American Shipping Company ASA Pareto Oil & Offshore Conference 13 September 2018 Company Presentation
Important information This Company Presentation is current as of September 2018. 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
American Shipping Company (AMSC) AMSC Snapshot Fleet overview Established in 2005 Oslo listed with mcap. of USD ~200m* 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 Q4 2020 Exploring growth and diversification opportunities in the U.S. Jones Act market Admitted to OTCQX International to increase awareness and public profile among U.S. investors # Vessel Design Type Built 1 Overseas Houston Veteran Class MT 46 MR 2007 2 Overseas Long Beach Veteran Class MT 46 MR 2007 3 Overseas Los Angeles Veteran Class MT 46 MR 2007 4 Overseas New York Veteran Class MT 46 MR 2008 5 Overseas Texas City Veteran Class MT 46 MR 2008 6 Overseas Boston Veteran Class MT 46 MR 2009 7 Overseas Nikiski Veteran Class MT 46 MR 2009 8 Overseas Martinez Veteran Class MT 46 MR 2010 9 Overseas Anacortes Veteran Class MT 46 MR 2010 10 Overseas Tampa Veteran Class MT 46 Shuttle tanker 2011 * Market cap. based on closing share price of NOK 27.90 per Sep 7 th, 2018 3
Long Term Contracts Returning Stable Cash Flow American Shipping Company Bareboat charter to OSG TCs to blue chip charterers* 2009-19 2019 - 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 4
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Recovering Rates American Tanker Rate Index (spot) with Time Charter Equivalents American Tanker Rate Index 400 AR 350 = ~USD 75,000 TCE 350 300 AR 270 = ~USD 58,000 TCE 250 200 150 100 Source: L&R Midland 5
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 20% 20 15 10 16 11 9 5 15% 0 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: Carrying capacity expressed in barrels; includes newbuildings; excludes vessels in layup 6
# vessels Integral Part of OSG s Fleet AMSC s tankers is a substantial part of OSG s fleet 25 20 2 2 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. AMSC s 10 vessels are a core part of OSG s Jones Act tanker fleet 15 6 The AMSC fleet represent ~30% of all modern Jones Act tankers below 15 years (36 in total) 10 2 22 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 5 10 0 AMSC owned MRs OSG owned MRs ATBs Lightering ATBs MSP tankers Total OSG controlled Avg. age: 9 8 41 7 9 18 7
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 40,000 157 35,000 30,000 142 4) 25,000 20,000 134 1) 134 2) 130 3) 135 15,000 10,000 5,000 107 - 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 cost @ 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 price for 4 vessels Company materials 8
Fully Financed until Q4-2020 Current debt structure (USD million) Aker Loan (USD20m) Senior unsecured bond (USD220m) Secured bank facility (USD 150m) Secured bank facility (USD300m) 622 7 220 127 268 Q2 2018 Key terms on funding 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 + 325 bps margin Total annual installments: Y1: USD 8.3m Y2-4: Y5: Unsecured bond USD 28.3m (annually) USD 44.3m (expect to refinance after year 4) 9.25% fixed rate, semi annual installments Senior unsecured debt with maturity Feb 2022 Ammortization commencing at 42 months of USD 20m per year Covenants include minimum cash, maximum debt restrictions and dividends incurrence test Aker loan Accruing interest of 10.25% with maturity in 4Q 2020 Will be repaid by proceeds from Philly Tankers 9
Stable, Predictable Cash Flow Simplified illustration of AMSC s annual cash flow excluding profit share (USDm) 88 4 3 47 20.5 21.5 Fixed BBC Revenue Deferred Charter Hire (DPO) SG&A Bank Debt Service Bond Coupon Free Cash Flow 10
