U.S. Markets closed

Edited Transcript of PXS earnings conference call or presentation 14-Nov-19 1:30pm GMT

Q3 2019 Pyxis Tankers Inc Earnings Call

ATHINA Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Pyxis Tankers Inc earnings conference call or presentation Thursday, November 14, 2019 at 1:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Henry P. Williams

Pyxis Tankers Inc. - CFO & Treasurer

* Valentios Valentis

Pyxis Tankers Inc. - Chairman & CEO

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day and welcome to the Pyxis Tankers conference call to discuss the financial results for the third quarter 2019. As a reminder, today's call is being recorded.

Additionally, a live webcast of today's conference call and the earnings presentation is available on Pyxis Tankers' website, which is www.pyxistankers.com.

Hosting the call today is Eddie Valentis, Chairman and Chief Executive Officer of Pyxis Tankers; and Henry Williams, Chief Financial Officer.

I'd now like to introduce Pyxis Tankers' Chief Executive Officer, Eddie Valentis. Please go ahead.

--------------------------------------------------------------------------------

Valentios Valentis, Pyxis Tankers Inc. - Chairman & CEO [2]

--------------------------------------------------------------------------------

Thank you, operator. Welcome, everyone, and thank you for joining our call for the 3-months results ended September 30, 2019.

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 results for the third quarter 2019 reflected a significant improvement from an operating perspective over the comparable period of 2018 and over our Q2 results. In Q3 '19, we generated time charter equivalent revenues of $6.2 million, 140% higher than the same period in 2018. We had a net loss of $800,000 or $0.04 per share for the third quarter of 2019 versus a net loss of $4.1 million or $0.20 per share in the same period in the prior year. Our adjusted EBITDA for Q3 2019 increased by $3.6 million to $2.1 million.

During the third quarter, the spot market was lackluster. Our more conservative approach to vessel employment by staggered short-term time charters of our medium-range product tankers proved beneficial. In Q3 2019, the average daily time charter equivalent for our MRs was over $14,400 per day, 6.5% higher than Q2, with daily utilization of almost 100%. Starting in the fourth quarter, we have seen the chartering market improve nicely beyond this typical historical seasonal upswing.

The positive impact globally of new IMO regulations regarding the use of low-sulphur fuels has started to boost the solid fundamentals of supply and demand growth within our sector. However, we continue to be concerned about the uncertainty surrounding trade barriers and the recent geopolitical events, which could hamper worldwide economic growth and the demand for oil and petroleum products.

Our fleet and existing chartering activities shown on Slide 4. We look to capture the rising market over the near term in order to enhance our operating cash flow. As you can see, we have 1 MR scheduled for redelivery shortly and 3 others by next spring. Our 2 young MRs, the Pyxis Epsilon and Pyxis Theta, each have charters options which can increase the daily charter rate by over $2,100 per day for another year, starting within 6 months from now. Given that our cost structure is substantially fixed, these increases would drop to the bottom line.

As of November 11, we had 57% of our remaining available days in 2019 covered, exclusive of any extensions. The MRs have an average daily rate of approximately $15,300 per day, which is $700 higher than the average for 1-year time charters over the last 7 years. As you can see, our small tankers continue to operate in the spot market. At this point, we have 18% of our available days booked for 2020, exclusive of extensions, thus providing further upside opportunities. We expect to continue our mixed chartering strategy for the near term.

Please turn to Slide 6 for a brief review of the product tanker market, which is positioned for further improvement. Clearly, global economic activity has slowed and was reflected in soft spot market for most of the first 3 quarters of 2019. Inventories of major refined petroleum products worldwide are currently at or below 5-year averages. After an extended maintenance period, refinery runs have recently risen, thus increasing available cargoes. After a busy year-to-date, the addition of new capacity is slowing.

Turning to Slide 7. As previously mentioned, a better and sustainable charter market is underway. Our positive outlook is based on demand growth of 3% per annum with modest ton-mile expansion from the changing refinery landscape. Moreover, the MR2 sector should be a primary beneficiary of the new IMO 2020 fuel regulations, which should provide incremental cargo demand for our class of vessels.

The distribution of new compliant low-sulphur fuels, through the massive global network of ports and marine storage facilities, should further increase ton-mile demand, expand trading routes for MRs and possibly create arbitrage opportunities.

