Omar Nokta upgrades FRO, OSG, NAT

Oil Tankers Owe Strength to OPEC
Ruthie Ackerman
11.26.07
Forbes.com

Increased oil production has sent spot charter rates surging on oil tankers in the last week, helping to keep the stocks of crude oil tankers and operators above water.

On Monday, Dahlman Rose & Co. analyst Omar Nokta, upgraded three tanker companies because they are the most exposed to the strong spot rates. Nokta raised his rating on Frontline, Overseas Shipholding Group, and Nordic American Tanker Shipping to “buy” from “hold” and reiterated his “buy” rating on General Maritime, Tsakos Energy Navigation, Ship Finance International, and Omega Navigation Enterprises.

But even with the upgrade oil tanker stocks were a mixed bag at the close on Monday, indicating investors didn't share Nokta's optimism.

Notka said the spot rates on the Very Large Crude Carriers, or VLCC’s, have jumped in the Arabian Gulf in the past few days. Last week, VLCC’s averaged $33,000 per day. On Monday morning they spiked to $84,000 per day, a level not seen since August 2006. The number of vessels being chartered has jumped significantly, limiting the supply of ships, Nokta said.

The strength in the oil tanker market has spread to West Africa and the Mediterranean as well, he added.

The problem for oil tanker lines over the last year has been that the supply of ships outstripped the demand for oil. With oil prices at record highs since OPEC's production cut in Nov. 2006, demand for oil tankers fell.

But Nokta believes the strong demand for oil tankers over the last few weeks is a result of increased production from the Organization of Petroleum Exporting Countries. As global oil stock levels have fallen over the past six months, OPEC has been under pressure to increase production. OPEC appears to have raised production by 750,000 barrels, Nokta said, which is more than the 500,000 barrel boost it previously announced.

Nokta believes the increased production is a sign that a formal boost should come when OPEC meets on Dec. 5. With gasoline, U.S. heating oil, and crude oil stockpiles down substantially there should be a significant amount of imports through the winter and into the spring, boosting the demand for oil tankers, Nokta said.

The conversion of 60 VLCCs into dry bulk carriers for 2008 and 2009 should offset a significant number of the 36 new VLCCs being built and the 69 more being delivered in 2009. With increased production in the Arabian Gulf demand will increase helping the tanker market to outperform expectations, Nokta said.

Dahlman Rose Upgrades FRO and OSG

Crude Oil Declines as Reports Show OPEC Production Increase
By Mark Shenk
Nov. 26 (Bloomberg)

Crude oil fell on speculation that OPEC is increasing production to reduce record prices and keep the global economy from slowing.

The 12 members of the Organization of Petroleum Exporting Countries will probably increase output 1.1 percent to 31.6 million barrels a day this month, according to preliminary estimates by PetroLogistics Ltd. OPEC agreed in September to raise production targets for the 10 members with quotas by 1.9 percent starting Nov. 1.

``The Petrologistics numbers are showing a good-size build in OPEC output,'' said Tim Evans, an analyst with Citigroup Global Markets Inc. in New York. ``Most of the increase is from Iraq, which is fairly encouraging.''

Crude oil for January delivery fell 48 cents, or 0.5 percent, to settle at $97.70 a barrel at 2:44 p.m. on the New York Mercantile Exchange. Futures touched $99.11 today, the highest since reaching a record $99.29 on Nov. 21. Oil futures trading began in 1983. Prices are up 65 percent from a year ago.

Iraq, which last month resumed exports from Kirkuk through its northern pipeline network, will make the biggest contribution to the supply increase, raising output by 20 percent to 2.15 million barrels a day, according to PetroLogistics, which assesses supply by tracking tankers.

Iraqi Recovery

``This is the highest we've seen since the U.S. invasion in 2003 and may be a sign that the Iraqi oil industry is finally recovering,'' said Evans.

Iraqi production has yet to recover from the unrest that followed the U.S.-led invasion in March 2003. Iraq produced 2.48 million barrels a day in February 2003, the last month before the invasion. The Persian Gulf country has the world's third-biggest proved oil reserves, according to BP Plc.

Saudi Arabia is producing more than 9 million barrels a day, CNBC reported, citing unidentified people at the Saudi oil ministry. The country, which is OPEC's largest producer and the world's top oil exporter, pumped an average 8.75 million barrels a day in October, the highest since November 2006, a Bloomberg News survey showed.

Prices also fell on signs that slowing economic growth in the U.S., Europe and Japan will curb fuel consumption. Investor optimism about financial markets in the U.S., which consumes a quarter of the world's oil, fell this month to the lowest in two years after concern grew that the country is heading toward a recession, according to a UBS AG poll.

The UBS/Gallup Index of Investor Optimism dropped to 44 in November from 70 last month. The sentiment gauge declined to the lowest level since Hurricane Katrina struck the U.S. Gulf Coast and is down from a three-year high of 103 in January.

