Okeanis Eco Tankers Corp (ECO) 2024 Q4 法說會逐字稿

Hello and welcome to OET's 4th quarter 2024 financial results presentation. We'll begin shortly. Aristides Alastizos, CEO and Iraklis Speronis,, CFO of Okeanis Eco Tankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. I would like to advise you that this session is being recorded. Iraklis will begin the presentation now.

Welcome to the presentation of Okeanis Eco tanker's results for the 4th quarter of 2024. We will discuss matters that are forward looking nature and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer slide.

So starting on slide 4 and the executive summary.

I'm pleased to present the highlights of the 4th quarter of 2024. While Q4 fell short of the market's expectations a few months back, it closes a year of very healthy commercial and financial results. We achieved fleetwide Time charter equivalent of about $39,000 per vessel per day. Our VSCs were at $385,000 and our Suez maxes at $39,500.

We report adjusted to be done of $37 million adjusted net profit of $13 million and adjusted earnings per share of $0.41.

Continuing to deliver on our commitment to distribute value to our shareholders, our board declared an 11th consecutive distribution in the form of a dividend of $0.35 per share.

Total distributions over the last four quarters stood at $3 per share or 89% of our earnings for the year.

In November, we successfully completed the 5-year dry up for the nation of the Nussa, concluding our 66 vessel 2024 VHCC driver project.

We look into 2028 with only our 2 2020 build series maxis which will undergo the 5-year dry dock sometime in the second or third quarter.

So on slide 5, we show the detail of our income statement for the quarter and full year. For the year in 2024, our TC revenues stood at $262 million with the daily fleet YTC of $53,000 per day, 56,000 VLCCs, and 49 industries.

If I was approximately $204 million and net income was just shy of $109 million or $3.38 per share.

Moving on to slide 6 and our balance sheet.

We ended the quarter with $54 million of cash. Our balance sheet debt continues to amortize by approximately $12 million every quarter, now standing at $646 million as of year-end.

On slide 7, we recap our main driver behind our operational and commercial success, and one of our key competitive advantages are fleet.

Our 14 vessels, all built at first-class yards in Korea and Japan, have an average age of 5.4 years. That is the youngest crude oil tanker fleet among the peers. And we're also the only pure eco and fully scrapper fitted fleet.

These elements allow us to set a benchmark above the spot market established by conventional or mixed feeds.

A slide 8, moving on to our capital structure. After a busy 12 months, we're now in a position to read the benefits of the improved pricing achieved by refinancing most of our vessels. Having improved our margins by 130 basis points across 12 assets, our interest expense starts to show material improvement in Q4 and going forward.

We have, successfully set our robust balance sheet with added flexibility and extended maturity.

Our book leverage stands at 59% while our market adjusted net LTV is approximately 40%.

Our financing are a mix of traditional mortgage-backed, banking loans, as well as sale and lease backs, and their financiers are balanced with both traditional European shipping banks, as well as Asian banks and leasing houses.

We're particularly happy to have relationships to all these markets. This gives us flexibility in the future and allows us to develop and strengthen relationships.

We look forward to next year when we will have the opportunity to refinance the last outliers within our capital structure, Denis Via and this is what they call a massive opportunity for further improvement over break even costs.

In the meantime, while we're not active in pursuit of further deals, we're always on the lookout for a creative opportunity. If one arises in this competitive financing market and it makes sense, we will not hesitate to take advantage of.

I will now pass the presentation to TRY to see this for the commercial market.

Thank you, Iraklis

Let me start by saying that Q4 was less interesting than we expected.

But at least the Q1 of 2025 began on a different note.

In early Q1, the Biden administration significantly expanded the sanctions framework, which impacted more vessels, Russian banks and charters.

Almost immediately, the market rebounded quickly and significantly, a topic we will discuss in more detail later on.

However, Q4 ended relatively weakly with crude markets lacking their usual seasonality.

