American Shipping Company ASA
American Shipping Company ASA Company Presentation January 2022
Important information This Company Presentation is current as of January 2022. 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 forward-looking statements. Forwardlooking 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 forwardlooking 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
Table of contents 1 COMPANY OVERVIEW 2 AMSC FINANCIAL OVERVIEW 3 MARKET OVERVIEW
American Shipping Company (AMSC) Introduction to AMSC Oslo listed with market capitalization of USD 225m* o OSE ticker: AMSC o U.S. OTC ticker: ASCJF o Bond ticker: ATI02 Fleet overview # Vessel Design Type Built 1 Overseas Houston Veteran Class MT 46 MR 2007 2 Overseas Long Beach Veteran Class MT 46 MR 2007 Pure play Jones Act tanker owner with a modern tanker fleet 3 Overseas Los Angeles Veteran Class MT 46 MR 2007 Fixed rate bareboat contracts generate stable, predictable cash flow 4 Overseas New York Veteran Class MT 46 MR 2008 Solid balance sheet with no debt maturities before 2025 5 Overseas Texas City Veteran Class MT 46 MR 2008 Strong cash flow supporting dividends and solid debt service coverage 6 Overseas Boston Veteran Class MT 46 MR 2009 Presently trading at a 13% dividend yield 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 32.80 per January 10, 2022 4
Fleet employment overview Fixed rate bareboat charters to OSG secures cash flow Bareboat contract Time charter contracts Los Angeles BBC exp. Dec 2022 New York BBC exp. Dec 2022 Texas City BBC exp. Dec 2022 AMSC’s fleet is on firm bareboat Charters to OSG with seven vessels having evergreen extension options Houston BBC exp. 2023 Ext. Options Long Beach BBC exp. 2023 Ext. Options Boston BBC exp. 2023 Ext. Options Nikiski BBC exp. 2023 Ext. Options Martinez BBC exp. 2023 Ext. Options Anacortes BBC exp. 2023 Ext. Options Tampa Jones Act end users 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. 2025 5
OSG is a leading Jones Act operator OSG’s business is diversified OSG financial performance OSG’s business spans across multiple Jones Act tanker and ATB segments as well as US Flag and Alaska crude tankers AMSC’s vessels are a vital part of OSG’s operations and earnings potential 2021 financial results impacted by the covid pandemic Q3 2021 demonstrated improved revenue and EBITDA compared to Q2 2021 OSG announced a number of new TC fixtures during second half of 2021 and has taken several tankers out of warm lay-up AMSC monitors charter cover in challenging markets 25 20 Breakdown of OSG’s fleet 4 # vessels 3 15 2 2 10 5 23 2 19 10 0 AMSC OSG owned MRs owned MRs ATBs Lightering ATBs MSP tankers ATC Tankers Total OSG controlled Source: OSG Q3 2021 earnings presentation 6
Further consolidation in the Jones Act tanker market Jones Act tanker & ATB ownership based on carrying capacity AMSC fleet Seacor, recently acquired and taken private by American Industrial Partners, subsequently acquired US Shipping with its 6 vessel fleet - Transaction will strengthen Seacor’s presence in the Jones Act tanker market More than 85% of the Jones Act tanker fleet are controlled by four large entities US Shipping Acquisition The AMSC fleet has a key position in the Jones Act tanker market representing 28% of all modern tanker below 20 years (36 in total) Note: Measured as carrying capacity by barrels and excludes 11 large Alaska Crude Tankers 7
Strong competitive position reduces re-chartering risk AMSC has the most cost efficient fleet due to substantially lower delivered cost AMSC’s bareboat rate reflects the low delivered cost AMSC has an average delivered cost of USD107m per vessel Provides AMSC with the lowest bareboat breakeven levels in the modern Jones Act tanker fleet Considerable lower than its peers which have either built or bought vessel at prices ranging from USD130-157m Current average bareboat rate of 24,050 per day is at least 10,000 per day cost advantage compared to competitors Current estimated newbuild cost at Philly or NASSCO would be above USD150m assuming an order for multiple vessels, with earliest delivery in 2026 q 157 Annual bareboat costs given various total capital IRRs with newbuild cost @ USD 134m and USD 150m 150 142 4 Estimated newbuild delivered cost in 2025 135 1341) 1342) 130 3) Newbuild delivered costs 2015-2017 S&P transaction values 2013-2015 107 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 of newbuilds. 4) Based on average price for 4 vessels. AMSC analysis 8
