StealthGas Inc (GASS) 2014 Q4 法說會逐字稿

Good day, and welcome to the Fourth Quarter and Full Year Results 2014 Conference Call. Today's conference is being recorded.

At this time I would like to turn the conference over to Mr. Harry Vafias, CEO and President of StealthGas. Please go ahead.

Good morning, everybody. Thank you for taking the time to attend our conference call and webcast to discuss the fourth quarter and year end results for 2014. My name is Harry Vafias. I'm the CEO of StealthGas, and joining me on the call today is our Chairman, Michael Jolliffe; and Mrs. Fenia Sakellaris, who will be presenting the Company's financial performance at the later stage of our call.

Before we briefly present our today's agenda, I would like for all of you to be reminded that we'll discussing forward-looking statements, and based upon the current expectations. If you could all please have a look at our disclaimer, slide 2 of this presentation.

Let's proceed in summarizing today's topics as outlined on slide 3. I will begin with an overview of our Company's highlights for the year. Then I'll discuss the financial performance, and provide an update on the LPG market. Finally, after a close look at our shares performance in 2014, I will share our view on our Company's outlook.

I would like you to know that all amounts, unless otherwise clarified, are implicitly stated in US dollars. Let's move to slide 4 in order to recap our Company's key highlights for 2014.

With regards to our fleet operations, we had a delivery of five newbuildings. In addition, we sold two of our middle-aged vessels, which were then leased back by a company on a bareboat basis. Although we sold the vessels at a gain, this gain did not show up in our quarterly results, as it will be amortized over the next four years.

The sales and leaseback left us controlling a fleet of 47 vessels, 45 of which are 100% owned by us. Continuing our proven strategy, period charters to reputable clients, fleet employment including spot voyages, reached 85%. The following of a narrow lean hierarchy and tight control allowed us to report costs as low as possible. And although we did face some increases early on in the year, in the fourth quarter we managed to contain the operating expenses.

In that regard, let me add that we are running a tight ship, and we believe we are running these vessels cheaper than most of our competitors, which especially in the difficult market, is very important.

In addition, our G&A costs and management fees compared very favorably to other public shipping companies, whether they manage vessels in house, or through third-party managers. Our daily technical management fees have not increased for the past eight years, since 2007, and at an average of $340 per day, per ship per day, are amongst the lowest in the shipping industry.

With regards to financial highlights, we navigated through a difficult market environment quite successfully in 2014. With an increase in our net revenues and assets, gearing fell to 34.4%, while our unrestricted cash balance stood strong at about $130 million.

As far as our financial strategy is concerned, we successfully concluded follow on capital raises of $115 million, which took place in three different stages, and my family participated in two of these. Moreover, in November 2014 we reenacted a share buyback program in order to give value back to our investors. So far our Company has bought back about 1.5 million shares, and almost reached the initial threshold.

Today we decided to increase that buyback program by another $20 million on top of the previously approved $10 million, in order to support our shares and give value back to our shareholders.

Looking at our Company's positioning against peers in slide 5, it's evident that StealthGas remains the leader in its segment. Our Company has the highest number of owned vessels, almost double the size of our second-largest competitor. We also have in line the biggest order book compared to company peers, all of them in the best possible yards for these types of high-tech ships.

In terms of our average fleet days, it was reduced in Q4 2014 to 10.9 years from 11.3 years in Q3 2014.

Slide 6, it presents our fleet employment. In terms of charter types, out of a fleet of 45 ships and as at the end of 2014, we had 14 of those on bareboat, 24 of those on time charter, and seven in the spot market. The two vessels that are chartered in by our Company, the Gas Cathar and Gas Premiership, are also on time charters.

We have 11 contracts that extend beyond 2017, seven of which run up to 2022. Based on ongoing contracts as of the end of 2014, committed revenues amount to $220 million.

