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Overseas Shipholding's Loss Widens

TK FRO

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Overseas Shipholding Group Inc. , the second largest independent oil tanker company in the world, reported weak financial results for the second quarter of 2012 with widening losses. The company suffered losses for thirteen straight quarters.

Quarterly GAAP net loss was $55.3 million or $1.83 per share compared with a net loss of $37.3 million or $1.24 per share in the prior-year quarter. Second quarter adjusted earnings per share of a loss of $1.52 was way below the Zacks Consensus Estimate of a loss of $1.05.

Quarterly Shipping revenue was nearly $291.4 million, up 7.2% year over year. Second-quarter Time Charter Equivalent (TCE) revenue was $210 million, up 1.3% year over year, beating the Zacks Consensus Estimate of $204 million. TCE revenue represents Shipping revenue excluding Voyage expenses.

Segment Shipping Revenue

Quarterly Pool revenue was approximately $69.9 million, remaining same year over year. Time and bareboat charter revenue was also $69.9 million, up 8.8% year over year. Voyage charter revenue was $151.6 million, up 10% year over year.

TCE Revenue in Details

Quarterly TCE revenue for the International Crude Oil Tankers segment was $79 million, up 4% year over year. Average spot TCEs fell 30% year over year to $10,500/day, primarily due to a sharp reduction of International Flag MR spot rates. International Product TCE revenue was $44.2 million, down 14% year over year. U.S. Flag TCE revenue was $83.8 million, up 10% year over year.

Operating Expenses

Total operating expenses in the second quarter of 2012 was $321.8 million, up 8.8% year over year. Voyage expenses shot up 26.3% year over year while Vessel expense remains same year over year. Charter hire expenses decreased 2.1% year over year. General & Administrative expense was down 2.9% year over year. 

Cash Flow & Liquidity

During the first half of 2012, Overseas Shipholding generated $19.6 million of cash for operations compared with $6.6 million in the prior-year period. Free cash flow, in the first half of 2012, was a negative $20.6 million compared with a negative $106.3 million in the prior-year period.

At the end of the second quarter of 2012, Overseas Shipholding had $226.6 million of cash & marketable securities compared with $54.9 million at the end of 2011. Total debt at the end of the reported quarter was $2,244.7 million, compared with $2,065.9 million at the end of 2011. At the end of the second quarter of 2012, debt-to-capitalization ratio was 0.57 compared with 0.57 at the end of 2011.

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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