Imperial Petroleum Inc.

Good morning, everyone, and thank you for joining us today at our fourth quarter conference call of Imperial Petroleum. I'm Harry Vazquez, CEO of Imperial, and with us today is our CFO, Mrs. Aguilari. Before we commence our discussion, we'd like you all to read the Safe Harbor language in slide number two. In essence, it's made clear that this presentation may contain some forward-looking statements as defined by the Private Securities Litigation Reform Act. We raise the attention of our investors to the fact that such forward-looking statements involve risks and uncertainties which may potentially affect our company's performance in the future. In addition, we'd like to state that during this call, we will quote monetary amounts. These, unless explicitly stated, otherwise are all denominated in U.S. dollars. Let's start from slide three for a summary of our company highlights. Focusing on our fourth quarter's operational and financial results, Without doubt, the key highlights of our company are the two successful equity offerings from which we raised a total of about $90 million. We thank all of our participating shareholders for their confidence in Imperial Petroleum and then trust in our growth strategy. Indeed, since our public trading commencement, our shares have been highly liquid and have attracted plenty of investor attention. Our daily average trading volume is region 30 million shares, outpacing the majority of the other listed shipping companies. We have placed great emphasis on our growth and the testimony to our commitment to expand our fleet is the acquisition of two product tankers, the Injustice and the Clean Nirvana. The first vessel was delivered on March 28th and the second will be delivered by the end of May. Total consideration for these two transactions is in the order of 31 million for which we have already secured the related financing. Following these deliveries, our fleet will consist of six oil tankers with an average age of approximately 13 years. With regards to our performance during the fourth quarter of 21, the tanker market remained weak for the majority of the quarter, undermining our earnings potential, particularly for the ships in the spot market. Market outlook was slightly more positive towards the end of the year on the back of low inventories and production growth. Hence, prospects for tankers were more positive for 2022. The unfortunate outbreak of the war in Ukraine created turbulence in most shipping segments, including oil tankers, as energy prices and supply have been adversely affected. Seaborne energy trade is now governed by risk and uncertainty, thus resulting in a rise in shipping rates, especially in Europe. Summarizing our fourth quarter results, we ended the quarter with a net loss of $1.5 million, mainly due to the weak market we faced at the time. Our performance for the whole of 2021 was soft, as we ended the year with a net loss of $3.6 million. Looking at our capital structure following our two offerings, we have a very strong cash base of about $90 million with a debt of only $28 million, allowing us to dedicate our funds to a healthy and rapid fleet expansion while keeping leverage at moderate levels. On slide four, we will discuss our share performance. Shortly after the spin-off, Imperial Petroleum shares became very liquid with large daily trading volumes. It was surprising to witness that in less than a month, from mid-February up until the beginning of March, our stock appreciated by about 1,400%. Following our second public offering, our NAV per share is about $2. Slide 5 is a summary of our current fleet deployment status. Our contract coverage is in the order of 100%, as all of our tankers are currently under period employment. One of our product tankers is under bearable charter, while our remaining three vessels are under time charter contracts. We recently agreed on a minimum two months time charter for Afromax tanker staff Berana at a daily rate of $33,000 per day. As evident from the earnings visibility table, virtually 50% of our period contracts hold the charters extension options, all at incremental rates. Should all the charter extension options get exercised, Fleet coverage for the whole of 2022 will be in the order of 53%. Moving on slide six in order to discuss tanker market fundamentals. The fundamentals and prospects for the tanker market prior to the Russia invading Ukraine were promising with the world closer to overcoming the difficulties brought upon a two-year pandemic period. The COVID-19 pandemic brought upon a fall in demand followed by an equally sharp fall in supply of oil and oil products. As oil demand was recovering strongly and oil product reserves around the globe remained at historically low levels, it was expected that tankers would find themselves in high demand this year. The unfortunate invasion of Russia in Ukraine and consequences thereof have startled the world energy markets, and exactly how things will evolve in the medium term is quite difficult to predict. But what seems quite certain in the short term is that trade flows have changed and will change even further. And when trade flows change, the market inefficiencies that are created will in most cases result in increased ton miles potentially to a significant extent, a factor that is positive for shipping and especially for oil. But exactly how the balance between increased ton miles versus potentially lost volume as a consequence of the sanctions on Russia will play out is still to be seen. In more detail, the war in the region of Ukraine and fears of potential shortages in the supply of Russian crude oil have caused the price of oil to trade in the region of $100 per barrel since March. Similarly, tanker charter rates increased significantly, especially in Europe, as charters seek to secure tanker tonnage. Average spot daily AfraMax tanker rates spiked to $88,000 per day at the beginning of March and are currently in excess of $20,000 per day in contracts with Q4 when spot rates were in the region of $8,000 per day. The situation in Ukraine and the global response with sanctions to Russia continues to evolve, and as mentioned, its impact on energy supply and demand, energy prices, tanker operations, and charter rates remains subject to considerable uncertainty. This uncertainty has escalated energy and energy transportation prices. In slide seven, we are providing an update on the order book focusing on the MR2 product tanker segment in which we mainly operate. The MR2 segment, 47,000 to 52,000 deadweight tons in which we operate. It has a total of 1,233 ships, which is equivalent to about 46% of the total MR fleet. About 16% of the vessels in the MR2 segment are above 15 years of age. The MR2 order book is currently 106 vessels, which is equivalent to 8.6% of the total MR2 fleet, a relatively low order book. With regards to new building ordering, this has remained low in the past years, mostly due to uncertainty around environmental regulatory aspects, scare birth capacity, higher steel prices, and a broader market uncertainty around the COVID-19 pandemic. I will now pass the floor to our CFO, who will provide a summary of our financial performance.

