Okeanis Eco Tankers Corp (ECO) 2025 Q1 法說會逐字稿

Welcome to Okeanis first quarter 2025 financial results presentation. We will begin shortly. Aristidis Alafouzos, CEO and Iraklis Sbarounis, 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 via the webcast. I would like to advise you that this session is being recorded. Iraklis will begin the presentation now.

Thank you. Welcome to the presentation of Okeanis Eco tanker's results for the first quarter of 2025. We'll discuss matters of the forward-looking nature and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer on slide 2.

Starting on slide 4 and the executive summary. I'm pleased to present the highlights of the first quarter of 2025. We achieved fleetwide time charter equivalent of about $385,000 per vessel per day. Our VLCCs were at $38,000 and our Suez maxes at $39,200.

We report adjusted EBITDA of $32.5 million, a adjusted net profit of $11.4 million, and a adjusted EPS of $0.36 cents. Continuing to deliver on our commitment to distribute value to our shareholders, our board declared the 12th consecutive distribution in the form of a dividend of $0.32cents per share. Total distributions over the last four quarters stood at $2.22 per share, or 91% of our earnings for the period.

Slide 5, we saw the detail of our income statement for the quarter. PC revenues stood at $48.6 million. EBITDA was $23.5 million, and reported net income was $12.6 million or $0.39 per share.

Moving on to slide 6 on our balance sheet, we ended the quarter with $43 million of cash. Our balance sheet debt continues to amortize by approximately 12 million every quarter, now standing at $634 million as of year end. As a reporter. Our book leverage stands at 59% while our market adjusted Net LTV is around 40%.

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

Our 14 vessels have an average age of 5.6 years. That is the youngest crude oil tanker fleet amongst listed peers and the only pure eco and fully scrubber fitted fleet. This gives us an advantage, allowing us to set a benchmark about the spot market established by conventional or mixed fleet. All our vessels are built as first-class guards in Korea and Japan, making us resilient to risks around the implementation of the USDR.

We're also pleased to have behind this an extensive VLCC drydock program from last year, and in 2025, we only have two Suezmax drydock expected to take place likely within Que slide 8, moving on toward capital structure. After a refinancing cycle in 2023 and 24, we're already reaping the benefits of improved pricing.

Our interest expense for the quarter has decreased meaningfully, and this does not take into account the most recent financing announced, which will take effect in Q2 and Q3 of this year.

We have successfully set a robust balance sheet. We added flexibility, and extended maturity. That flexibility came in handy in April when we declared the purchase options to buy back our three Chinese leaf vessels, Nissos Anafi, Nissos Kea, and Nissos Nikouria.

We're paying no penalties for the exercise of these options as we have dropped this when we amended the leases a year and a half ago. Thenurian the care are expected to be delivered back to us in early and late June respectively, while we are not in early August.

We have already announced our plans to finance the Nikoan anath it by a new $130 million bank loan with the Greek bank, priced at 140 basis points over Shour, maturing in seven years with competitive amortization profile.

We're actively working on firming up the financing for the camp. I expect we'll be in a position to announce this later in the quarter, and we're targeting terms that are at least in line with the other two.

The terms achieved make us very optimistic in anticipation also of the tour refinancing of Danios Via and Danios what we call next year, a great opportunity for further improving our break even costs. The financing market remains very competitive. The capital structure of the company is very stable. The time to market outlook is positive. All this combined with the with a strong relationship with financiers, both existing and go way back as well as new ones, bring us great opportunities.

I will not pass on the presentation to what for the commercial market.

Thank you Iraklis. Q1 that progressively strengthened and market fundamentals were better than in Q4. There were both major drivers for this, such as increased sanctions pressure on the shadow fleet and the US trying to impact Chinese imports of Iranian oil.

As well as more localized drivers like the Kazakhstani increasing their production. This crude usually sails into Europe and volumes were so high in addition with European maintenance season that forced some of this crude to be sold in the East.

