Q2 2020 Overseas Shipholding Group Inc Earnings Call
Second quarter 2020 earnings release conference call.
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I would now like to turn the conference every two Standalone President and CEO. Please go ahead.
Sure.
Good morning.
All for joining in on this call for the presentation of our 2022nd quarter results for allowing us to provide additional commentary inside into the current state of our business and the opportunities and challenges that lie ahead.
Usual victory blood, Molly Garcia and Princeton following our joining me on this presentation.
Before providing commentary on the specifics of overseas recent and future business activities.
I could take a moment to reflect on the Truman impact of the pandemic that has come to dominate so much of our lives and recent box.
As was the case in our previous presentation.
19 continues to cloud all of our activities with heightened uncertainty.
Previously unimaginable challenges.
Circumstances affecting all of us as a result of the cobot 19 pandemic remain exceptional in our lifetime.
Family and friends at higher risk of infection present, a new element of constant concern.
Children's educational experience.
Disrupt their learning trajectory.
Remote working conditions, a challenge the connection amongst our colleagues.
Employees and crew members were unable to work moly.
Subjected to the constant threat of unavoidable virus exposure in the conduct of their jobs.
It is easy to understand how these circumstances can exact heavy toll on the individuals collectively work each day to ensure that our vessels can load transit discharge cargos without material interruption.
In the face of all these challenges.
That's a responsibility chaired by what she's Mariners and shore based support team in meeting the essentially transport transportation fuel to markets that we served its commendable.
The contribution made by all our employees in particular, our seafarers realizing the strong financial results reported this morning.
Should be applauded by all the benefit from their service.
Our business cannot function without the dedication of the individuals who bear the burden of ensuring its continued safe operation.
I wish to recognize those contributions and put a voice to the evolving story and I wish to.
Oh jeez employees, our greatest that's it and it's important that we remembered this as we review the results achieved.
Thanks, and acknowledgement from the jobs, well done cannot be express too often or too deeply.
Keeping our employee safety remains our number one priority recognizing them for the services that they provide is our shared obligation.
Turning now to our presentation.
Like the direct every one to the narrative on pages to in three of the Powerpoint presentation available on our website regarding forward looking statements estimates and other information that may be provided during the course of this call.
The contents of that narrative barn important part of this presentation and I'm sure everyone to reconsider them carefully.
Well the offering you more than just at historical perspective, I know, we're seeing today no presentation includes forward looking statements, including statements about anticipated future results.
These statements are subject to uncertainties and risks.
Actual results may differ materially from injections and couldn't be affected by Oh, we bought a wide variety of risk factors, including factor it's beyond our control.
For a discussion of these factors we refer you specifically to our annual report on form 10-K, what's the school year ended December 31st 2019.
Our form 10-Q for the first quarter of 2020.
Form 10-Q for the second quarter of 2020, which we anticipate being filed later today.
And our other filings with the FCC, which are available at the FCC Internet site Www Dot dot dot Gov as well is on our own website www dot whiskey dotcom.
Forward looking statements in this presentation speak only as the date these materials.
We do not assume any obligation to update any forward looking statements, except as may be legally required.
In addition, our presentation today includes certain non-GAAP financial measures, which we defined and reconciled to the most closely comparable GAAP measures our second quarter earnings release, which is posted on our website.
As announced earlier this morning, I wish we delivered solid financial results in the quarter just completed.
As Dick will detail more fully in his remarks always Ci hatching plays a deep book of time charters that have been providing considerable insulation from exposure to the disruptions caused by called bid 19, the transportation fuel distribution markets. We're active in.
Well its cheez it definitely were employed at healthy charter rates close to 95% of available days for the first half of 2020.
During the quarter costs were managed to levels consistent with historical performance and that's a result cash flow from operations was strong.
We are managing our operations very much aware that the systems within which we operate under escalating stress presenting new risks vulnerabilities there previously not affected our performance.
Whether these systemic stresses ease with time and what costly ultimately imposed upon us well only be known with hindsight.
As these contingencies become clear we will continue our efforts to provide better guidance on their long term financial and.
Given the high percentage of fixed revenue streams during the first and second quarters.
Which are largely expected to continue for much of the rest of this year.
Most importantly management challenges have been and we may sustaining operational readiness at all times and containing the cost of adapting to developing logistical health and safety protocols.
