Pyxis Tankers Inc (PXS) 2023 Q2 法說會逐字稿

Good day, and welcome to the Pyxis Tankers conference call to discuss the financial results for the second quarter 2023. 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.

Good morning, everyone, and thank you for joining our call for results of the 3 months ended June 30, 2023. The Russia-Ukraine war continues to affect the global energy markets and disrupt economic and strategic priorities as well as global relationships on trade, restrictive monetary policies have resulted in slowing economic activity and most recently lowering of inflation within many (inaudible) countries.

In spite of this, the product tanker sector maintain solid chartering activity and high asset values. At Pyxis, we continue to successfully navigate through these uncertain times, and we are pleased to report good operating and financial results for the most recent period. 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 healthy financial performance in revenues, operating cost control and profitability despite operating fleet of vessels as a result of the 14-year-old Pyxis Malou in late March. In the second quarter ended June 30, we generated consolidated time charter equivalent revenues TCE of $8.6 million, a decrease of $2.7 million over the same period in 2022. Our daily TCE [per equivalent margin] in Q2 2023 was approximately $25,000, which was down slightly for the same quarter last year due to less export chartering activity.

We reported net income of $2.8 million or $0.25 basic EPS for the most recent period, which was down from last year. Our adjusted EBITDA in Q2 2023 was $5.2 million. Over the course of the second quarter, the product tankers chartering environment experienced great softness. Despite reasonable demand for transportation fuel worldwide, moderating economic activity was met with seasonal refinery maintenance program. The ongoing Russian-Ukraine war continues to result in tight inventories of petroleum products which are below 5-year averages in a number of locations around the world, changing trade partners, expansion of ton-mile, dislocation to end markets, creating arbitrage opportunities and higher transportation costs.

For example, in the U.S., recent inventories of gasoline and diesel were up 7% and 14%, respectively, lower than 5-year averages. While product prices are significantly lower than a year ago, refinery activity continues to be solid with healthy crack spreads, reflecting good global demand.

These development (inaudible) support a constructive outlook for product tanker chartering. In light of this, we continue to consider the purchase of modern acquisition demand. We are always looking for economically viable acquisitions and in the meantime, to further improve our balance sheet and for limited extent repurchase common shares.

Most recently, our Board unanimously approved a $6.8 million equity investment in a joint venture for the acquisition and the 2016 Japanese build Ultramax dry bulk carrier, where we own 50% of the joint venture and the balance held by an affiliate of our CEO and Chairman, Mr. Valentis.

The $28.5 million vessel purchase is expected to be funded by $11.3 million of equity and $19 million secured 5-year bank loan. We believe this counter-cycle investment in a first-class eco vessel, which is scrubber and ballast water treatment system fit should provide attractive returns (inaudible) through a well-managed structure.

Upon anticipated closing of the transaction by late August, where we have seen significant dry powder to pursue additional strategic opportunities. Please turn to Slide 4. For information on our existing fleet unemployment activities. We are continuing to prudently maintain our mixed chartering strategy of time and spot charters with a focus on diversification by customer and duration.

As you can see after the sale of the Pyxis Malou, we now maneuver a fleet of 4 eco-efficient MRs, which has an average age of 8.6 years and is over 4 years younger than the industry average of 13 years. 3 of our tankers are currently contracted under short-term by charters and 1 in the spot market. As of July 26, 55% of the available days in Q3 were booked at an average estimated TCE rate of approximately $27,800, which at this point represents an 11% sequential increase over our Q2 daily chartering results.

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 recent economic activity for most of the world has been affected by restrictive monetary policies in the world and other geopolitical events. The EU and G-7 group ban on seaborne cargoes of Russian refined products, which started in early February 2023 have subsequent price gaps, have reduced Russian revenues, created market dislocations, which has been compounded by lower inventories of refined petroleum products in many parts of the world, product exports from the refineries located in the Middle East, U.S. and certain parts of Asia are expanding. According to Drewry, an independent industry research firm in 2022, seaborne trade of oil products increased 1.7% to over 1 billion tons while ton-miles rose 3.2% to almost 3.4 trillion.

According to another leading research firm, ton-miles demand should increase 12% in 2023, cargo volumes grows 4%. And in 2024, a further 7% growth in ton-miles and another 4% increase in volumes is expected. Variation changes in trade routes can be seen in Slide 7. Please turn to Slide 8 to review several macroeconomic considerations which support fundamental sector demand, historically seaborne trades of refined products have been moderately correlated to global GDP growth.

In July, the IMF revised global GDP growth estimate upwards to 3% for this year due to resilient economic activities, primarily in the OECD, offset by the adverse effects of significantly higher interest rates and persistently stubborn high inflation. Recently, the IEA slightly revised estimate of global oil consumption to increase 2 million barrels per day or 2.2% from average of around 2.1 million barrels per day in 2023. In continuation of the recent crude oil production cut by OPEC+ including 0.5 million barrel per day reduction by Russia starting in August is expected to result in tighter top line later this year. However, incremental production is expected from the U.S., Canada, Brazil, Norway and (inaudible) Of course, (inaudible) actions by Iran and Venezuela supplement global-wise oil supply.

