Highlights - Diluted EPS of $3.24 per share on net income of $128.4 million. - Sale of securities adds $3.2 million, or $0.08 per share, to earnings in the period. - A $4.8 million non cash charge to interest in connection with terminating prior long-term credit facilities decreased earnings by $0.08 per share. - Dividend of $0.25, an increase of 43%, declared by the Board. - Panamax International adds new partner, Flota Petrolera Ecuatoriana (FLOPEC). - Fleet expansion program brings OSG's owned, operated and newbuild fleet to 113 vessels.
NEW YORK, May 2, 2006 (PRIMEZONE) -- Overseas Shipholding Group, Inc. (NYSE:OSG), a market leader in providing energy transportation services, today reported results for the first fiscal quarter of 2006.
For the quarter ended March 31, 2006, net income was $128.4 million, down 22% from $164.9 million in the same period a year earlier. Diluted earnings per share were $3.24, in comparison with $4.18 per share in the first quarter of 2005. TCE revenues in the quarter increased by 5% to $280.1 million compared with $267.2 million in the first quarter of 2005.
"OSG generated strong results and cash flows in the quarter, clearly demonstrating the advantages of having a large, diverse and modern fleet," stated Morten Arntzen, President and CEO of OSG. "This enabled us to strengthen our balance sheet, increase our book of long-term fixed charter revenue and pursue capital-efficient growth." Arntzen continued, "Looking toward the future, our newbuild program of 24 vessels across all segments provides us with improved scale and efficiencies to compete on a worldwide basis and provide superior service to our customers. This scale is critical to our success."
Quarter-over-quarter, TCE revenues for the crude oil segment were $207.1 million, up 3%, principally due to an increase of revenue days in the VLCC and Panamax sectors partially offset by the 2005 sale and redelivery of two Aframax tankers and off hire days in the period. TCE revenues in the product carrier segment were $53.9 million, up 36%, due to an increase in revenue days and higher average rates earned in both the spot and time charter markets. U.S. segment revenues were down 34% quarter-over-quarter to $13.0 million, as a result of a decrease in revenue days reflecting the sale of three crude tankers in 2005 coupled with an increase in drydock days during the period. The decrease in revenue days was partially offset by an increase in rates.
Of the $280.1 million in TCE revenues, approximately 72% were derived from the spot market and 28% from time and bareboat charters. OSG's fleet diversification strategy and the increase in revenues derived from product carriers, the majority of which trade on medium to long-term charters, has enabled OSG to reduce the percentage of TCE revenues from the spot market from 79% in 2003 and 85% in 2004. Detailed spot and time charter rates by vessel class can be found in Spot and Time Charter TCE Rates Achieved later in this press release.
For the three months ended March 31, 2006, total ship operating expenses increased $41.5 million to $150.6 million. The increase in time and bareboat charter expenses of $17.4 million resulted from the sale and charter back of 13 vessels. Vessel expenses increased $5.1 million principally due to additional costs incurred on three reflagged vessels that participate in the U.S. Maritime Security Program, increased crew costs and the timing of certain purchases, such as spares and stores. General and administrative expenses increased $8.0 million principally due to additional headcount, the recognition of targeted cash incentive compensation on a quarterly basis, expenses incurred in connection with investigations by the U.S. Department of Justice and increases in legal, accounting and consulting services. In addition, lower earnings from asset sales accounted for an increase in quarter-over-quarter ship operating expenses of $13.0 million.
Highlights of Recent Activities and First Quarter Events
Fleet Expansion
-- On March 7, 2006, OSG signed an agreement with a subsidiary of Cido Tanker Holding Co., a privately held shipping company headquartered in Hong Kong, to time charter two International Flag product carriers for a period of seven years, with an additional three year extension option for each vessel. The vessels will be built by Hyundai Mipo Dockyard in South Korea and are scheduled to be delivered to OSG in May and June 2008.
-- On March 29, 2006, OSG announced that it will build four 114,000 dwt 44-meter beam Aframax tankers at the New Times Shipbuilding Co. Ltd. shipyard based in Jinjiang, China. The vessels, scheduled for delivery in 2008 and 2009, will increase OSG's Aframax fleet to 21 tankers serving customers in the Atlantic basin, and will operate in the Aframax International pool. The tankers will be built using the new Common Structural Rules recently established by the International Association of Classification Societies (IACS) for all tankers and bulk carriers ordered after April 1, 2006 which includes stricter hull strength requirements.
