StealthGas Inc (GASS) 2009 Q1 法說會逐字稿

Good day, and welcome to the StealthGas Inc. first-quarter 2009 financial results conference call. For your information, today's conference is being recorded. At this time I'd like to turn the call over to your host for today, Mr. Harry Vafias, President and Chief Executive Officer. Please go ahead, sir.

Thank you and good morning, everyone. Welcome to our conference call and webcast to discuss the results for the first quarter ended March 31, '09. I'm Harry Vafias, the CEO of StealthGas, and I would like to remind you please that we'll be discussing forward-looking statements in today's conference call and presentation.

Regarding the Safe Harbor language, I would like to refer you to slide number 1 of this presentation, as well to our press release on our first-quarter '09 results. With me today is Andrew Simmons, our CFO, and if you need any further information on this conference call or presentation, please contact Andrew or myself.

Starting from slide number 2, we continue with our business strategy despite the uncertainties presented by the world economy today. And I would like to highlight how we continued with its implementation in the first quarter of '09 and later discuss the outlook for the remainder of this year and the decision we took today for the time being to suspend the payment of our dividend.

Our primary objective continues to run a highly efficient and modern fleet on secure employment contracts with first class charters that serves a very specific niche market that has no correlation whatsoever to most other shipping segments, many of which have and are experiencing significant downturns in both charter levels and vessel values.

At the end of March '09, our fleet numbered 41 vessels, 39 Handy-Size LPGs and two medium-range product tankers. Looking at '09, we are contracted to continue to expand our business. We took delivery of the Gas Astrid in April and she was deployed on a one-year time charter to a major Japanese-based client. Her sister, the Gas Exelero, will join the fleet in June and she too has been taken by the same charter for a one-year period.

These charters are new clients for us and we are very pleased to have commenced this commercial relationship with them. With the delivery of the Gas Exelero our LPG fleet will number 42 ships. We're also contracted to deliver two more product tankers, one in May and one in November this year.

Our second goal has been to maintain moderate leverage at all times despite the near fivefold increase in the size of the Company since October '05. After taking into consideration the total fleet (inaudible) 41 ships at the end of the first quarter '09, our net debt to capitalization ratio stood at 42%, which in our view, particularly in these challenging times, coupled with our employment, charter profile and overall quality of our charter, should hold the Company in good stead going forward.

Our third goal has been to secure and maintain a visible revenue stream with stable and predictable cash flows enabling us to continue to pursue a prudent growth strategy. As you might expect, given the significant uncertainties in today's world, we are finding charters currently less keen to commit to long period deployment on Handy-Gas carriers. So the number of days of fixed employment for our fleet in '09 currently stands at 67% of available days with 38% already covered for 2010.

As you would have seen from our results for Q1, our time charter equivalent rate was $7,344 per vessel per day compared to $7,652 in the corresponding quarter last year, which represents a drop of only 4% (inaudible) emphasizing the steadiness of the performance of our fleet even in these very difficult market conditions.

We have also again included an adjusted time charter equivalent on a blended basis in our slide presentation for both the LPG vessels and the product tankers as if none of the vessels were on available charter. This not only gives you a more realistic figure in terms of the average time target equivalent, but we have also adjusted the vessel operating expense line later in the presentation as if it were to be responsible for the operating expenses of all the vessels in our fleet.

On this basis the PC was $8,821 in Q1 '09 against $9,034 at the same time last year, a reduction of just $213 a day or 2.4%, which we believe is relatively positive given the current economic outlook and compared also to the rate of decline in some other sectors of the shipping industry.

We currently have 13 vessels in our fleet on bareboat charter which is the most secure in terms of operational risk, plus we are shielded from such items as banker, crew and maintenance cost as these and all other expenses are for the available charter's account.

Our fourth goal has been to own and operate a modern fleet of LPGs and in this respect our average age is 11 years, not including the four brand new product tankers and the six brand new LPG vessels that we are contracted to acquire between June '09 and 2012 which will only enhance our competitive position further in terms of average age to the industry average. The industry average is about 20 years.

It's our belief that charters in these challenging economic times will increasingly look for modern and efficient tonnage, so our modern fleet relative to the industry, in my opinion, is important as we move forward in this uncertain period we're all facing.

