Pyxis Tankers Inc (PXS) 2018 Q4 法說會逐字稿

Good day and welcome to the Pyxis Tankers conference call to discuss the financial results for the fourth quarter 2018 call. As a reminder, today's call is being recorded. Additionally, a live webcast of today's conference call and an accompanying presentation is available on Pyxis Tankers website which is www.pyxistankers.com.

Hosting the call today is Eddie Valentis, Chairman and Chief Executive Officer of Pyxis Tankers; and Henry Williams, Chief Financial Officer.

I would now like to introduce Pyxis Tankers' Chief Executive Officer, Eddie Valentis. Please go ahead, sir.

Thank you, operator.

Welcome, everyone, And thank you for joining our call for the 3 months and year results ended December 31, 2018. Before starting, please let me draw your attention to some important legal notifications on Slide 2 that we recommend you read, including our presentation today, which will include forward-looking statements. Thank you.

Turning to Slide 3. Our results for the fourth quarter 2018 reflected a decline over the comparable period of 2017 in the context of a continued challenging charter environment, especially spot charter activity. This impacted our revenues and profitability despite ongoing cost discipline.

In Q4 2018, we generated time charter equivalent revenues of $4.4 million, about $900,000 decrease over the same period in 2017. We had a net loss of $3.4 million or $0.16 per share for the fourth quarter of 2018 versus a net loss of $1.4 million or $0.08 per share in the same period in the prior year. Note that 2018 results were affected by a $700,000 or $0.04 per share vessel impairment charge and higher shares outstanding by 1.94 million. Our adjusted EBITDA for Q4 '18 was $200,000.

In summary, 2018 was a very difficult period. Q1 started off on a positive note, but during Q2, charter rates steadily declined. By late summer, rates for medium-range tankers, MR, became extremely weak. During this time, we decided not to fix any of our tankers under depressed time charters and rode out an equally disappointing spot market. However, we did see a pickup in rates starting November, primarily due to seasonal higher demand and fixed 3 of our MRs under short-term time charters at an average daily rate of $13,300 per day.

Through the summer of 2019, we expect chartering activity to be choppy. However, starting in the fall, we expect the market to improve significantly beyond the historical seasonal upswing over the fourth quarter. The primary reason is the worldwide impact of the new IMO regulations regarding the use of low-sulfur fuels. These IMO-compliant low-sulfur fuels will be used by the vast majority of the maritime industry.

We recently fixed 2 of our younger MRs under time charters at higher rates averaging approximately $15,400 per day for 1 year with a charterer's options for an additional year at $17,500 per day starting Q2 2020. Our Pyxis Malou is just returning from a special survey with ballast water treatment system installed and will start employment under a 6- to 8-month time charter at $14,000 per day. These charters and the rest of our fleet activity is shown on Slide 4.

As of March 15, we had 44% of our remaining available days for 2019 covered, exclusive of any extensions. The MRs have an average daily rate of $14,800, which is 5% above the 10-year average for 1-year time charters. As you can see, our small tankers continue to operate in the spot market. We will continue to utilize our mixed chartering strategy.

Please turn to Slide 6 for a brief update on the product tanker market. A more detailed market overview is available at the back of our presentation.

Inventories of major refined products worldwide currently are near 5-year averages, except for high gasoline positions, which leads to an imbalance out of certain refineries. In the short term, we expect the chartering environment to be choppy due to seasonal softness, earlier and longer refinery maintenance programs, new tonnage hitting the market and the lack of arbitrage opportunities.

Turning to Slide 7. Overall, we expect a better and sustainable market starting Q3 2019. Our outlook is based on demand growth of 3% per annum due to solid global consumption of refined petroleum products and modest ton-mile expansion from the changing refinery landscape. Moreover, the MR2 sector will be the primary beneficiary of the new IMO 2020 fuel regulations which should provide incremental demand for our class of vessels in the context of tapering supply.

The MR2 order book continues to decline. And as of end of February, a leading industry source estimated the order book at 7.1% out of a worldwide fleet of 1,660 vessels. While 74 MR2s are scheduled for delivery over the next 10 months, new ordering activity has been low. In the last 12 months, only 43 MR2 were ordered.