-- On April 7, 2006, OSG signed long-term time charter-out agreements for two more of its Jones Act product carriers being built at the Aker Philadelphia Shipyard. The agreement between OSG and Tesoro Maritime Company, an independent refiner and marketer of petroleum products, is in addition to four other previously announced long-term charters: two with Shell Trading U.S. Company, a subsidiary of Shell Oil, and two with British Petroleum PLC. To date, six of the Company's ten newbuild Jones Act Product Carriers have been secured by long-term charters at attractive rates.
-- On April 24, 2006, Flota Petrolera Ecuatoriana (FLOPEC), an Ecuadorian state-owned oil company, joined Panamax International. The addition of five Panamax tankers from FLOPEC's fleet increases the joint venture's fleet to 20 modern, double hull tankers, all of which trade in the Americas.
Fleet Metrics and Statistics
-- As of March 31, 2006, OSG had an operating fleet of 89 International Flag and U.S. Flag vessels. Fifty-six percent, or 50 vessels, were owned, compared with 69%, or 68 vessels, as of March 31, 2005.
-- OSG's newbuild program of chartered-in and owned vessels totals 24 and spans across all lines of business: four International Flag crude tankers; six International Flag product carriers; and 10 Jones Act product carriers, representing 1.2 million deadweight tons, and four LNG carriers, representing 864,800 cubic meters.
-- Revenue days in the quarter totaled 7,208, an increase of 1% over the same period a year earlier.
---------------------------------------------------------------------
Three Months Ended March 31,
----------------------------
Revenue Days 2006 2005
---------------------------------------------------------------------
Crude 3,912 3,841
Product 2,600 2,256
U.S. 516 856
Other 180 180
----------------------------
7,208 7,133
---------------------------------------------------------------------
-- Future revenue associated with time charters, excluding the LNG segment, totals $845.8 million, representing 32,140 revenue days.
Other Corporate Activities
-- On April 12, 2006, OSG's Board of Directors announced a quarterly dividend of $0.25 per share, a 43% increase from $0.175 per share, which had been in place since June 2003. OSG has paid a quarterly dividend to shareholders since 1974.
-- On April 3, 2006, OSG announced that Jean-Paul Vettier, a retired senior executive of Total S.A., the fourth largest publicly-traded oil and gas company in the world, had been appointed to its Board of Directors, effective April 1, 2006.
Financial Profile
During the first fiscal quarter, shareholders' equity increased by $135.3 million to more than $2.0 billion and liquidity, including undrawn bank facilities, increased to more than $1.75 billion. Total long-term debt as of March 31, 2006 was $854.5 million compared with $965.7 million at December 31, 2005. Liquidity adjusted debt to capital was 19.5% as of March 31, 2006, an improvement from 24.5% as of December 31, 2005.
On February 15, 2006, the Company announced it had entered into a $1.5 billion seven-year unsecured revolving credit agreement with a group of banks. Borrowings under this facility bear interest at a rate based on LIBOR. The terms, conditions and financial covenants contained therein are generally more favorable than those contained in the Company's prior long-term facilities. In connection with entering into the agreement, the Company terminated all of its other unsecured revolving credit facilities (long-term credit agreements of $1.285 billion and a short-term agreement of $45 million).
Average TCE Rates Achieved
The following table shows time charter equivalent revenues per day and revenue days (defined as ship operating days less lay-up, repair and drydock days) for the Company's International fleet for the three month period ended March 31, 2006 compared with the same period of 2005.
Three Months Ended
March 31,
------------------
2006 2005
--------------------------------------------- ------- -------
Trade - Crude
--------------------------------------------- ------- -------
VLCC
Average TCE Rate (a,b) $78,611 $82,749
Number of Revenue Days 1,633 1,472
Aframax
Average TCE Rate (a) $38,107 $37,409
Number of Revenue Days 1,362 1,523
Panamax
Average TCE Rate (a) $29,244 $27,377
Number of Revenue Days 917 767
--------------------------------------------- ------- -------
Trade - Refined Petroleum Products
--------------------------------------------- ------- -------
Panamax
Average TCE Rate (a) $24,663 $15,563
Number of Revenue Days 180 228
Handysize
Average TCE Rate (a,b) $20,423 $17,731
Number of Revenue Days 2,420 2,028
--------------------------------------------- ------- -------
(a) Includes vessels operating on voyage
charters and period charters.
