Imperial Petroleum Inc.

Good morning, everyone, and thank you all for joining us at our first quarter 2024 conference call. I'm Jai Vahias, CEO of Imperial Petroleum, and with me today is Mrs. Fenia Sakellari, who will be discussing our financial performance. Before we commence our discussion, we'd like you to read the safe harbor language on 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 are based upon the current beliefs and expectations of Imperial Petroleum and are subject to risks and uncertainties which could cause future results to differ materially from these forward-looking statements. We would like to note that the slides of the webcast presentation will be available and archived in our company's website. In addition, before we commence our discussion, we'd like to clarify that during the call, we will quote monetary amounts unless explicitly stated all in U.S. dollars. On slide three, we're summarizing our operational and financial performance. Q1-24 was a much better quarter than Q4-23. Our performance was lower when compared to the same period of last year, which was a record quarter as both market and utilization rates were at their peak. The tanker market in the first quarter of 2024, driven mainly by the geopolitical tensions and the reduction in Swiss canal transits, remained firm both in terms of demand and rates. The Western market remains stronger than the Eastern, particularly for MRs. Hence, our strategic repositioning of the majority of our MR tankers that took place within Q4-23 was crystallized into a rise of our revenues and profitability. Indeed, leveraging upon our MR fleet and the full operation of our Suez Maxis, as the Suez Protopia was idle for the majority of the last quarter of 23, our fleet was better utilized. It was also engaged in longer haul voyages with far less commercial off-hire. In the first quarter of 24, our operational utilization came in at about 80%, improved compared to the Q4 23 by 23%. As said, market is firm, so are asset values, even for older tonnage. We therefore took the strategic decision to sell the 2009 Afromax tanker Stag Grace II our only Chinese-built vessel, for a consideration of $42 million. These funds will be used for fleet renewal when an attractive and financially sound opportunity arises. Looking briefly at our Q124 results, our revenues came in at $41.2 million, generating an EBITDA of about $19 million and a net income of $16.7 million, which compared to our Q423 performance, revenues were higher by 38%, and EBITDA by an astonishing 136%. Our net income was up by 157%. This improvement is much relied upon our strategy given that tanker spot rates in Q124 did not vary significantly from rates prevailing during the second half of Q423. We continue to maintain a strong cash base of about 67 million and remain a debt-free company. Our consistently profitable performance, along with the dynamic share buyback program, which was active from early September 23 until early January 24, have assisted our share price to rise. In the beginning of September, Imperial Petroleum was trading at close to $1.5 per share, now trades above $3.5 a share. Taking into consideration that our current NAV per share is about $14 a share, we still trade at a steep discount. On slide four, we're providing a summary of our current fleet deployment. Both of our handy-sized dry bulk ships are on short-time charters expiring in May and June, respectively at improved rates compared to the previous quarter. It's noted that in Q124, the Baltic handy-sized TC equivalent averaged 12,000 a day, which corresponds to a 24% year-on-year increase. All of our tankers are operating in the spot market where rates remain favorable. Moving on from the extreme market spikes following the Russian invasion in Ukraine, the tanker market now seems to have stabilized at reduced, although historically firm, levels. In early 2023, when the effect of the Russian-Ukraine conflict had not yet crystallized, spot rates for Suezmax tankers were about 65,000 a day, while for Aframax tankers close to 8,000 a day. Spot rates for both of these tanker segments are now about 40,000 a day. The current stabilization of rates at firm levels is supported by the continued geopolitical tension in various places and continued changes in trend patterns caused by sanctions on Russian oil and oil products. Limited capacity in the Panama Canal and significant reduction in the usage of the Suez Canal due to ongoing attacks by the Houthis on the merchant vessels. On slide five, we're reviewing the tanker market. As mentioned during Q1 of this year, the tanker market was predominantly affected by pressure stemming from geopolitical events. A predominant driver of Q1 market were the Hovis assault on more than 80 ships. Due to this, the majority of tankers chose to bypass the Red Sea and therefore take a longer route around the Cape of Good Hope. It's estimated that this has added about 30 days to a round-trip voyage from Middle East to Europe, while it has assisted rates to remain at firm levels. We saw VLR2s being the biggest winners from the Suez Canal disruptions, but also CleanMRs got a significant boost, especially east of Suez. On the dirty side, AfraMaxis and SuezMaxis continue to enjoy the effects of the sanctions on Russian oil and oil products, and still outperforming the VLCCs, which have been much less effects from both the sanctions and the Houthi attacks. Intensification of sanctions on oil trade has had and will continue to impact the oil market in the long run. Sanctions against Russian oil are ruled by law, hence will take a significant amount of time to resolve, regardless of when the Russian-Ukraine conflict might come to an end. What needs to be taken into consideration is that the expected unwinding of the sanctions in the Red Sea might lead to a downward correction in earnings. The expectation is that this unwinding might take place towards the end of this year. Going forward, it is expected that oil demand could grow by 3.25% over the next two years. This demand is anticipated to be stronger in Asia Pacific, while supply growth will be focused mostly in the U.S., Brazil, and Canada. Oil demand and supply dynamics are in place for a positive tanker market outlook ahead. Due to the strong prevailing market, we do witness limited scrapping activity. both new building and second-hand asset values continue to increase. Should free rates remain at this level, we might see prices firm even further. On slide six, MR's Afromax and Sruismax segments have had a current order book which is lower than the percentage fleet that is above 20 years of age. Therefore, we anticipate a shrinking of the fleet in the years ahead. As market is firm, we currently witness limited scrapping activity, but at the same time, there is a limited yard capacity for new orders, hence there is a marginal room for a sharp rise of the current order book. In terms of market values, both new billing and second-hand asset values continue to increase, and perhaps there is room for further rise in asset values. Looking briefly at the dry bulk segments, during the first four months of this year, global seabourn demand for dry bulk commodities have increased by 0.4%. However, the Chinese economy, which accounts more than 40% of the global Seaboard imports continue to be weak, mostly due to the Chinese property sector, along with ongoing challenges stemming from domestic and retail demand. We do witness, though, an improvement in hand-sized drabbel crates at the back of stronger demand and the increase of average sailing distances. I'll now pass the floor to Mrs. Ekelheis, who will provide you with a summary of our financial performance.

