OSG America L.P. Reports Results for Third Quarter and Nine Month Period

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31 Oct 2008

., the largest operator of U.S. Flag product carriers and ocean-going barges transporting refined petroleum products, reported financial results for the three and nine month period ended September 30, 2008. For the quarter ended September 30, 2008, time charter equivalent (TCE)1 revenues were $63.7 million, up 6% from $59.9 million from the quarter ended June 30, 2008, due to an increase of 128 revenue days. The Company reported a net loss for the third quarter of $9.7 million, or $0.32 per unit, driven by a non-cash vessel impairment charge of $19.3 million, or $0.63 per unit, discussed later in this press release. Earnings before interest, taxes and depreciation (EBITDA)1 were $4.5 million. Operating expenses were $83.8 million for the period, up 25% from $66.8 million in the preceding quarter. The increase was due to the vessel impairment charge and higher vessel expenses resulting from fewer off-hire days, partially offset by a reduction in depreciation and amortization expense due to the change in useful lives of four vessels, including the two vessels purchased at the end of the second quarter, which were previously chartered in under capital lease agreements. Interest expense of $1.3 million decreased primarily due to the interest savings associated with the purchase of the two vessels in the second quarter.
For the nine months ended September 30, 2008, OSG America reported TCE revenues of $176.0 million, a net loss of $1.0 million, or $0.03 per unit, and EBITDA of $42.7 million. Comparative financial information for 2007 is not included herein because this information pertains to operations of OSG America’s predecessor, and because OSG America commenced operations as an independent company following its initial public offering on November 15, 2007.
President and CEO Jonathan Whitworth said, “While it was necessary to take a charge on the Overseas Integrity that impacted quarterly results, when excluded, earnings were strong and ahead of our internal expectations. Fleet utilization significantly improved from the second quarter in the product carrier and non-Jones Act fleet. The OSG America fleet offers attractive levels of locked-in revenue for our unitholders with term charter coverage for the remainder of 2008 of 94% and a minimum in 2009 of 82%. Thanks to the skill of our crews and technical operations team based in Tampa, hurricanes Gustav and Ike did not impact our fleet.”
Declaration of Cash Distribution
On October 23, 2008, the Board of Directors of OSG America LLC, the general partner of OSG America L.P., declared a quarterly distribution to all unitholders in the amount of $0.375 per unit for the three months ended September 30, 2008. The distribution of approximately $11.5 million will be paid on November 13, 2008 to unitholders of record on November 3, 2008. The Partnership generated $14.5 million of distributable cash flow for the third quarter of 2008 resulting in a distribution coverage ratio of 126.6%.
Financial Strength and Charter Coverage
At September 30, 2008, the Company had $122 million available under its $200 million senior secured revolving credit facility, $31.4 million of working capital and a long-term debt to total capital ratio of 19.4%.
At September 30, 2008, Overseas Shipholding Group, Inc. owned a 75.5% interest in OSG America, including a 2% general partner interest. Subsequent to quarter end, the sponsor purchased 500,435 common units based on an unsolicited inquiry from an institutional unitholder. As a result, the sponsor currently owns a 77.1% interest in OSG America. Overseas Shipholding Group is a market leader providing global energy transportation services with liquidity exceeding $1.4 billion.
Utilization during the third quarter of 2008 for the Jones Act ATBs, Jones Act Product Carriers and non-Jones Act Product Carriers was 92.4%, 97.3% and 100.0%, respectively. The utilization rate for Jones Act Product Carriers increased from the second quarter due to fewer off-hire days and scheduled drydocks in the third quarter and due to the Overseas Diligence being in service for the full quarter following an extended idle period in the second quarter. Utilization of the non-Jones Act Product Carriers increased due to the Overseas Maremar being in service for the full quarter following a scheduled drydock in the second quarter.
Utilization is defined as revenue days (the number of calendar days available during the period less off- hire or scheduled drydock and maintenance days multiplied by the number of vessels) divided by operating days (the total number of calendar days less off hire on time chartered-in vessels during the period multiplied by the number of vessels).

Source: OSG America