Q2 2021 StealthGas Inc Earnings Call
Thank you for standing by and welcome.
Welcome to the South gas second quarter 2021 results conference call.
At this time all participants are in a listen only mode.
That will be a presentation, followed by question and answer session.
At which time, if you wish to ask a question you would need to press. The Star then one on your telephone keypad.
I must advise you the call is recorded today Wednesday, 20 Festival August 2021.
I would now like to hand over to Mr. Harry <unk> CEO stealth Gass. Please go ahead Sir.
Good morning, everyone and welcome to our second quarter 'twenty One earnings conference.
First call and webcast.
This is Jaime Vasquez it feels tells Gus and joining me on our call today is our final himself assure mission second Irish beef.
Before we commence our presentation I'd like to remind you that we'll be discussing forward looking statements, which reflect current views with respect to future events and financial performance at this stage if you could all.
Inventory that disclaimer on slide two of this presentation. Our risks are further disclosed in store guests filing with the Securities and Exchange Commission.
Also like to point out that all amounts quoted unless otherwise clarified are implicitly stated in U S dollars.
Slide three summarizes the key highlights from our second quarter 'twenty one results that we released today.
Take a month or four months into second quarter of this year was governed by two conflicting events.
Improved revenue was combined with increased costs.
Even though the COVID-19 pandemic is still persisting, we managed to limit our spot exposure compared to the first quarter of this year and most importantly, lower commercial players.
However.
Hello, Good high voyage costs also affected by the increase in oil price.
In addition, we faced high operating cost and Drydocking expenses.
Due to the COVID-19 pandemic as a result of higher high revenue did not culminating in our operating profitability.
Even though the second quarter issues.
We see no for LPG demand.
Additional utilization came in at 96, 3% better performance compared to the first quarter of 2021 mainly due to decreased.
Decreased spud activity, along with the reduction of off hire days by about 45%.
We have about.
74 per cent of three basic tools don't do charters for the remainder of 2021 with total fleet employment days for all subsequent periods generating approach might be 66 million, excluding our JV vessels and contracted revenue.
Coverage for the remainder of Q3 'twenty, one is as high as 87%.
In terms of our sale and purchase activity, we agreed to sell two of our small LPG vessels, the Gaza and PD Island I called loyalty for further trading.
These same talks which would further enhance our liquidity focus shouldn't on our financial performance when compared to the second quarter a faint the country. Our revenues came in at 39.
$2 million, an increase of $3 million compared to the same period of last year, mainly due to a 55% reduction of bareboat chartering activity, where revenues are by default lower time charter spot earnings.
In conjunction with a slight improvement of revenue stemming from the spot market escalated.
Escalated voyage costs nearly.
Really fight a revenue boost our daily time charter equivalent in the second quarter of 2021 decreased by about $260.
At least take outcome given that we had about 121% and higher spot presence in 72% higher daily banker costs compared to the same period of last year, thus leading to an almost 4 million.
Nine point isn't voyage gosh.
Oh, that'd be done, including noncash items came in at $17.3 million on and that didn't come again, including noncash items and driven mostly by one off gains so that I think from our JV I shouldn't be activity came in at 4.8 million corresponding to an EPS of 13 cents.
Right in terms of capital structure and liquidity are gearing remains low in the order of 37% and total cash basis about $48 million.
Slide four provides an analysis of our fleet employment in terms of charter types out of a fleet of 42 operating ships, excluding our seven JV vessels, we have five.
From Bareboat 32 on time charter and five in the spot market.
Regardless, the uncertain market and we haven't got to the uncertain market, we have managed to significantly reduce our spot exposure.
Compared to our previous announcement, we successfully concluded nine new charters and charter extensions, we have 16 vessels concluding that video.
Those are as up until the end of 'twenty, 'twenty, one which would be a real opportunities should the market improve.
<unk> coverage for the remainder of 'twenty one is in the order of 74%. While currently our period coverage for the second quarter of this year is as high as 87%.
We have close to $66 million of secured revenue, including our.
Charlie vessels total should keep driving those increases to about $76 million.
