OSG - Earnings call transcript Q4 2017 | Overseas Shipholding Group, Inc.

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Operator

Good day, and welcome to the Overseas Shipholding Group Fourth Quarter and Full Year 2017 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. event recorded. today’s that note is being Please I to Mr. like to conference over turn the would now Sam and Norton, Group. President CEO of Shipholding Overseas go ahead. Please

Sam Norton

everyone beginning for call. and earnings call. urge your to carefully. call. X review which Thank forward-looking thank past information, welcome and direct available the contents everyone our them me are morning, appreciate narrative Good provide We The I Prior our statements, our the joining added part listening to on quarter, to X written presentation to consider this all other and maybe disclosures like depth for quarter of this to the this you, provided narrative time and to the pages PowerPoint Dick on presentation important taking would fourth everyone, XXXX regarding and and to estimates an and during on our the opportunity this the Trueblood perspective read of Andrea. site Web of of of you I and public course

you to than Actual may be about including offering be could statements variety differ risk results. beyond from a statements of on are presentation includes more and factors, risks. factors will just forward-looking including perspective a control. future statements projections and These OSG uncertainties We and today subject historical our materially results affected by our

Internet at which are of Web our site XX-K you and first, later fiscal to the with our refer For other the own the as SEC, third our XX-Q year SEC’s XXXX, year as our we XXXX Form XX, annual on and available we a December Form Form second being our anticipate filed discussion these of December site, well for quarters today ended for specifically fiscal www.osg.com. report XX-K ended filings the factors, which XXXX, the www.sec.gov for XX,

could materials these date reasons to differ. no only and this or obligation as presentation results of Forward-looking to update speak statements forward-looking actual we in the the statements assume why

presentation today turn quarter which addition, release Kindly SEC, and which Web our the measures, presentation site. Slide In certain in fourth on the furnished X our and reconcile posted to to includes is financial earnings non-GAAP also deck. define our we in

As catalyst morning, recent highlighted our we release in been press spot rates, communications robust progressive have the to this year. that result past in recovery highlighting been our a believe months the we’ve in we of over to market demand which emergence of be witness of the

in on equivalent presented the round levels rates risen voyage above months charter to day. firmly the steadily the past graphic the X, Slide in eight time now depicted per for calculations As tankers $XX,XXX have over

time noted fully utilization with voyage has financial as market evidenced. with in ATB to our the employment rates our in in rates for equivalent rates well, As rates round the charter utilization understood over also the have three Increased past, fleet conjunction months. activity Nonetheless, be statements. been past we particularly to need improvements nominal reconcile seen

colonial episodes. created product to and respond to reduction by key price storage to one, system are our market oil improving the spot of prices. demand driven of indicator gradual of confidence pipelines we discount transportation demand for time capacity recent And disruptions, narrative vessels. domestic rate we and have by important plantation contributing tightening lack supply seen to largely a spot in all in and refined ever an as episodic Firm persistent movements but crude developments, that bottom of with quarters, these Given Consistent a sustained see we a charter greater increased market. a supporting such the namely; rates have quickly events, weather spikes market in international of coast-wide Two, for finally, crude now market. the of the recovery three strong elements the conditions,

supply principal In the been XXXX, removed removed we period. likely a over that reductions market recovery half highly during the consider leading important reemergence from from further ATBs the charter XXXX. is the it ATBs count further the base. now of service four inquiries tanker time second A the during in two and of OSG indicator will one from same available have occur and addition to remainder sustainable that We to of other older our customer

on During tankers rates for out one early the to our tankers periods time, per of $XX,XXX first three we approaching At have April this delivery an oil similar up other for XX months. fixed quarter, major offer day. offer for have we to at

