Q3 2022 Pyxis Tankers Inc Earnings Call

Tankers website, which is www dot pyxis tankers dot com.

Hosting the call is Eddie Melendez, 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 Melendez. Thank you. Please go ahead Sir.

Good afternoon, everyone and thank you for joining our call for the results of the three months ended September 30 of 2022.

The impact from the Russian invasion of the Ukraine continues to take center stage affecting global energy markets and the resetting personal economic strategic priorities as well as global relationships. Many countries are battling high inflation cost of living.

Increases in the slowdown in economic activity. However, the product tanker sector continues to be positively affected with strong chartering activity and rapidly increasing asset values.

At <unk>, we continue to successfully manage through these unprecedented times.

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 strong financial performance in revenues growth and profitability.

In the third quarter ended September 30th 'twenty to 'twenty, two we generated consolidated time charter equivalent revenues TCE of $12 million, an increase of $8 5 million over the same period in 2021 charter rate continue to accelerate during the quarter, especially in the spot.

Market, our daily TCE for Q3, 2022 for a five eco Mas was $29062 sequentially up 10, 6% over the prior quarter and up a factor of four vessels. The results in the same period last year. Moreover, we report.

Net income of $5 3 million or 48 cents.

Basic EPS for the most recent period versus losses in 2021.

Our adjusted EBITDA in Q3, 'twenty, two climbed to $8 million.

Over the course of the third quarter, the product tanker chartering environment experienced further strengths.

This was a function of increased mobility with some amplifying demand for transportation fuels. Despite moderating economic activity. In addition, the ongoing Russian invasion of the Ukraine has a resulted in tightening of product inventories, which continued to be below five year averages in many parts of the world changing.

<unk> patent expansion of ton miles dislocation to end markets, creating arbitrage opportunities and higher transportation costs, while high inflation persists petroleum product prices, such as gasoline and diesel has softened to varying levels since the beginning of summer 2022.

Accordingly, our refinery activity continues to be very strong with healthy crack spreads reflecting solid global demand.

These developments have translated in a robust product tanker charter rates in the spot market and greater time charter activity, our booking rates for Q4 2022 continues to show upward momentum.

As of November 10, 82% of our available days for the fourth quarter were booked at an average estimate that D C of $36800.

We're continuing to maintain our mixed chartering strategy of time on spot charters with a focus on diversification by customer and duration. Please turn to slide four for information on our existing fleet unemployment activities.

As you can see two of our vessels are currently in the spot market and the remaining three MRV com.

Track that under short term D. CS that run up to next fall.

For the Q4 bookings the average estimated spot charter rate is $47700 and another its time charter of $32600.

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 six for a further update on the product tanker market. In addition to my prior comments about the market recent economic activity for most of the world has been affected by the war and other geopolitical events.

Initial sanctions on exports on petroleum products have had limited financial impact on Russia, which has benefited from market dislocation and low inventories in many parts of the world, especially Europe .

The EU ban on Rosa refined products starting in early February 2023 should only compound complexities of the market and according to one analyst an incremental 8% growth in product tanker demand.

As previously highlighted tight supplies of gas oil and diesel changing trade routes and adding ton miles two voyages by increasing exports from the refineries located in the middle East U S and certain parts of Asia, increasing demand for transportation fuels more recently for air travel.

Only exacerbates the difficulties in replenishing diesel and jet fuel inventories.

And not dissipated events such as the houses complete shutdown of Europe's major operating natural gas pipeline not the same one and its subsequent bumping only create chaos for the energy value chain.

Of course, some European utilities to consider switching to alternative such as fuel oil for power generation.

Liable secure energy sources will continue to be a major priority.

Please turn to slide seven to review macroeconomic considerations.

Historically seaborne trade of refined products has been relatively correlated to global GDP growth why is the IMS maintain its GDP growth estimate to three 2% for this year, it's likely to use its outlook for 2023 to two 7% in their October update.

The IEA recently reduced its oil consumption, one average of $99 6 million barrels per day for 2022, 2% increase.

Slightly lower growth estimates in 2023 to one 7%.

Due to moderating economic activity and lower crude prices Opex plus recently cut production by an estimated net effect of 1 million barrels per day through 2023.

Orchestrate the releases of crude from the strategic petroleum reserves offset in countries such as the U S are winding down by the end of the year.

Increases of 6% of U S oil production, we lot supply over time, however, given geopolitical and macroeconomic factors leading research firm recently estimated demand growth for refined products at 6% for 2023.

Moving to slide eight.

U S refineries are currently achieving high seasonal utilization map, Stephanie healthy crack spreads in order to meet solid product demand from the U S Europe , and Latin America zero carbon policies continue to delay the economic rebound in China and have resulted in the recent government approvals for the <unk>.

Export of approximately 120 million barrels of gasoline diesel and jet fuel through early next year. In fact, many of these cargos should be carried on their Mas within the Asian region over the longer term, we expect demand for the product tanker sector to be supported by a refinery additions led by the <unk>.

And there's a <unk>.

