Third Quarter 2004 Earnings Results


NEW YORK, Oct. 27, 2004 (PRIMEZONE) -- Overseas Shipholding Group, Inc. (NYSE:OSG) reported record net income for the first nine months of 2004 of $190,113,000, or $4.87 per share, an increase of 90% compared with net income of $100,111,000, or $2.89 per share, for the first nine months of 2003. EBITDA for the first nine months rose to $415,405,000 from $250,297,000 in the first nine months of 2003.

Net income for the quarter ended September 30, 2004 of $68,521,000, or $1.74 per share, rising 388% compared with net income of $14,036,000, or $0.40 per share, in the third quarter of 2003. EBITDA for the third quarter rose to $145,398,000 from $57,946,000 in the third quarter of 2003 (see Appendix 2).

"OSG has extended its run of consecutive record earnings announcements with the highest third quarter income and the highest first nine months income in the Company's history," said Morten Arntzen, President and Chief Executive Officer of OSG. "Continued strong demand for tankers has resulted in very high tanker rates throughout the third quarter, traditionally a weak period for the industry, and has lifted tanker rates to record levels in the early weeks of the fourth quarter."

He also commented, "On October 22nd, President Bush signed into law the Jobs Creation Act, an important milestone for the U.S. shipping industry. The Jobs Creation Act will place OSG's U.S. based international tanker fleet on a level playing field with its offshore competitors for the first time since 1986 and will allow us to compete more aggressively. It represents a major step forward in creating economic conditions for U.S. companies to invest in the international shipping business. The new tax law will effectively restore the pre-1987 tax treatment of foreign shipping income beginning in 2005 and will permit indefinite deferral of taxation on such income until it is repatriated to the U.S. as dividends. Had the tax deferral on foreign shipping income contained in the Jobs Creation Act been effective for 2004, our provision for federal income taxes of $95,100,000 for the first nine months would have been essentially eliminated. In addition, because of the enactment of the Jobs Creation Act, the Company expects to reverse approximately $70,000,000 of net deferred tax liabilities and take them into income in the fourth quarter of 2004."



                               Highlights
 Operations

 --  In July, a joint venture in which OSG holds a 49.9% interest took
     delivery of four 442,000 dwt V Pluses (tankers of more than
     350,000 dwt) built in 2002 and 2003. These unique vessels,
     designed and built for a 40-year life expectancy, can each
     transport 3.2 million barrels of crude oil and are the only
     double hull V Pluses in the world.

 --  During the third quarter, OSG established a strategic business
     unit headquartered in Newcastle to pursue opportunities in LNG
     transportation. The new unit will be headed by Angus Campbell,
     who is currently a senior executive in our Newcastle operations
     center.

 --  In August, the Company sold the Olympia, a 1990-built single hull
     VLCC, taking advantage of high second hand vessel prices and
     further reducing the average age of the Company's VLCC fleet.

 --  In August, the Company agreed to sell the Dundee, a 1993-built
     double sided VLCC. A gain of approximately $13.6 million will be
     recognized in the fourth quarter.

 --  In September, the Company, along with one pool partner, chartered
     in an Aframax tanker for one year. This was the tenth vessel in
     2004 that the Company chartered in.

 --  In October, the Company agreed to sell the Diane, a 1987-built
     double sided product carrier. A gain of approximately $5.4
     million will be recognized in the first quarter of 2005.

 Finance

 --  With fixed charges for the nine months ended September 30, 2004
     of $58,678,000 and EBITDA of $415,405,000, the Company's
     EBITDA/Fixed Charges ratio was 7.1 compared with a ratio of 5.0
     for the nine months ended September 30, 2003.

 --  In July, OSG closed a $100 million, seven-year unsecured
     revolving credit facility, contributing to the quarter end
     liquidity of $1.1 billion.

