OSG president and CEO Sam Norton: calls engine upgrades “a major investment in the future of our company.”
“The year has started well at OSG,” stated president and CEO Sam Norton, as Tampa, Fla. headquartered tanker and ATB operator Overseas Shipholding Group, Inc. (NYSE: OSG) reported outcomes for the primary quarter of 2023. “All asset categories achieved financial results at or above expectations. For the third consecutive quarter, we delivered adjusted EBITDA in excess of $40 million, despite having three fewer operating vessels during the first quarter of 2023 as compared to the final two quarters of 2022. Above average lightering volumes and the continued strength in international MR markets, as well as incrementally higher average TCE rates for our Jones Act MR tankers, all contributed to the past quarter’s favorable results. The stability of cash flow witnessed in the past several quarters has allowed cash balances, including investments in treasury securities, to increase to $118.9 million at quarter end.”
“In April,” continued Norton, “OSG signed operating agreements with MARAD for our three internationally trading U.S. flag vessels to enter into the Tanker Security Program. These contracts are the result of many years of work with labor, industry, and government partners to stand up this important program. OSG is proud to have the first ships to be entered into this program and looks forward to further growth opportunities for its internationally trading U.S.- flag tankers, both in the context of the Tanker Security Program as well as in other supporting roles tied to our national security.”
RESULTS
Shipping revenues have been $113.8 million for the primary quarter of 2023, a rise of $9.8 million, or 9.4%, in comparison with the primary quarter of 2022. TCE revenues have been $104.7 million for the primary quarter of 2023, a rise of $10.8 million, or 11.5%, from the primary quarter of 2022. The will increase primarily resulted from a 255-day lower in layup days. There have been no vessels in layup in the course of the first quarter of 2023. During the primary quarter of 2022, there have been two vessels in layup for the total quarter and two further vessels that got here out of layup throughout that quarter. Additionally, the rise in revenues resulted from (a) a rise in common each day charges earned by our fleet, (b) a 27-day lower in drydock days, (c) a rise in Delaware Bay lightering volumes and (d) one full Government of Israel voyage and one partial Government of Israel voyage that started in the course of the first quarter of 2023 however was accomplished within the second quarter in the course of the three months ended March 31, 2023 in comparison with one full voyage throughout the identical interval in 2022. The improve was partially offset by fewer vessels in our fleet as we returned three typical tankers leased from American Shipping Company in December 2022.
Operating revenue for the primary quarter of 2023 was $22.5 million in comparison with working revenue of $7.7 million for the primary quarter of 2022. Net revenue for the primary quarter of 2023 was $12.1 million, or $0.14 per diluted share, in contrast with a web lack of $509 thousand, or $(0.01) per diluted share, for the primary quarter of 2022.
Adjusted EBITDA was $40.9 million for the 2023 first quarter, a rise of $15.5 million in contrast with the primary quarter of 2022, pushed primarily by the rise in TCE revenues.
CONFERENCE CALL
In a convention name with monetary analysts, Norton stated that, within the first quarter, “the primary takeaway is that much has gone as planned.”
“This is largely as expected with such a significant portion of our vessels operating under fixed time charter contracts. To the extent that variability to expectations will materialize during the coming year, these will occur as a result of changes in lightering volumes and in the rate conditions experienced in the international MR market in which our non-Jones Act vessels trade,” he stated. “As noted earlier, we saw a better than expected performance in both of these areas during the first quarter, which helped get the year off to a good start. Improved market conditions have provided opportunities to reduce exposure to volatility in our conventional tanker trades and given us a forward book of contract cover that extends for several years.”
However, he famous that quite a few elements have triggered the corporate to be cautious about annualizing its first quarter outcomes for the steadiness of the yr.
“First, we count on the over-performance seen in lightering and worldwide MRs to revert on common to extra normalized ranges over the steadiness of the yr. Should this happen, we’d count on TCE contributions from these property to drop on a quarterly foundation by roughly $5 million.
“Second, we may have a heavier schedule for intermediate surveys and drydocks over the steadiness of the yr with 9 out of service durations deliberate versus two within the first quarter. Days not incomes will thus rise in the course of the steadiness of the yr as in contrast with the primary quarter. Nonetheless, our forecast for the full-year 2023 doesn’t change from our views offered two months in the past.
“We proceed to see time constitution equal earnings for the full-year approaching $400 million. Attaining this high line outcome ought to generate adjusted EBITDA between a 140 million and 150 million for the total calendar yr 2023. After deducting debt servicing plan, upkeep capital bills, we anticipate that free money movement for the full-year needs to be between $50 million and $60 million.
“To ship these outcomes, our mission is firmly targeted on execution and operational excellence, in addition to the pursuit of development alternatives in our specialised companies. As we’ve acknowledged in prior calls, using surplus money movement is a daily subject of dialog with our board.
“We think about allocation of capital selections to be among the many most vital we should make in direction of reaching a correct steadiness between investing sooner or later, managing the extent of our fastened fee obligations, and contemplating applicable means for returning money to our shareholders.
TRANSITION TO ZERO-EMISSIONS
“We acknowledge the necessity to spend money on options to make sure the long-term sustainability of our enterprise mannequin and to be attentive to formidable objectives of reaching a future goal of [zero emissions] for ocean delivery. Succeeding these efforts would require consensus on viable expertise and sensible options to use throughout the complete provide chain of manufacturing and distribution, giant capital investments with prolonged payback durations and scale growth of efficient and extensively out there options to fossil fuels.
“During this transition, there will likely be a continued want for transporting typical fuels and for investing in present tankers to enhance efficiency and to scale back greenhouse fuel emissions as our business evolves. OSG is dedicated to lowering its carbon emissions and has set its personal particular targets. Incremental and continuous enchancment are our objectives. We will meet these targets within the brief run by bettering our operational efficiencies.
“In the medium-term, we’re utilizing and taking part within the provide chain for various fuels and testing applied sciences for funding to retrofit present ships. In the longer-term, we’re partnering with others to spend money on and develop expertise and processes essential to make significant reductions to carbon emissions.
“We are also exploring new opportunities for transporting liquid bulk commodities other than fossil fuels. These evolving markets point to interesting and exciting potential for OSG to leverage its strong operating franchise. OSC continued to commit resources to identify the best opportunities available. With this vision, we will remain true to our mission of being a world-class shipper of liquid bulk commodities.”
