American Shipping Company ASA

Transcription

1 American Shipping Company ASA Company Presentation September 05 Slide

2 Important information This Company Presentation is current as of September 7, 05. 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. Slide

3 Agenda Introduction Market Company Summary Slide 3

4 AMSC has 0 vessels on bareboat charters with OSG 0x tankers on Bareboat Charter to OSG at fixed rate + profit share OSG Time Charters the vessels to oil majors AMSC s fleet (9 product tankers + shuttle tanker) are on firm Bareboat Charters to OSG until December 09 with evergreen extension options OSG time charters the vessels to oil majors for U.S. domestic trade (Jones Act) OSG is among the world s largest tanker shipping companies, with a large U.S. domestic and international fleet OSG has emerged as a financially healthy company and is aiming for a near-term IPO on NYSE AMSC receives fixed annual Bareboat revenue of USD ~88m + ~50% of the profits generated by OSG under the Time Charter contracts Slide

5 Agenda Introduction Market Company Summary Slide 5

6 Introduction to the U.S. Jones Act The Jones Act has been in place since 90 The Merchant Marine Act of 90, P.L (the Jones Act ) requires that goods and passengers transported by water between U.S. ports be done in vessels that are built in the U.S, registered under the U.S. flag, U.S. crewed and >75% owned and controlled by U.S. citizens AMSC s operation in the Jones Act market is made possible by the lease finance exception of the Jones Act, which permits foreign ownership of the ships under certain conditions including that the vessels be bareboat chartered to qualified U.S. citizen operators, such as OSG The U.S. Jones Act industry is comprised of those ships that transport merchandise between U.S. ports located in continental United States, as well as Alaska, Hawaii and Puerto Rico Significant financial impact gives bi-partisan support for the U.S. Jones Act USD bn in annual economic output 70,000 jobs working on or with Jones Act vessels 8,000 jobs in U.S. shipyards Over 39,000 vessels of all sizes representing an investment of USD 30bn Essential feature of U.S. national security, ensuring non- dependency of ships controlled by foreign nations Source: Shipbuilder s Council of America Slide 6

7 Overview of shipping trade lanes Trade lanes, barrels/d 000 bbl s carrying capacity Intra-West Coast Product: 80 Crude: 60 Import: Crude: 650 Product:,000 6,63 7, Barges Tankers Import: Crude:,00 Product: 75 Jones Act trade Int l tankers Corpus Hou/New Orl 0 Crude: YTD Crude: 700 Import: Crude: 3,350 Product: 590 a b c Gulf Coast - East Coast: 330 Crude: 0 Product: 0 Gulf Coast - East Coast (Lower): 570 a. Tampa: Product 30 b. Port Everglades: 0 c. Charleston/Savannah/J.ville: , , Clean USG Chemicals Crude oil West Coast MSC Source: EIA, Navigistics Slide 7

8 Resilient U.S. production also with lower oil prices Oil price, Jones Act newsflow and weekly U.S. oil production MMbbl/d US crude production USD/bbl Brent price 0 Aug 5: KinderMorgan acquires Philly Tankers for USD 568m 0 U.S. crude production current levels relative to EIA 00 estimates MMbbl/d Oct - No v : American Phoenix sold to Genesis Energy, KinderMorgan acquires x PTs from Crowley and SeaRiver Kodiak sold to Seacor Feb 5: Longterm contracts in place for Philly Tankers jan- jan- jan-3 jan- jan-5 0 jan-6 0 Brent oil price, USD/bbl Current low case base case high case 8 Source: Company filings, EIA as of April 05 Slide 8

9 EIA report on US crude exports implies neutral to positive impact for Jones Act trade Comments Unrestricted exports will reduce the Brent / WTI spread - Will limit the incentive for exports - Will shift margins from refiners to producers and therefore likely to lead to more modest refiner capacity growth US crude production and export, EIA reference case, mmbbl/d Potential volumes for Jones Act trade Limited actual exports expected despite loosening of regulation In a scenario with modest production growth, US refinery capacity is likely to absorb crude growth and change in policies is expected to have very limited impact on actual exports In a scenario with higher production growth, US refiner capacity is not expected to absorb all crude growth. Exports are estimated to grow but crude for domestic trade is expected to grow also positive for Jones Act market Production Export Dom. trade Current level Production Export Dom. trade 00 restricted exports Production Export Dom. trade 00 unrestricted exports Source: EIA as of September 05 Slide 9

