Imperial Petroleum Inc.

Good morning, everybody, and thank you for joining us for the first quarter 2023 conference call of Imperial Petroleum. I'm Harry Vafios, the CEO, and with me today is Mrs. Aquilaris, our interim CFO, who will be discussing our financial performance. Before we commence our discussion, we'd like you all to read the safe harbor disclaimer 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 investors and uncertainties which may potentially affect our company's performance. In addition, we'd like to state that during this call, we will quote monetary amounts unless explicitly stated, otherwise are all denominated in U.S. dollars. Starting from slide three is a summary of our company's performance highlights. The first quarter of 2023 had the best turnout possible for Imperial Petroleum, as we ended the period with a record net income of almost $36 million and outstanding performance for a fleet of our size. Our earnings per share, or EPS, came in at $2.31, which is close to our current share price. In conjunction with our past quarters, we generate an annual return on equity in the region of 19%, based on the trailing 12 months to March 2023, a return that cannot be left unnoticed. Setting aside our short performance, year 2023 commenced with a busy agenda for Imperial Petroleum from a strategic standpoint. We deployed about $70 million of cash in order to pay all of our outstanding debt. Imperial Petroleum is now a debt-free company with a flexible capital structure. Striving for growth, we acquired two more handy-sized bulk carriers, reaching a fleet of a total of 12 ships. Furthermore, we proposed a spin-off of two of our dry bulk carriers to a separate company called C3IS. Finally, on April 28, 2023, we effected a 15-for-1 reverse stock split in order to regain compliance with the NASDAQ minimum bid price requirement. Our strategic initiatives allow us to enjoy a company which is thriving in terms of financial performance owns a debt-free capital structure with an unencumbered fleet, has granted flexibility to our shareholders through our spin-off to expand and perhaps diversify our investment, and has taken action in order to regain compliance with NASDAQ just to provide more assurance to our shareholders. We continue to trade at a deep discount to NAV, but remain positive that our solid profitability will assist our share price to recover and realistically reflect the true valuation of the company. On slide four, we provide a summary of our fleet employment. As evident, all of our dry bulk carriers are under time charter employment. As for our tankers, following the conclusion of Magic One's legacy time charter, they're all operating on the spot market. Indeed, the spot market for all tankers, product Aframax and Suezmax tankers continues to be strong, particularly when compared to rates prevailing a year ago. This upward trend in rates is reflected in our performance as well. Our daily time chart equivalent in Q122 was $12,600 and climbed in Q123 to $53,750 per day, marking a rise of about 330%. Change in trade partners following the Russian-Ukrainian conflict have made voyages longer haul. This, along with a firm oil demand, maintain rates at high levels which are evidently favorable for the owners. On slide five, we're reviewing the tanker market. In spite of the global economic recession and the recent Western banking crisis that has caused some volatility in the market, global oil demand is forecasted to grow by about 2 million barrels per day this year. This growth will be facilitated mostly by China, which is no longer held back by COVID restrictions. This will give a rise in domestic demand. In addition to this, intensified refinery activity in China is expected to support crude imports, which should hit a record in the second half of 2023. In the beginning of April 2023, Saudi Arabia and other OPEC-plus members announced voluntary production cuts from May till the end of the year as a precautionary measure aimed at supporting the stability in the oil market. This has had an impact on rates in the short run. However, the basis little fleet growth along with trade flow changes and the Atlantic East arbitrage, we do not expect to see a noticeable and long-lasting weakness in the market. As evident, global tanker market is impacted by various events and thus it's difficult to make predictions as to future performance. However, firm demand and high utilization present present favorable conditions for a continuation of high freight rates and perhaps with some volatility in the periods ahead. Since 2020, oil demand has grown by about 9%, while oil exports have followed a slower pace of 6% growth. In other words, there's a supply shortfall in the market. Overall, global oil demand is anticipated to have a very long tail and to peak in the late 2030s, and this creates a positive outlook for the broader tanker market. On slide six, we're focusing on the product tanker market. We expect the outlook for this segment to remain positive for this year and beyond due to the small order book and longer whole-sheet bond trading patterns. Product anchor fleet growth will be 2% this year, while product anchor demand growth will exceed 10%. The Suezmax and Aframax tanker markets have been supported mostly by the intra-Atlantic Basin crude tanker demand. Briefly to comment on market rates and trade patterns during the first quarter. The tanker market saw an extremely strong start to the year, especially on the dirty side, but also the clean tankers were enjoying healthy freight levels too. The significant changes in oil and oil product trade flows, coming as a result of the sanctions imposed on Russian cargoes, continue to be the main driver behind the strong markets. India continues to buy large quantities of Russian oil, and China, coming out of the COVID lockdown, started to increase significantly their imports significantly. also of Russian Urals, crude from the Baltic and the Black Sea. In addition, the G7 nations' price cap restrictions on Russian oil products came into effect as of February 5th, which led to both Russian dirt and clean oil products having to find new buyers, and except for Turkey, the majority of these outlets are resulting in major increase in ton miles. On the dirty side, the Atlantic shore, the high straits, and especially the Afro-American segment, had a very solid Q1, with historically high levels paid on both sides of the Atlantic. East of Suez, a dirty market trade, did not see the kind of picks that the Atlantic market experienced, but the owners enjoyed a relatively stable and strong market also there. On the clean side, we saw more volatility west of Suez than east of Suez, but the average for the quarter turned out quite similar. I'll now pass you on to Mrs. Secularis, who will provide a summary of our financial performance.

