Overseas Shipholding Group, Inc.

Good morning, and welcome to the Overseas Shipholding Group Third Quarter 2021 Earnings Release Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sam Norton, President and Chief Executive Officer. Please go ahead.

Thank you, Anthony. Good morning. Thank you all for joining Dick Trueblood and me on this call for the presentation of our 2021 third quarter and nine months results. and for allowing us to provide additional commentary and insight into the current state of our business and the opportunities and challenges that lie ahead. To start, I would like to direct everyone to the narrative on pages two and three of the PowerPoint presentation available on our website regarding forward-looking statements, estimates, and other information that may be provided during the course of this call. The contents of that narrative are an important part of this presentation, and I urge everyone to read and consider them carefully. We will be offering you more than just an historical perspective on OSG today, and our presentation includes forward-looking statements, including statements about anticipated future results. These statements are subject to uncertainties and risks. Actual results may differ materially from those contemplated by our forward-looking statements and could be affected by a variety of risk factors, including factors beyond our control. For discussion of these factors, we refer you specifically to our annual report on Form 10-K for the fiscal year ended December 31st, 2020. Our Forms 10-Q for the quarters ended March 31st, 2021 and June 30th, 2021. And our Form 10-Q for the third quarter of 2021, which we anticipate being filed later today. And our other filings with the SEC, which are available at the SEC's internet site, www.sec.gov. as well as on our own website, www.osg.com. Forward-looking statements in this presentation speak only as of the date of these materials, and we do not assume any obligation to update any forward-looking statements, except as they may be legally required. In addition, our presentation today includes certain non-GAAP financial measures, which we define and reconcile as the most closely comparable GAAP measures in our third quarter earnings release which is also posted on our website. Third quarter financial results released this morning offer both a reminder of the lingering impact of the global pandemic and the potential that lies latent in OSD's underutilized assets that are available for redeployment once market conditions normalize. Overall, we are pleased with the progress we have made and the cash flows delivered, which exceeded anticipated EBITDA during the quarter. Throughout the first three quarters of this year, the progression back to a healthy domestic energy transportation market has been uneven and protracted. Demand for conventional tanker use globally and in the U.S. in particular has remained subdued, affected by a combination of volatile market forces. These conditions of heightened uncertainty persisted in our core markets during the third quarter. Of particular note was the erratic recovery profile outside of the U.S., and the resulting drag on economic activity internationally, which continued to inhibit a rebound in the international tanker markets. Notwithstanding these challenging conditions, today's announced results, together with the refinancing details disclosed at the end of September, evidence progress in moving towards a sustainable financial future for OSG. Most notable in these results released today is the continued sequential improvement in quarter-to-quarter EBITDA performance and the increased cash levels available at quarter end. Vessels in operation performed well during the third quarter, providing solid cash flow. And as the third quarter has transitioned into the fourth, we have been encouraged by signs that what has been the weakest segment of our portfolio are conventional tankers. Demand has been gaining momentum. In recent weeks, two OSD tankers have been reactivated and rejoined the operating fleet. with a third preparing to begin work again in early December. Laid-up OSD vessels will thus be reduced from seven to four by year end. Further tightening market fundamentals have resulted in all of OSD's active vessels having been committed under time charters into at least the first quarter of 2022. As such, current conditions provide optimism that continuing sequential quarter-to-quarter EBITDA improvement is attainable over the next six months. As has been the case all year, our ATVs, Alaskan tankers, and niche market activities achieved results during the past quarter approaching or exceeding historical norms, highlighting the benefit of having diversified asset portfolios. Whereas the prior quarters saw us achieve a number of business initiatives that fall outside of the core MR petroleum transport trades, recent successes have occurred within the conventional tanker sector. Since our last communication, We have activated the overseas T-West from layup and completed our intermediate survey and dry dock, allowing the vessel to enter into a 27-month charter contract transporting renewable diesel commencing mid-November. We have secured a two-year time charter extension for one of our vessels operating on the West Coast, giving the vessel committed time charter business through the end of 2023. We have activated the overseas Nikitsky from layup And following a series of spot voyages in October and November, fixture on a three month time charter, the customer with whom we have no previous time charter history, an interesting indication of new entrants becoming active in the Jones Act tanker space. We have obtained time charter commitments of three to six month duration for two other vessels, the third on subjects to be declared within this week. While the duration of these fixtures is shorter than what we would optimally prefer, Our customers' willingness to start making longer time charter commitments suggests improving marketing conditions into next year. As we've been activating ships, so too have changes been seen in the broader Jones Act tanker market. Importantly, two older Jones Act tankers have been sold for demolition in recent weeks, reducing the available tanker supply by roughly 5%. A competitor MR tanker is also coming out of layup to enter into a long-term charter. and two larger ATBs that had been inactive for more than a year have been restored to service and committed on time charter. Available, uncommitted vessel supply has thus been quickly reducing in recent weeks. It bears remembering that no additional supply is currently on order, nor is any new capacity likely to be available for delivery at any time for the next several years. The latest Energy Information Agency data indicate that demand patterns for transportation fuels consistent with historical levels for these products have largely recovered in the U.S. With gasoline and diesel inventories below the lower band of five-year running historical levels for this time of year, this normalization of consumption patterns should stimulate more domestic marine transportation demand as we move through what is historically the seasonal high demand winter months. Increased chartering demand in a supply-constrained environment is supportive of a belief in better days ahead. I will now turn the call over to Dick to provide you with further details on our third quarter results for 2021. Dick? Thanks, Sam.

