Imperial Petroleum Inc.

Good morning, everyone, and thank you for joining at today's first quarter 2022 call for Imperial Petroleum Inc. I'm Harry Vassias, the CEO of Imperial Petroleum, and with me today is our CFO, Mrs. Aquilaris. Before we commence our discussion, we'd like all to read the safe harbor disclaimer posted in slide number two of our presentation. In essence, it's made clear that this presentation may contain some forward-looking statements as defined by the Private Securities Litigation Reform Act, and 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 would like to state that during this conference call, we will quote monetary amounts. These, unless explicitly stated otherwise, are all denominated in US dollars. Turning to slide three for a summary of our company's performance highlights. As of June 10, 2022, we had raised approximately 135 million in total net proceeds, after underwriting discounts from our public offerings. In addition, on June 13, 2022, we entered into agreements for warrant exercises expected to result in additional net proceeds to us of about 21 million. Testimony of our commitment to our growth plan is that within the course of five months, we doubled the number of vessels in our fleet and almost tripled our fleet's deadweight ton capacity. Imperial Petroleum commenced operations with just four tankers, and we now own a fleet of eight tankers. Towards the end of the first quarter 2022, we took delivery of an MR tanker, the Clean Nirvana, and within the second quarter of 2022, we added three more vessels, an MR tanker, the Clean Justice, and two Suez Max tankers, the Suez Protopia and Suez Enchanted. These vessels will contribute to our results from the second quarter onwards. Sadly, the war in Ukraine is still ongoing and has had an unprecedented impact on the world economy, particularly on energy prices. This uncertain environment with oil price peaking did not leave shipping rates unaffected. We see a rise in rates across all tanker segments, especially from the end of the first quarter onwards. Focusing on our first quarter 22 results, these were encouraging for Imperial Petroleum. With a fleet operational utilization of almost 99%, stemming from the operation of our initial four tankers, our revenues came in at 5.1 million, 28% higher than our revenues in the fourth quarter of 21. Our bottom line was positive in the order of 0.2 million, marking a turning point from the losses faced in the previous quarters. Most importantly, we enjoy a healthy and strong balance sheet. Following the capital deployment of 78 million for our vessel acquisitions, we still have about 55 million of available cash. On slide four, we discussed our capital allocation in more detail. As said, we have invested $78 million, which is equivalent to almost 55% of our net proceeds from our capital offerings. The four vessels acquired were purchased with equity. However, we are in advanced discussions to secure post-delivery financing in the region of $47 million, about 60% gearing. Consequently, and including proceeds from our recent warrant transaction, Total of about 125 million will be available to be deployed for further growth. Leverage will increase, equity returns, while current steel prices provide low financial risk as total demolition value of our acquired vessels is in the order of 40 million. That is 85% of our expected loans. Slide five is a summary of our current fleet employment status. Since our last announcement, the charters of the Magic Wand exercised their option and extended the charter for one more year until May 23. In addition to this, the Clean Justice entered into a time charter contract for a minimum 80 days up to 120 days duration. We have a well-balanced fleet deployment. Four of our vessels are on period charters while the remaining four vessels operate in the spot market under improved rates compared to Q1 of this year. On slide six, we discuss the tanker market. The Russian war against Ukraine has reshaped the global oil markets. Following the sanctions on Russia, Europe has reduced Russian oil imports. Europe was importing about 30% of its crude from Russia. To compensate for the loss of Russian oil, Europe has increased imports from the US and Africa. On the other hand, Russia has been exporting oil to India and China. Even if Europe agrees to ban Russian oil, as it was recently discussed, it's believed that the impact could be tempered by demand from Asia. Seaborne oil trade has been rerouted. Tankers are now sailing longer voyages, and this, along with the current cap in oil production, has led to a global rebound in tanker markets and a sharp rise in rates, particularly for product tankers. Given current market environment, ton-mile growth is expected to climb to 6% in the period 2022 to 2025. The solid market fundamentals of the tanker sector, low order book, An expected rise in demolition activity may fuel a further improvement in market rates in the years ahead. On slide seven, the tanker market fundamentals are indeed promising. New building ordering for all tanker segments in which we operate in has remained low in the past years due to uncertainty around environmental regulatory aspects. High steel prices and uncertainty around the COVID-19 pandemic. On top of that, and given the number of vessels above 20 years of age, we do anticipate a fleet contraction if we see softening freight rates, i.e. demolition to outpace new vessel deliveries. I will now pass the floor to our CFO, Mr. Kallaris, who will provide a summary of our financial performance.