Our fifth goal has been to maintain close customer relations. The quality of our customer relationship is exemplified by a continued and consistently high fleet utilization and the quality of our charters which also lowers our counterparty risk. I'm pleased to say that to date, except the reported issue with the charter of the Gas Ice, that we continue not to have any issues in terms of charters performance. And as you can see from our balance sheet, we have where we are unsure of the credentials of a small number of charters taking cash deposits or bank guarantees to secure the hires.

Our sixth goal has been to maintain cost efficient operations. I'm pleased to report yet another good performance in Q1 of '09. Our net income breakeven level increased by just $134 to $5,559 per ship per day compared to $5,425 in the same period of 2008. The close and cost effective management of our vessel continues to be a vitally important area of operation for our company given relatively narrow margins which these vessels produce. And it's vital that we continue to keep a very tight control over these expenses going forward as I believe we have again demonstrated in the first quarter of this year.

Some of the cost pressures we have discussed in (inaudible), particularly crew cost and availability, continue to be a factor. But our prudent policy of operating a relatively high number of vessels on double charters continued to shield us to some extent in this regard as these costs are borne by the charter. But there's no doubt that crew wages and the availability of well-trained crews for our specific type vessels will continue to be a challenge going forward despite the fact we've seen some easing of that pressure in the recent months.

Slide number 3 -- this slide demonstrates the development of our fleet. By the end of the first quarter '09 we had a fleet of 39 gas carriers and two product tankers, thus solidifying our number one position in the Handy-Size LPG sector worldwide. By the end of '09 this will increase a total of 41 gas carriers and four product tankers as we are contracted to take delivery of these ships.

Commencing now in July 2011 following a recently negotiated delay without any financial penalty we are scheduled to take delivery of five LPG ships ordered by the Company, therefore in the medium-term expanding our fleet of LPG carriers to 46 vessels assuming no sales take place in the meantime.

StealthGas continued to solidify its number one ranking in owned vessels in the 3,000 to 8,000 CBM segment upon which we are concentrating. We continue to focus primarily on this segment because of its strong fundamentals coupled with the relatively stable rates that we have demonstrated that are continuing to obtain in this difficult period and a sizable order book and fleet growth compared to other size segments in the LPG sector and out of this particular sector.

We currently have a market share of about 14% and after the acquisitions detailed above we expect our market share to grow to about 17% further enhancing our view of growing position of some influence within the market. Also we believe that our move into the product carrier sector was and will be well-timed and we have continued our policy of deploying the vessels on secure medium- to long-term charters. We feel the vessels being on an available charter basis, which is as previously discussed, shields the Company from such risks as accruing maintenance and banking costs.

Slide number 4 -- this slide demonstrates our fleet deployment profile and provides you with the earnings visibility for each of our 42 current ships and the two product tankers contracted joining the fleet in May and November '09. At the bottom of the employment profile chart we have included the percentage of [workdays] fixed; this enables you to assess the stability and predictability of our earnings.

As you can see 67% of workdays already fixed for '09 and 38% for '10. The percentage of workdays currently contracted for is lower than we have seen in the past. Due to the current economic slowdown, charters at present are somewhat reluctant to commit for long period employment and are paying to hire ships more on the spot basis.

I'll now turn to the financial highlights of the first quarter '09. So I'll pass you on to our CFO, Mr. Simmons.

Thank you, Harry. Good morning, everybody. Now with the slide number 5 we turn to be financial highlights for the first quarter of 2009. With an average of 40.8 vessels owned and operated in this quarter we realized net income of $200,000 on voyage revenues of $29.2 million and produced an EBITDA of $8.6 million.

For the first quarter of '09 we reported a loss of $7.3 million on interest rate swap and currency hedging arrangements which included an unrealized non-cash loss of approximately $6.2 million and a realized cash loss of approximately $1 million, plus a non-cash provision of approximately $200,000 for a restricted stock portion of deferred stock-based compensation.

Excluding these non-cash items net income would have been $6.6 million or $0.30 per share. Our earnings per share for the fourth quarter of -- sorry, for the first quarter 2009 including non-cash items was $0.01 per share calculated on 22.2 million average shares outstanding.

