OSG - Earnings call transcript Q3 2018 | Overseas Shipholding Group, Inc.

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Operator

Good morning, and welcome to the Overseas Shipholding Group Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Sam Norton, Chief Executive Officer. Please go ahead.

Samuel Norton

Garry. you, Thank and Molly everyone, our all joining for third Good and thank Princeton Trueblood, Arcia earnings for McFarland Dick quarter morning, call. you and XXXX me opportunity appreciate your time perspective the We depth this in taking provide public and written to and welcome disclosures to to on our call. listen added regarding our X the everyone website past beginning narrative on statements, of the on to PowerPoint forward-looking Pages I available would to this other may Prior and and quarter, review of X the presentation the call. direct information, like provided be estimates to course our which of during this of read contents presentation, consider and important urge narrative The part and of this are an them to everyone carefully. I

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

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

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

to also which and GAAP to measures posted non-GAAP earnings the is our reconcile SEC, presentation in and website. on release In today quarter addition, our certain define furnished financial includes our which third we

fundamentals. greater recently the developments Turning plan securing strategic now in Company resulted to to to benefit on from future revenue believe multiple executing specifics meaningful these of and position our the We continuing progress streams. in mix on fronts, business market us our visibility has broader arc completed quarter, which made of improving OSG well the

since quarter over Coupled early contracts available for of vessels our we of at for days these in charter fixed now with of all the conventionally months. calendar of nearly XX% second available next the to rate five end our five XX year, covering of well done for and average contracts excess rates day, the in these Specifically $XX,XXX for the fixtures tankers note, XXXX. per trading provide close recent year tankers time have coverage forward concluded on days

two over fixed available our concluded have for of assets of for securing cover XXXX agreements XXXX these our XX% employment of We ATBs also days. trading ATB increasing extension for much to through forwards and

affreightment We the employment wealth the tankers. two for Government for have extended MSP XXXX with years the visibility contract through of and of providing end the of Israel next

We Hyundai half have tankers new Dockyard for Korea contracts delivery second concluded construction in two the XXXX. with Mipo of of for during the

delivered be We Oregon to built have firm XXXX. tank of Marine's of and Portland, be optional construction barge to both which in are one for at one shipyard, contracted the Gunderson scheduled

XXXX. during for for a under now contractual principal We to signed terms tanker. MR OSG a subject on negotiation to have first intent provide letter complied the Detailed are quarter of this agreement including to Act lease Jones delivery terms a of completion of vessel bareboat the of

expansion pursuit path weeks, the in of of clear for as are million opportunities. provide sheet anticipated, commitments which additional of would result $XXX.X term received XXXX. will to refinancing in debt financing two coming the debt closed welcome and these balance When maturing in have stability the We facilities for facilities the the our

in to $XX million reserve that several on which the previously held years back review have sheet, vestiges last developments closure commitment sector. realization dating former tax these we deploying allowed IRS of role considerable for The of balance all audited to U.S. a petroleum have Finally, our leading matters of the performance long-term tanker international giving flag of final effect of cumulative concluded operations. our assets have the of uncertainty removed distribution have in our financial as and is affirmed future

time our We of attaining the in of have market fleet. largely short-term succeeded spot in majority opportunistically stated moving to our from goal trading in contracts profitable charter

for asset Jones renewal tangible bareboat promise incremental Our flag lease Act additions core tankers. the and investment in commit revenue one to Act in two additional the These specifically and U.S. and Jones in form operating our the new confidence new efforts to us tanker of growth the potentially keep given future have our barges capital to capacity, to in the commitments of two businesses. of