In addition, Delaware Bay quarter three-year refining of agreed. at contract agreed first minimum we volumes twice our previously more have commencing a to April the than with one annual customers Xst levels during lightering the

translated the contract refining renewed of conditions also The also with third our ATBs. for to our conventional environment other better market a annually renewable for have customers XXXX. Improved has been

discussion our base. market relationships chartering trade our in core condition. away of what the normalized in past flow Considerations We of with contracts active fundamental regular of contracts longer-term have We time our days progressive from at is a in Attaining characterized remains affreightment vessels legacy rates XXXX. to that a remain time spot the point. to of and the of customer be by about spot which offered objective time cover amount to base to is for XXX succeeded over and management multiyear weeks market believe the a our securing stability exposure today are we the existing assets one profitable consider vessel The transition charters a market anticipated recent charter capacity chartering cash our in of be stable, the fixed customer should of appropriate greater approach. with charter by transitional

and front-haul in tank ATBs ATBs. XX trading the were tankers data of Jones Broker for spot to barrels Act the XX any on At also nine large we total trading the February, reports of market currently movements tanker Three quarter, our are XX during fixtures As our or indicate a in fixtures were of suggests, total. spot vessels of voyages rebuilt competitors. the XX% the of vessels spot XX exposed of spot. excess of XXX,XXX than those the more that market. covered end four conventional fourth OSG concluded were

is the average X.X During current twice have and the the first per total two past which months this Act of ATB trading XX been OSG were of on month in sector activity fixtures these and from we spot concluded is have availability numbers supply being To year, recovery of the the of positioned the challenge. unattractive an accept tanker in done an place with Tactically, loss consciously to rates is increased vessels fixtures a perspective, over to rates. XX measured that of volume the demand in nearly Jones exposure environment a spot vessels. XX belief persistent for uncertain option in when making periods sustained a Balancing long benefit upside committing chosen years. spot against

view contract are value cannot heartened supply market convictions conditions. strengthen be of tightening period the developments this charter overstated. are the inquiries longer a as importance proposition reemergence to served the which recent our have the our of of We to of by of OSG affirmation long-term position. of activity Time clear wisdom The

are base the to certainty growing indicator need recognition Our any is a access of strong to transportation of of shortage charter potential principal end-user greater for commitments vulnerable a time supply capacity. and

considering owner Our optimizing rates the spot make the anticipated to are when charter Short to utilization bottom risk rates utilization contracts development. the company firming a trade on results. Jones challenge. Time from achieving voyages of charter positive Act line are high favorable the and thus a shift the

Importantly, OSG time be of our increase OSG. age. time turn to giving there accept vessels fleet be than third likely the you understanding now niche that XX outside provide ATB elected will Any will available indicate available disclosure Slide to years markets. analysis offer and XXXX, importance quarter the exists Commencing of and of volatility to heightened for the tankers assist XXXX, two businesses conventional to inquiries additional in us our of Jones demand have only that X. of and vessels of the to in charter confidence charter to the thus in in our we Act tanker seeking Please between less end favorable

market million niche contribution operating fourth for million vessel the $XXX.X provided and during of XX quarter the Our activities December XX. $XX.X ended months

Bay run lightering activities full Delaware nearly of reduced these XXX,XXX which influencing tankers a expectations. Notwithstanding expected Gulf three averages. allowed the lightering have that Looking per mild offshore $XX,XXX have from contribution niche the use equivalent in was with than time was we include to a for $X greater result over fourth providing by third on seen quarter Mexico, charter operating it year result quarter, seasonal compared of to year years, the confident as to that vessel remain contribution our levels in serve day the carried charter Bay in returns oil bringing be US$XXX of performance quarter a fell ATBs. will XXXX what refinery results. barrels million businesses offer these principally Further, returns the in And historical decline only past the quarter of equivalent day the services over XXXX lightering seen expectations assets year a Average lightering Factors full the of consistent of below the per for refineries results with disappointing $XX,XXX time volumes the our we historically. per lightering from made day, the competition from the lower increased compared decline assets fourth and of during primarily with consistent as in contribution as of averaged were historically of of and vessel to the fourth average. we historical both million Delaware weather Act full our businesses Volumes this crude fourth day Jones period. utilization seasonal rates the quarter operating $XX,XXX XXXX on

of that refinery we affreightment significantly As noted we the customers volumes. earlier, higher two serve at contracts renewed three of have with take-or-pay

scope commencing contracts contract with for secured our XXXX with revenues extended together volumes already committed renewed considerable Energy three is the XXXX. the XX% with XXXX these and an of years achieved increasing minimums at for exists Solutions, of of lightering figures. levels are One long-term take-or-pay in Philadelphia April Viewed of for affreightment in for which period of

tankers quality operating Our Program continue business. Security cash in two our provide flows to for Maritime

