StealthGas, Inc.

Good morning everybody and welcome to our fourth quarter and 12 months 2020 earnings conference call and webcast. I am Michael Jolliffe, the Chairman of the Board of Stealth Gas and with me on our call today is Harry Vafias, the Chief Executive Officer of Stealth Gas along with our Finance Officer Fenia Sakalaris. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance. At this stage, if you could all take a moment to read our disclaimer on slide two of this presentation. Risks are further disclosed in Stealth Gas filing with the Securities and Exchange Commission. I would also like to point out that all amounts quoted unless otherwise clarified, are implicitly stated in United States dollars. Slide three summarizes the key highlights of our fourth quarter 2020 results that we released today. Our market environment in this last quarter of 2020 remained fairly unchanged compared to quarter three 2020. Main reason for this flat market is of course the ongoing COVID-19 pandemic which greatly affects LPG demand. Vaccine delays, along with the recurring lockdowns, prevented any meaningful recovery, particularly in the European region. Admittedly, we faced a far tougher market in Europe than in Asia, where trade, although primarily spot, was indeed more stable and at better freight rates. Given this environment, where new time charter activity was quite negligible, our presence in the spot market was even stronger than in the third quarter of 2020, with more than 16 vessels operating predominantly on the spot market throughout most of the quarter. Hence, trading risks were high, with voyage costs and off-hours, thus undermining our earnings potential. Even in this difficult market, Stealth Gas demonstrated quite strong performance and managed to end the quarter with a profit. We were resourceful and versatile in adapting to these soft market conditions and leveraging upon our expertise, even managed to improve spot earnings stemming from the Asian region. We also need to mention that this quarter we took an expected and from our medium gas carrier operations as two out of our three medium-sized gas carriers underwent their scheduled dockings within quarter four, thus producing an operating loss. Focusing on our operations, our fleet utilization for quarter four 2020 was 98.5% with about 60 days of technical off-hours as a result of the dry docking of two small LPGs. In terms of our operational utilization, this came in at 93.6%, mainly due to more than 16 of our ships operating predominantly in the spot market, equivalent to 29% of our voyage days. Going forward, we have about 50% of our fleet days secured on period charters for the remainder of 2021. The total fleet employment days for all subsequent periods generating $81 million in contracted revenues. Including the time charter agreements of our joint venture structures, total secured revenues increased to close to $92 million. During the fourth quarter of 2020, we sold, for further trading, our oldest small LPG vessel, the Gas Pasha, which is 1995 built. Moreover, Earlier this month, we took delivery of an 11,000 cubic metre pressurised ice-class new building LPG, the Echo Blizzard, thus completing our capital expansion phase. Looking at our financial performance highlights, our voyage revenues came in at $37.3 million, marking an increase of $2.1 million compared to the same period of last year. This was primarily due to the increase of revenues stemming from our larger LPGs and six vessels coming off their boat, including the four ships re-delivered due to the bankruptcy of our charterer. Compared to the third quarter of 2020, our daily time charter equivalent decreased by about $500 a day. As our spot exposure increased, so did the voyage costs incurred, thus suppressing our daily time charter equivalent earnings. With an adjusted EBITDA, excluding impairment charges, that is, of about $14 million, our adjusted income came in at $1.1 million, corresponding to an adjusted EPS of $0.03. Our capital structure remains solid, with low gearing, a strong cash base, and zero capital commitments in the near future. It is quite interesting, however, to comment on our annual performance. In spite of an unpredictable and tough market, this was a good year for Stealth Gas, given that excluding non-cash items, we generated a net income of almost $17 million, corresponding to an earnings per share of 44 cents. Indeed, our strong results are mostly attributed to the performance we had during the second quarter of 2020, But still, it should be noted that all of our quarters this year ended with a profit in spite of the difficulties that we faced. Slide number four provides an analysis of our fleet employment. In terms of charter types, out of a fleet of 42 operating vessels, including our eight joint venture vessels, we have five of these on bare boat, 26 on time charters, and 11 in the spot market. Regardless of the difficult economic environment since our last announcement, we concluded 10 new charters and charter extensions. The majority of these charters were concluded from the beginning of February onwards when period activity visibly picked up. This can be either attributed to seasonal factors or it could possibly be the first sign of our market's gradual recovery. Our period coverage for the remainder of 2021 is in the order of 50%, while currently our period coverage for the first quarter of this year is in the order