Highlights

• TCE revenues increased 7% quarter-over-quarter to $64.2 million, reflecting 196 additional revenue days
• Net income of $4.7 million declined 5% from the same period a year ago; second quarter net income included severance costs and a loss on sale of vessels that totaled $772,000
• Distribution coverage ratio for the second quarter was 104%
• Sponsor announced intention to tender for all outstanding common units at $8.00 per share
• 85% of revenue days on term charters for the balance of 2009, 64% in 2010 and 54% in 2011

OSG America L.P. (OSG America or the Partnership) (NYSE: OSP), the largest operator of U.S. Flag product carriers and ocean-going barges transporting refined petroleum products, today reported financial results for the second quarter and six months ended June 30, 2009.

For the second quarter ended June 30, 2009, the Partnership reported net income of $4.7 million, a 5% decrease from $4.9 million in the same period of 2008. Net income in the second quarter of 2009 included $772,000 of charges related to the loss on sale of one vessel and severance and relocation costs. Time charter equivalent (TCE)¹ revenues were $64.2 million, up 7% from $59.9 million. The increase in TCE revenues was principally due to additional revenue days and higher TCE rates associated with the newly delivered Jones Act product carriers, partially offset by the lay up in the second quarter of 2009 of one ATB and reduced daily TCE rates earned on the two non- Jones Act product carriers.

President and CEO Myles Itkin stated, “The U.S. Flag market continues to face significant challenges as U.S. oil demand in the second quarter fell quarter-over-quarter for the sixth consecutive quarter. We are taking aggressive steps to reduce costs in response to these market conditions, including placing vessels in lay up. However, we expect the Jones Act vessel supply/demand balance to continue to weaken through 2010. Despite these near-term challenges, OSG America’s modern fleet, technical excellence, strong client relationships and industry leadership will allow us to succeed over the long term.”

For the six months ended June 30, 2009, the Partnership reported net income of $10.9 million, a 25% increase from $8.7 million in the same period of 2008. TCE revenues were $131.7 million, an increase of 17% from $112.3 million in the same period of 2008. Higher TCE revenues reflect an increase of 547 revenue days due primarily to four Jones Act product carriers that delivered after the first quarter of 2008. Additionally, the OSG 243 re-entered service in April 2008 following completion of its 12-month conversion to double hull. Income from vessel operations totaled $12.1 million, up 23% from $9.8 million in the first half of 2008.

Quarterly and Recent Events

Proposed Tender of OSG America L.P. – On July 29, 2009, Overseas Shipholding Group, Inc. (OSG; NYSE: OSG), which owns a 77.1% interest in the Partnership, announced its intention to tender for all of the outstanding common units of OSG America held by the public. In a letter received by the independent members of the Board of Directors of OSG America LLC, OSG America’s general partner, OSG, communicated its intention to initiate a tender offer in late August for all the publicly held common units at a price of $8.00 in cash per unit, representing a premium of approximately 12.7% above the closing unit price of OSG America on July 29, 2009 and 11.1% above the average closing price of the units for the preceding 90 trading days.

Vessel Delivery – The Overseas Nikiski, a newly built 46,815 dwt U.S. Flag Jones Act product carrier, was delivered on June 11, 2009 by American Shipping Company ASA (“AMSC”). The vessel is on a three-year time charter to Tesoro.

Update on Vessels in Lay up – As a result of weak market conditions, the Partnership placed the Overseas Galena Bay, a single hull vessel, in lay up during July 2009 upon the completion of a time charter to SeaRiver. The barge OSG 214 has remained in lay up since April 2009. In addition, OSG, the time charterer of the Overseas New Orleans and the Overseas Puget Sound, both single hull vessels, requested that the Partnership place both vessels in lay up in April. OSG America continues to receive time charter revenues from OSG for these vessels but at reduced rates reflecting a pass-back to OSG of vessel expense savings realized during the lay up period. The Overseas Puget Sound will begin a grain voyage in August.

Negotiations with AMSC – OSG and AMSC (collectively the “parties”) are negotiating to resolve a number of issues outstanding between them, including among other things, the arbitration previously disclosed in the Partnership’s filings with the Securities and Exchange Commission. In February, the parties signed a Nonbinding Agreement in principle to settle all of their outstanding commercial disagreements, including the arbitration. The parties failed to implement the Nonbinding Agreement by the agreed upon date and thus the terms of the Nonbinding Agreement ceased to be operative. While the parties continue to seek to resolve the issues outstanding between them, which may involve materially altering the prior agreements between the parties, no assurance can be given that OSG will enter into a definitive agreement to resolve such issues, including the arbitration. The arbitration may be resumed by either party at any time.