(b) Includes the effect of forward freight
agreements.
Spot and Time Charter TCE Rates Achieved
The following table provides a breakdown of TCE rates achieved for the first quarters of 2006 and 2005 between spot and time charter rates. The information for VLCCs, Aframaxes and Panamaxes is based, in part, on information provided by the pools or commercial joint ventures in which they participate.
Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
----------------- -----------------
Spot Time Spot Time
Charter Charter Charter Charter
--------------------------- ------- ------- ------- -------
Trade - Crude
--------------------------- ------- ------- ------- -------
VLCC
Average TCE Rate $78,611 -- $83,971 $29,492
Number of Revenue Days 1,633 -- 1,439 33
Aframax
Average TCE Rate $41,658 $26,601 $42,184 $23,331
Number of Revenue Days 1,039 323 1,142 381
Panamax
Average TCE Rate $34,464 $25,205 $39,485 $18,108
Number of Revenue Days 381 536 347 420
--------------------------- ------- ------- ------- -------
Trade - Refined Petroleum
Products
--------------------------- ------- ------- ------- -------
Panamax
Average TCE Rate -- $25,444 $15,019 $16,024
Number of Revenue Days -- 180 49 179
Handysize
Average TCE Rate $27,763 $19,271 $26,058 $17,283
Number of Revenue Days 567 1,853 180 1,848
--------------------------- ------- ------- ------- -------
2006 TCE Rates
The Company has achieved the following average estimated TCE rates for the percentage of days booked for vessels operating through April 21, 2006. The information for the VLCCs, Aframaxes and Panamaxes is based, in part, on information provided by the pools or commercial joint ventures in which they participate. All numbers provided are estimates and may be adjusted for a number of reasons, including the timing of any acquisitions or disposals and the timing and length of drydocks and repairs.
Second Quarter Revenue Days
---------------------------------
Average Fixed Open
Vessel Class and TCE as of as of % Days
Charter Type Rates 4/21/06 4/21/06 Total Booked
------------------------- ------- ------- ------- ------- ------
Trade - Crude
------------------------- ------- ------- ------- ------- ------
VLCC - Spot $49,000 1,111 531 1,642 68%
------------------------- ------- ------- ------- ------- ------
Aframax - Spot $29,000 263 905 1,168 23%
Aframax - Time $28,500 279 -- 279 100%
------------------------- ------- ------- ------- ------- ------
Panamax - Spot $30,500 129 324 453 28%
Panamax - Time $25,000 546 -- 546 100%
------------------------- ------- ------- ------- ------- ------
Trade - Refined Petroleum
Products
------------------------- ------- ------- ------- ------- ------
Panamax - Time $19,000 182 -- 182 100%
------------------------- ------- ------- ------- ------- ------
Handysize - Spot $27,500 246 376 622 40%
Handysize - Time $17,500 1,754 -- 1,754 100%
------------------------- ------- ------- ------- ------- ------
VLCC and V-Plus tankers trade in the Tankers International pool;
Aframaxes trade in the Aframax International pool and Panamaxes trade
in the Panamax International joint venture.
The following table shows average estimated time charter TCE rates and associated days booked and days open as of April 21, 2006, by quarter, for the third and fourth quarters of 2006.