of 74%. With these deals, we managed to preserve our contracted revenues in the order of $80 million, including our joint ventures, total secured revenues increased to about $92 million. In slide five, I would like to provide a summary update as to our two joint ventures' performance. Our first joint venture, which comprises in its majority of small LPG vessels, currently has three out of the five total vessels under time charter contracts. The time charter contract for the medium gas carrier, the Ethonebula, was recently extended for another three months. All vessels operating in the spot market throughout the last quarter of 2020 marked an improved performance as all of these vessels traded in the Asian region. Focusing on our second joint venture, comprising of three medium gas carrier vessels, these are all under time charter contracts, thus producing a steady cash flow. Two of our vessels, the Gaschem Bremen and the Gaschem Stade, underwent their scheduled dry docking within quarter four 2020, thus affecting profitability for the quarter, as the dry docking and off-hire costs combined were close to $2 million. In terms of our fleet geography, presented in slide 6, our company focuses on regional trade and the local distribution of gas. This graph is a snapshot of the positioning of our LPG vessels, excluding our joint venture vessels, as of February 15, 2021. Currently, we have 15 of our LPG vessels trading in Europe, 16 vessels trading in the Middle East and Far East, and four vessels in Africa, and three in America. I will now turn the call over to Fenia Sakalaris for our financial performance.

Thank you, Mr. Jolly, for a good morning to everyone. I will continue the presentation focusing on our financial performance for the fourth quarter of 2020. As mentioned earlier in our call, increased spot activity during the last quarter of 2020 suppressed both our revenue and profitability potential. Let us move on to slide 7, where we see the income statement for the fourth quarter of 2020 against the same period of the previous year. Voyage revenues came in at 37.3 million, marking a 2.1 million increase compared to the same period of last year. This increase is attributed to a 50% reduction of bear boat activity and a rise of time charter revenue stemming mostly from our larger LPG vessels. Voyage costs amounted to 5.3 million, marking a 30% increase compared to Q4-19, as our sport exposure increased by 82%. Based on all of the above, our net revenues for the period were 32 million, corresponding to a net revenue margin of 86%. Running costs of 14.6 million marked about a 16% increase compared to Q4-19, mostly attributed to six fewer vessels on bare boat, now operating either on time charter or in the spot market. Increased crew change and medical costs due to the COVID-19 pandemic add to our operating cost base as well. Dry docking costs came in at about 1 million, corresponding to the dry docking of two small LPG vessels. We have eight scheduled dry docking for 2021. All of these dry docking with a budget of almost 3.5 million are for small LPGs and are currently apportioned evenly throughout the quarter. Based on all of these, our adjusted EBITDA is in the order of 13.7 million. Interest and finance costs marked close to 1.4 million decrease, mainly attributed to LIBOR decrease and the lowering of our debt. Our finance costs would have decreased even further had it not been for swap interest, which this quarter, and due to very low LIBOR levels, was in the order of $500,000. We are currently about 35% hedged, and swap interest will continue to remain at this level as long as LIBOR remains so low. With regards to income from our JVs, and as mentioned earlier in our call, losses incurred this quarter are attributed to the dry docking of two of our medium gas carriers at a cost including of higher cost of about $2 million. Based on all of the points analyzed above, we ended the fourth quarter of 2020 with an adjusted net income of $1.1 million, corresponding to an adjusted EPS of $0.03. We further on added to this year's profitability, so for the whole 12 months of 2020, our adjusted net income is $17 million, corresponding to an adjusted EPS of $0.44, a good performance given the difficult market conditions. Slide 8 demonstrates our performance indicator for the period examined. As mentioned earlier on, our operational utilization for Q420 was in the order of 93.6% and 96.1% for the whole of 2020. In terms of our adjusted time charter equivalent, we noticed a rise on an annual base of about 600 daily, an outcome mainly due to improved charter rates from smaller PVGs, which prevailed at the beginning of 2020, that is prior to the COVID-19 pandemic, improved time charter rates for our 22,000 CBM semi-refrigerated vessels, and a time charter contract for our single AfraMax tanker currently producing a strong revenue. Looking at our balance sheet in slide 9, our free cash is in the order of $38 million, while to date we have no further capital expenditure, which means no cash commitments in the near future. Our gearing is now in the order of 37.3%. Based on our scheduled principal repayments, we will reduce our leverage by around $40 million per year. We have no balloon refinancing obligations for 2021 and have already completed the majority of balloon refinancing for 2022 as well. I will now hand you over to our COO, Mr. Hari Vafies, who will discuss market and company outlook.

