Overseas Shipholding Group, Inc. Moving Energy with Integrity

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1 Overseas Shipholding Group, Inc. Moving Energy with Integrity

2 Overseas Shipholding Group, Inc. is a market leader in global marine energy transportation services. The Company owns and operates a modern International Flag and U.S. Flag fleet that transports crude oil, petroleum products, gas and dry bulk commodities throughout the world. Quick facts Second largest publicly traded tanker company in the world. 1 More than 135 owned, operated and newbuild vessels totaling more than 13 million deadweight tons and 864 thousand cubic meters. Office locations in Athens, London, Manila, Montreal, Newcastle, New York, Philadelphia, Singapore and Tampa. 3,600 officers, engineers and crew; 275 shoreside personnel. Publicly traded since Dow Jones Transportation company. Incorporated in Delaware in OSG s predecessor company was founded in On the front cover: Following her inaugural launch on September 18, 2006, the Overseas Houston returns to Aker Philadelphia Shipyard for completion of interior work. 1 As measured by number of vessels

3 Corporate Overview Welcome to OSG Whether you are a customer, investor, employee, journalist or just someone with an interest in who we are and what we do, it s my pleasure to share with you important information about our Company, our people, our fleet and our operations. In today s highly competitive global energy market, our customers needs change rapidly. This is driven in part by a regulatory environment that continues to get more complex, making customers more demanding and requiring flawless services from marine transportation companies. Ours is an industry undergoing a significant transformation from small operators who transport only a few cargoes, to an industrial model of large companies, reliable performance, continuous investment and exceptional quality. Our multinational management team, our staff and the seafarers aboard our ships are uniquely positioned not only to respond to these changes, but to lead and to innovate. OSG is building the platform today that will enable us to achieve our vision. Our goal is to be the most respected energy transportation company in the world. In order to achieve that, we seek to set the standards by which others in our industry are measured. We will achieve market leadership in each of the segments we operate by having the best business practices in the industry and continuing to retain our loyal customers and win new ones. We are committed to investing in and continuously upgrading the quality of our operations and setting the Gold Standard of technical management. At OSG we provide our employees with an exciting place to work, a place that provides opportunities for professional development and growth. Finally, our financial performance gives us the flexibility to make investments that will support our future growth. All of this, I believe, results in OSG being one of the most attractive investments in the public shipping sector. Our operating fleet of more than 100 tankers and our newbuild program of more than 30 International Flag and U.S. Flag vessels give us the scale to be successful in any market while providing customers a single, reliable partner to do business with. We have a clear vision and strategy and a bright future ahead. Thank you for your interest in our Company. Morten Arntzen President and Chief Executive Officer

4 2 Overseas Shipholding Group, Inc. Since our inception, some of the largest energy companies in the world have come to rely on us for their seaborne transportation needs. They choose us for a variety of reasons, but we think it all comes down to doing four things right. 1 We develop strong relationships with customers, by listening to their needs and providing the best advice and service we can. Our customer focus and our ability to consistently provide reliable, quality service are the cornerstones of how we conduct business. Our customers prefer long-term relationships with an experienced and trusted transportation partner and a globally recognized brand like OSG. Our customers also depend on us to move their cargoes safely and provide customized transportation solutions that can only come from experience. We maintain and build our customer relationships one at a time. 2 We continuously improve and innovate. We continually bring together cross-functional and cross-office resources as well as incorporate the best thinking and experience of our global partners in order to improve everything we do. We are developing market data systems to support competitive information sharing and improve collaborative decision-making. We have enhanced onboard vessel communications in order to simplify, streamline and optimize operations. Across our lines of business, operations and global support divisions, we constantly ask ourselves how we can improve, and identify and provide resources to transform ourselves. OSG is a world-class provider of energy transportation services with superior customer relationships, talented ship and shore-based staff, high operational standards and a long history of profitability and growth.