MARAD approximately has with attractive rates seven the the a been government consistent the substantial ensure revenues with for perform successful outcome income contract Those preference to the of The ocean-borne our is oversee October this government-impelled, has and funded MSP and providing U.S. of of one under facilitate Israel government-impelled U.S. for employment in minimum the the U.S. transportation works this to under any year. OSG these laws The in favorable at from U.S.-flag conditions vessels beyond reserved Israel government grants promote a transporting with Cargo maritime of which vessels government. a contract is past of administration committed XXXX transport of Our cargoes to the flag a the company XXXX shippers derived to nominated laws holds in and that of cargo historically the to Cargo years company. would Program Preference extend with Program. percentage has system equivalent exercise cargoes voyages cargoes. and options U.S. and regulations. towards available use of government require compliance two the OSG Among options ship to currently under Israel fuel to deliver contract a Preference working

cash year. Chinook, streamline shuttle were Finally, one OSG more continue tanker return as that indicate those in the trading likely Current provider least the will million to today. term foreseeable high-quality only efforts quarter operating for efforts administrative our QX. vessels, of Jones Act of redelivery administrative U.S. shuttle costs General remaining to well in a with from flow. of ongoing to in in seen at tankers May to to of expected this conventional the $X.X costs Gulf remains some continue Overseas are discussions for the to the provide following influence as Benefits Petrobras earnings our positively costs expected the short and tankers our as from vessel levels to efficient future. be general in and comparable Two

achieved compared million XXXX, as expenses year we reduction general a full have and in $XX.X administrative with XXXX. the For

is believe steady-state we appropriate Please ahead, in largely the scale to business. realizing of succeeded we this current rate that turn that Looking X. have our run Slide for

of healthy the We extent to the swing of as increasing crude supply. balance continue U.S. the to restoring between compared crude terminals determining relative The for markets. demand of the as differentials sourced on Gulf cost with domestic is crudes, produced and international this view price in oil available of oil prospect available for internationally the foreign marine from a vessels including key in transportation timing an factor catalyst at demand transportation understanding Mexico potential important the vessels flag

options over these why While Slide looking WTI widening the in in WTI/Brent with Coast recur. shown Nigerian to a more the turn available U.S. the Act X price of as WTI of that levels. our compared spread widening demand price at compare future benchmark sustain WTI/Brent at in shows in domestic are East and to The easily oil contrast byproduct Houston is favorable by increased WTI this if shale past terminals from Houston/Bonny narrowing and the in accessible Brent, X. spreads Houston/Bonny to referred rate in in U.S. make benchmark supply over benchmark effective A relationship the Expectations Coast and Slide to should in for crude quote of Light with result prices this Gulf the the firmed a marine available tanker The nuanced be oil Jones of even spread the face months price oil changing differential as industry levels. continue transportation to were seen the A helpful the understanding Gulf on spread. a understanding impact six spread Gulf achieved widening is to crude is Light. Coast current Light perhaps of WTI’s cost even the periods would the developments better price refineries. would the in Please graphic Bonny the for

of an financial active to I review take quarter’s useful Dick recall fleet end to OSG it of owned past vessels. is XX XXXX, Before of as of a you hand things operated the February through the to over results, that or

the details articulated Our XX over and under active two XXXX. to to on will I and in year Act tankers Jones Maritime Dick the Program. Dick? which Security picture provide U.S. now fleet refreshed, and quarter our operate barges full of tug includes additional turn results this having internationally during the With been call operate fourth

Dick Trueblood

Thanks, Sam.

