Q1 2022 Pyxis Tankers Inc Earnings Call

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Good day and welcome to the Pyxis tankers conference call to discuss the financial results for the first quarter of 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 W. W. W jumped pyxis tankers don't come.

Hosting the call is Mr. Eddie for Lantus, 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 Finland Test. Please go ahead Sir.

Thank you Dorothy.

Good morning, everyone and thank you for joining our call for results over the three months ended March 31st 2022.

Just the major economies were recovering from the latest COVID-19, Varian Arlington earlier this year the Russian invasion of the Ukraine commenced at the end of February the <unk>.

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The shock to the global energy markets and.

Setting 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 tried to overcome the 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 two that we recommend you read including our presentation today, which will include forward looking statements. Thank you.

Turning to slide three.

Our most recent quarterly results reflect the lingering effects from the on the conveyance on mobility and economic activity, which resulted in a continuation of a soft spot.

Putting environment.

Moreover, our results for the period ending March 31st 2022 were impacted by non recurring events, including completion of the sale of our two small tankers and the accidental grounding of one on one in March which resulted in reducing operating base for revenue opportunities.

For the first quarter 2022, we generated consolidated time charter equivalent revenues of P. C.

$3 8 million down 10% from the same period in 2021, due to lower charter rates and greater spot chartering activity promoting to 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 RMR.

Our fleet currently consists of equal mr's.

Sequentially the D C for our modest in Q <unk> Q1, 2022 increased 5% primarily due to more operating days from the two vessels additions in the second half of last year offset by lower charter rates.

We acquired the 2013 built because he's got the Ria last July in 2017 bid Pyxis Lambda at the end of 'twenty to 'twenty two.

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 cost and therefore mentioned factors.

Our loss of nine cents per common share reflects an increased share count affecting point $3 million for the most recent period.

Our adjusted EBITDA for the period ended December 31st plan for 'twenty, one was a negative 700000.

Over the course of the first quarter 'twenty to 'twenty, two the product tanker chartering environment, initially and gradually improved with a recovery from the effects of on the ground, especially in the western hemisphere.

That economic activity was met with increased mobility, which increased demand for transportation fuels. However, the outbreak or was there also an invasion of Ukraine at the end of February has shocked the world although markets simply the disruptions caused by this event resulted being 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 gasoline diesel deficits in Europe , and low transportation fuel stockpiling under the U S East coast.

Finally, I'm trying to meet this increased demand, which has resulted in changing trade patterns expansion of ton miles and higher prices for all of your product and increasing transportation costs.

Our company has recently experienced a dramatic improvement in charter activity more importantly, 67% of available days in Q2 2022.

We are booked at an average estimated time charter equivalent of $27900 per day as of May 13th.

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 four floating formation on our existing fleet unemployment activities.

As you can see we continue to use our mixed chartering side that just time and spot charters with a focus on diversification by charter and basin.

Three of our vessels are currently in the spot market and the remaining two vessels are under short term time charters, we have chosen not to call at amey erosion port well Scotty any directly affiliated cargos.

We believe our targeting strategy provides a reasonable balance of risk and return, especially for our company and for a small company like ours.

Thanks.

Please turn to slide six 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 war.

Political actions.

Advent of increasing a severe sanctions against Russian exports of petroleum products have been met with low inventories in many locations, especially Europe .

Tight supplies for gasoline and diesel are changing trade routes and adding ton minus two 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.

Hedging natural gas prices are also forcing some utilities to suites 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 plants have them be unconstrained available supplies.

Yeah.

Please turn to slide seven.

Historically seaborne trade of refining projects have been relatedly.

Related to global GDP growth and its most recent update the IMF lowered its GDP estimates triangle in cases to three 6% for this year and 2020 thing.

In early May a leading research firm estimates seaborne trade for refined products would increase 4% in 2022.

Even with the orchestrate the release of crude from the strategic petroleum reserves of certain IEA members kind of consumption outweighs supply.

Scheduled production increase from OPEC, plus 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 comeback record inflation may lead to further slowing of economic growth.

Moving to slide eight.

Over the longer term, we expect demand for the product tanker cycle to be supported by a refinery additions led by the middle East and Asia Rudy estimated that over $4 9 million barrels per day of annuity finery capacity is scheduled to come online between 2021 'twenty two 'twenty six virtually all of weights.

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, where products and services in various locations and create arbitrage opportunities in the spot market of course.

Cable wildcard is another variant of Covid, 19, which would likely have a negative effect on demand.

Let's move on to slide nine.

The product tanker supply picture, it's much clear as the outlook for <unk> continues to look very promising VM or two order book continues to drift lower and recently estimated that the overall order book at seven 4% of the worldwide fleet over 1650.

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No ordering has been subdued I said 35 miles were ordered last year and only two in the first two months of 2022.

61 them ours are scheduled for delivery during the remaining 10 months of this year and 46 are scheduled for delivery in 2020 free. Moreover, due to the recent surge in ordering of new container ships gas guys and dry bulk vessels, mainly Asian yards don't have available contraction slots, where they live.

And the 'twenty 'twenty four.

Known as the decision making process for tanker new ordering is further complicated by ongoing developments in soup and engine designs stricter environmental regulations are rapidly escalating shipbuilding costs involving and still unclear selection.

The availability of lower carbon fuels.

Demolitions are continuing at a brisk pace of 33 months, whereas crop last year and already seven in the first two months in 2022.

And I believe the increase is a function of near big scrap metal prices and financing headwinds facing the operation of older less efficient vessels do you think new environmental regulations higher annual costs, including maintenance.

Great the consumption of bunker fuel.

Given these considerations and the fact that seven appointed 100% of the global fleet over months is 20 years of age or older. We expect this trend and scrapping to continue. Consequently, we continue to believe annual net fleet growth for remarks should be around 2% this year and next.

Turning to slide 10.

But theyre chartering conditions have led to further increases this year in acid prices across the board new building prices are now over $41 million with delivering two 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.

Chief Financial Officer, who will discuss our financial results in greater detail.

Thanks, Jamie on Slide 12, Let's review our unaudited results for the three months ended March 31, 2022, our time charter equivalent revenues for Q1 of 'twenty, two 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.

In the first quarter of 'twenty to the daily TCE rate for <unk> were approximately $500 lower than the comparable 2021.

Moving to slide 13, we incurred a net loss to common shareholders of $3 $7 million for the three months ended March 31, 2022, or nine basic and diluted loss per share based upon $42 5 million weighted average shares outstanding compared to a <unk>.

Lower net loss of $2 1 million or seven cents.

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 cost associated.

In the completion of the sale of our two small tankers and the grounding of the Epsilon in February .

Adjusted EBITDA declined to a negative $700000.

In Q1 of 'twenty two.

Please turn to slide 14 to review our capitalization at March 31, 2022 at quarter close our consolidated leverage ratio.

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.

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 and demand fundamentals over the product tanker 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 <unk>.

Short term time charters.

Experienced management team should help us achieve a 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.

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Connect now thank you.

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