For the first quarter ended March 31, 2009, the Partnership reported net income of $6.2 million, a 65% increase from $3.8 million in the same period of 2008. Time charter equivalent (TCE)1 revenues were $67.5 million, up 29% from $52.4 million. The increase in TCE revenues was principally due to 351 additional revenue days and higher TCE rates earned by the Jones Act product carriers that have been delivered after the first quarter of 2008. Income from vessel operations was $6.9 million, up 57% from $4.4 million in the first quarter of 2008, and included a $2.0 million charge related to certain headcount reductions and relocation costs, offset by a $220,000 reversal of a reserve for a customs duty that is no longer required and a $150,000 retroactive increase in the subsidy received from the U.S. Government for non-Jones Act product carriers participating in the U.S. Maritime Security Program (MSP). EBITDA1 was $20.0 million, up 11% from $18.1 million for the same period a year ago.

President and CEO Myles Itkin stated, "Although first quarter financial performance was solid, the outlook for the remainder of 2009 for U.S. Flag vessels is very challenging. U.S. oil demand in the first quarter of 2009 was down approximately 6% compared with the same quarter in 2008, mainly due to a demand decline in middle distillates. Lower oil demand levels resulted in a reduction in first quarter 2009 refining utilization levels. Specifically, U.S. Gulf Coast refining utilization declined from 84% in the first quarter of 2008 to 81% in the first quarter of 2009, the lowest first quarter level in 17 years. As a result, we saw less seaborne movements of products and increased waiting time for cargoes, both of which adversely affected spot rates."

1 Time charter equivalent (TCE) revenues, distributable cash flow and EBITDA are non-GAAP financial measures. See Appendix for a description or reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.

Quarterly and Recent Events

Shipyard Contract Termination -- During the first quarter, Overseas Shipholding Group, Inc. (the Sponsor), which owns a 77.1% interest in the Partnership, terminated its contract with Bender Shipbuilding & Repair Co., Inc. (Bender) related to the construction of six ATBs and two tug boats. The Partnership and its Sponsor intend to complete two tug boats, which the Partnership owns, and two ATBs, which the Partnership has the option to purchase, at alternative yards. As of today, the Sponsor has moved one ATB out of the Bender shipyard and anticipates moving the second ATB by the end of May 2009.

Vessel Delivery -- As previously reported, the Overseas Boston, a newly built 46,815 dwt U.S. Flag Jones Act product carrier, delivered on February 19, 2009. The vessel is on a three-year time charter with Tesoro.

Vessels Placed in Layup -- As a result of deteriorating Jones Act market conditions, principally weaker demand levels and lower refining margins, the Partnership placed the OSG 214 in layup in April. Additionally, the Sponsor placed in layup the Overseas New Orleans and Overseas Puget Sound, vessels that the Partnership has time chartered-out to the Sponsor through December 31, 2009. The Partnership will continue to receive time charter revenues for these vessels, but at reduced rates to reflect a lower level of vessel expenses during the layup period.

Settlement with American Shipping Company - The Sponsor and American Shipping Company ASA (formerly known as Aker American Shipping ASA, or "AMSC") (Oslo: AMSC) have agreed to suspend the arbitration previously disclosed in the Partnership's filings with the Securities and Exchange Commission and have signed a Nonbinding Agreement in principle to settle all of their outstanding commercial disagreements, including the arbitration. The Nonbinding Agreement provides for the dismissal with prejudice of all the claims in the arbitration and contains a number of provisions materially altering the prior agreements between the parties. There is no assurance that AMSC and the Sponsor will enter into the definitive agreements on these terms or on any terms. Any such settlement is expected, however, to increase the costs incurred by the Partnership to bareboat charter eight AMSC vessels.

Six AMSC vessels are included in the Partnership's operating fleet, and another two are part of its newbuild fleet. The Partnership has options to acquire from the Sponsor the equity of the entities that have rights with respect to four additional vessels.

Declaration of Cash Distribution

On April 27, 2009, the Board of Directors of OSG America LLC, the general partner of OSG America L.P., declared a quarterly distribution to all unitholders in the amount of $0.375 per unit for the three months ended March 31, 2009. The distribution of approximately $11.5 million will be paid on May 15, 2009 to unitholders of record on May 8, 2009. The Partnership generated $17.5 million of distributable cash flow for the first quarter of 2009, resulting in a distribution coverage ratio of 152%. Excluding the dividend of $5.3 million received from an affiliated company (Alaska Tanker Company), distribution coverage ratio for the period was 106%.

Key Debt Metrics

As of March 31, 2009, total debt outstanding was $81 million and the Partnership had $165 million available under its $200 million senior secured revolving credit facility. The debt to total capital ratio at quarter end was 15.1%.

Financial Forecast

Itkin further remarked, "In the United States, oil demand has historically been lowest in the second quarter, which falls between the peak winter heating season and the peak summer driving season. We expect the decrease in second quarter demand to exacerbate the current weak spot market. It is estimated that 19 Jones Act vessels industrywide are either currently in layup or waiting for cargoes. In addition, the recent decline in the International Flag product carrier market has reduced the rate forecast of the two non-Jones Act product carriers in our fleet. Although we are somewhat insulated from the full effect of spot market deterioration due to our fixed term coverage, OSG America is facing several factors with the potential to significantly affect our future performance. These also include challenging credit markets that may hinder our ability to exercise options to acquire newbuildings and increased costs from any settlement with AMSC, that raise pressure to take steps to preserve capital. We will closely monitor all of these developments over the course of the year and consider their effect, if any, on our current cash distribution policy."

For 2009, OSG America forecasts distributable cash flow of approximately $43 million.

Fleet Information and Key Metrics

At March 31, 2009, the Partnership's fleet totaled 30 vessels, aggregating 1.3 million deadweight tons, including two newbuilds and six vessels the Partnership has options to purchase. See OSG America's website for a detailed fleet list, which includes charter-in and charter-out dates and newbuild delivery dates.

  Vessel Type                                    No. of Vessels Owned   No. of Vessels Chartered-In   Total as of Mar.