5 Corporate Overview 3 3We operate with integrity and are a responsible global citizen. We believe our health, safety and environmental programs are some of the most comprehensive in the industry today. We adopt compliance standards that go beyond common statutory rules. We have transparent financial reporting and have embraced both the letter and the spirit of Sarbanes-Oxley. We know that integrity is important for our shareholders and customers. 4 Our people are the heart of our business. We are able to attract and retain the best and most talented people in the industry because we offer our onboard and shoreside employees an exciting place to work as well as opportunities for professional development and growth. In a highly specialized industry such as marine transportation, cross-office training, relocation opportunities and established career paths are investments we don t hesitate to make. The recently expanded management team is a group of men and women who have been promoted or appointed from within or brought in from the outside. The strength of this team s experience diverse thinking, leadership, mentoring skills, and their ability to build and maintain strong relationships with customers, partners and suppliers will lead us into the future.

6 4 Overseas Shipholding Group, Inc. Our Commitment to Customers Some might think transporting energy is a commodity business, but we think of it as a service business. Our customers many of whom are the world s largest oil and gas companies, governments, refiners and traders demand superior service and reliability. In order to bring the breadth of our expertise to bear, we have organized our operations around the segments we serve: crude oil, refined petroleum products, gas and the U.S. Flag market. Our commitment to customers is a bedrock principle of our Company, which is based on the integrity of our people, the quality of our operations and our dedication to providing high quality, safe and reliable services, day after day, year after year. These qualities are the essence of our culture and have remained steadfast for nearly 60 years.

7 Corporate Overview 24 Hours a Day, 7 Days a Week We serve thousands of customers throughout the world through a global office network that provides around-the-clock availability. We oversee logistics planning and provide real-time information on fleet positions and loading and discharge operations. Our flexible, customized solutions help meet the specific needs of customers with diverse cargoes and different tanker requirements. Our ability to gather and process market information effectively, our seafarers knowledge of complex tanker operations, trading routes and port facilities, and our ship-based information technology systems ensure that our customers receive the highest level of service. Our chartering solutions span a range of needs: from a specific voyage, a medium-term or long-term charter commitment to a contract for select services at regular intervals, to lightering services. OSG stands for quality, reliability, consistency and flexibility.

8 Overseas Shipholding Group, Inc. Crude Oil Our market-leading positions in each of our crude oil tanker segments give us a number of competitive advantages. Our customers benefit from the flexibility and reliability that a larger fleet provides, as well as superior commercial operations and technical management with a trusted service provider. The scale of our fleet improves the timeliness and quality of market information, which, in addition to the purchasing power that economies of scale provide, allows us to operate more efficiently and cost-effectively. Nearly all of our crude oil tankers participate in commercial pools comprising like-minded ship owners of similar, modern, well-maintained vessels. All pool members benefit from this larger network of ship and cargo owners, which for us has led to relationships with new customers and shipyards, as well as fleet expansion opportunities. Access to a broader customer base improves our ability to triangulate voyages. In other words, by adding backhaul voyages, we increase the percentage of time that vessels are carrying cargo. In 2006, our laden percentage was greater than 60 percent. 1 By means of a secure extranet information system, pool participants benefit from real-time, transparent information on ship schedules, vessel positions, voyage results and pool performance. We currently participate in three commercial pools: ~ Tankers International has a fleet of more than 45 double hull tankers and holds the leading commercial presence in the VLCC market. ~ Aframax International is the second largest Aframax fleet in the world with more than 40 operating and newbuild vessels. ~ Panamax International is the third largest operator of Panamax tankers with a fleet of more than 15 double hull vessels. OSG is the largest transporter of crude oil to China. In 2006, OSG and its pool partners transported nearly one-third of China s crude oil imports. 2 1 Laden seatime divided by total seatime (excluding time in port) 2 Through our participation in Tankers International

