Overseas Shipholding Group, Inc., a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, reported results for the third quarter 2017.

Highlights

Loss from continuing operations for the third quarter was $6.3 million, or ($0.07) per diluted share, compared to a loss from continuing operations of $52.9 million, or ($0.59) per diluted share, for the third quarter 2016. During the third quarter 2017, we recognized a $7.4 million impairment charge on one of our ATBs which is currently held for sale.
Net loss was $6.3 million for the quarter ended September 30, 2017, compared to a net loss of $98.7 million for the quarter ended September 30, 2016. Net loss for the prior year period included a loss from discontinued operations from International Seaways (INSW) of $45.9 million.
Shipping revenues were $93.3 million for the current quarter, a decrease of 18.3% from $114.2 million in the prior year quarter. Time charter equivalent (TCE) revenues(A) for the third quarter 2017 were $84.9 million, down 22.6% compared to the same period in 2016.
Third quarter 2017 adjusted EBITDA(B), a non-GAAP measure, was $22.6 million, down 43.0% from $39.6 million in the same period in 2016.
Cash and cash equivalents were $199.7 million at September 30, 2017. Total cash(C), a non-GAAP measure, was $203.6 million at the end of the current quarter.
During the third quarter 2017, we repurchased and retired $18.5 million in principal of the 8.125% notes due in 2018.

“The solid performance of our niche market activities was once again the key take away from our third quarter results,” Sam Norton, OSG’s President and CEO stated. “Earnings from spot market voyages disappointed, but a strong balance sheet, continued focus on cost control and a belief that upside potential now outweighs downside risk in accepting short term market challenges leads us to be optimistic about the future.”

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Third Quarter 2017 Results

Shipping revenues were $93.3 million for the quarter, down 18.3% compared with the third quarter of 2016. The decrease in shipping revenues primarily resulted from weakening market conditions and reduced charter rates. TCE revenues for the third quarter of 2017 were $84.9 million, a decrease of $24.8 million, or 22.6%, compared with the third quarter of 2016, primarily due to lower average daily rates earned as a result of a continuing excess supply of vessels in the market and the shift from time charter contracts to spot market charters. The hurricanes that occurred during the third quarter disrupted the petroleum markets in the Gulf of Mexico. As a result, shipments were reduced for a period of time due to port and refinery closures. The impact was partially mitigated by recoveries from customers and an increase in demand after the storms. Shipping revenue for the first nine months of 2017 were $297.6 million, a decrease of $50.0 million compared to the first nine months of 2016. TCE revenues for the first nine months of 2017 were $278.3 million, a decrease of $58.3 million compared to the first nine months of 2016.

Operating income for the third quarter of 2017 was $0.4 million, compared to an operating loss of $83.4 million in the third quarter of 2016. The increase reflected reduced operating expenses, including depreciation and amortization expense and lower general and administrative expenses, which partially offset the decline in shipping revenues. During the third quarter 2017, we recognized an impairment charge of $7.4 million on one of our ATBs due to a change in its expected deployment. In the third quarter of 2016, we recognized an impairment charge of $97.8 million. Operating income for the first nine months of 2017 was $33.9 million, an increase of $76.9 million compared to the first nine months of 2016.

Loss from continuing operations for the third quarter 2017 was $6.3 million, or ($0.07) per diluted share, compared with a loss from continuing operations of $52.9 million, or ($0.59) per diluted share, for the third quarter of 2016. This change reflects a lower tax benefit in the third quarter of 2017 compared to 2016. In the prior year period, a deferred tax liability on the unremitted earnings of INSW was recorded, resulting in an income tax provision of $49.8 million, compared to an income tax provision of $3.1 million in the 2017 period. In addition, interest expense decreased by $1.1 million in the current period as the result of significant debt reductions in the current and prior year periods.

Income from continuing operations for the first nine months of 2017 was $2.3 million compared with a loss from
continuing operations of $65.7 million for the first nine months of 2016. The increase reflects a lower tax provision in the first nine months of 2017 compared to 2016. In the prior period, a deferred tax liability on the unremitted earnings of INSW was recorded, resulting in an income tax provision of $1.4 million, compared to tax expense of $2.1 million in the 2017 period.

Adjusted EBITDA(B), a non-GAAP measure, was $22.6 million for the quarter, a decrease of $17.1 million or 43.0% compared with the third quarter of 2016, driven primarily by the decline in TCE revenues, partially offset by lower general and administrative expenses. Adjusted EBITDA for the first nine months of 2017 was $88.3 million, a decrease of $38.0 million or 30.1% compared with the first nine months of 2016.

Discontinued Operations

As previously disclosed, OSG completed the separation of its business into two independent publicly traded companies through the spin-off of its then wholly owned subsidiary INSW on November 30, 2016. The spin-off separated OSG and INSW into two distinct businesses with separate management. OSG retained the U.S. Flag business and INSW holds entities and other assets and liabilities that formed OSG’s former International Flag business. The spin-off transaction was in the form of a pro rata distribution of INSW’s common stock to our stockholders and warrant holders of record as of the close of business on November 18, 2016.

In accordance with Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of INSW are reported as discontinued operations for the three and nine months ended September 30, 2016.

Net (loss)/income from discontinued operations for the three and nine months ended September 30, 2016 was $(45.9) million and $47.6 million, respectively.

Source: Hellenic Shipping News.