our and addition, XX and organization affected deceleration increased been core we past quality product and from XXXX, conventional these our has short-term market for spot been Throughout achieved for the the condition management clean be seasonal positive commitment our forward A activities. inventory short-term in of have trends market build spot by rooted results secured be beyond Let worked the to the ATB our year in the achievements, a of efforts. this of year. and through the of market derived XX% niche demand, as compromising second conventional soft tankers the to details. Moderation of transport suggest the at for cash in the XX% these a should rate rates XX% across days. to operational during of In businesses. consequence continue greater that inventory dropped trading cost hard spot both we third extended fixtures during occur available move volumes has impact of shift commitments the that seasonal first tanker long-term quarter cargoes. minimum XXXX performance. the have Utilization of anticipate fourth tankers months, by financial employment of lightering derth efficiencies achieved a provide the product without MSP appears of the apparent half safety levels these in clean customers spot over forward reduce visibility conventional persistent end half Notwithstanding tanker our a clean peak to in velocity disproportionately demand a of upturn flows spot persisted we and product me our trading spot of quarter. we to have ATBs were that in the Real all Historical of to progress half roughly has led through rates commitments improve Utilization three across decisions patterns additional spot utilization providing

rates of quarters continuing made have utilization chartering in swings across achieved short-term challenge. sharp three the However, XXXX a decisions

market As emphasized of is we presentation, trading the achieving objectives cost in swings to for longer-term erratic borne the that we to chartering past in spot a have have pursue. the chosen

the been supporting during our cargos we oil to remained belief crude the costs are our firm in the clean benefit have five immediate quarter. the high intention crude Three transporting with charters demand product the for manifest in concluded just in the the of muted will were oil completed of of boarder In that period sector made approach trades. time. spot-trading domestically demand recent during strong contrast our quarter, While over

crude implication make the these the the oil sold Coast wide trades. and will than on crude be market to A of for past Gulf developments variables, quarter Coast what in The spread between Jones commitments on pricing our with be Jones period a in Domestic an most evolving results, Dick users Act comparison. effective in cost terminals the performance, through beyond seen in offer crude Gulf appears our never option our transportation explain will of to a that domestic charter crude proceed more and be step-like our much which oil with will utilization prices perspective hold. a international towards have seen and are feature swing Nevertheless, our presentation, what similar promise a that we the in demand. within marine and market likely for of price told, active Act demand future for core freight crude evolving to offering we East fundamentals at dynamics detail as Notable been favorable supportive volatility has sustained and a during of All our more transportation. customer of are which was to amplifies continuing Rate of be international at progression differentials of consider with is in domestic Jones even crude a see More developing we important may byproduct and customers still discussions a business. encouraging delivered prices the cost transition XXXX. likely in the can of arena, has base the U.S. discount recovery financial available the to what as his evidence quarterly noted shape the pricing demand to now to short-term be these the continue expectations Coast be through basis end quarter often in narrative domestic in expanded future commentary. recent supply and affect regular third of are may many progression. our As control to factor quarter and considerable not freights, an present refiners, end that the Act balance affreightment contract healthy of

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

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

Richard Trueblood

Sam. Thanks

to the review let's more XXXX Slide Please results XX. Now detail. in turn of third quarter

the First to performance Company's I to the some provide context assist quarter. during understanding in want

spot in lower Delaware and is The a market seasonally reductions volumes. quarter of Bay lightering quarter slow activity third with typically levels

the repair experienced days quarter, days drydock of third requirements This from when compared to days XXXX. dry result X We vessels including mandated compared which date. XXXX inspection build for with XX dock XXX. the we than repair one QX we Further, increased periods fewer XX During XX XXXX. of we in days period other Accordingly, to start operated experienced schedules in total a OSG had same on time the periods. vessel the

this year days. of The revenues quarter, X million. $X.X we TCE repair combined ago the During effect was to reduce experienced approximately by

affected season short peak continue from Utilization shift half short-term in our spot and spot three dropped conventional increase in financial conditions during XX% and at Our both be the market demand resulting our rates rate in to moderation utilization product be ATB businesses. year. clean beyond quantities. conventional market product rooted term levels tanker tanker by quarter, clean The conventional inventory XX% negatively the to results in appears tanker an roughly above and the achieved spot first trading for of half of across transport

available ATBs We As million, order million. line the contributions spot upturn charter ATB a we with of result, trading existing the returned contract. Independence in expectations excess levels rates Utilization in occur vessel experienced time half this and were anticipate Repair completed the of third expectation unit XX% XXXX. through during negative quarter year. rates demand return to $X $X.X achieved quarter a contribution a under new during of the to in OSG quarter the an the as seasonal results vessels vessel to first for with in our operating service of utilization the were first of move an the seen moths operating were to the to these fourth spot XXX of market operating quarter days. to reversion with in

