CORRECTING and REPLACING Overseas Shipholding Group Reports Fourth Quarter and Fiscal 2010 Results

NEW YORK--(BUSINESS WIRE)--In the "Select Quarterly Income Statement Detail" section, first bullet, third sentence should read: Synthetic time charters represented 2% of revenue days, at $32,397 per day ... (sted Synthetic time charters represented 2% of revenue days, at $27,699 per day ...)

The corrected release reads:

OVERSEAS SHIPHOLDING GROUP REPORTS FOURTH QUARTER AND FISCAL 2010 RESULTS

Highlights

• Fiscal year 2010 TCE revenues of $853.3 million declined 10% from 2009, driven by weak spot market rates, particularly in the latter half of the year
• Fiscal year 2010 Loss was $134.2 million, or $4.55 per diluted share, compared with Earnings of $70.2 million, or $2.61 per diluted share in fiscal year 2009
• Fourth quarter TCE revenues were $183.2 million, down 10% from $204.1 million in the year ago period, primarily driven by increased spot exposure and lower spot rates for VLCCs
• Fourth quarter Loss was $55.3 million, or $1.83 per diluted share, compared with a Loss of $23.2 million, or $0.86 per diluted share in the same period a year ago
• Adjusted for special items, fourth quarter Loss was $59.0 million, or $1.96 per diluted share. Special items included a gain on vessel sales and the Company’s share of the mark-to-market gain on certain interest rate swaps in its FSO joint venture
• Liquidity totaled approximately $1.3 billion, including cash and short-term investments of $274 million
• Overseas Chinook, which is being converted to a shuttle tanker, and Carina (MR) delivered during the quarter
• Regular quarterly dividend of $0.4375 per share declared on February 2, 2011

Overseas Shipholding Group, Inc. (NYSE: OSG), a market leader in providing energy transportation services, today reported results for the fourth quarter and fiscal year ended December 31, 2010.

For the fiscal year ended December 31, 2010, the Company reported TCE¹ revenues of $853.3 million, a 10% decrease from $952.6 million in 2009. The year-over-year decline in TCE revenues was due to increased spot exposure combined with lower average spot rates earned by most of the Company’s vessel classes, predominantly for the Company’s VLCCs and MRs. Revenue days decreased slightly year-over-year by 861 days, or 2%. Net loss attributable to the Company (Loss²) for fiscal year 2010 was $134.2 million, or $4.55 per diluted share, compared with Earnings of $70.2 million, or $2.61 per diluted share, in the prior year. Adjusted for special items, the Loss was $98.4 million, or $3.34 per diluted share, compared with a Loss in 2009 of $23.1 million, or $0.86 per diluted share. Details on special items are provided later in this press release.

For the quarter ended December 31, 2010, the Company reported TCE revenues of $183.2 million, a 10% decline from $204.1 million in the fourth quarter of 2009. The decline in TCE revenues was due to increased spot exposure combined with lower average spot rates earned by most of the Company’s vessel classes. Revenue days increased quarter-over-quarter by 632 days, or 7%, primarily as a result of a net growth in the International Product Carrier fleet centered in the MR class. The Loss for the quarter ended December 31, 2010 was $55.3 million, or $1.83 per diluted share, compared with Loss of $23.2 million, or $0.86 per diluted share, in the same period in 2009. Adjusted for special items, the fourth quarter Loss was $59.0 million, or $1.96 per diluted share, compared with a Loss in the fourth quarter of 2009 of $15.9 million, or $0.59 per diluted share.

Morten Arntzen, President and CEO, said, "2010 was clearly a disappointing year financially as a result of very depressed rates in all tanker segments in the last two quarters of the year. Nevertheless, we made substantial progress on a number of fronts that will benefit the Company in 2011 and beyond. We made further strides forward in our G&A reduction campaign; we kept ship operating costs in check; we put the two state-of-the-art FSOs we have in joint venture with Euronav to work in Qatar on long-term charters; we equipped our U.S. Flag business unit with the assets, contracts and cost base to return to profitability; and we continued to enhance our already strong commercial platforms."

Arntzen added, "We will continue to focus on internal actions that can enhance our competitive position and improve our margins in 2011. With critical mass in our three main businesses, Crude, International Products and U.S. Flag, in 2011 we will concentrate on flawless execution of our balanced growth strategy."

