Imperial Petroleum Inc.

Good morning, everyone, and thank you for joining us for the third quarter 2022 conference call of Imperial Petroleum, Inc. I'm Harry Vafia, the CEO, and with us today is our interim CFO, Mrs. Fenia Sekelaris. Before we commence our discussion, we'd like all of you 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. 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 conference call, we will quote monetary amounts. These, unless explicitly stated otherwise, are all denominated in U.S. dollars. Let's start from slide three with a summary of our company's performance highlights. With a net income of $15.5 million in one quarter, in just one quarter, we announced today outstanding results both in terms of revenue and profitability. Tanker rates, particularly in the spot market, remained firm also at the third quarter, so we grasped the opportunity and increased our daily time charter equivalent per ship to about $33,000 compared to $13,000 the previous quarter. We strategically dedicated 70% of our fleet days to spot activity, and this proved highly lucrative. Amidst this positive market momentum, we continued to grow our fleet. On October 19th, we took delivery of our second dry bulk hunting size vessel, and we now count 10 operating vessels, six of which were acquired within a course of just 10 months. Our fleet addition fueled our earnings potential. In Q3 22, our revenues came in at $42.6 million, up by $31 million compared to Q2 2022. Our EBITDA climbed to almost $19 million, that is a $16 million increase compared to the second quarter of 2022. Our most important success, though, was our impressive profitability of $15.5 million, marking an unheard of 15,400% rise compared to Q2 2022, while generating in a course of three months a profit equivalent to 23% of our current market cap. Needless to say that Imperial Petroleum is heavily undervalued on the market, as company performance is seemingly uncorrelated with stock market valuation. On slide 4, we discuss our capital allocation and expected company liquidity. As previously announced, we took delivery of our first bulker, the Echo Bushfire, on September 21st. Our second dry bulk handy vessel, the Eco Angel Bay, was delivered to Imperial Petroleum on October 19th. In terms of loan financing, on September 29th, we finalized a $17 million loan against our product anchors, Clean Nirvana and Clean Justice. We have an official commitment and we are progressing with a $31 million loan against our two Suez Maxes, the Suez Enchanted and the Suez Protopia. Aside from the loans, primarily, our strong profitability has enhanced our liquidity and we ended the third quarter of 2022 with a free cash base including our time deposits of about $92.5 million, equivalent to 1.3 times our current market capitalization. Following the recent funds spent for the EcoAngel Bay and the conclusion of the $31 million financing mentioned earlier, we expect to have a free cash base of about $105 million, partly available for further fleet expansion and lows of only $70 million. Slide 5 is a summary of our current fleet deployment status. Our fleet has grown and therefore we elected to take on some short-term period coverage. We currently have three of our tankers and one bulk carrier on time charters. Based current fleet employment, 37% of our fleet days for Q4-22 are covered under period employment. The remaining of our fleet continues to operate in the spot market as rates are firm and therefore favor spot operations. Indeed, since October 10th, we have witnessed a further strengthening of daily spot rates, particularly for the Suezmax and Aframax tankers. This is mostly attributed to the increased tanker activity in the Middle East and U.S. Gulf markets. On slide 6, we are discussing the tanker market. The Russian war against Ukraine and related rippling effects still influence the tanker market. Indeed, the oil market is facing a restructuring following refinery closures sanctions imposed on Russian oil and the recent strategic decision of China to reduce petroleum product exports. In addition to this, the decision of OPEC Plus to cut oil production by 2 million barrels a day has affected the price of oil and has increased broader market uncertainty. Subsequently, the change in trade flows, increasing tonnage and reduced vessel supply kept especially the Afromax and Suezmax rates at very firm levels, both in the east and the west of Suez. Time Charter X for all vessel sizes have continued to firm, and with the expectations of a strong market, charters have recently started looking for long-term coverage, even up to three years. Currently, the critical focus date is the 5th of December, which is the cut-off date for EU imports of Russian crude oil, and what practical effects this will have on the market. As a base case scenario, we do expect in 2023 both and oil demand growth and further ton-mile demand growth, which will be stronger for major Asian countries. If Europe finally bans Russian oil by the start of 2023, Russia will need to relocate its exports towards Asia to a greater extent. This change in Russian flow might increase demand for vessels, particularly for product tankers. For the near short term, the issues of concern are if the new sanctions on Russia cause an unexpected fall in demand, that could, in an extreme scenario, outweigh the aforementioned 10-mile growth. In addition to this, another concern is whether the U.S. will have a radical response to OPEC cuts that could have a sharp impact on the market. Summing up, it seems that although the anchor market seems bullish, there is a high element of uncertainty that might tilt the market either further up or down in the future. On slide 7, regardless of the geopolitical variables affecting our market, we do witness the anchor market having solid fundamentals. All of the tanker segments in which we operate in have very low order book and a relatively old fleet. In addition to this, very few yards remain available to build vessels before 2025, so we do not expect a boom in new building ordering. These conditions lead to the conclusion that we might witness more scrapping in the medium term. In fact, a fact which will tighten our market supply even further. I'll now pass the floor to Mrs. Akelaj, who will provide a summary of our financial performance.