Please turn to slide seven. We completed a refinancing of significant elements of our debt during the third quarter. This resulted in a lengthening of our debt maturity, a reduction in annual cash debt service requirements, and an increase in our liquidity. Additionally, we were successful in harmonizing financial covenants across all of our loans. Specifically, we used proceeds from our $325 million new borrowing to repay in full our term loans with scheduled maturities in 2023 and 2026. And additionally, make a $16 million payment on our Alaskan tanker loan due in 2025. The remaining proceeds increased our liquidity This provides OSG with the financial flexibility to continue to make the post-COVID-19 transition to a normal market. In September, we return the overseas Key West and the overseas McKiskey to service. Each vessel performs spot voyages during the month. We are performing a survey and ballast water treatment system installation on the Key West to permit her to fulfill her 27-month time charter without interruption for scheduled means. Domestically, transportation fuel consumption levels continue to increase in comparison to the prior year. The continuing disruption in international tanker markets with resulting low transportation rates coupled with the continuing COVID-19 impact on international demand for transportation fuel resulted in a continuation of higher-than-normal clean product flows in the United States. spot market activity increased again during the third quarter. We performed more than half of the voyages executed by tankers. The Overseas Houston continued to operate in the spot market and was employed for approximately half of the quarter. The Overseas Boston operated under a short-term time charter during the second half of the quarter. The remaining spot voyages during the quarter were smaller in size and generally satisfied with ATVs. Please turn to slide eight. The third quarter, historically the slowest quarter of the year, continued to show a gradually improving market. The results we achieved reflect a sequential improvement over each of the prior 2021 quarters. TCE revenues increased 5% to $75.4 million, and adjusted EBITDA increased 20% to $12.2 million, both compared to the second quarter. Please turn to slide nine. Alaskan tanker revenues increased $2.6 million as the Alaskan Legend completed her 45-day dry dock period in June and was fully in service during the third quarter. Jones Act handy-sized tanker revenues increased $2.2 million due to the return to service of the McKiskey and Key West, coupled with increased utilization of the Boston, offsetting this with an off-hire dry dock period for the New York. Our ATV revenues increased as the OSG 204 commenced our new time charter contract at a higher daily rate during July. Lightering revenues decreased from the second quarter due to a seasonal decline in volumes. The Mykonos and Santorini continue to participate in the Maritime Security Program and provide services to the Government of Israel. During the quarter, we performed two resulting in a $600,000 increase in TCE revenues. We had five vessels in layup at the end of the third quarter, down from seven at the beginning of the quarter. Please turn to slide 10. Niche business TCE revenues declined slightly for the second quarter as lightering revenues decreased due to the lower summertime volumes. Shuttle tanker and non-Jones Act product tanker revenues both increased. Please turn to slide 11. Vessel operating contribution, defined as TCE revenues less vessel operating expenses and charter hire expenses, increased $1.5 million from Q2 2021 to $16.6 million in the current quarter. Niche market activities declined $1.4 million due to the lower summer volume, summer glidering volume. The ATB contribution increased due to the new charter for the OSG 204 starting in July. The Alaskan tanker contribution increased $2.9 million due to the completion of the Legends dry dock during the second quarter. The Jones Act tanker loss increased to $12 million from $11.5 million. The change principally resulted from an increase in costs as two tankers returned to service late in the quarter. the number of layup days decreased slightly between the two quarters. The combined vessel operating contribution of our hitch markets, ATVs, and Alaska crude oil tankers provided a vessel operating contribution in the current quarter of $28.5 million compared to $26.7 million in the second quarter. Please turn to slide 12. Third quarter, 2021 adjusted EBITDA increased $2 million from the second quarter of 2021. This resulted from increased contributions from our Alaskan tankers and ATVs. Adjusted EBITDA continued to be negatively impacted by the four Jones Act tankers in layup for the full quarter and two vessels in layup for two-thirds of the quarter. Lower spot market utilization also contributed. Please turn to slide 13. Net loss for the third quarter of 2021 was $16 million compared to a net loss of $10.7 million in the second quarter of 2021. During the third quarter, we recognized a $7.9 million pre-tax loss associated with the refinancing, resulting from prepayment fees and the write-off of previously deferred financing costs. Additionally, we recognized a $1 million impairment charge related to the right-of-use assets associated with two of our bare boat chartered tankers. Our assessment of these vessels indicated that estimated future employment would not fully recover the right of use assets. Please turn to slide 14. By early in Q3 2021, we had completed all scheduled dry dock work for 2021. The total 2021 investment to date, including amounts expended in early July, was approximately $20.4 million. We have activated the overseas Key West to enter her new time charter. And in order to make her available without interruption to her charterer during the 27-month charter period, we accelerated her dry dock that would have been due in the second quarter of 2022 to occur prior to the commencement of her charter in November 2021. We anticipate that that expenditure will be approximately $6 million, which includes the installation of the ballast water treatment system. Additionally, we accelerated the dry dock of the overseas Boston so that she would be available for the entire charter period without the need to conduct scheduled maintenance. At June 30, 2021, we had total cash of $62 million, including $100,000 in restricted cash. During the third quarter, we generated $12 million in adjusted EBITDA, and we entered into a $325 million term loan and used $274 million to pay off two loans and partially prepay another. We incurred $6 million of loan issuance and prepayment fees. Working capital consumed $11 million. We expended $1 million on dry docking and improvements to our vessels, and we invested $1 million in vessels and other CapEx. Further, we incurred $8 million in interest expense and repaid $10 million of debt through scheduled amortization. The result was we ended the quarter with $85 million of cash, including $100,000 restricted. Please turn to slide 15. Continuing our discussion of cash and liquidity, as we mentioned on the previous slide, we had $85 million in cash at June 30, including $100,000 of restricted cash. That would be September 30. Our total debt was $458 million. This represents an increase of $41 million in outstanding indebtedness since June. We will amortize an additional $4.4 million of our loans over the remainder of 2021. With $339 million of equity, our net debt-to-equity ratio is 1.1 times. This concludes my comments on the financial statements. I'd like to turn the call back to Sam. Sam? Thank you, Dick.