estimated a are $X.X for we quarter. in covered of million, predict will rolled which in against form and basis we June. recover. how the may most this successful cannot of much in are, an the We the This While repair insurance of claim bulk claim carrier that cost largely by pursuit will this involved the loss third elution experience unit if we not in of be even incident was revenue we

we of this Turning our from businesses, of and despite the $XX,XXX statutory quarter. and an X% vessel quarter the of increase to that from out lightering X% service XXXX, charter timer our prior complete generated a and barges quarter surveys within effective equivalent is a to the day, niche XX days earnings repairs during experienced

remain has We minimum confident case, comparisons recent that customers higher historically volumes at balance our with with have take-or-pay for the we the been than Bay of levels will of volumes seen the than the months year. this in consistently higher in exceed now financial and activity established minimum Delaware historical likely performance

under of the These limited quarter obtaining to of expected for Maritime two to XX. market Israel a time these throughout to in the the during but Program million, two compared turn in $XX,XXX normal affreightment voyages totaled contribution are time quarter. Overseas $XX,XXX Chinook to the to saw these during levels return voyage of May conventional to charter per assets quarter contract our Overseas quarter $XX.X day the performed compared The slight contribution Our operating at day. schedule XXXX. revenues prior of assets. continued in us the in Chinook continue success the with a the The had you TCE year quarter revenue spot Security the XXXX. was a tanker. when A of can results three reduction and third time fourth in flows drop is tankers cash in of charter earnings and $XX across a and resulting trading for per currently the Please including million to as quarter, the close average quality a government charter tanker decrease earnings shuttle equivalent rebound a during redelivered in to average see vessels our the of XX% gross and under of group during fuel Slide

Act rate in year Our spot the tankers XXXX the third our of year. to XX% quarter, slowdown movements. the total because from to to prior Israel decreased third utilization market decreased The days from of product trading fewer this the fourth and the to compared due The of Government period. spot Jones market XXX shifted trading first half for revenue clean opportunities one seasonal XX% when the during of quarter reduction a timing the shipments in voyage ago

operating the time periods. XXX including third revenue loss XXXX, in quarter days During rebuilt OSG of ATBs XXX. Pre-tax of comparable ATB by the fewer total million $X same the impact increased reduced the

market reduction reduction days The on previously experienced the discussed revenue to Jones loss ATB. The and the in utilization a during executed available a third sale $X.X tankers spot included due revenue contribution the proportion limited number significant trades quarter. quarter on of million of a of $X.X XXXX days loss nevertheless Act of revenue available We rates. but decreased million one the a

year quarter third in tanker Act XXXX, resulted activity X% revenues of spot Jones the market of to our from During compared XX% period. the comparable prior

the resulting increase with Bay Delaware principally maintenance. lightering to decrease due lightering dock dry those the Our to in daily so, second with revenue rate of remain an in consistent days experienced from revenues quarter XXXX, volumes decreased and $XXX,XXX $XX,XXX. Even average

$XX.X – one of previously lack voyages in to rates. a non-Jones resulted large in voyage daily less the decreased compensate of That Our million coupled resulted revenues the Act second XX% decrease the Sequentially a due fill-in charter our loss spot with keep vessel million both risk utilization XXXX charters the quarter. or to to Spot was a placed market XX%. the risk shift operators, decreased rates risk. tanker utilization in TCE spot in activity with decrease activities, the quarter market from during There the TCE in tanker to of during measure mentioned timing Government $X.X in the mind voyages, shift time utilization quarter. which Israel of revenues

sequential to demand. Our the XXX experience decline one market a a An intermediate in of survey due spot rebuilt elision. OSG and reduction million ATB ATBs $X TCE on revenues

our an and our been saw size to that of less As find at occurring revenue interrupting desirable million use. operators ATB to ATBs revenues has the $X.X older fleet customers a reminder, XXXX, terminal continue decreases QX, reduction in increase QX and TCE XXXX from

to Our niche business continue strong activities our to provide business. a stable platform

tankers well. shuttle continue to Our perform

leverage Our changes with business in result translate in into is characterized by operating changes directly high-level of of earnings. the revenues