Seven AMSC-owned product carriers are included in the Partnership’s operating fleet, and another one is part of its newbuild fleet. The Partnership has options to acquire from OSG the equity of the entities that have rights to bareboat charter from AMSC up to four product carriers, two of which would be converted to shuttle tankers by OSG.

Declaration of Cash Distribution

On July 29, 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 June 30, 2009. The distribution of approximately $11.5 million will be paid on August 14, 2009 to unitholders of record on August 7, 2009. The Partnership generated $11.9 million of distributable cash flow for the second quarter of 2009, resulting in a distribution coverage ratio of 104%.

Myles Itkin, President and CEO of OSG America stated, “After much discussion, the Board decided to maintain the dividend for the second quarter for both common and subordinated units. Management’s current forecast indicates that distributable cash flow in the second half of 2009 through 2010 will be below that required to cover the Partnership’s historical quarterly distribution on the common and subordinated Partnership units. Recent deterioration of the Jones Act market resulting from lower U.S. oil demand and suspended or cancelled refinery expansion projects present near- and medium-term challenges for the Partnership. In addition, six vessels in the Partnership’s operating fleet will come off term charters by the end of 2009 and are expected to enter the spot market. The Board of Directors will continue to carefully evaluate the appropriate level of future distributions based on the Partnership’s financial condition, capital needed for future growth and earnings, and the general economic and financial market environment.”

Key Debt Metrics

As of June 30, 2009, total debt outstanding was $75 million, and $170 million was available under the Partnership’s $200 million senior secured revolving credit facility. The debt to total capital ratio at quarter end was 14.8%.

Fleet Information and Key Metrics

At June 30, 2009, the Partnership’s fleet totaled 30 vessels, aggregating 1.3 million deadweight tons, including one newbuild and six vessels for which the Partnership has options to purchase the equity of entities that own or bareboat charter-in such vessels within one year of each vessel’s delivery to OSG. See OSG America’s website for a detailed fleet list, which includes charter-in and charter-out dates and newbuild delivery dates.

Utilization² during the second quarter of 2009 for the Jones Act ATBs, Jones Act product carriers, and non-Jones Act product carriers was 90.7%, 99.0% and 98.9%, respectively. Second quarter utilization for Jones Act ATBs was negatively impacted by the lay up of the OSG 214 since April 2009.

The following tables provide information with respect to average daily TCE rates earned, revenue days, average daily vessel expenses and operating days for the three and six months ended June 30, 2009 and 2008.

In the second quarter of 2009, TCE rates for Jones Act ATBs were approximately $2,300 per day below the second quarter of 2008 due to lower Delaware Bay lightering volumes, which negatively affected two ATBs, and charter renewals at lower rates affecting another two ATBs. Jones Act product carriers were approximately $2,200 per day above rates in the same period of 2008. The increase in average TCE rates for the product carriers reflects the higher rate time charter contracts that were executed in 2006 for the vessels that have entered the fleet since the end of the first quarter in 2008. Lower rates for non-Jones Act product carriers reflect a combination of reduced worldwide oil demand and increased fleet tonnage, which have adversely impacted the international product carrier market in which these two vessels compete approximately half the time.

Higher daily operating expenses for Jones Act ATBs in the second quarter of 2009 compared with the second quarter of 2008 are primarily due to the charter-in from OSG of the OSG 400, which charter-in was converted from a time charter to a bareboat charter in November 2008. The larger size of the ATB plus the complexity of the lightering trade, the trade in which the OSG 400 operates, requires a larger than average crew, resulting in higher average daily vessel expenses. Lower quarter-over-quarter daily expenses on Jones Act product carriers reflects lower expenses associated with the vessels in lay up. If the vessels in lay up were excluded, average daily operating expenses for the Jones Act product carriers and ATBs in the second quarter of 2009 would have been $16,042 and $9,527, respectively. Lower daily operating expenses for the non-Jones Act product carriers reflect an increase in the subsidy from the U.S. Government, which lowered expenses by approximately $800 per day compared with the same period of last year. In addition, in 2008 daily operating costs for the six-month period reflected increased repair costs of $1,000 per day.

