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OS

OVERSEAS SHIPHOLDING GROUP INC (OSG)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 delivered strong profitability despite fewer vessels: Net income $20.4M and diluted EPS $0.26, with operating income up 27% YoY to $25.9M; Adjusted EBITDA rose to $47.3M (+8.4% YoY) .
  • Shipping revenues declined 4.7% YoY to $116.0M on fleet reductions and higher drydock days, partly offset by higher average rates and lightering volumes; TCE revenues fell 3.5% YoY to $110.1M .
  • Management highlighted >$860M forward charter book added through early 2024 (+116 months of cover) and “durably balanced” market outlook; dividend of $0.06/share initiated and 1.425M shares repurchased in Q4 2023 .
  • Key potential catalysts: ongoing Saltchuk non-binding indication of interest, expanded charter coverage, Alaska fleet upgrades, and cash returns (dividend/buybacks) .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA beat prior-year quarter, reaching $47.3M as cost reductions offset revenue pressure; full-year Adjusted EBITDA hit $175.7M, +23.1% YoY, achieving management’s $175M target .
  • Chartering momentum: added 116 months of forward charter cover since prior report; forward charter book >$860M in TCE earnings as of early March 2024, with 2024 “essentially fully booked” per call .
  • Shareholder returns: $0.06 dividend declared (paid Jan 4, 2024) and 1.425M shares repurchased in Q4; CEO: “we have ‘stuck the landing’ with our 4th quarter performance” .

What Went Wrong

  • Top-line pressure: shipping revenues down 4.7% YoY to $116.0M and TCE revenues down 3.5% YoY to $110.1M on lower fleet count and increased drydock days .
  • Fewer voyage charters reduced voyage revenues ($21.1M vs $27.4M YoY); revenue days fell to 1,768 from 2,023 YoY .
  • S&P Global consensus estimates were unavailable for Q4 2023 (SPGI mapping issue), limiting beat/miss analysis versus Street estimates.

Financial Results

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Shipping Revenues ($USD Millions)$121.8 $106.6 $115.4 $116.0
Time Charter Equivalent (TCE) Revenues ($USD Millions)$114.1 $100.1 $108.6 $110.1
Operating Income ($USD Millions)$20.4 $20.3 $28.2 $25.9
Net Income ($USD Millions)$10.1 $12.3 $17.6 $20.4
Diluted EPS ($USD)$0.11 $0.15 $0.22 $0.26
Adjusted EBITDA ($USD Millions)$43.6 $39.5 $48.1 $47.3

Segment operating contribution (Vessel Operating Contribution, non-GAAP):

Segment ($USD Thousands)Q4 2022Q4 2023
Specialized businesses$31,725 $28,151
Jones Act MR tankers$7,793 $13,668
Jones Act ATBs$6,535 $8,378
Total Vessel Operating Contribution$46,053 $50,197

KPIs and operational metrics:

KPIQ4 2022Q4 2023
Revenue Days (total)2,023 1,768
TCE Average Rate – Lightering ($/day)$80,352 $96,986
TCE Average Rate – Jones Act MR Fixed ($/day)$62,916 $69,898
Total Cash and Investments ($USD Millions)$93.5 $91.2
Shares Outstanding (ending)78,297,439 70,946,476
Q4 Share Repurchases (shares)—1,425,000