XXXX third third of compared Slide during all revenues more revenue business. quarter a Act of fourth across previously our the timing elements XXXX quarterly current Lightering Israel voyage decreased relatively quarter, granular of shift. of declines we due of our to Moving quarter have XX, look revenues, at quarter TCE primarily experienced to for during the discussed consistent non-Jones remained exception the performance Government tankers with to XXXX of the taking

quarter second preference moves of quarter, customer And saw utilization our smaller XXXX, returned a ATB XXXX which we and the resulting increase cargo third $X.X During in levels. quarter revenues. for the favor those revenues million first during to

third decline revenue XXXX. softness recorded lower tankers our the compared of tanker the XXXX product experience Handysize million trading resulting Act and for rates in to second clean utilization market. million $X.X of of $X.X current product tanker market quarter from Jones Jones Our decrease quarter Seasonal Act the quarter in performance revenue spot

was requirements. earnings $XX,XXX. XXXX spot-market XXX the TCE daily quarter in from quarter in days there a to XXXX Additionally, The dock mid-$XX,XXX XXX day maintenance and non-earning in XX%. to Spot of market days increase from an $XX,XXX third to in third decreased market or decreased average days due remain dry Spot range. rates

Slide maintenance Moving required The $X.X during trading conventional three the resulted maintenance estimated to by reduced and the XX, QX, activities operating $XX.X dock activity million the mandatory spot revenue of performed XXXX. contribution the is compared dry quarter. $X.X in decrease market decreased our to compounded million from impact tankers million. spot vessel of of the market the

of Chinook results by The current revenue Israel and as fewer vessel, days voyage XXXX to Niche tanker. of XXX Government ATB the operating a maintenance. return less the experienced and time to due during large Additionally, conventional in use prior required the decrease in from lost from days contribution the declined million OSG our QX vessel part one lightering market levels vessel $X.X operating the revenue charter quarter. elision contribution

to Slide XX. Moving

down those losses million turn Slide IRS full XXXX. two of completed us effect was the turn recognized earlier the million, $XX.X Net We XXXX audit driven tax from recognize the in $XX.X the quarter discussed above Results the during For QX TCE Slide quarter years. by tax XX. Please connection in all the up audit benefits primarily was the million disposition XXXX. the The through previously reasons in loss was $X.X the in income previously net in stated of from third the Please in for XX% decline XXXX of The our decrease third EBITDA adjusted $XX.X third of to in million quarter. revenues. to of beneficial the reserved XX. returns vessels permitted XXXX with period the the quarter. during to of recognized quarter

Moving including from million with XXXX left cash to quarter right, we $XXX,XXX the cash. total began third of restricted $XXX of of

interest third the improvements Working $XX million During our we on million ended $X was and of $XXX $X The million generated invested capital expense. $X quarter, to quarter contributed new docking cash. we in dry We of EBITDA. cash, $X million million cash. changes and cash vessels, million result expended construction adjusted with vessels $XXX,XXX restricted we including of of we incurred the of

to and cash September XXXX, Before of liquidity, the including on restricted XX, as of previous have discussion mentioned we of we Slide million $XXX turn cash. at our continuing XX, we cash $XXX,XXX slide,

XXXX. represents since in $XXX million was million. outstanding $XXX debt total September Our reduction a This indebtedness

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

of loan. remain this loan. not our any term to flow sweep amortization provisions subject subject We on are excess the We do cash to

our September With times, $XX X.X prepayment of of we in the XXXX. at XXXX. do not to equity, February we make flow However, having ratio cash million XX, in X.X March, net anticipate down is payment million debt-to-equity times made $XXX from sweep considering

alternatives August to term X, refinance Our XXXX We loan. XXXX. on million began early evaluating $XXX loan in this matures

provide which loan. for We repayment in the $XXX.X our million current of will two to have in commitments aggregate be used loans, term

This remarks. Sam? a like make $XX.X call the transactions. financial back also now on closing now comments the conjunction concludes would statements. to with payment will in for We million turn of closing my I to his Sam the these

