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Operator
Good morning, everyone, and welcome to our fourth quarter and 12 months 2022 earnings conference call. This is Harry Vafias, CEO of Stelgas, and I'm going to discuss market and company outlook. And with me is Mr. Stovallis, who's handling investor relations, to discuss the financial aspects. Before we commence our presentation, I'd like to remind you that we'll 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. Risks are further disclosed in Stelka's filing with the Securities and Exchange Commission. I'd like also to point out that all amounts quoted, unless otherwise clarified, are U.S. dollars. Today, we released our earnings results for the fourth quarter of 22, completing a full year of trading as a pure LPG company. Following the 2021 spin-off, and we are happy to report yet again a strong profitable quarter and record profits for the year. So let's proceed to discuss the results and what we see in the market in general. In slide 3, the fourth quarter is typically a seasonally strong quarter for LPG trading. We had just finished dry docking all the vessels that were due, so we had our full fleet available for chartering. Our aim was to charter most of our vessels on period thus reducing the spot exposure and we did and we did by reducing spot days from 843 to 596. On a yearly basis, we have reduced our spot exposure to just 17% of our fleet days. We kept seeing charter interest in locking period coverage, so we continue entering into period charters at improving rates. With us managed to have secure total today, 55% of our 2023 days contracted out. we have locked in about $105 million for subsequent periods. In terms of our sell and purchase activity, we continue to look for opportunities to sell some of the older vessels in the rising market. Since the last announcement and up until now, we entered into agreements to sell three of our oldest vessels, 20-year-old or more, the Gas Protégé, the Gas Spirit, and the Gas Galax. Two already delivered last month, and the third one is pending. earning us a total proceeds of about $12.5 million. As an update regarding the MG Senior Building Vessels, due to the year constraints, we now expect the joint venture vessel to be delivered in Q3 of this year, the next test gas vessel in Q4, and the last vessel in Q1-24. Looking briefly at our financial highlights, we need to keep in mind that the four tankers that were part of the spin-off last December were included in the last year's comparative results. Vonia's revenues came in at a very strong $42.7 million compared to $36.1 million last year, an 18.3% increase, in spite of the smaller fleet. Overall, for the full year, our revenues came in at $152.8 million, the highest revenue figure since 2018, compared to $150.2 million for the same period last year, a 1.7% increase year-on-year. In line with the trend in recent quarters, we had substantial decreases in OPEX and depreciation as well due to the smaller fleet, but we also saw a rise in voyage costs that was due to the combination of high spot exposure compared to Q4-21 and increasing banker costs due to the rise in crude oil prices. Overall, our net profit for the quarter was $7.7 million compared to a net loss of $38.7 million for the same quarter in 2021. and a very strong 10.6 million adjusted income figure that is excluding impairments compared to 2.8 million for the same quarter in 2021, almost four times higher. But the number I like to stress is the full year net income that went from a $35.1 million loss for 21 to a $34.3 million gain in 22. This is the highest annual profit since the company's inception and lifting back in 2005. That brings our EPS for the quarter to $0.20 and $0.90 for the 12 months. We remain steadfast in managing prudently our liquidity and so our total cash, including restricted cash and short-term investments, more than doubles to $95.7 million compared to $45.7 million at the end of last year. We continue to be well capitalized, maintaining a low debt ratio of 36%. On slide four, we see our fleet employment update for February. Last time, we announced 11 new charters. This time, we announced eight new charters and charter extensions at similar or better levels, and we continue to see charters interested in locking in longer than usual periods, always a good sign for the future market. As such, we increased our contracted base from 40% previously to 55% for the remainder of 2023 and have secured about $80 million in revenues. Our total contracted revenues for all periods have increased to $105 million. I would also like to stress something that we rarely see, that as of today, all our vessels are fixed on period, short or longer term. We have no vessels available in our fully-owned fleet if a charterer needs to move a spot cargo today, and that can only be seen as a favorable situation to be from our side. Lastly, we have three vessels we expect to dry dock in 2023, the three handy size ones. Another vessel that was due for dry dock was one of the vessels we sold for further trading. On slide five, I'd like to provide you an update on our two JVs, comprising of a total of six vessels. On our first JV, which comprises of small LPG vessels, after the sale of the Nebula last year, we fixed two of the vessels on a one-year and a six-month charter, respectively. A single vessel is operating in the spot market. Three of the vessels are due for dry dock this year, although we may delay one of the dry docks to next year. Our second JV comprises of two medium gas carriers, plus one more under construction. Both of these vessels have their charters expiring shortly, but the market for these larger vessels remains strong. As previously discussed, we do not intend to fund the new building acquisition with our own equity. The JV has sufficient cash earmarked for this, together with any finance process that are arranged. In terms of our fleet geography on slide six, our company focuses on regional trade and local distribution of gas. And this graph is a snapshot of the positioning of our vessels, excluding the JV-1s, as of February 22. The distribution of our fleet has not really changed since our last call, as we continue to have half of our fleet in Europe and the rest mostly in Asia. Currently, we have 16 vessels trading west of Suez, particularly in North Europe, 11 vessels in the Middle East Far East, mostly Singapore and China, and three vessels trading in the U.S. and Caribbean. And finally, two in Africa. I'd like to turn over the call to Mr. Stovaris for a financial performance.