Clearly, the refinancing efforts completed at the end of the last quarter and improved employment visibility for all of our active vessels through the early months of next year provide some relief from the elevated business uncertainty we have experienced for much of the past two years. We believe these developments are important in creating a longer runway to allow for the markets to heal and for the anticipated restoration of normalized trading conditions for many of our core assets to emerge. Having bolstered our liquidity position with the completion of our refinancing at the end of the third quarter, OSG is now well positioned to pursue opportunities in what we continue to see as an improving market environment. Global energy markets are on track to regain pre-COVID consumption levels by early next year, with demand signals indicating a rising need for transportation capacity. Increased international air travel in the months ahead in particular should add to firming market demand. Revisiting points made in the comments last quarter, we are optimistic that the following catalysts should serve to drive improved operating conditions in 2022. First, as noted earlier, low domestic inventory levels of key refined products and a steady normalization of fuel demand patterns consistent with historical levels of consumption should encourage continued improvement in refinery utilization rates and create strong underlying conditions to stimulate more domestic marine transportation demand. Second, as we know, the state of international economic conditions significantly impacts the domestic market for demand for oil. As the international markets progressively heal from the lingering effects of the pandemic, it should be expected that the U.S. will experience a reduction in significant import volumes that we've seen this year. In particular, if international tanker rates increase on the back of higher product demand outside the U.S. When this occurs, we should see a rise in demand for our services. Third, if crude price spreads in domestic versus international crude oil increase, more favorable conditions for coast-wide domestic crude oil movements should occur. In particular, shifting availability of Nigerian crude oil once the new Nigerian domestic refinery begins operation next year bears watching in this context. The final catalyst that would drive improved operating conditions is the emerging demand for transporting renewable diesel. Both new and expanding production facilities in the U.S. Gulf Coast will move renewable diesel to the consuming markets on the U.S. West Coast, which should generate both more and longer voyage demand for Jones Act tankers. With availability of acceptable vessels in the Jones Act static, incremental demand from these emerging product flows of renewable diesel and other alternative fuels should add progressively to the domestic baseload transport needs for crude oil and refined products. Some medium-term caution may still be warranted when considering the full emergence of the recovery that we await. Traders remain reluctant to commit vessels on time charter for more than a few months, and there is still a lot of uncertainty around what comes next, with rising COVID caseloads and continuing chaos in the natural gas and crude oil markets, where prices continue to rise due to lack of prompt available supply. Nonetheless, It is certainly good news that two Jones Act tankers have been scrapped and that the overhang of the laid-up large ATVs has been removed. Recent chartering activity for our vessels is also a sign of a significant shift in at least, in the very least, short-term market sentiment. We believe these factors continue to build momentum for achieving a better operating environment and we remain patient in awaiting a full recovery. In the meantime, continuing strong contributions expected from our ATC vessels And the anticipated revenue streams from our niche businesses should act as continuing cash flow stabilizers, supporting what we consider to be a fundamentally promising medium and long-term future for our business overall. Anthony, we can now open up the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Ryan Vahan with NeedHIM. You may go ahead.