For the year 2015 we have secured $90 million, translated to fleet coverage of 65%. For 2016 the secured income is $43 million, with a fleet coverage of 30%. While for 2017 we have secured $27 million, with a fleet coverage of 15%. Overall it's worth mentioning that 72% of all secured revenues will be received within the period 2015-2017.

Looking at the chartering activity for January 2015, we managed to charter out our single crude oil tanker of our fleet for a period of five years with a floor rate and profit split above [a certain] level. In addition, we managed to extend the time charters of three newbuildings to be delivered the second quarter of 2015, from two years to five years.

Looking at our client base, it's evident that our Company strives to maintain long-term relationships with reputable energy companies.

At this point I would like to dedicate the next couple of slides to discuss further our fleet and our expansion plans. With regards to our fleet trading, presented in slide 7, currently 55% trades in the Middle and Far East. 25% trades in Europe, and 20% in South America. We have dramatically increased our presence in South America in the past 12 months as a result of increasing product supply coming out of the US and Brazil. However, the Far East still remains our major trading region.

Proceeding to slide 8 which demonstrates our fleet breakdown and development plans, by the end of 2014, our 45-vessel fleet was comprised of 41 LPGs and 4 tankers. With our newbuilding additions, by the end of 2015 we will reach 55 ships. While by the end of 2017, the fleet will be comprised of 61 ships fully owned, and 63 vessels controlled.

Slide 9 presents our capital expenditure program. It's worth to be noted that our Company is aiming for fleet renewal with investments in modern quality eco-vessels able to achieve significant OpEx savings. As evidenced by the table to the left, for the total of 15 newbuildings expected until 2017, we have committed $432 million. The majority of these vessels will deliver within 2015. One vessel not included in this analysis has already been delivered at the beginning of January. And in 2017 we expect to receive four semi-refrigerated vessels of larger capacity, for which we have committed 50% of our total CapEx.

It's important to say that these vessels are of 22,000 cubic meter capacity each, semi-refrigerated, making them more versatile and ideal for medium haul transportation of LPG and petrochemical gases.

As presented in the capital expenditure analysis to the right, $79 million out of our CapEx has already been paid as equity advances, another $154 million is committed bank debt, while a further $125 million is debt under negotiation. This leaves us with about $75 million of equity funding requirements.

Taking into account that cash in our balance sheet stands at about $130 million, StealthGas is already in a comfortable position to equity finance these future CapEx requirements.

I will now hand you over to Mrs. Sakellaris for some brief comments on our income statement, fourth quarter, and then year, as well as our balance sheet for the year 2014. And later I will discuss the market and industry outlook.

Thank you, Harry. Good morning, everyone. So let's start presenting our financials on slide 10 where we see the income statement for the fourth quarter of 2013 and 2014, respectively, as well as the yearend results.

Focusing on the quarter results, particularly 2014, we see that our voyage revenues amounted to approximately $35 million, marking a 9% increase compared to Q4 2013. This increase is attributed mostly to the addition of five newbuildings in our fleet.

In terms of voyage cost, we see a $185,000 increase this quarter. We had a few more vessels in the spot market.

Net revenue came at $31.5 million, higher than last year's by approximately $2.7 million, corresponding to 90% of voyage revenues for the period compared to 89.6% in Q4 2013.

Our running costs increased to $11.5 million from $10 million last year, mainly because we added three newbuildings in Q4 2014, plus two vessels coming off bareboat charter.

Drydocking costs were nil in this period, since in 2014 only one vessel was drydocked, in Q1. Whereas in 2013 a total number of seven vessels were drydocked.

Depreciation charges remained fairly stable in terms of net revenue percentage, but marked an increase since five new vessels came onboard. The item that heavily burdened our Company's operating income this quarter was the impairment losses of $6.2 million incurred as we intend to scrap some of our oldest vessels within 2015, and to be prudent, proceeded to marking the value down to scrap value.

However, and as will be indicated below, excluding this impairment, loss which is not a cash item, our operating performance actually improved in the last quarter of 2014.