On slide five I'd like to provide an update their stores to joint venture performances, our first joint venture, which comprises mainly of small LPG ships. Currently has only one vessel vehicle should be trading in the spot market since our last announcement.
We managed to lock their gas defiance on a six months time charter and extend the time charter for the gas shuriken for an additional two months.
Focusing on our second JV comprising of two medium gas carriers vessels. These are all under time charter contracts you have us producing steady cash flows.
Following the recent sale of the gas can Hamburg, which pushed.
Just a question of double games, our JV outfit looking to expand further in the M. D C market associated with the order of 40000 cubic meter medium gasco your vessel to be delivered mid 2023.
These JV outfit has sufficient cash to cover all equity requirements with regards to this upcoming vessel delivery.
Everybody in about two years' time.
In terms of our fleet geography in slide six our company focuses on regional trade and local distribution of gas.
Wrapping a snapshot of the peninsula positioning of our LPG vessels, excluding our JV vessels I suppose.
Oh Gosh 23, currently 17 vessels.
Trade in Europe, 13 vessels in the Middle East and far East four vessels in South America, and four vessels in Africa.
Now I'll turn to Mister Stryker thanking Laurie for our financial performance.
Thank you Harry and good morning to everyone I will continue the presentation focusing on financial performance for the second.
Our 2021.
As mentioned earlier in our call on the one currently managed compared to the first quarter. This year to improve revenues decreased the number of vessels in the spot market and reduced commercial off hire.
The other hand, when compared to especially to the same period of last year all of our cost items were bedroom from vessels, leaving bareboat charters.
Second quarter and additional costs attributed to the pandemic that we did not manage it says later revenue generation to operating profitability.
Let us move on to slide seven where we see the income statement for the second quarter of 2021 against the same period of the previous year.
Voyage revenues came in at $39.7 million, making a 3 million.
Compared to the same period of last year.
This is mainly attributed to six vessels on bareboat.
Either spot or under time charter contract.
In terms of wage costs.
Under the 6 million, marking a 4 million increase compared to Q2 'twenty I just broke days increased by 121% in Cleveland.
It could be 500 days and daily banking cost increased by 17% due to the increase in oil prices.
We need to know, though that compared to the first quarter of this year, we did manage to reduce our spot prices and improve revenue stemming from the spot market. However, we faced higher bunker costs and additional bunker expenses for the balance to go one of our product tankers.
About.
The anticipated decline of voyage costs.
Based on all of the Borgwarner Drillings for the period were 33 point something million.
Running cost at $15.8 million marked about 36% increase compared to Q2 'twenty.
Most of that if you did do six fewer vessels on bareboat for which now we can do it operating costs along with it.
Okay.
Daily rise in excess of 50% of these.
You know daily crew cost mainly for group medical and crew flight expenses.
Which is attributed to the COVID-19 pandemic.
They don't need charges amounted to $2 million correspond to the drydocking of three small LPG vessels from the data interpretation.
Three LPG vessels due to the COVID-19 pandemic.
Moody's in the Central Asia, particularly China as close of a drydocking in the remaining Asian yards from significant distinctions, which increased duration of related costs.
Impairment North was $3.1 million relating to three basic and plus.
Get a sense for which the company has entered into separate agreements to sell them to third parties.
Based on all of these are EBITA, including noncash items, such as impairment is in the order of $17.3 million.
Interest and finance core smart close to 700000 degrees, mainly attributed to library degrees.
With regret.
The income from our JV as both of our JV arrangements ended the quarter with an operating profit. However, it is a 3.5 million gain.
It's been hard because that drove this quarter's profitability.
Based on all the points analyzed above we ended the second quarter of 2021 with a net income excluding noncash items, a $4.8 million.
Watched always plugged into Navy EPA she'll take defense.
Slide eight demonstrates our performance indicators for the period examined I've mentioned earlier on our operational utilization for Q2 'twenty. One was in the order of 96, 3% due to increased productivity compared to the same period of last year that these however, compared to the previous quarter.
This year, we noticed a considerable decline 45%.
A combination of higher.
That's what I've seen activity segment.
With regard to our daily TCE in Q2 'twenty.
At least mark to gradually decline over the quarters in Q2, 'twenty, one we noticed that nobody's increase.