So this created a stretch to his max fleet and helped us to his max rate the firm. In Q1 we achieved a fleet YPC of $38,500 for operating day. With the utilization at 100%, we earn 38,000 on the VLCC and 39,200 for operating day on the Maxes respectively.

Moving on to Q2 guidance.

The market has continued to trend higher. opex plus surprised the market and began unwinding their cuts at a faster than expected pace. And the expectation is that this unwinding will continue at a similar pace, a lot faster than the planned from opex. This, along with continued focus on Iranian exports have given support to the already healthy markets. On the back of this, we have consistently improved, in their market fundamentals, and we've seen rates trend higher over the course of the quarter.

We discussed previously in many of our quarterly presentations our preference to triangulate and optimize our VLCC, and we continue to focus on this generally. But this quarter we also fixed some AGE round voyage cargos when we felt that the earnings or the time charter equivalent was attractive and the market didn't have much room left for further improvement. Based on our triangulated averages. This week the VLCCs are coming off their short term low in the spot market.

What's encouraging about this is that it was a short term weakness and more so that it was the highest low point of the year, and we consider that quite a positive signal.

Suezmax has also came off quite a bit in the past week, but they've also bottomed and we see the spot market stabilizing and slowly firming, and we've seen steady increases on the paper market as well.

Our Q2 guidance stands at 70% of the 2% of the LTC spot days at $46,700 per day. And 64% of Suezmax are paid at $50,600 per day.

Moving on to slide 12.

Well, we continue to outperform the market with our superior fleet and the strong chartering department. And you can see from the charts that the delta really grows when the market firms, and we can take, we can make use of our nimble fleet to possession aggressively and take advantage of our short term tactics. This is an advantage that, much larger companies with 50 shift fleets don't have that we do.

Moving on to slide 13, I apologize to keep showing you different iterations of this slide.

But we want to express our opinion again and again on this, and that the fleet development isn't only about age, but it's also about what percentage of the shadow fleet is of the total fleet and the difficulty that this segment will have in reintegrating itself in any potential peace deal between Ukraine and Russia or an Iran deal.

Because we do expect that in the potential future potential Iran deal that the flows will normalize on normal ships, and this shadow fleet being overaged, under maintained, and to a decent degree sanctions will have very difficult process to reintegrate, and we expect internally that there will just be extremely low utilization on this segment and growing in large segments of the fleet.

And then just looking at the age profile a bit closer, again we've said this in the previous call that it's hard to even have a bearish medium term view when 50% of the fleet of the VLCCs is over the age of 20 years old in 2028, which also coincides when you can have a new building deliver if you place the order today.

And the tightening supply side is one part of the equation, and we can split the sides, look at the oil fundamentals a bit as well. Over the past years we've seen a period of tightening balances and reducing inventories. And now we may see some slight inventory builds or, a flat market. This potential near term surplus is driven by a rising production both from Opex.

As they unwind the cut faster than we expected, as I mentioned earlier, and also from growth in non-opus producers. Geopolitical uncertainties continue to affect the short to medium-term outlook, particularly around trade flows and sanction dynamics. And the longer term setup looks really constructive.

Demand is expected to grow, led by emerging markets, especially India, and we also see the possibility for strategic stockpiling, which is helped by a low oil price and it's favorable for curve, a weaker dollar and the requirement to refill the SPR in the United States as well. This surplus in the market which is potentially coming, will need to be cleared, and this will be done on long haul voyages, which means that to mile demand continues to rise.

A moving on July 15, the current supply side story is increasingly supported for tankers.

Opex is actively adding barrels back, which the market didn't expect and wouldn't have assumed if you had discussed with oil analysts at the beginning of this year.

We've already seen 800,000 barrels per day returned between May and June, and with more expected through 2026 until they reach their 2.2 million barrel projected unwind capacity.

At the same time, we have offshore and unconventional products from projects from non-OPEx producers, particularly in the US, Brazil, Guyana, and Norway, wrapping up and projected to bring over 2 million barrels per day of incremental production.