Thank you, Harry, and good morning to everyone. In the first quarter of 23, our revenue and profitability took off. The fact that the fleet of 12 vessels managed to generate about 36 million of net income is impressive and encouraging for the quarters to follow. We ended the quarter with an operational utilization of 85%, with six days of technical of hire, and 495 days, or 54% of our fleet days, dedicated to spot activity. Both conditions and rates favored spot market operations. Evidently, this proved to be a sound and very profitable decision. Looking at our income statement for Q123 on slide 7 compared to Q122, revenues came in at 65.4 million, up by 60.3 million compared to the first quarter of 22, due to a further increase in market rates and the increase of our fleet by an average of six vessels. Voyage costs increased by 16.4 million, due to the increase in spot days by 468, that is 1,700%, and a rise in daily banker costs by 5,300 compared to Q1-22. Our running costs increased by 5.2 million, solely attributed to our fleet expansion. Compared to the fourth quarter of 22, when we had similar number of assets, our daily OPEX remained stable. We do expect a rise in OPEX in the second quarter of 22, as the two dry Balkan-sized carriers joined our fleet towards the end of Q123, and therefore the cost of their operation was not fully reflected in our results. Basically above, we generated a strong EBITDA of 40 million, that is 37.3 million, or 1,435% higher than in Q122. Our net profit of 35.7 million was an all-time high result, corresponding to an EPS of 2.31 cents, based on the number of shares outstanding as adjusted for the reverse split effected on April 28, 2023. Our profit margin for the quarter was in the order of 55%. Moving on to slide 8, let us take a look at our balance sheet for the three months of 2023. As of March 31, 2023, we had a free cash base of about $115 million, including time deposits. Within March, we utilized $23 million to repay one of our outstanding loans, while within April we further deployed another $46 million to repay early and in full all of our debt. Imperial Petroleum is now a debt-free company with unencumbered assets and zero cash flow obligations stemming from financing. Our operating cash flow for the quarter was $31 million, so in a single quarter we generated from our fleet operations cash almost as much as our market capitalization. As to date, our cash starts in the region of $70 million. We will continue to utilize upon the high interest rate environment and commit our excess cash on time deposits. Yields are high. Only Q123, we generated close to 1.3 million of interest income, fully hedging against our then finance costs for the period. In slide 9, we present a financial snapshot, placing efforts on our solid financial position. Going forward, as mentioned earlier, our cash balance is quite high in the region of 70 million, enabling us to expand our fleet further. Full debt repayment will lead to annual cash flow savings, principal and interest of almost 15 million. Funds that may be directed to asset investments. We enjoy both healthy liquidity and a good financial structure. Looking at profitability, Q123, our daily time charter equivalent per person, came in the order of $53,750. What is most impressive and a mathematical proof that our strong results may continue is that following our full debt repayment, our daily cash flow breakeven progression is about 9,000. Imperial Petroleum proved to be a company capable to grow fast and produce impressive returns. Our return on equity basis trailing last month is region 19%. Our considerations going forward stem mostly from how market conditions will play out and affect our segment. One question is the duration of the global recession. and recent banking crisis and the extent to which this will affect the oil market. Moreover, at basis strong oil demand, it is anticipated that OPEC will increase supply in the second half of 2023, but this is still unsure. Moving on to company specific, our only capital obligations going forward are five dry dockings scheduled to take place in the remainder of 2023. Concluding our presentation with slide 10, we simply outline once more the strong but yet proven points that make Imperial Petroleum a company that has a short but impressive track record of a successful fleet expansion, which ensured immediate returns. We hope that our company's worth will finally be reflected in our share price. At this stage, our CEO, Mr. Hari Vafkes, will summarize our concluding remarks for the period examined.

Our performance in the first quarter of 2023 resulted in record revenues and profitability. We are extremely pleased that our strategies are paying off. Commercially, we capitalized on the strong tanker market and efficiently utilized an average fleet of about 10 ships to produce in a single quarter net income of $36 million, marking a 17,750% increase compared to the net income generated in the first quarter of 2022, and an EBITDA of about $40 million, which is 1,435% higher than the same period of last year. Strategically, we propose the spin-off of two of our dry vessels to a separate company called C3IS. In terms of our financial strategy, we paid down all our debt and have stopped issuing new shares. Without a doubt, we are well-positioned to benefit from the good market conditions that seem to last going forward. We have now reached the end of the presentation and would like to open the floor for your questions. So, operator, please open the floor.