Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Chris Wetherbee – Merrill Lynch.
Christian Wetherbee – BAS-ML
I was just wondering if I could touch on the potential Bender cancellations first. I was just wondering if you guys had a sense of what the cost might be associated with the cancellation there and if there’s a sense of timing of when that agreement could be reached.
Myles Itkin
We’re reasonably hopeful that an agreement is reached during the next few weeks. The additional charges that would be associated with cancellation will be charges that will impact OSG as opposed to OSP.
Christian Wetherbee – BAS-ML
So from an OSP perspective the only risk, I guess, is on the two tugs, which I think you noted were about $25 million carried at book value.
Myles Itkin
That’s correct.
Christian Wetherbee – BAS-ML
And those have not been delivered. Correct me if I’m wrong that those haven’t been delivered.
Myles Itkin
They have not yet been delivered.
Christian Wetherbee – BAS-ML
And the expectation on the timing of those deliveries?
Myles Itkin
That’s part of the negotiation. As soon as it becomes determined we’ll be happy to share it.
Christian Wetherbee – BAS-ML
And they’re largely complete, though, right?
Myles Itkin
They are not fully complete at this stage. Our head of the U.S. Flag group has been working with alternative yards to really determine timing and cost of completion. We’re in the process of doing that right now.
Christian Wetherbee – BAS-ML
Then I guess when you think about moving the two, I guess, semi-complete ATBs to another yard for alternate completion. Can you give us a sense of what the construction market looks like right now? I mean obviously we know kind of what the international markets look like but get a sense of how much the price for new buildings have fluctuated over the last 12 months to get a sense of how it may impact you for that last mile completion of those two ATBs.
Myles Itkin
As you know, the arrangement between OSG and OSP has OSP acquiring the vessels at fair market value. So the ultimate cost of construction is somewhat less impactive on OSP.
Christian Wetherbee – BAS-ML
So the price that OSP ultimately takes to vessels is still to be determined depending on what the market value is at the time of delivery. Is that correct?
- To read the full transcript on Seeking Alpha, click here »