10 # of 6,000dwt vessel equivalents Strong market despite significant oil price volatility Incremental vessel demand from 05 Comments vessels of incremental demand through 00 Primary driver for growth remains crude trade - US Gulf to US East Coast trade still open, but increased competition from imports Products trade also expected to continue growing on stronger US demand (gasoline) Lower oil price limits demand for US GoM shuttle tanker trade Upside on Chemicals trade as incremental petchem plants set to start in Other/Chemicals Product USGC - USEC Crude/Product USWC Crude USGC-USGC Crude USGC-USEC Shuttle GoM Source: Arctic Securities Slide 0

11 Only yards deliver tankers. Most NB s have been chartered vessel age implies further scrapping Yard delivery schedules Vessel age since delivery Vessel AKPS Crowley PT AKPS Crowley PT AKPS Crowley PT3 AKPS Crowley PT Philly Tankers PT Philly Tankers PT Philly Tankers PT3 Philly Tankers PT Matson container Matson container Kinder Morgan PT Kinder Morgan PT Kinder Morgan PT3 Kinder Morgan PT Kinder Morgan PT5 Seacor PT Seacor PT Seacor PT 3 Tote container Tote container Yard 00 Contracted 0 n/a n/a Contracted n/a n/a # vessels Candidates for scrapping ATBs Tankers Source: Navigistics Slide

12 AMSC with relative cost advantage vs rest of JA fleet AMSC; a modern fleet acquired at a low cost Cost Newbuild prices Philly Tankers EV/vessel without contract (newbuild price) Philly Tankers implied EV/vessel with contract Transaction values ) Average 3 ) 3 ) ) providing low break-even costs Bareboat costs USD/d 5,000 0,000 35,000 Delivery Year # vessels Trx date n/a n/a n/a New regulation n/a n/a n/a Apr American Philly Phoenix Tankers Dec 3 Aug 5 Oct 30,000 5,000 0 AMSC 8.0% 8.5% 9.0% 9.5% 0.0% 0.5%.0% Annual bareboat costs given various total capital IRRs with newbuild USD 3m Notes: Source: ) Based on Philly Tankers ) Based on newbuild cost for the tankers delivered to American Petroleum Tankers (Golden State excluded due to cost overrun) 3) New regulation adds NOx emission requirement that estimated will increase cost to USD 5-50m ) Based on total consideration for 9 vessels, including additional expenses incurred by KinderMorgan for taking delivery Company materials Slide

13 AMSC second largest tanker owner; industry consolidation ramping up Fleet overview Industry consolidation ramping up Aug 05: Kinder Morgan acquired Philly Tankers, previously majority owned by AKPS for a total transaction value of USD 568m Nov 0: Kinder Morgan acquired product tankers from Crowley for a consideration of USD 70m Oct 0: Genesis Energy acquired a - year old tanker for USD 57m 3 ATBs * (total of ) April 0, Crowley acquired profitshare interests in vessels from AKPS for a total transaction value of USD 0m Plains Resources Tankers (total of 3) Newbuild ATBs (total of 8) Newbuild tankers (total of 6) Dec 03: Kinder Morgan acquired existing and 5 newbuild tankers from AMPT for a total transaction value of USD.bn ) Notes: ) Purchase price and additional investment required by KinderMorgan in order to take delivery of the newbuildings * Articulated Tug Barge Source: Navigistics, Company filings Slide 3

14 Agenda Introduction Market Company Summary Slide

15 Time Charters with staggered expiry higher rates expected at contract renewals T/C contract coverage (ex. options) Average TC rates on AMSC s vessels Vessel Los Angeles Texas City Anacortes Houston Long Beach New York Nikiski Martinez Boston Tampa Customer Contract to 05 USDk/d Q 0 Q 0 Q3 0 Q 0 Q 05 Q 05 AMSC earns a fixed BB payment of USD 88m / year + profit split OSG holds vessels until 09, with evergreen extension options thereafter Slide 5

16 USD/d USDm Attractive and growing profit share Illustration of the OSG profit share arrangement: Q 05 financials, USDm TCE hire OPEX, profit layer to OSG - BBC hire - and dry-dock provision = Profit to share 6,65 ) - (3,736) - (9,3) = 6,0 AMSC is currently generating profit share above market TC rates of approx. USD 55k/d ) Notes: Source: ) Market rate not adjusted for utilisation American Shipping Company Slide 6