Frontline Ltd., the world's biggest supertanker operator, and Overseas Shipholding Group Inc. had their ratings raised by Dahlman Rose & Co. because of increasing OPEC shipments. Ship- hire rates on tankers sailing to Asia from the Middle East, the world's busiest market for supertankers, more than doubled since Nov. 9, according to data from the London-based Baltic Exchange. Dahlman is an investment bank that specializes in marine transport companies and related industries.

OPEC will load 24.5 million barrels a day onto tankers in the four weeks to Dec. 8, compared with 23.8 million barrels in the month ended Nov. 10, Oil Movements said on Nov. 22. It will be OPEC's 14th consecutive weekly increase and the biggest this year, according to the company, which tracks shipments.

Upcoming Meeting

The group, which produces more than 40 percent of the world's oil, is scheduled to discuss crude-oil production for the first quarter of 2008 at a meeting in Abu Dhabi on Dec. 5.

``We are primed to make another run for $100,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``There's a good shot we will make it this time but once that occurs there is no telling what will happen.''

The dollar dropped to a record low against the euro earlier today on concern U.S. credit-market losses may prompt the Federal Reserve to keep reducing interest rates. The U.S. currency recovered against the euro later in the session.

``On one hand there's growing evidence that demand will drop,'' Wittenauer said. ``Economic concerns are being reflected in a number of markets. At the same time, we are seeing weakness in the dollar, which tends to push commodity prices higher.''

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.

OSG Adds 4 Suezmax Tankers

OSG Adds New Tanker Class to Its Crude Oil Fleet with Four Suezmax Vessels
(BUSINESS WIRE)

Overseas Shipholding Group, Inc. (NYSE:OSG), a market leader in providing energy transportation services, announced today it has expanded its crude oil tanker fleet with the addition of four Suezmax vessels. The vessels complement OSG’s crude oil tanker fleet of ULCCs, VLCCs, Aframaxes and Panamaxes. Ranging in size between 120,000 and 200,000 deadweight tons (dwt), Suezmaxes offer greater port flexibility than VLCCs and better economies of scale than Aframax tankers. The addition of the vessel class to OSG’s fleet enhances its ability to offer customers a full range of vessel options when transporting crude oil throughout the world.

Mats Berglund, head of OSG’s Crude Oil Tanker Strategic Business Unit, commented, “OSG is now the only ship owner in the world that can offer customers service in all crude oil tanker segments as well as lightering. In addition, the vessels enhance our ability to gather market intelligence enabling us to better understand and respond to changes in the market and to better serve the needs of our customers.”

OSG has purchased, sold and bareboat chartered-back two Suezmax tankers from Double Hull Tankers, Inc. (NYSE: DHT). OSG expects to take delivery of a 2001-built 164,000 dwt vessel in December 2007 and the second ship, a 2000-built 153,000 dwt vessel, is expected to deliver to OSG in the first quarter of 2008. The vessels have been chartered for seven and 10 years, respectively.

OSG has time chartered-in two 156,000 dwt sister ships for three years. The vessels, currently under construction in China, are expected to deliver in the fourth quarter of 2008.

Jefferies Rates Overseas (OSG) "Buy"

Overseas Shipholding "buy," target price raised

Wednesday, July 25, 2007 9:40:18 AM ET
Jefferies & Co

NEW YORK, July 25 (newratings.com) - Analysts at Jefferies & Co reiterate their "buy" rating on Overseas Shipholding Group (OSG.NYS). The target price has been raised from $84 to $124.

Overseas (OSG) reports 2Q results

Overseas Shipping Quarterly Profit Rises on Rates
By Todd Zeranski
July 25 (Bloomberg)

Overseas Shipholding Group, the largest U.S.-based oil-tanker owner, said second-quarter profit rose 31 percent on higher spot rates for its so-called Very Large Crude Carriers and smaller Aframax and dry-bulk vessels.

Net income rose to $78.9 million, or $2.28 a share, from $60.2 million, or $1.52, a year ago, New York-based Overseas Shipholding said in a statement. Revenue climbed 30 percent to $299.9 million. The company was expected to earn $1.43 per share, the average estimate of five analysts surveyed by Bloomberg.

Very Large Crude Carriers, or VLCCs, can carry 2 million barrels of oil. These ships operate mainly out of the Persian Gulf on routes to Asia and the U.S.

Overseas Shipping said its 21 VLCCs were chartered in the spot market at an average rate of $53,474 per day, 15 percent higher than the year-ago period. The company's break-even point for VLCCs is $28,700.

For its 15 Aframax tankers, which can transport about 600,000 barrels of oil, Overseas Shipholding said it was paid an average of $32,187 a day in the spot market, where rates vary by voyage, 21 percent higher than a year earlier.

Maritrans Purchase

Overall, Overseas Shipping totaled 8,704 revenue days for the quarter, a 16 percent increase over the year-ago period. The increase was aided by the purchase of four Handysize vessels that carry dry-bulk commodities, as well as the acquisition of a fleet of oil-transfer boats and the former Maritrans Inc. fleet.

Chief Executive Officer Morten Arntzen, 52, expanded the company's fleet of domestic tankers with the $455 million purchase of Maritrans in September.

