Pyxis Tankers Inc (PXS) 2021 Q3 法說會逐字稿

Good day, and welcome to the Pyxis Tankers' conference call to discuss the financial results for the third quarter 2021. 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 now like to hand the conference over to your speaker today. Please go ahead.

Thank you, Sam. Good afternoon, everyone, and thank you for joining our call for the 3 months results ended September 30, 2021. While we continue to be encouraged by the expanding global distribution of vaccines and other medical developments as well as the positive impact in personal and commercial activities, we are concerned about the lagging distribution in less developed countries and then certain effects of any new COVID variance. So stay safe and strong as we recover and return to a more normal way of life.

Before starting, please let me draw your attention to some important legal notification 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 primarily reflected the poor chartering environment. In the 3 months period ended September 30, we generated time charter equivalent revenues of $3.4 million, down 21% from the same period in 2020, primarily due to depressed charter rates. We had a net loss of $3.7 million in Q3, which was significantly higher than the same period in the prior year. Our loss of $0.10 per share reflected an increased share count of 16.8 million for the most recent period. Our adjusted EBITDA for the period ended September 30, 2021, was a negative $1.3 million.

The product tanker chartering environment during the third quarter 2021 reflected a further compression of rates, both in the spot and period markets, well below historical averages. Our operating results for Q3 primarily reflected poor results for our medium-range product tankers that were trading in the spot market and lower time charter rates. The average daily time charter equivalent for our MRs was $7,326, dramatically lower than in the same period last year. However, we have recently seen an improvement in the market. And as of November 12, 49% of available days in Q4 for our MRs were booked at a time charter equivalent of approximately $10,900 per day.

We're encouraged by accelerating economic activities and greater mobility worldwide, especially in the OECD countries. Reportedly, global inventories of refined petroleum products are at or below 5-year averages, and refinery utilization continues at a robust level. A rebound in global GDP growth led by the developed countries looks to be strong through at least 2022. The supply outlook for product tankers continues to look very promising based on low new vessel ordering and the record level of scrapping.

We continue to position the company for a sustainable recovery in our sector, which we believe is just starting. We look to accomplish important strategic and financial objectives by expanding our fleet of Eco-MRs while maintaining a solid balance sheet. In July, we took delivery of the Pyxis Karteria, a 2013-built eco-efficient MR. On November 15, we signed an agreement to acquire from an affiliated company the Pyxis Lamda, a 2017-built 50,000 deadweight Eco-MR that was constructed at SPP Shipbuilding in South Korea for $32 million.

The company's Audit Committee, consisting of independent and disinterested members of the company's Board of Directors, have negotiated and approved risk acquisition, which is expected to close in December 2021. The equity portion of the consideration for this transaction consists of cash on hand the issuance by the company of $3 million under an amended unsecured promissory note due 2024 and $3 million in common shares, representing almost 19% of our acquisition price. The remaining portion of the consideration of this purchase will be funded by borrowings under a new $29 million loan from one of our existing lenders, which will also refinance an outstanding loan the Pyxis Malou, our 2009-built tanker. This 5-year bank loan will bear interest at LIBOR plus 3.15%, have principal amortization of $625,000 per quarter and be secured by both vessels. This loan is subject to execution of definite loan documentation and standard closing conditions.

Let us now 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 short time and spot charters, which position us for better chartering markets ahead.

Next, please turn to Slide 6 for a further update on the product tanker market. In addition to my prior comments about the market, it is abundantly clear that higher vaccination rates, especially in the developed countries, have led the economic recovery as recently pointed out by the IMF. But this improvement has been uneven globally due to varying levels of monetary and fiscal support but same distribution, government health restrictions and commercial supply chain disruptions.

Also, inflation is now a concern for everyone. While progress has been made in certain elements of our business such as global inventories of refined products, which are now at or below 5-year averages and increased commercial and personal mobility, we are only just starting to see an improvement in the chartering environment. Charter rates typically increase in this time of year due to increased cargoes of fuel oil in the Northern Hemisphere. But we are optimistic that this is the beginning of more sustainable period of stronger rates.

Turning to Slide 7. The path of global economic recovery may continue to be bumpy. Increasing oil demand and production, combined with high refinery throughput, are positive signs. Updated IMF global growth estimates are encouraging: 5.9% increase in 2021, followed by 4.9% in 2022 and should lead to more seaborne cargoes. Recently, a leading research firm estimated growth in seaborne trade at 7.1% this year, followed by 5.1% in 2022 to approximately 1 billion tons of refined petroleum products.

