American Shipping Company ASA. DNB Nordic High Yield Bond Conference

Transcription

1 American Shipping Company ASA DNB Nordic High Yield Bond Conference 11 October 2018

2 Important information This Company Presentation is current as of October Nothing herein shall create any implication that there has been no change in the affairs of American Shipping Company ASA ("AMSC" or the "Company") since such date. This Company Presentation contains forward-looking statements relating to the Company's business, the Company's prospects, potential future performance and demand for the Company's assets, the Jones Act tanker market and other forwardlooking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Company Presentation, including assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. 2

3 American Shipping Company (AMSC) Introduction to AMSC Fleet overview Established in 2005 Oslo listed with market capitalization of USD ~250m* o o o OSE ticker: AMSC U.S. OTC ticker: ASCJF Bond ticker: AMTI01 Pure play Jones Act tanker owner with a modern tanker fleet Long-term bareboat leases generate stable, predictable cash flow Solid balance sheet with no debt maturities before Q Exploring growth and diversification opportunities in the U.S. Jones Act market # Vessel Design Type Built 1 Overseas Houston Veteran Class MT 46 MR Overseas Long Beach Veteran Class MT 46 MR Overseas Los Angeles Veteran Class MT 46 MR Overseas New York Veteran Class MT 46 MR Overseas Texas City Veteran Class MT 46 MR Overseas Boston Veteran Class MT 46 MR Overseas Nikiski Veteran Class MT 46 MR Overseas Martinez Veteran Class MT 46 MR Overseas Anacortes Veteran Class MT 46 MR Overseas Tampa Veteran Class MT 46 Shuttle tanker 2011 * Market cap. based on closing share price of NOK per Oct 9 th,

4 Share price development Outperformed OSE peers and OSEBX since Jan AMSC +40% FRO +39% OSEBX +13% Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018 Jun-2018 Jul-2018 Aug-2018 Sep-2018 Oct-2018 Nov-2018 Sources: FactSet as per 10 Oct

5 Long Term Contracts Returning Stable Cash Flow American Shipping Company Bareboat charter to OSG TCs to blue chip charterers* Beyond Spot - 7yrs** Charters include S&P rating BBC BBC Options TC BBC BBC Options TC A+ BBC BBC BBC Options BBC Options TC TC A- BBC BBC Options TC BBC BBC Options TC AA- BBC BBC Options TC BBC BBC Options TC BBB+ BBC BBC** BBC Options BBC Opt. TC TC BBB- Bareboat Charter (fixed rate of USD ~88m/year) + DPO (fixed deferred charter hire, USD ~4m/year) + Profit Split (variable 50/50 sharing of profits) = Stable annual cash flows *Illustrative TC contract durations **Tampa was converted to a shuttle tanker and is on a 10 year BBC backed by a 10 year TC 5

6 A Major Component of the Jones Act Fleet Jones Act tanker & ATB ownership based on carrying capacity 25% AMSC fleet AMSC fleet age vs. Jones Act Fleet % 15% ATBs Tankers AMSC 10% 5% 0% OSG Kinder Morgan Crowley Seacor US Shipping Chevron Kirby Bouchard Moran Genesis M.S.C Reinauer Source: Navigistics Wilson Gillette Report and AMSC Analysis Note: Measured as carrying capacity by barrels 6

7 Integral Part of OSG s Fleet AMSC s tankers is a substantial part of OSG s fleet Number of vessels AMSC is important to OSG OSG is a pure-play Jones Act company following its spin-off of its international fleet into International Seaways Inc. 2 2 AMSC s 10 vessels are a core part of OSG s Jones Act tanker fleet 6 The AMSC fleet represent ~30% of all modern Jones Act tankers below 15 years (36 in total) The AMSC fleet is the most cost-efficient modern fleet in the Jones Act tanker market due to favourable construction cost compared to newbuilds delivered today AMSC owned MRs OSG owned MRs ATBs* Lightering ATBs MSP tankers Total OSG controlled Avg. age: Source: Navigistics Wilson Gillette Report and Company filings 7

8 Bareboat costs (USD/day) Competitive Position Reduces Re-Chartering Risk AMSC can offer charters at attractive levels due to substantially lower newbuild cost 45,000 Newbuild Delivered Costs Transaction Values 40, ,000 30, ) 25,000 20, ) 134 2) 130 3) ,000 10,000 5, AMSC 8.0% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% Annual bareboat costs given various total capital IRRs with newbuild USD 134m Notes: Source: 1) Based on Philly Tankers 2) Based on newbuild cost for the tankers delivered to American Petroleum Tankers 3) Based on total consideration for 9 vessels, including additional expenses incurred by Kinder Morgan for taking delivery 4) Based on average sales price for 4 vessels Company materials 8