Harry Vafias
Thank you, Harry, and good morning to everyone. I will discuss our financial performance for the fourth quarter and 12 months of 2022. Let us turn to slide seven, where we see the income statement for the fourth quarter and full year of 2022 against the same periods of 2021. Net revenues came in at $36.2 million for the quarter and $130.5 million for the 12 months, a slight increase by 2% over the 12-month period, despite the vessel sales and roughly an 18% reduction in the total fleet days. Operating expenses were $14.5 million for the quarter and $54.8 million for the 12 months. an 11% reduction in the 12-month period, a similar trend to what we saw in the previous quarters that was due mainly to the reduction in the fleet size. In terms of dry docking costs, we had 3 million in 2022 versus 5.2 million in 2021. We dry docked four vessels last year. Depreciation is another item that saw a large decrease to 6.8 million for the quarter, and 27.8 million for the 12-month period, a 25% decrease year-on-year. And that was also due to the decrease in the number of vessels. Interest and finance costs increased to 3.4 million due to increases in interest rates, but overall, during the year, they were actually lower. Impairment loss was 44 million in 2021, which was the write-down for the tanker vessels that were part of the spin-off. Whereas in 2022, just $3 million, which relates to the vessels that were held for sale. Equity income in the seas is our shares in the profits of our JV structures and came in at $1.2 million for the quarter and $10.9 million for the 12 months. Both our JV structures operated profitably. So we can see that for the year 2022, income in all categories increased and expenses across the board were reduced. As a result of all the points analyzed above, we ended the fourth quarter of 2022 with a net income of $7.7 million and $34.3 million for the 12-month period. This was the best-ever full-year net income for Stealth Gas. Even on a net income adjusted basis, that is, if we were to exclude the $40 million write-off from the tankers in 2021, Stealth Gas reported for the full year 2022 $36.8 million, more than 2.6 times the previous years. Looking at our balance sheet in slide 8, our liquidity, including restricted cash and short-term investments, that is basically time deposits, was at the end of the year in the order of $95.7 million, a doubling from the $45.7 million in Q4 2021. The increase in liquidity came from the refinancings, the vessel sales, and from improved operating cash flow. Advance of 23.4 million relate to the payments made for the MGC vessels under construction. Our vessels net book value decreased from 681.3 million to 628.3 million due to regular depreciation and the sale of the vessels. The total value of our investments in our JV is 46.6 million. It was reduced compared to last year due to the 16.5 million in distributions we received after the sale of the EcoNebula. The overall outstanding debt was $277 million from $300 million at the end of last year. As a result of the solid results being reported, we increased shareholders' equity by $43 million during the year to $821 million as of December 31, 2022. Concluding our financial commentary with slide 9, we will briefly reiterate our debt profile and capital structure. Following the refinancing we did in the last couple of years, we have extended the maturity of the loans to 2025 and beyond, thus securing the company from any refinancing risks in the medium term. We have also signed a commitment letter with one of our existing financiers for the financing of the two new building vessels, whereby we expect to receive up to $70 million in finance proceeds for the delivery of these vessels, subject to customary closings. We expect to conclude the loan agreement before the end of the quarter. Overall, we continue to keep low leverage with a debt ratio below 40%, and we continue to have six unencumbered vessels. As previously mentioned, the successive raises of interest rates by the Fed have started showing into a rising interest rate expenses. Our average LIBOR cost went from below 20 basis points a year ago to over 4% at the end of Q4. We have in place interest rate hedges for 36% of our debt at an average of 1.76. That mitigates the effect of rising interest rates somewhat. Rates seem to have plateaued and the economic debate has recently shifted to when the Fed will do its pivot. We expect to continue to reduce our existing debt through regular repayments as well as prepayments, as the case may be, in order to reduce expenses. Overall, debt has been reduced from $303 million a year ago to $279 million at the end of Q4 2022. I will now hand you over to our CEO, Harry Vafias, who will discuss market and company outlook.