Based on the remarks above, operating income for the period was $1.9 million, reduced compared to Q4 2013 by $5.7 million.

Looking at finance cost, charges for the quarter came in at $2.3 million, fairly the same level as Q4 2013.

Other income line includes mainly income or losses from FX, and interest rate derivative instruments. The loss increase compared to last year's quarter, we faced the change in the fair value of an FX instrument whereby with hindsight we prematurely hedged some yen payments. Based on all of the above, we reached a net income loss for the quarter of $1.2 million.

Earnings per share for the quarter was minus $0.03 on 43.4 million outstanding shares, compared to $0.17 on 32 million shares last year.

Looking at adjusted figures derived from the exclusion of non-cash items, such as impairment losses and derivative gain or losses from net income, we reached an adjusted net income of $5.9 million for the period, which corresponds to $0.14 per share, compared to $0.16 per share last year, despite a 35% increase in the number of shares outstanding.

I will now briefly comment on our year-end results. Our Company achieved a net revenue of $117.8 million, marking a 10% increase compared to last year. Compared to 2013, we increased our fleet operation utilization to 93.3% from 92.3%.

Income from operations marked a $6.1 million decrease from last year as a result of impairments. In relation to other P&L items, we would like to note that the increase in finance cost for the year is mostly attributed to higher commitment fees.

Adjusted net income for 2014 was $18.9 million, compared to $18.7 million last year. This corresponds to $0.48 per outstanding share on 39.3 million outstanding shares, while in 2013 adjusted earnings per share were $0.66 on 28.3 million shares.

Having completed our income statement analysis and before looking at our balance sheet, I would like to proceed to slide 11 in order to discuss some operational data, which will give you a better understanding of our financial performance.

In the fourth quarter of 2014, we managed to increase our fleet utilization to 99.8%, while our operational fleet utilization marked a small decline compared to last year, due to the increase of spot market days. Overall for the year, our Company performed better, as 2014 operational fleet utilization was 93.3%, which is 1% higher than 2013.

Proceeding to our average daily results for Q4 2014, our adjusted time charter equivalent dropped to $8.6K from $9.2K last year. This decline is attributed to market conditions and declining freight rates. Therefore some charters that took place in 2014 were lower than prior year's. The adjusted time charter equivalent 2014 was less by $150 compared to $9,083 for 2013.

I would like to briefly comment that the trend for declining rates suppressed our revenue base, even though the operational characteristics continue to stand strong. We have high rates of fleet utilization. And given our Company's strategy to preferably hire our vessels and time charters, we have a low number of spot market days. It is therefore evident that when the market conditions improve, our revenues will also increase.

Our adjusted total operating expenses followed an increasing trend in 2014. In Q4 2014, they were 4.5K while for the whole of 2014, they reached a value 4.8K. The main reasons for this increase are the operation of more vessels compared to last year, the fact that the number of vessels commenced trading in South America which is one of the most expensive trading areas, and the number of all the vessels requiring repairs, especially the previous quarter.

By excluding the operational costs of the new vessels, and assuming the same number of vessels and hire types as in Q4 2013, we get that we have actually less than 3% increase in total daily OpEx costs, exactly the percentage increase we got year on year in the fourth quarter.

This fact shows that our Company followed the successful cost-containment strategy. I will now comment on the balance sheet analysis. So let us have a look at slide 12.

As a general comment, I must say that our balance sheet depicts a growing and financially healthy company. On the asset side, the key [point] is obviously our expansion plan. Due to the addition of the new vessels, vessels value increased to $709 million, which corresponds to 75% of total assets.

Advances for vessels marked a 26% increase compared to 2013, as we expect delivery of a further nine in 2015.

A balance sheet item I would like to spend some time to comment on is our cash and cash equivalent balance, which marked a 50% increase compared to 2013, amounting to $129 million. One reason for this cash increase is the $115 million proceeds of three (inaudible) share offerings that took place this year, which increased our equity and consequently the Company's cash balance.

