StealthGas, Inc.

This is Michael Jolliffe, the Board Chairman of Stealthgas. Joining me on our call today is our CEO, Harry Vafgas, and our Finance Officer, Fenja 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, you could all take a moment to read our disclaimer on slide two of this presentation. Risks are further disclosed in stealth gas filings with the Security and Exchange Commission. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in U.S. dollars. Slide three summarizes the highlights of our third quarter 2021 results that we released today. Our key strategic highlight is the successful spin-off completion of our four tankers now trading in a separate listed entity called Imperial Petroleum Inc. Indeed, we are excited to have completed this transaction as we strongly believe that the timing was right for the creation of two businesses in distinct sectors of the shipping industry. And that is, of course, LPG carriers and tankers. Focusing on stealth gas performance in the third quarter of this year, this was mainly governed by poor spot activity, increased bunker costs, and a high number of commercial idle days. Even though the COVID-19 pandemic is still persisting, we managed to limit our spot exposure compared to the second quarter of this year. However, and due to seasonal factors, we did face increased commercial idle time for open vessels seeking new period employment. As a result, our spot revenues were weak, while due to the rise in oil prices our voyage costs were disproportionately high. Given the completion of two dry dockings and the partial completing of another two dry dockings within the third quarter, we incurred technical off-hire days. This, in combination with the soft spot performance already discussed, resulted in a lower operational utilization in quarter 321 of 94.1%. However, in spite of the commercial obstacles faced in this quarter, we managed to take advantage of the improved market, noticeable from September onwards, and fixed several vessels on period charters. We now have only three vessels operating in the spot market. We have 93% of fleet days on period employment up until the end of this year, with total fleet employment days for all subsequent periods generating approximately $66 million, excluding, of course, our JV vessels in contracted revenues. Period coverage for the first quarter of 2022 is as high as 77%, while for the whole of 2022 our employment coverage is 39%. Focusing on our financial performance, and compared to the third quarter of 2020, our revenues came in at $37.5 million, an increase of $400,000, mainly due to a 45% reduction of bare boat chartering activity, where revenues are, by default, lower than time charter and spot earnings. Revenue potential was offset by the poor earnings generated from spot activity. Our daily time charter equivalent in the third quarter of 2021 dropped by about $100. We had about 60% increase in commercial, idle, and technical off-hire days. As a result of all the above, we generated in the third quarter of this year an EBITDA, excluding non-cash items, of $14.6 million. In terms of net income, Stealthcast produced break-even results. The profitability stemming from both of our joint venture arrangements stood strong, and we ended the quarter with an aggregate adjusted net profit of about $1.8 million, corresponding to an adjusted EPS of $0.05. Moving on to slide number four, we wish to explain in simple terms the impact of the tanker spin-off on stealth gas. As said at the beginning of our call, strategically, we felt the timing was right for this separation of asset classes to occur, as future prospects for both markets look promising. From a financial perspective, the spin-off of our tankers to Imperial Petroleum will lead to a reduction of gases OPEX by about $2.5 million per quarter, or $10 million annually, a drop in quarterly depreciation charges by about $2.2 million per quarter annually, or $8.8 million annually, and an almost $30 million reduction, and that is about 9% of total debt, in stealth gas total leverage. However, these tankers, depending on their employment type and market cycle, were generating on average 10% to 15% of our total time charter equivalent revenue. Hence, this asset separation will, for the time being, lead to a decline in revenue potential. Placing our focus now on stealth gas third quarter and nine months performance, slide five, provides an analysis of our fleet employment. In terms of charter types, and as of December 2021, out of a fleet of 37 LPG operating ships, excluding our seven joint venture vessels, we have four of these on bare boat, 30 on time charters, and only three in the spot market. Regardless of the uncertain market, mostly due to COVID-19 pandemic, we have managed to significantly reduce our spot exposure. Since our previous announcements, we successfully concluded nine new charters and charter extensions. We have three vessels concluding their period charters up until the end of 2021, two of which have charter extension options. Our period coverage for the remainder of 2021 is in the order of 93%, while for the first quarter of 2022, the average period coverage is 77%. We have close to $66 million of secured revenues, and including our joint venture vessels, total secured revenues increases to about $87 million. In slide 6, I would like to provide an update as to our two joint venture performances. Our first joint venture, which comprises in its majority of small LPG ships, currently has all vessels on time charter. Since our last announcement, we managed to fix the gas shuriken on a 14-month time charter, extend the time charter for the Echo Nebula for an additional six months, and fix the Echo Lucidity on a time charter with a six months minimum duration. Our second joint venture, comprising of two medium gas carrier vessels, are both under time charter contracts, thus yielding steady cash flows. Our joint venture arrangements combined have a cash base of about $40 million. In terms of our fleet geography presented in slide 7, our company focuses on regional trade and local distribution of gas. This graph is a snapshot of the positioning of our LPG vessels, excluding our joint venture vessels, as of November the 30th, 2021. Currently, 18 vessels of the LPG fleet trade in Europe, 12 vessels in the Middle and the Far East, and two vessels are now currently trading in South America and five in Africa. I will now turn the call over to Fenia Sakalaris, our Financial Director, for our financial performance. Thank you.

