American Shipping Company ASA Q1 2020 results and company update 20 - - PowerPoint PPT Presentation

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American Shipping Company ASA Q1 2020 results and company update 20 - - PowerPoint PPT Presentation

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American Shipping Company ASA Q1 2020 results and company update 20 May 2020 Important information Nothing herein shall create any implication that there has been no change in the affairs of American Shipping Company ASA ("AMSC" or

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Q1 2020 results and company update

20 May 2020

American Shipping Company ASA

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Important information

  • Nothing herein shall create any implication that there has been no change in the affairs of American

Shipping Company ASA ("AMSC" or the "Company") as of the date of this Company Presentation. 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 forward-looking 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

  • r 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.

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First quarter 2020 highlights

* Net profit after tax, adjusted for non-recurring items, currency fluctuations, mark-to-market of derivatives and changes to deferred tax ** Includes DPO, reported EBITDA for Q1 20 is USD 21.1 million

3

  • Adjusted net profit of USD 2.9 million*
  • Normalized EBITDA** of USD 22.0 million
  • DPO of USD 0.9 million
  • Closed the USD 305m senior secured refinacing for 9 ships

including a USD 70m RCF facility

  • Swapped LIBOR exposure for approximately USD 220m of

senior debt at an average rate of 0.493%

  • AMSC remains insulated from Covid-19 related market

volatility through its long-term, stable bareboat contracts

  • Declared Q1 dividend of USD 0.08 per share, consistent

with prior guidance

  • Ex-dividend date of 26 May 2020 with payment on or about 4 June 2020
  • Classified as a return of paid in capital
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Normalized EBITDA (USD millions) Normalized EBITDA per quarter (USD millions)

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  • Normalized EBITDA of USD 22.0 million in Q1 20 (USD 21.7 million in Q1 19)

85 85 85 84 85 3 4 4 11 10 10 20 30 40 50 60 70 80 90 100 2016 2015 4 2017 2018 4 2019 Profit Share DPO Reported EBITDA 21 21 21 21 21 22 21 21 2 4 6 8 10 12 14 16 18 20 22 24 Q2 18 1 1 Q1 20 1 Q3 18 Q4 18 1 1 Q1 19 1 Q2 19 1 Q3 19 1 Q4 19 Reported EBITDA DPO

Stable, predictable EBITDA

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Long-term fixed rate bareboat charters to OSG secures cash flow

Fleet deployment overview

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Firm Charter Options

Houston Long Beach Los Angeles New York Texas City Boston Nikiski Martinez Tampa Anacortes

Vessel End users

  • AMSC’s fleet is on firm BB Charters to OSG with

evergreen extension options

  • AMSC receives fixed annual bareboat revenue of

USD 88 million + ~50% of the profits generated by OSG under the time charter contracts

  • OSG time charters the vessels to oil majors for

U.S domestic trade

BBC exp. 2022 BBC exp. 2022 BBC exp. 2022 BBC exp. 2022 BBC exp. 2022 BBC exp. 2023 BBC exp. 2023 BBC exp. 2023 BBC exp. 2023 BBC Options BBC Options BBC Options BBC Options BBC Options BBC Options BBC Options BBC Options BBC Options Options BBC exp. 2025

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 Delaware Bay Lightening (Crude)  Shuttle tankers from deep water U.S. Gulf to Gulf Coast Refineries (Crude)  Crude from Corpus Christi, TX to LOOP (not shown)  Crude from Corpus Christie and Beaumont to Northeast

Jones Act crude oil & products primary trade routes

A critical part of oil majors’ transportation logistics

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Jones Act Tanker Routes:

 Gulf Coast refineries to Florida and East Coast (Clean)  Mid-Atlantic to New England (Clean)  Alaska and Intra-west coast movements (Clean/Dirty)  Cross-Gulf movements (Dirty) 1 2 3 4 5 6 7

6 4 2 5 3

EAGLE FORD PERMIAN

1

Patoka, IL

1

US GULF

Key US Oilfields Clean Pipeline Barges Crude Pipeline

8

8

Source: Navigistics’ Wilson Gillette Report Apr 2020

BAKKEN Cushing, OK

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Majority of fleet carry clean products

  • highly stable trade over time

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Fleet deployment by main trades (Tankers and ATBs) US Clean Product Demand stable over time

Source: Navigistics’ Wilson Gillette Report Apr 2020, EIA Short Term Energy Outlook May 2020 and AMSC analysis Note: 1) Idle capacity refers only to ATBs mostly approaching scrapping