During Q4 and specifically in in November as Iraqi mentioned earlier, we successfully completed the five-year dry dock for NSos Daussa, making, marking the conclusion of our six vessel the LCC dry dock project.

Given the crude market weakness, we took the opportunity to clean up one more VLCC and repositioned her in the west. Again, this captured a higher earnings spot voyage for a backhaul that we'd like to bring our ships to the west. We also continued to strategically position our vessels in the west with selective Suez max voyages to the east to maximizing earnings potential.

As a result, our Swiss are performed our VLTCs in the 4th quarter.

Despite the continued seasonal weakness from Q3, we achieved a fleetwide PC rate of 39,000 per operating day for the fourth quarter and 52,900 per operating day for the full year of 2024, while utilization stood at 98% in Q4 and 97% for the full year, demonstrating efficient vessel deployment.

If we compare our earnings with peers that have already reported Q4 results, our performance for the year stood at 19% for the VLCCs.

And 29% for the sewage maxis.

Now going into Q1 and as mentioned earlier, the expanded sanction framework has significantly improved the market.

The Chinese, Indians, and Turkish buyers became wary of using sanctioned ships and more specifically of buying Russian and Iranian crude oil in general. As a result, they started sourcing alternative crudes.

Leading with India and China actively importing from West Africa, the Middle East, and the US Gulf, and Brazil.

This shift has notably improved market rates and sentiment.

In addition to the above, continued growth in a Brazilian crude production is boosting demand for long haul voyages.

As far as our fleet is concerned, fleet triangulation remains a priority, ensuring we maximize laden legs and op optimize vessel deployment.

We've also repositioned one of ours is maxis to the clean product trade, allowing us to capture premium earnings while repositioning her to the west after her front haul voyage to the east we fix.

Given these developments so far in Q1 of 2025, we have fixed 81% of the LCC spot phase at 39,100 per day and 77% of Suez max spotha at 33,400 per day.

With the ongoing OPEC plus production policies and the new US sanctions on Russia and Iran, we see further upside potential for 1 mile demand in the near term.

Today we are earning around 50,000 per day on the VLTCs and 45 to 50,000 on the s.

Many of the stronger pictures we concluded after mid-January when the market firms will reflect in the last part of our Q1 earnings as well as in our Q2.

Similarly to the full year 2024 results and based on periods that have reported earnings, our Q1 performance on fixed days stands at 7% outperformance for the VLCCs and 39% for the match.

As we now move to slide 12, OET remains the only publicly listed pure play echo scrubber fitted tanker platform, enabling us to consistently outperform the market. Our VLCC and Tourism fleets have delivered higher TCs than our peer group for multiple years, reinforcing our competitive advantage.

In 2024, OET's BLCC significantly outperformed peers, demonstrating the earnings power of our modern fleet and the strong performance of our commercial team.

It is important to note that for Q4 2024 we have used guidance figures for peers that have not reported yet.

We believe the GAAP will widen even further once the actual rates are published.

All in all, our chartering teams, fuel efficient vessels, scrubber advantage, and strategic training patterns continue to differentiate OE in the volatile markets.

Now let's discuss the market outlook and the latest market dynamics.

On July 13, we see the crude tanker market is experiencing a structural supply imbalance driven by an aging fleet and lowly building orders.

By 2028/700 vehicles to season and sewage maxes will be more than 20 years old, while only around 200 vessels are scheduled for delivery in the same period, indicating a further tightening of supply.

Notably, this calculation does not even account for vessels over the age of 15 years old, which will be less efficient, and by 2028 will represent 40 to 50% of both segments.

Additionally, the expanded sanction list now includes almost 10% of both VLCC and Suez Max fleets, while 20% of the total VLCC and Suez Max fleets operate in the dark race fleet.

And with limited yard availability and rising shipbuilding costs, fleet expansion remains significantly constrained.

Also, if sanction enforcement continues, the sanction fleet can double as we calculate 10% of the fleet is engaged in OFAC sanctionable activity, especially involved in the Iranian and Venezuelan business, which is also almost exclusively reliant on the OC.