In 2014, capital expenditure of $130 million were recorded, based on the advances of $48.4 million, and vessels acquisition of $81.4 million.

Loan repayment totaled $17.2 million. All of the above, including the operational costs, were met by the Company's operating cash flow, proceeds from sale of vessels, and retained earnings; all signs of a financially healthy company. Consequently, these equity proceeds can be used to fund future CapEx requirements.

I will commence the analysis of the liability side by analyzing our outstanding debt balance. As of year ended 2014, total outstanding debt of our Company amounted to $325.5 million from $352.9 million in 2013. This year's drawdowns realized in relation to the finance of newbuilding deliveries came out to approximately $48 million, while repayments of $75.2 million.

Within Q4 2014 we repaid $43 million, including a $19 million voluntary loan repayment, and $40 million for two sold vessels. Our outstanding loan balance is bound to increase in 2015, due to the delivery of a further nine newbuildings in the months to come.

We expect by the end of 2015 to have a total outstanding debt of over $430 million, while our asset base will have surpassed $1 billion.

Our capital base marked an increase this year of more than $100 million, mainly due to our share capital offerings. I will now hand you over to our CEO, Mr. Harry Vafias, who will discuss market and Company outlook.

Let us proceed now to the market update in slide 13. The LPG market continues to grow, as is the main driver of LPG demand. The graph to the left demonstrates the percentage annual change of rise in imports for 2014. As noted, China's LPG imports grew by about 38%, Japan's by about 6.5%, while Korea's by about 30%.

It's anticipated that China's new propane dehydrogenation capacity will ensure that Asia will remain the main driver of the seaborne LPG trade.

From the supply side, US has become a major exporter of LPG, with 60% year on year export increase in 2014. The bulk of US LPG export is currently bound for Central and South America, but an increasing share is expected to go to Asia, adding to distance adjusted demand.

Slide 14 presents the evolution of LPG charter rates. At this point I would like to touch upon a very important topic affecting the shipping industry that of falling oil prices. Oil price decline began last fall with Brent oil dropped from $70 a barrel to the current level of below $50. The main reason behind this price reduction was a sharp increase in global oil production.

The new price regime in the oil market has naturally lowered the price of LPG and reduced charter rates until the market adjusts. As presented in the graph to the left, monthly rates for LPG vessels followed a declining trend in 2014. However, the [regional] LPG price spread has been less in other markets is driving investment in new export capacity, a fact which I believe might positively affect the LPG shipping rates in the near future. Based on current market sentiment, the oil rates for small LPG vessels are expected to remain stable.

Moving to slide 15 and looking at the pie chart to the left, we see the age distribution of the small LPG fleet. A key characteristic is that older vessels are a significant part of the total tonnage, about 17% of the fleet is older than 31 years. Given the fact the rates have decreased, it's anticipated the market trend will move towards increased scrapping.

Continuing to slide 16, we present some market forecast data. In terms of LPG order book, newbuilding deliveries are expected to increase during the period 2015-2016. However, the majority of ordering activity takes place in the VLGC segment, while for small LPG carriers, there are barriers to entry, as only a few yards in Japan have the capacity to build these ships and are currently fully booked until Q1 2017.

In terms of fleet utilization, although the broader shipping industry has been affected by larger order books, LPG vessels, including and the VLGCs are expected have a fleet utilization of about 86.3% in 2015, marking the highest coverage across any vessel type.

Share performance, I will now continue to discuss further our Company's outlook, commencing with our share performance for 2014. As evidenced in slide 17 by the graph and commentary presented, our share followed a declining trend in 2014, negatively affected by falling oil prices, mild weather and broader industry trends.

The Company's financial performance and share buyback scheme had a positive impact on our shares and investors.

In slide 18 we present selected peers share price performance along with the evolution of the price of crude oil for 2014. As evident, there's a strong correlation between StealthGas and competitors' share performance. Most importantly as observed, all shares followed the oil price trend, indicating how the declining oil affected the LPG and LNG carriers.