3% 5% 21% 22% 42%

West Coast Chemicals MSC

6%

Idle1) Crude Oil Clean USG

Apr 2020

Total capacity: ~22.9 mbbls

  • Total clean products demand in the US is very stable over

time

  • Highly inelastic to price, as only very low (below $2pg) or very

high prices (above $4.5pg) seems to have impact on demand

  • Currently fuel demand is severely impacted by “stay at home

policies” across the US, caused by the Covid-19 pandemic

  • EIA is forecasting a gradual return to normal demand by the

end of 2020

10 12 14 16 18 20 22 Jan‐19 Mar‐19 May‐19 Jul‐19 Sep‐19 Nov‐19 Jan‐20 Mar‐20 May‐20 Jul‐20 Sep‐20 Nov‐20 Jan‐21 Mar‐21 May‐21 Jul‐21 Sep‐21 Nov‐21

U.S. Liquid Fuel Consumption (Products Supplied) (mbbls/day)

EIA Projections

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Short term dip in clean product demand expected to be followed by gradual recovery in 2H 2020

  • Demand for clean products in the USA decreased by 30% in

April

  • Recovery has already started as the US economy is

gradually opening up

Source: EIA Weekly Petroleum Status Report May 13 2020 8

Drop in clean products demand already recovering EIA forecast gradual recovery in 2020

  • Pick up in demand for gasoline will be driven by:
  • Less interest in public transportation, less mass airline

travelling, less cruise vacation

  • All leading to “Staycation” in the USA involving more

automobile driving

  • Demand for diesel is less impacted due its industrial nature

being consumed by trucks, buses, machinery, etc.

  • Demand for Jet fuel will likely suffer until commercial air traffic

is back in favour

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Increasing seaborn transportation of clean products from U.S. Gulf to East Coast Gulf Coast to Florida Trade Lane

Steady long term growth in clean product shipments to Florida

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1

PADD 1 PADD 3 PADD 2

Jacksonville Port Everglades Tampa Corpus Christi Houston Beaumont New Orleans Pascagoula

Mbbls per month

  • As Florida has no pipeline connection nor any refineries, all

clean products consumed are supplied by sea

  • Florida is sourcing 90% of its clean products demand on a

Jones Act tanker from U.S. Gulf refineries

  • Florida consumption is split 65-70% Gasoline, 15-20% Diesel

and 10-15% Jet fuel

  • Increasing consumption of clean products in Florida is driving

demand for Jones Act tanker shipments cross U.S. Gulf

  • Over the past 10 years this trade has grown with a CAGR of

about 3.5%

  • Demand impact from Covid-19 mitigating measures expected

to reduce shipments in 2020, but return to normal in 2021

12.5 17.5 22.5 27.5 Jan‐2010 Apr‐2010 Jul‐2010 Oct‐2010 Jan‐2011 Apr‐2011 Jul‐2011 Oct‐2011 Jan‐2012 Apr‐2012 Jul‐2012 Oct‐2012 Jan‐2013 Apr‐2013 Jul‐2013 Oct‐2013 Jan‐2014 Apr‐2014 Jul‐2014 Oct‐2014 Jan‐2015 Apr‐2015 Jul‐2015 Oct‐2015 Jan‐2016 Apr‐2016 Jul‐2016 Oct‐2016 Jan‐2017 Apr‐2017 Jul‐2017 Oct‐2017 Jan‐2018 Apr‐2018 Jul‐2018 Oct‐2018 Jan‐2019 Apr‐2019 Jul‐2019 Oct‐2019 Jan‐2020 Mbbl PADD 1 Receipts of Products by Tanker and Barge from PADD 3 Trendline 3.5% CAGR

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PADD 3 to PADD 1 Crude Oil Moves by Tanker and Barge Trade lane carrying Crude from Gulf Coast to U.S. Northeast

10 Source: EIA, Marine Traffic and AMSC analysis

PADD 1

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PADD 3 PADD 2

Jacksonville Port Everglades Tampa Corpus Christi Houston Beaumont New Orleans Pascagoula Washington New York Philadelphia Boston

Crude trade to Northeast has remained strong despite current oil market volatility

  • Historically, volumes have been driven by spread in pricing of

U.S. Crude Oil vs international alternatives

  • Low crude oil price and falling U.S. oil production is

potentially increasing oil price spread volatility going forward

1 2 3 4 Jan‐2013 Apr‐2013 Jul‐2013 Oct‐2013 Jan‐2014 Apr‐2014 Jul‐2014 Oct‐2014 Jan‐2015 Apr‐2015 Jul‐2015 Oct‐2015 Jan‐2016 Apr‐2016 Jul‐2016 Oct‐2016 Jan‐2017 Apr‐2017 Jul‐2017 Oct‐2017 Jan‐2018 Apr‐2018 Jul‐2018 Oct‐2018 Jan‐2019 Apr‐2019 Jul‐2019 Oct‐2019 Jan‐2020 Apr‐2020