Against this backdrop, O's modern fleet and eco position.

Positions as well to capitalize on the supply constraint that's coming.

Now moving on to fly 14, crude demand is expected to outpace supply in 2025, driving increased on miles and higher fleet utilization.

Key agencies forecast a continued recovery in oil demand, particularly from Asia.

China had positive data with strong traveling around the lunar new year, and a new record corporate borrowing in January.

Refinery alignment realignments and new sourcing routes are leading to longer voyages and greater tanker utilization.

Geopolitical factors, sanctions, and shifting trade routes are further strengthening demand for modern compliances like OAT.

We expect these factors to support higher fleet utilization and firmer rates in the coming quarters.

From 5 to 15 to 18.

We aim to illustrate the significance.

Of sanctions exposed trades and its potential impact on the conventional fleet in light of the latest wave of sanctions.

The shadow fleet has expanded due to sanctions on Russia and Iran and Venezuela. Approximately 20% of the global tanker fleet is now engaged in sanctioned trade, with 10% already being on the OPAC list, effectively reducing the supply of vessels available in the conventional market.

As compliance measures tighten, compliance fleets will be more positioned to capture premium rates driven by higher utilization.

We believe the market divide between compliant and non-compliant police will continue to widen, favouring modern, efficient and transparent operators.

As mentioned earlier, India, China, and Turkey are increasingly moving away from sanctions exposed trade, seeking compliant crude from alternative routes. This shift bothunm demand and the utilization of the conventional fleet.

Slide 16 focused on Iran, and given the new administration in the US, a potential decrease in Iranian exports levels seen during the previous Trump administration could push conventional VLCC fleet utilization above 90%, which has historically led to very strong tanker market rates.

To conclude the presentation, a reduction in Russian and Iranian exports could generate a significant increase in demand for modern supply field disease.

If all Russian and Iranian barrels are lost and replaced by long haul VLCC voyages, we estimate a need for an additional 20 to 60 VLCCs.

The current fleet size order book and utilization of close to 88% do not support such an increase.

Reinforcing the bullish outlook for compliant modesty.

OET is optimally positioned to satellite on these shifts and generate strong cash flows for shareholders.

During the Q4 softness, OET delivered a strong full year performance and remains well positioned for 2025. Market fundamentals remain supportive with tight supply, increasing 10 miles, and geopolitical shifts working in our Favor. We will continue to optimize our fleet, maximize utilization, and capitalize on strategic advantages. With that, we thank you for your time and happy to take any questions.

Thank you. (operator Instructions)

Our first question comes from Liam Burke at B Reilly. Please go ahead.

Yes, thank you very much.

In your prepared remarks, you laid out a number of strong reasons why there'll be tight capacity for the VLCC class going forward.

What would you say are some of the positive pressures on Suezma's capacity going forward?

Hi, thank you for your question.

A large part of the Suez Max trade of the Suez Max, hold on, a large part of the Russian trading fleet right now moving the Russian barrels uses Suez Max vessels.

So over time if we see if we see further sanctioning of that fleet, it will further tighten the supply of Suza vessels.

And then the age profile on that fleet is very old as well. In addition to that, and I think more importantly, we've seen that with the reduction of Interest from Indians and the Chinese for buying, whether a Russian and for the Chinese, Iranian and Venezuelan barrels, it opens the AR for longer haul voyages on classes that are less efficient than the VLCC, so you have to look at masses.

For example, a trend we've seen recently is that there's a big port in in the Black Sea controlled predominantly by Western oil majors including Chevron called CPC, and historically this port has lifted Aromax and Suez Max and cargos because nothing larger than a Suez Max can fit laden through the Turkish Strait.

Because of the tightness Due to the lack of purchasing of Iranian and Russian barrels, we've seen that there's been CPC cargos that are moving again towards Asia.

While since the Red Sea closed, this trade has completely stopped.

In January, for example, prior to the in February, prior to the sanctions on the Russian fleet, there were no cargos that were sold in the east.