Thank you, Harry, and good morning to everyone. I will present a summary of financial performance for the fourth quarter and 12 months 2021. The market during the fourth quarter of 2021 remained challenging for tankers. Summarizing our performance, we did face two main hurdles that led to an operating loss. The first was the ballasting of one of our product tankers to its new charter employment in November, from which we incurred voyage costs of about $800,000, and the second was our high general administrative costs, due to the spin-off of our four tankers from Stelkas to Imperial Petroleum. Focusing on our fourth quarter 2021 financial performance, in slide 8, revenues came in at 4 million, marking a decrease of 1.6 million, or 28%, compared to revenues of 5.6 million in Q420, mainly due to the weakening of the tanker market. Voyage costs marked almost 300,000 degrees in voyage expenses, mainly due to the decrease of spot days by 24 days or 27%, offset by voyage costs of $800,000 incurred due to the ballasting of our product tanker clean flasher to its new period deployment. Our running costs were stable as our fleet mix, i.e., number of vessels on bare boat, remained unchanged. General administrative costs increased by almost $250,000 compared to the same period of last year as we incurred one-off charges related to the spin-off process. Basically above, we generated an EBITDA of 800,000 and a net loss of 1.5 million in Q4-21. For the 12 months of 2021, we marked a 3.3 million decline in net revenues and a net loss of 3.6 million, primarily due to the softening of the tanker market and increases in both voyage and operators' costs, as we had more vessels operating under time-charted contracts or in the spot markets. Moving on to slide 9, let us take a look at our balance sheet for the 12 months of 2021. Our total cash base, including restricted cash, decreased by $1.3 million compared to 2020 due to our operating income decline. Following our capital offerings, our cash is now around region $90 million. Total debt is in the order of about $28 million, and this equates to a giving ratio of 13% basis fleet book values. Concluding our presentation in slide 10, we outlined the key variables that will assist us progress with our company's growth. The fundamentals going forward are our proven growth expertise, our attention on operating costs and leverage levels, and our strong relationship with charters. At this stage, our CEO, Mr. Harry Vazquez, will summarize our concluding remarks for the period examined.

Since becoming an independent public company, Imperial Petroleum has had an outstanding course. The daily share trading volume has stunned all of us, and investors expressed their trust in our company's vision by helping us raise about $90 million of new equity. We are truly indebted and obliged to our investors and grateful for their trust and confidence in Imperial Petroleum. Our core strategy is growth, as evident from the acquisition of the two product tankers recently. We will focus on expanding our fleet further and endeavor to convert shareholders' expectations into reality. We have now reached the end of our presentation and we would like to open the floor for questions. So operator, please open the floor.

Thank you, dear participants. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for a name to be announced. Dear participants, please stand by while we compile the Q&A queue. This will take a few moments. Thank you.

We cannot take calls from people without names.

