OREANDA-NEWS. Overseas Shipholding Group, Inc. (OSG) (NYSE MKT:OSGB), a provider of oceangoing energy transportation services, today reported results for the quarter ended September 30, 2015.

Highlights

  • Time charter equivalent (TCE) revenues(1) for the third quarter of 2015 were $233.6 million, up 33% compared with the same period in 2014.
  • Net income for the third quarter was $173.4 million, or $0.33 per diluted share, compared with $10.6 million, or $0.03 per diluted share, in the third quarter of 2014. The increase included net tax benefits of $119.1 million recorded in third quarter 2015 that were not a result of pre-tax income in the quarter.
  • Adjusted EBITDA(2) was $123.9 million, up 88% from $65.8 million in the same period in 2014.
  • Total cash(3) was $654.6 million as of September 30, 2015, growing from $512.4 million at the end of 2014.
  • Repurchased approximately $101 million in principal amount of unsecured notes, reducing annual cash interest expense by approximately $8 million.
  • The Board of Directors authorized a $200 million equity repurchase plan, for purchases during the next two years.
  • Entered into a pre-filing closing agreement with the Internal Revenue Service (IRS), which contributes to a cash refund of $54.9 million anticipated to be received in fourth quarter 2015 and increased net operating loss carryforwards available to reduce future taxable income of approximately $392 million.

“Our third quarter results reflect the earning power of our 79 vessel fleet and the effectiveness of our operating strategy,” said Captain Ian T. Blackley, OSG’s president and CEO. “Our international fleet predominantly trades in the spot market, which continues to demonstrate underlying strength in both crude and product, and we enjoy the security of medium-term time charters in the domestic market. Our strong cash generation is giving us significant flexibility to enhance our capital structure, position the firm to take advantage of growth opportunities and deliver value for our shareholders.”

Third Quarter & First Nine Months of 2015 Results

TCE revenues grew to $233.6 million for the quarter, an increase of $57.4 million compared with the third quarter of 2014, driven by continuing strength in international crude and product spot market rates. TCE revenues grew to $690.4 million for the first nine months of 2015, an increase of $128.0 million compared with the first nine months of 2014.

Net income for the third quarter of 2015 was $173.4 million, or $0.33 per diluted share, compared with $10.6 million, or $0.03 per diluted share in the third quarter of 2014. The Company entered into a final IRS closing agreement regarding payments it made on behalf of OSG International (OIN) at its emergence from bankruptcy. The IRS agreed these payments are a deductible expense, and as a result, the Company recognized a one-time, non-cash income tax benefit of $150.1 million. Accordingly, OSG’s investment in OIN for financial reporting purposes now exceeds its tax basis; as management does not believe it can assert that investment is indefinite, the Company was required to record a non-cash tax liability of $31.0 million.

Net income for the first nine months of 2015 was $274.7 million, or $0.52 per diluted share, compared to a net loss for the first nine months of 2014 of $178.8 million.

Adjusted EBITDA was $123.9 million for the quarter, an increase of $58.1 million compared with the third quarter of 2014, driven primarily by the strength of spot rates in the international crude and product markets. Adjusted EBITDA was $368.2 million for the first nine months of 2015, an increase of $160.6 million compared with the first nine months of 2014, driven primarily by those higher rates.

International Crude Tankers

TCE revenues for the International Crude Tankers segment were $76.2 million for the quarter, an increase of $26.8 million compared with the third quarter of 2014. This significant increase resulted from a substantial strengthening in daily rates across all vessel types in the segment, with the VLCC spot rate increasing to approximately $57,600 per day in the third quarter, up nearly three times from the comparable 2014 period; the Aframax spot rate increasing 80% to $35,500 per day; and the Panamax blended rate increasing 19% to $19,000 per day. TCE revenues for the International Crude Tankers segment were $220.0 million for the first nine months of 2015, an increase of $43.0 million compared with the first nine months of 2014.

International Product Carriers

TCE revenues for the International Product Carriers segment were $50.0 million for the quarter, an increase of $21.2 million compared with the third quarter of 2014. This significant increase resulted primarily from higher Medium Range (MR) spot rates, nearly doubling from the same period in 2014 to approximately $22,000 per day. TCE revenues for the International Product Carriers segment were $135.9 million for the first nine months of 2015, an increase of $53.5 million compared with the first nine months of 2014.

U.S. Flag

TCE revenues for the U.S. Flag segment were $107.4 million for the quarter, an increase of $9.4 million compared with the third quarter of 2014, driven by a $6.4 million, or 11% increase in Jones Act Product Carrier TCE revenues, largely driven by increased rates achieved on renewal of expiring time charters. TCE revenues for the U.S. Flag segment were $334.5 million for the first nine months of 2015, an increase of $31.5 million compared with the first nine months of 2014.