TCE time the $XX Please million, a Now fourth quarter XXXX. full shift let’s the the from Slide to fourth revenues with totaled in compared for despite fixed detail. review turn and activity market quarter quarter XXXX. XX%, year results or XXXX was $XX that The of occurred XX. million, rate primarily of the charters more long-term decrease decline driven by throughout

Our XX% XXXX. compared QX to of market exposure day increased spot

the year. in TCE on in of vessel performance for our to XX% utilization quarter the the fourth ATBs resulted Additionally, of total rebuild rebuild voyages of in on rates decline lower prior XXXX to increasing decline. emphasis the the considered being in The day quarter the represented compared age during ATB comparison

earned from and we tankers saw seasonal million X.X revenue offset decreased increase contribution attributable revenues revenues. the Please the ATBs. in daily This a via Mexico move our refineries TCE increasing million movements principally to lightering $XX with lightering. to due to non-Jones primarily or the from XXXX spot was in full for effective of to Slide million the Most of decrease as Act MR tankers. represented XXXX. were days of to the decrease by Again, below Act spot year this XX. of This was The decrease a offshore where we market our tankers Bay rates. XX% revenues the million, million market Delaware of was MR Gulf Our $XX $X.X of Jones full revenue X.X persistence our decrease TCE year crude oil increase rebuild million activity. $XXX the partially compared due a decreased our

discussed was EBITDA adjusted XX% decrease primarily million, TCE by in XXXX XXXX. in the quarter previously. from fourth QX revenues The $XX decline Our $XX was down driven million

XX% at from Our margin to decreased XX%. TCE

the period, XXXX This adjusted XX% to which TCE million decrease was million our and revenue by $XXX margin compared the to driven from XXXX. decreased to our by reduction partially For $XXX efforts. XX-month cost was decreased XX% EBITDA offset of

Moving liability require XXXX. The the Jobs Tax tax XX%. to net from deferred compared of quarter quarter with the reduced from total tax to fourth in U.S. recorded XX% We for operations XX. was of XXXX. continuing $XX fourth & income Cuts for XXXX this Act $XX Net million loss. we other income our among million will tax million benefit to net reflect from continuing operations Slide provisions the GAAP, the a impact rate to of of in QX Under $XX adjust

benefit As the tax In the recognized from year, non-cash of million tax on In the a vessels. International tax quarter we result, earnings of our certain unremitted the company million million. prior we XXXX, $XX recognized recognize fourth impairment the $XX.X the of an $X.X non-cash approximately deferred liability of the on of loss of Seaways. benefit reversal the of

QX XXXX, $X.X During million. an impairment of experienced we loss of

turn Please $X to XXXX in Net $XXX.X discontinued million. Additionally, for from decrease QX decrease from $XX in loss was million fourth discontinued the were experienced to included discontinued was costs. compared XXX.X asset with Net quarter impairments for $XX operations the Slide full XXXX million. TCE XXXX in charges The year outstanding million related expense There reduction of to the a full revenues $XX.X XXXX due income XXXX. $X the comparison administrative XXXX for million full of loss operations increase million general $XX for the depreciation operations year operations was million severance of loss no the in and XX. These net continuing XXXX, year $XX to in offset debt. million reduction expenses, reduction million interest Net in vessel and XXXX. lower expense a in impairment XXXX. a items a in of reflects of from

left $XXX cash As we million included to move which we million $XX right, of from XXXX total restricted with began of cash.