Or was it mostly due to the COVID-19 pandemic has seen floods very low hence it's difficult to predict if this upward trend will be sustained.
Looking at our balance sheet in slide nine our free cash is in the order of 53 million why to date, we have no further direct capital expenditure I E no cash commitments in the near future.
Our gearing is now in the order.
Seven 1%.
Based on our scheduled principal repayments, we will reduce our leverage by around 42 million per year.
Nobody's Gonna litigation 2021 with minimal balloon refinancing some of the order of 20 million that is for the 'twenty 'twenty to.
From 'twenty to 'twenty three.
I'll now hand, you over to our CEO, Mr. Harry Potter, because when we discuss market.
Order of company outlook.
Yes.
On slide 10, given the ongoing COVID-19 pandemic is quite difficult to affirm that shows how the market will behave in the years ahead.
However, the current market conditions and as per the analysis cut by potent and partners demand for LPG is predicted to increase in this year's ahead Chinese.
These inputs will be driven mostly by the petrochemical sector.
There are 13 PTH plunge.
<unk> planned to commence operations up until 'twenty two 'twenty three the rise of the Petrobras shuttle local drive European LPG imports, which are forecasted to grow by 8% until the end of 2022.
Overall LPG pricing.
Rushing will likely remain at high levels are greatly correlated to oil prices. However, tuition increase of COVID-19 cases due to the delta variant might lead to a decrease in demand and secondly, oil and LPG price decline.
On slide 11, we see that during Q2 'twenty one charter rates for small LPG remained relatively unchanged compared.
To the previous quarter, but still remain much lower than pre pandemic levels looking at the small LPG trade west of Suez the spot market firmed, particularly towards the end of the second quarter.
Owners face less competition for cargoes has limited downtime in spot rates spot rates marked a slight rise as a result of the increase in oil.
Prices charter employment in the region, most more active particularly driven by the demand for petrochemicals.
He used to offshore markets in the second quarter accepted the stable LPG demand, but rather discouraging perfume product market.
Nevertheless, partly instrument firmed in several vessels, mostly large is about 5000.
Can we just were fixed on period employment, particularly short term time charters looking.
Looking ahead, it's adult Nevada, and the opening of crackers in Korea that will affect demand in the second half of 'twenty or 'twenty, one focusing on market fundamentals of small LPG pressurized segment has substantial old tonnage 31% of the fleet is currently.
20 years of age, which is a driving force behind the increased scrapping activity.
Since the beginning of the year, we have seen the demolition of six small pressurized ships.
Indeed, we are witnessing that heightened demolition activity, which we view as a positive macro trend for our segment.
Aspiration published orders there are 19 vessels.
Currently on order 11 to be built in Japan, and Korea, and an 828 to be built in China and to be delivered until the end of 'twenty 'twenty three.
Slide 12 presents our share performance since the beginning of the year. The performance of our stock is presenting along with selected gas carriers peer group and the price of oil since the beginning of this year the majority of.
Vessels of Docs, followed the correlation to oil price, but however in the past few months, we noticed a shipping stocks have deviated from this pattern.
With regards to oil in July 21, Opex. Several non OPEC members are going to increase monthly production starting with sugars. However, recent caution about decreased demand because of increasing.
Delta.
Shipping still have recently driven crude oil prices down.
It remains to be seen how oil prices will behave in effect the market going forward.
In slide 13, we are outlining the key variables that will affect our performance in the quarters ahead, given the market turmoil, it's quite difficult to make firm predictions. We have isolated a few key points of my sister financial.
So as much in the upcoming quarters.
First point this will have a total tariff coverage of about $66 million in pre contracted revenues, our total cash base of about $50 million.
Sufficient cash in both JV and an additional cash inflow arising from the sale of the two small.
LPG vessels tanks.
We can argue that our liquidity.
Performed in addition, we have reduced our spot exposure to five ships that shielding our voyage costs going forward. Moreover, we remain at a very low LIBOR environment, Hence our finance cost will decrease further.
Our biggest concern is the future of the Covid Delta Valeant as it seems at the outbreak of different variance pose a threat for both global health.