Thank you, Harry, and good morning to everyone. As evident from our impressive results, this quarter we successfully leveraged upon our fleet expansion and the firm tanker rates. Compared to the third quarter of 2021, we have increased our fleet by an average of four vessels. Strong rates allowed us to capitalize upon our fleet additions, and therefore we managed to increase our average time charter equivalent per vessel by 20,000 per day and produce a profit of 15.5 million. Even though we dedicated 70% of our fleet days to spot operation and three of our product actors repositioned within Q3-22, we managed to sustain a solid operational utilization of about 86%. Looking at our income statement for Q3-22 in slide 8, revenues came in at 42.6 million, up by 38.5 million due to our fleet additions, but mostly due to high spot rates, particularly for the Suezmax and Afromax vessels. Voyage costs increased by 17.7 million due to the increase of spot days by 456 days, that is equivalent to 786%, and the rise in banker prices. This quarter, we incurred 1.2 million of voyage costs for the ballasting of three of our product tankers, the benefit of which will appear in Q4 2022. Our running costs increased by 3 million due to the average increase of our fleet by four vessels, and one of our product attackers, the Clean Sanctuary, ex-Clean Thrasher, coming off barefoot close to the end of the quarter. Basis thereof, we generated a strong EBITDA of around 19 million, that is 17.5 million, or 1,500% higher than in Q3 2021, and a net profit of 15.5 million, corresponding to an APS of 8 cents. Our profit margin for the quarter was in the order of 36%. Moving on to slide 9, let us take a look at a balance sheet for the 9 months of 2022. As of September 30, 2022, and in spite of vigorous fleet expansion, our free cash, including our time deposits, was in the order of 93 million. Our debt of 43 million is very low, as it equates to a gearing ratio of 13% basis fleet book values and even lower basis market values. In essence, at the end of our third quarter, our free cash was 2.2 times higher than our outstanding loans. Overall, we are following and will continue to follow a conservative leverage strategy. We are also pursuing a sound cash management strategy as we yield interest on our free cash through time deposits, thus in a way hedging against decreased finance costs. In slide 10, we present a financial snapshot placing emphasis on our solid capital structure. Going forward, we expect to have a free cash base in the order of 105 million and loans of about 70 million. In other words, we expect to maintain a negative net debt ratio. Based on our loan agreements, our loan repayments are well-structured. We will have a low annual principal repayment schedule of about 10 million per annum, while our first balloon payment is due in December 2026. Looking at profitability and growth, this has been so far a success. Having almost tripled our fleet within a course of 10 months, we ended the third quarter of 2022 with an average daily TC per vessel of 33,000, while our average daily OPEX per vessel was 6,600. Our considerations going forward are if the prevailing market uncertainty coupled with global inflationary pressures might negatively affect our market. Concluding our presentation with slide 11, we simply outline once more the strong but yet proven points that make Imperial Petroleum a growing company with promising performance in the quarters to come. At this stage, our CEO, Mr. Harry Vafias, will summarize our concluding remarks for the period examined.

This quarter's unprecedented profitability growth is solid proof that our company's strategy is indeed paying off. With the capital recently raised, we have managed to grow our fleet, substantially increase our profitability and cash flow, and create value for our investors. As a result of having acquired six investors in the course of 10 months, we generated net income of $15.5 million in a single quarter, which is 15,400% higher than our profit in Q2 2022. an equivalent to 23% of our current market cap. We incurred moderate debt during the quarter, maintaining a healthy capital structure with approximately $42 million of debt, while preserving a free cash balance available for further fleet expansion of about $92 million. Given the strong market fundamentals and the promising charter rate environment, and by taking advantage of our efficient management of our expanded fleet, We believe that we will achieve strong results and generate significant cash flow going forward. However, the valuation of our shares of common stock does not reflect our strong financial performance and capital available to fund our growth prospects. We've now reached the end of our presentation, and we would like to open the floor for your questions. So, operator, please open the floor.