Fixed Rates
and Revenue Days Open Days
as of 4/21/06 as of 4/21/06
--------------------------------------------------------------------
Q306 Q406 Q306 Q406
--------------------------------------------------------------------
Trade - Crude
--------------------------------------------------------------------
VLCC
Average TCE Rate -- --
Number of Revenue Days -- -- 1,654 1,654
Aframax
Average TCE Rate $28,500 $28,500
Number of Revenue Days 280 291 1,135 1,178
Panamax
Average TCE Rate $25,000 $24,500
Number of Revenue Days 552 503 450 506
--------------------------------------------------------------------
Trade - Refined Petroleum
Products
--------------------------------------------------------------------
Panamax
Average TCE Rate $19,000 $19,000
Number of Revenue Days 184 184 -- --
Handysize
Average TCE Rate $17,000 $17,500
Number of Revenue Days 1,735 1,686 784 928
--------------------------------------------------------------------
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
----------------------------
($ in thousands except 2006 2005
per share amounts) ---------- ----------
Shipping Revenues:
Pool revenues $ 193,105 $ 187,954
Time and bareboat charter revenues 70,848 69,911
Voyage charter revenues 27,073 17,542
---------- ----------
291,026 275,407
Voyage Expenses (10,917) (8,220)
---------- ----------
Time Charter Equivalent Revenues 280,109 267,187
---------- ----------
Ship Operating Expenses:
Vessel expenses 48,915 43,800
Time and bareboat charter hire expenses 43,171 25,801
Depreciation and amortization 34,354 36,359
General and administrative 24,011 16,021
Loss/(gain) on disposal of vessels 121 (12,902)
---------- ----------
Total Ship Operating Expenses 150,572 109,079
---------- ----------
Income from Vessel Operations 129,537 158,108
Equity in Income of Affiliated Companies 6,812 17,673
---------- ----------
Operating Income 136,349 175,781
Other Income 9,392 11,223
---------- ----------
145,741 187,004
Interest Expense 22,607 22,831
---------- ----------
Income before Federal Income Taxes 123,134 164,173
Credit for Federal Income Taxes (5,230) (746)
---------- ----------
Net Income $ 128,364 $ 164,919
========== ==========
Weighted Average Number of
Common Shares Outstanding:
Basic 39,516,077 39,435,079
Diluted 39,569,551 39,499,100
Per Share Amounts:
Basic net income $ 3.25 $ 4.18
Diluted net income $ 3.24 $ 4.18
Cash dividends declared $ 0.175 $ 0.175
2005 has been reclassified to conform with the 2006 presentation.
TCE Revenue by Segment
The following table reflects TCE revenues generated by the Company's three reportable segments for quarters ended March 31, 2006 and 2005, respectively, and excludes the Company's proportionate share of TCE revenues of joint ventures.
Three Months Ended March 31,
-----------------------------------
% of % of
($ in thousands) 2006 Total 2005 Total
-------------------------------------------------------------------
International
Crude $207,091 74.0 $201,647 75.5
Product 53,862 19.2 39,506 14.8
Other 6,201 2.2 6,284 2.3
U.S. 12,955 4.6 19,750 7.4
-----------------------------------
Total TCE Revenues $280,109 100.0 $267,187 100.0
===================================
--------------------------------------------------------------------
Income from Vessel Operations by Segment
The following table reflects income from vessel operations accounted for by each reportable segment. Income from vessel operations is before general and administrative expenses, gain/(loss) on disposal of vessels and the Company's share of income from joint ventures.
Three Months Ended March 31,
-------------------------------------------
($ in thousands) 2006 % of Total 2005 % of Total
------------------------------------------------------------------
International
Crude $129,775 84.4 $140,490 87.1
Product 20,534 13.4 16,468 10.2
Other (a) 1,811 1.2 (2,416) (1.5)
U.S. 1,549 1.0 6,685 4.2
-------------------------------------------
Total Income from
Vessel Operations $153,669 100.0 $161,227 100.0
===========================================
------------------------------------------------------------------
(a) 2005 reflects reserves related to Department of Justice
investigations and the settlement of certain crew benefits.
Reconciliations of income from vessel operations of the segments to amounts included in the consolidated income statements follow:
Three Months Ended March 31,
----------------------------
($ in thousands) 2006 2005
---------------------------------------------------------------------
Total income from vessel operations
of all segments $ 153,669 $ 161,227
General and administrative expenses (24,011) (16,021)
(Loss)/gain on disposal of vessels (121) 12,902
--------- ---------
Consolidated income from vessel
operations $ 129,537 $ 158,108
========= =========
---------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
($ in thousands) 2006 2005
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 197,378 $ 188,588
Voyage receivables 123,614 157,334
Other receivables 35,568 22,202
Inventories and prepaid expenses 25,726 16,763
---------- ----------
Total Current Assets 382,286 384,887
Capital Construction Fund 301,460 296,126