Our net debt to capitalization stood at 42.3% at the end of Q1 '09 and we believe that maintaining our leverage at moderate levels is important, particularly in the challenging environment which we are currently operating. Plus by comparison, it these moderate when we take into account our period employment coverage and in comparison generated a majority of quoted shipping companies. It would also allow us to continue to prudently grow our fleet over the next four-year period.

We now turn to slide number 6. This slide provides you with an overview of the development of our income statement for five consecutive quarters. In comparing our results from the first quarter of 2008 to the first quarter of 2009, revenues have increased by 8.1%; EBITDA has declined by 40.8%, although this reduces to 33.1% if we exclude the one-off gain in Q1 of '08 for the profit on the sale of three vessels.

Net profit net of non-cash items in the aforementioned gain on vessel sales reduced by $2 million to $6.6 million compared to $8.6 million in Q1 of '08, thus producing an earnings per share of $0.30 per share. Given the current economic climate, the softening to some extent that we have seen in spot rates we are, as discussed earlier by Harry, reasonably satisfied with our operating performance in the first quarter of 2009.

Slide number 7 -- these are our operating highlights for each quarter of last year and the first quarter of 2009; it also provides comparison to the full years 2007 and '08. In terms of fleet data in the first quarter of 2009, we owned an operated an average number of 40.8 vessels and achieved 99.7% fleet utilization. Total chartered base for the fleet during the first quarter of '09 was 3,158 and we also had 501 total spot market days. This was a significant increase over just 28 days in the same quarter last year.

In terms of average daily results per vessel, for the first quarter of '09 we achieved a time charter equivalent of $8,821 per day per vessel on the adjusted basis, compared to $8,614 per day per vessel in Q4 of '08. Vessel operating expenses per day on an adjusted basis, i.e. no vessels on bareboat charter, were $3,736 per day compared to $3,724 in Q4 '08. We are pleased with this virtual net increase in the day-to-day running expenses and it's evident the measures we instigated to have even more stringent manner than on cost as a consequence of the overall prevailing economic conditions are assisting us in our ongoing performance.

As we have already discussed, we continue to strive to run our fleet in a very cost effective manner, concentrating extremely hard on operating our ships efficiently and safely, and this continues to be borne out by our very high fleet utilization. We also are pleased that our vessel operating expenses in Q1 of '09 were the same as for all of 2008. And while we expect operating costs to rise in 2009 as crewing still remains a challenge, we are hopeful the rate of increase in operating costs will continue to a abate as the year progresses, again due to the slowdown in the world's economic situation.

So on a cash flow basis our daily breakeven per vessel for the first quarter 2009 was $5,415 per day if we deduct the realized loss on derivatives compared to $5,051 in Q4 of '08. However, it should be noted that Q4 of '08 was significantly affected by the writeback of the bonus provisions taken in the first three quarters of 2008.

What is encouraging from a cost standpoint is if you turn back to the previous slide, is the relative stability of our vessel operating expenses and general administrative expenses. On a net income basis our daily breakeven per vessel was $5,558 per day in Q1 of '09 compared to $5,069 for the fourth quarter of '08, again reflecting mainly the significant decline in G&A costs in the prior quarter.

Slide number 9 -- this is our financial calculator. Using the input given on this slide are shareholders and investors can estimate our financial performance for 2009. This slide provides you with the revenues we would have secured as of today until the end of 2009 based on contracted revenues and the time in bareboat charters.

Total contracted revenues to date are $101.4 million which is 90% of total 2008 revenues, plus we have the variable (inaudible) revenues to be generated to those of our vessels with days that are not yet contracted for the remainder of 2009 and we've provided you with that number of days which is 5,723 as the fleet currently stands. So you can input the rate you wish to assume a vessel, not vessels not yet chartered will earn for the remainder of 2009 and you can calculate our projected performance for this year.

Thank you very much for your kind attention and I'll now hand you back to Harry for some further comments.

Moving on to slide 10, this slide shows the highly volatile freight markets for the large, very large gas carriers over the past seven years plus fair grades for the medium-size and the large-size gas ships. In comparison the medium-size and smaller semi-(inaudible) and fully pressurized ships, our core sector, have experienced a much lower volatility with steady growth in freight during some of the (inaudible) mid '05 (inaudible).