Great. Thanks, operator. Hi, Sam. Hi, Dick. Good to hear from you guys again. encouraging that it seems like things are starting to get better, especially internationally, which seems to be what's been holding things up on your recovery. But I think just taking a step back, I'm curious, as we start to get into 2022, business starts to normalize, Sam, your words, which I agree with. For shareholders today, should we think about this business and potentially how the stock's going to really start to work that once you're in a normalized environment, this is a $100 million free cash flow business. Are you guys thinking, again, just kind of high level, are you thinking using some of those proceeds, those free cash flow to pay off some of the debt and kind of switch up the heavy debt load to more of an equity focus? In other words, fast forward one year, I don't think you're the value of your vessels, your business, it's going to deteriorate. In fact, with cash flow going much higher. Is that how you envision today if you're at 375 of net debt and a couple hundred million dollar market cap that you'll use those proceeds just to kind of invert this capital structure?

I think that's a very real possibility, Ryan. We've talked about this before. Of the options that are available to us in an environment where we're generating surplus cash flow. Repurchasing shares, to my mind, is probably the least effective way to deploy cash. It doesn't really likely do much for our stock price, and it does provide a bit of a return maybe to our shareholders, but I think the principal shareholders that we have maybe have longer-term expectations, not just trying to get a short-term stock boost. So in that environment, dividends are tax inefficient for our large shareholders, so that's sort of in the same boat. In that environment, taking surplus cash flow to reduce leverage seems to be, you know, a likely direction that we would seek to pursue. I would add to that, you know, we continue to think there are opportunities to invest in this business, both in the sort of conventional trades that we're in right now, but progressively over time in the transitioning energy markets that are likely to come, and particularly adaptations to emerging regulations to respond to climate or carbon emissions and climate change. You know, it's early yet for us to be talking in some detail about what those opportunities might be, but I just want to throw out there as a placeholder that We think there are opportunities for us to benefit from the premier position that OST has in the liquid bulk transportation market to avail ourselves of some potentially interesting opportunities in emerging trade for alternative fuels and alternatives to carbon-based transportation fuels.

