April 29 2008
OSG reports strong first quarter
Overseas Shipholding Group, Inc. (NYSE: OSG) today reported results for the first quarter of FY 2008.
For the quarter ended March 31, 2008, TCE (time charter equivalent) revenues were $375.8 million, a 45% increase from $259.2 million for the same period of 2007. TCE rates include the effect of forward freight agreements, which are used to create synthetic time charters.
The growth in TCE revenues reflects an increase of 1,052 revenue days primarily in the International Crude Oil and Product Carrier segments, and a more than 100% increase quarter-over-quarter in VLCC spot charter rates.
EBITDA for the quarter increased 22% to $178.4 million from $146.1 million in the comparable period of 2007. Net income for the period increased 33% to $112.4 million, and diluted EPS increased 67% to $3.60 per share compared with $84.7 million, or $2.16 per share, for the same period a year ago.
Net income in the first quarter of 2007 benefited from a gain on sale of securities of $15.0 million, or $0.25 per diluted share. Period-over-period diluted EPS also benefited from the company's repurchase of 19.3% of total shares outstanding since March 31, 2007.
Morten Arntzen, President and CEO of OSG, commented, "As anticipated, superior first quarter results reflect the strength of the crude oil tanker market and the strong performance of our product tanker business. We are building long-term sustainable value for shareholders by taking a portfolio approach to running this business. While we have continued to strengthen and grow our spot-oriented crude transportation business, we have diversified our fleet, built a substantial book of locked-in future revenue and expanded in businesses providing for earnings and cash flow stability."
Arntzen continued, "It is based on OSG's quality, scalable platform that we are able to expand into new, higher margin businesses and win projects such as the U.S. Gulf shuttle tanker business and the FSO charter for one of our ULCCs. Embarking on my fifth year at OSG, I've never felt better about how the business looks than I do today. Looking at what we've achieved and seeing the commercial and technical platform we have in place to support our growth plans makes me confident about what OSG can achieve going forward and the results we can deliver for our shareholders."
TCE revenues in the first quarter of 2008 for the International Crude Oil segment were $248.9 million, an increase of $102.1 million, or 70%, from $146.8 million, in the same period of 2007. The increase was principally due to increases in rates earned by VLCCs as OPEC increased its quota production by 500,000 barrels per day, resulting in additional long-haul movements from the Middle East to both the Far East and the United States. Revenue days in the International Crude Oil unit increased by 767. OSG Lightering, a unit of the International Crude Oil segment, added $18.7 million or 508 revenue days in the period. TCE revenues for the International Product Carrier segment were $66.4 million, up $8.5 million, or 15%, from $57.9 million in the year earlier period. The growth was principally attributable to an increase in revenue days from the delivery of four vessels after January 1, 2007. TCE revenues from the U.S. segment were $52.8 million, up $3.2 million, or 6%, from $49.6 million in the same quarter a year earlier. This reflects the delivery of the Overseas Houston, Overseas Long Beach and the Overseas Los Angeles in 2007, offset by the sale of two dry bulk carriers and the reflagging of one car carrier under the Marshall Islands flag in 2007. The balance of TCE revenues were derived from the company's two International Flag dry bulk carriers and, in 2008, one car carrier.
Income from vessel operations was $127.4 million in the first quarter of 2008, a 65% increase from $77.4 million in the same period a year earlier. For the quarter ended March 31, 2008, total operating expenses increased 43%, or $85.4 million, to $283.3 million from $197.9 million in the corresponding quarter in 2007.
The increase in operating expenses was principally the result of the acquisition of the Heidmar lightering business effective April 2007, and an increase in chartered-in tonnage in the International Crude Oil and Product Carrier segments. As of March 31, 2008, OSG chartered in 56 vessels compared with 48 at March 31, 2007.
Voyage expenses increased by $18.7 million quarter-over-quarter, principally a result of higher fuel expenses.
Vessel expenses increased $12.0 million quarter-over-quarter primarily due to crew costs associated with the company's continuing efforts to attract and retain high quality crews.
In addition, the company increased the estimated salvage value of its owned fleet effective January 1, 2008. This change in estimate reduces depreciation by approximately $2.7 million per quarter commencing in the first quarter of 2008.