Overseas Shipholding Group is considering splitting up its international and domestic (Jones Act) tanker fleets, company CEO Ian Blackley has told investors.
Blackley’s comments came as the company delivered positive results for the fourth quarter of 2015 and the year overall, signalling it is well on the road to recovery after emerging from bankruptcy in 2014.
The New York-headquartered, NYSE-listed company provides energy transportation services for oil and petroleum products in both the US domestic and international markets.
In his comments on future developments for the business, Blackley said: “We could, for example, spin off the international businesses to standalone business or merge it with another company to provide greater scale on liquidity, promoting further consolidation within the fragmented international tanker industry.
“There are compelling reasons why we believe that separating the businesses has potential to unlock greater value. The tax treatment of the two businesses, the limitation on foreign shareholders mandated by the Jones Act, and the different operating models now used by our two businesses.
“Additionally, separating should also enable us to distribute this value to equity holders more efficiently than we can today.”
The domestic fleet comes under the legal requirements of the Jones Act which mandates that cargo vessels on intra-US routes (including non-contiguous states or territories such as Hawaii, Alaska and Puerto Rico) must be US-made, US-flagged, US-owned and US-crewed.
Officially called the Merchant Marine Act, the law dates to 1920 and was intended to protect home shipbuilders from foreign competition. Its defenders say it also as a national security aspect.
