Pyxis Tankers Inc.

Good day, and welcome to the Pixis Tankers conference call to discuss the financial results for the first quarter 2024. I must advise you that the conference call is being recorded. Additionally, a live webcast of today's conference call and accompanying presentation is available on Pixis Tankers' website, which is www.pixistankers.com. Hosting the call is Mr. Eddie Valentis, Chairman and Chief Executive Officer of Pixis Tankers. and Mr. Henry Williams, Chief Financial Officer of the company. I would like to pass the floor to one of your speakers today, Mr. Eddie Valentin. Please go ahead, sir.

Hello, everyone, and thank you for joining our call for results of the three months ended March 31st, 2024. The effects on global seaborne trade from the Russian-Ukraine war have been further compounded by the conflict in the Red Sea. Overall, Global economic activity has been resilient, including the OECD, despite the tight monetary policies by many central banks. Inflation is persisting and the prospects of interest rate cuts have been lowered to later this year. However, the fundamentals for our two markets, product tankers and rival carriers, are positive, characterized by healthy charter rates and rising asset values. While market conditions are dynamic and beyond our control, we expect to continue to successfully manage our operations through this volatile time. Before commenting on our solid operating and financial results for the most recent period, please let me draw your attention to some important legal notifications on slide 2 that we recommend you read, including our presentation today, which will include forward-looking statements. Thank you. Turning to slide 3, our most recent quarterly results reflected healthy financial performance in revenues and profitability despite operating fewer tankers. After selling two MRs in 2023 for significant gains, we operated three product tankers in Q1 2024. However, during the quarter, we expanded our dry bulk fleet with the addition of modern Camsomax and ended the period with five vessels in the company's fleet. In the quarter ended March 31st, we generated consolidated time charter equivalent revenues, TCE, of $10.2 million, an increase of 10.2% over the same period in 2023. Our daily TCE for our eco-fleet was approximately $27,600, for which the Air Mars averaged $31,719 in Q1 2024, and our midsize bulkers averaged $16,950. For the most recent period, we reported an empty income of $3.6 million over $0.33 basic EPS, which was lower without the gain on vessel sale in Q1 2023. Our adjusted EBITDA in the most recent period was a solid 6 million. The project tanker chartering environment remained strong throughout the first quarter of 2024. Despite slower economic activity, armed hostilities contributed to tighter inventories of refined petroleum products, which continue to be below five-year averages in a number of locations around the world. Changing trade patterns, expansion of tonne miles and dislocation to end markets creating arbitrage opportunities. Despite higher crude prices over the last year, refinery activity continues to be supported by reasonably healthy crack spreads reflecting good global demand. These developments bolstered the constructive outlook for Product Anchor Charter 8. As of May 16th, 83% of available days in Q2 2024 were booked for our MRs at an average TCE rate of $32,500 per day. Two of our MRs are employed under short-term time charters and one in the spot market. The supply and demand fundamentals for the dry bulk sector look to be relatively balanced for 2024. Recently, we expanded our fleet with the acquisition of our second mid-sized dry bulk carrier. In mid-February 2024, we closed on the purchase of a 2015 built Kamsa Max. As of May 16th, Our two scrubber-fitted bulk carriers were booked for 92% of available days in Q2 at an average TCE of $18,400 per day, both employed under short-term time charters. Considering the favorable prospects for both sectors and our existing capital resources along with established lending relationships, we remain committed to actively pursuing value-enhancing investment opportunities. We have decided to further expand our fleet by investing in the acquisition of a sister ship of our Conqueror's Parade. Also, our board has authorized the purchase of an additional 1 million of common shares in the open market. Over the past year, the company has spent 1.6 million to acquire over 415,000 shares, which represent about 9% of outstanding public float at May 2023. In addition, we have just announced the redemption of approximately 25% of the outstanding Series A convertible preferred shares scheduled for June. Please flip to slide four for information on our existing fleet and employment activities. We are continuing to prudently maintain our mixed chartering strategy of time and spot charters with a focus on diversification by customer and duration. As you can see, four of our vessels are under staggered short-term time charters, which provide us with attractive fixed revenues over defined periods of time and optimized working capital. The Pixis Lambda, our youngest vessel, continues to operate in the spot market. Notably, the average age of the vessels in our fleet is below the industry averages, with our remise at 9.7 years and 8.2 years for our bulkheads. The next special surveys are scheduled to occur next year for the Conqueror study and our latest acquisition, which will be named the Conqueror Venture. Please turn to slide 5 now to review the acquisition details for the Conqueror Venture. The company, through a 60% owned subsidiary, has agreed to enter into a joint venture agreement to purchase an eco-efficient Kamsa Max Bulkair built in 2015 at a leading Chinese yard. The Concur Venture, fitted with a balanced water treatment system, will be acquired for $30 million, which is expected to be funded by a combination of bank debt, cash, and the issuance of restricted common stock by the company. As one of the sellers of the vessel, I have agreed to receive 1.5 million in restricted common shares of the company, priced at a premium to the current share price, as part of the purchase consideration. The vessel-owning subsidiary expects to enter into a new 16.5 million five-year secured amortizing back loan, which will be priced at a rate of sulfur plus 2.15%. The balance of the purchase price, vessel working capital, transaction fees, and other closing costs will be funded by $13.2 million in total cash, of which the company will contribute $7.3 million. As a further sign of commitment to the company, I have agreed to reinvest $5.9 million in cash for the remaining 40% minority interest in the new ship owning subsidiary. The transaction was unanimously approved by the company's independent directors. It is anticipated that the acquisition of the Concord Vessel, which is subject to customary closing conditions, will be completed in June 2024. Afterwards, we will have a balanced fleet of six echo vessels in our fleet, three MRs and three bulkers. Please turn to slide 7 to review several macroeconomic considerations which support fundamental product tanker demand. Since our update two months ago, there hasn't been much change, except market conditions continue to be very healthy with a positive outlook for the balance of 2024. Over the longer term, We expect demand for the product sector to be supported by refinery additions led by the Middle East and Asia. According to Drury, nearly 4.4 million barrels per day of net new refinery capacity is scheduled to come online by 2028. Much of the incremental refining capacity will be export-driven, which should lead to further expansion of ton-miles. As you can see on slide 8, the impact of the ongoing Russian-Ukraine war and more recently the Israeli-Hamas conflict have helped boost charter rates, lengthen sailing distances and expand ton miles. However, these types of Black Swan events only add to market uncertainty. Let's move on to slide 9. The combination of robust chartering conditions for the last two-plus years and continued positive outlook by owners has resulted in a significant pickup in orders for the construction of new product tankers since 2022. According to R.O. Shetbroking, at the start of May, the order book for MR2 stood at 9.8% of the global fleet or 180 vessels with a manageable delivery schedule. Due to significant backlogs, Many Asian yards don't have available construction slots for MR2 deliveries until the second half of 2026 or later. Delays in scheduled new-build deliveries continue to be an unpredictable factor and ran 9.7% last year. It is important to note that 13.8% of the global MR2 fleet, or 254 vessels, a number exceeding the order book, are 20 years of age or older. Given this large number, combined with declining economics of operating older vessels, major scrapping should occur over the next five years. But with a strong market, only foreign mines were demolished in 2023. Overall, we continue to estimate the net fleet growth for a month to be about 2% this year. Turning to slide 10, strong chartering conditions have led to Steep increases in MR2 prices across the board. Values for second-hand tonnage remain well above 10-year averages. Construction contracts for new buildings in South Korea now exceed $49 million, excluding yard supervision and add-ons. Prices for young, eco-efficient MR2 vessels, our preference, are approaching the cost of new builds. making viable acquisition candidates difficult to find. Now, I would like to quickly touch on some updates for the dry bulk sector, so please click to slide 12. Overall, the supply demand fundamentals for the sector look reasonably balanced for 2024. Considering a reasonable correlation to global GDP growth of 3.2% in 2024, demand for dry bulk commodities should remain positive. In early May, a leading research firm estimated dry bulk trade should grow 2% to 5.6 billion tons this year. But tonnages increased 5% due to the effects of island hostilities and, to a lesser extent, restrictions caused by adverse weather conditions. To a fair extent, the supply picture for the dry bulk carriers looked manageable. Recently, Arrow estimated the order book for Panamax carriers, which include Camp Samarco-class vessels, was 271 vessels or 10.9% of the global fleet. But a significantly higher percentage, 17.3% of the global fleet, is 20 years of age or more, which should eventually lead to more scrapping. At the beginning of May, the order book of Ultramarx stood at 379 units or 26.3% of the global fleet of this highly versatile vessel class. At this point, I would like to turn the call over to Henry Williams, our Chief Financial Officer, who will discuss our financial results in greater detail.