Proceeding to slide 19, we are presenting scenarios on our Company's performance for years 2015 and 2016, when the Company will operate a total of 57 and 59 vessels, respectively.

In general, I hold a conservative view on making predictions. But we supply a number of available scenarios. Historically charter rates for small LPGs have varied between $7,000 in poor market conditions, to $13,000 at peak times.

As evident from the table presented which indicates the effect of various time charter rates on our EBITDA, low rates narrow EBITDA potential. In addition, we present a conservative view on fleet utilization for the year, again, due to market conditions considering as a lower case for us to achieve a fleet operational utilization of 90%, while the upper case to maintain a fleet operational utilization of only 93%.

Our overall assumption is that all vessels are open and available for time charter. Based on all the above, and from a conservative standpoint, we anticipate seeing our EBITDA vary for the 2015 between $53 million and $75 million. While for 2016, our conservative view is an EBITDA variation between $55 million and $82 million.

In the optimistic case of improved market conditions, if charter rates climb in the range of $10,000 to $11,000 a day, we expect for 2015 to see an EBITDA between $85 million to $108 million, and for 2016 an EBITDA between $91 million and $121 million. And that is of course without all the vessels delivered, since the four bigger ones, the four semi-refrigerated ones, are only delivering after the beginning of 2017.

Proceeding to slide 20, on the final slide of our presentation, we consider valuation of StealthGas against comparable companies. As evidenced from the peer group, all companies trade at a discount to NAV, while asset values exceed current enterprise values.

In that respect LPGs carrier shares, including StealthGas, offer attractive pricing. Our shares trade at a discount to peer group. Since we are undervalued, we currently offer a very good entry point for investors.

I will now hand you over to our Chairman, Mr. Jolliffe, who will provide some concluding remarks.

Thank you, Harry. I would like to add that in spite of market conditions, we managed in 2014 to sustain a satisfactory financial performance. We will continue to secure cash flow through period charters, and to focus on controlling our costs.

In addition, we strive to continue giving value to our investors. Therefore our Board approved the extension of the program for share buybacks up to an additional $20 million. We believe that this will send a strong signal to the market that we are keen to support the stock price, and believe that we are greatly undervalued.

Our biggest focus is to materialize our expansion plan. Our healthy financial position of low gearing and $130 million cash base will assist our expansion strategy, regardless of market conditions.

Being myself more than 40 years in shipping, I have learned that regardless of market conditions, by having a strong balance sheet and low running costs shields you during the tough times, and that is what we have been doing since we went public some 10 years ago.

To finish, I will paraphrase the investor, saying never short a dull market. The unexpected fall in the price of oil may have resulted in a sluggish LPG market trying to adjust. But overall, the long-term positive fundamentals in the sector are still there, and there is still underlying growth that we believe strengthens the case for upside potential. Thank you.

We thank you very much for your attention, and we look forward to having you in our first quarter results. And of course now we can open the line for questions.

(Operator Instructions) Natasha Boyden, MLV & Company

Thank you, Operator. Hi Harry and Co. I've got a bit of sore throat, so only a couple of questions. Harry, the decision to start scrapping some of your older ships, is this really a rationalization of your own fleet, especially given the increased costs associated with their operation? Or as one of the largest LPG owners, are you sort of trying to set an example to your peers and competitors?

I think Natasha, it's a bit of both. Every quarter I get multiple questions about the older ships and why do we keep them if they don't make any money, and why do we keep them if they lower our utilization, and why do we keep them if they increase our running costs.

And so now with the market being worse than it was the last two years, and since the vessels have-- one of them is 25 years, and the other one is 24 years. And these are the two oldest ships. And scrap prices are still relatively high. We thought it was a good idea to proceed with the demolition.

Do you think that you might be setting a trend amongst your sector with that?

I hope. There are a few of our competitors that have even older ships than us. And us being the leader, if we show them that time is up for these ships and we need to give space for the younger and more technologically advanced ships, we hope that some will follow us.