Thank you, Harry, and good morning to everyone. Our financial performance for the first quarter of 2022 was better, both compared to the first and fourth quarter of 2021. As said, during the first quarter, rates did not mark a noticeable improvement. We did have virtually all of our vessels on period deployment, though, hence incurred minimum voyage costs. Indeed, our operational utilization was in the order of 99%, as our commercial of hire for the whole quarter was only four days. Looking at our income statement for Q122 against Q121 in slide 8, revenues came in at 5.1 million, same levels as in Q121, but 28% higher than the previous quarter, Q4-21, as all vessels were on period charters. Voyage costs marked almost 0.9 million degrees, given that our spot days were 82%, 102 days, that is, lower, offset by the year-on-year increase in banker costs. Indeed, in the first quarter of 22, we had only the stealth Barana performing a spot voyage in between her period employments. Our running costs were stable as our fleet mix, number of vessels on bare boat that is, remained unchanged. Overall, we tried to keep costs at moderate levels in spite of inflationary pressures. Based on the above, we generated an EBITDA of 2.6 million, that is almost 50% higher than in Q1 2021, and a net profit of 0.2 million. Moving on to slide nine, let us take a look at our balance sheet for the three months of 2021. 2022. Following our capital offerings that took place up until the end of the first quarter, our cash base increased sharply to 82 million of free cash. As mentioned earlier in our call, a large portion was deployed for vessel acquisitions. Total debt is in the order of about 28 million. As of the end of the first quarter, our free cash was three times higher than our outstanding loans. We are in advanced discussion, as we mentioned, on financing our newly acquired ventures, Hence, our gearing will increase. However, we follow a conservative strategy on leverage. Concluding our presentation in slide 10, we outlined the key variables that assist us in our company's growth. Even in this limited time of imperialist operation, we have shown commitment. We are joining high-quality fleet while always working on cost-efficient operation and maintaining a solid capital structure. At this stage, our CEO, Mr. Hari Vafias, will summarize our concluding remarks for the period examined.

Having raised the total of 135 million from our equity offerings, we considered the number of acquisition candidates to be acquired and grow our fleet. We managed within a brief period of time to identify, acquire, and take delivery of four tankers, doubling our tanker fleet size and almost tripling our fleet's cargo carrying capacity. The outbreak of war in Ukraine shocked shipping markets and altered oil trading patterns, resulting in an improvement in the charter market. For Imperial Petroleum, the first quarter of 22 was transitional. The vessels we acquired were added to our fleet towards and after the end of the first quarter, while improved charter rates for our existing vessels materialized from the beginning of the second quarter. Nevertheless, this was a profitable quarter with a significant improvement in revenue and earnings from the last quarter of 2021. The strong tanker market, the dynamic fleet expansion, along with improved charter rates, bodes well for the second quarter to be even more profitable. Our remaining cash balance is about $55 million following the $78 million spent on vessel acquisitions and before we incur debt for this acquisition which will increase our cash balance even further. As will the warrant exercise transaction we recently announced that is expected to result in additional net proceeds of about $21 million. We are committed to growing our company further and will seek to expand our fleet so that Imperial Petroleum becomes a true pioneer in the field of energy shipping. We have now reached the end of our presentation. We would like to open the floor for your questions. So, operator, please open the floor.

Thank you, sir. As a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be taken by an operator. Once again, it's star 1 if you have any questions or comments at this time. Please stand by while we compile the Q&A queue. This will take a few moments. Thank you.

Thank you.

