StealthGas, Inc.

Thank you very much. Good morning, everyone, and welcome to our third quarter 2023 earnings conference call and webcast. I'm Michael Jolliffe, Chairman of the Board of Directors, and joining me on our call today is Harry Vafias, our CEO, to discuss market and company outlook, and Konstantinos Sistovares handling investor relations to discuss the financial aspects. 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 US dollars. Today we released our results for the third quarter 2023, announcing the second best quarterly profit ever and best ever nine month results till today. So let's proceed to discuss these results and update you on the company's strategy and the market in general. Turning to slide three, we summarized some highlights starting with fleet and operations update. We first concluded the previously announced sale of two vessels delivering those in early July. As discussed in the previous quarter, we still have two more vessels to deliver to buyers and we expect these to be delivered in the first quarter of next year. During the current quarter in October, our joint venture took delivery of one new building medium gas carrier, the Echo Sorcerer, that was deployed immediately on a period charter. In terms of chartering, we were very active and concluded over nine new period charters, securing over 50% of our fleet days for 2024. Most of these charters were of longer-than-usual tenors of one to three years. We have thus contracted revenues of £195 million for all subsequent periods. Moving to our financial highlights, with an average seven fewer vessels compared to last year, net voyage revenues, that is net of voyage costs, came in at a very strong $34.7 million. Compared to $34.9 million last year, just a 1% decrease in spite of the smaller fleet. Net income for the second quarter was $15.7 million compared to $6.7 million last year, a 134% increase. While for the nine months period net income was $43 million compared to $26.6 million last year, a 62% increase, which is the highest profit recorded by the company since its inception. Earnings per share for the nine months were $1.12. Also, worth pointing out that during that period we have halved our debt by paying down facilities of $150 million in just nine months and still maintaining strong liquidity. In October, we also authorized a $10 million increase in the share repurchase program that began in May, making it $25 million in total. The company has repurchased over 3.9 million shares, spending over $19 million so far, and buying back a substantial 10% of the outstanding shares over a short period of time. Let us move on to slide 4 for our fully owned fleet employment update as of November. In contrast to the previous call, this time we announced quite a number of new period charters. During the last couple of months, we saw increased interest from charterers to cover their commitments with inquiries for charters of longer than usual duration. We took advantage as the rates have been climbing and fixed the number of vessels in one to three year charters. As a result, we have significantly increased our contracted days for next year to 50%. We have also managed to secure contracted revenues for all periods up to 2027 up to $195 million, more than double what we reported in the previous quarter. Only two of our vessels currently operate in the spot market, one of which already fixed for December. Lastly, in terms of dry docks, we completed the dry dock of three of the larger handy-sized vessels in the previous quarters and have none left for the remainder of the year. For next year, there are seven small LPG vessels scheduled for dry docks. In slide five, I would like now to provide an update on our two joint ventures comprising of six vessels. In the first joint venture, we own four small LPG vessels, two of which are trading in the spot market. Two of the vessels completed their dry dock this year in quarter two and quarter three. The remaining dry dock for the gas shuriken should take place in January of next year. The second joint venture currently comprises of two medium-sized gas carriers. Here, as you may recall, one vessel was sold in the first quarter and the proceeds were distributed to the partners. In the current quarter, the joint venture took delivery of one new building medium-sized gas carrier, the Echo Sorcerer, and the vessel was immediately deployed on a period charter and is currently loading in Houston. As previously discussed, the remaining vessel, the Echo Ethereal, is on a very profitable time charter for one year with a charter's option to extend one more year and a sale or purchase option, all at profitable levels whilst the vessel is mortgage-free as its debt was repaid in June. In terms of our fleet geography, presented in slide 6, Our company mainly focuses on regional trade and local distribution of gas rather than long distance. This graph is a snapshot of the positioning of the fleet, including the joint venture vessels, as of mid-November. The majority of our fleet, 19 vessels, currently trade in Europe, particularly in the Northwest and in the Mediterranean. We have focused on this area as the freight rates west of Suez continue to command a premium over east of Suez in order to enjoy better rates, although the larger the vessels, the smaller this gap has become recently. Seven vessels are trading in the Middle to Far East, and four vessels trading in the US and Caribbean, and three in Africa. And while our main fleet is focused on local distribution, the larger vessels in our fleet perform more transatlantic voyages As an example, this year all but one of these vessels have loaded cargo in Texas to cross the Atlantic and unload in Europe and Africa. I will now turn the call over to Konstantinos Sistovares for our financial performance.