Earlier this month, we experienced our first shipboard case, a cold Goodnight.
Resulted in an extraordinary expenses and the loss of several revenue days associated with cleaning and obtaining clearance for further operation The coast Guard C.D.C. and other health officials.
And this expense largely thanks to the effective planning a response of our operations teams.
Neither the extra costs no. The time lost out of service will materially impact our overall results.
The continued spread of coping lighting across the U.S. elevates the risk of further shipboard outbreaks as crew members rotate on and off that holds and of course, the normal towards a duty.
We are not alone in constructing this challenge we have seen in recent weeks escalating number of shipboard infections on vessels of our industry peers.
Maintaining a virus free environment onboard operating vessels will be a continuing concern.
We remain focused on developing and implementing effective means forgetting crew to win from our vessels.
As a matter that both protects their personal safety and endeavors to ensure with the highest level of confidence the joining crew members not bringing the virus onto the vessel or otherwise affecting the vessels acceptability in service.
Nonetheless, all prior periods, resulting from managing buyers related delays as well as a potential and has yet unknown new cost for testing cleaning quarantine immunization and certifications are to be anticipated.
Several pieces of legislation have been passed in response to the Carol good 19 and data.
We're not expecting any material impact on either our liquidity position for our financial results arising out of the application of already enacted permission.
There are several legislative proposals that could present opportunities to recover some code that 19 related costs.
It is still too early to assess with any certainty the prospect of these proposals.
Turning now to be impacted the virus on our Jones Act trade, we've experienced reduced called the volumes and increased I'd times elbow vessels, a derivative books falling refinery runs diminishing, but still a bit man destruction for transportation fuels.
During the quarter two of our tankers one of our remaining rebuilt atps.
The lightering bars that was redeployed to engage in conventional ATP trade solve their time charter contracts come to an end.
Increased demand due to the seasonal cycle and Cobiz 19 has resulted in a little to no spot market voyages.
As such we have taken to doesn't fit in to place the overseas key west and lay up at the end of the quarter.
We are also permanently we're moving the O S. T to 44 from service through a sale for scrap and action that was due to be taking in any case by the end of this month.
At this time, we continued to maintain the operational availability of the overseas long beach potential spot market bugs.
In August the O.S.G. Threefifty vision will move back into the Lightering service following completion of a required dry dock and special survey, replacing the O.S.G. 351 horizon in the service.
This will allow the always see 351 horizon to complete her plant die dry docking special survey.
Worked it is anticipated to be completed before the end of September.
As we moved into the final quarter of this year, you always see 350 basis will again be redeployed as a conventional ATP available in the spot markets.
He oversees martinez and overseas in accordance have also been in dry dock undergoing special survey work. The combination of these activities will result in reduced revenue days during July and August with an expected production in time charter equivalent revenues for the third quarter of approximately 15% when compared to the second quarter.
Yeah energy information age that she reports that refinery runs in the U.S. in recent weeks have recovered to close to 80% of capacity.
Over the past four weeks motor gasoline consumption has averaged 8.7 million barrels per day up from an April low a 5 million barrels per day, and now roughly 9% below comfortable year ago levels.
Yes, let consumption figures are also running at just less than 10% below year ago averages.
Analysts that we follow expect these figures to continue to improve in the months ahead, although full recovery of normalized consumption levels will not likely be seen until 2021.
Jet fuel consumption remains 40% below year ago levels. That's passenger flights in the U.S. continue to operate at roughly one third of year ago capacity.
He is a passenger figures at U.S. airports have come off their lows.
But I've been flattening out at about 25% of your bill comparable so over the past six weeks.
Surely jet fuel consumption recovery has a harder and longer pathway back to previous levels, something that will likely continue to weigh distillate prices and refinery margins for the foreseeable future.
Survey of numerous new forecast indicates the gasoline consumption in the United States.
I'll leave you read level slightly below historical norms trends in diesel consumption are also encouraging.
The shape and speed of jet fuel recovery remains an area of focus for one of our key customers when real Delta.
Currently three of our vessels are attracted to serve deltas trainer refinery.
Delta has restated in its recent earnings call. That's a trainer refinery remains an important part of its fuel strategy.
Marathon oil has also just announced that it will not be start its martinez refinery.
