Pyxis Tankers Inc (PXS) 2022 Q1 法說會逐字稿

Good day, and welcome to the Pyxis Tankers Conference Call to discuss the financial results for the first quarter 2022. 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 is Mr. Eddie Valentis, Chairman and Chief Executive Officer of Pyxis Tankers; and Mr. Henry Williams, Chief Financial Officer of the company. I would like to pass the floor to one of your speakers today, Mr. Eddie Valentis. Please go ahead, sir.

Thank you, Dorothy. Good morning, everyone, and thank you for joining our call for results of the 3 months ended March 31, 2022. Just as the major economies were recovering from the latest COVID-19 variant, Omicron, earlier this year, the Russian invasion of the Ukraine commenced at the end of February. .

The war has sent a shock to the global energy markets and resetting personal, economic and strategic priorities as well as global relationships, especially here in Europe. While various governments have been dealing with the fallout from this difficult situation, the product tanker sector has been positively affected. The ability to effectively manage through these uncertain times is critical, so stay safe and strong as we try to overcome these challenges in the pursuit of a more normal way of life.

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 most recent quarterly results reflected the lingering effects from the Omicron variant on mobility and economic activity which resulted in a continuation of a soft spot chartering environment. Moreover, our results for the period ending March 31, 2022, were impacted by nonrecurring events, including completion of the sale of our 2 small tankers and the accidental grounding of 1 of our MRs, which resulted in reducing operating days for revenue opportunities.

For the first quarter 2022, we generated consolidated time charter equivalent revenues or TCE of $3.8 million, down 10% from the same period in 2021 due to lower charter rates and greater spot chartering activity from which we incur voyage-related costs and commissions. However, given the recent changes in the operating fleet, we believe it is best to focus on the results of our MRs as our fleet currently consists of Eco-MRs. Consequently, the TCE for our MRs in Q1 2022 increased 5%, primarily due to more operating days from the 2 vessels additions in the second half of last year, offset by lower charter rates.

We acquired the 2013 built Pyxis Karteria last July and 2017 built Pyxis Lamda at the end of 2022. We had a net loss of $3.7 million in Q1 2022, which was significantly higher than the same period in the prior year due to higher costs and the aforementioned factors.

Our loss of $0.09 per common share reflected an increased share count of 13.3 million for the most recent period. Our adjusted EBITDA for the period ended December 31, 2021, was a negative $700,000. Over the course of the first quarter 2022, the product tanker chartering environment initially and gradually improved with a recovery from the effect of Omicron, especially in the Western Hemisphere.

Greater economic activity was met with increased mobility with increased demand for transportation fuels. However, the outbreak of the Russian invasion of Ukraine at the end of February has shocked the world and lower markets. Simply, the disruptions caused by this event resulted in sanctions of Russian oil companies, which led to the rapid boost for the product tanker sector.

We are experiencing a significant dislocation of refined petroleum product inventories in many parts of the world, gas oil diesel deficits in Europe and low transportation fuel stockpiles on the U.S. East Coast. Refineries are trying to meet this increased demand, which has resulted in changing trade patterns, expansion of ton-miles, higher prices for oil products and increasing transportation costs.

As a result, our company has recently experienced a dramatic improvement in charter activity. More importantly, 67% of our available days in Q2 2022 for our MRs were booked at an average estimated time charter equivalent of $27,900 per day as of May 13.

While these recent events highlight the short-term opportunities and challenges facing us, we are optimistic about the longer term given positive supply and demand sector fundamentals.

Please turn to Slide 4 for information on our existing fleet and employment activities. As you can see, we continue to use a mixed chartering strategy of time and spot charters with a focus on diversification by charter and duration. Three of our vessels are currently in the spot market, and the remaining 2 vessels are under short-term time charters.

We have chosen not to call at any Russian port or carry any directly affiliated cargoes. We believe our chartering strategy provides a reasonable balance of risk and return, especially for a small company like ours. Next, please turn to Slide 6 for a further update on the product tanker market.

In addition to my prior comments about the market, the economic recovery for most of the world has been amplified by the [world] and geopolitical actions. The advent of increasing and severe sanctions against Russian exports of petroleum products have been met with low inventories in many locations, especially Europe.

Tight supplies for gas oil and diesel are changing trade routes and adding ton-miles to voyages by increasing exports from the refineries located in the Middle East, U.S. and certain parts of Asia. Improving traveling activity, especially with summer holiday season approaching only compounds the difficulties in replenishing gasoline and jet fuel inventories.

Surging natural gas prices are also forcing some utilities to switch to alternatives, such as fuel oil for power generation. In the meantime, many countries are focused on energy security, and we seek to replenish their strategic reserves, which only adds to uncertainty and constraints available supplies.

Please turn to Slide 7. Historically, seaborne trade of refined products have been relatively correlated to global GDP growth. In its most recent update, the IMF lowered its GDP estimates annual increases to 3.6% for this year and 2023. In early May, a leading research firm estimated the seaborne trade for refined products would increase 4% in 2022.