Vessels and other property 2,264,328 2,288,481
Vessels under Capital Leases 35,922 36,267
Deferred drydock expenditures, net 26,133 19,805
---------- ----------
Total Vessels, Deferred Drydock
and Other Property 2,326,383 2,344,553
---------- ----------
Investments in Affiliated Companies 276,446 269,657
Other Assets 54,496 53,457
---------- ----------
Total Assets $3,341,071 $3,348,680
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, sundry liabilities
and accrued expenses $ 89,601 $ 105,173
Short-term debt and current installments
of long-term debt 20,066 20,066
Current obligations under capital leases 6,682 6,968
---------- ----------
Total Current Liabilities 116,349 132,207
Long-term Debt 813,950 923,612
Obligations under Capital Leases 40,534 42,043
Deferred Gain on Sale and Leaseback
of Vessels 222,429 233,456
Deferred Federal Income Taxes and
Other Liabilities 136,446 141,334
Shareholders' Equity 2,011,363 1,876,028
---------- ----------
Total Liabilities and
Shareholders' Equity $3,341,071 $3,348,680
========== ==========
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands) Three Months Ended
March 31,
-----------------------
2006 2005
--------- ---------
Cash Flows from Operating Activities:
Net income $ 128,364 $ 164,919
Items included in net income not affecting
cash flows:
Depreciation and amortization 34,354 36,359
Amortization of deferred gain on sale
and leasebacks (10,399) (693)
Deferred compensation relating to
restricted stock and stock option grants 925 361
Deferred federal income tax credit (3,389) (1,183)
Undistributed earnings of affiliated
companies 5,750 (5,291)
Other - net 4,278 (2,061)
Items included in net income related to
investing and financing activities:
Gain on sale of securities - net (4,966) (6,675)
Loss/(gain) on disposal of vessels 121 (12,902)
Changes in operating assets and liabilities (3,339) (75,680)
--------- ---------
Net cash provided by operating activities 151,699 97,154
--------- ---------
Cash Flows from Investing Activities:
Expenditures for vessels (4,957) (542)
Payments for drydocking (8,619) (2,629)
Proceeds from disposal of vessels -- 77,159
Acquisition of Stelmar Shipping Ltd. -- (742,433)
Expenditures for other property (2,052) (599)
Investments in and advances to
affiliated companies -- (1,034)
Distributions from affiliated companies -- 15,050
Other - net (612) 6,678
--------- ---------
Net cash (used in) investing activities (16,240) (648,350)
--------- ---------
Cash Flows from Financing Activities:
Issuance of debt, net of issuance costs -- 752,250
Payments on debt and obligations under
capital leases (111,461) (526,886)
Cash dividends paid (6,920) (6,902)
Issuance of common stock upon exercise of
stock options 121 166
Other - net (8,409) (495)
--------- ---------
Net cash provided by/(used in)
financing activities (126,669) 218,133
--------- ---------
Net increase/(decrease) in cash and
cash equivalents 8,790 (333,063)
Cash and cash equivalents at beginning
of year 188,588 479,181
--------- ---------
Cash and cash equivalents at end of period $ 197,378 $ 146,118
========= =========
2005 has been reclassified to conform with the 2006 presentation.
Fleet
On March 31, 2006, OSG was the second largest publicly traded oil tanker company in the world as measured by number of vessels. OSG's fleet of 113 vessels, including newbuilds, aggregates 12.7 million deadweight tons and 865,000 cbm. Adjusted for OSG's participation interest in joint ventures and chartered-in vessels, the fleet totaled 106.25 vessels. For current fleet information, which is updated on a quarterly basis, refer to the Company's website at www.osg.com
Vessels Vessels Total at
Owned Chartered-in March 31, 2006
-----------------------------------------------
Total Vessels Total
Vessel Type No. WBO No. WBO Vessels WBO Dwt
------------------- ---- ---- ---- ----- ------- ------ ----------
VLCC (including
V-Plus) 12 12 10 6.25 22 18.25 6,994,410
Aframax 9 9 8 7.00 17 16.00 1,758,994
Panamax 9 9 2 2.00 11 11.00 831,396
Summary Inter-
national Flag
Crude Tankers 30 30 20 15.25 50 45.25 9,584,800
Panamax 2 2 -- -- 2 2.00 73,313
Handysize 12 12 13 13.00 25 25.00 1,074,834
Summary Inter-
national Flag
Product Carriers 14 14 13 13.00 27 27.00 1,148,147
International Flag
Dry Bulk Carriers -- -- 2 2.00 2 2.00 319,843
Total International
Flag Operating
Fleet 44 44 35 30.25 79 74.25 11,052,790
U.S. Flag Operating
Fleet (a) 6 6 4 4.00 10 10.00 386,047
Total Operating
Fleet 50 50 39 34.25 89 84.25 11,438,837
Newbuild Fleet
International Flag
Aframax Crude
Tankers 4 4 -- -- 4 4.00 456,000
Handysize Product
Carriers -- -- 6 6.00 6 6.00 298,000
U.S. Flag Product
Carriers -- -- 10 10.00 10 10.00 460,000
Subtotal of Crude
Tankers, Product
Carriers and Dry
Bulk Carriers 54 54 55 50.25 109 104.25 12,652,837
Newbuild LNG
Carriers 4 2 -- -- 4 2.00 864,800 cbm
Total Operating
and Newbuild Fleet 58 56 55 50.25 113 106.25 --
WBO = Weighted by Ownership
----------------------------------------------------------------------
(a) Includes three owned product carriers that trade
internationally and are included in the Product revenue segment.