You kind of took my next question. I was going to ask you about offshore wind, renewable. You mentioned you have a new customer. that has no previous history. And along the same lines, while we're talking about that tanker side of the business, Dick, maybe this one's better for you, but how should we think about, first, Sam, I definitely want to hear just as far as how you think those tankers, where the business comes from, from the remaining that you expect to get back into business into next year. But also, Dick, just how should we think about the trajectory of that contribution from that Jones Act. I think about that line item, and it's quite interesting because if you just zero that out for right now, this is an $85-something million EBITDA business, and given everything that's happened here, it's quite remarkable how stable and steady that part of the business has been. So just a question for you, Sam, on just where you think those tankers, what kind of customers you'll have there, especially with we're hearing that offshore wind is starting to pick up. Obviously, you've got the Key West going. And then, Dick, just on how to think about that trajectory as more of these vessels are getting to water. Thanks.

So, you know, I did mention that there were a couple of tankers that were scrapped, and the overhang of sort of available tankers has been diminishing. The key missing ingredient from our markets at the moment is transportation of crude oil domestically. That was a larger feature pre-COVID than it is today. Some of that, in my mind, is reflective of changing refinery ownership landscape in the United States. There's been considerable turnover of refinery assets. Shell has broadly exited the market. BP has scaled back. Others have shut down their refineries or have been transforming them into renewable diesel facilities. I think some of that is transitional. I think some of that maybe gives rise in the future to changing crude oil demand patterns. But that's, you know, it's a visibly absent part of the market mix right now. As I referred to in my remarks, we're looking at the Nigerian refinery, which is scheduled to open next year. It's been significantly delayed, but once it opens, it has a nameplate refining capacity of 600,000 barrels a day. That would take a huge percentage of Nigerian crude oil production off of the available international market and divert it to domestic refining. That could have an interesting impact on price differentials between Atlantic Basin crews and domestic crews. That's something we're watching. There's some talk about the strategic petroleum reserves. There was even news commentary this morning that the government is looking at the EIA report that's due out today. to try and figure out whether there's need or warrants moves to release strategic petroleum reserves that could give, over a short term, could give some boost to the crude oil market. If those things happen, you know, the market will tighten, you know, very quickly in my view. There's not a lot of excess capacity left. We still think, notwithstanding the fixtures that have been done in recent weeks, we think that our customers are largely speaking still short transportation capacity uh and uh and that as the market tightens and it becomes clear that availability is is diminishing um we think the trading desk will move to try and square up those short positions and that creates a little bit more demand that's that's our view you know as i said there's a lot of uncertainty a lot of up and down in the markets that we see right now uh but uh we're we're encouraged by the trends that we're seeing and steady progress is the byword for us right now. We're not trying to, I have a saying I use in the office all the time, you know, we're trying to eat one meal at a time and get ourselves back into a healthy state.

I think that kind of covers it really sound.

You know, as you think about, I think your question is as you think about as we bring vessels back into operation, what is the kind of contribution? You know, if you go from, you know, Let's just use a number that for the vessels that we have on long-term lease, it's about $30,000 a day of cash burned per vessel for a vessel in layup. If we turn that around and put it in the market, current rates are in the mid-50s. And let's just say operating costs would drop that to sort of a $30,000 a day. plus contribution. You go from negative 30 to plus 30 per day. That's the impact of bringing a ship out of layup.

They're clearly highly leveraged assets. When they're not employed, there's a significant burden. When they are employed, then you have 100% the opposite effect.

Understood. Thank you, guys.

Again, if you have a question, please press star then 1. Our next question comes from Jay Mintzmeier with Value Investors Edge. You may go ahead.

Hey, good morning, Sam. Good morning, Dick. Congrats, first of all, on the excellent term loan you guys closed.

Yeah, it helps a lot.

Yeah, significantly took a lot of risk off the table. Very happy to see that. Also very happy to see some of these shifts coming off the layup. Great commentary before with Ryan, so I don't want to belabor that too much. I did want to ask a little bit about renewable diesel out of California and some of those new initiatives. First of all, how do you see that market progressing right now? And then secondly, is there anything that you've seen in this infrastructure bill that might change your market or might impact you in any sort of way?