Importantly, The latter are long haul barrels moving from the Atlantic basin to Asia, adding significant 10 mile demand and supporting the utilization. Looking at utilization a bit more closely, we can see that it is already quite high. Real utilization, according to sources, has recently hit around 90%. And with higher Middle Eastern voltages over the summer, we could see that number rise even more.

Last time we saw utilization levels around this percentage was 2015 and the VLCC rates were trading close to $70,000 today.

At the same time, and as discussed previously, we have we have structural constraints, the shadow fleet that is growing older and less compliant, while the mainstream fleet isn't growing meaningfully to offset this.

So we're in a situation where rise in supply and trade demand are being met by a fleet that is already a near full employment. This is the type of setup where we think that the rates can move sharply and sustainably high.

One focus we want to, for this quarter is Iran, which remains the key wild card. And we think that the recent developments have been particularly interesting and perhaps one of the scenarios which may be an outcome hasn't been as widely considered. We discussed over the previous quarters the positive drivers of a maximum pressure campaign.

And that would require replacement of non-Iranian barrels to the market and primarily to the Chinese market, and this would increase freight because it would be demand for Normal, the normal fleet rather than the shadow fleet. But we haven't really discussed why a potential Iranian deal may be even more bullish, because to be honestly, we didn't think that an Iranian deal would be possible, and the progress has been actually surprisingly quick so far, but obviously it's not a finished deal yet.

I think an Iran deal would bring back. The most important export of Iran, which is oil and gas into a US denominated trade. And this would immediately engage the normal fleet, so the shadow fleet will no longer be used for this trade because it wouldn't be compliant. Due to sanctions, due to insurance, due to flagging, due to classification. And they would have to substitute the normal fleet for this.

Iran is currently exporting slightly over 1.5 million barrels, and we assume that in a potential deal and due to the increased efficiency of the trade and also the higher demand for Iranian crude, we could see this production increase, and that's, one deal to see per day. This is an additional catalyst that will be very positive for the freight market. But we also think that the Iranian national fleet will also have to renew their vessels. I mean, the average age on their vessels.

It is very high. The ships are under maintained, and they must be near the end of their economic life. So we really think that The the replacement of the NITC fleet will give a lot of support to modern asset values, especially for VLCCs like this and sacs that we have in our fleet.

And for sure they're going to want a portion of these ships to have immediate delivery and not be new buildings, so owners and companies that have ships available for sale will obviously see the most interest.

From, this type of purchasing. But if we look at, if it doesn't materialize and we see an opposite scenario. It's also supported where we see stronger secondary sanctions. For the first time, the US is focused on sanctioning. Chinese refiners and Chinese. Farm And if this continues, it could limit the Iranian ability to export to China due the logistical problems. And again that would boost the employment. So these two new this one new scenario is interesting and. I think either a maximum pressure scenario or a The deal scenario are the most likely and kind of forgetting about the Iranian problem and the status quo remaining to me seems the least likely.

That's all for me and thank you for listening to our Q1 presentation, and we're happy to answer any questions.

Thank you. If you have any questions today, please submit them through the webcast.

So we already have a few questions coming in. Let me try and organize this. The first one comes from, Liam Berg at the Briley, three different questions, maybe the first one is for BMS.

You expect the same terms on the refinancing of the 3rd VLCC out of, saving lease tax.

Yes, we are, we're actively, working on, securing, the financing for the care. I expect it to be in, similar, if not better terms than the ones we have announced to be announcing to me yes.

Then a couple of other questions. Suezmax rates benefiting from the increase in non-Opex class crude production?

Hi Liam, thanks for the question. I think that the main driver of the Suezmax rates, which we touched upon was that the Kazakhstannis have been previously cheating on their opexplus production, but currently, I guess, producing it within their the guideline, but this increased production of Kazakhstan's crude which usually sells into Europe, and was able to be arbitraged into Asia, and this happened, I think mostly in February and March and a little bit of April. So you saw a lot of Suezmax is taking this CPC crude that usually sells into Europe and taking it much further to Asia. And because the Suez Canal is still closed for this trade, you saw Suezmax having to sail.