60000 barrels per day, you need in the San Francisco Bay.
It's too early to assess the impact of disclosure on fuel distribution patterns on the west Coast and marathon have indicated that they are reviewing plans to restart the facility has a renewable diesel plant.
As such we're not sure if and if so how this decision may impact the upcoming contract renewals for vessels currently chartered tobacco.
Marathon is also now it's a transaction to sell off all of its retail gasoline stations.
Transaction includes a commitment by marathon to supply gasoline to the buyer for over the next 15 years.
The impact of this transaction not marine transportation demand well does not likely be material.
Too much uncertainty exists to predict how supply demand the price of crude oil will unfold in the Bronx ahead.
Production cuts to date have supported recovery crude prices and increased consumption in many markets. It's brought all markets well off the bottom seen in April.
However, as always relative price remains to critical variable from our perspective.
Irrespective of the overall quantity of domestic production cuts shouldn't we continue to see domestic prices at a sustained discount to international prices. That's that's been the case for most of the past several years.
Cost wise transportation of crude oil should continue to be demanded.
Relative price differential should not be looked at in isolation. However, international shipping rates also factor into the equation when looking at comparable delivered cost economics.
Predicted in our last call the unusually high international tanker rates seen during the spring did not less.
The reduced rates reflect declining crude oil production coupled with the increase of tonnage released back ended the market once product that was being stored books delivered for consumption and increased available vessel supply.
It bears repeating that although rates and the international markets Act only indirectly domestic market conditions lowering international rates have the marginal effect of creating more competition for our vessels.
Considering cargo movements on a deliberate cost per barrel basis.
Before handing things over to Dick take you through the numbers.
It is gratifying to know the contribution made in the quarter from our newly acquired if you see vessels.
Working closely with the agency staff in Oregon managed to quickly integrate the HTC operations into our all without any visible disruption to the customers that we serve.
Corp. completed their acquisition a VP exploration Alaska in late June and we have established an effective working relationship with our new customer in the weeks would've thought.
In addition to the three large crude tankers being operated by 80 C. O Estes U.S. flags leave consist the day of one congratulate TB July doing Atps, three shuttle tankers, and LR tankers and to non Jones Act EMR tankers that participate in the U.S. Maritime Security program.
Well. She also currently owns and operates two Marshall Islands, lagged EMR tankers, which trade internationally Oh.
Well its GE has auto order one Jones Act compliant barge scheduled for delivery in November of this year.
I will now turn the call over the Dick to provide you with further details on our second quarter results for 2020 <unk>.
Thanks, Dan.
Please turn to slide seven.
We took delivery of the O.S.G. tool or Eightd at the end of May drew the remaining 5 million dollar availability on the loan is that.
The total loan balances now 32.9 million at a fixed 5% interest rate.
The barge had niche and initial voyage charter issue as reposition from Oregon to the Gulf of Mexico, where she delivered into a one year time charter starting in July 2020.
Our strong cover from long term charters.
Continued to serve all SG well during the second quarter is the impact of covert Nike hit the domestic and global economies.
This has been particularly beneficial is there have been only minimal spot cargos.
Sure reductions at all forms of travel wreak havoc on the Master transportation fuels.
Crude oil inventories rapidly expanded and refined product production.
Good.
Nevertheless, we were quite pleased with our second quarter operating results.
Experienced feed the revenue growth on both the year over year basis, as well as on a sequential quarter basis.
GCU revenues grew 22.3% or $18.3 billion from the year ago quarter.
Well actually Tc revenues increased 3.3 million or 3.4%.
Adjusted EBITDA grew 63.7% or $11.6 million compared to the second quarter 2000 Nike.
As a reminder, the second quarter 2019 included a 4.3 million dollar right off the bar, yes receivables.
Our first quarter adjusted EBITDA. Likewise included a one time gain of $19.2 billion determination.
Prior range, that's related to our acquisition of Alaska property.
Please turn to slide eight.
The second quarter continue to reflect the positive impact of our fleet operating principally at the time charters and approved braided buyer.
The mix in number of vessels has changed since last year's second quarter.
We operate at 24 vessels for the full second quarter 2020, and 21 in the second quarter 2019.
The second quarter of 2019, we continue to reduce the number of operating Regal 80 Beach four to one.
