OVERSEAS SHIPHOLDING GROUP INC (OSG)·Q2 2023 Earnings Summary

Executive Summary

• Q2 2023 delivered net income of $12.3M ($0.15 diluted EPS), up sharply year over year from $3.7M ($0.04 diluted EPS), driven by lower voyage, vessel, and charter hire expenses despite fewer vessels and lower shipping revenues .
• Shipping revenues fell 9.6% year over year to $106.6M; TCE revenues declined 3.0% to $100.1M, while Adjusted EBITDA rose 25.4% to $39.5M, reflecting stronger operating leverage and higher average TCE rates for Jones Act MR tankers .
• Strategic catalysts: all three non-Jones Act MR tankers accepted into the U.S. Tanker Security Program and the Overseas Mykonos awarded a long-term MSC charter expected to contribute >$20M in TCE earnings in the initial contract year .
• Capital allocation: buyback authorization increased by $10M to $20M; OSG repurchased 2.1M shares for $8.0M in Q2, ending with total cash and investments of $120.8M .

What Went Well and What Went Wrong

• What Went Well

  • “Solid and satisfying” quarter per CEO; notably higher average TCE rates for Jones Act MR tankers in a tight market supported improved profitability .
  • Adjusted EBITDA increased 25.4% year over year to $39.5M, reflecting decreases in voyage, vessel, and charter hire expenses and higher rate realization .
  • Strategic wins: acceptance into Tanker Security Program (TSP) and MSC time charter for Overseas Mykonos, with expected >$20M TCE contribution in first year .

• What Went Wrong

  • Shipping revenues decreased 9.6% year over year to $106.6M due to fewer vessels (redelivery of three tankers in Dec-2022), more drydock days, fewer Government of Israel voyages, and no MSC voyages versus prior year .
  • Revenue days fell to 1,740 in Q2 from 1,903 in Q2 2022, weighing on reported shipping revenues despite stronger average rates .
  • Quarter-over-quarter moderation: shipping revenues ($113.8M → $106.6M), TCE revenues ($104.7M → $100.1M), and Adjusted EBITDA ($40.9M → $39.5M) softened from Q1, partly reflecting operational timing and voyage mix .

Financial Results

Segment breakdown (Vessel Operating Contribution):

KPIs:

Notes: OSG realigned vessel categories in 2023 reporting; prior-period tables were conformed where applicable, but Alaska is explicitly broken out in Q4 2022 only .

Guidance Changes

No formal quantitative revenue/margin/OpEx/tax guidance was provided in the Q2 press release; strategic contract and capital allocation updates above frame forward earnings visibility .

Earnings Call Themes & Trends

Note: We attempted to retrieve Q2 2023 and prior earnings call transcripts, but encountered system retrieval errors; themes above are derived from press releases .

Management Commentary

• “Solid and satisfying best characterizes the second quarter results… notably higher average TCE rates for our Jones Act MR tankers… Stable and historically consistent returns from our specialized assets continued to generate positive cashflow and provide sufficient liquidity to fund our… share buy-back program…” — Sam Norton, President & CEO .
• “MSC’s award of a long-term charter for the Overseas Mykonos… represents an important step in meeting OSG’s ambition to expand its US flag operations outside of coastwise trades… expected to… contribute more than $20 million in time charter equivalent earnings during the initial contract year.” — Sam Norton .
• “All asset categories achieved financial results at or above expectations… For the third consecutive quarter, we delivered adjusted EBITDA in excess of $40 million…” — Q1 commentary .
• “Improving market conditions have resulted in OSG achieving more stability in its financial profile and greater visibility of forward cashflows… We can now look forward to evaluating real opportunities to extend and expand the cash generating capabilities of our unique franchise…” — Q4 commentary .

Q&A Highlights

• We attempted to read the full Q2 2023 earnings call transcript and prior transcripts but encountered retrieval errors; Q&A details and any intra-quarter guidance clarifications are unavailable from transcripts. Themes are synthesized from press releases only .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2023 EPS and revenue was unavailable for OSG at the time of analysis; therefore, formal beat/miss vs consensus cannot be assessed. We attempted retrieval but mapping was not available for this ticker in our system. In lieu of consensus, we highlight year-over-year EPS improvement ($0.15 vs $0.04) and Adjusted EBITDA growth (+25.4%) despite lower shipping revenues .

Key Takeaways for Investors

• Earnings quality improved: EPS rose to $0.15 with Adjusted EBITDA at $39.5M, supported by lower operating costs and higher average rates, even as shipping revenues declined year over year due to fleet changes and voyage mix .
• Strategic visibility: Overseas Mykonos long-term MSC charter expected to add >$20M in TCE earnings in the initial year; three non-Jones Act MRs accepted into TSP, reinforcing forward revenue stability and national security-linked demand .
• Rate backdrop constructive: Jones Act MR average rates continued to strengthen amid tight market conditions, underpinning operating leverage into 2H23 .
• Mix headwinds manageable: Revenue days fell and Government/MSC voyage counts were lower in Q2, but lightering and higher daily rates partly offset the impact .
• Cash and buybacks: $120.8M total cash and investments; buyback authorization lifted to $20M with 2.1M shares repurchased in Q2, supporting capital return and potential per-share accretion .
• Trajectory vs prior quarters: Q2 softened modestly vs Q1 on revenues and Adjusted EBITDA, but year-over-year profitability improved meaningfully; watch for MSC charter commencement benefits in 2H .
• Monitoring items: Drydock schedules and fleet availability, Government/MSC voyage cadence, and the rate environment for Jones Act and lightering; these will drive quarter-to-quarter variance .