From the Black Sea through the Mediterranean around Africa and Asia. So it really stretched 10 miles as opposed to the similar voyage that was going to Italy or France, and it displaced a lot of ships. And I think that that was one of the main drivers for why this. The suezmax had a big jump late in Q1 and early in Q2.

I think This the op plus increasing production quite quickly and dropping their the OSP distorted a bit these arbitrages so currently this arbitrage from. The Kazakhstani crude to go east closed. But I think that once the local pricing of different crews balances out, we'll see that our creep back open again and see more ships going that way so that'll be supportive on Hama.

One more fallout from, Liam. Although rates were lower year over year, they still remain elevated. Understanding geopolitics, remains a risk. How do you see the rate environment, the balance of 2025?

Overall we're optimistic on the balance of 2025. I think that We've seen the markets are slowly, beginning to simmer and we're going towards the boil, so I think that we don't need much more momentum to really push us into a stronger bull market.

And I consider that quite a likely outcome. So you know you can see from our fleet that we remain 100% spot focused. And We think that there's potential for us to capture more upside, and we're waiting to do it hopefully in the second half of this year.

We have one more question from, Benedict, for the Ningness at Carson's.

So besides the management of geopolitical risk, there is quite a meaningful reduction in margin on the new financing. Are there other facilities where you can refinance at these terms without penalties? Are these the kind, of terms we should expect for the ocean view refinancing as well? I, I'll take that one, Well, to answer simply, other than, the two, the I in the despotico, we have no penalties to refinance any of our other vessels, earlier, so, these two vessels, the purchase options kick in about a year from now.

And the What we see today with the current financing is that it Encourages a lot that. This, we, what we can achieve is very meaningful with regards to the ocean view refinances as well. So if we were to do those transactions today, I would expect that, we should be in a position to achieve similar rates, yes.

We have another question from, Frederick Diwat attorneys.

What would you like to see happen in the term market for you to consider TC coverage?

Hi, Frederick, thank you for your question. I think that TC coverage at the moment is generally.

It's a relatively good levels and there is demand for, both shorter and longer term PC exposure from the charters. For us, we still think that asset values and expectations of spot earnings. Are quite a bit higher and that the PC rates need to move up to cover that GAAP. I do think we'll get there and I think there will be opportunities.

For owners to put on some DC coverage and attractive rates once charters are able to really make a really strong profit on that first voyage, I think that that's generally a good driver for longer term TC, 1year to 3 year TC business where the first voyage can really be profitable and for from the charter's perspective decrease the risk for the balance of the TC series. But I think we're quite a bit closer to what we find interesting, but there's still a GAAP at the moment.

I think we have time for one more, Peter Hogan, from ABG.

There are reports of stronger prices for older tankers, around selling at 20 2007 built at 48 to 50 million. In the case of an Iran deal A, what should we expect for this market, and B, how would that impact on your tonnage?

Hi Peter, thank you for the question. There has been a, I think. Where towards the end of last year, it seemed that at least, especially for the older sized vessels values had kind of plateaued for the VLCC size and segments.

As this year has moved on and with the sanctions placed by the Trump administration on the various Iranian affiliated shipping companies and ships, we've seen that there's been a strong bid for older tonnage and that this price, they've really moved up. We continue to think that that has more upside as The Iranian fleet is limited by all 5 sanctions and their ability to trade effectively.

But in the case of an Iranian deal, I think that the real upside is to newer vessels because once you're in a compliant business, you need to be able to adhere to all the different rules and regulations and the value of, having efficient eco tonnage, potentially with rubber will be much bigger, and these are not speculative investments done by.

Traders That like the Iranian affiliated traders for 1 or 2 or 3 voyages until the ship breaks down and they abandon it somewhere or use it for storage. This is a strategic national reinvestment for the Iranian national Iranian tanker fleet. So I think that the big upside would be on younger tonnage, and there is already quite a bit of interest on younger the VLCC tonnage. And adding a strong and, immediate buyer like this could really maybe push prices up to levels that you had always been guiding they would reach.

Okay. I think that covers it for today. We look forward to touching base again in August.

Thank you.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.