While after the sanctions were put on in February, we already have 11 cargoes potentially going east just from this one port. So, I think we'll see more barrels from whether West Africa, Libya, Algeria, the Black Sea moving east on the Suez maxis.

And we're quite constructive on the Suez Max segment.

Great.

Thank you. You talked about a slow start to the first quarter 25, and you announced the fixtures for both the Suez and BLCCs for a partial quarter for most of the first quarter. Then you follow by saying that there's strength into the end of the first quarter and into second quarter, which generally you think the second quarter would, you see moderation in rates. What's What do you see into the 2nd quarter is driving the rate momentum here.

Alright, well.

I think one thing to understand is that.

Especially on the VLTCs.

And if you're fixing longer voyages from the US Gulf, you're going to be working very far ahead. So, you're going to be working maybe even a month or a bit longer ahead. So, in December, like in mid-December, we were negotiating a cargo that would load in mid to end January, and that voyage would last through Q1. So, a weak fixture in Q4 might have little impact on actual Q4. And have a big impact on Q1 and maybe even, I mean, if it's a round voyage from the US Gulf east which we don't do, but it could even lead into Q2.

So I think what we were saying is that the fixtures that we fixed after January 15th.

Which was when Biden sanctioned the additional ships and the and the charters and squeezed the system have improved a lot. But because those pictures you're fixing maybe a month in advance from the US Gulf on a VLCC or slightly less on the sage max, and you'll only start feeling them towards the end of Q1 when the vessel actually loads and discharge, especially with the IFRS accounting principles. And they will roll into Q2 as well. So I think that our earnings for Q1 were also impacted by the IFRS.

TC principles which we have a bigger we're impacted at times more because of the slightly smaller fleets than some of our peers who have 50 or 60 ships and you know 3 or 4 ships having a very bad, by the principles how you allocate the income makes a much bigger effect to us.

Great.

Thank you very much.

Thank you.

Our next question is from Bendick Nittingis from Clarkson Securities. Please go ahead.

Yes, thank you. So to my understanding, you now have, one smack that is cleaned up and that's the only one cleaning in your fleet as of now, is that correct?

Yeah, that's correct.

And I just wanted to ask a bit about the dynamic there because you have been been cleaning up several of your previously, and how easy is it going to be to switch those back into the clean trade? Is it easier now that you have cleaned them relatively recent or is it going to take the same couple of weeks to get that done?

No, I.

Once you go dirty, the cleaning process is more or less similar. Maybe it's slightly.

But marginally easier, but I would, we would allocate the same cost and time when we're budgeting for.

And for the act now, do you expect to keep that trading clean or is it as the older ones sort of opportunistically positioned in the clean market for a single voyage?

No, we were, we basically sailed to this port in Asia.

We had this clean opportunity. We compared it with a crude opportunity to come west and reposition the ship in the west.

The clean voyage made a little bit more money and we knew the cargo was firm because with the counterparty we worked with before, so we took the opportunity to book it. I think once we come west.

I can with almost certainty I can say we'll go back into the crude market.

Okay, thank you.

Thank you.

The next question is from Peter Haugen at ABG. Please go ahead.

Good afternoon.

First question on the market in terms of what can happen here. There are obviously lots of alternatives, but in terms of only the Red Sea transit, if we were to assume that well, the only thing changing from now to the future is normal transits through the Red Sea again, how do you think that will impact your markets that we see on the wis markets?

Hi, Peter. Thanks for your question, and thanks for only asking one part of all these different elements like Russia and Iran, because you can go on and speak for hours.

But about the Red Sea, I think initially.

Most of these changes and disruptions that occurred to the oil markets are positive for tankers. I definitely think it would be positive for Suez maxes because it will bring back part of the trade which has been priced out just because of the cost to go around the cape, and this is principally either the Basra West on Suez maxis, which was a huge trade before.

And that today has just can cannibalize by the VLCC because they load to bother them to go around the cap and also to see.