Although over the past month, since the economic crisis became a reality, there has been a lessening activity particularly in the longer time charter market as we believe charters, as I have already discussed, are holding back on fixing vessels long-term due to the global uncertainty.

However, it's clear from these (inaudible) type of ships which form the core of our business and that are far removed from dry wet over container markets have over the past seven years not experienced the wide fluctuations in rates that these other shipping segments have seen and we are hopeful that despite the world economic outlook, that this relatively nonvolatile trading pattern will continue to remain in tact.

We continue to expect that the supply of product will increase in the next two to three years plus demand is expected to continue to be buoyant, particularly in the far east and developing world. Therefore we continue to believe that the outlook for our core sector is encouraging and thus we will be continue with the development of our fleet to take advantage of this expected outlook as it becomes a reality.

Slide 11 -- this slide indicates that the freight rate evolution for 12-month time charters for our market. The figures are based on independent estimates by Lorentzen & Stemoco. As you can see highlighted in yellow, this segment is characterized by relative stability and rates have been steady over the past two quarters and will [depend] the forecast for the second quarter of '09 is at rates that will remain steady for the 3,500 pressurized segment and will drop by around 5% from the current levels in the 3,500 CBM semi-refrigerated vessels who tend to carry gases that are destined for more industrial type usage.

Slide 12 -- we continue to believe that the forecasted minimal fleet growth of the Handy-Size LPG segment in the year 2010 and the negative fleet growth in '11 at the time when several large-scale natural gas projects come on stream gives a fine and positive outlook for our core sector. There is an expectation that the supply of LPG product that must be shipped at this time will increase.

We continue to believe that this supply/demand access is very encouraging for our company and it's a virtually unique situation within the shipping industry, particularly given the conditions faced by many of the other sectors of shipping today. It is this important factor that undermines (inaudible) to continue to expand the Company with future acquisitions, thus positioning ourselves to take advantage of the expected positive market conditions in the years to come.

Slide 13 -- I wanted to include this slide for the first time to give by taking a sample of different types of listed companies and comparison of their price to net asset value compared to ours. As you can see from the slide, based upon data made available to us yesterday, we seem to present a very attractive (inaudible) to investors when benchmarked against these companies who do not benefit from the fundamentals that we have just discussed.

I believe that you will take another -- if you take another random sample of listed shipping companies you would see a similar picture on a comparative basis. We have taken very healthy companies, slightly healthy companies in order to be a fair comparison. I firmly believe that on this basis at least we are new to being valued appropriately by the market and this ongoing situation is also partly responsible for the decision to suspend, for the time being at least, our dividend which we will discuss further on the question side.

We have now actually reached the end of our presentation and we would like to open the floor to your questions. So operator, please open the floor. Thank you.

(Operator Instructions). Natasha Boyden, Cantor Fitzgerald.

Good morning, gentlemen. You've mentioned in your release that asset values have held up better in the gas carrier market than other shipping sectors. Can you perhaps provide some details, maybe even a percentage of how the asset values have declined in your sector, maybe vis-a-vis perhaps the other sectors? And then perhaps can you talk about has S&P activity improved at all in the LPG carrier market or is it still pretty much dead on arrival as you've mentioned in the past?

The price drops on the other segments -- you know them better than I do, so I will not comment on that. The price drops on the other segments, you know them better than I do, so I will not comment on that. The price drops in our ships -- for our ships, I'll give an example, a resale 5,000 CBM Japanese vessel was $23 million, $23.5 million, one and one half year ago and today is in the region of $20.5 million, $21 million. So you can get an idea from that. And on the -- what was the second part?

Just in terms (multiple speakers).

(multiple speakers) (inaudible).

Yes.

(multiple speakers) virtually nonexistent. You know there isn't again and the reason is that excluding the big players and the gas arms of big oil corporations, the smaller buyers that make those ships do not have finance and thus they find it very difficult to pay up $10 million, $15 million and $20 million cash to buy one ship. So this other thing will change very soon. I'll let the banks start relending money which everybody needs.