                       Tanker Market Overview

Supply and demand fundamentals have combined to create a highly favorable environment in the crude oil tanker markets. World oil demand and production have risen to unprecedented levels, spurred by strong worldwide economic growth. Global GDP is forecast to grow by 4.2% in 2004, well above the long-term estimated trend of 3.2%, and is expected to remain strong in 2005. China and other developing Asian countries are accounting for much of the incremental demand, while Middle East OPEC, the Former Soviet Union ("FSU") and West Africa are providing much of the requisite increase in supply. There have also been persistent one-off factors that have increased demand for tanker tonnage. The threat of political unrest in Venezuela, Nigeria and Iraq, and concerns about exports from the FSU, have tended to increase demand for oil to rebuild inventories; congestion in the Bosporus Straits has lengthened the time required for Aframaxes and Suezmaxes to complete voyages in this region and thereby reduced the supply of suitable tonnage. In the current very tightly balanced tanker markets, even a slight change in any of the factors affecting supply and demand can cause sharp fluctuations in tanker freight rates. In the third quarter, an unusually active hurricane season served to further bolster VLCC and Aframax rates, both of which have soared to record levels as increased demand for tankers more than offset a fairly sizable number of newbuilding deliveries. The hurricanes disrupted cargo operations and also shut down significant oil production in the U.S. Gulf that has to be replaced with imports sourced primarily from the Middle East, West Africa and the North Sea.

VLCC Sector

During the third quarter, rates for modern VLCCs trading out of the Arabian Gulf averaged $72,600 per day, 13% more than the previous quarter, and 154% more than the average rate for the corresponding quarter in 2003.

Global oil demand in the third quarter of 2004 was estimated by the International Energy Agency ("IEA") at 82.0 million barrels per day ("b/d"), an increase of 1.1% from the previous quarter and 3.6% higher than the comparable quarter in 2003. The increase in global oil demand is expected to continue, reaching an all-time high of 84.0 million b/d in the fourth quarter of 2004, 2.4% greater than both the third quarter of 2004 and fourth quarter of 2003. This growth in demand is attributable to both seasonal heating demand across the Northern Hemisphere during the winter months, and the rapid economic expansion of China and other Asian countries. Strong demand from Asian refiners for West African crude, and continued disruptions to Iraqi exports via the northern pipeline to Ceyhan in the Mediterranean boosted demand for VLCCs. Toward the end of the quarter, severe hurricanes significantly affected U.S. oil output and disrupted tanker traffic to the U.S. Gulf, causing delays and further tightening the balance between vessel supply and demand. As of early October, approximately 30% of oil production capacity in the Gulf of Mexico was still shut down. A return to full-scale production is not expected to occur until the end of the year, which could further benefit VLCC employment.

Chinese oil demand experienced a counter-seasonal contraction and decreased to 6.2 million b/d in the third quarter of 2004. The decline was partly due to measures taken by the government to prevent the economy from overheating and to conserve energy. As a result, year-on-year growth in oil demand slowed from the heated pace of almost 25% in the previous quarter to a still healthy 8%.

In response to sharply higher world oil prices, OPEC Middle East producers boosted production to 20.9 million b/d in the third quarter of 2004 from 19.9 million b/d in the second quarter.

The world VLCC fleet grew to 448 vessels (130.1 million dwt) at September 30, 2004 from 433 vessels (126.1 million dwt) at the start of 2004. Newbuilding orders placed during the first nine months of 2004 totaled 35 vessels (10.6 million dwt) compared with 51 vessels (15.5 million dwt) for the full year 2003. The orderbook expanded to 89 vessels (27.2 million dwt) at September 30, 2004, equivalent to 20.9%, based on deadweight tons, of the existing VLCC fleet.

Aframax Sector

During the third quarter of 2004, rates for Aframaxes operating in the Caribbean trades averaged $30,400 per day, 15% higher than the previous quarter, and 62% higher than the corresponding quarter in 2003.

Total non-OPEC oil production for the third quarter of 2004 was estimated at 49.8 million b/d, 2.3% higher than the corresponding quarter in 2003. The incremental growth was led by the FSU. Seaborne oil exports from the FSU in the third quarter of 2004 were estimated at 6.1 million b/d, 9.6% higher than the comparable quarter in 2003. Expansion of the port and pipeline system feeding the Baltic Sea terminal of Primorsk and an anticipated increase in duties on Russian crude exports beginning in early October fueled higher third quarter exports.