Select Quarterly Income Statement Detail

• The $20.9 million decrease in TCE revenue for the quarter ended December 31, 2010 from the year-earlier quarter is principally due to a decrease of $30.5 million in the International Crude Tankers segment driven primarily by a 55% decline in the average TCE rate realized by the VLCC fleet, with lesser declines in the Suezmax, Aframax and Panamax fleets. The decline in the average VLCC rate is the result of lower spot market rates and an increase in spot exposure that reflects the expiration of synthetic time charter cover between the comparable periods. Synthetic time charters represented 2% of revenue days, at $32,397 per day, in the fourth quarter of 2010 compared with 74% and $42,419 per day in the same period a year ago. TCE revenues in the U.S. Flag segment increased $7.1 million, or 12%, primarily as a result of the deliveries of the shuttle tanker Overseas Cascade and two product tankers earlier in 2010, which commenced multi-year time charters at attractive fixed rates that were agreed prior to the Jones Act market downturn.
• Vessel expenses were $69.5 million, a 6% decrease from $73.8 million in the same period a year ago. The decline is principally attributable to a reserve taken in the fourth quarter of 2009 for an assessment related to prior years by a multi-employer pension plan that had covered the Company’s British officers and in which the Company is no longer an active member. Daily vessel expenses for our International Flag fleet for 2010 have been held below 2009 levels;
• Charter hire expenses were $99.4 million, a 14% increase from $86.8 million in the year-earlier quarter, principally due to the deliveries of three time-chartered MRs and two bareboat-chartered Jones Act product tankers;
• G&A expenses were $24.0 million in the 2010 quarter, a decrease of $12.4 million from $36.4 million in the fourth quarter of 2009. The Company has made substantial progress in its G&A expense reduction program in 2010, with a $2.6 million reduction in shoreside compensation and a $1.2 million reduction in legal and consulting costs. Also contributing to the year-on-year decrease were non-recurring expenses of $7.6 million in the fourth quarter of 2009, which included legal and advisory fees associated with the tender of OSG America L.P. and the Aker settlement in December 2009 and OSG’s share of additional costs associated with the management of the FSO conversion project. For the full year 2010, G&A expenses were $100.4 million, a 17% reduction from $121.1 million in 2009; and
• Equity in income of affiliated companies increased significantly in the fourth quarter of 2010 to $9.1 million from a loss in the third quarter of 2010 of $0.2 million and a loss of $5.3 million in the year-earlier quarter. The two FSO service vessels were fully employed during the fourth quarter on long-term contracts and earned service level bonuses provided in the contracts. In addition, the Company recognized a benefit in the current quarter related to interest rate swaps associated with the FSO Africa as long-term interest rates rose.

Special Items

Special items that affected reported results in the fourth quarter of 2010 reduced the quarterly Loss by an aggregate of $3.7 million, or $0.13 per diluted share, and included:

• Net gains of $2.1 million, or $0.07 per diluted share, associated with vessel sales and shipyard contract termination cost recoveries; and
• A net gain of $1.5 million, or $0.05 per diluted share, which increased equity in income of affiliated companies, related to the interest rate swaps on the FSO Africa, net of charges recognized in connection with the reduction in the FSO debt facility discussed below under Segment Information.

For a detailed schedule of these special items in the current quarter and fiscal year and corresponding historical periods, see Reconciling Information, which is posted in Webcasts and Presentations in the Investor Relations section of www.osg.com.

Liquidity and Other Financial Metrics

• Cash and cash equivalents and short-term investments (consisting of time deposits with maturities greater than 90 days) totaled $274 million, down from $525 million as of December 31, 2009. Uses of cash during the intervening period included payments for vessels under construction and for vessel acquisitions, cash contributed to the FSO Joint Venture in connection with the conversions of the FSO Asia and FSO Africa, and voluntary prepayments of debt;
• In January 2011, the Company received a $41.1 million tax refund resulting from a November 2009 change in U.S. tax rules that permitted an extended carryback period and accelerated depreciation on vessels placed in service in 2009.
• Total debt was $1.99 billion, up from $1.85 billion as of December 31, 2009;
• Liquidity³, including undrawn bank facilities, was approximately $1.3 billion and liquidity-adjusted debt to capital⁴ was 48.0%, an increase from 40.1% as of December 31, 2009;
• As of December 31, 2010, vessels constituting 30.5% of the net book value of the Company’s vessels were pledged as collateral;
• Construction contract commitments were $222 million as of December 31, 2010, including $152 million due in 2011. All such commitments are fully funded. The total construction contract commitments at year-end 2010 represents a decrease of $300 million from $522 million as of December 31, 2009; and
• Principal repayment obligations are $45 million and $54 million in 2011 and 2012, respectively.

Segment Information

Crude Oil

• On December 1, 2010, the joint venture that owns the FSO Africa entered into an agreement with the lenders to restructure the FSO Africa tranche of the joint venture loan facility reducing the balance available to borrow to $120,000,000, shortening the term of the loan to approximately three years and increasing the margin over LIBOR. The FSO Africa is jointly owned by OSG and Euronav N.V. (Euronext Brussels: EURN). As a result of this amendment, cash collateral aggregating $111,000,000, was released to the joint venture partners in December 2010;
• The Action, a time chartered-in Aframax, redelivered on October 24, 2010;
• The Sabine, a chartered-in International Flag Aframax lightering vessel in which the Company had a residual value interest, was sold on December 10, 2010; and
• In January 2011, OSG redelivered the Overseas Jacamar (Aframax), which had been chartered in, and the Aqua, a time-chartered Aframax in which the Company had a less than 100% ownership interest.