Thank you, Harry, and good morning to everyone. We commence this year with a promising performance, marking an unquestionable improvement compared to Q4-24 results. Market continues to be firm and rates have normalized at high levels, which are lower though than the peak levels witnessed at the beginning of 2023. Let us discuss now our financial performance in Q1-24 compared to the same period of last year. Looking at our income statement for Q1-24 on slide 7, revenues came in at 41.2 million in Q124 compared to 65.4 million in Q123. The main reason for this comparative decline in revenues during the first quarter of 2023, in which we marked a record performance to date, was that rates were at their peak as the effects of the Russian-Ukraine conflict had not yet been normalized. In fact, tanker market spot rates prevailing during the first quarter of 2023 were higher than rates witnessed in Q124 by an average of 38%. In addition, in Q124, we operated a lower average number of vessels, but most importantly, the tanker vessels Aquadisic and Stade Grace II acquired in Q124 did not materially contribute to our results as they were delivered to us mid-quarter. Further to this, the Stade Grace II underwent dry docking right after her delivery. Voyage costs decreased by 3.4 million due to decreased port expenses by 1.4 million as a result of longer haul voyages, reduction in transit through the Suez Canal and decreased commissions by 2.2 million due to lower revenues when compared to the same period of last year. Our running costs decreased by 0.9 million due to a lower average number of vessels. In terms of dry docking, these amounted to 0.6 million as during Q124, our Afromax tanker, the Gstaad Grace 2, commenced its dry docking, which was concluded within April 2024. Basically above, We generated an EBITDA of close to 19 million compared to an EBITDA of 40 million in Q123 and net profit of 16.7 million compared to 35.7 million net income in Q123. Our basic earnings per share for the first quarter of 2024 came in at 56 cents. Moving on to slide 8, let us take a look at our balance sheet for the first quarter of 2024. In spite of our recent vessel acquisitions, which, as mentioned, took place in February, we do maintain a hefty free cash base in order of $67 million, and we remain a debt-free company. Following the sale of Stade Grace II, which took place in April 2024, and the receipt of almost $38 million from C3IS Inc., which will take place within July 2024, our cash balance will be in the order of $150 million, this without taking into account the free cash flow that will be generated up until then. Our operating cash flow for Q124 was 18.6 million, meaning that all of our profitability was translated this quarter into operating cash. Overall, we have minimum liabilities as our equity to assets ratio is in the order of 96%. Proceeding to slide nine, we provide a snapshot of our strong fundamentals along with some considerations going forward. We do enjoy a healthy liquidity and profitability position but nevertheless traded a steep discount to our net asset value, which is close to 14 per share. Our profitability relies on our strong TC generation. In Q124, our daily TC generation was reaching 31,000 per day, per fleet voyage day, while our daily breakeven remains low. We have minimum capital expenditures going forward, as we have one more scheduled dry docking in Q424, following which our next dry docking is due in Q1, 2026. Concluding our presentation with slide 10, we summarize our strong points. Our financial position is healthy, we enjoy recurring profitable quarters, and are able to adjust our commercial strategy to market conditions. At this stage, our CEO, Mr. Hari Vafias, will summarize our concluding remarks for the period examined.

This year commenced quite favorably for Imperial Petroleum. 16.7 million of net income for the first quarter of this year, which is almost 106% higher than our profitability in the last quarter of 2023, fills us with optimism. The market continues to be governed by turbulence, which directs longer haul voyages and is sustaining charter rates at firm levels. The financial health of Imperial Petroleum is undisputable, with a large cash pile and no bank debt. Going forward, we will remain focused on the growth of our company. We would like to thank you all 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 our next call for our second quarter results. Thank you.