I'll take the renewable diesel one first. The current state of the renewable diesel market in the United States is simply stated California is the market. It provides significant subsidies or economic incentives for switching of conventional diesel to renewable diesel in the order of magnitude of $1.50 per gallon in benefits that would be shared between refineries distributor, retailer, how that mix gets split up varies from customer to customer, but that's a lot of money to be spread. If you look at the announced installation, including the existing installation of renewable diesel capacity that's going to be installed in the Gulf Coast in Louisiana and Texas over the next couple of years, The numbers suggest reaching 100,000 or more than 100,000 barrels per day of renewable diesel. If all of that were to go on tankers to California, that would create incremental demand for something like 10 to 12 tankers. My opinion, the alternatives to sending vessels, excuse me, sending that renewable product in ships is to send it by rail. Rail cost is about 60% more expensive than marine cost, so that's not preferable. And so as long as there's marine capacity available at rates that are sort of what's called $60,000 a day plus or minus for the tankers, I think you can expect to see increased demand and increased capacity taken out of the market to serve that renewable diesel trade. To say that 10 or 12 ships are going to go into that trade, that's probably not going to happen. There's obviously dynamic forces at work here. One of them is other states could conceivably adapt similar regulations or incentives to California to try and incentivize use of renewable diesel. Renewable diesel is really interesting because it's basically the same as diesel. It can run through the same pipelines. It can be mixed in the same quantities or in unlimited quantities with standard diesel. You don't need to prepare your tanks or storage tanks or tanks for rail or for marine in any different way than you would from diesel. So if there's a market that emerges for renewable diesel outside of California, then some of that production on the East Coast or in the Gulf Coast could be diverted to those, and those might not be marine trades. There's also in Northern Europe, in Scandinavia, there's demand for some of that product to move. So some of that product might move into those markets, but those markets are pretty small. So I think the general view is a significant percentage of the oncoming renewable diesel production in Louisiana and Texas is going to move to California over the foreseeable future. The timeline... for those plants coming online. Valero and Darling Energy have a new plant that's starting up this month. That's where the Key West is going. There's another vessel that's been taken on time charter to augment the Key West. There is a planned expansion by Valero and Darling, which is slated, I believe, for 2023, the early part, first half of 2023. They've tried to accelerate that. That will add another couple of vessels if they're shipping to the West Coast. There are two other – there's a company called Renewable Energy Group that's expanding their facility in Louisiana, and then PBF has indicated they want to take one of their units in Chalmette, Louisiana, and convert that into into a renewable diesel facility. As I said, I think the current levels of renewable diesel production are around 25,000 barrels per day in the Gulf of Mexico. Between now and the end of 2023, that will probably increase to over 100,000 barrels per day. So that's all pretty interesting over the medium term. I think the short-term impact is probably already in the market. The vessels that have been taken to serve Valero, Darling Energy's Darling Green Energy facility, those are already fixed. But there is more to come, and we're watching that very carefully. There's also, I would add, there's plans for some increased capacity on the West Coast. You know, the Martinez Refinery, Marathon's Martinez Refinery will be converting to part of their hydrocracker unit to renewable diesel, Phillips 66, Rodeo Refinery. There's also a Greenfield Refinery in Oregon, a company called Next, N-E-X-T, So the renewable diesel is also going to be produced on the West Coast. There's likely to be demand for moving that production up and down the coast. That actually creates an incremental demand as well. So we're watching that space very, very carefully. We think it's pretty interesting for our business. The second question that you had escapes me at the moment.

Thanks for that. Yeah, looking at the infrastructure bill, is there anything in there that's going to benefit you in any sort of way or not really?

You know, it's hard to say. Most of what I've seen in the infrastructure bill is kind of deepening ports and directed towards the sort of container trade. You know, I haven't seen anything specifically that would shout that it's going to benefit the liquid bulk transportation trades. I referenced in my comments to Ryan's question that we think there's interesting ideas about changes that will occur in an effort to try and supplant carbon-based fuel transportation. One of the things that I'm interested in and looking at is transportation of liquid CO2. There's already a number of larger CO2 tankers have been contracted and designed and are being built in Korea for some of the North Sea trades where offshore oil platforms are capturing CO2 and they're re-injecting the CO2 into older wells. Where they capture the CO2 and where it gets sequestered are in two different places and that has to be moved. As you move up in scale, liquid bulk transport by marine assets is always usually a more effective or cost-effective way of doing things over distances, even in the Jones Act. So that's something that I'm looking at. There's also emerging hydrogen economies that are likely to come out in the next five to ten years. How hydrogen is produced and where it's moved and how it's consumed, that opens up opportunities for transportation and potentially marine transportation. So those are things that we're thinking about. But there's nothing specific in infrastructure bills that would promote those, although there's lip service given to climate change and enabling a transition to a post-carbon future, how those details play out yet to be seen.