The runway remaining rebuilt barge is being sold for scrap this month.
The related tug will go through dry dock before relocating to Oregon be paired with the O.S.G. tool fly.
The second quarter of last year, we added three Alaskan tankers as well the Gulf Coast Suncoast in key west.
The key west operated under short term time charter initially during the quarter.
Well in the spot market, while the rest of our Jones Act Handysize tankers were on long term charters.
Offsetting this effect with the continued reduction in our gold 80 days.
We had 56 off hire days due to dry dock activities during the quarter.
Alaskan tanker acquisitions contributed $15.9 billion revenue during their first full quarter of operations.
Revenues from our Jones Act Handysize tankers decreased 8.8 billion a year ago quarter.
This reflects the impact at higher rates 2020, as well as the addition of the key west.
The effective Daly gray for fixed earnings increased over $4000 per day, well the number of days increased by 129.
The key West we re delivered for short term time charter during the quarter with minimal utilization thereafter.
Made the decision to layer up due to current market conditions, which are exacerbating the normal third quarter seasonal slowdown.
80, BTC revenues decreased by 5.1 billion from 2019 second quarter driven by the reduction in our operating 80 days to one.
We added the able with GE tool for during June and she contributed $1.3 million in revenue.
Total revenue days declined 341 during last year's quarter to 124 this years quarter.
Do you see revenues from our core non Jones Act tankers increased 4.6 million from last year's quarter.
The Gulf Coast Suncoast, both of which are on long term time charters contributed $3 million.
We conducted two wages for the government of Israel this year compared to one last year.
During the quarter, both the meat you know since you have to really had dry dock related off hire days.
Yeah, but none in the prior year.
The effective day rates for spot fixed earnings both increased in comparison to last year.
Lightering revenues decreased $6.2 billion second quarter 2019.
During the second quarter 2000, Nike both Btds, we're engaged in Delaware Bay Lightering activities.
Subsequently the P.S. refinery ceased operations in the oil Street Threefifty was reposition the Gulf of Mexico.
During the second quarter 2020, the O.S.G. 350 was in dry dock, therefore off hire for approximately one month.
The U.S.G. 351.
Lighter fewer barrels during the quarter due to reduced demand from our customers as refinery utilization decreased.
Each of our lighter on contracts require annual minimum volumes you wider paid for.
As a result barrel reduction just the timing shifts rather than an elimination of revenues.
Good day rates earned during the quarter decreased from 2019.
Sequentially. The 3.3 million dollar increases GCU revenues were driven by the Alaskan tanker acquisition.
John exact handysize tankers revenue reflected little variation between the quarters.
Which was expected due to all but one of the vessels being employed on long term charters.
Offsetting this was the $2.8 million decrease and Eightv revenues and a 7 million dollar decrease in wire revenues.
Both for the reasons previously stated.
Please turn to slide nine.
The spread between fixed and spot earnings is the portion of our fleet operating on time charters continued widened during the second quarter due to the addition of the three Alaskan tankers all of which are under long term time charters.
Please turn to slide 10.
National tanker spot market GE revenues continue to represent.
Decreasing portion of our total tanker revenues as a reminder, we classify short term time charters as spot market activity.
Turning to slide 11.
Our niche businesses continued to provide earnings stability, which served to underpin our overall operations.
During the second quarter Twentytwenty lighter revenues declined for the reasons. We previously described.
The O.S.G. Threefifty has now returned to the Delaware Basin.
The O.S.G. Threefifty want horizon as she undergoes her drydocked during the third quarter.
Jones Act tankers revenues increased for the year ago order and were flat with the preceding quarter.
Shuttle tanker revenues increased on the first quarter as the Cascade completed her dry dock.
Yeah during the first quarter.
Please turn to slide 12.
Vessel operating contribution, which we defined as TV revenues less vessel operating expenses and charter hire expenses.
Reached 9.3 million or.
4% from Q2, 2019 36.3 billion current quarter.
The largest contributor to the increase was 88 million dollar addition to vessel operating contribution from our Alaskan tankers.
The Jones Act tankers added 7.2 million.
Offsetting these increases were reduced contributions from arete Tvs or 3.4 billion.
In each market activities threea yet.
Decline in Eightv contribution results again from fewer operating rebuilding needs in the quarter.