The MR2 order book continues to decline. While a significant number of MRs have been delivered in 2019, new ordering activity continues to be relatively low. Slippage in new tanker deliveries should continue, and demolitions should increase given that 6% of the global fleet of MRs are 20 years or older and in light of the economic impact on new environmental regulations on all the less-efficient vessels. Availability of cost-effective capital continues to be tight industry-wide, further constraining the placement of newbuild orders. Consequently, we believe net fleet growth for MRs will be less than 3% in 2020.

Turning to Slide 8. MR2 asset prices have increased over the last few years, especially for modern acquisition tonnage, and currently, approximate 10-year averages. There continues to be attractive opportunities to acquire secondhand tankers at reasonable prices and capture the potential upward movement of charter rates. So our sector has positive near-term fundamentals, combined with the major catalyst of IMO 2020, which should translate into improving cash flows, asset values and hopefully, better 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.

--------------------------------------------------------------------------------

Henry P. Williams, Pyxis Tankers Inc. - CFO & Treasurer [3]

--------------------------------------------------------------------------------

Thanks, Eddie. Let's start with the unaudited results for the 3 months ended September 30, 2019, on Slide 10. Our time charter equivalent revenues for Q3 '19, which we define as revenues net minus voyage-related costs and commissions, were $6.2 million, an increase of $3.6 million or 140% from the same period in 2018, primarily as a result of higher MR rates and higher utilization.

Our most recent periods reflect higher-yielding time charter activity. For the 3 months ended September 30, 2019, our daily TCE rate fleet-wide was $12,360, more than double the 2018.

Better results for 2019 are showed in Slide 11. We incurred a net loss of $800,000 for the 3 months ended Q3 2019 or $0.04 basic and diluted loss per share based upon 21.1 million weighted average shares outstanding compared to a net loss of $4.1 million or $0.20 basic and diluted loss per share based on a slightly lower share count.

The improvement in TCE revenues of $3.6 million was partially offset by a $300,000 increase in interest expense, which was due to higher weighted average cost of debt. Nevertheless, better TCE revenues substantially flowed to the bottom line and resulted in a $3.6 million improvement in adjusted EBITDA over the same period in 2018.

Please turn to Slide 12, which reviews our recent fleet data by vessel type. Given the size of our fleet, changes in these metrics related to a single vessel in one reporting period can have disproportionate effects on the total fleet operating results. Focusing on the quarter ended September 30, 2019, we would like to point out 3 key takeaways. Our TCE for our 4 MRs averaged $14,400 per day with our eco-efficient MRs generating almost $15,200 per day per ship. Despite nearly 100% utilization of our MRs, fleet-wide utilization improved to 90.6%, with the small tankers experiencing fewer but still significant off-hire days in the spot market. And lastly, vessel operating expenses fleet-wide improved 2%, further representing cost discipline and consistency.

Turning to Slide 13. As you know, we believe it's important to review total daily operational cost to run and manage a public tanker company, including overhead. These costs vary by fleet composition and vessel delivery, company operating structure and management. We define total daily operational cost as vessel operating cost, eco and commercial management fees plus G&A expenses. For comparative purposes, we believe that the total daily operational cost of our eco-efficient MR2 tankers of $7,500 per day per ship continue to be stable and very competitive within the industry despite our small size.

Please turn to Slide 14 to review our capitalization as of September 30, 2019. At quarter close, our consolidated leverage ratio was on par with a number of publicly traded tanker companies as net funded debt stood at $59.7 million or 60% of total capitalization. No balloon payments or principal are due for almost 3 years.

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

--------------------------------------------------------------------------------

Valentios Valentis, Pyxis Tankers Inc. - Chairman & CEO [4]

--------------------------------------------------------------------------------

Thank you, Henry. Q4 2019 has started off in a very positive fashion. We believe this is the beginning of a sustained improvement in the product tanker market, leading to further increases in charter rates, cash flows and asset values. Our current mix of staggered time charters and spot exposure should position us to take advantage of expected increasing rates over the near term. Utilizing our cost-effective operating platform and deep management experience should enhance our shareholder value.

In conclusion, we feel confident in the long-term sector fundamentals, excited about our potential opportunities created by IMO 2020 and are positioned to capitalize on future events.

I thank you for joining our call today, and look forward to reporting on further progress at Pyxis Tankers.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

Thank you. Thank you for participating. You may all disconnect.