Do you have some kind of idea of how much really needs to be scrapped in order to kind of rationalize the fleet and begin to push rates up?

As you understand, the fleet, the LPG fleet is not overbuilt like for example the bulk carriers. We are happy that our order book is only 10% of the existing fleet. Of course the more ships you get rid of, the better. But it's not a matter that we have to scrap a big percentage of these ships. Because do not forget, these very old ships do not compete with the young ships anyway, because they cannot load and discharge in all major controlled terminals.

Okay, great. Thank you, Harry. I'm just going to turn quickly to another question. You mentioned in the press release and in the presentation that you've increased your operations in Latin America and the Caribbean. Can you just clarify for me why operation costs would be higher on those routes?

Yes. It's a variety of reasons. One is (inaudible). One is supplying consumables. They cost two to three times more than in Singapore. And the ports that control and customs, they are much more slower and bureaucratic. All these things together lead to higher costs, lower utilization, and therefore to take to agree to fix our ships on contracts there, we need to see at least 10% to 20% premium than the rates we see in the Far East.

That's really helpful, Harry. I'm sorry I can't ask any more questions, but I'll turn it over. Thank you.

Jeff Geygan, Milwaukee Private Wealth Management

Good afternoon, gentlemen. Thanks for taking my questions today. For the Chairman of the Company, I'm a little curious, as you thought about rewarding shareholders who've been quite patient, you're buying in stock. What was it that made you decide to buy stock as opposed to employing a dividend again?

Well, I think that we're a shipping company. And the net asset value of our fleet is about double the share price. So it seems to me that at this stage of the Company's development, to spend some money on buying back our own ships at half their real value provides good value to the shareholders. And we'll hopefully see an increase in the stock price as a result.

We are also concerned in what is, as we explained earlier, a difficult market that to start paying a dividend again with the uncertainty of the oil price, which is something I think that surprised all of us, including the major oil companies. It is a dangerous thing to do, because once you establish a dividend, it is only proper that you can sustain it.

And since we cannot be sure that we can sustain the payment of a dividend in this difficult market, we felt that the best use of the small amount of spare cash we have, because although we have substantial cash on our balance sheet, as Harry explained during the presentation, much of this cash of course is there to pay for the newbuildings that we already have on order, and to provide of course working capital for what is a very substantial fleet. So we felt that the best use of the limited resources that we have is to buy back stock.

I appreciate that answer. I would just remind you that the shares have traded at a discount to NAV at varying degrees over the last five-six years that I've owned the shares. And it doesn't seem to me it's an all-or-none decision in that some of your returning of capital to shareholders could potentially be in the form of a smaller dividend, and the balance of that used at your discretion to buy in stock, agreeing with you that it is cheap, but just a thought from your shareholder base here.

My second question, Mr. Vafias, in putting these semi-reefs in place, what does that really telegraph to us in terms of the strategy on a forward basis?

Nothing really. We haven't changed our strategy. We are the worldwide leaders on the pressurized side. This is our core market. This is where we want to be. But as we discussed in previous calls, having four larger ships that can add to the distribution chain and for us being able to offer with brand-new ships to the OE majors, both medium-haul and short-haul gas transportation is a positive plus.

Don't forget these ships as of today, make about a million a month. Which is in excess of a 20% return on equity. So if the market stays as is when they deliver, they're going to, I think, add positively to the bottom line.

Well of course we're interested in those kind of return on equities. Does this further imply that you will add more of the larger vessels in the future?

I cannot predict the future, Jeff. You know us. We're very conservative. If the rates of the smaller ships stay as they are, the answer is no. If we start like seeing an improvement of the oil, or the price of oil starts going up and pushing rates up and we find a good opportunity, yes we might add one or two ships. But we don?t-- I don't think we're going to be a huge player in these vessels, not in the short term.

All right. Thank you. I appreciate your time today.