Once again, ladies and gentlemen, please press star 1 on your telephone and wait for your name to be taken by an operator. Please stand by while we compile the Q&A queue. This will take a few moments. We have a question coming from the land of Johnson from investor. Please ask your question. Hi.

First of all, thank you for the presentation and congrats on definitely increasing revenue. The shareholders are appreciated.

I'm sorry.

As an investor, my question is y'all have done offerings about two months apart and During that duration, it's kind of killed the momentum on the stock running for the bulls. Are you going to do future offerings? And what is your timeline on that?

Thank you for your question. First of all, as you know well, to do an offering, we must have the board's agreement and consent. We are well capitalized at the moment, so we haven't discussed another offering. We have the right to do as many offerings as we want. We want to grow the company as we discussed many times in the past and in RF1. And we can grow also outside the tanker segment. But we haven't had any discussion with the board for another offering as we speak.

Okay. And I do appreciate that answer. It's just, it has definitely killed the momentum and lowered the sentiment. So we kind of want some insurance or assurance, excuse me, that, you know, you're going to be for the retail investors that you want to see the stock run when the laws are down so that we can all succeed. If you really think about your shareholders, you won't do that many offerings. And I realize you need to grow your, And the return on investment, you know with ship acquisitions that makes sense, but if there continues to be offerings It's going to kill the momentum and it's going to lower the sentiment and there won't be many retail investors for IMPP You are very correct in this business as you know better than me assurances cannot be given but as you see that the business is slowly slowly entering a new age of profitability and stability and

We will have to see what happens in the future.

Okay, so just to understand, you don't have an answer and you can't give any assurance for your investors about offerings.

Exactly right. There can be no assurances because we don't know how the market is going to be in two months. We don't know how the capital markets are going to be in two months. And we don't know what the strategy for additional acquisitions is going to be in two months. I can only speak about now and the previous quarter. This is what I can speak about. Okay.

I appreciate that. That's the answer I need. Thank you.

Thank you.

We have the next questions coming from John Gordon from Investment. Please ask your question. John Gordon, your line is open. You may ask your question.

Operator, please go to the next question, please.

We have the next questions coming from the line of Joe Fred from Alliance Global Partners. Please ask your question.

Yeah. Hi, Harry. It's actually Poe Fred from Alliance Global Partners. I had a couple questions for you. One is, are you looking at 60% debt on the 76 million of acquisitions? Is that sort of what we should look for as far as incremental debt so your cash balance might go up by about 40 million?

Yeah, something like that.

Okay. And when you look at the second quarter and even to the third quarter, You know, I think to just confirm, it looks like you're looking at about 50% forward cover for the third quarter and almost full cover for the second quarter. And do you have average rates? Would those average rates be sort of in the 35,000 range for the second quarter? And then it looks like, you know, closer to 20,000 in the third quarter. Can you just give us a flavor for your forward cover?

Yes, I cannot speak about the third quarter. For the second quarter, the coverage percentages are about, as you say, I would be slightly more conservative on the average rates, but you're not far away from the actuals.

Okay. And then on the warrant exercise, you're raising $21 million. What will this, are these all Class C warrants, and how many warrants will still be outstanding after the exercise?

Because we've done a few offerings and we have had warrants outstanding, I don't remember the numbers by heart, but if you want, please send us an email so we can check the exact outstandings and not make any mistake. Okay, great.

And then if you look at sort of your cost structure looking into the third quarter when your fleet is fully, you know, on the water, all the acquisitions are completed and you have a full quarter, you know, under your belt, can you give us an idea of sort of what your cash break-even costs would be, you know, if you look at OPEX and then G&A layered on top of that?

Our G&A is relatively low, as also our OPEX is. The question is if you're going to have debt by that time or not. So that's, let's say, the million-dollar question. The plan is, yes, by the end of the third quarter to have debt on these acquisitions. As you can understand, the banks, since we're a new company, are taking their time. We are not in a hurry either, as we have plenty of equity to do our moves if we need to. So it will depend on how many shifts have debt and how many don't, I think.