The introduction of the always cheap dual core in June and deal with sheet you bought fuel five later this year will reverse this trend.
Each market activities declined due to increased dry dock related off hire days for our MSP vessels.
And the U.S.G. 350 vision as well as reduced Delaware Basin Lightering demand.
Sequentially vessel operating contribution decreased two and half million from the first quarter.
Tribute to the decrease were low do you low utilization for the key west after her redelivery of short term time charter.
An increase in each market drydocked related off hire days.
And a reduction in the number of operating rebuilt 80 days.
This was partially offset by a 6.6 million dollar increased contribution.
The Alaska tankers due to their inclusion for the full quarter as opposed to 90 day in the first quarter.
Please turn to slide 13.
Second quarter 2020, adjusted EBITDA was 29.8 million compared to first quarter.
20, adjusted EBITDA up to 52.8 million.
The first quarter 2020 included the gain associated with the acquisition of the tankers.
And HTC.
Second quarter adjusted EBITDA increased 11.6 million from 18.2 billion in Q2 2019.
The increase resulted from an increasing the number of vessels operating including the Alaska bankers.
The effective increased rates across the fleet.
Improved overall utilization do shift to time charters.
Yes, again was partially offset by the impact of off hire days reduction in Regal, eight TB and reduced Delaware based demand.
Please turn to slide 14.
Net income for the second quarter was $6.4 million compared to the net loss.
$1.7 billion recorded second quarter 2000 Nike.
Operationally the increased T.D. Jones Act tanker revenues and do not Jones Act tankers as well as the addition of the Alaska anchors.
The increase in net income.
Please turn to slide 15.
During each year, we perform scheduled maintenance as required by regulation.
That's what maintenance requirements are based on your original construction day at intervals of approximately two and half years.
As a result, we have years in which the volume of Drydocked activities are substantially greater other years.
This slide provides information for scheduled maintenance and ballast water treatment system installations.
Does not include unplanned repairs, which should they occur it could impact the schedule.
Well vessels are in dry dock or otherwise unavailable for use their offhire, even if otherwise weigh on time charter.
We work to minimize the number of off hire days to reduce the revenue loss we sustain.
This year, because it kovac Nike estimating the timing of dry dock activities on a quarterly basis is particularly challenging.
Just yards or for a scheduled dry dock because it staffing issues related to cope with 19 walked us.
Technical personnel from third party vendors necessary to accomplish certain aspects of the maintenance process have been and are unable to travel retail locations.
This has resulted in a series of backlogs throughout the industry.
West Coast Guard.
In understanding through this time and it is likely that they will continue their flexibility.
Slide presents our best estimates of the timing of dry dock activity for the remainder of the year, which has changed from prior estimates.
Perhaps possible, perhaps likely that these estimates will continue to change as to timing.
We expected, although the timing may shift annual tolls will remain reasonable estimates.
2020 is an active write off year for us we estimate which includes the three recently acquired Alaskan tankers that our investment will be $45.9 billion to drydocking expenses and $17 million for ballast water treatment systems in 2020.
We will experience approximately $20 million lost revenue for the full year, resulting from 401 off hire days.
In all cases, we endeavor to work through this process expeditiously to minimize the cost incurred in a number of days off hire.
Please turn to slide 16.
This graphical presentation of the information in the table on Slide 15 also adds a look back to 2019.
A year at relatively low activity in fact, there were no dry dock days third or fourth quarters of 2019.
Our estimate is that we will experience 275 off hire days in the third and fourth quarters of 2020.
The related revenue losses expected to exceed $14 million.
Although this graph doesn't look forward to 2021.
21 will look more like 2019 than 2020.
Please turn to slide 17.
You always GE to acquire was expected labor in late November. This year. We have invested you. The ended the second quarter $36.5 million in the U.S.G. tool Clive.
Our remaining payments, including a box, which will be do on delivery or $14.5 million.
We are currently engaged in discussions you obtained financing for the tools wise.
Please turn to slide 18.
There's been no change to our estimates as to the timing of future amounts at profit sharing that may occur the messy shifts that we bareboat.
Chart provides information for 2020 through 2023.
As we previously stated we do not anticipate any profit sharing obligation will be created 2020.
And we look here whats profit sharing picture it might be for assumed average GE rates.
Based on estimated future market rates.