AMSC commitment to ESG The fleet is a part of the North American Emissions Control Area and runs on ultra low sulphur (0,1%) compliant fuel which is well below the new international 0,5% IMO requirement Local movement of crude and clean products has material environmental savings vs international sourcing of cargoes Voyage from Texas/Louisiana to Florida 1-3 days steaming Shorter distances means less pollution per barrel transported Lower fuel consumption and stricter fuel regulations result in a significant reduction in SOx, NOx, PM and CO emissions for Jones Act tankers ENVIRONMENT Jones Act vessels has a longer economic life and is typically not scrapped until after its 35th anniversary – compared to 25 years expected useful economic life for international MR tankers 691 161 Europe - Florida Texas/Louisiana (international - Florida (Jones MR) Act) Source: Arctic Securities research AMSC will install Ballast Water Treatment Systems (BWTS) across the fleet ** BIMCO 2001 Bareboat contracts with clear requirements for how counterparties operating their vessels comply with international environmental regulations Crews on Jones Act tankers are typically unionised U.S. Citizens which are paid and have benefits according to U.S. tariffs which are considerably better than international crew compensation Diverse management team consisting of one woman and two men and the Chair of the Board of Directors is a Woman As an Oslo Stock Exchange listed company AMSC complies with stringent governance rules Equal treatment of shareholders 2 of 3 Board Members are independent including the Chair SOCIAL GOVERNANCE Metric tons Voyage from Europe to Florida is 12-13 days steaming 800 700 600 500 400 300 200 100 0 Round Voyage Fuel consumption* *Compares fuel consumption for a round voyage Europe to Florida (29 days of which 4 days in port) with Texas/Louisiana to Florida (8 days of which 4 days in port) for 10 year old MR tankers ** BWTS Capex is recovered by adjusting the bareboat rate. AMSC budgets total BWTS Capex of USD 20-25m which will be recovered through upward adjustments to the bareboat rates. The bareboat rate is adjusted by dividing the BWTS Capex for a vessel by the number of days until it reaches 25 years of age (ie: for a 10 year old vessel with USD2m in Capex the bareboat rate is adjusted by USD 365 per day) 9
Table of contents 1 COMPANY OVERVIEW 2 AMSC FINANCIAL OVERVIEW 3 MARKET OVERVIEW
Financial overview Historically stable and predictable EBITDA Last twelve months cash flow demonstrates strong cash conversion from contracted revenue USDm USDm 100 100 95 11 10 3 4 90 85 4 4 4 4 27 70 3 60 80 Profit share DPO 40 70 Reported EBITDA 30 85 85 85 85 85 85 13 50 75 65 3 80 90 88 87 16 20 31 10 60 0 55 BB revenue 50 2015 2016 2017 2018 2019 SG&A Normalized Debt Bank interest Bond interest Free cash EBITDA amortization flow 2020 Fully funded balance sheet with ample liquidity Total debt USD 552m LTM debt service USD 56m DPO Overall healthy financial profile Normalized EBITDA of about USD 87 million annually Strong cash conversion due to limited capex Bond 220 FRN 7.75% Significant free cash flow generation Attractive debt financing in place until 2025 with blended interest cost of 5.4% U.S. Facility 132 L 3.25% European Facility 140 L 2.70% 60 L 3.95% Tampa Facility Strong liquidity with USD 56 million in cash holdings, around 1x annual debt service 11
Table of contents 1 COMPANY OVERVIEW 2 AMSC FINANCIAL OVERVIEW 3 JONES ACT MARKET OVERVIEW