Operator
On slide 10, we are providing some insight on the LPG market and how trade partners shape the shipping markets for our product. We have laid out these themes previously and 2022 data coming in to support our views. The one positive change from the previous call being the resurgence of Chinese demand. According to data from Bankero, during 2022, LPG exports increased 4.5%, slightly better than was expected. The main exporters of LPG being the US and Middle Eastern countries, both managed significant increases in exports last year, with the US increasing exports by 9% and increasing volumes destined for Europe. European exports continue to be muted, as European countries continue to diversify their sourcing away from Russian supplies and importing a third of their supplies from further away, that is mainly the U.S., thus increasing ton-mile demand. Apart from Europe, the largest importers of LPG are India, China, Korea, and Japan, all increased their imports. The last quarter of 2022 saw the lifting of COVID policies in China, and while there was an initial concern over the rising COVID infection numbers, it seems that the reopening has finally started boosting LPG imports. And while import data vary widely, all point that Chinese imports grew significantly at the end of the year, making the year-on-year change finally positive compared to negative in the previous call that we had. We therefore remain optimistic on Chinese LPG demand, supported by expected economic recovery that is pegging China's GDP growth to 5.5% for this year. A main catalyst for Chinese LPG demand will be the increasing capacity of its PDH plants that use imported propane as feedstock. These plants have been plagued by startup delays and low production run rates due to the unfavorable margins, but the rapid expansion of PDH capacity in China over the last few years is unquestionable. To understand the scale The scale current domestic production capacity of around 10.3 million tons was less than 5 million tons in 2018. There are 12 new plans scheduled for 23, potentially increasing capacity by more than 20% and more projects beyond that. On slide 11, we present some key fundamentals in our shipping market commencing with the market rate evolution. During Q4 22, time charter rates rose on the back of increasing demand, while on a year-over-year basis, there continues to be healthy growth between 5% and 18%, depending on the size and location. At the smaller LPG trade, west of Suez, following the softer summer months, the final months of 2022 and beginning of 2023 have, on average, been reasonably tight, and at times even so tight that cargoes have gone unfixed due to the lack of available ships. There has been a fair bit of activity on the period side and rate, Rates continue to push upwards, although at a moderate pace. As of now, we see limited tonnage available for time charter, and we cannot see any major reasons for a drastic turnaround in sentiment in the near future. East of Suez, like in Atlantic, we saw a fair bit of activity on the period side. The spot market has been less active than usual considering the time of the year, but it's also explained by the high time charter coverage amongst the main charters in this market. Rates have trended marginally upwards. For the handy-sized vessels, the spot market has been tight or very tight in the final months of 2022 and during the beginning of 2023. A significant number of handy-sized ships were fixed for short-term ammonia time charges, and this resulted in less tonnage being available for the LPG and PET chem trades. The fundamentals for our core fleet of small-pressure vessels continue to look promising, as almost a third of the fleet is over 20 years old. As their market remains strong, scrapping activity remains subdued. Even the vessels that we recently showed were destined for further trading. However, upcoming environmental regulations on EXI and carbon intensity will make it harder for older vessels to trade and we expect to see increasing scrapping activity or vessels being removed from international trading to do restricted cabotage trades in less demanding areas. The ordering activity continues to be subdued with only a handful of ships being ordered. As per recent published orders, there are 24 ships on order to be delivered up until the next couple of years. We continue to believe that the risk of seeing bulk ordering of used vessels that could tip the supply-demand balance is improbable. A sub-2% annual increase in the fleet before scrapping is one of the smallest, if not the smallest, in all shipping segments. On slide 12, we are showing the evolution of our LPG fleet. In this slide, for comparison purposes, we have extruded the tanker vessels that we held up until 2021, and we have focused on the pure LPG fleet in terms of cubic capacity, including our JV vessels. We have always been active in the sell and purchase market, buying and selling vessels. Recently, we have been shedding quite a few older ships, four in 2022, and three more this year. This is part of our strategy to keep renewing our fleet in order to maintain its competitiveness. We thus have reduced the average average of our fleet to below nine years. In our joint ventures, we may have a little more opportunistic approach in terms of selling and buying. However, in our core flicks, we expect that with the addition of the 40,000 cubic meter new builds starting in late 2023, we will once again increase our capacity in terms of cubic meters while being able to better service the diverse needs of our customers. In slide 13, we are planning some key variables that will affect our performance for the quarters ahead. Obviously, the most important development that we have mentioned earlier is the reopening of China after a long-awaited two years. With the Chinese economy back on track, we should see increased LPG trading. On the other hand, recessionary fears should be a concern for all of us. The latest impression is that the global economy, especially the U.S., is faring better than originally imagined, and recently the IMF even revised slightly upwards its projections. But with persistent inflation and high interest rates, economies are more fragile than what they've been for a long time. To sum up, I'm very pleased to report best-ever annual profit for stealth gas. In a difficult environment with rising interest rates and a smaller fleet, we managed to earn total net income of about $34 million or $0.9 per share. Our adjusted EPS for Q4 was four times higher than the adjusted EPS for Q4-21. Our total cash doubled from $45.7 million at prior year end to $95.7 million at the end of 2022. while our total assets were $821.5 million at the end of last year, with only $303 million in total liabilities. These results give us the energy we all need to continue to push for more noteworthy results and to strengthen the company and our balance sheet even further. We hope to keep the momentum going and we expect another strong quarter for the beginning of the year. We have now reached the end of our presentation and would like to open the floor for questions.