Yeah, certainly, Sam. Thanks for all the commentary on that. It's definitely a lot of moving pieces and some interesting markets. I want to turn real quick back to valuations and kind of big picture here on the company. Ryan already touched on it a little bit, but If you normalize your enterprise value, you just go back. I mean, it doesn't take a lot of imagination. You just go back to 2019 type levels and what you were expecting for 2020 before COVID. You see valuation that just doesn't make sense. And if you would comp yourself to any other U.S. company at the time, Secor, Kirby, that sort of thing, you'd be at $6, $7, $8 a share, right? I mean, and Solchuk had an opportunity to bid. They came after you guys last summer. At the worst of the worst, they came after you before you'd done the term loan, when liquidity was terrible, before the market started turning up. I mean, the worst possible situation you could be in. And they offered you guys $3 a share, right? I mean, you're in a way better position today. The board clearly turned down that offer. But here we are, the shares are at $2. They're, you know, 50% or 40% lower than they were at the takeover offer, which was in a worse position. You mentioned earlier on the call that You know, you don't see repurchases as a path forward to closing that value gap. You're not really sold on future dividends. So I guess what I'm getting at here, Sam, is we turned down $3. The board turned down $3 because it wasn't good enough, which made sense. It was an opportunistic bid at a terrible time. But how do we justify that now, right? The shares are $2. How do we close that gap? I mean, what is the possible way forward to justify turning down that $3 takeover?

I'm not in a position to comment on your conclusions as to why they offer may or may not have been accepted to make that point. You've made some assumptions. That's fine. Those are your assumptions, but I'm neither confirming nor denying that those are the case. I think directionally your instincts are correct that we feel that the medium-term prospects for this business are solid, and that in an environment where you remove the volatility that's been created by COVID and other factors, in a constrained supply environment, we should have a good business to be able to extract good returns over the medium term from the assets that we have. Um, and, and that we need to get there, right? We need to demonstrate that, uh, that we've been able to restore normalization, uh, in our business profile and generate the cash flows that are latent in the assets that we have. Uh, I'm going to repeat what I said earlier round here. I say we eat one meal at a time. Um, you know, we, we're just trying to get through to, uh, uh, that, uh, promised land, so to speak, uh, to, to, have a high-quality problem of having more cash than we need and what we're going to do with that cash and how we satisfy both the demands of our shareholders to see a higher stock price, but also how do we perpetuate the franchise value of this business given the opportunity spread that we see as I've talked about in some of the other type markets that may emerge in the next three to four years. You know, I promised myself I wasn't going to say this, but I'm going to anyway. There's a columnist who writes for Bloomberg. His name is Matt Levine. If you don't read him, you should. He's got a really funny way of thinking about how markets work. But he wrote a comment, I think two days ago or so, about how a public company CEO is potentially – being uh fiduciary having you know whatever the the he's not meeting his fiduciary responsibilities if he has a conference call and doesn't mention the words ev and crypto uh because apparently that's the way to have your stock price go up 300 percent um the uh which was of course what happened to hertz last week excuse me the uh When I think about it to some extent, we're, you know, we're an analog business in the digital world. Uh, and it's not really sexy and it's not really catching the attention of people in the current climate, but the current climate can change. And, you know, you're, you're a value investor from what I've read in the way that you approach things. Um, you know, it's like, like, like skirts and ties. you know, fashions and trends tend to change over time. And I'm a big believer that ultimately the cash flow generation capacity of the business is the single most important determinant of its value. And whether it's expressed in the stock price or through return of cash to shareholders or through pivoting to, you know, higher multiple type businesses that might be available in time, those are the questions that we in the board try and think about on a regular basis. and we try not to get lost in the short-term price signals that you referred to in the last couple of months, let's say. We think the business is good business. We think over time it will prove itself out, and we're focused in sustaining the necessary liquidity to be able to avail ourselves of the optionality that exists in our business portfolio, and that's That's what we're going to continue to do and have confidence that that eventually will be recognized by others like yourself.

Yeah, thanks, Sam. So it sounds like the launch of the NFT or the OSG coin is canceled. Too bad.

