Q4 2020 Overseas Shipholding Group Inc Earnings Call

Good day and welcome to the overseas Shipholding group fourth quarter, and full year, 2020 results conference call on.

All participants will be in a listen only mode.

Should you need assistance. Please signal of the conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May Press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two please note because that is being recorded.

I'd now like to turn the conference over to Sam Norton, President and Chief Executive Officer of overseas Shipholding Group. Please go ahead.

Thank you Sarah.

Good morning, everyone.

Thank you for joining us for this call and the presentation of our 2024th quarter and full year results for allowing us to provide additional commentary and insight for the current state of our businesses and the opportunities and challenges that lie ahead.

As usual Dick Trueblood, Molly RCA and Princeton Mcfarland are joining me on this presentation.

The start I would like the directory every ones of the narrative on pages, two and 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 are an important part of this presentation and I urge everyone to read and consider them carefully.

We will be offering more than just the historical perspective on all the sheet of day.

The 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 projected could be affected by a variety of risk factors, including factors beyond our control of.

And for a discussion of these factors we refer you specifically to our annual report on form 10-K for fiscal year ended December 31, and 2020 and.

And our other filings with the SEC, which are available on the SEC's Internet site Www dot.

Dot Gov.

On our own website www dot dot com.

Forward looking statements for this presentation speak only as of the date of these materials and we do not assume any obligation to update any forward looking statements, except as may be legally required.

And Additionally, our presentation today includes certain non-GAAP financial measures, which we define and reconcile to the most closely comparable GAAP measures and our fourth quarter earnings release, which is posted on our website.

The full year financial results delivered by O S. T. During 2020 met expectations and what was clearly one of the most difficult operating environments in recent memory.

Demand for petroleum products across the barrel and was severely impacted throughout the year by the ongoing.

And death.

The global crude movements for constrained by coordinated OPEC production cuts.

Transportation fuel demand and particular demand for jet fuel fell well below normal levels.

In addition, global fuel inventory builds and observe during much of the year I think the further suppressed for demand for oil products.

Both of these performance and 2020 off with clear insight into the earnings potential and the operating platform and that's the losses that we have today.

And as highlighted on our communications during the past year.

And with these high percentage of fixed revenue streams during much of 2020 of the state.

And the performance from our niche businesses, resulting in strong cash flow from operation, particularly when considering the nearly 400 revenue days lost during the year to play and dry dock operations.

The only partial year revenue contribution from both of our ATC acquisition, and our investments and two new barges.

During the course of 2020, and we were gratified to be able to realize the fruits of these investments and our chartering strategy laid the groundwork for the full year results and cheap.

Chartering strategy also serve to insulate us from much of the market demand destruction and hit the industry in 2020.

Our most important management challenges have been and will remain just any operational readiness at all times.

It's the one shipboard case of of positive COVID-19 past experienced early in July we have not experienced any further shipboard outbreak they've seen no loss of revenue days for extraordinary of expenses incurred as a result of the COVID-19 on board any longer.

You should not take these results for graphic.

COVID-19 continues to affect our industry and operations and the pose risks and the hardships for those charged with delivering the services that our communities rely upon us.

For us.

And once again recognition of needs to be given to the individual's onboard vessels and personal commitment to of safe and virus free environment.

Moving on to be the essential element and keep it.

Okay.

The successes of 2020, however are now firmly in the past.

The continuing pandemic has remained as the significant drag on transportation fuels demand as.

And so we have moved into 2021.

Unlike last year Osp's book of the time charter contracts, that's not been us deep entering 2021, leaving us less insulated from the observable consequences of COVID-19 and.

Domestic refiners and distributors have been hard hit by the they've been the driven demand destruction for transportation fuels.

So much of the past year.

Throughout much of the passenger of pool of for the finding economics high inventory levels and reduced domestic production of collectively serve to suppress near term demand for the type of transport.

In addition to flagging the band the Middle Distillate Glut, that's been the biggest obstacle to the recovery of refining margin.

Increased output and improved group.

That's the glut and the weak middle distillate spreads have reduced refining margin undermining crude demand and crude prices.

Refiners and distributors of transportation fuel felt the thing of the energy market development.

Cost cutting and the face of reduced demand inflated inventories and for refining margins. That's caused the pendulum of our customers' risk aversion to of swung to the extreme.

Focused and concentrated only on the immediate future with the outcome being reluctant to commit the long term contract.

The situation has caused and wished you to place seven of our vessels in lay up and in order to conserve cost until demand returns.

We're not alone and making such a day.

Within the Jones Act segment of the industry fully one third of the Jones Act tanker and ATB fleet is or will soon be without committed and employment lay.

Lay ups of available surplus capacity had been observable and recent bonds and the list of laid up tonnage is set to expand.

One large Jones act the ATB operator entered chapter 11 protection during the second half of last year.

And all of its Atvs are currently laid up and the administrative works to find a way to develop a satisfactory as a couple of plants.

The lack of committed employment for such a large percentage of the available Jones Act fleet is the function of missing demand and not as in years past a reflection of the fundamental excess of supply.

High level of explanation of the cause of the current lack of demand for our ships can be summarized as follows.

COVID-19, and the restrictions on mobility and posed and an effort to restrain its spread dramatically impacted transportation fuel demand across much of 2000, and 'twenty and into the early 2021.

This was true across the barrel of refined products, but especially true for jet fuel and to a lesser extent cash.

Further low end use demand resulted in a large build and refined product inventories into the summer of 2000 and twice that.

The large product inventory has impeded normalized operating conditions for a refiner distributor customers for two reasons.