Features: Features: - Tanker Operator

INDUSTRY - UNITED STATES
OSG expands its fleet
portfolio
A lot has happened at leading US tanker owner and operator Overseas Shipholding
Group (OSG) last year. During its financial presentation made at the end of February,
the company outlined its current position.
New York Stock
Exchange quoted
OSG said that for the
fiscal year ending
31st December, 2007, the
company experienced a 5%
increase in time charter equivalent
(TCE) revenues to $1,039.2 mill
from $992.8 mill in 2006.
Although net income declined
$181.4 mill, or 46%, to $211.3
mill for the fiscal year compared
with $392.7 mill in fiscal 2006,
EBITDA in the same period
decreased 20% to $476.3 mill
from $595.1 mill in 2006. Diluted
earnings per share declined 38%
to $6.16 per share in 2007 from
$9.92 per diluted share a year ago.
In 2007, gains on vessel sales and
sale of securities totaled $48.3
mill, or $0.99 per diluted share,
compared with $74.1 mill, or
$1.56 per diluted share, in 2006.
For 4Q07, TCE revenues were
$251.8 mill, an 4% increase from
$241.6 mill for the same period in
2006. The growth in TCE
revenues reflects an increase of
1,600 revenue days across all
segments of the company's fleet.
The impact of this increase in days
was substantially offset by higher
fuel costs and a significant
weakening in spot rates for OSG's
VLCCs, Aframaxes and handysize
product carriers as the market
switched from contango (when the
price of oil in the futures market is
higher than the current market
price) to backwardation (when the
current market price of oil is
higher than the futures market).
The switch to backwardation
adversely impacted seaborne
crude oil movements in all tanker
categories as it became more
economical for refiners to
drawdown on crude oil
inventories. Rates for VLCCs,
Aframaxes and product carriers
fell to their lowest levels seen for
the last three years in early
November before picking up
significantly in late November.
TCE revenues in the 4Q07 for
OSG's international crude oil
tanker segment amounted to
$134.8 mill, a decrease of $20.5
mill, or 13%, from $155.3 mill,
in the same period of 2006. This
decrease was mainly due to
significant declines in the daily
TCE rates earned for the VLCCs
and Aframaxes, but partially
offset by the inclusion of the
results of Heidmar Lightering
from April 1, 2007.
Meanwhile, TCE revenues for
the international product carrier
sector were $59.4 mill, up $5
mill, or 9%, from $54.4 mill in
the year earlier period. The
growth was principally
attributable to the delivery of two
LR1 (Panamax) product carriers
during 3Q07. TCE revenues from
One of the Aker Jones Act product tankers taken on bareboat terms by OSG.
the US segment were $50.6 mill,
up $22.5 mill, or 80%, from
$28.1 mill in the same quarter a
year earlier, reflecting the
acquisition of Maritrans and the
delivery of three product carriers,
the Overseas Houston, the
Overseas Long Beach and the
Overseas Los Angeles last year.
The balance of TCE revenues
were derived from OSG's two
International Flag dry bulk
carriers and one car carrier.
"OSG's expansion and
diversification has created a
global shipping company that is
well-positioned to thrive in any
market," said Morten Arntzen,
OSG's president and ceo. "In
2007, we strengthened our
leadership position in each of the
markets we trade. The acquisition
of Heidmar Lightering, the IPO
of substantially all of the assets in
our US flag unit structured as a
master limited partnership, the
expansion and diversification of
our crude oil and product fleets
with Suezmax and LR1 tankers,
and our entrance into the US
ultra-deepwater shuttle tanker
trade, were just a few of the
transactions undertaken to
increase earnings and cash flows
in the future.
18
TANKEROperator March 2008