The first question comes from Christian Herrera from Shareholder. Please ask a question.

Hello?

Christian, your line is open. Please ask a question.

Yes, hi. Do you hear me? Yes. Okay, yes. My question is why the volume of this company is very... I see the volume is very barcode-ish on the events of this news. It should be promising. I know that you guys missed your revenue by... a nice percentage, but I see a lot of potential in the future of this oil tanking business. With rising oil prices, with Ukraine closing their borders and Russian oil importations being sanctioned, how come you guys haven't taken into the fact that there's a lot of oil that With oil prices going up, why isn't the volume going up also of your shares? In the stock, the volume is very low right now.

Thank you, but the daily share volume of our stock is very high. We have an average of 30 million shares per day, which is higher than any other U.S.-listed shipping company, so I don't really understand your question.

Yeah, well, right now it's very, very low. I'm sorry, but this morning was high, yes, at around 9.30, but I'm looking at my volume on my charts. It's extremely low.

We cannot control the volume of shares sold, Christian. Apologies, but we cannot control that. It's up to the shareholders who wants to sell and who wants to buy, right?

Right, right.

Thank you for your question, though. Let's go to our next call.

Thank you. The next question comes from the line of Martin Daniels. He's also an investor. Please ask a question. Excuse me, Martin, your line is open.

Sorry, can you hear me?

Yes.

Okay. I believe, and it's interesting because you guys talk really fast, so it's like... I didn't catch everything, but I believe you stated that your next offering for shares is going to be at $2. Is that correct?

Can you speak closer to the phone because we are losing you.

Sorry, one second. Can you hear me better?

Much better.

Perfect. So I believe like... You ran through it really fast. I have the slides here, so I can look through it. But I believe you mentioned in regards to the next year offering going to be at $2 per share?

No, we didn't say that. We said the net asset value per share is $2.

Okay. So as an investor, what guarantee can I have to know that my money will grow with your company?

Martin, this is a stock market. There are no guarantees in this business. If you believe in our dream and you believe in our track record and in our quality of assets, you invest. If you don't believe, you don't invest. We don't give guarantees.

Of course. Okay. Thank you, Martin. You as well. Have a great day.

Thank you. The next question comes from the land of Mikhail Malik. He's also investor. Please ask a question.

Hello. Yes. Hi. Can you hear me?

Yes. Not very clearly, but we can.

Okay. You can hear me now more clearly.

Yes. A bit better.

Okay. So I have a question, uh, with the oil rising Ukraine, Russian war, I'm with oil be more I'm you know scarce why have you guys I put a public offering and water should press continue to I can't go lower as opposed to I'll going high we we did the offering in order to raise money to grow the company because in this in this business with four vessels you're considered the the very small organization

And two, with the war in Ukraine and oil going up, there are certain opportunities to contract out our ships at very good day rates and therefore make money, as we have already done last week with the fixture of our tanker, the Stealth Barana, which we mentioned on the call. That's why we did it.

Okay, so this company is a really good company. I would invest in it personally. But I do want to know, what do you see for this company? Do you see this company growing in the future? Do you see this company taking a big loss? What do you see for this company?

Our goal is the company to control 15 to 20 oil tankers within the next 12 to 18 months. That's our goal.

And do you think this will affect the prices of the share?

The price of the shares, as you have seen, go up and down.

Because with you guys acquiring more tanks, will it make the share price go up?

How can I know that, my good friend? If people believe that acquiring tankers is good business, yes, the shares will go up. Okay. Let's go to our next call. Thank you, Nikhail. Thank you. You're welcome.

Thank you. The next question comes from Stephen. He's also an investor. Please ask your question.

Yes, with the increase in ship acquisitions, what are the contracts looking like?

The two ships we are currently acquiring are trading spot at the moment. But if we find good contracts paying good money, then we're going to fix them for either short contracts, meaning two to six months, or slightly longer contracts, one year or slightly excess of one year.

Okay, thank you.

Thank you, Stephen.

Thank you. The next question comes to the line from Donald Russell. He is also an investor. Please ask your question. Donald, your line is open.

Hello.

Hi, Donald.

Hi, I just have a quick question. So you did a public offering, you know, done on a Sunday.