Thank you, Michael, and good morning to everyone. I will discuss our financial performance for the third quarter of 2023. Let us turn to slide seven, where we see the income statement for the third quarter and nine months of 2023 against the same periods of 2022. Even though calendar rate days were reduced by 19% and we had seven fewer vessels, net revenues after voyage expenses came in at 32.3 million for the quarter and 99.5 million for the nine months. an increase of 15% for the quarter and 5% for the nine months compared to last year. So our fewer vessels generated more revenues comparatively, total revenues were flat, and had reduced voyage expenses. Operating expenses were 12.3 million for the quarter, down 13%, and flat at 40.2 million for the nine months. As previously stated, we did face inflationary pressures and had cost overruns, particularly during the first quarter of this year. In the third quarter, we see a normalization of expenses that are coming down in line with the fleet reduction. We also note depreciation costs being reduced significantly as a result of the fleet reduction to 5.6 million and 18.1 million respectively for the quarter and nine months. During the third quarter, the company also recognized a non-cast gain on the sale of two vessels that were delivered in July of $4.7 million. As a result, income from operations quadrupled to $16.4 million for the quarter and increased by 60% compared to last year to $36.2 million for the nine months. Interest and finance costs were significantly reduced by 30% over the quarterly period and 12% over the nine-month period, even though rates have more than tripled during those periods. This is a result of the aggressive debt repayments the company engaged in order to control interest costs and will result in significant savings. For the nine-month period, there was also a considerable increase in the equity income in joint ventures, which is our shares in the profits of our JV structures and our circa 40 million investment there. This income came in at 11.4 million and was mainly attributed to the profits from the sale of one joint venture vessel in the first quarter. As a result of all of the above, we ended the third quarter of 2023 with net income of $15.7 million compared to $6.7 million for the same quarter of last year, a 134% increase. And for the nine-month period, $43 million compared to $26.6 million last year, a 62% increase. Profits so far this year were the highest this company has ever seen. Moving on at our balance sheet in the next slide eight, our liquidity, including restricted cash and short-term investments, was at the end of the quarter 80 million, reduced from 95.7 million at the end of last year, mainly due to debt repayments. Vessels held for sale were 38.7 million as of September 30th, and it refers to the two vessels under agreement to sell with deliveries in the beginning of next year. These vessels are debt-free, so all of the proceeds on delivery will improve further our liquidity position. Advances of 23.4 million remain unchanged. and relate to the advance payments made on the medium gas carrier vessels under construction. A circa similar amount of equity outlay will be needed on the delivery of these vessels. Vessels net book value decreased from $628.5 million to $510 million, mostly due to the sale of vessels. The value of our investments in our JVs was $38.7 million, covering five vessels, while a sixth vessel was added in October, for which we did not invest more money in the JV. Moving on to the liability side, the company has significantly reduced all liabilities, and particularly the outstanding debt component. So total liabilities have been reduced since the beginning of the year by $156 million, from $303 million down to 147.5 million. As a result of the solid results being reported, shareholders' equity has increased by 33 million to 550 million. Concluding our financial commentary with slide 9, we will briefly have a look at the debt profile. Over a nine-month period, the company has more than halved its outstanding debt with over 150 million of debt repayments, down to 127.7 million as of September 30th, and continues to maintain a very low leverage. During the third quarter, 13 million was repaid. The company has 15 vessels out of the 27 in its current fleet, mortgage-free. About 35% of the remaining debt is hedged with the interest rate swaps at an average of 2.1% that mitigate the effect of the interest rate rises. The refinancing risk is very low as the first balloon payment is in two years time. And overall, all balloon payments on the remaining debt have become much more manageable as you can see on the right hand picture. While debt reduction is a strategic move and we expect it to continue, there is still the financing for the delivery of the two new building vessels in the first quarter of 2024. For this, the company has signed a facility agreement with the lender to provide up to $70 million in finance proceeds for the delivery of these vessels, subject, of course, to customary closings. I will now hand you over to our CEO, Harry Vafias, who will discuss market and company outlook.

Moving on slide 10, a brief insight on the LPG market. So far, the first nine months of the year have been very positive as far as LPG supply is concerned, with global exports estimated to have risen by 3.1%. The U.S., the world's largest exporter, continued to export record amounts, with 13% increases year on year, exporting 44 million tons of LPG in the first nine months of this year. In order to continue on that record streak, US exporters like Energy Transfer continue to invest in future export capacity expansion projects. On the other hand, the OPEC-related oil production cuts by Saudi Arabia led to reduced volumes coming out of the Middle East, while other Middle Eastern countries have ramped up production to try and fill the gap. As far as imports, we continue to have anemic demand from petrochemical plants in Europe, that operate at lower margins in general, although the onset of winter when household demand increases have been supportive in terms of regional trade. Import growth has been from places like India, where imports rose to 1.8 million tons in October compared to an average of 1.5 million tons this year, and particularly China, where imports have increased by 30% in the nine-month period. China's economy, despite all the problems, seems to be resilient so far and even registered 5.2% growth in the first nine months of this year. New Chinese PDH plants continue to come on stream as China wants to control its propylene production. Hence, major investments have been made for increasing the capacity. PDH capacity has increased over 4 million tons this year alone, and while not all plant projects have come on stream and have been pushed back to next year, the macro picture points to a continuously increasing demand. Utilization rates for these plants hit a high of 85% in August, but has since fallen as production margins have become less profitable. The other latest