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Overseas Shipholding Beats in 4Q

TK FRO

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Overseas Shipholding Group Inc. , the second largest independent oil tanker company in the world, reported improved financial results for the fourth quarter of 2011. However, the company suffered losses for the eleventh straight quarters.

Quarterly Shipping revenue was nearly $257.8 million, up 11.1% year over year. Fourth-quarter Time Charter Equivalent (TCE) revenue was $190.1 million, up 3.8% year over year, beating the Zacks Consensus Estimate of $184 million. TCE revenue represents Shipping revenue excluding Voyage expenses. Quarterly GAAP net loss was $50 million or a loss of $1.65 per share compared with a net loss of $55.3 million or $1.83 per share in the prior-year quarter. Fourth-quarter 2011 adjusted EPS of a loss of $1.72 was also better than the Zacks Consensus Estimate of a loss of $2.22.

Segment Wise Shipping Revenue

Quarterly Pool revenue was $47.9 million, down 12.6% year over year. Time and bareboat charter revenue was $72.2 million, up 0.9% year over year. Voyage charter revenue was $137.6 million, up 30.3% year over year.

TCE Revenue in Details

Quarterly TCE revenue for the International Crude Oil Tankers segment was $47 million, down 32% year over year. Average spot TCEs fell across all Crude sectors due to significant pressure of continued world fleet overcapacity and higher bunker prices. International Product TCE revenue was $55.9 million, up 24% year over year. U.S. Flag TCE revenue was $84.3 million, up 30% year over year.

Operating Expenses

Total operating expenses, in the fourth quarter of 2011, was $297.7 million, up 5.2% year over year. Voyage expenses increased 38.5% year over year. Vessel expense spiked 6.5% year over year while Charter hire expenses dropped 5.3% year over year. General & Administrative expense was down 31.6% year over year. 

Cash Flow & Liquidity

During 2011, Overseas Shipholding used $61.1 million of cash for operations compared with $27.7 million in the prior-year period. Free cash flow, in 2011, was a negative $248.6 million compared with a negative $449.1 million in prior-year period. At the end of 2011, Overseas Shipholding had $54.9 million of cash & marketable securities compared with $273.7 million at the end of 2010. Total debt, at the end of 2011, was $2,065.9 million compared with $1,986.2 million at the end of 2010. At the end of 2011, debt-to-capitalization ratio was 0.57compared with 0.52 at the end of 2010.

Our Recommendation

Overseas Shipholding mainly competes with Frontline Ltd. (FRO - Snapshot Report) and Teekay Corp. (TK - Snapshot Report). We maintain our long-term Neutral recommendation on Overseas Shipholding. Currently, it holds a short-term Zacks #3 Rank (Neutral) on the stock.

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