In 2020, if we were to achieve an average tc rate of $62000 for us the Gen. MST vessels, there would be no profit share.
The minimum average rate required to result in profit sharing obligation to 2020 $69000.
And this would accrete create an aggregate payout $300000.
Years beyond 2020 assume that the radar and in the prior year, what's the market rate based on the assumption portrayed here. The first year much profit sharing obligation would exist is 2022.
Given the assumptions used the profit sharing payout would be $8 million.
The minimum average rate necessary to achieve any level of profit share in 2022 would be $62000.
Again, using the assumptions here the profit share earned in 2023 would be $14 million.
Profit share is payout in the year subsequent to the year earned.
Finally, it is worth noting that certain costs to recover the minimum rate that will result in profit share declines.
Calculations are complex and have a variety of factors involved.
This chart is meant to be indicative of possible outcomes based on assumptions made.
Please turn to slide 19.
At the beginning of the second quarter, we had total cash of $102 billion, which included $20.1 million restricted cash.
During the second quarter 2020, we generated third $30 million with adjusted EBITDA.
We drew the remaining $5 million available audio SG tool for loan on delivery the vessel.
We expanded $7 billion on dry docking and improvements to our vessels and we invested $18 billion new vessel construction at other capex.
We incurred $6 million and interest expense and may debt repayments of mine.
Result was we ended the quarter $95 million cash.
$20.1 billion restricted cash.
Please turn to slide 20.
Continuing our discussion of cash and liquidity as we mentioned on the previous slide we had $95 million cash at June 32020, including $20.1 billion of restrict cash.
Our total debt was down $446 million, which represent a net decrease of $4 million an outstanding indebtedness since March 2020.
A 325 million dollar term loan has an annual amortization requirements of $25 million or six quarter million dollars per quarter.
With $374 million of equity our net debt to equity ratio, It's 0.9 times.
After the ended the second quarter, we fully repaid 24 million dollar loan secured by one of our two tankers delivered in October 2019.
We funded part of the pay off with $20 million of restricted cash.
This will be resolved and a reduction of annual debt service, a $2.6 million and our total debt is now $422 million.
This concludes my comments financial statements I'd like to turn the call back to Sam Sam.
Thanks, a lot Dick [laughter].
I saw quoted in an article yesterday that math is logic of certainty and statistics is the logic of uncertainty.
If this is true then we have by necessity all become better statisticians in recent months.
Uncertainty about the virtually every quarter, our lives extent and impact of the continuing pandemic on the broader economy in general and non fuel production distribution and consumption patterns. In particular is it this time virtually unknowable.
As we try and solve the puzzles that these circumstances present, our approach should be to result in a principled way by integrating wouldn't be as previously thought with what we have learned an interim so as to reach a new conclusion that incorporates both elements giving them.
Oh, great weight.
In this context, we can observe the following point.
As recently as six months ago demand for Jones Act tankers, and Atps appeared to be well in balance with supply.
Time charter demand was from with rates correspondingly at healthy levels.
Ensuing months available supply has been reduced by the removal from service of our last two rebuilt 80. These.
Additional scrapping of a handful of other vessels can be expected in the year ahead.
Although our two new barges will partially offset this reduction of capacity no additional new supply is on order nor can any vessels will be delivered for likely several years into the future even if order today.
Clearly shipyards one of the few domestic yards capable of building Jones Act tankers has taken on a government contract to build training vessels, a contract which could fill the yard for years to come to the exclusion of other work.
Another domestic yard Barnett Marine Corp was recently awarded a contract to design and produce the next generation of up to 10 guided missile frigates.
NASSCO shipyard in San Diego has also committed it's near term capacity to build vessels for the U.S. Navy.
In short the supply side is the math problem with a high degree of certainty in driving it solution.
The issues of uncertainty lie therefore with questions concerning demand.
Looking at the market for refined products that large the recovery in gasoline and diesel consumption that has occurred since April was and incur is encouraging and suggests a trajectory towards restoration of normalized demand within the foreseeable future assuming current trends are not reverse.
Recovery rates in Florida, specifically underscore a belief and improving demand fundamentals in the markets. Most important the Jones Act trade.
Base load movements of clean products from Texas, and Louisiana into Florida should therefore provides strong support for sustaining a healthy demand condition as we move through the balance of this year and into 2021.