Mbbl

Padd 3 to Padd 1 'PADD 3 to PADD 1 Crude Movements by Tanker

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Fleet profile by vessel age Considerable fleet growth in past years, but scrapping has already reduced active fleet to 2015 levels

1 2 3 4 5 6 7 8 9 10 11 12 35 40 1 45 50 30 25 20 15 10 5

Scrap/lay up ATBs AMSC Tankers

11 Source: Navigistics’ Wilson Gillette Report Apr 2020, broker reports and AMSC analysis

Fleet reduction as scrapping continues

Number of vessels

Candidates for scrapping

Kbbls capacity

5000 10000 15000 20000 25000 30000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Fleet Scrapping

Actual Projected 2015 levels

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Net capacity reduction driven by scrapping and limited orderbook

12 Source: Navigistics’ Wilson Gillette Report Apr 2020, broker reports and AMSC analysis

Negative fleet growth

0% 0% 15% 12% 6% ‐7% ‐4% ‐2% ‐5% ‐10% ‐5% 0% 5% 10% 15% 20% 2013 2014 2015 2016 2017 2018 2019 2020 2021

  • Since 2016, five tankers and thirteen ATBs has been

scrapped, sold for operations outside the Jones Act market or gone into definite lay-up

  • The entire JA tanker orderbook consist of two small

barges for delivery in 2020 and no new tankers expected in the next five years

  • Yard capacity for tankers are limited with NASSCO

mainly building navy ships and Philly Shipyard building MARAD Training Ships

  • Likely delivered cost for a newbuild is now around

USD150m with first available delivery slot in 2025

  • Sustainable multi-year TC rates of ~USD70,000 per

day required to justify newbuilds

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*Applicable to common stockholders of the parent company

Figures in USD million (except share and per share information) Q1 2020 Q1 2019

Operating revenues 21.9 21.6 Operating expenses (0.8) (0.8) Operating profit before depreciation - EBITDA 21.1 20.8 Depreciation (8.4) (8.3) Operating profit - EBIT 12.7 12.5 Net interest expense (11.7) (10.3) Unrealized gain/(loss) on interest swaps 0.8 (1.2) Gain / (loss) on investments

  • (0.2)

Net foreign exchange gain / (loss) (0.2)

  • Profit/(loss) before income tax

1.6 0.8 Income tax expense

  • Non-cash income tax benefit/(expense)
  • 0.1

Net profit / (loss) for the period * 1.6 0.9 Average number of common shares 60,616,505 60,616,505 Earnings/(loss) per share (USD) 0.03 0.01

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Income Statement (unaudited)

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SLIDE 14

Figures in USD millions 31.03.2020 31.03.2019

Vessels 670.4 703.4 Interest-bearing long term receivables (DPO) 24.8 26.3 Derivative financial assets

  • 1.2

Trade and other receivables 0.3 0.2 Cash held for specified uses 0.8 3.2 Cash and cash equivalents 36.3 48.8 TOTAL ASSETS 732.7 783.2 Total equity 161.8 172.1 Deferred tax liabilities 11.4 12.9 Interest-bearing long term debt 512.3 554.3 Interest-bearing short term debt 44.3 33.7 Deferred revenues and other payables 3.0 10.2 TOTAL EQUITY AND LIABILITIES 732.7 783.2

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Balance Sheet (unaudited)

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CASH DEVELOPMENT IN 1Q 20 (USD millions)

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47.9 37.1 21.1 16.1 11.1 4.8 0.1

EBITDA OB Cash Amortization Interest * CB Cash Other Dividends

Cash position decreased during the quarter

* Interest expense during the quarter includes a one-time USD 1.9 million payment for termination of interest rate swaps just prior to refinancing of the bank debt , as well as the semi-annual bond interest payment

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Summary – long term stable business model despite short term volatility imposed by Covid-19

INCREASING DEMAND IN KEY TRADES

  • Continued strong crude trade from U.S. Gulf to the U.S. Northeast
  • Growing clean trade into Florida and to U.S. Northeast
  • Jones Act tanker market expected to remain stable despite current volatility

REDUCING FLEET CAPACITY WITH NO YARD AVAILABILTY

  • Slim orderbook with only two replacement barges for delivery in 2020
  • No available yard capacity to build Jones ACT tankers until 2025 or later
  • Negative fleet growth expected next two years as scrapping of old tonnage continues

STRONG AND IMPROVING FINANCIAL PERFORMANCE

  • Modest loan to asset values and healthy credit metrics
  • Contracted cash flow providing solid debt service coverage
  • Significant free cash flow generation

LONG TERM CONTRACTS PROVIDE STABLE CASH FLOW

  • Bareboat contracts provide strong and stable cash flows
  • Likely to continue with OSG for many years through evergreen extension options
  • Most cost competitive fleet reduces re-chartering risk
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