17 Low-risk cash-flow profile with significant upside Illustration of AMSC cash-flow ex. profit split Illustration of AMSC dividend potential at various long term TC rates ) incl. profit split Recent market rates Base BB revenue DPO avg 05-8 SG&A New bank debt servicing Bond debt interest Cashflow to Quarterly equity USD 0.03/share 60,000 65,000 70,000 75,000 80,000 85,000 Average long term TC rate, USD/d Profit share (50%) Quarterly dividend potential USD/share BB-revenue Notes: ) Assumes 96.5% utilization of AMSC s fleet and cash-flow components as shown on the left hand side Slide 7

18 Recent bank debt refinancing at attractive terms Overview of AMSC s refinancing AMSC s debt repayment profile, USDm USD 500m bank debt refinancing agreed in June 05 - USD 350m tranche with BNP Paribas, Credit Agricole, SEB and Wells Fargo New bank debt Bond USD 50m tranche with CIT Maritime Finance 3 Average weighted tenor: 6 years Average weighted interest cost: Libor + 30 bps margin Total annual installments: USD 3 million and later Slide 8

19 DPO mechanism adds cash flow to AMSC DPO explained DPO = Deferred Principal Obligation OSG pays a reduced cash rate on the first 5 vessels for 7 years, accruing up to USD 7m on each vessel - Originally structured to reduce OSG s cash costs during the startup period - Structured as a loan from AMSC to OSG Payable to AMSC after 7 years, over 8 years including 6.06% - Due in full if OSG does not extend the charter after the initial term Full cash effect for AMSC from Q3 05 Split of bareboat rate for PT -5 first 7 years, USDk/d. DPO rate Cash rate Estimated yearly DPO payments to AMSC, USDm Slide 9

20 Lean organization with experienced management team and board of directors AMSC management team AMSC board of directors Pål Lothe Magnussen President / CEO President and CEO from January 05 (CFO since 0) Previously: Director / Investment Banking Division / DNB Markets, Vice President / Corporate Banking Shipping and Offshore / DNB with experience from New York, Singapore and Oslo MBA from Columbia University, MSc. from the Norwegian School of Management Anette Malm Justad Chairman Board member since December 007 Previously: CEO / Eitzen Maritime Services and various positions in e.g. Yara International, Norgas Carriers / IM Skaugen and Norsk Hydro MSc. In Technology Management from MIT/NTH/NHH in addition to MSc in Chemical Engineering from NTH Morten Hofstad CFO CFO from July 05 Previously: Investment Director / Converto, Director / Glitnir, Corporate & Investment Banking, Controller / Bourbon Offshore MSc. from the Norwegian School of Economics and Business Administration (NHH) and ITAM Peter D. Knudsen Board Member Board member since March 0 Previously: CEO / Jason Shipping, CEO / Eitzen Maritime Services and various positions in Christiania Bank, Nordea Bank and GIEK and others MBA from Oslo Business School / Arizona State University Leigh Jaros Business Controller / Finance Manager Controller in AMSC from July 008 and CFO July 0 May 0 Previously: +0 years corporate financial experience including financial reporting, analysis and budgeting. Ms. Jaros was employed by Aker Philadelphia Shipyard as its Accounting Supervisor prior to joining AMSC. BSc in Finance and Economics from West Chester University Kristian Røkke Board Member Board member since December 0 and CEO in Akastor Previously: President & CEO of Aker Philadelphia Shipyard MBA from the Wharton School, University of Pennsylvania Slide 0

21 Agenda Introduction Market Company Summary Slide

22 Investment highlights Highlights ATTRACTIVE U.S. JONES ACT MARKET Comments U.S. crude production has held up despite lower oil prices Vessel acquisitions by players deeply embedded in the U.S. petroleum transport shows that shipping remains a competitive alternative Recent long term Time Charter rates made at attractive levels LEADING MARKET POSITION AMSC is the second largest Jones Act product tanker owner AMSC s modern fleet built at cost substantially below newbuilding prices, providing lowest break-even cost of all modern tankers Attractive USD 500m bank debt refinancing recently committed LOW RISK BASELINE DIVIDEND WITH UPSIDE POTENTIAL Current quarterly dividend of $ 0.03/share with strong support in fixed Bareboat revenue Ambition to grow dividend level as Time Charter contract renewals provide substantial upside through profit share Slide

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