Average Age of International Flag Operating Fleet
OSG has one of the youngest International Flag fleets in the industry. The Company believes its modern, well maintained fleet is a significant competitive advantage in the global market. The table below reflects the average age of the Company's owned International Flag fleet in comparison with the world fleet.
-------------------------------------------------------------------
Average Age of OSG's Average Age of
Owned Fleet at World Fleet
Vessel Class 3/31/06 at 3/31/06 (a)
-------------------------------------------------------------------
VLCC 6.0 years 8.4 years
Aframax 8.3 years 8.9 years
Panamax (b) 3.0 years 10.6 years
Handysize 5.2 years 12.6 years
-------------------------------------------------------------------
(a) Source: Clarkson database as of April 1, 2006.
(b) Includes Panamax tankers that trade crude oil and
refined petroleum products.
Drydock Schedule
In addition to regular inspections by OSG personnel, all vessels are subject to periodic drydock, special survey and other scheduled maintenance. The table below sets forth anticipated days off-hire for these events by class for the Company's owned and bareboat chartered-in vessels.
Q106 Q206 Q306 Q406
------ -------------- -------------- ---------------
Pro- Pro- Pro-
Actual jected jected jected
Days Days No. Days No. Days No.
Off- Off- of Off- of Off- of
Hire Hire Vessels Hire Vessels Hire Vessels
------- ----- ------- ------ ------- ----- -------
Trade - Crude
------------------ ---- ---- ------- ------ ------- ----- -------
VLCC 19 14 2 14 1 14 1
Aframax 74 0 0 54 3 0 0
Panamax 73 0 0 0 0 3 1
------------------ ---- ---- ------- ------ ------- ----- -------
Trade - Refined
Petroleum Products
------------------ ---- ---- ------- ------ ------- ----- -------
Panamax 0 0 0 0 0 0 0
Handysize 100 172 5 73 2 130 4
------------------ ---- ---- ------- ------ ------- ----- -------
U.S. 114 0 0 5 1 0 0
------------------ ---- ---- ------- ------ ------- ----- -------
Total 380 186 7 146 7 147 6
------------------ ---- ---- ------- ------ ------- ----- -------
Market Overview
Worldwide oil demand during the first quarter of 2006 increased by approximately 700 thousand barrels per day ("b/d"), or 0.9%, compared with the first quarter of 2005. While there was no oil demand growth in OECD countries, non-OECD demand rose by 2.3%. The largest increase in demand of 5.2% occurred in the Middle East and, therefore, had no impact on tanker demand. Oil demand growth stagnated in Southeast Asia as reductions in or eliminations of fuel subsidies had a depressing impact on demand.
Tanker supply increased by 1.3%, or 4.1 million dwt, during the first quarter of 2006 from year-end 2005 levels. While there was growth in all vessel categories, the highest percentage growth was in the Panamax sector, where tonnage increased by 2.4%. Product Carriers, on the other hand, reflected the lowest percentage growth at 1.1%. The additional tonnage exerted downward pressure on TCE rates. Also, since the beginning of 2006, approximately 18 million dwt have been ordered. The high volume of ordering was, in part, a reflection of the April 1, 2006 effective date for the Common Structural Rules ("CSR") that resulted in more stringent shipbuilding requirements and an increase in newbuilding prices for tankers ordered after the effective date.
Vessels ordered today will, for the most part, not be delivered until the end of 2008 for Product Carriers and the end of 2009 for crude tankers. Shipyards are operating at or near full capacity and thus have no incentive to reduce newbuilding prices. Prices for newbuilds remained strong during the first quarter, increasing by 3% to 5% from year-end 2005 levels, depending upon vessel category. In some instances, owners who were willing to pay a premium for immediate delivery paid higher prices for modern second hand vessels than for newbuildings.