Jones Act – a vital part of the US economy 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 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 and is a vital part of the US economy 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 13
A critical part of oil majors’ transportation logistics Jones Act crude oil & products primary trade routes BAKKEN 3 2 Patoka, IL 5 PERMIAN Key US Oilfields Cushing, OK EAGLE FORD Clean Pipeline 4 Crude Pipeline Barges 1 6 US GULF 1 8 Jones Act Tanker Routes: 1 Gulf Coast refineries to Florida and East Coast (Clean) 5 Delaware Bay Lightening (Crude) 2 Mid-Atlantic to New England (Clean) 6 Shuttle tankers from deep water U.S. Gulf to Gulf Coast Refineries (Crude) 3 Alaska and Intra-west coast movements (Clean/Dirty) 7 Crude from Corpus Christi, TX to LOOP (not shown) 4 Cross-Gulf movements (Dirty) 8 Crude from Corpus Christie and Beaumont to Northeast 14
Majority of fleet carry clean products - highly stable trade over time Fleet deployment by main trades (Tankers) US Clean Product Demand typically stable over time January 2022 Total capacity: 14.3 mbbls Demand for Clean Products (mbbls per day) 2% 24000 22000 U.S. West Coast 26% Clean USG 47% Bio-Fuel 9% Chemical 20000 Clean USG 18000 Crude 16000 Idle Bio-Fuel 14000 12000 U.S. West Coast Idle 2% Source: Note: Crude 14% Marine Traffic, EIA and AMSC analysis, EIA Weekly Petroleum Status Report January 1, 2022 Idle Tankers in warm lay-up 10000 15
Clean product demand almost fully recovered refinery utilization still below normal EIA is forecasting a gradual full recovery in 2022 Demand for clean products in the USA decreased by 30% in Q2 2020 compared to same period previous years Demand recovery since then has been significant, and is now almost back to pre-covid levels EIA is forecasting a gradual full recovery through 2022 Drop in clean products demand almost fully recovered Total demand for Gasoline, Diesel and Jet fuel Mbbl/d 18000 16000 14000 12000 10000 8000 18-Oct 15-Nov 13-Dec 17-Nov 16-Dec 20-Sep 23-Aug 2020 19-Oct Range 2015-2019 26-Jul 28-Jun 31-May 3-May 5-Apr 8-Mar 8-Feb 4-Jan 6000 2021 Refinery utilization % Range 2015-2019 2020 20-Sep 22-Aug 24-Jul 25-Jun 27-May 28-Apr 30-Mar 1-Mar 31-Jan 2-Jan 100 95 90 85 80 75 70 65 60 55 50 2021 Source: EIA Short Term Energy Outlook December 2022, EIA Weekly Petroleum Status Report January 1, 2022 16
Clean products shipments to Florida close to pre-covid levels Long-term trend of increasing marine transportation of clean products into Florida, reduced by COVID-19 Gulf Coast to Florida Trade Lane Increasing consumption of clean products in Florida is driving demand for Jones Act tanker shipments cross US Gulf As Florida has no pipeline connection nor any refineries, all clean products consumed are supplied by sea Over the past 10 years this trade has grown with a CAGR of about 3.5% Florida is sourcing 90% of its clean products demand on Jones Act tankers from US Gulf refineries Impact from Covid-19 mitigating measures have significantly reduced shipments in 2020, but has gradually return to normal during 2021 Florida consumption is split 65-70% Gasoline, 15-20% Diesel and 10-15% Jet fuel PADD 2 Mbbls per month 30 25 PADD 1 20 New Beaumont Orleans Houston Pascagoula 15 PADD 3 Jacksonville Tampa Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 Dec-2012 Mar-2013 Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Jun-2017 Sep-2017 Dec-2017 Mar-2018 Jun-2018 Sep-2018 Dec-2018 Mar-2019 Jun-2019 Sep-2019 Dec-2019 Mar-2020 Jun-2020 Sep-2020 Dec-2020 Mar-2021 Jun-2021 Sep-2021 10 Lower Atlantic Receipts of Products by Tanker and Barge from Padd 3 Corpus Christi Port Everglades 1 6 month moving average Sources: EIA, data through July 2021 17