development is obviously the delays in the Panama Calal due to drought. The first impact is that these delays are leading some shippers to use alternative routes and tie up vessel availability, leading to increased on-mile demand. This primarily affects the VLGCs, where rates have increased rapidly, but it also has a trickle-down effect all the way to the handy-sized vessels that have seen their rates rising as well. The longer-term effects, if this issue persists, remain to be seen as rising costs could have an impact on demand. On slide 11, we present some of the key fundamentals in our shipping market, commencing with time-chartered rates for our market. We continue to see a year-over-year basis, see significant increases in rates up to 19%, particularly in the larger sizes like the 7,500 cubic meters and handy sizes listed there. Compared to the previous quarter, overall rates remain flat as there is less activity in the summer months. On the small LPG trade west of Suez, the spot market was soft through Q3, but at the time of writing, we are starting to see more activity and rates are moving upwards. There are a number of time charted vessels coming up for renewal and strength of the of the spot market will likely decide if time charter levels will remain stable or improve further. East of Suez, the Asian market has for the most part of Q3 been quiet and freight levels were poor. Significant idle time was experienced by several vessels. From the start of Q4, we have seen a slightly more spot activity and expectations are as in the West for a busier winter period. On the period side, things were relatively quiet through Q3 and have not picked up as much as was expected. The exception is on the 7.5 K cubic meter vessels, where there is a very tight supply-demand balance, and TCE rates have continued to increase. There remains a gap to TCE rates in the West, but for larger vessels, the smaller the gap. On the handy side, on the MDC vessels, the spot market was rather dull and uneventful. On the period side, we saw relatively little activity through Q3, But even though the spot side struggled through the quarter, period expectations and one-year rates kept reasonably steady. The start of Q4 and the strength of the MGC market, coupled with the expected spillover effects from the Panama-Calal drought, has given a boost to the owners' expectations, and rates are currently on an upward trajectory. Spot rates for MGCs were reasonably strong through the first two months of Q3, but have since experienced a boom and are, at the time of writing, historically strong. The effect of Panama Canal is expected to cause a significant tightening of an already tight VLGC market for quite some time, and this also has and will continue to have a significant spillover effect on the smaller ships. On the period front, for MGCs, we saw a lot of activity. Existing time charter vessels were extended, and more importantly, the new building list for second half 23, first half 24, which at the start of the third quarter was fairly has at the time of writing been reduced to only one vessel. I'd like to reiterate that the fundamentals for a core fleet of small pressurized ships continue to look promising with an aging fleet as almost one-third of the fleet is over 20 years of age. And although scrapping activity is limited due to the firm markets, we continue to see only a handful of vessels being ordered, not enough to keep the supply-demand balance. Similar picture in the handy-sized fleet where there are only three vessels to be delivered over the next two years. Only in the MGC market there is indeed a high order book, but demand for these vessels has so far proved resilient and freight rates are near record levels. On slide 12, we're showing the evolution of our LPG fleet. In this slide, for comparison purposes, we have excluded the tanker vessels that we held up to 2021 and focused the pure LPG fleet in terms of cubic capacity including our JV vessels. In a rising market, we have sold and delivered so far this year eight vessels, and two more are expected to be delivered around January. Though, through such sales of mostly older vessels, we have maintained the average age of our fleet to 10 years, which is quite moderate for industry standards. Concurrently, we have been investing in modern new building MGC vessels, significantly larger than those in our core fleet. We are cautiously expanding in a segment that is hot right now with freight rates close to all-time highs, albeit much more volatile. One of these vessels will deliver in October and two more will have fixed delivery in January. Our intention is to keep a diversified fleet.

Please look at slide 13 where we are outlining some of the key variables that may affect our performance in the quarters ahead. We remain optimistic in the longer term for the reasons we analyzed earlier. This is a fast-changing environment with many uncertainties, mostly relating to the macroeconomic factors, while some related to China's economy and others to unseen influences like the Panama Canal delays or geopolitical tensions in the Middle East. On the other hand, what is certain in the short term is that we are entering the winter for the northern hemisphere and period when demand normally strengthens and we are seeing this in the market. To sum up, so far, 2023 has turned out to be a tremendous year for gas shipping overall and especially for stealth gas. So far, for the first nine months of 2023, we have reported our strongest performance on record with a basic EPS of $1.12. For the third quarter, in what normally would be a seasonably weak quarter, we reported net income of £15.7 million, the second best quarter on record, only surpassed by the first quarter of this year. As the market is firming, we took advantage of the momentum and entered into a number of long-period charters, some with durations as long as three years, thus securing part of our future revenues. We have thus extended the duration of our contract coverage to over 50% for 2024. Also, part of our strategy is deleveraging, and so far during this year we have more than halved the outstanding debt, repaying $151 million and greatly reducing our interest rate expenses in the process, while at the same time keeping 15 out of the 27 vessels debt-free. At the same time, we sought to expand the repurchase of shares with an additional $10 million, making it $25 million in total. We believe we are well positioned to benefit from strong markets and to continue to generate shareholder value. And even though our share prices climbed significantly over the past six months, we believe we continue to be astounded, still very undervalued investment, for anyone wishing to invest in our company at this time. We have now reached the end of our presentation and we would like to thank you for joining us at our conference call today and for your interest and trust in our company. We look forward to having you with us again at our next conference call for our fourth quarter results in February. Thank you very much.