Josh Nahas, Fox Hill Capital

Hi Harry. How are you?

Hi Josh, are you well?

Yes, good. Last quarter you gave us a very helpful breakout of the older ships versus newer ships, what they were earning on the TCE. Do you have that information handy that you can give us?

You mean off my head, what's the difference between older and modern ships?

Well because in the 3Q [pres] you actually broke out of the TCE for the-- I think it was the 10 or 15-year-old ships versus the younger ships. So I'm just curious what that spread is this quarter.

Yes. I mean if we are talking about, let's say a five-year-old ship versus a really old ship, really old anyway, anything above 18 years of age, I would say the difference is 20%.

And what about the spread between say the 3500 CBM and the 5,000 to 8,000?

Modern ship or old ship?

Modern ship.

The difference would be between a 5 and a 3 1/2 would be $2,000.

Okay. On the funding slide, I just was comparing it to the 3Q slide. And it seems like the committed bank debt went from $170 million in Q3 to $153 million. So are the banks not willing to-- did they reduce what was committed?

Because I noticed the equity funding was $55 million in Q3 in the slide. And now it's gone up, because we've got less committed bank debt.

No, no. It's the exact opposite. Actually we have so many banks willing to finance, that we are holding off the drawdowns, because we have the cash, in order not to have to pay higher interest rates. The number you say it's different, is because it was one drawn down. So from $170 million of committed debt, we drew down $20 million because some ships did deliver. And therefore now the committed debt is $150 million.

Okay. But you are going to spend more cash equity funding was $55 million as of Q3. But so you're going not lever the ships as much? Is that it? Because now equity funding is $73 million, so I'm just-- that $20 million or so change where we're funding more cash equity than we were according to the Q3 slide.

No, no. I don't really understand what you're asking, sorry. As I said, we had the $170 million of committed bank debt for our newbuildings. We took delivery of the newbuildings. So the committed bank debt became bank debt. And therefore the $170 million became $150 million.

Okay. But then if you look at the slide, it gives you what your equity funding is, and it's $73.8 million. And if I just pull up the slide from Q3, it was $55 million was the cash equity funding portion. So I'm just trying to understand the bridge $55 million to $73 million. Does it just mean we're funding more-- we're just doing a lower LTV so we're paying more equity on the remaining funding? That's what I'm trying to figure out.

Sorry. I cannot answer that question. Unfortunately I don't have the information in front of me. If you want, you can email me the question, and I'll come back to you. I have no idea. With such a huge order book, I cannot obviously remember all the different draw downs and cash equivalents at any given point.

Okay, okay. We can follow up on that one. And just on the extension of the charters from two years to five years, can you give us any idea of what the rationale was and what kind of rate we're earning over-- obviously rates are pretty low right now. So I assume you've got to lock yourself in for five years on those charters, you got a reasonable premium to where rates are today.

Yes, yes. Very good comment. Actually we did it because these ships are special cases. They're the only ships in the world that have a special refrigerating capacity. And they are ice class as well. And therefore we got a rate which in today's environment is non-existent. We got 20% to 40% above market. That's why we did it.

Oh, okay. All right. And then just one last question. In terms of cash, what's the minimum cash working capital you need per ship, if you're going to buy back $20 million of stock, and you have $73 million or so of cash funding needs, what's the minimum cash you need to hold to fund your working capital per ship?

A conservative company in any shipping segment, especially if it has any ships in the spot market, needs to have a minimum $1 million per ship.

Regardless of size? So a VLGC and a Handy would need the same amount, or does it vary?

If I had VLGCs I would have more to be on the safe side. But any reasonable size ships, I'm not counting VGLCs that are very, very volatile. I would keep $1 million per ship to be on the safe side for a rainy day.

Okay. All right. Those are my questions.

George Berman, JP Turner & Company

(Inaudible), gentlemen. Thanks for taking my call. Quick question. The impairment charge you took on the ships to be demolished, is that the complete write-down to zero or are we going to get some back for the scrapping value?

