OSG America L.P. (the Company or the Partnership) (NYSE: OSP), the largest operator of U.S. Flag product carriers and ocean-going barges transporting refined petroleum products, has reported financial results for the three and nine month period ended September 30, 2008.

For the quarter ended September 30, 2008, time charter equivalent (TCE)1 revenues were $63.7 million, up 6% from $59.9 million from the quarter ended June 30, 2008, due to an increase of 128 revenue days. The Company reported a net loss for the third quarter of $9.7 million, or $0.32 per unit, driven by a non-cash vessel impairment charge of $19.3 million, or $0.63 per unit, discussed later in this press release. Earnings before interest, taxes and depreciation (EBITDA)1 were $4.5 million. Operating expenses were $83.8 million for the period, up 25% from $66.8 million in the preceding quarter. The increase was due to the vessel impairment charge and higher vessel expenses resulting from fewer off-hire days, partially offset by a reduction in depreciation and amortization expense due to the change in useful lives of four vessels, including the two vessels purchased at the end of the second quarter, which were previously chartered in under capital lease agreements. Interest expense of $1.3 million decreased primarily due to the interest savings associated with the purchase of the two vessels in the second quarter.

For the nine months ended September 30, 2008, OSG America reported TCE revenues of $176.0 million, a net loss of $1.0 million, or $0.03 per unit, and EBITDA of $42.7 million. Comparative financial information for 2007 is not included herein because this information pertains to operations of OSG America’s predecessor, and because OSG America commenced operations as an independent company following its initial public offering on November 15, 2007.

President and CEO Jonathan Whitworth said, “While it was necessary to take a charge on the Overseas Integrity that impacted quarterly results, when excluded, earnings were strong and ahead of our internal expectations. Fleet utilization significantly improved from the second quarter in the product carrier and non-Jones Act fleet. The OSG America fleet offers attractive levels of locked-in revenue for our unitholders with term charter coverage for the remainder of 2008 of 94% and a minimum in 2009 of 82%. Thanks to the skill of our crews and technical operations team based in Tampa, hurricanes Gustav and Ike did not impact our fleet.”

1 Time charter equivalent (TCE) revenues, distributable cash flow and EBITDA are non-GAAP financial measures. See Appendix for a description or reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.

Quarterly and Recent Events

Vessel Delivery

On September 19, 2008, the Overseas Texas City, a newly built 46,815 dwt U.S. Flag Jones Act product carrier, delivered on time. The vessel began trading on October 3, 2008, commencing a three-year time charter to BP Products North America.

Charter Extension

The time charter on the Overseas Philadelphia was extended by one year to January 10, 2010.

Vessel Repositioning

Effective October 16, 2008, the OSG 192 commenced trading in the Delaware Bay lightering business. The OSG 192 will return to the Product trade upon delivery of the first newbuild lightering vessel.

Vessel Impairment

During the quarter, the Company determined that the Overseas Integrity would not undergo its mandatory scheduled drydocking in order to continue operations, taking into consideration additional costs associated with possible conversion of the vessel from the crude lightering trade to the clean product trade. This vessel has ceased operating and will be placed in layup, pending the sale of such vessel. Accordingly the Company recorded a charge of $19.3 million to write down the carrying amount of this vessel to its estimated net fair value as of September 30, 2008. This vessel has been classified as held for sale on the balance sheet at September 30, 2008.

Newbuild Delivery Delays

The series of six ATBs under construction at Bender Shipbuilding & Repair Co. and its affiliated company have been delayed. The Company continues to work with the shipyard to resolve these delays. See Appendix and Supplemental Information for updated expected delivery dates.

Declaration of Cash Distribution

On October 23, 2008, the Board of Directors of OSG America LLC, the general partner of OSG America L.P., declared a quarterly distribution to all unitholders in the amount of $0.375 per unit for the three months ended September 30, 2008. The distribution of approximately $11.5 million will be paid on November 13, 2008 to unitholders of record on November 3, 2008. The Partnership generated $14.5 million of distributable cash flow for the third quarter of 2008 resulting in a distribution coverage ratio of 126.6%.

Financial Strength and Charter Coverage

At September 30, 2008, the Company had $122 million available under its $200 million senior secured revolving credit facility, $31.4 million of working capital and a long-term debt to total capital ratio of 19.4%.

At September 30, 2008, Overseas Shipholding Group, Inc. owned a 75.5% interest in OSG America, including a 2% general partner interest. Subsequent to quarter end, the sponsor purchased 500,435 common units based on an unsolicited inquiry from an institutional unitholder. As a result, the sponsor currently owns a 77.1% interest in OSG America. Overseas Shipholding Group is a market leader providing global energy transportation services with liquidity exceeding $1.4 billion.

Fleet Information and Key Metrics

Fleet

As of September 30, 2008, OSG America’s fleet totaled 35 vessels, aggregating 1.4 million deadweight tons, including three newbuilds and 10 dropdown vessels. See OSG America’s website for a detailed fleet list, which is updated on a quarterly basis upon release of earnings.

Vessel Type		No. of Vessels Owned		No. of Vessels Chartered-In		Total as of Sep. 30, 2008		Total Dwt
Jones Act ATBs		8		2		10		316,972
Jones Act Product Carriers1		5		5		10		461,127
Non-Jones Act Product Carriers		2		-		2		93,224
Total Operating Fleet		15		7		22		871,323
Jones Act ATBs		6		-		6		248,229
Jones Act Product Carriers/Shuttle Tankers		-		7		7		327,705
Total Dropdown and Newbuild Fleet		6		7		13		575,934
TOTAL OPERATING, DROPDOWN AND NEWBUILD FLEET		21		14		35		1,447,257

1 The Overseas Integrity, which has ceased operating and will be placed in layup, has been removed from the operating fleet list as of September 30, 2008.

Last Updated ( Friday, 31 October 2008 )