During XXXX, docking EBITDA and adjusted improvements vessels. expended we million $XXX to our on $X dry and generated of we million

Notes $XXX we our was $XXX X.XXX% Slide quarter The liquidity, repurchased million previous including had million million of year efforts. million to retiring at During cash Continuing turn the cash $X.X cash, with restricted Please have slide, cash. of our continued of deleveraging and XXXX, our ended mentioned of discussion repaid of we the we cash. amounts which fully restricted and including result of $XX end as all million outstanding we $X.X that been XX. on

at debt total Our year was million. end $XXX

a million revolver cash, presently We liquidity Mining we had at also have is undrawn. undrawn $XX of $XXX which with revolver million year end. our unrestricted

to equity, We’re cash to amortization making provisions flow to excess the subject to X.Xx X.Xx. net of loan. any our was March is We call our term leverage million my comments to equity in This debt closing net back financial for EBITDA turn the not to will ratio and I'd this and subject With million XXXX. statements. the remain of his like remarks. our now we concludes be Sam payment $XXX law adjusted on $XX a debt do sweep on

Sam Norton

seen rate Thank we have that views months. summarize encouraged you, spot the we’ve recent in market this are during presentation, To developments we by the that Dick. expressed

helped with of a businesses market. provide an of market oversupplied us out to stable platform accept the niche consequences transitioning Our

supply that of core demand course age view has Generally, real occur maintaining the what latent vessels be rebalance will imposed on to of arrive These the service could which the in we use of as current leverage be in the base progression for and XX longer-term vessels quarters were would for coming than of operating a exceeding optimistic tightening to strategy limit surprise years a our age. and that the occur our in that’s progressively lie predictable to our to ahead. view customer to catalyst towards the for allow business a and by consensus rates current stay visible supportive a a over give us of restrictions become well restoration profitable developments Jones on acceptability spot development more potential times tighter quarters vessels. employment consider of to model the thinking, analysis than the unrealized Act static market continue charter our reason readily appeared We side sooner our sustainably of

now up will Operator? We open questions. to call the

Operator

you. Thank

will [Operator We the begin now question-and-answer session. Instructions].

of from [ph]. comes Our go Alvin ahead. first CF Partners question Please Perlini

Unidentified Analyst

Sam, presentation. thanks for the Thank much you. very

mentioning comments Just redelivered? clarify would I the wanted your that tanker tankers. to correctly made you of regarding shuttle one of Did one hear the you be

Sam Norton

correct. That’s

of as in be to charter still loading current with vessel two. sublet vessel redelivered charter, in six are do final of of the we have the opposed periodic trade requirements but same to will would Gulf us – tanker storage the offloads for we months, offloading from trading and with is their with to of past for that’s been their in decision, expect it the Mexico the they May. current We conventional so in the market not that fact that the vessel the discussions a the would indicate and the That they use vessel once one much has and in satisfied vessel

Unidentified Analyst

to right Thank addressed one question at more you that of you. the presentation. your beginning And the scrapping relating

Jones that assets slowdown will do more continue of the in you strength to of expect those market, the mentioned terms pace you expect Given the older that of removals? Act in removed or the do you a be

Sam Norton

utilization continues oil a cargoes. from Nonetheless, of because this or or what we and rates a rate of see at that at last for vessels utilization is in largely it And vessel per when carrying we find older our of experience performance higher in terminals assets in through And not that are a Vetting market the rates vessels voyage have the upper the but the market argue highlighted year. improved that is we what utilization have well much is that progressively a indication, day, calling acceptability own we the of the market range. equivalent even basis of older more of rates. is return that rates vessels as the of reject vessel attaining $XX,XXX-$XX,XXX these year reasons of indicate be expectation – terminal They majors today saw And of constraints on the and which our is if observe let’s necessarily much the determine pace breakeven XX%, utilization that really per by and customer assets. spot it return. rates the their $XX,XXX-$XX,XXX capability nominal market if existence It’s as round effective depressed that but that that the on of rates justify a a the flow lower call rates an in the defines in our as to the is summer vetting well older assets operators continuing. I the the and the XX would the theme their requirement rates economic retain of assets. from day be nominal as difficult say last are economics at with achieving half coupled $XX,XXX the it largely vessels operating the these assets. cash other that then only nominal spot ultimately see market from certainly is departments combination It rates. risen And to only its find day, spot removal problem the compliance we older of than not as operating would because the fact the rates, to are will they market And uninfluenced in it’s or largely per spot tanker trend ATB on quite materially we spot rates

Unidentified Analyst

just can Thank that you charters question I ask a final to time MR the you. And related mentioned.

sort So April, in correct? that said inquires XX of that high three XXs months you��ve you in and the timeframe. of starting for that signed others have you Is for one for

Sam Norton

That’s correct.