Softer rates prevailed from late August through mid September as U.S. refineries underwent maintenance. Rates then spiked sharply higher toward the end of the quarter as multiple hurricanes disrupted cargo operations in the U.S. Gulf, damaging infrastructure and shutting down production. Rates rose even further early in the fourth quarter as 30% of the U.S. Gulf's oil output remained shut down, with expectations that full-scale production might not resume until the end of the year. The expected increase in crude oil imports to compensate for the domestic shortfall will provide further support for tanker demand over the next several months.

The world Aframax fleet increased to 622 vessels (61.9 million dwt) at September 30, 2004 from 601 vessels (59.2 million dwt) at the start of 2004. Newbuilding orders placed during the first nine months of 2004 totaled 46 vessels (5.1 million dwt) compared with 99 vessels (10.6 million dwt) during the full year 2003. The orderbook increased to 163 vessels (17.7 million dwt) at September 30, 2004, equivalent to 28.7%, based on deadweight tons, of the existing Aframax fleet. The expected phase out under IMO regulations of approximately 48 Category 1 Aframaxes by year-end 2005 should mitigate, to some extent, the impact of the substantial number of deliveries expected during this period.

Financial Profile

On July 23, OSG closed an unsecured revolving credit facility of $100 million. This new facility, priced at a highly competitive margin, has a term of seven years. The Company has also renegotiated certain of its secured credit facilities, reducing margins, extending terms and increasing advance levels.

With shareholders' equity of $1.2 billion as of September 30, 2004 and $1.1 billion of liquidity, including undrawn credit facilities, the Company believes its financial flexibility and strength distinguish OSG from most of its competitors.

With one of the most modern VLCC and Aframax fleets in the industry, substantial liquidity and proven access to alternative sources of capital, the Company is unusually well positioned to take advantage of market opportunities as they present themselves.

OSG Fleet Profile

OSG is one of the largest tanker owners in the world and the leading U.S. based tanker company, with customers that include many of the world's largest oil companies. During the third quarter of 2004, OSG sold one VLCC and the charters-in of one VLCC and one Aframax commenced. A joint venture in which OSG participates also took delivery of four V Pluses. At September 30, 2004, OSG's fleet comprised 62 vessels totaling 11,506,612 dwt, including six vessels owned by joint ventures and 14 vessels chartered in under operating leases. Adjusted for OSG's proportional interest in joint venture and chartered in vessels, the fleet totals 53.9 vessels totaling 9,121,127 dwt.

At September 30, 2004, the Company's VLCC fleet, had an average age of 5.4 years compared with a world VLCC fleet average age of 8.1 years. OSG's Aframax fleet had an average age of 6.3 years compared with a world Aframax fleet average age of 9.5 years.

Appendix 1

The following table presents comparative per share amounts for net income, adjusted for the effects of vessel sales and securities transactions, including write-downs in the carrying value of certain securities pursuant to FAS 115:



                        Three Months Ended     Nine Months Ended
                           September 30,          September 30,
                        -------------------   -------------------
                          2004       2003       2004       2003
                        --------   --------   --------   --------
 Basic net
  income per share       $  1.74   $   0.40   $   4.87   $   2.89
 (Gain)/loss
  on vessel sales          (0.21)      --        (0.26)      0.02

 (Gain) on
  securities
  transactions             (0.12)     (0.03)     (0.15)     (0.13)
                        --------   --------   --------   --------
                        $   1.41   $   0.37   $   4.46   $   2.78
                        ========   ========   ========   ========

Note: Net income adjusted for the effect of vessel sales and securities transactions is presented to provide additional information with respect to the Company's ability to compare from period to period vessel operating revenues and expenses and general and administrative expenses without gains and losses from disposals of assets and investments. While net income adjusted for the effect of vessel sales and securities transactions is frequently used by management as a measure of the vessels operating performance in a particular period it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Net income adjusted for the effect of vessel sales and securities transactions should not be considered an alternative to net income or other measurements prepared in accordance with accounting principles generally accepted in the United States.