Judy estimated that over four 9 million barrels per day of new refinery capacity is scheduled to come online by 2026, virtually all of which is outside the OECD.

Plant shutdowns are likely to slow but over the long run maybe further contempt contribute to the importing of refined products into mature large OECD markets and provide additional ton mile expansion.

Let's move on to slide nine.

The product tanker supply picture is much clearer.

Outlook for them or to US continues to look very promising.

Order book continues to drift lower waste subdued new ordering for product tankers due to the surge in ordering of new container ships gas carriers of dry bulk vessels, mainly Asian yards don't have available construction slots with deliveries at the end of 2024 or later over the five year period ending 2021.

Ladies and delivery of new builds averaged almost 18 months per year are known as decision making process for tanker ordering are further complicated is further complicated by ongoing developments in ship and engine designs stricter environmental regulations are rapidly escalating shipbuilding cost as well as an evolving.

I'm still unclear selection and availability of lower carbon fuels.

New I am more regulations governing CCL tool nations, including debtor collections on the ratings and the E X I N C. III, starting 2023 and could limit available supply due to slow stemming by older vessels.

Despite the strong charter market and the reasonable scarp prices 17, EMR tools have been demolished.

Since the beginning of 2022.

Given that about 7% of the worldwide fleet over months is 20 years of age or older demolition activity should pick up. Consequently, we continue to estimate that the annual net fleet growth for a modest so it would be around 2% throughout 2023.

Turning to slide 10.

Robust charter conditions have led to steep increases in asset prices across the board new building prices are now over $43 million with airlines delivering about two years values for young aircraft leasing demand near historical highs and acquisition opportunities opportunities.

Sure.

However, higher asset prices kind of increased our fleet value.

V.

This combined with rising earnings power should lead to higher equity values and hopefully share prices.

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, Lee on Slide 12, Let's review our unaudited results for the three months ended September 32022, our time charter equivalent revenues for Q3 of 22, which we define as revenues net minus voyage related costs and commissions.

$8 million to $12 million, an increase of $8 $5 million from the same period in 2021.

Higher charter rates, especially in the spot market, where we incurred voyage related costs and commissions as well as the impact from changes in our fleet.

Since summer of last year, we have added to <unk>.

And sold two small tankers in.

In the third quarter of 2002, the TCE rate for <unk> was $29062 per day.

Dramatic increase from the comparable 2021.

Moving to slide 13, we generated net income to common shareholders of <unk>.

$5 1 million for the three months ended September 32022, or <unk> 48.

Basic and <unk> 42.

EPS.

Compared to a net loss of $3 $7 million or <unk> 37.

And diluted loss per share in the same period in 2021.

For accounting purposes, the fully diluted earnings.

Calculation in 2022 assumes the potential conversion of all outstanding series, a convertible preferred stock.

Our common shares and the elimination of the associated dividend.

In Q3 22, a substantial portion of the increase in TCE revenues dropped to the bottom line adjust.

Adjusted EBITDA rose to $8 million, an improvement of $9 $2 million from the third quarter of last year.

Please turn to slide 14, which reviews, our recent fleet data as we operate one eco modified vessel in for eco efficient tankers, given the size of our fleet changes in these metrics related to a single vessel in one reporting period can have a disproportionate effect.

On the total fleet operating results beyond the significant improvement in TCE for 2022, the key takeaway.

<unk> remains the relative stability in operating expenses.

Alright, rising cost pressures, such as insurance and moves.

Turning to slide 15, as you May recall, we believe it is important to periodically review total daily operational cost to run and manage a public tanker company, including overhead.

These costs vary by fleet composition and vessel delivery removal company operating structure and management, we define total Jamie operational cost as the sum.

Vessel operating expenses technical and commercial management cost.

G&A expenses base.

Based upon recent results the total daily operational cost of our modern eco efficient <unk>.

<unk> continued to be very competitive compared to the U S.

Pure play product tanker peers, despite our small size.

Now flip to slide 16 to review our capitalization at September 32022 at quarter close our consolidated leverage ratio to net funded debt stood at approximately 51% total capitalization.

We continue to be in full compliance of our own events a weighted average interest rate was five 9% for the most recent quarter.

And the next bank loan maturity is July of 2025.

Over 21% of our debt has interest rate protection or fixed coupon mitigating further increases in interest costs.

I should point out that during the quarter working capital improved $5 1 million to $2 million.

With that I would like to turn the call back over to Eddie to conclude our presentation.

Thanks Henry.

The combination of solid demand the recent geopolitical events, including the war lower refined product inventories in many parts of the world Hasnt been particularly beneficial to our sector. Despite slowing economic activity. We are optimistic about the prospects of the chartering environment over the long term.

We are filing further support in the positive supply and demand fundamentals of the product tanker sector given the various uncertainties. We will stay on course with our mixed chartering strategy of spot employment complemented by time charters in order to prudently optimize revenues and provide cash flow visible.

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Unless we find an attractive accretive acquisition, we expect to use excess cash flow to further improve our financial position.

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.

This will conclude the conference call for today you may all disconnect have a nice day.

Okay.

Yeah.