9 Corporate Overview 7 Refined Petroleum Products With a top 10 market position transporting petroleum products, we are a strategic link between refineries and consumers of refined products. Our fleet of long and medium-range Handysize vessels transport commercial and government cargoes in what are some of the most complex trades in the industry. Some of our larger clean product carriers are employed on long-haul product routes allowing customers the ability to take advantage of economies of scale. The diverse nature of refined petroleum product cargoes, which include gasoline, diesel, jet fuel, home heating oil, vegetable oils and easy chemicals, together with predominantly shorter routes of the trade for medium-range tonnage, increase the operational complexity as well as the people power involved with frequent port calls and cargo loadings and discharges. The skills and experience of our seafarers and our high quality, modern, expanding fleet result in our being the partner of choice for many customers. We create flexible procedures consistent with customer systems and proactively resolve customers logistical challenges. In a testament to the quality of our operations, most of our product carriers are contracted out for medium- to long-term charters to many of the world s largest refiners, traders and oil companies.

10 Overseas Shipholding Group, Inc. U.S. Fleet OSG is one of the largest commercial owners and operators of Jones Act vessels in the United States and has a trade presence in all four U.S. coastwise markets. As one of the few publicly traded tanker operators with a dual flag fleet, we offer global customers a range of transportation options in both domestic and international markets. Our recent fleet expansion added Articulated Tug Barges (ATBs) that transport refined petroleum products primarily within the U.S. Gulf as well as provide lightering operations in the Delaware Bay. Our Veteran Class Jones Act Product Carriers, delivering between now and 2010, serve longer haul trade routes within the United States. The diversity and quality of our U.S. Flag fleet allows us to provide a greater level of responsiveness and better serve our customers. Some customers, for example, prefer ATBs which are well-suited for short haul trades and can access draft restricted ports, while others prefer tankers, which offer a greater degree of cargo flexibility, have significantly larger cargo carrying capacity and are better suited for longer haul trades. In addition to our commercial presence, OSG s U.S. government business includes four vessels that participate in the U.S. Maritime Security Program. We are also eligible to take part in U.S. government preference cargo trades, an exciting new business opportunity for both our U.S. Flag and International Flag fleet. Our commitment to invest and expand in this unique, stable market affords commercial and U.S. government customers the option of doing business with one of the largest, most reputable and financially sound companies in the trade. OSG s newbuild program will transform the U.S. Jones Act fleet by adding 14 modern double hull vessels between now and 2010.

11 Corporate Overview Gas Our expanding gas business is a great example of our ability to anticipate global energy transportation demands and respond with customer-focused solutions that depend on innovation and technology. Recognizing the emerging importance of natural gas to global energy supplies, we are in both the liquefied natural gas (LNG) and compressed natural gas (CNG) markets. In LNG, we have long-term contracts to transport LNG from Ras Laffan in Qatar to South Hook terminal at Milford Haven in the United Kingdom. To serve this market, we are building four Q-flex LNG carriers that are scheduled for delivery in 2007 and At the time of delivery, these state-of-the-art vessels will be the largest LNG carriers in the world and the only LNG vessels with onboard reliquefaction capabilities, a unique technology that greatly expands delivery options. Extending our LNG transportation platform, our strategic partnership with a subsidiary of TransCanada Corporation will produce the first commercially viable CNG vessels. TransCanada s patented technology for the design, construction and operation of gas transport modules and our marine transportation and vessel construction oversight expertise will support specific projects transporting CNG from stranded fields worldwide. OSG s LNG vessels will be capable of delivering 3.5 million tons of liquefied natural gas to the U.K. market each year.

