OSG Takes a Hit in Q4 2008

(Mar 6 2009)

Overseas Shipholding Group (OSG) said for the fiscal year 2008, the company recorded the highest TCE revenues in the company’s history.

Timecharter equivalent revenues of $1,545 mill, a $506 mill or 49% increase over $1,039 mill seen in 2007. Year-on-year growth in TCE revenues was principally due to an additional 4,090 revenue days and a significant increase in daily TCE rates earned by OSG’s crude oil tankers. Year-on-year spot charter rates for VLCCs increased more than 110% to $92,351 per day and Aframaxes increased by 47% to $44,374 per day.

Net income for the 12 months increased 50% to $317.7 mill, or $10.65 per diluted share, compared with $211.3 mill, or $6.16 per diluted share, in 2007. However, 2008 earnings included special items that reduced net income by $131.2 mill, or $3.18 per share.
In 2007, gains on vessel sales and sale of securities added $48.3 mill, or $0.99 per diluted share to net income. Period-on-period diluted EPS benefited from the company’s re-purchase of 14.4% of total shares outstanding since 31st December, 2007.

In a reversal of fortune, OSG reported a net loss in 4Q08 of $79.5 mill, or $2.89 per diluted share, compared with net income of $21 mill or $0.67 per diluted share, for the same period in 2007.

Fourth quarter results were negatively impacted by non cash goodwill and asset impairment charges associated with OSG's US Flag unit and other items that reduced net income by $170.6 mill, or $5.42 per share.

Morten Arntzen, president and ceo said, "OSG had strong financial performance in the crude and products units in 2008, along with the best commercial and technical fleet performance since I joined the Company five years ago. The extraordinary volatility and unpredictability of the year reinforced our long-held view that balanced growth, active asset management, strong in-house technical and commercial management capabilities, and a tenacious focus on the balance sheet are critical to long-term success.

"As we face headwinds in the coming year, cash flow visibility, financial flexibility, an undiminished commitment to quality and broad cost management efforts will further differentiate OSG from our peers,” he said.

Regarding the ATB newbuild programme, Arntzen stated, "The problems associated with our US Flag unit are extremely disappointing. It is evident that Bender (shipbuilder) cannot meet the terms of its contracts to deliver the vessels. We are taking decisive actions to manage the situation and are working on an agreement that will enable us to complete two of the ATB units and two tugs at alternative yards in order to meet our customer commitments without interruption."

Non cash charges in 4Q08 associated with OSG’s US Flag unit, aggregating $176.8 mill, or $5.66 per share, included:
• $105.1 mill, or $3.18 per share, related to write-downs associated with the non delivery of four ATBs.
• $62.9 mill, or $2.28 per share, related to goodwill impairment.
• $8.8 mill, or $0.20 per share, related to additional write-downs associated with two older US Flag vessels, the 'M300' and 'Integrity', assets held for sale since 30th September, 2008.
Other items impacting reported results in 4Q08, aggregating $6.1 mill, or $0.23 per share, included:
• $8.3 mill positive change, or $0.30 per share, in the mark-to-market balance of unrealised freight derivative positions.
• $2.2 mill loss, or $0.07 per share, on vessel sales and sale of securities.

Source: Tanker Operator