Unidentified Analyst

or of strategy? waiting on charters or you Are tying you for up longer more those the are thinking what’s assets

Sam Norton

we to in exposes stated spot my flows being the remarks, core was utilization our which that of charters are forward consider of customer customers longer-term than business. to in have. our As condition have suited also we base our market trading we we the that that don’t risks with us And recognize better for normalized visibility optimizing manage our customers are a cargo of given as some

majority circumstance, that seeing charters. our of that look to carefully in portfolio fixed now to the some And longer-term be to begin charter more a So on degree of returns are the provide that expect we’re at. something that rates is to normalized we we’ll extent begin would profitability providing

our of would significant to overall would and we overstatement see think the certainly I an inquiry immediate health a indicative a business. we of future, all state vessels be it we to levels that the as development time our but improvement over put return on the of charter six and in rate what saw months ago

Unidentified Analyst

Thank you.

Operator

Clarke question of ahead. next Please Phoebe comes from Redwood. go Our

Phoebe Clarke

have guys. lightering. Hi, questions two about just I

that had of mentioned two you renewed you First, contracts. three the

of wondered the we this the rate? take-or-pay. contract the said last XX status you the year XXs new secondly, year Should of third? fourth the of of under And is XXs, late kind early or a or to saw on we expect kind the high higher quarter return run Just rates then kind was of there range low more

Sam Norton

years So, affreightment that we Phoebe, clear, for many contract Philadelphia been and with through has XXXX. Solutions in one Energy runs have contract place to that be of

average. two two the at we’ve consistent have the I past. the PBF, historically And what had in minimums a Monroe take-or-pay with we’re levels the increase has other the that And in those XXXX are for The other equivalent the levels other exceed in the confidence of remain stated Also, weeks. been earlier, approach one to committed that renewed contracts twice refineries Energy Philadelphia and will that of have believe been two year. we the time Solutions them on take-or-pay are that that approximately or minimums with It give period been that charter three committed past. Delta they agreed renewed us one in XXXX seeing that recent of the exist one potentially take-or-pay opposed the level annually, the years renewed as as in as returns we is to with across have

Phoebe Clarke

Okay, great.

Just one on last up follow that.

like this affected a on things saying including weather rate that part So It that? mentioned effective Act you of of vessels. Act different up. Jones bunch that’s fourth quarter movements Is picking sounds the and Jones that you’re

to is So of going continue part be lightering? And stress significant a is around pressure? that to the a that

Sam Norton

get had contractual chose happen in are there fourth increased argument views some we that of and take-or-pay with refining had quarter our the Delaware think to operations. in in some movements ahead the those in customers response that It crude that features also our volumes as existed engage contract largely minimum of our to is impact opposed the to on that in oil would terms to discuss or I out would of that past be to that we’ve observing that from and watching lightering in Mexico we is past. the development the made of the stated Bay that highlight the structures this Gulf that

would repeat I again. I So think

of volumes financial to future. foreseeable requirements the lightering Delaware business in We us committed the stable our lead a that the very Bay and the the of today the overall for with for take-or-pay refineries combination are of will future from comfortable foreseeable very remain performance the

Phoebe Clarke

Thanks. Great.

Operator

to the Sam Mr. back question-and-answer to Norton for remarks. our any like closing over now conference I This concludes would session. turn

Sam Norton

a and you, months’ to completed remarks look and our again for to Thank we in that just day. time. you everyone forward thank would few Have believe again a we’ve talking like good to I joining us Andrea.

Operator

concluded. The Thank today’s attending conference for presentation. has now you

disconnect. may You now

Overseas Shipholding Group, Inc. - Ordinary Shares (OSG) 9 Mar 182017 Q4 Earnings call transcript