12 10 Overseas Shipholding Group, Inc. The OSG Difference For us to be a preferred carrier for the world s largest oil companies, it takes a combination of superior customer service, a track record of reliable performance, exceptional technical management capabilities and a high quality fleet. Combined, these are critical ingredients that assure our customers that by doing business with us, they are working with a best-in-class operator where exceeding standards is central to the integrity of our operations. The essence of the OSG difference is the quality of our tankers (100% of our owned International Flag fleet is double hull), the skills and knowledge of our seafarers, and our commitment to setting the Gold Standard of excellence in technical operations. World-Class In-house Technical Operations Our integrated technical management centers in the United States and Europe manage our operating fleet of crude oil tankers, refined petroleum product carriers, the U.S. Flag fleet, and soon, the OSG gas fleet. Our fleet management teams interact with ship officers on a daily basis, ensuring our vessels exceed quality, safety and environmental regulatory standards and comply with Company-established policies and practices. The experience of the technical team is significant, with a majority having served as masters or chief engineers prior to serving shoreside. As the Company has expanded and diversified, we have added specialists in areas such as clean product carriers. We also actively rotate experts throughout the field to ensure we deploy fleet-wide best practices. In addition, our fully integrated shipboard management systems monitor every aspect of a voyage from maintenance to voyage profitability.

13 Corporate Overview 11 By continuously seeking new ways to do more than just what is expected of us, OSG seeks to set the industry s Gold Standard for technical excellence. Training and Recruitment Programs We have developed a notable fleet-wide competency development program. Our seafarers participate in professional development training and specialized classroom and computer-based courses all customized by us resulting in our ability to attract and retain the most qualified crews onboard our vessels. To ensure that we have a continuous supply of personnel as our fleet continues to expand, we have developed a Cadet Recruitment Program to attract and hire top graduates each year. We also fund scholarship programs to encourage new graduates to pursue career opportunities with us. After years at sea, many graduates find opportunities at one of our shoreside offices. Some have even advanced to top management positions at the Company. Enhanced Compliance Programs As part of our commitment to ensure excellence onboard our ships, we established an Operational Integrity Group, which we believe is the first of its kind in the industry. The group is responsible for auditing compliance with fleet-wide operating procedures, environmental regulatory requirements and safety and maintenance standards. This program is augmented by an Operations Compliance Officer who reports to the CEO and is responsible for auditing all operational practices and procedures of the Company s fleet and shoreside technical operations. We are committed to ensuring that our training and education programs meet international standards and Company requirements. These programs operate under our continuous improvement philosophy and have resulted in many fleet-wide improvements including streamlined vessel operating processes and procedures and enhanced ship-based communications.

14 12 Overseas Shipholding Group, Inc. Financial Strength and Stability The strength of our financial position is a critical element of our success and a source for future growth. Maintaining financial flexibility and a strong balance sheet, as well as continued access to capital markets, supports our balanced growth strategy. Our financial position has enabled us to expand our fleet in capital-efficient ways, and by diversifying and growing segments characterized by long-term charters, we have increased our portfolio of future revenues, providing more stability to our business.

15 Moving Energy with Integrity Integrity is at the heart of our reputation and culture. It is also one of the most important reasons why our customers choose to work with us. Integrity is what our seafarers and shoreside staff have built their entire careers on, upholding the core values of seamanship and supporting every aspect of our shipping operations with respect and thoughtfulness.

16 Corporate Headquarters Overseas Shipholding Group, Inc. 666 Third Avenue New York, NY USA T F North America OSG Overseas Ship Management (Canada) Inc St-Charles Blvd. Suite 509 Kirkland, Quebec H9H 5B4 Canada T F OSG America 2 International Plaza, Suite 335 Philadelphia, PA USA T F OSG America Two Harbour Place 302 Knights Run Avenue, Suite 1200 Tampa, FL USA T F Asia/Pacific OSG Ship Management Asia Pacific Pte Ltd. 20 Cecil Street Equity Plaza Singapore T F OSG Ship Management, Manila Inc. Suite 1208 (12th floor) Ermita Center Building 1350 Roxas Boulevard Ermita, Manila Philippines T F Europe OSG Ship Management (GR) Ltd. 110 Vouliagmenis Ave. & Zamanou St. Glyfada, Athens Greece T F OSG Ship Management (UK) Ltd. Moreau House 116 Brompton Road London SW3 1JJ United Kingdom T F OSG Ship Management (UK) Ltd. Quorum 4 Balliol Business Park East Benton Lane Newcastle NE12 8EZ United Kingdom T F