Note: Margins (%) were not disclosed in the press release tables; SPGI fundamental margin metrics unavailable due to CIQ mapping issue.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareFY 2023N/A$0.06 declared Dec 6, 2023; paid Jan 4, 2024 New
2024 Charter CoverageCY 2024“90% of 2024 trading days fixed” (as of Q3 2023) “2024 is essentially fully booked” (call commentary) Raised/confirmed
Forward charter book (TCE)As of Mar 2024N/A>$860M TCE value; +116 months of cover added since last report New
Vessel charter extensionOverseas TampaN/ABareboat charter extended 5 years (Jun 2025–Jun 2030); options remain New
Alaska fleet employmentAlaskan ExplorerN/AContract to transport USGC crude to Delaware Bay refiner New
Debt/obligation prepaymentDPO to AMSC subsN/APrepaid $5.6M at discount, gain $0.912M recognized New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Charter coverage/backlogTSP acceptance; Mykonos MSC charter to contribute >$20M TCE in year one 90% of 2024 trading days fixed at rates generating >$30M/month TCE >$860M forward charter book; 116 months added; 2024 essentially fully booked Strengthening
Alaska fleet strategyAlaska class vessels active; no layups in Q2 2023 Alaska vessels stable operations Purchased Alaskan Frontier ($20M); engine lifecycle upgrades expected to improve fuel efficiency 15–20% and enable future methanol Investment/upgrades
Lightering volumesIncreased lightering volumes Volumes boosted by healthy refining margins Q4 lightering TCE average rate up to $96,986/day Improving pricing
Capital allocation$10M buyback increase; 2.1M shares repurchased in Q2 Repurchased 4.58M shares and canceled warrants Dividend initiated; 1.425M Q4 repurchases; remaining buyback authority $25M (call) Ongoing returns
Macro/marketTight Jones Act MR market; stable specialized assets Healthy refining margins and strong international tanker rates “Durably balanced market” with stable demand and constrained supply (CEO) Supportive backdrop
Corporate actions——Saltchuk non-binding $6.25/share indication under Board review (call) Potential M&A

Management Commentary

  • CEO: “we have ‘stuck the landing’ with our 4th quarter performance… meeting our adjusted EBITDA target of $175mm for the full year, a 23.1% gain over 2022… producing strong cashflow and providing the means to make continued progress in meeting our key capital allocation goals” .
  • CEO: “we agreed to employ the Alaskan Explorer to transport US Gulf Coast crude oil to one of our Delaware Bay refining customers… OSG has added 116 months of forward charter cover… increasing the value of our forward charter book to over $860 million” .
  • Call commentary: 2024 “essentially fully booked”; remaining repurchase authority $25M; detailed charter maturity ladder and options on Alaska vessels .

Q&A Highlights

  • Strategic/Corporate: Board reviewing Saltchuk’s non-binding indication of interest; management emphasized fiduciary process and focus on shareholder interests .
  • Fleet investments: MAN B&W engine lifecycle upgrades across Alaska class expected to deliver 15–20% fuel savings and potential methanol capability; supports longer asset lives and lower maintenance .
  • Charter book/coverage: Reinforced >$860M contracted TCE revenues and high 2024 coverage; discussed options/renewals (e.g., Alaskan Legend/Navigator, Mykonos with MSC) .
  • Capital returns: Remaining buyback capacity and dividend initiation framed within strong cash generation and reduced operating/charter hire costs .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2023 EPS and revenue were unavailable due to a Capital IQ mapping issue for OSG in our SPGI dataset. As a result, formal beat/miss versus SPGI consensus cannot be provided for this quarter.
  • Actuals: Shipping revenues $116.0M; diluted EPS $0.26; Adjusted EBITDA $47.3M. Street estimate comparisons should be revisited once SPGI mapping is restored .

Key Takeaways for Investors

  • Cash generation and operating leverage remain compelling: higher rates and lower operating/charter costs drove strong EBITDA and EPS despite fewer ships .
  • Backlog durability: >$860M forward charter book and near-full 2024 coverage underpin visibility, supporting continued buybacks and dividends .
  • Alaska fleet upgrades and Alaskan Frontier acquisition expand capacity optionality and potential returns; efficiency gains (15–20% fuel savings) could lift margins as upgrades come online .
  • Lightering and MR fixed-rate strength: pricing favorable (e.g., lightering ~$97k/day; MR fixed ~$69.9k/day) supports TCE resilience even with lower revenue days .
  • Corporate optionality: Saltchuk proposal represents a non-fundamental catalyst; outcome (and valuation) could drive stock volatility and rerating .
  • Tactical: With strong coverage and cash, near-term narrative favors capital returns and execution on Alaska upgrades; monitor charter renewals/options and MSC/TSP exposure .
  • Medium term: Balanced market, constrained supply, and Jones Act dynamics should sustain rate support; continued deleveraging and buybacks enhance per-share metrics .

References: Q4 2023 8-K press release and financials ; Q3 2023 8-K ; Q2 2023 8-K ; Q4 2023 earnings call transcript via Seeking Alpha/MarketScreener/InsiderMonkey .