Appendix 2

Reconciliation of net income, as reflected in the condensed consolidated statements of operations, to EBITDA:



                        Three Months Ended      Nine Months Ended
     ($000)                September 30,           September 30,
                      ---------------------  ---------------------
                         2004         2003      2004        2003
                      ---------   ---------  ---------   ---------
 Net income           $  68,521   $  14,036   $190,113   $ 100,111

 Provision for
  federal income
  taxes                  32,700       3,789     95,100      38,100

 Interest expense        18,809      16,480     55,183      45,042

 Depreciation
  and amortization       25,368      23,641     75,009      67,044
                      ---------   ---------  ---------   ---------
 EBITDA               $ 145,398   $  57,946  $ 415,405   $ 250,297
                      =========   =========  =========   =========

Note: EBITDA represents operating earnings, which is before interest expense and income taxes, plus other income and depreciation and amortization expense. EBITDA should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. EBITDA is presented to provide additional information with respect to the Company's ability to satisfy debt service, capital expenditure and working capital requirements. While EBITDA is frequently used as a measure of operating results and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

Appendix 3

Table shows time charter equivalent revenues (combined spot and period charters) per day and revenue days (defined as ship operating days less lay-up, repair and drydock days) for the Company's principal foreign flag segments for the third quarter and first nine months of 2004 compared with the same periods of 2003:



                        Three Months Ended     Nine Months Ended
                             September 30,       September 30,
                      ---------------------   -------------------
                         2004        2003        2004      2003
                      ----------   --------   --------   --------
 VLCC

 Average TCE Rate      $ 61,729    $ 25,995   $ 64,194   $ 41,800
 Number of
  Revenue Days            1,557       1,214      4,580      3,464

 AFRAMAX

 Average TCE rate      $ 31,148    $ 20,942   $ 32,117    $ 27,404
 Number of
  Revenue days            1,235         974      3,584       2,933

 PRODUCT CARRIER

 Average TCE Rate      $ 17,214    $ 14,356   $ 17,827    $ 16,014
 Number of
  Revenue Days              524         507      1,521       1,732

Appendix 4

Equity in Income of Joint Venture Vessels

The following is a summary of the Company's interest in its foreign flag joint ventures. Revenue days are adjusted for OSG's percentage ownership in order to state the days on a basis comparable to that of wholly-owned vessels:



                   Three Months Ended         Nine Months Ended
                      September 30,             September 30,
                 -----------------------   -------------------------
                     2004         2003         2004          2003
                 -----------  ----------   -----------   -----------
 VLCC

 Equity in
   Income        $ 9,592,000  $2,172,000   $12,302,000   $17,641,000
 Number of
  Revenue Days           162         303           242           942

 AFRAMAX

 Equity in
  Income         $   868,000  $  355,000    $2,670,000   $ 2,209,000
 Number of
  Revenue days            46          45           137           135

During the first quarter the Company concluded an agreement with a joint venture partner equally splitting the ownership of three pairs of sister vessels between the two partners, with OSG becoming the 100% owner of the VLCCs, Dundee, Sakura I and Tanabe. The results of these vessels are now included in the VLCC segment. In July 2004, a joint venture in which OSG has a 49.9% interest took delivery of four V Pluses.



 Appendix 5

      Summary of the Company's foreign and domestic flag fleets
                      as of September 30, 2004:

 ---------------------------------------------------------------------
                               Number of Vessels           Dwt
 ---------------------------------------------------------------------
                                         By %                   By % 
 Type                           Total  Interest    Total      Interest
 ---------------------------------------------------------------------
 Foreign Flag Fleet:
  V Plus:
   Owned jointly with others      4      2.0     1,766,694     881,581
  VLCC:
   100% owned                    14     14.0     4,295,089   4,295,089
   Owned jointly with others      1      0.3       259,995      77,999
   Time chartered in              7      3.3     2,118,429     982,855
  Suezmax                         1      1.0       147,501     147,501
  Aframax:
   100% owned                    13     13.0     1,354,911   1,354,911
   Owned jointly with others      1      0.5        97,078      48,539
   Time chartered in              3      1.8       326,381     192,118
  Product Carrier                 6      6.0       287,934     287,934
  Capesize Bulk Carrier:
   Time chartered in              2      2.0       319,843     319,843

