The decrease in shipping revenues primarily resulted from weakening market conditions and reduced charter rates. For example, TCE revenues for 3Q17 were $84.9 mill, a decrease of $24.8 mill, or 22.6%, compared with 3Q16. This was primarily due to lower average daily rates earned as a result of a continuing excess supply of vessels in the market and the shift from timecharter contracts to spot market charters.
The hurricanes that occurred during 3Q17 disrupted the petroleum markets in the Gulf of Mexico. As a result, shipments were reduced for a period of time, due to port and refinery closures. The impact was partially mitigated by recoveries from customers and an increase in demand after the storms.
Shipping revenue for the first nine months of 2017 were $297.6 mill, a decrease of $50 mill, compared to the first nine months of 2016. TCE revenues for the period were $278.3 mill, a decrease of $58.3 mill, compared to the first nine months of 2016.
Operating income for 3Q17 was $0.4 mill, compared to an operating loss of $83.4 mill in 3Q16. This increase reflected reduced operating expenses, including depreciation and amortisation expense and lower general and administrative expenses, which partially offset the decline in shipping revenues.
During the quarter, OSG recognised an impairment charge of $7.4 mill on an ATB, due to a change in its expected deployment. In 3Q16, the company recognised an impairment charge of $97.8 mill.
Operating income for the first nine months of 2017 was $33.9 mill, an increase of $76.9 mill, compared to the 2016 period.
Loss from continuing operations for 3Q17 was $6.3 mill, compared with a loss of $52.9 mill for 3Q16. This change reflected a lower tax benefit in 3Q17, compared to 2016. In the previous year, a deferred tax liability on the unremitted earnings of INSW was recorded, resulting in an income tax provision of $49.8 mill, compared to an income tax provision of $3.1 mill in the 2017 period. In addition, interest expense decreased by $1.1 mill in the current period, as the result of significant debt reductions in the current and prior year periods.
Income from continuing operations for the first nine months of 2017 was $2.3 mill, compared with a loss of $65.7 mill for the first nine months of 2016. The increase reflected the lower tax provision in the first nine months of 2017, compared to 2016.
Adjusted EBITDA was $22.6 mill for the quarter, a decrease of $17.1 mill, compared with the third quarter of 2016, driven primarily by the decline in TCE revenues, partially offset by lower general and administrative expenses. Adjusted EBITDA for the first nine months of 2017 was $88.3 mill, a decrease of $38 mill or 30.1%, compared with the first nine months of 2016.
OSG completed the separation of its business into two independent publicly traded companies through the spin-off of its then wholly owned subsidiary INSW on 30th November, 2016. OSG retained the US flag business and INSW holds entities and other assets and liabilities that formed OSG’s former international flag business.
“The solid performance of our niche market activities was once again the key take away from our third quarter results,” Sam Norton, OSG’s President and CEO said. “Earnings from spot market voyages disappointed, but a strong balance sheet, continued focus on cost control and a belief that upside potential now outweighs downside risk in accepting short term market challenges leads us to be optimistic about the future.”