Even with the orchestrated release of crude from the strategic petroleum reserves of certain IEA members, current consumption outweighs supply. Scheduled production increase from OPEC class and to a minor extent U.S. Shale Oil will add supply as the year progresses. However, the imbalance should continue with tight inventories and high oil prices.

We are cautious that the implementation of stricter governmental monetary policies to combat record inflation may lead to further slowing of economic growth.

Moving to Slide 8. Over the longer term, we expect demand for the product tanker sector to be supported by refinery additions led by the Middle East and Asia. Drewry estimated that over 4.9 million barrels per day of new refinery capacity is scheduled to come online between 2022 and 2026, virtually all of which is outside the OECD.

Planned shutdowns, mostly in the OECD, may further contribute to the importing of refined products into these mature large markets and ton-mile expansion. Unforeseen events, such as the war, could lead to additional price spikes for products and shortages in various locations and create arbitrage opportunities in the spot market.

Of course, a possible wildcard is another variant of COVID-19, which would likely have a negative effect on demand. Let's move on to Slide 9. The product tanker supply picture, it's much clear as the outlook for MR2s continues to look very promising. The MR2 order book continues to drift lower. And recently, Drewry estimated that the overall order book at 7.4% and -- of a worldwide fleet of 1,615 vessels.

New ordering has been subdued as 35 MRs were ordered last year and only 2 in the first 2 months of 2022. 61 MRs are scheduled for delivery during the remaining 10 months of this year and 46 are scheduled for delivery in 2023. Moreover, due to the recent surge in ordering of new containerships, gas carriers and dry bulk vessels, many Asian yards, don't have available construction slots with deliveries until 2024.

[A known] decision-making process for tanker new ordering is further complicated by ongoing developments in ship and engine designs, stricter environmental regulations, a rapidly escalating shipbuilding costs and evolving and still unclear selection and the availability of lower carbon fuels.

Demolitions are continuing at a brisk pace as 33 MRs were scrapped last year and already 7 in the first 2 months in 2022. This rapid increase is a function of near picked scrap metal prices and financial headwinds facing the operation of older less efficient vessels due to new environmental regulations, higher earning costs, including maintenance and greater consumption of bunker fuel.

Given these considerations and the fact that 7.1% of the global fleet of MRs is 20 years of age or older, we expect this trend in scrapping to continue. Consequently, we continue to believe annual net fleet growth for MRs should be around 2% this year and next.

Turning to Slide 10. Better chartering conditions have led to further increases this year in massive prices across the board. New building prices are now over 41 million with delivery in 2 years. Stronger asset values and improving earnings power should support higher equity values. 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. On Slide 12, let's review our unaudited results for the 3 months ended March 31, 2022. Our time charter equivalent revenues for Q1 of '22, which we define as revenues net minus voyage-related costs and commissions were $3.8 million, a decrease of 10% from the same period in 2021, primarily due to lower charter rates, especially in the spot market, where we incur higher voyage-related costs and commissions and more off-hire days associated with our MRs. In the first quarter of '22, the daily TCE rate for MRs were approximately $1,500 lower than the comparable 2021.

Moving to Slide 13. We incurred a net loss to common shareholders of $3.7 million for the 3 months ended March 31, 2022, or $0.09 basic and diluted loss per share based upon 42.5 million weighted average shares outstanding compared to a lower net loss of $2.1 million or $0.07 basic and diluted loss per share based on 13.2 million shares outstanding.

Besides lower TCE revenues, the most recent quarter results were negatively impacted by increases in vessel operating expenses and nonrecurring items associated with the recent changes in our fleet and certain events, including the delivery costs associated in the completion of the sale of our 2 small tankers and the grounding of the Epsilon in February.

Adjusted EBITDA declined to a negative $700,000 in Q1 of '22. Please turn to Slide 14 to review our capitalization at March 31, 2022. At quarter close, our consolidated leverage ratio of net funded debt stood at approximately 59% of total capitalization. We continue to be in full compliance of our loan agreements. Our weighted average interest rate was 4% for the most recent quarter, and our next bank loan maturity is July of 2025.

We have interest rate caps covering 28% of our current outstanding LIBOR-based bank debt.

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

Thanks, Henry. The impact of recent global events, including the war and low inventories in many parts of the world have been beneficial to us. While we are uncertain as to how long and how high these charter rates will last, we find solace in the positive long-term supply-demand fundamentals of the product banking sector. We look to continue to take advantage of some interesting opportunities in the spot market, but will likely maintain our mixed chartering strategy complemented by short-term time charters. .

Our experienced management team should help us achieve the balance of risk and return during these unpredictable times. We appreciate your interest, and thank you for joining our call today. We look forward to reporting on future progress at Pyxis Tankers. Be safe. Be well.