 U.S. Flag Fleet:
  Crude Tanker                    3      3.0       275,904     275,904
  Product Carrier                 4      4.0       188,810     188,810
  Bulk Carrier, bareboat
   chartered in                   2      2.0        51,902      51,902
  Car Carrier                     1      1.0        16,141      16,141
 ---------------------------------------------------------------------
 TOTAL                           62     53.9    11,506,612   9,121,127
 ---------------------------------------------------------------------

 Appendix 6

 Summary Consolidated Statements of Operations

                      Three Months Ended        Nine Months Ended
                         September 30,             September 30,
                   ------------------------  -------------------------
    ($000)             2004        2003         2004           2003
                   -----------  -----------  -----------   -----------
 Time Charter
  Equivalent
  Revenues         $   167,888  $    84,176  $   513,931   $   325,603
                   -----------  -----------  -----------   -----------
 Running Expenses
  (including time
  charter hire and
  depreciation)         66,883       50,467      188,780       148,680
 General &
  Administrative         9,294        7,697       32,494        26,230
                   -----------  -----------  -----------   -----------
 Total Ship
  Operating
  Expenses              76,177       58,164      221,274       174,910
                   -----------  -----------  -----------   -----------
 Income from Vessel
  Operations
  (100% owned)          91,711       26,012      292,657       150,693
 Equity in Income
  from Joint
  Ventures              12,024        4,417       19,022        24,574
                   -----------  -----------  -----------   -----------
 Operating Income      103,735       30,429      311,679       175,267
 Other Income           16,295        3,876       28,717         7,986
                   -----------  -----------  -----------   -----------
 Income before
  Interest and
  Taxes                120,030       34,305      340,396       183,253
 Interest Expense       18,809       16,480       55,183        45,042
                   -----------  -----------  -----------   -----------
 Income before
  Taxes                101,221       17,825      285,213       138,211
 Provision for
  Federal Income
  Taxes                 32,700        3,789       95,100        38,100
                   -----------  -----------  -----------   -----------
 Net Income        $    68,521  $    14,036  $   190,113   $   100,111
                   ===========  ===========  ===========   ===========
 Basic Net Income
  Per Share        $      1.74  $      0.40  $      4.87   $      2.89
 Diluted Net
  Income Per Share $      1.74  $      0.40  $      4.86   $      2.87
 Weighted Average
  Number of Shares
  (Basic)           39,369,000   34,956,000   39,022,000    34,648,000
 Weighted Average
  Number of Shares
  (Diluted)         39,424,000   35,273,000   39,084,000    34,938,000  

 Appendix 7

 Summary Consolidated Balance Sheets 

 ($000)                             September 30,     December 31,
                                        2004              2003
                                     ----------        ----------
 Cash and Cash Equivalents           $  418,763        $   74,003
 Other Current Assets                    93,568            67,420
 Capital Construction Fund              260,504           247,433
 Vessels, including Capital Leases    1,510,756         1,364,773
 Investments in Joint Ventures          114,620           183,831
 Other Assets                            65,121            63,226
                                     ----------        ----------
 Total Assets                        $2,463,332        $2,000,686
                                     ==========        ==========

 Current Liabilities                 $  123,807        $   98,208
 Long-term Debt and Capital Leases      907,880           787,588
 Other Liabilities                      216,892           197,815
 Shareholders' Equity                 1,214,753           917,075
                                     ----------        ----------
 Total Liabilities and 
  Shareholders' Equity               $2,463,332        $2,000,686
                                     ==========        ==========

                 * * * * * * * * * * * * * * * * * * *

The Company plans to host a conference call at 11:00 AM EST on Wednesday, October 27, 2004 to discuss results for the quarter. All shareholders and other interested parties are invited to dial into the call, which may be accessed by calling (888) 802-8576 within the United States, and (973) 935-8515 for international calls. A recording of the call will be available for one week at (877) 519-4471, if dialed from within the U.S., and at (973) 341-3080 for international calls; the replay pin number is 5284017.



           * * * * * * * * * * * * * * * * * * * * * * * * *

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, anticipated levels of newbuilding and scrapping, 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.



            

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