Mediterranean and Black Sea barrels going east again, which had completely stopped. So I would say that overall for the swim maxis, it may be positive in the for the red seat to reopen.

Okay.

And for the able to see do you think?

I don't think you'll have a major impact for the VLCCs.

There's been a lot of, some of the people who have equity barrels and They discharge in the Red Sea and loading from the AG. They're using their own ships for this, so you might see a bit more business for the normal fleet to do this business.

But I think for the VLCC they won't have the same impact as it will for the sewage.

Okay, thank you. And if I could follow up with a few questions on what to use in evaluation really, so, currently we see brokers are quoting for the 55-year eco we also see $112 similar for Sumaxis at $74. So, these numbers are obviously lower than they were last summer. But I would say it looks as if they're holding up quite well, although we haven't seen that, or at least I haven't seen, that many relevant transactions here. So in terms of 112 for a 5 year old be able to see and 74 for a 55 year olds max, how do you think those numbers compare to if you were to see a transaction today in the market?

But I think as you correctly mentioned there haven't been many transactions recently, so it's hard to benchmark where prices are today.

At times since last summer or the period you mentioned, the markets felt weaker a little bit, but as these.

Potential developments happen around Iranian reduction in Iranian exports and Chinese imports of Iranian crude. I don't think that the VLCCs will fluctuate down very much at all. I think that there is such a limited pool of sellers of 5-year-old VLCCs that their values are quite firm.

I think as well on the Suez Maxes, it's just the wiz Max have a much bigger order book and delivering sooner. So there may be some downside and potential market weakness on sewage max values, but on the VLCs, I'm pretty confident.

Understood. Okay, thank you. And, a fine one from me in terms of, well, Outlook here I guess it's for, well, my interpretation is that you, you're still, pretty optimistic, but, if given the opportunity to take your coverage now, what would you deem to be interesting in terms of, say 1 and 3 years for be able to see some susu mass.

I mean, I think we have the classic Greek approach which is 5,000 higher than the charter's ideas.

But I mean, generally speaking, the market for TCs, it gets a lot more liquid when the market is firming a lot and so.

If there's an opportunity to time charter out some vessels, you have to take advantage of that when there's a big movement in in spot rates and also in paper rates. Unfortunately, most of the charters today, they do tend to hedge apart or most of their TC exposure using SFA.

So a liquid time charter market often needs to coincide with a liquid FFA market.

And I think there's a lot of, if you're aware of when these opportunities present themselves, you can find some attractive deals to do.

So it's something we've looked at in the past. We didn't really find it that attractive, but we will keep looking at it in the next fight as well.

Okay, thank you.

Thank you for that color. That's all for me.

The next question is from Claremont Molins at Value Investors Edge. Please go ahead.

Good afternoon.

Thank you for this thorough presentation. Most has already been covered, but I wanted to delve a bit into a dark fleet and the sanctions currently in place on Russian trade.

Could you give us some color on whether there are big differences on utilization of targeted vessels by European or United States sanctions? Do stand-alone European sanctions also have a large impact on efficiency?

Hey, thanks for your question.

I think by far the biggest impact on utilization is by US sanctions.

I don't think that the impact of EU sanctions or UK sanctions is very large to Chinese buyers, although it may be more pertinent to Indian and Turkish buyers.

But for sure utilization falls drastically once you enter the grave fleet.

And then even more so if you're sanctioned by the EU or the UK.

And I think drastically so if you're in a sanctioned by the US, I mean, some of the research outlets like Kepler or even some of the shipping brokers, they do some really nice research on this which I'm sure you.

You can find some articles where they describe, and they go through each ship by ship and compute some nice data.

Makes sense. Thanks for the color. I'll turn it over.

Thank you for taking my questions.

As a final call for any last questions, (Operator Instructions)

We have no further questions on the call, so I'll hand the floor back to Iraklis for any closing remarks.

Thank you. Thanks everyone for listening in. We look forward to catching up again in mid-May for Q1. Thank you.