9 Current financing structure Current debt structure Key terms on funding USDm Aker Loan (USD20m) Senior unsecured bond (USD220m) Secured bank facility (USD 150m) Secured bank facility (USD300m) Bank debt Average weighted tenor: 6 years (80% of the loan amount with 5 year tenor and 20% with a 10 year tenor) Average weighted interest cost: Libor bps margin Total annual instalments: Y1: USD 8.3m Y2-4: USD 28.3m (annually) Y5: USD 44.3m (expect to refinance after year 4) Unsecured bond 9.25% fixed rate, semi annual instalments Senior unsecured debt with maturity Feb 2022 Amortization commencing at 42 months of USD 20m per year Covenants include minimum cash, maximum debt restrictions and dividends incurrence test Q Aker loan Accruing interest of 10.25% with maturity in 4Q 2020 Will be repaid by proceeds from Philly Tankers 9

10 Stable, Predictable Cash Flow Simplified illustration of AMSC s annual cash flow excluding profit share (USDm) Fixed BBC Revenue Deferred Charter Hire (DPO) SG&A Bank Debt Service Bond Coupon Free Cash Flow 10

11 Jones Act a Vital Part of the US Economy The Jones Act has been in place since 1920 and is a vital part of the US economy The Jones Act generally restricts the marine transportation of cargo and passengers between points in the United States to vessels that meet the following criteria: - Built in the United States - Registered under the U.S. flag - Manned predominately by U.S. crews - At least 75% owned and controlled by U.S. citizens - AMSC s presence in the Jones Act market is made possible by the lease finance exception of the Jones Act The Jones Act is an essential feature in U.S. national security - Ensuring non- dependency of ships controlled by foreign nations - Maintaining critical domestic shipbuilding capacity - Supporting a domestic pool of highly skilled mariners The Jones Act is a significant contributor to the US economy - Large U.S. employer - Substantial amounts of capital invested 100,000,000,000 USD 100bn contribution to the US domestic economy 30,000,000,000 USD 30bn total investment in over 40,000 vessels 400,000 Number of jobs directly and indirectly impacted by the US maritime industry Source: American Maritime Partnership and U.S. Maritime Administration 11

12 A Critical Part of Oil Majors Transportation Logistics Primary trade routes for Jones Act crude oil and products The Permian Pipeline Crunch BAKKEN Permian Pipeline Capacity New Projects and Production Growth, MBDs 2 Pipeline project Start Incremental capacity Total capacity Current capacity 2.80 Patoka, IL 4 Local refining BridgeTex Q Key US Oilfields Clean Pipeline Crude Pipeline Barges PERMIAN EAGLE FORD US GULF 1 6 Permian Express III Q Sunrise Q Cactus 2 Q Gray Oak Q EPIC Q Jones Act Tanker Routes: Enterprise NGL 2Q Gulf Coast refineries to Florida and East Coast (Clean) 2 Alaska and Intra-west coast movements (Clean/Dirty) 3 Cross-Gulf movements (Dirty) 4 Delaware Bay Lightening (Dirty) 5 Shuttle tankers from deep water U.S. Gulf to Gulf Coast Refineries (Dirty) 6 Gulf Coast crude to Northeast refineries (Dirty) Permian production growth has surpassed pipeline takeaway capacity additional volumes to drive tanker demand Source: Navigistics Wilson Gillette Report Sep

13 Majority of Fleet Carry Clean Products Jones Act tanker fleet deployment by main trades (Tankers and ATBs) 2015 Total capacity: ~20 mbbls Aug 2018 Total capacity: ~27.5 mbbls Clean USG MSC Idle 1) 3% 0% 8% Chemicals Clean USG MSC 3% 5% Idle 1) 8% Chemicals 36% 17% West Coast 45% 17% West Coast 36% Crude Oil 22% Crude Oil Significant upside potential for Jones Act deployment in Crude Oil Source: Note: Navigistics Wilson Gillette Report Sep 2018 and AMSC analysis 1) Idle capacity refers only to old ATBs 13

14 Rising Clean Product Volumes Rising seaborn transport from Gulf to East Coast Gulf Coast to Florida Trade Lane Mbbls per month PADD PADD New PADD 3 Houston Beaumont Orleans Pascagoula Jacksonville Tampa Corpus Christi 1 Port Everglades 12 J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A PADD 1 receipts by Tanker and Barge from PADD 3 6 months rolling average Sources: EIA 14

15 Jan-2013 Mar-2013 May-2013 Jul-2013 Sep-2013 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan-2017 Mar-2017 May-2017 Jul-2017 Sep-2017 Nov-2017 Jan-2018 Mar-2018 May-2018 Jul-2018 Sep-2018 Mbbl Crude Returning to Peak Levels on East Coast PADD 3 to PADD 1 Crude Oil Moves by Tanker and Barge Trade lane carrying Crude from Gulf Coast to U.S. Northeast 4 3 PADD 2 Boston 2 New York Philadelphia Washington PADD New PADD 3 Houston Beaumont Orleans Pascagoula Tampa Jacksonville PADD 3 to PADD 1 Movements of Crude by Tanker (3M rolling Ave) Corpus Christi 6 Port Everglades East Coast volumes back to ~6 tankers, up from ~1 tanker during 2017 Volumes driven by spread in pricing of U.S. oil vs international alternatives Source: EIA, Marine Traffic and AMSC analysis 15

