OSG’s Sam Norton: “We’ve stuck the landing!”

OSG president and CEO Sam Norton: “Transporting liquified CO2 is a natural next step into an exciting emerging market, consistent with OSG’s expertise with liquid cargoes.“

”It would be appropriate to state that we have ‘stuck the landing’ with our fourth quarter performance,” said Sam Norton, president and CEO of Tampa, Fla., headquartered Overseas Shipholding Group, Inc. (NYSE: OSG) as the company reported results for the fourth quarter and full year 2023.

Highlights included:

• 2023 net income was $62.5 million, or $0.77 per diluted share, compared to net income of $26.6 million, or $0.29 per diluted share, in 2022. Net income for the fourth quarter of 2023 was $20.4 million, or $0.26 per diluted share, compared to net income of $10.1 million, or $0.11 per diluted share, for the fourth quarter of 2022.
• Full year Adjusted EBITDA for 2023 was $175.7 million, an increase of $32.9 million, or 23.1%, from 2022. Fourth quarter 2023 Adjusted EBITDA was $47.3 million, an increase of $3.6 million, or 8.4%, from the fourth quarter of 2022.
• Shipping revenues for 2023 were $451.9 million, a decrease of $14.9 million, or 3.2%, compared to 2022. Shipping revenues for the fourth quarter of 2023 were $116.0 million, a decrease of $5.7 million, or 4.7%, compared to the fourth quarter of 2022. The decreases in shipping revenues primarily resulted from fewer vessels in the fleet, as OSG redelivered three conventional tankers leased from American Shipping Company in December 2022.
• Time charter equivalent (TCE) revenues, a non-GAAP measure, for 2023 were $423.5 million, a decrease of $2.8 million, or 0.7%, from $426.3 million in 2022. TCE revenues for the fourth quarter of 2023 were $110.1 million, a decrease of $4.0 million, or 3.5%, compared to the fourth quarter of 2022.

“The fourth quarter’s contribution led to meeting our adjusted EBITDA target of $175 million for the full year, a 23.1% gain over 2022, despite having three fewer vessels in operation in 2023,” said Norton.”The benefits of charterparties fixed at escalating rates over the past several quarters are now being realized, producing strong cashflow and providing the means to make continued progress in meeting our key capital allocation goals. Previously announced capital investments in our Alaska class vessels, the purchase of 1.425 million shares during the 4th quarter, and the approval of the first dividend payment in many years underscore this point.”

ALASKA CLASS TRANSPORTS GoM CRUDE

“Strong fundamentals have continued to support charterer interest in our vessels,” continued Norton. “Significantly, at year end, we agreed to employ the Alaskan Explorer to transport U.S. Gulf Coast crude oil to one of our Delaware Bay refining customers, demonstrating the existence of employment options for this class of vessel outside of its traditional Alaskan market. Taken together with three other vessel fixtures concluded in early 2024, OSG has added 116 months of forward charter cover since our last earnings report, increasing the value of our forward charter book to over $860 million in time charter equivalent earnings as of the beginning of March 2024.”

“We couldn’t be more pleased with our 2023 results and believe we are well-positioned now, and over the long term, to generate strong cash flows in what we expect to be a durably balanced market characterized by stable demand and constrained supply,” Norton concluded.

SALTCHUK OFFER

Norton had some interesting things to say in a conference call with analysts today, but one thing he would not be drawn on was the Saltchuk offer to take OSG private.

“Before discussing our 2023 performance and offering a perspective on how we see 2024 shaping up, I would like to comment briefly on the unsolicited non-binding indication of interest submitted to our Board by Saltchuk Resources to acquire the OSG shares it does not already own for $6.25 per share in cash,” Norton told the analysts. “As we have previously disclosed, our board is carefully considering Saltchuk’s indication of interest in consultation with our outside financial and legal advisors and is committed to acting in the best interest of our stockholders. Because the board’s work is ongoing, we do not intend to comment further on this matter during this call or to respond to questions regarding Saltchuk’s indication of interest or the possibility of any potential transaction. We respectfully ask that your questions be focused on the company’s financial results and ongoing business activities.

LCO2 CARRIER OPPORTUNITIES

Something that Norton did address in the call with analysts was OSG’s continued interest in opportunities in the transport of captured carbon as LCO2

“Looking ahead for the longer term, OSG is actively engaged in pursuing opportunities in the emerging market for transporting carbon dioxide that may be captured from industrial sites in the future,” he said.
In December, OSG was awarded a $400,000 grant from the U.S. Department of Energy to study the development of its proposed Tampa Regional Intermodal Carbon Hub, or T-RICH. The study is an important step towards realizing the potential for participating in an emerging market to manage the transport and sequestration of captured CO2. The study will evaluate the commercial feasibility of developing intermediate storage hub at Port Tampa Bay for CO2 captured from industrial emitters across the state of Florida. As conceived, T-RICH would receive, store and process initially 2 million metric tons of CO2 per year, which will be transported by OSG vessels across the Gulf of Mexico for permanent underground storage. T-RICH will be the first of its kind in the nation and could be scaled in the future to meet expanded volumes of captured CO2.”

“We seek opportunities to invest judiciously in gaining and sustaining a first mover advantage and participating in the emerging market for transporting liquid bulk commodities that are not currently in the mix of products being shipped on our vessels. In this category, we see the most interesting opportunities to be the transportation of liquid carbon dioxide generated in the value chain seeking to capture and sequester industrial emissions of carbon dioxide.”

• Download the Seeking Alpha transcript of the conference call HERE

• Download the full OSG earnings press release HERE