I was going to say we're going to accept Bitcoin for charter payments beginning in 2022. That will really help our business, I'm sure.

yeah that might help look i mean you've been investors in your company for a long time so it's coming from positional love so i hope i still get the uh annual christmas card and and such but yeah it's just you know there's a there's a lack of uh you know you look at your shares in the last three four years and it's a dead money situation and i know that a lot of that's been out of your control but investors have to pick right they have to pick between are they going to invest in osg are they going to go somewhere else in shipping And it's hard for them to justify that when the price goes sideways for four years and a takeover offer, which looked low, but it didn't seem like there was any fluidity on that. The last little follow-up I have, I know it's a touchy subject. The board was doing an alternative value assessment or strategic review. Was there any sort of conclusion out of that? It just seems like the whole thing has been a big black box and not a lot of communication there.

The board has responsibility to consider offers that are presented to it and to do so in the context of what's best for the shareholder. That's the shorthand legal obligation that the board has, and I think that the board has carried out its duties in recent months with that primary objective in mind. And they will continue to do so. I think, you know, you kind of touched on it over the summer. We were kind of in the worst position that we could have been. We had issues about liquidity. We had issues about whether the market was ever going to turn around. We had issues about, you know, maturing debt, potential covenant breaches, all those sorts of things. You know, we've cleared the decks of most, if not all of those issues. So I think the board has adapted a posture of allowing more time to establish a clearer understanding of what the real potential of this business is. And we as a management team are pretty relaxed that we've got the sufficient liquidity to allow us to be able to now work on what comes next. I know that may not satisfy you if you're looking for a 30% increase in the stock price in the next two months. But for us, you know, we're building for that longer-term value. We think this is a unique and valuable franchise. And our responsibility as a management team is to sustain and expand that franchise where we think best. And we think we have the board's support in pursuing that objective.

All right, thanks, Dan. Appreciate you.

Our next question comes from Rick Bandizian with Avatar Securities. You may go ahead.

Good morning. I hopped on late. Sorry if you guys addressed this already, but I think I heard a question about the $3 bid. Clarify for us. The bidder walked, right?

Uh, the, the bidder, uh, amended its 13 D filing to, uh, uh, to say that it was, uh, I can't remember the exact wording of it, but the duty uncertainties of the COVID environment that they were, they were, uh, they were suspending their discussions. Uh, I would note that they are still 17% shareholders of the business. So I think walking is not right characterization.

Okay, I mean, did he pass or delay, I guess, whatever you want to call it, because you guys gave him the stiff arm, or did he just change his mind and it was truly a macro call? Because there's a lot of questions on the call about the strategic alternatives process, right? Like, is it ongoing? Is it over? What's the code there?

You know, I'm not in a position to comment on what Salt Chuck may or may not have been thinking other than that I read what you can read in their filing on their 13D that they felt that COVID environment was creating heightened uncertainty beyond what they had expected and that they were hitting the pause button. Okay. They're still a 70% shareholder. I don't know what their plans are for the future. This is, as I said in my recent, in the last call, this is really, there was a committee that was established on the board to deal with this. for sort of administrative as well as legal reasons. I was not included in that committee, which was the right structure in my view. And my job, our job here as the management team, is to run the business, and the board's job is to consider the shareholders' interests, kind of exclusively from a Delaware legal perspective. The board considered a number of different paths forward, I think the outcome that has been disclosed is that we refinanced our business and gave ourselves a runway to be able to build this business and get it back to a better shape. By implication, I think you can understand that that strategic alternative was the one that the board settled on as the most appropriate given the market environment at the time. Is the strategic alternative process over? I don't think it ever ends. I think the board has a responsibility for looking after the shareholders' best interests. And they will, as and when appropriate, they will revisit that issue and carry out their fiduciary responsibilities. We as the management team will continue to focus on building the value of the business. And each of us will... we'll do what we do best and hopefully that leads to the right outcome.

Okay, so it sounds like we're in like a tier two strategic alternatives process. I think I heard you say the word considered, right? So when you go out of your way to put strategic alternatives in a press release, there's some window, defined window. Sounds like that first tier window has expired and now we're sort of in that, yeah, we're always looking at, you know, ways to boost the value of the you know, the equity. Last question. Thank you for your time. Has the bidder reached out since the last 13-D? No. No. Have a good day. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Sam Norton for any closing remarks.

Thank you, Anthony. And thanks again to everyone for participating on today's call. We look forward to speaking with you again early next year. Again, just anticipation that we bring you improving and better results. Good day to you all.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.