Moving to Slide 8. Over the longer term, we expect demand for the product tanker cycle to be supported refinery additions led by the Middle East and Asia, duly estimated that approximately 4.26 million barrels per day of new refinery capacity, net of closures, is scheduled to come online between 2021 and 2025, virtually all of which is outside the OECD. In fact, according to the IEA, shutdowns of 1.7 million barrels per day of capacity have been announced mostly in the OECD, which could result in greater importing of refined products into these mature large markets and ton-mile expansion. Of course, unforeseen events like the recent price spikes and shortages in many countries for winter heating fuels can create temporary opportunities in the spot market.

Moving to Slide 9. The supply outlook for MR2s continues to look very promising. The order book is drifting lower. And recently, Clarksons estimated the overall order book stood at a low of 6% of the worldwide fleet of 1,680 vessels. While 64 MRs are scheduled for delivery over the 14 months ending December 2022, new ordering activity remains subdued and [slippage] continues. Moreover, due to the recent surge in ordering for new containerships and dry bulk vessels, many Asian yards don't have available construction slots with deliveries until 2024. An onerous decision-making process for tanker new ordering is further complicated by ongoing developments in ship and engine designs, safety and environmental regulations, rapidly escalating shipbuilding costs and evolving and still unclear selection and availability of lower carbon fuels and the lingering debate surrounding scrubbers.

Demolitions are on a record pace as 32 MRs was scrapped in the first 9 months of the year. This rapid increase is a fraction of recent port charter rates, peak scrap metal prices and financial headwinds facing the operation of older, less efficient vessels due to new environmental regulations and higher bunker fuel consumption. Given these considerations and the fact that 5.9% of the global fleet of MRs is 20 years of age or older as of October, we are hopeful that this trend will continue. Consequently, we believe annual net fleet growth for MRs should be around 2% this year and next.

Turning to Slide 10. Despite depressed charter rates, secondhand MR2 prices, especially for modern eco vessels, have picked up. Newbuild prices are now exceeding $40 million with delivery in 2-plus years. Obviously, we still believe that it's a good time in the cycle to acquire eco tonnage and capture potential upward movements in charter rates and further asset appreciation.

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 focus on our unaudited results for the 3 months ended September 30, 2021. Our time charter equivalent revenues for Q3 '21, which we define as revenues net minus voyage related costs and commissions, were $3.4 million, a decrease of 21% from the same period in 2020, primarily due to lower charter rates, especially employment in the spot market. In the third quarter of '21, our fleet-wide daily TCE rate of $7,000 was dramatically lower than the comparable period in 2020.

Moving to Slide 13. We incurred a net loss to common shareholders of $3.7 million for the 3 months ended September 30, 2021, or $0.10 basic and diluted loss per share based upon 38.3 million weighted average shares outstanding compared to a lower net loss of $1.9 million or $0.09 loss per share based upon 16.8 million shares. Besides lower TCE revenues, the most recent quarterly results were negatively impacted by an $850,000 increase in vessel operating expenses due to the start-up of the newly acquired Pyxis Karteria and higher crewing costs fleet-wide due to the effects of COVID-19. Adjusted EBITDA declined to a negative $1.3 million in Q3 '21.

Please turn to Slide 14, which reviews our recent fleet data by current vessel type. The key takeaways are as follows. Q3 2021 data was impacted by the Pyxis Karteria, which joined our fleet in mid-July. Certain onetime vessel operating costs were incurred during that time, and vetting approvals had to be obtained after initial voyages. Depressed chartering conditions were evident by the substantial decline in TCE as a number of our MRs traded spot in the most recent period, and the performance of our small tankers improved markedly in a number of metrics.

Please turn to Slide 15 to review our capitalization at September 30, 2021. At quarter close, our consolidated leverage was comparable to many publicly traded tanker companies as net funded debt stood at approximately 44% of total capitalization. The weighted average interest rate was 4.3% during the third quarter of 2021 and next bank loan maturity is scheduled for Q1 of 2023. We have interest rate caps covering 35% of our outstanding LIBOR-based bank debt.

With that, I would like to turn the call back over to Eddie.

Thanks, Henry. We believe the recent start in the recovery of charter rates combined with a positive longer-term supply and demand fundamentals give us an optimistic view of the product tanker sector and our company. These recent acquisitions of modern eco-efficient MRs enhance our competitive position and create opportunities for further growth as well as greater profitability and asset appreciation.

As we wrap up a challenging year, we are excited about the prospects of a healthier and more prosperous 2022. 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.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.