Tuesday, October 30, 2007

OSG Q3 Profit Falls 71%

Overseas Shipholding Third-Quarter Profit Falls 71%
By Todd Zeranski
Oct. 29 (Bloomberg)

Overseas Shipholding Group, the largest U.S.-based oil tanker owner, said third-quarter profit fell 71 percent as the company was paid less for oil deliveries.

Net income declined to $26.6 million, or 83 cents a share, from $90.8 million, or $2.29, a year earlier, the New York-based company said in a statement today. The average estimate of 12 analysts surveyed by Bloomberg was 70 cents a share. Revenue rose 4.3 percent to $277.2 million.

Shipping rates have fallen 19 percent this year, according to the Baltic Dirty Tanker Index. The decline is due at least partly to ship supply outpacing crude-oil demand. While the size of the world fleet expanded 3.8 percent, demand increased 1.7 percent, according to the International Energy Agency.

``They're going to have a tough couple of quarters, this and next,'' Natasha Boyden, a Cantor Fitzgerald LP analyst, who has a ``buy'' rating on the stock, said. ``The rates haven't rebounded like we thought they would. Weather hasn't been helpful, and that's usually the biggest driver.''

Overseas Shipholding was unchanged at $69.21 in New York Stock Exchange composite trading. The stock has risen 23 percent this year.

Profit included a gain from sales of vessels of $1.5 million, or 5 cents a share. The year-ago quarter had a gain of $15.8 million, or 39 cents.

Oil is up 53 percent in 2007 and reached a record $93.80 a barrel in New York Mercantile Exchange trading today.

Tanker Fleet

The world fleet will increase by as much as 32 percent during the next five years, estimates Lloyd's Register-Fairplay, the company that assigns ship registration numbers.

``We hope we would see asset values come down, as rates have been depressed for several quarters,'' Boyden said. Overseas Shipholding ``would like to see that, because they would be able to buy.''

Last month, Overseas Shipping said it would add four Suezmax carriers, which can each transport 1 million barrels of oil, to its fleet. The company owned or operated 51 crude-oil tankers at the end of the quarter, including 20 very large crude carriers, or VLCCs, which can carry 2 million barrels of oil.

The company has booked 44 percent of the fourth quarter for its VLCCs at an average rate of $25,500 a day. For its Aframax tankers, which can transport 600,000 barrels of oil, it has booked 13 percent of the quarter at a spot charter rate of $17,000 a day.

VLCC Fleet

The company's VLCCs operate mainly out of the Persian Gulf on routes to Asia and the U.S. The tanker owner said it was paid an average of $34,802 a day for its VLCCs in the quarter, a 50 percent decrease. Its break-even point for VLCCs is $17,400.

Its Aframax tankers earned an average spot rate of $24,614, from $34,952 a day a year earlier, a 30 percent decline.

Overseas Shipholding's U.S.-flag fleet ships crude oil and refined products between U.S. ports under the Jones Act, a 1920 law that requires commercial vessels operated between U.S. ports to be built in the U.S., crewed by Americans and owned by an American company.

Revenue for its U.S. fleet nearly tripled to $53.8 million.

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