So let's look at perhaps then with the dividend suspension that you've done, it's obviously going to give you an extra $16 million, $17 million in cash. What is -- and you've obviously moved into buying product tankers and that perhaps may not be the best sector now going forward given the problems that the product tanker sector is having.

So what is your strategy going forward? Where do you think is the most attractive area for you to grow into right now? Or do you just think it's prudent for you to rein things in and sit on your cash and just sit there and wait for things to get better? Can you just tell us what is your strategy at this point?

The simple strategy doesn't exist. Firstly, I don't think it's the right time to buy anyway, so even if we had a bundle of money we would still not buy. So that's number one. Number two, anyway we will sit on the cash, wait and see. I think there are going to be very interesting opportunities from September onwards.

I don't think there are going to be very interesting opportunities on the gas side for the reasons explained because, A, the freight rates have not collapsed and, secondly, the values have not collapsed. So when and if we think it's the time to buy, we will probably not buy gas carriers and we will buy something else. Now what this is going to be depends on what will happen in the next six to nine months.

Can we assume you're probably not going to expand any further into the product sector, would that be a reasonable assumption?

No, I wouldn't say that because product tanker prices have dropped considerably and if you're lucky enough to find a relatively good charter that is not too bad of an idea.

And the order book doesn't scare you though?

It scares me a bit, but if you think that -- if you succeed in having a three- to five-year chartered then the order book will worry you five years down the line. And I don't think we will be worried too much five years down the line because of a lot of order cancellations, because of a lot of order postponements, and because of hopefully more scrapping on the tanker side.

Okay, and then moving on to a new build. Are we, on new builds, currently right now on track to be delivered on time?

Which new buildings, the product tankers or the LPGs?

Both.

Product tankers, I think we've already discussed that. One will be delivered this month or the next and the other one is end of the year. And the LPG obviously is on time since we delayed it anyway. So it will be ready on time anyway.

Right, but the one for the end of this year is scheduled to be coming in on time?

The product tanker you mean?

Yes.

From what we know, yes, now if something happens last-minute, obviously we will rediscuss.

Okay, all right, thank you very much (multiple speakers).

And I want to stress that especially these product tankers which are expensive ships have already been financed, so there are no worries about how we're going to pay for them.

Okay, great. That's very helpful. Thank you, Harry.

Mike Drickamer, Morgan Keegan.

Good afternoon, guys. Andrew, can you remind me what your cash payments are for the remainder of the ships to be delivered, when they're expected to be paid?

Yes, we have, as Harry just said, the Stealth SV coming in May which we owe around about $52 million on that ship, which is, as Harry said, financed partly with the remainder in cash and partly by a facility -- a committed facility from a Greek bank. Then we have $18.8 million to pay on the sister ship of the Gas Astrid in June, which again already has a committed financing on it.

And then the final product tanker in November of this year where we have the same amount to pay out the Stealth SV and again financed partly -- partly financed by cash and partly financed by a committed bank facility. And then we have no acquisitions at all in 2010 currently scheduled and then the five [Canray] LPGs that we've ordered which now commence in February of 2011.

Okay, and for the vessels for February 2011, is that a committed facility yet?

There's no facility on those vessels at the moment. It's a bit far out, we have one or two people who've given us a very broad brush indication that they'd like to look at it, but currently in this -- in the banking market it's difficult --.

Harry, you have that new slide in your presentation there on the valuation. I have my own theory, but I'd love to hear your theory as to why you think the Company is trading at such a steep discount to other shipping companies?

Why -- I didn't get your comment?

I was just wondering what your theory is as to why your company trades at such a steep discount to your other shipping companies.

Everybody knows that, Mike. It's very simple. It's not my theory, it's everyone's theory. The theory is firstly market cap; secondly, a very niche market that nobody cares about; thirdly, very little volume; fourth, very little fluctuation in day rates, so boring stock. I don't know, probably that's it.

So then what are you doing to address the issue? Obviously you're expanding outside of gas which expands beyond the niche that nobody cares about. What else are you doing to address those issues?

I don't think there are many things we can do. We've been on road shows. We've tried to explain that we are not a dry bulk company, that's why it is very weird that our share price is trailing the BDI index. It's very weird that nobody appreciated, up to yesterday, our very, very good dividend that was yielding in the few -- in the released month 17%.