Thank you, Mr. Jolliffe, and good morning to everyone. I will discuss our financial performance for the third quarter and nine months of 2021. Indeed, as we mentioned at the beginning of our call, our biggest obstacle in this third quarter was commercial of higher days, coupled with a sharp rise in banker costs. These factors led to low spot revenues, thus undermining overall profitability. Market improvements noticeable from September onwards allowed us to lock almost all of our fleet on time charters, hence significantly minimizing spot exposure and on higher potential. Let us move on to slide 8, where we see the income statement for the third quarter of 2021 against the same period of the previous year. Voyage revenues came in at $37.5 million, marking a $400,000 increase compared to the same period of last year. This increase is attributed to four fuel vessels on Berbote, now operating either spot or on a time-chartered contract, offset, though, by the fact that 25% of quarterly spot days were, in essence, commercial of hire. In terms of off-hire this quarter, we faced waiting time of vessels seeking new period deployment, but most importantly, we had one of our product tankers and one semi-ref vessel being idle for the majority of the quarter. As discussed earlier in our call, almost all of the vessels might in idle time within the third quarter of 2021 are now operating under time-shunter contracts. In terms of voyage costs, this amounted to 4.5 million, marking a 700,000 increase compared to Q320, in spite of the decline in number of spot days by about 30%. Key driver for this rise is the sharp rise in daily banker costs by 55%. Based on all of the above are net revenues for the period when in the order of 33 million. Running costs at 15.5 million, marked about 12% increase compared to Q320, mostly attributed to four fewer vessels on per boat, for which now we incur operating costs, along with a $250 rise in our daily crew costs, mainly crew medical and crew flight expenses attributed to the COVID-19 pandemic. Dry docking charges amounted to 1.7 million and corresponded to the dry docking of four small LPG vessels, two of which faced prolonged time in the docking yards as they also underwent ballast water system installation. Based on the above factors, EBITDA, excluding non-cash items such as impairment, came in at $14.6 million. Interest and finance costs marked close to a $400,000 increase, as $1 million of this quarter financial costs corresponded to swap interest, as well as arrangement and refinancing costs. With regards to income from our joint ventures, both of our JVs entered the quarter with an operating profit as the majority of the vessels when are the time charter employment at improved rates. As a result of all the points analyzed above, we entered the third quarter of 2021 with a net income of one, excluding non-cash items, of 1.8 million, corresponding to an EPS of five cents. Proceeding to flight nine, we will briefly comment on our performance indicator for the period examined. Our operational utilization for Q321 was quite low, in the order of 94.1%, as technical of hire due to heavy didactic schedule and commercial of hire marked a 50% increase compared to the same period of last year. With regards to our daily time charter equivalent, in Q321, daily TCE marked a gradual decline over the quarters. In Q2-21, we noticed an obvious increase, which in spite of seasonal factors and poor spot performance faced in this quarter, we managed to preserve to a great extent. Looking at our balance sheet in slide 10, our free cash balance increased and is now in the order of 43 million, while to date we have no further direct capital expenditure. Our gearing ratio has further declined to 36.6%, while taking into account our free cash, our net debt-to-asset ratio is as low as 32%. This year, we have been very active in vessel refinancing, as within the first nine months of 2021, we've completed the refinancing of 14 vessels, thus reducing our average annual finance cost, that is LIBOR plus margin, by 100 basis points. We will further refinance another seven vessels within the first quarter of 2022, and therefore we will have no balloon obligation for the next two years. I will now hand you over to our CEO, Mr. Hari Vafias, who will discuss market and company outlooks.

Proceeding on slide 11, during Q321, in spite of the customary seasonal softness, rains improved mostly towards the end of the quarter. Looking at the small LPG trade west of Suez, the spot market experienced the usual seasonal downturn during the summer months, forcing owners to experience idle time between voyages. We've also seen a few vessels leaving the area, heading east, in the last couple of months, which has further aided the balance. Due to the limited availability of spot owners not noticeable since September and reasonable freight rates, charters have been increasing their time charter exposure, which has been positive for the owners. With the expected winter seasonal increase in cargoes, owners might witness further rate improvement and enjoy an even more balanced market. In the east of Suez, the spot market in Asia since September is tight. and lacking available tonnage. So there are cargoes in the market that are finally not shipped due to the lack of tonnage. Naturally, this has had a positive effect on the freight rates over this period. The increasingly tighter spot market has resulted in an active time charter market as charters have been actively looking for forward shipping covers to move their contract cargoes and get an advantage in the tight spot market. We have seen numerous both new time charters fixed and extensions on existing time charters for periods from three months up to one year. Focusing on our market fundamentals, the small LPG pressurized segment has substantial old tonnage. Thirty-one percent of the fleet is currently above 20 years of age, which is a driving force behind increased scrapping activity. Since the beginning of this year, we have witnessed the demolition of seven small pressurized vessels Indeed, we are witnessing a heightened demolition activity. As per recent orders, there are 16 vessels on order, seven to be built in Japan and Korea, and nine to be built in China and to be delivered until the end of 2023. It's important, however, to point out that seven older LPG vessels, equivalent to 45% of current order book, were sold for demolition within the first nine months of 2021. Slide 12 presents our company share performance since the beginning of the year. During this period, we see that Gas's share price has increased by almost 6% and has been trading upwards in the periods of result announcements. It's also interesting to note that following our tanker spin-off, the average trading volume has risen by about 85%. Our stock still trades at the discount to our NAV. In slide 13, we are outlining the key variables that will affect our performance in the quarters ahead. Given the market turmoil, especially due to the COVID-19 pandemic, it's quite difficult to make any 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 $87 million, a total cash base of about $50 million, sufficiently quitted in both our JV arrangement and solid period coverage with minimum spot exposure. Moreover, we remain under a low library rate environment, hence our interest costs will remain low for the short term. On the downside, we have seven scheduled dry dockings for 2022, for which we face increased costs due to related restrictions mentioned earlier. and while the enduring pandemic might push the global economy in another downturn. Concluding our presentation, in spite of the global challenges we're all facing, we believe that SelfGas will perform well, provided we don't witness another global economic slowdown due to the new COVID-19 variants like the Omicron. At this stage, our board chairman will summarize our concluding remarks for the period examined.