Organizational Changes at Overseas – Analyst Blog

Overseas Shipholding Group Inc. (OSG), a leading energy transportation company, has made organizational changes to focus on its core segments of crude oil, products and U.S.-flagged shipping.

 

The company will move its stand-alone liquefied natural gas (LNG) carrier fleet under the International Product Carrier and Gas strategic business unit. Marc La Monte, the head of the Overseas gas unit, has left the company. However, technical management of the LNG fleet remained under Ian T. Blackley, a senior vice president and head of International Shipping Operations.

 

The product carrier unit is led by senior vice president Lois K. Zabrocky. The company promoted Christian Skovhoj to the position of vice president from the head of sale and purchase department of the OSG Ship Management unit.

 

During second quarter 2010, Overseas reported mixed financial results. Shipping revenues were $283.9 million, up nearly 0.5% year over year. Time Charter Equivalent (TCE) revenues were $231.7 million, down 7% year over year, but exceeded the Zacks Consensus Estimate of $229 million. TCE revenues represent Shipping revenues less Voyage expenses.

 

Net loss was $37.9 million or a loss of $1.26 per share in the second quarter compared with a net loss of $8.8 million or a loss of 33 cents per share in the prior-year quarter. However, in the reported quarter, Overseas incurred $27.8 million of one-time special charges. Excluding this, adjusted loss came in at 34 cents for the quarter, significantly higher than the Zacks Consensus Estimate of a loss of 22 cents per share.

 

The shipping industry is highly competitive and fragmented. Competitors include independent ship owners, oil companies and state-owned entities with their own fleets. Failure to secure continued employment for its vessels may significantly affect Overseas Shipholding’s financials in future. Some of its prime competitors are Frontline Ltd. (FRO), Teekay Corporation (TK) and TORM A/S (TRMD).

 

As a market leader in global energy transportation services segment, Overseas Shipholding maintains a state-of-the-art fleet of vessels with major emphasis on quality, safety and environmental issues. We believe long-run fundamentals of the oil tanker industry remain compelling, particularly given the improving global economy. Management has decided to keep its vessels in the pooling arrangement, which will increase charter hire and utilization rates.

 

We maintain our long-term Neutral recommendation on Overseas. It is currently a short-term Zacks #3 Rank (Hold) stock.