Products

• In October 2010, the Company finalized amendments to certain construction contracts, replacing contracts for two LR1s with scheduled delivery dates in 2011 with two crude Aframaxes slated to deliver in 2013. These amendments increased the Company's remaining construction commitments by less than $5 million, but deferred $70 million of construction commitments from 2011 into 2012 and 2013;
• The 50,000 dwt newbuild Overseas Kythnos, which was initially chartered-in on a bareboat basis for five years, was purchased in October 2010 and the related charter was cancelled;
• The Carina, a 47,000 dwt newbuild which is time chartered-in for eight years, delivered in November;
• The Atlantic Grace, a 47,000 dwt 2008-built product carrier, delivered under a three-year time charter-in and joined the Clean Products International (CPI) commercial pool on February 12, 2011; and
• In January 2011, OSG redelivered the Overseas Takamar (LR2), which had been chartered-in.

U.S. Flag

• The Overseas Chinook delivered to OSG on December 17, 2010. The vessel is being converted to a shuttle tanker and will commence a four-year time charter to Petrobras America, Inc. on May 1, 2011 to service Petrobras’s ultra-deepwater fields in the U.S. Gulf of Mexico;
• On November 12, 2010, the Overseas Galena Bay was sold;
• OSG’s last two U.S. Flag single hull tankers, the Overseas New Orleans and the Overseas Puget Sound, are under contract of sale with closings expected during the first half of 2011;
• The OSG Honour/OSG 209 was broken out of layup in the fourth quarter as Jones Act products demand improved; and
• As of December 31, 2010, three U.S. Flag vessels remained in layup, including the two tankers under contract of sale noted above.

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provide a breakdown of TCE rates achieved for the three months and fiscal year ended December 31, 2010 between spot and fixed charter rates and the related revenue days. The Company has from time to time entered into FFAs and related bunker swaps as hedges for reducing the volatility of earnings from operating the Company’s VLCCs in the spot market. These derivative instruments seek to create synthetic time charters. The impact of these derivatives, which qualify for hedge accounting treatment, are reported together with time charters entered in the physical market under Fixed Earnings. As of December 31, 2010, the Company had no synthetic time charters outstanding. The information in these tables is based in part on information provided by the pools or commercial joint ventures in which the segment’s vessels participate.

Revenue days in the quarter ended December 31, 2010 totaled 9,582 compared with 8,950 in the same period a year earlier primarily due to net fleet additions in the International Products fleet. Revenue days for the year ended December 31, 2010 totaled 37,038 compared with 37,899 in the same period a year earlier. A summary fleet list by vessel class can be found later in this press release.

¹ See Appendix 1 for reconciliation of TCE (time charter equivalent) revenues, a non-GAAP measure, to shipping revenues.

² References to Results, Earnings or Loss refers to Net Income / (Loss) attributable to Overseas Shipholding Group, Inc.

³ Liquidity is defined as cash plus short-term investments plus Capital Construction Fund plus availability under the Company’s secured and unsecured credit facilities.

⁴ Liquidity-adjusted debt is defined as long-term debt reduced by cash, short-term investments and the Capital Construction Fund.

Fleet Information

As of December 31, 2010, OSG’s owned and operated fleet totaled 111 International Flag and U.S. Flag vessels compared with 106 at December 31, 2009. Fifty-seven percent, or 63 vessels, were owned as of December 31, 2010, with the remaining vessels bareboat or time chartered-in. Adjusted for OSG’s participation interest in joint ventures, the operating fleet totaled 107.0 vessels. OSG’s newbuild program totaled 11 vessels (nine owned and two chartered-in) across its crude oil, product and U.S. Flag lines of business. A detailed fleet list and updates on vessels under construction can be found in the Fleet section on www.osg.com.

Consistent with general practice in the shipping industry, the Company uses time charter equivalent revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. Time charter equivalent revenues, a non-GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance.

Conference Call Information

OSG has scheduled a conference call for today at 11:00 a.m. ET. Call-in information is (877) 941-8416 (domestic) and (480) 629-9808 (international). The conference call and supporting presentation can also be accessed by webcast, which will be available at www.osg.com in the Investor Relations/Webcasts and Presentations section. Additionally, a replay of the call will be available by telephone through March 7, 2011; the number for the replay is (877) 870-5176 (domestic) and (858) 384-5517 (international). The passcode for the replay is 4403846.

About OSG

Overseas Shipholding Group, Inc. (NYSE: OSG), a Dow Jones Transportation Index company, is one of the largest publicly traded tanker companies in the world. As a market leader in global energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets, OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world’s most customer-focused marine transportation companies and is headquartered in New York City, NY. More information is available at www.osg.com.

Forward-Looking Statements

This release contains forward-looking statements regarding the Company's prospects, including the outlook for tanker and articulated tug barge markets, changing oil trading patterns, anticipated levels of newbuilding and scrapping, prospects for certain strategic alliances and investments, estimated TCE rates achieved for the first quarter of 2011 and estimated TCE rates for the second, third and fourth quarters of 2011, timely delivery of newbuildings in accordance with contractual terms, prospects of OSG’s strategy of being a market leader in the segments in which it competes and the forecast of world economic activity and oil demand. These statements are based on certain assumptions made by OSG management based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of OSG, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors, risks and uncertainties that could cause actual results to differ from the expectations reflected in these forward-looking statements are described in the Company’s Annual Report for 2009 on Form 10-K and those risks discussed in the other reports OSG files with the Securities and Exchange Commission.