Reduced jet fuel demand will be felt in the short to medium term.
But in aggregate the net production will be between 250 in 500000 barrels per day nationally, we're less than 5% of total fuel demand.
As such the overall impact of reduced jet fuel consumption should not have an outsized impact on broader marine transport them.
In the West Coast markets current thinking is that distribution needs will remain largely stable some prospects for increased demand from Gulf Coast West Coast books.
Tightening regulatory requirements in California offer the chance for shipping renewable diesel from the Gulf Coast to the West Coast, a business that would represent incrementally new long haul ton mile demand.
Placement of output from the closed Martinez refinery could also offer an opportunity for shipping Gulf coast product to the west coast to feel this need.
Demand for crude oil movements domestically is on the other had much more difficult to predict.
Price differentials pipeline developments refinery operational conditions and international politics All Act.
Lead to modify the decision trees that ultimately influence crude price and production outcomes.
Currently five of our vessels are engaged in crude oil trades and will come open to be reemployed over the next six months.
Reduction in domestic crude transport needs.
Hi, good by either a further reduction domestic production or unfavorable relative price differentials between domestic and international crudes Cruddas released some of these vessels back into the otherwise balance clean markets.
Conversely.
The multiple variables affecting we're finding sourcing decisions favorite domestic or international crude purchases additional crude transportation demand could serve to significantly tighten the market has favorable implications on future rate development.
Taking these factors into consideration and constructing an understanding of how we think the next several quarters will unfold our revenue expectations remain consistent with earlier guidance.
Absent an increase in off hire days potentially caused by virus related events.
Our fixed revenue coverage should be helpful sustaining good financial results.
More than 80% of vessel available days for the balance of this year are covered either through time charter contracts or contracts of affreightment.
A key contributing element of this forward visibility of earnings.
The contribution now being made by the Alaskan tanker company vessels purchased in March.
For the third quarter, we expect to achieve time quarter charter equivalent earnings of approximately $85 million after taking into consideration. The lost revenue days discussed earlier in this presentation.
We anticipate a stronger performance in the fourth quarter, which should put us squarely on track to be within the range of $380 million to $400 million a time charter equivalent earnings for the full year.
Similarly, we expect consolidated adjusted EBITDA for the second half of 2020 to reach between 40 and $45 billion result, which would bring full year adjusted EBITDA to a figure likely to exceed $120 million.
During the next six months a total of seven of our vessels will come to the end of their current charters joining the three vessels that were already opened at the end of July.
As their existing time charter portfolio begins to mature and that's just become open for extension reemployment or redelivery visibility beyond the end of this year becomes much less clear.
We see the prospects for extending many of our existing charters is encouraging.
However, the range of possible outcomes as wide and will be strongly influenced by the shape of demand recovery.
Challenges remain has do opportunities, but overall, we believe steps we've taken over the past several years to improve the promise of always tees future have positioned the company well to sustain its recent performance and to adapt to the current environment.
We have strengthened our balance sheet invested in new assets.
The dark contract cover it profitable rates reduced cost of achieved material improvements in our t. safety and operational performance mattress.
We are focused on achieving high health and safety performance and this coded 19 environment.
While we foresee greater uncertainty in the immediate future. We remain confident that long term what success of our business model those teams ability to maintained its position as the leading U.S. flag vessel operator in the years to comp.
Operator, we can now open up the call to take questions sorry.
Thank you they will now begin the question answer session.
To ask a question you May press Star then one on your touched that.
If you're using a speakerphone please pick up your handset before passing the team.
To withdraw your question. Please press Star then too.
At this time, we'll pause momentarily to assemble or not.
My first question comes from Chaitman spire value investors edge. Please go ahead.
Hi, good morning, gentlemen, congrats on another stable quarter as we continue their process and thanks for taking my questions.
Thank you.
So I noticed in the last two presentations sense Cove. It happened there hasn't been has clear of a forward EBITDA Guide I know, we had one kind of at the very started here I think late last year as well I'm understanding there's some uncertainty out there of course, but is that original guidance still are we still within that window it looks like.
Two is pretty stable are there any uncertainties that we should specifically be focusing on going forward.
I think the we try to provide additional guidance and my comments I'm just concluded a there is a higher level of uncertainty due to.