The company said it repurchased 5.5 million shares at $66.13 per share during the quarter.

The earnings report was released after the close of regular trading on U.S. stock markets. Shares of Overseas Shipholding today rose $2.46, or 2.9 percent, to $86.14 in New York Stock Exchange composite trading.

Banc of America Dowgrades Overseas (OSG)

Oil Tanker Stocks Fall on Analyst Downgrade and Expected Rate Slump
Wednesday July 25, 12:08 pm
NEW YORK (AP)

Stocks of companies that own and operate crude oil tankers mostly fell Wednesday, after a Banc of America Securities analyst downgraded Overseas Shipholding Group Inc. and said the third quarter may be challenging for the sector.

Analyst Daniel L. Barcelo downgraded Overseas Shipholding to "Neutral" from "Buy" as the stock approached his fair value estimate. He maintained the stock as his top pick in the sector, but said he no longer sees any near-term catalysts to drive up the stock.

Across the sector, Barcelo said the tanker companies should post "solid" second-quarter earnings, although they may struggle in the near-term as tanker charter rates slip.

"Looking ahead, the third quarter may prove difficult as rates have collapsed between 25 to 50 percent since peaking in early May due to relatively high inventory levels, limited OPEC production and refinery turnarounds," the analyst said. "Thus we expect third-quarter rates will drop about 25 percent from second-quarter levels, on average, for all three major types of crude vessels."

The analyst expects tanker rates to even out throughout the rest of the year, and then to turn around in 2008 and 2009.

In midday trading, shares of Overseas Shipholding fell 32 cents to $84.

Frontline Ltd. fell 63 cents to $47.71, while Teekay Corp. rose 7 cents to $55.89.

Ship Finance International Ltd. fell 58 cents, or 1.9 percent, to $29.25. The stock has traded between $18.41 and $31.78 in the last 12 months.

General Maritime Corp. fell 3 cents to $27.45, and Aries Maritime Transport Ltd. rose 4 cents to $9.97.

Knightsbridge Tankers Ltd. rose 40 cents to $29.32.

Seven Changes to Tanker Company Forecasts

Overseas Shipholding Upgraded by JPMorgan on Valuation Change
By Alaric Nightingale
July 6 (Bloomberg)

Shares of Overseas Shipholding Group Inc., the largest U.S.-based oil-tanker owner, were upgraded by analysts at JPMorgan Chase & Co., who said they previously valued the company's fleet of ships incorrectly.

Analysts in New York led by Jonathan Chappell raised their rating to ``overweight'' amid seven changes to their forecasts for tanker companies. The bank's recommendation on Overseas Shipholding had been ``neutral,'' according to data compiled by Bloomberg.

Management meetings uncovered value ``previously ignored by us'' in the vessels New York-based Overseas Shipholding has leased from other shipping lines, ``rendering the shares still inexpensive,'' the analysts wrote in a report published today.

JPMorgan's other actions were all changes to profit estimates. Frontline Ltd., the world's biggest oil-tanker company by capacity, is likely to have made more in the second quarter than the bank previously expected because of higher-than-estimated rental rates for its vessels.

JPMorgan cut its earnings estimates for General Maritime Corp., Tsakos Energy Navigation Ltd. and Top Tankers Inc., and raised the estimates for Nordic American Tanker Shipping Ltd. and Double Hull Tankers Inc.

FRO, GMR, OSG, TNP, DHT, NAT, TOPT

Overseas Shipholding Shares Rise

Overseas Shipholding Shares Rise to Record on Outlook
By Todd Zeranski
July 5 (Bloomberg)

Shares of Overseas Shipholding Group Inc., the largest U.S.-based oil-tanker owner, rose for a third day this week, touching a record, on improved earnings prospects because of high oil prices and strong demand for vessels to supply refiners.

The company has been helped by an ``underlying bullishness on the outlook for the second half for tankers,'' Omar Nokta, an analyst at Dahlman Rose & Co. in New York, said today in an e- mailed message. Nokta rates Overseas Shipholding shares a ``buy'' and owns none.

Shares of New-York based Overseas Shipholding rose $1.82, or 2.1 percent, to $88.27 in New York Stock Exchange composite trading after touching a record $88.77 earlier in the day. The stock has risen 8.4 percent this week and is 48 percent higher than at this time last year.

Crude oil for August delivery rose to a 10-month high of $71.81 a barrel today on the New York Mercantile Exchange, extending an 18 percent rally this year on strong demand for gasoline and concern over possible supply disruptions.

G. Scott Burk, an analyst at Bear Stearns Cos., raised his second-quarter and full-year earnings estimates for Overseas Shipholding on July 2, citing high rates for the company's Very Large Crude Carriers, or VLCCs, and Aframax tankers.

Slightly more than half of the company's ships have yet to be booked for 2008, enabling it to benefit from an expected increase in rates, Burk said in a note to clients.

The analyst raised his second-quarter profit estimate to $1.64 per share from $1.32 and his full-year estimate to $7.08 from $6.86. Burk rates the company's stock at ``peerperform.''