We proceed with slide 10. As market uncertainty brought upon by the COVID-19 pandemic still prevails, it's very difficult to firmly assess our market's future. We can, however, provide a summary commentary as to LPG trade and possible scenarios going forward. In 2020, global LPG loadings amounted to 141.8 million tons, marking an annual decline of 2.1%. LPG imports to China marked a moderate decline of 0.2%, while LPG trade contraction in the EU was sharper as imports fell by about 4%. Focusing on the EU, the lockdown during the second quarter of 2020 took out significant demand for small LPG ships. Added to this, trade scaled down on a combination of lower LPG from refineries combined with weaker industrial and auto gas demand. That came trade also scaled back in 2020. However, as per Greg's broker analysis, Pepsi volumes are expected to increase by 8% in 2021, backed by both trades recovering from the COVID-19 lockdowns as well as the new U.S. ethylene export volumes. On slide 11, we see that during Q4 2020, rates for small gas ships remain fairly stable. It's, however, too early to assess if stabilization of rates is due to seasonal factors or it can be deemed as a first sign of a gradual market recovery. Looking at the small LPG trade west of Suez, all throughout the fourth quarter, the spot market continued to be challenging for owners. Since the beginning of February, activity increased and should things continue to improve as the COVID-19 vaccination process intensifies, you might see a better second half of 2021. Period activity has picked up as well as we have seen a few fixtures, particularly for the 5,000 cubic meter vessels. East of Suez, the market was better than in Europe. Both LPG and tech camps have been reasonably active and owners have managed to avoid any significant idle time. The period market was relatively low with some charter renewals and a few short-term time charters. An increase in spot levels in the near future might probably lead to charters deciding to take more time charter tonnage. Regardless of the current situation, which is driven by global economic conditions, our segment's specific fundamentals that of an aging fleet low order book remain positive and will likely accelerate our market recovery rate once the broader economic environment permits. The small LPG pressure segment has substantial old tonnage. 31% of the fleet is above 20 years of age. Since our last announcement, we have recorded the demolition of four small ships. It's highly likely that we'll witness increased demolition activity within 2021. As per recent published orders, there are 20 vessels, that's about 8% of the total fleet, to be delivered until the end of 2022, with no registered orders for 2023. On slide 12, we discuss our company's output, commencing with our share performance since the beginning of 2020. The performance of our stock is presented along with selected gas carriers peer group and the price of oil. Since the beginning of last year, the majority of the shipping stocks follow a broad correlation to oil price volatility. It's worth mentioning, however, that most shipping stocks struggled during most of 2020, mainly due to the broad market generalization surrounding the negative impact of COVID-19 on the shipping industry. In reality, most shipping segments, including LPG, had a fairly good year, given market circumstances, that is. Hence, company valuations should have been far better. Focusing on our company, we carried trade at about 25% to 30% of NAV, but we deemed to be very low, given both our stated profitability along with our robust balance sheet. On 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 that may assist our financial performance in the upcoming quarters. First point is that we have a total period coverage of about $95 million in pre-contracted revenues. In addition, we operate several vessels in the spot market, which poses a risk, but at the same time gives us significant operating leverage should period activity pick up and market rates firm further. Although we are reluctant to give any numerical predictions, we have calculated that even a small $500 daily increase in spot rates will increase our EBITDA by about $4 million. Moreover, we have all of our 22-case MREFs and MGC vessels on time charges at improved rates, while the majority of our tankers are also on period charges, producing a solid cash flow. Fourth point is that we are under a very low LIBOR rate environment, hence our finance costs will decrease even further. Last, but most importantly, is that should vaccines bring the pandemic into remission, we anticipate our market to leverage on its strong fundamentals and recover at quite a fast pace. However, on the downside, we have 17 vessels concluding the period of employment up until the end of 2021. Moreover, we have eight dry dockings to complete within the year, thus burdening our cost base. Concluding our presentation with slide 14, we present a brief summary of our companies and market strong points. And given our good performance, particularly amidst an unusually difficult year, we feel even more confident that we will perform much better should our market begin to show glimpses of improvement. At this stage, our chairman will summarize our concluding remarks for the period examined.