OSG is the only tanker company with a significant International Flag and U.S. Flag fleet
Tell me about OSG in 25 words or less.
A leader in global energy transportation services, OSG operates a fleet of 120+ vessels that transport crude oil, refined petroleum products and gas worldwide.
1) By having a diversified fleet trading in multiple markets, OSG can capitalize on the crude oil spot market (where rates have historically achieved higher returns than term charters) and benefit from an annuity stream of revenue from medium to long-term charters from its product carrier, U.S. Flag and gas businesses.
2) The scale of OSG’s fleet and global platform gives it a competitive advantage. Scale improves the timeliness and quality of market information, which in turn leads to trading advantages. By participating in commercial pools, the Company can optimize vessel utilization and provide better customer service. In addition, the breadth of OSG’s operations and its reputation for high quality reliable service allow it to develop and expand customer and partner relationships worldwide.
3) Operating the cleanest, safest and most reliable fleet in the industry has never been more critical and remains the single most important strategic and cultural imperative for the Company. In today’s highly competitive market, major customers demand and increasingly only do business with the highest quality ship operators; those committed to protecting the environment, providing flawless service and reliability and maintaining high quality crews. OSG’s goal is to set the Gold Standard in technical operations through continuous improvement of operations and a commitment to recruit, educate and train, reward and retain the best sea staff for its U.S. and International Flag fleets.
OSG’s balanced growth strategy is focused on:
The business of transporting crude oil and refined petroleum products from one port to another is very complex and involves hundreds of publicly traded and private ship owners.
On the commercial side, the Company is focused on creating scale in each of its market segments. The benefits of scale include providing better service and flexibility for customers, while expansion through commercial pools provides high-quality, similar vessels to customers and enhances efficiency of vessels improving laden to ballast ratios; OSG is more important to clients and brokers giving it an information advantage; and enables OSG to build cargo systems.
The strength of OSG’s commercial platform, with office locations in New York, Houston, London, Singapore, Tampa and Montreal, provides customers access at all times to information about their cargo’s position and status.
OSG’s commercial success is critically linked to the strength of the Company’s technical operations.
OSG is committed to best-in-class, in-house technical operations. Teams located in Newcastle, England, Athens, Greece and Tampa, Florida ensure that OSG maintains and operates the highest quality fleet. The Company continuously invests in programs that optimize the performance of crews and ships through technology and fleet-wide best practices. In addition, shoreside personnel are highly qualified, with 25% having had a career at sea.
A best-in-class commercial and technical platform leads to higher margin projects and business opportunities such as the Company’s entrance in the FSO (Floating Storage and Offshore) market and U.S. Gulf ultra-deepwater shuttle tanker market.
Fifty-seven percent of the world’s oil is transported by sea2 and every marginal barrel of oil produced is transported by sea. The seaborne transportation of oil is directly linked to the global supply of oil, which expands and contracts regionally over time. For example, oil fields in the North Sea are now in decline, China is diversifying its dependence on importing crude oil from the Middle East and output is increasing in West Africa and Russia. Supply changes result in an increase in ton-mile demand (which is a measurement of tons of cargo carried, multiplied by the distance traveled). Increases in ton miles is favorable to shipping as the greater number of laden days in any given period of time results in more revenue earning days.
OSG’s product carrier fleet transports refined petroleum products, which is directly linked to global refinery production and capacity as well as shifting consumption patterns that result in market arbitrage opportunities. For example, when refineries on the U.S. Gulf Coast were damaged after Hurricanes Katrina and Rita in the fourth quarter of 2005, the United States imported gasoline, diesel and jet fuel from Europe, Asia and the Caribbean, activity that benefited the shipping market.
The price of oil indirectly affects marine transportation. If high oil prices reduce demand for refined petroleum products, then production will decline in order to match the lower demand, the result of which would be lower demand for tanker transportation.
Major oil and gas companies, refiners and traders make up OSG’s worldwide customer base. Some key customers: UNIPEC, Flopec, SONAP, BP plc, ExxonMobil, Stasco, PetroCanada, Citgo, ChevronTexaco, Valero, PDVSA, Hyproc, ConocoPhillips, Glencore, Vitol, Trafigura, TOTAL and Repsol. Key commercial pool partners include: Euronav, PDV Marina, Yasa Shipping Industry and Trading S.A.
Since the Company’s founding in 1948, the integrity of OSG’s staff in how it conducts business with customers coupled with its marketplace reputation earned by providing reliable, high quality transportation services characterizes a culture committed to excellence. Equally important is the Company’s commitment to transparent communications to investors, the media, customers and employees. This manifests itself in the corporate tagline: Moving Energy with Integrity.
1 Measured by number of vessels