American Shipping Company’s Fifth Vessel Delivered, Q3 results

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Oct 2008

Our fifth vessel, the Overseas Texas City, was the latest in the twelve-ship series to be delivered on time. Upon its delivery on September 19, 2008, American Shipping Company ASA (“AMSC” or the “Company”) immediately bareboat chartered the Overseas Texas City to OSG America L.P. (“OSG”), who subsequently time chartered the vessel to BP for operation in the U.S. Gulf to East Coast Florida trade. This is our third vessel to be time chartered from OSG to BP. Due to the current credit market turmoil, AMSC will be faced with challenges in the near term to raise equity and to secure debt financing for additional new build opportunities. Consequently, this may require a re-timing of the Company’s schedule to exercise newbuild option vessels with Aker Philadelphia Shipyard (“AKPS”).
AMSC’s operating revenues for Q3 2008 and the nine months ended September 30, 2008 were USD 8.6 million and USD 22.8 million, respectively, compared to USD 4.0 million in Q3 2007 and USD 7.5 million for the nine months ended September 30, 2007. This increase in revenue reflects the bareboat charter hire revenue from the service of the first five vessels of a twelve vessel series in the first nine months of 2008 versus two vessels in the first nine months of 2007. EBITDA was USD 7.3 million in the third quarter 2008 compared to USD 3.6 million in the third quarter 2007. EBITDA for the nine months ended September 30, 2008 and 2007 was USD 19.4 million and USD 6.7 million, respectively. For 2007, Aker Philadelphia Shipyard is included as discontinued operations as the shipyard was sold in December 2007.
Operating expenses were USD 1.3 million in Q3 2008 and USD 3.4 million for the nine months ended September 30, 2008 compared to USD 0.4 million in Q3 2007 and USD 0.8 million for the nine months ended September 30, 2007. This increase relates to the growth of the business, primarily personnel and other Sales, General and Administrative expenses. EBIT was USD 2.8 million in Q3 2008 compared to USD 1.4 million in Q3 2007. EBIT for the nine months ended September 30, 2008 and 2007 was USD 7.4 million and USD 2.6 million, respectively.
Net financial items (excluding unrealized gain/(loss) on interest swaps) were minus USD 4.8 million in Q3 2008 and minus USD 14.4 million for the nine months ended September 30, 2008, consisting of net interest expense (interest expense less interest income and capitalized interest) of minus USD 6.4 million for Q3 2008 and minus USD 16.6 for the nine months ended September 30, 2008, and a net foreign exchange gain of USD 1.6 million in Q3 2008 and a gain of USD 2.2 million for the nine months ended September 30, 2008. Net financial items in Q3 2007 and for the nine months ended September 30, 2007 were minus USD 4.0 million and minus USD 10.2 million, respectively. The net interest expense for Q3 2007 was minus USD 3.3 million and for the nine months ended September 30, 2007 was minus USD 11.1 million. The net foreign exchange impact for 2007 was minus USD 0.7 million for Q3 2007 and a positive USD 0.9 million for the nine months ended September 30, 2007. Capitalization of interest is related to the financing of progress payments on ships in construction.
In addition, in Q3 2008, AMSC incurred an unrealized loss of USD 8.4 million related to its interest swap contracts for the financing provided by Fortis. The year-to-date unrealized loss on interest swaps total USD 8.1 million and had no cash impact on AMSC.
Net loss for the third quarter of 2008 was USD 10.5 million versus a net loss of USD 6.3 million in the third quarter of 2007. For the nine months ended September 30, 2008 and 2007, there were net losses of USD 15.3 million and USD 10.4 million, respectively.
Interest bearing long term debt as of September 30, 2008 was USD 527.4 million net of USD 22.1 million in capitalized fees. This debt relates to the financing on the first five vessels as well as the NOK 700 million bond issued in February 2007.
Other non-current assets include prepayments to Aker Philadelphia Shipyard. Tax payable, trade and other payables include the unrealized loss on interest swaps of USD 42.5 million as well as other accrued costs and liabilities. The balance sheet as of September 30, 2007 includes Aker Philadelphia Shipyard.
Outlook
As conveyed at the Company’s Investor Day 2008 on September 9th, AMSC continues to be optimistic about the long-term prospects for the Jones Act product tanker market, as well as the potential for a substantial shuttle tanker market in the deepwater U.S. Gulf of Mexico. Although Jones Act spot market rates have been drifting lower recently due to surplus tonnage and decreased demand, the Company believes these are short-term conditions. It should also be noted that AMSC is not exposed to the current spot market as all of the Company’s vessels are on long-term bareboat charter to OSG. In any event, AMSC is confident that the current surplus tonnage situation will be short lived as older, less fuel efficient vessels will be phased out prior to their OPA 90 retirement dates. With respect to demand, the Company believes that demand will begin to increase again as the overall economy generally improves and announced refinery expansions become operational over the next several years.
AMSC continues to work closely with several of the oil companies who have significant interests in the deepwater U.S. Gulf region. AMSC remains confident that shuttle tankers will play a major role in supplying oil from production sites in the deepwater U.S. Gulf of Mexico to refineries along the U.S. Gulf coast.
The Company continues to explore market opportunities associated with various vessel types. Our advantageous relationship with AKPS remains strong and positions us well to pursue new business development ideas.

Source: American Shipping Company