Bankero
Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your questions, you can please press star 1 and 1 again. Once again, it's star 1 and 1 on your telephone and wait for your name to be announced. And it's star 1 and 1 if you will need to withdraw your question. Thank you.
spk05
We are now going to proceed with our first question. And the questions come from the line of Tate Sullivan from Maxine Group.
Bankero
Please ask a question.
Tate
Hello. Thank you. Thank you, Harry, for the comments. And I mean, with the cash and restricted cash and short-term investments increasing to 96 million at the end of 4Q, up from 86 million, and you paid down debt, can you talk about capital allocation priorities going forward with that building cash? Are you going to fund more of your new-build deliveries in cash versus debt? And can you also comment on your previous potential timeline to repurchase this, please?
Operator
Thanks, Tate. As we said on the previous quarter, the board wanted to see two to three good quarters before they allow us to use the cash more opportunistically. they saw the second good quarter hopefully if all going well they're going to see a good Q1 and therefore after that we will discuss the different opportunities for the cash for sure one opportunity is buying back stock another opportunity is paying down debt now that interest rates are rising or a combination of the two which is something that I would vote for
Tate
and financing the new-build deliveries for the next year or so. I saw one of your slides, you pointed to the available financing on those. Will you finance those at a 40% loan-to-value, 60%, or what is your usual financing on new-builds level?
Operator
Yes, 60% debt. The equity requirements are not much, as we have already paid a 20% deposit. Therefore, the new money that needs to be injected is actually very little.
Tate
You mentioned some delays in shipyards, and I have not heard many other companies mention delays from the shipyards. Were these specific to the shipyards where you're getting your medium gas carriers built, or have you seen other delays for other companies in the market?
Operator
The very popular shipyards, the majority of them are all facing delays. Thank God the delays are minimal as we want the ships to be active the soonest as the market is strong.
Tate
Okay, and last on the ship sales. Did you say 12.5 million of proceeds from three ship sales and then so no gains or losses on those sales because you already took the impairment on one of the vessels? Yes, I did an impairment.
Operator
12.5 million total, as these were the smallest and oldest by far vessels in our fleet. Imagine one of the vessels is 97 built, which would normally go for demolition, but we managed to get a higher price and sell it for federal trading.
Tate
Thank you, Eric.
Operator
Thank you.
Bankero
Once again, as a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. We are now going to proceed with our next question. And the questions come from the line of Cleveland Mullins from Value Investors Edge. Please ask a question. Your line is opened.
Cleveland Mullins
Good morning. Thank you for taking my questions. I wanted to start by asking about your joint ventures. You mentioned they finished the quarter with a combined cash base of 30 million, but could you provide some insight on the amount of debt outstanding on those structures?
Operator
Sorry, your line is not very clear. The amount what?
Cleveland Mullins
Sorry, the amount of debt on the JVs.
Operator
It's region 40 million, but if you want, you can send us an email and check it out precisely, as we don't have this number in front of us.
Cleveland Mullins
Sounds fair. Thank you. And following up on Ted's capital allocation question, and although share repurchases should be prioritized here given the outside discount to NAV as well as to peers valuation, has the board given any thought to maybe instituting a dividend policy?
Operator
Very good question. As you said very rightly, as we're trading to a discount to NAV, The share buyback is preferred versus dividends at the moment.
Cleveland Mullins
Makes sense. That's all from me. Thank you for taking my questions.
Operator
Thank you very much.
Bankero
As a reminder, once again, if you have any questions or comments, please press star 1 and 1 on your telephone and wait for your name to be announced. Thank you.
spk05
We have no further questions at this time.
Bankero
I will now hand back the conference to Mr. Harry Vafios for closing comments.
Operator
We would like to thank you for joining us at our conference call today and for your interest and trust in our company. And we look forward to having you again with us for our Q1 results conference call in May. Thank you very much.
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