16 Intra Gulf Crude Shipping Volumes Stabilizing Intra PADD 3 Crude Oil Moves by Area of Loading KBD s Intra Gulf Trades are mainly Crude Oil from Texas into Louisiana, Alabama and Mississippi PADD 2 PADD 1 New PADD 3 Houston Beaumont Orleans Pascagoula Tampa Jacksonville Corpus Christi 3 Port Everglades Jones Act U.S. Gulf loading has stabilized at 500k barrels per day Source: ClipperData August 2018 and AMSC analysis 16

17 Oil Price Spread - Key Driver for Increased Crude Shipping Volumes PADD 3 to PADD 1 Crude Oil Moves by Number of Tanker Liftings Crude Oil Price Spread - WTI Houston vs. Bonny Light Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 On average 8 MR voyages per month of crude to U.S. Northeast refineries Record thirteen voyages in September 2018 Crude loaded in Houston vs. West Africa needs to be minimum $1.50 cheaper to be competitive for purchase by U.S. Northeast Refiners Spread has been sufficiently wide since Aug/Sept 2017 Source: Argus and Marine Traffic 17

18 Fleet Reduction as Scrapping Continues Fleet profile by vessel age Number of vessels Considerable fleet growth over the last 3 years, but scrapping likely to bring fleet back to 2015 levels Kbbls capacity Actual Projected Candidates for scrapping levels Scrap/lay up ATBs AMSC Tankers Fleet Scrapping Source: Navigistics Wilson Gillette Report Sep 2018, broker reports and AMSC analysis 18

19 Limited Yard Capacity for New Tanker Projects Current key projects 1 Building two containerships under contract with Matson (Hulls ). The planned delivery dates for Hulls 029 and 030 is Q3 18 and Q1 19, respectively 2 LOI in place for building of two MR tankers 1 Constructing two containerships for Matson with delivery in Q4 19 and Q2 20 In Sep 18 started construction of first of six vessels in the U.S. Navy s John Lewis fleet oiler program Awarded the contract in 2016 to be built at a cost of about USD 600 million each and to be fulfilled through the next decade Building the Expeditionary Sea Base (ESB) ships for the U.S. Navy - However, in July a graving dock near the Coronado Bridge flooded, significantly impacting the vessel and delaying construction which was scheduled for delivery by 2019 Available newbuilding slots and strategy Seeking to diversify its business beyond the traditional vessels it has built for the commercial market - Teamed with Fincantieri Marine Group and Vard Marine to compete for DD&C of USCG s next generation heavy polar icebreaker (bids due Q4 18, contract awarded Q2 19) - Exploring various specialized vessels such as fishing trawlers and cable layers, as well as vessels to support the growing offshore wind industry - Looking into new long-term projects for non-commercial end users (Navy) Uncertainty around severity of recent incident on available capacity over the next years - Will likely lead to significant delays Doing significant upgrade and repair work for the Navy - In July and August landed a contract on guided missile destroyer and one for a guided missile cruiser which will be carried out through Sep 19 and Dec 19, respectively The two major commercial Jones Act yards now likely to focus on Navy and other government projects outside of tanker market limited capacity for tanker newbuilds over the coming years 19

20 Recovering Rates Time Charter Equivalent spot rates projected to return towards peak levels of TCE rates e: TCE 65k/d 2020e: TCE 70k/d 2021e: TCE 70k/d Aug 18: TCE 55k/d e 2020e 2021e Currently seeing strong momentum in rates Navigistics forecasts continued improvement on the back of solid fundamentals Source: Company information (historical rates), Navigistics Wilson Gillette Report Sep 2018 (projections) 20

21 Investment Highlights Highlights Comments INCREASING DEMAND IN KEY TRADES Soaring crude shipments from U.S. Gulf to the U.S. Northeast, highest since 2015 Growing clean trade into Florida Jones Act rates are increasing towards peak levels seen in 2014/15 levels Scrapping of older tonnage continues with 3 MR equivalents retired year to date REDUCING FLEET CAPACITY 15 tankers and ATBs approaching 35 years or older in 2020; with Special Surveys coming up Slim orderbook with only two ATBs for delivery in 2020 LEADING MARKET POSITION WITH STABLE CASH FLOWS Bareboat contracts provide stable cash flows with profit share upside potential Existing modern fleet that is integral to OSG s business Well positioned to take advantage of growth opportunities in a strengthening market 21

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