Yeah, I was just looking, Harry, at just the catch cost, meaning OpEx plus G&A, you know, the financial leverages and moving target, as you mentioned. So I'm sort of just looking at those two numbers.

Yes, we will have to revert on that, so please send us an email on it.

Okay, sounds good. And then when you look at it, you know, you've been – expanding the fleet, you're up to eight with a mix of product and crude tankers. Can you give us a flavor for where you see the best value right now on refined product tankers versus crude oil tankers and sort of what your optimal fleet might look like?

Good question. But in this market where tankers are very, very hot commodities and there are very few ships good ships for sale, especially non-Chinese builds, we cannot be very picky. Whatever we find that is reasonably priced and makes a good sense with the remaining fleet, we have to pounce on it. So, ideally, we would like a fleet of 12 to 16 vessels evenly split between crude and products. But as I said, there's very few quality ships for sale at reasonable prices, so we have to manage the expectations.

Okay, great. That's very helpful. Thank you, Harry. Thank you.

We have the next questions coming from the line of Steve Hodge from Ojox. Please ask your question.

Hi. Number one, I'd like to know on the warrant conversion yesterday, how many additional warrants were offered to the people that converted?

We'll have to check with Maxim because they did this exercise, not us.

But would that be considered? So since basically, you know, you just take the large investors, because I'm a Series B holder, and I think there's some other Series B holders that own about 200,000 warrants on this deal. And basically, we did not get the chance to lower our pricing as well as get an additional warrant. So it seems like you're just in it for the institutional investors and, you know, the little investors be damned. Is that the case now?

No, not exactly, as we did not decide on who will be approached and who not. I will repeat again, Maxim Investment Bank did, not us.

I understand that, sir, but still, you're the company. You have to sign off on it. So bottom line is we're stuck with warrants at $1.60. Eight shareholders were granted an additional warrant as well as an additional better pricing. So when does the shareholder get taken care of? Because it doesn't seem like you care about the wheelchair holding. Operator? Operator, I don't think he's answered the question. We'd like to have an answer to the question. We're going to take questions.

If you're so shouting and screaming, we have better things to do. So operator, please go to the next caller.

We have the next questions coming from Frank Molo from Parallax Investment. Please ask your question.

Yeah, my question was the same question, and that wasn't answered. Also, how do you plan on paying? You look to expand to 18 chips. How do you look to do that in the foreseeable future through more equity raises?

equity raises and through the profits generated by the current ships plus the debt raised on the current ships.

Okay. So will you be doing more secondary as you did in the past?

I've already answered that twice already. Two times. Okay.

Okay. And so are you familiar with a company? What's the name of it? There's another company very similar to your company. Recently, Maxim Group did an offering with them as well. Performance Shipping. Are you familiar with that company?

We know them. Not very well, but we know which company it is, yes.

Right, because they did the same thing. The stock went to $4, and recently they did a few secondaries, bought some ships, and now it's trading around $0.60 a share.

Okay, so what has this to do with us?

Well, I'm asking, are we looking at the same thing? It's almost identical if you look at the company, if you look at the equity raises.

Yeah, I cannot comment for other companies, my good friend. I only care about our companies, so I don't understand your question. There are hundreds of shipping companies. Obviously, they're not all alike, right? Right. We have cash. We have very low leverage. We have growing profits. We are at a time where tankers are doing really well. And we're going to see the benefits of the rising tanker market in Q2 and Q3. So we need to be patient.

Okay. Okay, because we saw a lot of dilution recently, a lot of sell-offs, especially with the warrants.

As you know very well, you can buy and sell our stock whenever you like. You are not obliged to keep the stock, right?

Well, our investors like to buy and look for a good future with the company.

Yes, the stock is trading below NAV, so the stock is cheap right now. The stock is cheap from a buying point of view.

Right, and that's what we're hoping, that the stock is cheap and it's not going to continuously be diluted. I know that Maximum Group LLC is infamous for doing secondaries and continuing to dilute the shares, and that's some of the concerns that we've had in the past.