The fact that we have.
Contract renewals that are gonna be coming up during the course of the second half of the year.
And you know, while we expect most if not all of those contracts to be successfully renewed we we don't know that so there's probably a broader band of.
Outcomes that result from from that track.
Okay understandable will stay in touch and see how that develops looking at the oldest due to a five I see your remaining milestone payments on slide 17, I apologize I became a little late on the call. We had another company one going on but it looks like it's still coming for Q4 has there been any delays to that delivery first of all and then second of all.
Well, what kind of the timeline for the financing on that and what is sort of the target amount.
The it is still on track there's been no you know shipyard construction related delays that occurred so we would expect it to deliver.
Late November as.
Currently plan and as has been plan.
As a reminder, I think we've said before it will deliver right out of the yard into a one year time charter so be.
Gainfully employed.
From day one.
We're at as far as financing we're actively involved in discussions with several lenders at this point.
Who have expressed an interest in financing.
The barge.
Yeah, I would expect it we will try to see if we can't wrap that up towards the tail ended the third quarter, maybe very early into the fourth quarter, but.
Sort of in the September.
Maybe early October timeframe.
Okay. Thank you Yeah, we'll look forward to that is is there a target amount on on that financing is expected to be similar to the previous one I think it was like 33 million.
As Michael J.
All right figures fingers crossed that we'll get that and actually get some free cash flow and delivery then okay. I think last question for me before I hop back end of Q I'm sure. There's some other folks good questions here looking at slide 15, you provide a pretty clear projection of your dry dock costs and ballast water treatment expensed and so on a we can see that even with strong cash flows.
Your your close on free cash flow. It in Q3 20 in in Q4 20, I do you have any guidance yet on fiscal year, 21, and where those drydock expenses are going to come out at around.
If you if you went to slide 16 and looked at.
What we spend.
In 2019.
It would be that plus an incremental about four alaska's tankers one of our tankers.
We will incur some.
Drydocked requirement next year, so that'll be.
You know probably $70 million incremental costs.
Okay.
2021, a relatively quiet year.
Okay, Yeah, I guess, what I'm getting out is that 2020 was just a massive outlier in and dry dock expenses and ballast water treatment landed on there as well it looks like 20 one's going to be a lot more mild or is that just massive percentage of your fleet just happen to hit the surveys at the same time or are there for years I 22 that we also need to be paying attention to.
So JV the cycles for tankers dry docks.
Our effectively every five years until the vessels reached 15 years of age and in the U.S. flag.
So the the dry docks or if you're going to look at the a year of deliberate when the ships were constructed.
And your project five year forward. Then you can you can see the expected timing of when those dry dock and special surveys come into play.
So let me answer to your question is they're very lumpy because the delivery dates for several of our vessels fall within a range of Oh, one or two years.
And so that that's the outcome that you get it should be noted that are looking further ahead. Once you asked like Nelson's reach 15 years of AIDS that dry dock requirements.
Our change to a twice within every five year cycle.
The intermediate dry docks can fall anywhere from 32 things within a window from 30 to 36 months from.
The prior dry dock. So has as you look beyond I think our earliest.
Ah vessel delivery was 2007 of the veteran class.
15 years forward once you get into 2022 and beyond those vessels start to have more frequent docking cycles.
If you look at the agency tankers, you can expect because all those tankers are beyond 15 years ways. You can you can detect that those vessels will will start to see actual dry docks every every into an after three years. So.
While it's well its constructive look backward in terms of understanding the lumpiness of our dry docks are going forward. The pictures will alter a little bit as we move a part of our fleet beyond 15 years of it.
Definitely definitely understandable, so same kind of structures international tankers, we follow it makes sense I just kind of highlighting the fact that 2020 is a massive level compared to you. It sounds like when he was very low at 21 is also low.
I think that's up that that's an accurate picture.
Excellent. Thanks, gentlemen, I'll jump back in the queue at some more but I want to make sure we get other questions in there. Thanks.
Thanks Jay.
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Oh no further questions. This concludes our question and answer session.
I like to turn the conference back over to San Martin for any closing or what.
That's appreciated Sarah Thanks again, everyone for participating in today's call. We look forward to speaking you were going to later in the year and I'm pleased to be able to continue to deliver the solid results that we manage thus far.
You all the good day.
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