The strong economy, concluding our presentation on slide 14, we present, a brief summary of the company's and market strong points I just mentioned and appear on prior earnings calls we are firm believers that our healthy capital structure strong market fundamentals, along with our market expertise will help us grasp the benefits of the small LPG market recovery when it arrives.
Health are these states will summarize our concluding remarks for the period examined.
During the second quarter of 'twenty, one we managed to improve our revenue and user commercial off hire in addition productivity picked up particularly for vessels above 5000 cubic meters and accordingly, we were able to conclude an extend period charters and therefore reduce our number of spot vessels.
Reaching nearly pre pandemic levels, however, compared to the same period of last year, we had six additional vessels concluding the bareboat charters, thus, adding to our operating cost base. We faced additional crew cost due to the COVID-19, but tissue, particularly core expenses related to medical and crew changes.
Additionally, our voyage.
Expenses were burdened us daily bunker cost increased by 70% compared to the same period of last year.
Added to this we underwent three guys treat dry dockings at the time of strict yard restrictions again due to the COVID-19 pandemic, thus, adding further to our costs due to these reasons our revenue generation was not reflected in an OPEC.
Operating profitability is difficult to predict how our market will behave in the quarters ahead as the global economy due to the Covid pandemic and related violence still remains fragile.
Nevertheless, we own a strong and diversified fleet across the broader LPG spectrum will enjoy adequate liquidity.
Further enhanced by reaching an agreement.
Shell to small LPG vessels, and low debt levels that allow us to get leverage regardless of how the global economy.
Going to the recent Covid Delta pandemic escalation.
We have now reached the end of the presentation, we'd like to open the floor for your questions. So please operator open the floor.
Thank you.
Agreement with reminder, ladies and gentlemen, if you wish to ask a question press. The Star then one on your telephone keypad and wait.
For your name to be announced.
Okay.
Okay.
Right.
Wanted to ask a question.
And your first question.
From the line of Randy.
How do you gentlemen, how's it going.
Hi, Andy I hope you're well.
Yes, they're all good all good.
Handful of questions here. So first for those nine recently extended charters can you provide either an average rate or the rate change.
Jeffrey <unk> charters, and then with the 87% of <unk> 'twenty. One now complete how do you expect <unk> 'twenty, one earnings or revenue to compare with <unk> 21.
I'm on the first question because he says you know different sizes of ships and different ages of.
From Pes.
I am giving an average number would not I couldn't help it would confuse matters.
I think in most cases I would say the rates were stable.
So nothing nothing fancy nothing.
Huge on the anchor side, but no major reduction either show in the circumstances I think we're happy.
Okay.
Sure.
On the on the second question.
The problem as you might have seen from this quarter is not the income side.
<expletive> the income side this somewhat secure.
The problem is the costs are.
We have delays we have very expensive group costs, we have the quarantine we have cases, where she has a single COVID-19 case, it must stop and quarantine for 14 days.
And things like that which can kind of make a quarter very profitable or not so.
Obviously, we cant really say too much for a Q3 I would expect can be happy with all of these things being considered if we.
If we are profitable and in Q3.
Got it okay.
And then you mentioned you agreed to sell to small vessels one was built in 2008.
Other in 2015, so why did you sell those too.
Specifically.
Yeah. Good question as we have seen the last couple of years and excluding coffee does well.
The better earners I would say are there shifts that are 5000 cubic meters and above.
Which is the bulk of our fleet anyway.
Both of these ships are three and a half thousand cubic meters of where the earnings are on the low side, even even in the up cycle of course, they have some increase.
Increased but the increase is small.
So we found the opportunity to shell both of those ships.
The more modern ship with former delivery.
So.
So on.
On one hand, we are a we are selling ships that are not big governors, we're selling shifts that even if the market improves I'm not going to add significantly.
To the bottom line and secondly.
Modern ship, we have a grid forward delivery.
We have the opportunity to exploit that ship a bit longer if indeed, we seen two four or slightly later later.
A better market.
In addition.
We think that having a significant cash balance in today's environment is very very very important and you know.
Thus, we past calls how conservative we are on that side.
We think you should have between $751 million per ship cash for a rainy day and we don't know how long the Covid Delta and all those other variants, we lost show by selling those ships in and having a small book loss.