Crude trade to Northeast is reduced but remains viable despite current oil market volatility PADD 3 to PADD 1 Crude Oil Moves by Tanker (3 month moving average) Trade lane carrying Crude from Gulf Coast to U.S. Northeast 4 PADD 2 3 New York Philadelphia Washington 2 PADD 1 1 New Beaumont Orleans Houston Pascagoula PADD 3 0 Feb-2013 May-2013 Aug-2013 Nov-2013 Feb-2014 May-2014 Aug-2014 Nov-2014 Feb-2015 May-2015 Aug-2015 Nov-2015 Feb-2016 May-2016 Aug-2016 Nov-2016 Feb-2017 May-2017 Aug-2017 Nov-2017 Feb-2018 May-2018 Aug-2018 Nov-2018 Feb-2019 May-2019 Aug-2019 Nov-2019 Feb-2020 May-2020 Aug-2020 Nov-2020 Feb-2021 May-2021 Aug-2021 Nov-2021 Mbbl per month Boston PADD 3 to PADD 1 Crude Movements by Tanker" Jacksonville Tampa Port Everglades Corpus Christi 6 Historically, volumes have been driven by spread in pricing of U.S. Crude Oil vs international alternatives Source: EIA, Marine Traffic and AMSC analysis 18
No yard capacity for newbuilds until 2026 Yard capacity Only two yards have sufficiently large dry docks to build Jones Act MR tankers: - Philly Shipyard - General Dynamics NASSCO Both yards build vessels for commercial Jones Act trading as well as government/naval contracts Both yards have won large government contracts in 2019/2020, which will occupy its capacity to build additional merchant vessels for several years going forward Philly Shipyard is listed on Oslo Axess (ticker: PHLY) Awarded contract for up to 5 training ships in April 2020 Awarded 1 1 Subsea Rock Installation Vessel from Great Lakes Dredge & Dock Company in Nov 2021 Likely no capacity for newbuild JA MRs until 2026 Significant backlog to build multiple vessels through 2026 Awarded a USD 22.2bn naval contract in 2019, largest shipbuilding contract in US Navy history Likely no capacity for newbuild JA MRs until 2026 The two yards that can build Jones Act MR tankers do not have capacity to deliver new vessels until 2026 Source: General Dynamics and Philly Shipyard filings 19
Two older tankers recently scrapped leading to further fleet retraction Fleet profile by vessel age Considerable fleet growth in past years, but scrapping has already reduced active fleet back to 2015 levels Kbbls capacity Number of vessels 12 Scrapped Tankers ATBs AMSC Projected Actual 30000 11 10 25000 9 2015 levels 8 Candidates for scrapping 7 20000 6 15000 5 4 10000 3 2 5000 1 0 50 45 40 35 30 25 20 15 10 5 1 0 2014 2015 2016 2017 2018 Fleet 2019 2020 Scrapping 2021 2022 2023 2024 Source: AMSC analysis 20
Negative fleet growth Net capacity reduction driven by scrapping and zero vessels on order Since 2016, seven tankers and fourteen ATBs has been scrapped, sold for operations outside the Jones Act market or gone into definite lay-up 20% 15% 15% 12% There are no new tankers or ATBs on order 10% 6% Yard capacity for tankers are limited with NASSCO mainly building navy ships and Philly Shipyard building MARAD Training Ships 5% 0% 0% 0% 0% -4% -2% -2% -1% -7% -5% -10% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Likely delivered cost for a newbuild is now above USD150m with first available delivery slot in 2026 Sustainable multi-year TC rates of USD70,000 per day required to justify newbuilds Source: Broker reports and AMSC analysis 21
Summary – long term stable business model LONG TERM CONTRACTS PROVIDE STABLE CASH FLOW RECOVERING JONES ACT TANKER MARKET REDUCED FLEET CAPACITY WITH NO YARD AVAILABILTY STRONG AND IMPROVING FINANCIAL PERFORMANCE Bareboat contracts provide strong and stable cash flows OSG has evergreen extension options on seven vessels Cost competitive fleet reduces re-chartering risk Crude trade from U.S. Gulf to the U.S. Northeast weakened in the short term Clean trade into Florida close to fully recovered Jones Act tanker market expected to fully recover during 2022 No tankers or ATBs on order and two tankers being scrapped during 2021 No available yard capacity to build Jones Act tankers until 2026 or later Negative fleet growth expected as scrapping of old tonnage continues Modest loan to asset values and healthy credit metrics Contracted cash flow providing solid debt service coverage Significant free cash flow generation 22
American Shipping Company ASA. Important information This Company Presentation is current as of January 2022. 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
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