Key factors that affected first quarter 2006 rates included a record high U.S. refining maintenance program that significantly reduced refinery utilization rates. This reduced demand for crude oil imports, but resulted in higher U.S. product imports. Warmer than normal temperatures in the U.S. Northeast, however, reduced overall product demand for heating oil in the U.S. At the same time, colder than normal temperatures in Japan increased requirements for crude oil and fuel oil. In addition, supply interruptions in the North Sea, Brazil and the Former Soviet Union ("FSU") reduced available non-OPEC crude oil supplies during the same period that OPEC crude oil supplies were affected by significant disruptions to Nigeria's oil infrastructure, continued problems in Iraq and heightened tensions with Iran. All these factors contributed to changes in supply patterns, which supported tanker rates during the quarter.
Earnings Conference Call Information
The Company plans to host a conference call at 11:00 a.m. ET on May 2, 2006 to discuss results for the quarter. All shareholders and other interested parties are invited to call into the conference call, which may be accessed by calling +1 800-231-5571 within the United States, or +1 973-582-2952 for international participants. A live webcast of the conference call and accompanying slide presentation will be available on Overseas Shipholding Group's website at http://www.osg.com in the Investor Relations Events and Webcasts section or via http://www.viavid.net. The webcast will be available for 90 days and requires Windows Media Player.
An audio replay of the conference call will be available from 2:00 p.m. ET on Tuesday, May 2, through midnight ET on Tuesday May 9, 2006 by calling +1 877-519-4471 within the United States and +1 973-341-3080 for international callers. The password for the replay is 7268723.
About OSG
Overseas Shipholding Group, Inc. (NYSE: OSG) is one of the largest publicly traded tanker companies in the world with an owned, operated and newbuild fleet of 113 vessels, aggregating 12.7 million dwt and 865,000 cbm. As a market leader in global energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets, the Company is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world's most customer-focused marine transportation companies, with offices in New York, Athens, London, Newcastle and Singapore. More information is available at www.osg.com.
Forward-Looking Statements
This release contains forward-looking statements regarding the Company's prospects, including the outlook for tanker markets, changing oil trading patterns, prospects for certain strategic alliances and investments, estimated TCE rates achieved for the second, third and fourth quarters of 2006, anticipated levels of newbuilding and scrapping, projected drydock schedule, the ability to restore refining capacity and crude oil production in the Gulf of Mexico from damage caused by hurricanes, the projected growth of the world tanker fleet and the forecast of world economic activity and world oil demand. Factors, risks and uncertainties that could cause actual results to differ from expectations reflected in these forward-looking statements are described in the Company's Annual Report on Form 10-K.
APPENDIX 1 - EBITDA RECONCILIATION
The following table shows reconciliations of net income, as reflected
in the consolidated statements of operations, to EBITDA:
---------------------------------------------------------------------
Three Months ended March 31,
---------------------------
($ in thousands) 2006 2005
-------------------------------------------------- --------
Net income $128,364 $164,919
Credit for federal income taxes (5,230) (746)
Interest expense 22,607 22,831
Depreciation and amortization 34,354 36,359
-------- --------
EBITDA $180,095 $223,363
===========================
---------------------------------------------------------------------
EBITDA represents operating earnings, which is before interest
expense and income taxes, plus other income and depreciation and
amortization expense. EBITDA is presented to provide investors with
meaningful additional information that management uses to monitor
ongoing operating results and evaluate trends over comparative
periods. EBITDA should not be considered a substitute for net income
or cash flow from operating activities prepared in accordance with
accounting principles generally accepted in the United States or as a
measure of profitability or liquidity. While EBITDA is frequently
used as a measure of operating results and performance, it is not
necessarily comparable to other similarly titled captions of other
companies due to differences in methods of calculation. The table
reconciles net income, as reflected in the condensed consolidated
statements of operations, to EBITDA.
APPENDIX 2 - CAPITAL EXPENDITURES
The following table presents information with respect to OSG's
capital expenditures for the first quarter ended March 31, 2006.
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Three Months Ended March 31,
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($ in thousands) 2006 2005
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Expenditures for vessels $ 4,957 $ 542
Acquisitions of interests in
affiliated companies -- --
Investments in and advances to
affiliated companies -- 1,034
Payments for drydockings 8,619 2,629
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$13,576 $ 4,205
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