Can you speak closer to the mic because we cannot hear you?

sure can you hear me now much better hello it's much better quick question the public offering the last one it was done on the weekend on a Sunday where investors couldn't react whether to buy or sell was that done by design or is that normal no it was not done by design we couldn't have the SEC

didn't give us the paperwork needed to do it on the Friday, and therefore we had to push it to Sunday. It's not very common, but it's not also something that cannot happen.

It just felt uncomfortable. It feels like a good company. You're in the right market right now, but for the amount of price of oil, it's going to be the same volume, is the markup the same? Sure, say the barrels go up to $140 a barrel at this point. Is your markup, people are not going to be ordering that much because it's so expensive. Are you still going to profit?

I don't really agree with you because people need oil. It's used for heating, it's used for transportation, it's used for so many different things. So we know it's expensive, but that doesn't mean that people don't want it. And for us, the high oil price is positive because we get better day rates for our tankers, especially if we trade them in Europe.

No, I know the demands there. I have actually... heating oil I have two tanks and usually I'll fill them both up but right now I'm just sipping I'm only doing 100 150 gallons at a time until this volatile market hopefully corrects but I'm just feeling that a lot of people are going to be like me just kind of sip at it instead of filling up the tank you know what I mean you're absolutely right but nobody can predict the oil price as we have seen in the past few years

So you're absolutely right, but let's see what happens, because as I said, we don't know if the oil price will go to $200 or back to $50. Let's see.

Where would you profit more, at the $200 range or at the $100 range, or it doesn't matter with this type of, because you're just delivering?

We profit more when there are international sanctions on certain countries. This is when we profit more.

Okay. I appreciate your time. Thank you for answering the questions.

Thank you, Donald. Let's take the last question from Tom.

Thank you. The next question comes from Tom Gordon. Please ask your question.

Thank you so much for taking my call. I know you're a busy man. You've got a bunch of boats to fill up here. Congratulations. First off, I don't think some of the callers on here understood your balance sheet. Let me come on. $90 million? Outstanding? Also, if I'm reading this correctly, you only have 22 on the base dollar of the book value for total debt. That's huge, right? Thank you, Tom.

Indeed, many people did not understand.

Yeah, I'm trying to clarify for some of the callers and my followers.

That's an absolute statement here.

I don't think they understand that book value. I mean, if they could turn to rust, you guys are still making money. Outstanding. I don't care if the price of oil goes to zero. We're still making money here. Your stock's reflecting as if they are rust, which they aren't. No one's really talking about your fifth boat you just picked up yesterday. Again, congratulations.

Tom, thank you for the kind words. You know we work hard. Our balance sheet is indeed extremely strong with very low debt and a lot of cash. And that's why we will continue to grow the company as we have promised to our shareholders. Just one final question.

And this is something to the mind of the gentleman that spoke earlier about the Sunday offering. No big deal. I understand that works. But my question is, did Citadel actually call you or somebody that's heavily shorted in this to have you try to dilute it on their behalf? And I'm saying that tongue-in-cheek because I love you guys. I know you guys are a $5 share company just based on your bulk value. So, you know, the ones that are at 152, trying to hold on here, trying to give us some confidence, knowing that, hey, this is a long-term place. Summertime, there's sanctions out there, people. And just understand that these people are buying boats for reasons.

You're very correct. And as you know very well, this is a very volatile stock that has already, in its short history, traded between $0.5 and $9. So you have to buy boats. When it's low and you have to sell when it's high. If people sell at the wrong reason, at the wrong time, sorry, then we cannot do anything about it.

I teach that every day to these guys. You can understand the naiveness on this call today. Great questions all, but albeit, they really need to look at that balance sheet because, again, that is huge. Huge. Because just on that balance sheet alone, that 13% total debt, That stock should be in the 350 range. There are worse stocks out there, a ton of worse stocks out there, and this one here has a bang-up job of doing a 2X, a 3X. So I'm hoping you guys are focused on that for the stockholders. Stop diluting. We already got six boats. Let's fill those things up, and let's get this thing going.

Thank you, Tom. This is what we're trying to do, and thank you for your confidence and trust.

Thank you.

Operator, we will not be taking any more questions, so I will give my closing remarks. We'd like to thank you for joining us at our conference call today, and we look forward to having you with us again at our next conference for our Q1 results. Thank you very much.