Also historically, slippage has been significant. In 2018, delays in scheduled deliveries ran almost 18%. 21 MR2s were scrapped in 2018, and demolitions should increase as 7.3% of the global fleet is 19 years or older. Consequently, we believe net fleet growth will be in the area of 2.7% in 2019 and lower in 2020.

Turning to Slide 8. MR2 asset values have increased, especially for modern eco-efficient MRs, but have stayed slightly below 10-year averages. There continues to be attractive opportunities to acquire secondhand tankers in relatively modest to low prices and participate in the upward movement of charter rates. So our sector has positive near-term fundamentals, coupled with relatively attractive asset values, which we believe translates into an attractive entry point to enhance stockholder value.

At this point, I would like to turn the call over to Henry Williams, our Chief Financial Officer, who will discuss our financial results in greater detail.

Thanks, Eddie. Let's start with our unaudited results for the 3 months and year ended December 31, 2018, on Slide 10. Our time charter equivalent revenues for Q4 '18, which we define as voyage revenues minus voyage-related costs and commissions, were $4.4 million, a decrease of approximately $900,000 or 17.5% from the same period in 2017 as a result of a difficult freight market, greater spot charter activity and lower utilization. In Q4 '18, our daily TCE rate was over $9,600 across our fleet of 6 vessels with utilization of over 84%. Results of the small tankers negatively affected the fleet-wide results.

Turning to Slide 11. We incurred a net loss of $3.4 million for the 3 months ended December 31, 2018, or $0.16 basic and diluted loss per share based upon 20.9 million weighted average shares outstanding compared to a net loss of $1.4 million or $0.08 basic and diluted loss per share based on a lower share count of 19 million for the same period in 2017.

Despite good discipline with vessel operating costs and G&A expenses during the quarter, lower net revenue directly impacted the bottom line. Also, we took a further noncash charge of $700,000 or $0.04 per share to write down the carrying value of our 2 small tankers to their fair market values. Those results translated into adjusted EBITDA of $200,000 for Q4 '18.

Please turn to Slide 12, which reviews our recent fleet data by vessel type. Given the size of our fleet, changes in these metrics related to a single vessel in one reporting period can have a disproportionate effect on the total fleet operating results. Focusing on the most recent quarter ended December 2018, we would like to point out 3 key takeaways: the TCE for our 4 MRs averaged almost $11,100 per day; the average TCE for our small tankers improved slightly to almost $5,900 per day but negatively affected our fleet-wide results; and finally, fleet-wide daily operating expenses were $5,800 per day, an improvement of over 4% from the same period in 2017. On an annual basis, OpEx was again very consistent year-over-year.

Turning to Slide 13. We believe that it's important to review total daily operational cost to run and manage a public tanker company, including overhead. These costs vary by fleet composition, vessel delivery, company operating structure and management. We define total daily operational costs as vessel operating costs, technical and commercial management fees plus G&A expenses. For comparative purposes, we believe that the total daily operational costs of our Eco-MR2 tankers continue to be competitive within the industry despite our small size.

Please turn to Slide 14 to review capitalization as of December 31, 2018. During the year, we completed debt refinancings for 4 of our vessels in order to take advantage of a loan discount from one of our banks who is exiting the industry, enhance our balance sheet liquidity and extend debt maturities. At year-end, our consolidated leverage ratio was on par with other publicly traded tanker companies as net funded debt stood at $63.6 million (sic) [$63.3 million] or about 59% total capitalization. No balloon payments are due for another 3.5 years. 58% of our outstanding debt is either fixed interest rate or protection from rising interest rates.

With that, I'd like to turn the call back over to Eddie to conclude our presentation.

Thanks, Henry.

We believe that late Q3 2019 will be the start of a multiyear, stronger product tanker market, leading to improving charter rates, cash flows and asset values. Our current mix of time charters and spot exposures should help us manage a potentially tough environment in the short term and then position us to take advantage of increasing rates. We hope to utilize our cost-effective operating platform and deep management experience to take advantage of opportunities to enhance stockholder value.

In conclusion, we feel confident in the long-term industry fundamentals and are positioned to capitalize on future events.

I thank you for joining our call today and look forward to reporting on further progress at Pyxis Tankers.

Thank you. That does conclude the conference for today. Thank you all for participating, and you may now disconnect.