Off Hire and Scheduled Drydocks

All U.S. Flag vessels are subject to periodic drydock, special survey and other scheduled maintenance. The table below sets forth actual days off hire for the second quarter of 2009 and anticipated days off hire for the Partnership’s owned and bareboat chartered-in vessels for the balance of 2009, by quarter. Actual off hire days in the second quarter of 2009 varied by 28 days from the prior projection of 116 days due to shorter than projected repair periods for the Jones Act ATBs. Projected off hire days for the third and fourth quarters of 2009 increased significantly from the prior projection because of the lay up of the Overseas Galena Bay and extension of the lay up of the OSG 214.

The OSG 252 and the OSG 242 are scheduled to drydock in the third and fourth quarter, respectively.

Use of Non-GAAP Financial Information

Distributable Cash Flow

Distributable cash flow represents net income adjusted for depreciation and amortization expense, undistributed income from affiliated companies, non-cash charter hire expense and estimated capital expenditure reserves. Distributable cash flow is a quantitative standard used in the publicly traded partnership investment community to assist in evaluating a partnership’s ability to make quarterly cash distributions. Distributable cash flow is not required by accounting principles generally accepted in the United States and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance required by accounting principles generally accepted in the United States.

The table below reconciles distributable cash flow to net income as reported in the statements of operations:

TCE Reconciliation

Consistent with general practice in the shipping industry, the Partnership uses TCE revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenues generated from voyage charters to revenues generated from time charters. TCE revenues, a non-U.S. GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable U.S. GAAP measure, because it assists management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance.

The following table reconciles TCE revenues to shipping revenues, as reported in the statements of operations:

EBITDA

EBITDA represents operating earnings, which is before interest expense, plus other income and depreciation and amortization expense. EBITDA is presented to provide investors with meaningful additional information that management uses to monitor ongoing operating results and evaluate trends over comparative periods. EBITDA should not be considered a substitute for net income or cash flow from operating activities prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. While EBITDA is frequently used as a measure of operating results and performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

The following table reconciles EBITDA to net income, as reported in the statements of operations:

Forward-Looking Statements - This press release may contain forward-looking statements regarding the Partnership’s prospects, including the outlook for U.S. tanker and articulated tug barge markets, the outcome of negotiations with AMSC, OSG’s intention to tender for the outstanding common units of OSG America, the payment of cash distributions, the timely delivery of newbuilds in accordance with contracted terms, projected drydocking schedule, off hire days for the third and fourth quarter of 2009 and projected distributable cash flow for the balance of 2009 and 2010 and the forecast of U.S. economic activity and U.S. oil demand. These statements are based on certain assumptions made by the Partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of the Partnership, which may cause actual results to differ materially from those implied or expressed by the forward-look statements. Factors, risks and uncertainties that could cause actual results to differ from expectations reflected in such forward-looking statements are described in the Partnership’s Annual Report on Form 10-K for 2008 and those risks discussed in other reports the Partnership files with the Securities and Exchange Commission.

Conference Call Information - OSG America has scheduled a conference call for August 5, 2009 at 1:00 p.m. ET. Dial-in information for the call is (800) 762-8779 (domestic) and (480) 248-5081 (international). The conference call and supporting presentation can also be accessed by webcast, which will be available at www.osgamerica.com in the Investor Relations & News Webcasts and Presentations section. The webcast will be available for 90 days. A replay of the call will be available by telephone through midnight August 12, 2009; the dial-in number for the replay is (800) 406-7325 (domestic) and (303) 590-3030 (international). The passcode is 4097790.

About OSG America L.P. - OSG America L.P. (NYSE: OSP) is the largest operator of U.S. Flag product carriers and ocean-going barges transporting refined petroleum products, based on barrel-carrying capacity. OSP has an operating fleet of 23 Handysize product carriers and tug barges that trade primarily in the Jones Act market. OSG America L.P.’s limited partner units are listed on the New York Stock Exchange and trade under the symbol “OSP.” More information is available at www.osgamerica.com.

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.

² Utilization is defined as revenue days (the number of calendar days during the period less days off hire for drydock, repair and lay up multiplied by the number of vessels) divided by the sum of operating days (the total number of calendar days multiplied by the number of vessels, excluding time chartered-in vessels) and time chartered-in days. Excluded from utilization is six revenue days for a time-chartered in conventional tug-barge unit.

OSG Ship Management, Inc.
Jennifer L. Schlueter, +1-212-578-1699
Vice President Investor Relations and Corporate Communications