domestic) and (303) 590-3030 (international). The passcode for the replay is 4170656.

 

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, OSG’s intention to tender for the outstanding common units of OSG America L.P., estimated TCE rates achieved for the fourth quarter of 2009 and estimated TCE rates for 2010, projected scheduled drydock and off hire days for the fourth quarter of 2009, projected locked-in charter revenue and locked-in time charter days, expected cash generated from operations for the balance of 2009 and 2010, timely delivery of newbuildings in accordance with contractual terms, prospects of the FSO Africa being delivered prior to the FSO Africa Cancellation Date and of MOQ exercising its right to terminate the service contracts if there is a late delivery, 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 management 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.

 

Contact Information

For more information contact: Jennifer L. Schlueter, Vice President Corporate Communications and Investor Relations, OSG Ship Management, Inc. at +1 212.578.1699.