Overview of the Jones Act The Jones Act has been in place since 1920 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 operation in the Jones Act market is made possible by the lease finance exception of the Jones Act Essential feature of U.S. national security, ensuring non- dependency of ships controlled by foreign nations and is a vital part of the U.S. economy 100,000,000,000 USD 100bn contribution to the U.S. domestic economy 30,000,000,000 USD 30bn total investments in over 40,000 vessels 400,000 # jobs directly and indirectly impacted by the U.S. maritime industry Large U.S. employer Source: American Maritime Partnership and U.S. Maritime Administration 11
A Critical Part of Oil Majors Transportation Logistics Jones Act crude oil & products primary trade routes BAKKEN 2 Patoka, IL 4 PERMIAN Key US Oilfields EAGLE FORD 3 1 6 Clean Pipeline Crude Pipeline Barges 5 1 US GULF Jones Act Tanker Routes: 1 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) 12
Majority of Fleet carry Clean Products Jones Act tanker fleet deployment by main trades (Tankers and ATBs) 1 % 24 % 3 % 8 % 18 % Idle MSC Chemicals West Coast Clean USG Crude Oil 46 % Source: Navigistics Wilson Gillette Report, Apr 2018 and AMSC analysis 13
Mbbl Rising Clean Product Volumes Seaborne products transport from Gulf Coast to East Coast is rising (Mbbls per month) Gulf Coast to Florida Trade Lane 25 PADD 2 20 PADD 1 15 PADD 3 Houston Beaumont New Orleans Jacksonville Pascagoula Tampa Corpus Christi 1 Port Everglades 10 PADD 1 Receipts of Products by Tanker and Barge from PADD 3 Sources: EIA 14
Crude Shipping Volumes Stabilizing Intra Gulf 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 PADD 3 Houston Beaumont New Orleans Jacksonville Pascagoula Tampa Jones Act U.S. Gulf loading has stabilized at 500k barrels per day Corpus Christi 3 Port Everglades Source: ClipperData August 2018 and AMSC analysis 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 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 1 1 0 New PADD 3 Houston Beaumont Orleans Pascagoula Tampa Jacksonville PADD 3 to PADD 1 Tanker Crude Oil Movements (3 month rolling average) East Coast volumes back to ~6 tankers, up from ~1 tanker during 2017 Corpus Christi 6 Port Everglades Volumes driven by spread in pricing of U.S. oil vs international alternatives Source: EIA, Marine Traffic and AMSC analysis 16
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 12 10 8 6 4 2 0 6.00 5.00 4.00 3.00 2.00 1.00 0.00-1.00 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 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
Limited Remaining Fleet Growth and Scrapping Continues Fleet profile by vessel age Considerable fleet growth over the last 3 years, but scrapping likely to bring fleet back to 2015 levels # vessels Scrap/lay up AMSC 12 ATBs 11 Tankers 10 9 8 7 6 Candidates for scrapping 5 4 3 2 1 0 50 45 40 35 30 25 20 15 10 5 1 Kbbls Capacity 30000 25000 20000 15000 10000 5000 0 2015 levels Actual Projected 2012 2013 2014 2015 2016 2017 2018 2019 Fleet Scrapping Source: Navigistics Wilson Gillette Report Apr 2018, broker reports and AMSC analysis 18
Investment Highlights Highlights Comments INCREASING DEMAND IN KEY TRADES Soaring crude shipments from U.S. Gulf to the U.S. Northeast Intra gulf crude volumes stabilizing Growing clean trade into Florida REDUCING FLEET CAPACITY Scrapping of older tonnage continues with 3 MR equivalents (~1 million bbls capacity) retired year to date 15 tankers and ATBs are approaching 35 years of age or older Slim orderbook with only two ATBs for delivery in 2018 and 2020 LEADING MARKET POSITION WITH STABLE CASH FLOWS AMSC has the most cost efficient modern Jones Act tanker fleet Stable cash flow from fixed rate bareboat contracts and upside potential from profit share arrangement Committed to returning capital to shareholders through dividends, whilst prudently managing the balance sheet and maintaining financial flexibility 19
Q&A 20