Nobody appreciated that we grew 5 times the fleet without overblowing the debt side of things. So, if nothing is appreciated management has to see what it is going to do to add value in other says. So this cash that was destined to be a dividend, now it will be destined to come back to the Company and we will use it accordingly.

Okay. So you don't believe anybody appreciated the dividend and that's why you're no longer paying the dividend?

And I'm very happy that the dividend guys left the stock. I'm very happy that our volume is close to 500,000 today in a few hours of trading. This is a stock for people that understand this business, who understand the fundamentals. It is not a stock for people that just want 15% or 16% or 17% yield per annum, it's not for them. So I'm happy that the stock is down and these people are out.

Okay, so you were basically a stable dividend with stable rates, a very conservative stable company, and now you're looking to possibly expand away from that, moving into product carriers or other shipping segments where perhaps there will be more growth, but there will be a lot more volatility in your earnings?

No, I never said that. I said that I will sit on my cash and if there are very attractive bargains and we have the cash to spend and we have finance -- and I have to tell you that we are one of the few Greek companies that get financed today and we are very proud of that -- we will look to maximize the earnings and maximize this equity potential and we will do it when it makes sense. And no, we will not be more let's say gamblers, because if we buy anything again we will try to put it on long period as we did since day one with [SelGas].

Okay. Thanks, Harry. That's all for me, guys.

Doug Ruth, Lenox Financial Services.

Good morning, Harry. What is the right level of leverage currently do you think for the Company?

I really don't understand your question.

What amount of debt should be on the balance sheet? How should we look at debt to equity levels. What should be the right level of that?

In today's environment, as you know very well, the less debt the better. So I don't think there's a number that I can give you. Of course the less the debt in today's environment the better. Obviously I will repeat again for a company that grew from nine shipped to 50 in five years, I think that 40% debt to market value I think personally is a very reasonable level. If you look at other companies, public companies obviously, they have negative equity, which means that the debt is higher than the value of the ships. So I think that we are I think in a very, very good position.

Okay. And could you explain how the Company accounts for the employees? How come the employees aren't considered employees of the Company? The people that work on the crew?

As we've discussed many times and you'll see it in all our prospectuses and filings, StealthGas has no employees, we are very lucky about that. The only StealthGas employees are myself, the CFO and the Board members and one internal auditor to be exactly correct. And the rest of the staff are indirectly working for StealthGas. They are not paid by StealthGas, they are paid by the management company and we pay a fee per ship to the management company.

And you feel like that's the best way to handle that?

It cannot get any cheaper than that. And if you look at other companies that are managing their ships themselves or having the employees themselves, we are definitely between 25% and 35% cheaper.

Wow.

Cheaper meaning we have less cost, meaning cheaper.

Yes. And you continue to believe that focusing on the Handy-Size vessel is the right strategy because there's less volatility?

As you can understand, to give you an example, very large gas carriers' cost last year -- a new ship cost about $100 million and today is earning $6,000 a day. It has a non-inclusive breakeven of $35,000. So if you have one of these ships you're losing about $24,000 to $25,000 per day. Our little ships have a running cost of $3,000. So even in today's very bad market, when they're earning 6.5, 7 or 7.5, these little ships are making $3,500-$4,000 profit per day. I think that answers your question.

Yes. And what is the trend with the wages? Is there any relief on that?

You mean the crew wages?

Yes.

After last year, before the crisis, it was quite -- we were quite stuck because we had to increase wages on a regular basis because there was a lot of competition for high spec crews. Now we still have the same problem, but I'm happy to say that it's been relaxing a bit because a lot of crews that were running from one ship to another are now jobless because of many idle ships and because of many cancellations of new buildings and scrapping of older ships. So we feel still have this problem, but if the crisis continues we hope that the problem is completely solved in the next one year.

Okay. Thank you, those were my questions.

Ross DeMont, Midwood Capital.

Just a couple quick questions. Harry, is there a scenario under which the product tanker you're expected to take delivery of at the end of this year under which you might, I don't know, negotiate another solution and not necessarily take delivery of that, or even I suppose the Stealth SV?