According to the EIA, the U.S. should increase average oil production in 2023 by 5.6% to almost 12.6 million barrels per day. Nevertheless, the expectation of tighter supply and solid global demand have resulted in an approximate 10% increase in oil prices since the start of the summer.

Now on to Slide 9. 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. Delivery estimates that almost 4.4 million barrels per day of new refining net capacity, net closures is scheduled to come [online] by 2028 with OECD experiencing a decline. However, originally plant shutdown may be delayed given inventory refinery economics, but over the longer run, closes to further contribute to the importing of refined products into mature large OECD market and provide additional ton-miles expansion. Many refineries, including both of the U.S., continue to experience good utilization, after profitable crack spreads in order to meet solid product demand.

Processing cheaper Russian [Rubles] has been a recent margin advantage for refineries primarily located in India, China, supporting domestic supplies and (inaudible) especially for transportation fuels. Let's move on to Slide 10.

The product tanker supply picture is much clearer and the outlook for MR2s continues to look very promising. While orders for the construction of new product lines have picked up in 2023. The order book is still relatively low by historical standards. According to Drewry, as of June 30, 2023, the order book for MR2s stood at 6.6% of the global fleet or 111 vessels, of which 17 are scheduled for delivering in the second half of this year. Due to huge backlogs, many Asian yards don't have available construction slots for a month with deliveries until early 2026. Delays in newbuild deliveries continue to be unpredictable factor and (inaudible) 12% annually over the last 5 years.

And on decision-making process for tanker new ordering is further complicated by an ongoing developments in ship and engine designs, stricter environmental regulation, escalating ship-building costs as well as an evolving and still unclear selection and availability of lower carbon fuels. As many as 144 vessels or 8.5% of the global fleet is 20 years of age older, significantly more than the order book.

Given this large number combined with declining economics of operating (inaudible) vessels, major scrapping should occur over the next 5 years. Thus, we estimate the net fleet growth for MRs of less than 2% per year through 2024. Turning to Slide 11. Good chartering conditions have led to steep increases in massive prices across the board. Values for second-hand (inaudible) is still way above than the averages but prices for old tankers have recently softened.

Construction comments for (inaudible) exclusive of the (inaudible) and add-ons.

Prices for young fleet (inaudible) and MR2s are present and stay near historical high and attractive acquisition of the business are very rare.

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

Thanks, Eddie. On Slide 13, let's review our unaudited results for the 3 months ended June 30, 2023. Our time charter equivalent revenues for Q2 of 2023 which we define as revenues net minus voyage-related costs and commissions declined to $8.6 million, a decrease of $2.7 million from the same period in 2022 due to lower chart rates primarily in the spot market, which was offset by higher utilization.

More importantly, with the sale of our oldest vessel in March '23, we operate one pure MR in the most recent period. For the second quarter of '23, the TCE rate for MRs was $25,000 per day, still a healthy rate but down 5% from the comparable 2022 period. Moving to Slide 14. We generated net income to common shareholders of $2.8 million for the 3 months ended June 30, 2023, or $0.25 basic and $0.23 diluted EPS compared to net income of $4.6 million or $0.43 basic and $0.38 diluted net income per share in the same period of '22.

For accounting purposes, the fully diluted earnings calculation assumes the potential conversion of all the outstanding Series A convertible preferred stock into common shares and the elimination of the associated dividend. In Q2 '23, a significant portion of the decrease in TCE revenues flow through the income statement as adjusted EBITDA decreased $2 million to a respectful $5.2 million.

Now flip to Slide 15 to review our capitalization at June 30, 2023. At quarter close, our consolidated leverage ratio of net funded debt stood at less than 19% of total capitalization. Due to increases in SOFR, our weighted average interest rate was about 8.2% for the most recent quarter. And the next bank loan maturity is in about 2 years. I should point out that at June 30, 2023, our total cash position was approaching $34.5 million. Most of our excess cash is invested in short-term money marketing expense, which currently earns an average of 5.2%.

Lastly, the Pyxis Theta is scheduled to have her second special survey with ballast water treatment system installation later this summer at a cost of approximately $1.4 million and 25 days off hire. With that, I'd like to turn the call back over to Eddie to conclude the presentation.

Thanks, Henry. Over the near term, fundamental demand is relatively in balance with supply. Macroeconomic headwinds and uncertainty from geopolitical conflict creates challenges of opportunities for the product tanker segment. We continue to benefit from the combination of solid end-market consumption, low refined product inventories in many parts of the world, changing trade patterns and expanding ton-miles.

Scheduled developments for the refinery landscape only enhance the long-term outlook of our sector. We will effectively utilize a strong financial position of excess cash and low leverage as well as big industry relationships to seize investment opportunities that maximize shareholder value. We appreciate your interest, and thank you for joining our call today. We look forward to reporting on future progress at Pyxis Tankers. Enjoy the summer and stay well.

And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.