It's a very valid concern, but on the other hand, you have, as I said before, a lot of cash, more cash coming from the debt that we are raising, plus a very, very hot tanker market. So I hope that the pros will be more than the cons, I think.

Do you think oil continuing to rise is going to increase your business in a significant way?

Obviously not even Exxon Mobil can answer that question, but generally speaking, I think that for the short to medium term, oil will be high, yes.

Yes, okay. Well, thank you very much for your time. I appreciate it.

My pleasure. Thank you.

We have the next questions coming from the line of Sami Sweli from Retail Investors. Please ask your question.

Hey there. Hello. Yeah, I just have a question about the Q2 guidance. Can you provide that?

We haven't given any actual guidance. We think that Q2 is going to be better than Q1, if that helps.

Okay, thank you.

Thank you.

We have the next questions coming from John Gordon from Investment. Please ask your question.

Hey, good afternoon or good morning out there. Thank you. Good afternoon. Hey, just a quick couple questions for you from a PR standpoint, my friend. I think you need a little bit more of that. If you're looking at your page four here, it shows that we got our two ships for the total of eight on the 3rd of June, correct? Yes. So why didn't anyone come out and say that instead of saying mid-June? The 3rd would have been a perfect timing. I think the stock would have went up, and I think more than half these phone calls that you're trying to answer politely is possible, right? wouldn't wouldn't be there. I just need more PR. Do you have a PR department? Can you? Is there something that exists there?

If you have any other questions, please fire away because we're here just for you.

Yeah, that's, that's the major question that I have is just somebody to demonstrate more PR. Wow, guess what, guys, we got our enchanted or Propecia, whatever you want to call that. Oh, let's get going. Right. Um, another thing is with Maxim group, the only thing I want to say about that is why, what you do have to sign off on those things. And I understand that this is not to insult you by no means, but when you do an offering, why is it that we go from a one 60 standpoint, right? The first quarter earnings, or I'm sorry, back in March and then take the lowest bidder out there. I'm sure there's other investment companies that you can just hang up on maximum and say, hey, guys, my company's worth wholesale value with eight ships. If I even lowball these in a high market, like you can't buy these ships, guys, so they're going up in price. So if each boat out there is worth, I'm lowballing it, $20 million, right? And then your cash flow divided by simply the shares out there, The wholesale value on your stock should be about 280 to $3 a share. I think that's where a lot of callers are getting frustrated, uh, within it. If you look at like the Weebles out there or in America, there's a bunch of little sites that they go to. Right. And talk about your stock. I've been with you guys for, you know, since the inception, not selling your stocks. I have a boatload of them.

The, the, your, your comments are mostly valid. in this business, you need to be patient because, as we said, the ships we took delivery at the end or the end of Q1 or beginning of Q2, thus their value has not yet been reflected in the performance. And on the comment about Maxim, you're also right. It's good to not take the lowest off around. I would agree with you on that.

I think we're learning together here, right, Harry? That maybe next time Maxim calls, you just sort of... hang up the phone and find someone else. Like, give me a call. My number's here. I'll find you somebody in New York in a New York second.

Thank you. As you see, we're in the same boat here. We're trying to grow a company that started with only four ships, and we are aiming to become medium or big if we can. Obviously, some of the shareholders are not happy when they are diluted, but on the other hand, We need the money to grow, so we need to find a fine balance between the two. I'm very happy that most of the comments you said, as I said, we've also discussed internally. So we really thank you for your contribution.

We appreciate you. Thank you. Just go buy some more boats with some money from a bank, not me. This is what we're going to try and do, yes. From a bank, not me. Or call me and I'll get another New York little investor out there for two bucks a share. The wholesale value, if you went out of business, I can sell your boats for more than the 68 cents we're currently at.

Thank you, John. We have now reached the end of our presentation. We'd like to close the questions. Operator, I'd like to thank everybody for joining us at our conference call today and for your interest and trust in our company. And we look forward to having you with us again at the next call for our second quarter results. Thank you very much.