Are you spying my telephone or something? I'm joking. Yes, of course, as always we try to find the best solution for the Company and our shareholders. And definitely we are discussing with the sellers and the charters, but we have not reached an agreement yet. So obviously we cannot disclose anything.

Okay, very good. And then just a modeling question . On I think page 9 you give us this financial estimator. What should we use as today's spot rate for a [40 to 50] CBM vessels?

(multiple speakers) It's the average, the [40 to 50] is the average size, if you want to be on the safe side use between 7 and 7.5.

7 and 7.5, okay. So that comes down to about $75 million of EBITDA. And can you just remind us on any other debt maturities or financing needs other than the cash which has to be paid for the Stealth SV for the sister of the Gas Astrid and if you take delivery for the final product tanker?

We need no other debt financing until 2011 unless of course we buy more ships.

Okay. For example the $52 million you owe on the Stealth SV, how much of that would be financed versus cash? Would it be 70% financed?

It will be about 50% to 55%.

Great, thanks for taking my questions.

[Sean Maloney], [Ship Management International].

Just really one question, Harry, looking at driving cost further down, how do you feel you're going to achieve this moving forward given the high crew cost? And I know you talk about that leveling out, although they're still very, very high. But also the low management fees. How are you going to control cost even more?

We have been successful in controlling cost the same as you have seen from our results, much or better than our competitors. If you see our competitors' releases in the last two years you'll see a very big steep increase on a per quarter basis. We were one of the few companies that not only kept the cost steady, but in many cases the cost fell on a per quarter basis and it's very simple, when you're on top of things you're hands on and you don't have too many third-party managers around the world.

Obviously you have a higher cost control and a much better cost control than, as you understand, having your vessels dispersed in three, four, third-party managers now around the world. And this is what we've done. As you know, the fleet is grouped in three different separate groups.

One group is managed by our in-house management company, the second group is split between two third-party managers and the third group is vessels and bareboat. And up to now this strategy has worked very well and I think it will continue to do so because we are on top of it. And we spend a lot of time on costs instead of only looking for future strategies and how to raise equity and those kinds of things.

Now on the crew, just answer that part of your question. We have been, again, pioneers in using crews from different areas of the world just to keep cost at bay. And because we have so many ships the crew -- the officers cannot blackmail us because they know that if they don't work for us they have to go and work for much smaller gas companies. They want to work for a big listed company and therefore in some cases they will accept 5% or 10% less to work for us than to work for a much smaller company that they won't know if it's around in the next nine months to one and a half years.

One last question, Harry. We're starting to hear very, very quiet talk about the (inaudible) recovery in the shipping market and certainly with China importing its largest ever amount of iron ore in the last three to four weeks and that's having an impact on tank size rate. What are going to be the drivers do you think to move your sets out of the doldrums and when will that happen? Also how concerned are you about the stability of your charters themselves going forward?

Number one, I don't think we are near the end of the (inaudible), so I wouldn't open the champagne yet, number one. Number two, the crisis started from the banks and will finish from the banks. China importing or not importing more dry bulk commodities doesn't really affect my business, it doesn't really affect the banks as you can understand, so it's a seasonal thing.

And lastly, as I told you before, our freight rates are relatively stable a drop-off of 10% is nothing compared to the 80% to 90% drops we've seen in containers and big bulkers. So I don't think my charters will have any problem because their losses, if any, are going to be much, much smaller than if they have very big tankers, bulkers or containers chartered in.

Thank you very much, Harry. I appreciate it.

Steve [Emerson], [Emerson] Investment Group.

Yes, for us who are not intimately familiar with shipping, when you take delivery of these two product tankers, based on today's spot rates or let's say charter rates, what kind of losses would you be seeing per day?

We have the vessels fixed, so you mean what kind of losses are chartered (multiple speakers)?

Okay, then my apologies for my ignorance. I didn't realize you had chartered out these vessels.

All of our vessels, especially the expensive ones, are chartered out. If the vessels were not -- let me fill you in, if the vessels were not charted then we will definitely pay the penalty and cancel the deal.

Okay. What are the penalties to cancel?