We wrote them down with an estimate of about $350 or $380 per ton per lightweight ton. I think when we are going to scrap the ships we're going to get more. How much depends on market conditions. So we prefer to take a very conservative approach on price per ton, and hopefully book a small profit when we actually scrap the ships.

Okay, great. When do you expect to have first ships fixed in the US market? I understand that exports are beginning sometime early next year.

We have been asked this question multiple times over the last one and a half years, and we have replied, well we don't expect much US business because the majority of the US exports are on larger ships, and our ships are used in the second step of the transportation process. When we lighter the big ships coming from the US, and then we take the product to smaller ports in the Far East or in Europe or in South America. So we have done a couple of US voyages. But we don't expect the US to be a major hub for us.

Okay, great. Then I noticed that you've been very aggressive with your buyback program announced I think in December, and you've basically completed the first part already. At these low prices can we assume that you'll continuously aggressive buying back your stock here in the $6 or below $6 range?

George, we have proven through our actions, not only from what we say, but when we think something is cheap we chase it. So we announced $10 million in November. Within 45 days we had nearly spent the whole amount, despite our low daily share volume. And now the Board reapproved another $20 million on top, so a total of $30 million. And if that is spent, I guess depending on market condition and the Board's decision, we will hopefully add more to that.

I think $30 million is not a small amount for a company like us.

Especially if you end up buying back 4 million or 5 million shares. You've just recently issued about twice where it is now. I think it's a very prudent move.

Let me ask you an overall general question. In Europe in particular, interest rates are at times negative. Would it make sense for a company like yours to use leverage, especially if you have currently low interest rate environment, a little bit more, maybe not for the ships, but to buy additional shares back. Or is your industry such that even low rates mean 8%-9%-10%-12%?

We don't speculate on interest rates. That's not, as you know, my job. I'm not a financial expert. I'm a shipping guy. What we do is we try to give value back to our shareholders. To give you an example, in December the most expensive loan we had was on one of our product tankers. And we took the prudent decision to pay down the whole loan of about $20 million in order to reduce the cost to our shareholders.

So these are the things that we do. We have a very low cost base. Because of our balance sheet, we get new loans at very attractive levels, LIBOR plus 250, LIBOR plus 260. So very, very attractive levels. And this is what we do.

Speculating on interest rate and different currencies is not something we do. And we're not good at it. That's why we've lost money in the past with yen hedges.

And if I may add to that, I think that the problem also with traditional ship finance, I mean our ships are all financed with traditional shipping banks with first preferred mortgage finance. And of course these banks, as Harry said I think earlier in the call, are having to compete with each other to lend money to us because we have a strong balance sheet, and because we have low debt-to-equity ratios.

However, these banks would not be happy to lend money to us that we were going to use to buy back stock. And because of the structure of shipping companies in general, not just StealthGas, it is not possible to do balance sheet financing. All the financing that we do is financed as first preferred mortgage finance of the asset itself. And the shipping banks would not, I think, be happy to lend us money to use it to buy back stock, however attractive that may be.

So I appreciate the question. It's a good question. But that is the practical position.

Great. So in other words, you could not get a fixed rate loan at today's currently low environment. I appreciate you saying, not speculating in rates. But when rates are at zero or now even below zero, I would find it prudent if you guys locked in a huge chunk of debt at say, LIBOR plus 0.5 or 1-2-3%.

I wish shipping debt was available at those prices. It was of course in the distant past, during the days before the recession. Today, you're paying somewhere between 2.5% to 3% generally over LIBOR for shipping debt.

And it's not fixed?

It's not fixed. And there is no fixed rate in the business. Of course you can fix it by hedging it. But of course there you have a cost.

That costs money.

Exactly right.

Yes, yes. Okay. Thanks very much. And we look forward to a great future. I--

Hello?

I think we lost him. Anyway, thank you all for being on our call today. And we look forward in having you in our Q1 call in a few months. Thank you very much.

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