For my but adding to our cash pile I think it's a conservative and defensive move to protect our shareholders.
Okay.
And then when one of those vessels being delivered there do they not have firm delivery dates.
The reality.
He is relatively prompt will deliver within September and the other one will deliver either before new year or offering you here. So we have as I told you some time to do.
Played her.
Okay, that's fair.
Or a bigger picture I guess theres been some consolidation right and LPG in recent years.
Years, even in recent months with BW at that goes on as well as navigator and ultra gas. So I guess two questions are the same question. One are you looking to buy some additional smaller LPG vessels or similar to the recent sales and your massive discount to any V are you looking.
To sell further vessels or even open to emerging with a larger player.
And listen Randy you know us, we're very open minded and very flexible, but first of all we look to protect our shareholders in a very difficult environment and just just by posting a profit in the survivor man despite.
The.
GAAP loss in the dry dockings that we had I think for US is a significant achievement.
Buying more ships I mean, unless it's a bargain I would say no.
And why would we buy ships at NAV one of.
We're trading at a big discount of NAV, it's better to sell their ships at NAV and then keep the cash.
Correct ourselves or if our cost pile improves to start buying back stock again like we did last year with our tender offer.
Merging I don't know if need to be honest.
Sure I mean, if we see good value in such a move definitely it will be considered by the board. The recent mergers that you said.
And we haven't really seen yet if it's a positive or not.
At least two three years to judge those are more fish.
Generally.
Speaking the bigger the better we have a big very big fleet and our own short shneur. The necessity for us just to merge to be big it must make a sense numbers wise and value wise.
That's fair all right I guess last question lets put it all together all the stuff you just said plus.
You know everything in your financials your balance sheets in good place you have a decent amount of cash flow visibility now with your charters through the third quarter and even through the fourth quarter. You sold a couple of older vessels clearly you're trading at that massive discount to NAV as you mentioned as well so market cap of 100 million asset.
Asset base close to a billion by your book values I don't know think you say $567 million. So.
Why not repurchase shares in a substantial now kind of at these levels I know COVID-19 uncertainties in cash balances and what have you, but selling ships and in buying shares seems like a very accretive use.
A cashier.
Exactly and I think we're one of the few companies that has done so much in the recent years, especially with our tender offer in the start of the Covid pandemic, what everybody thought the tumor crazy, but we did it and I think are some of our I'm sure holders did benefit from that.
And the board for not allow any.
Any share purchases before we see some light at the end of the tunnel I think it's a strict but I think on the other hand.
It shows how much we don't want to go and raise our emergency equity and value with everybody.
Like a lot of our competitors have done.
So we need patience.
It's been already close to two years of the Covid problem.
It will get strong sooner or later when you have the fleet we have the money we have the protection, but we need a bit more patience for this to go away.
And then of course, you freeze start generating more cash.
We sleep at this valuation.
The share buyback is a no brainer as we've done many times before.
I agree I agree.
Sounds good well good luck stay safe and thanks again.
Thank you Randy as always.
Thank you once again.
Good question.
On your telephone keypad.
We have a question from the line of.
Scott.
Uh huh.
Yes.
Good morning.
I was curious could you.
Tell us about the exact difference between net income and adjusted net income.
What is included in that difference.
Yeah.
So a few things.
We launched one of the most important things I think is the impairment.
But if you want the exact breakdown please send us an email because on the phone I might forget something and then I'll have a problem show better better send us an email and we'll revert you know we've been firm.
Things I've seen more a more proper.
Right right now we are our accounting is sold by our U S accounting standards or U S standards or international.
U S.
Okay.
Okay. Thank.
Which.
Thank you last please send us an email and we'll revert as soon as we can.
Okay. Thank you.
Yeah.
At this time, if you wish to continue.
Yes, we'd like to thank you for joining us at our conference call today and for your interest and trust in our company and we look forward to five.
You again with us for our third quarter 'twenty one results call in November Thank you.
Thank you that does conclude.
Thank you all for participating.
Dan.
Okay.
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Yeah.
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Okay.
Yes.
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Okay.
Thanks.
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