There is no penalty to cancel because the vessels are fixed, therefore we are not trying to cancel the ships.

Okay, got it. I've been reading that China, due to the decline in ship orders and cancellations, is going to be financing call it speculative shipbuilding to keep their yards full. In view of the fact that your sector is doing so well, have you been hearing about major builds coming in your sector?

Chinese Shipyards do not build gas carriers, so I think that covers you.

I'm sorry, I didn't catch that.

Chinese shipyards can not build gas carriers.

That's a great good answer.

It's a what?

No, that's okay. Now, what are the limitations or when might you be making a decision on buying back your stock in view of the table you gave us where your company is far cheaper than the assets?

I don't think we will be buying the stock back very soon, because number one, we don't think that this is the -- this is not the lowest price of our stock, number one. Number two, as I told you, we think there's going to be very interesting opportunities, as I said before, at the end of the year in other segments, not LPG. And thus we'll keep the cost and we'll see what we're going to do with it.

Okay, but however, it looks like now your segment is -- based on your stock is so cheap that it's a compelling value or are you going to wait until September or end of year to make that decision. If it's cheaper to buy your stock do you have the capability or the legal -- are you allowed to buy very significant amounts of your own stock in the Company?

Of course we're allowed. We're allowed to do whatever we like. But if you think it's so cheap, why don't you buy?

I have.

Good for you then. Then today you can buy some more because it's even cheaper.

Thank you.

Thank you.

(Operator Instructions). Mike [Trainer], Milwaukee Private Wealth Management.

Good morning, Harry, this is actually Jeff Geygan. On our last call when I asked you the question about suspending your dividend you were very hesitant to do that for fear that you would encourage a third party to come in and make a hostile offer for your company. Do you recall that?

That's true.

Okay. But today you have cut your dividend, so what has changed or do you anticipate that this action will in fact stimulate a third-party offer?

I'm not a prophet, I don't know if somebody will come. If somebody will come we'll sit and discuss. As you can understand from my slide number 13, as I will repeat again, we are one of the cheapest healthy stocks out there. So if somebody thinks we are indeed cheap and wants to discuss something our doors are always open.

I have said always when we were discussing the dividend and review with other investors I always said that we will be patient, but after a certain time limit. We've been patient for many, many, many quarters despite the fact, but except from two quarters the Company's stock was always trading below NAV, always, always. Always underperforming despite the fact that we kept all our promises and despite the fact that the profit and the income of the ships was always very stable.

So, since, as I said before, nobody appreciates this very good dividend, and since I was the biggest beneficiary of that dividend, I decided to sacrifice it and use the cash for a better reason which we're going to see in the next, as I said, six to nine months what that goal will be, I don't know.

Well, Harry, I appreciate that you may be the biggest beneficiary of the dividend, but you do have a fiduciary responsibility to the rest of us. So I trust that you will make decisions that are not only in your interest but the interest of all shareholders and if in fact your stock is so cheap maybe what's in the interest of all shareholders is to buy it back.

And what happens -- very good comment, Jeff. But what happens if the crisis doesn't finish and the charters of the product tankers go bankrupt, for example? What happens then?

Well, I'm not a prophet either.

Good. So as you can understand, because I've been in this business since I was 14 years old, I can tell you better to have the cash in the drawer in these very, very challenging times then immediately going back to your stock and have only $3 million or $4 million in the drawer because you never know what happens the next day.

That's true. You said you've been in the business since you were 14, but I should just clarify, how old are you now because the delta between 14 and today --?

Very good comment, I'm 31.

So you've been at it 17 years, right?

Correct.

Okay. Well, we continue to hold the stock. As shareholders we're a little bit concerned. We want to make sure that your use of that cash is prudent and that if the best prudence calls for buying in your own shares that you don't eliminate that for some reason that may not be obvious to us.

I have not eliminated anything, but we're not going to do anything with the cash for the time being as discussed.

Thank you.

Thank you. As we have no further questions I'd like to turn the call back over to you, gentlemen, for any additional or closing remarks.

We would like to thank everyone for joining us at our conference call today and for your interest and trust in our company. We look forward to having you with us again for the next conference call for our second-quarter and half year '09 results. Thank you very much, everyone.

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.