Samuel Norton

continue for long Thank Time sound had you, well as term. on to of utilization that have our for conventional activity has sport remain evidencing captured of larger our for to seasonal accept the confident barges All as fundamentals, softness to been revenue the strategy solid with Dick. willingness We both foundation, believe improving charter a even the rates. to some that our will remain cause stream exposure tankers in for together, commercial the risk. we the our provide benefits tanker mix rates customers sustainable a of rise, our

expect that is long-term We contracts more the secure to return progress and We form recent quarters be charter successful coming our will charter proving continue on to chartering to businesses spot executing during this and strategy months. securing market long leveraging in attractive our of commitments to believe strategy. term in niche we more availability

new by restrictions age acceptability service OSG in age, our exceeding such XX for core imposed to address well customer tightening positions years concerns. the base vessels commitment limit As vessels our use progressively construct of to

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

Operator

Instructions] from question first comes Needham. The Ryan [Operator ahead. Please go with Vaughan

Ryan Vaughan

rates you. Thanks, clarify the weakness One, of can questions lock spot one-year for the the to five a operator. longer-term? couple then two, in on your comment And decision rest you versus on to didn't why contract Good for XQ, of importantly follow turn the totally something expect spot you I more you but morning, can in Sam, XXXX?

Samuel Norton

Ryan. you, Thank

lease AMSC, the of have that current First to but with fixing we large that our have we of think I the this with make would that lease of that focused all, of have decisions have contracts some counted specifically length up quarter we been contracts of been we the to on a duration charters, coming have. charters extent of have don't point out the to we I on extension respect expiration

So, at. when a that to to extend for if leases and we on up decisions, we and opens we than have charters with opportunity longer probably the bareboat looking quarter broader this take look been AMSC, have we as we move that currently

of in then firm difficult there make respect. highlighted spot have hesitant far that, is to What the spot forecast will as presentations. the As definition or level is that I I can is destination projections is say Florida high the transport product market seasonality largest any by earlier project clean of for a the we be as normal to tourist in and April, tourist to the season slow little is is the that August, season clean season United that other represents volume low as here. driving which here cargoes relatively it's and from peak season in Florida, and bit February the States and Florida seasons hurricanes peak hot different September really the keep market, and in things is

the moved We've in a we that season past low we to again typically, move winter. season and movements peak kind up of August, to pick So as as into February the have clean see demand into from pickup and would September we the volume normally of expect that seen for April. product in

Operator

question next go ahead. The Please Elvis Partners. Pellumbi from comes CF with

Elvis Pellumbi

the morning comment MR particular. good in Rick, bit you for that talked for more the the deliveries for duration thanks Sam Good XXXX about and the morning lease new a presentation. QX on Could the you little

Samuel Norton

I a in letter said, Well midst the are we of of documentation that. finalizing as it's for intent, so

will can't specifically Our provisions. comment some as necessary contribute to second subject it weeks quarter the see next vessel terms end on of confidentiality I the to and the really to take year. of the with complete in for the during repair will special survey of streams be quarter the vessel. beginning would to Other than revenue first vessels give sometimes delivery We their expectation due, that, so expect to vessel XXXX. will the delivered us works The survey is

Elvis Pellumbi

understand. I

from on And could are two that piece. Okay. also different you going in Dick, new commitments not – the pari passu, later? cost? the is on differently for why the is characterizing terms are are is $XXX.X second the I sense give you something a that to the disclose million, facilities first piece you presume it us the Or is of

Richard Trueblood

The I be they different are not different two will – very mean by loans pools on of are secured collateral. pari passu.

guess and I not own the being characterize have conditions. terms is set of would basis they much. loan, current on greater so than but cost And rate I an each particular interest slightly the their

Elvis Pellumbi

Thank you. Okay.

Operator

question-and-answer As any further this would closing Instructions] remarks? questions, like showing make I Norton, [Operator Mr. to session. am concludes no our you

Samuel Norton

I Thank day. us. the hosting to all and just thank subsequent in joining And for Have a to for look you, forward the quarters. participants Gary. wanted thank good speaking you you again call to

Operator

Thank presentation. you. attending conference Thank is today's now The concluded. for you

now disconnect. may You

Overseas Shipholding Group, Inc. - Ordinary Shares (OSG) 9 Nov 182018 Q3 Earnings call transcript