Thanks, Eddie. On slide 14, let's review our unaudited results for the three months ended March 31, 2024. Our time charter equivalent revenues for Q1 of 24, which we define as revenues net minus boards-related costs and commissions, rose to $10.2 million. an increase of 10.2% as we operated fewer product tankers, but benefited from higher spot rates and the addition of the dry bulk. Strong charging conditions were reflected in our daily TCE for our MRs, which jumped to $31,790 in Q1 of 24. During the quarter, the overall fleet generated TCE of almost $27,600 per vessel through a mix of short-term time and spot charters. Moving to slide 15, we generated net income to common shareholders of $3.4 million for the three months ended March 31, 2024, or 33 cents basic and 30 cents diluted EPS compared to net income of $8.7 million, or 81 cents basic and 71 cents diluted income per share in the same period in 2023. The results from a year ago reflected the sale of our 2009 built MR, which we generated a gain of $8 million. Please note that for accounting purposes, the fully diluted earnings calculation assumes the potential conversion of all the outstanding Series A convertible preferred stock into common shares and the elimination of the associated dividend. In Q1 of 2024, the increase in TCE revenues of $900,000 and lower G&A expenses of $600,000 flowed through to adjusted EBITDA, which increased $1.8 million to $6 million. Now I'll flip to slide 16 to review our capitalization at March 31, 2024. At quarter close, our consolidated leverage ratio of net funded debt stood at 14 percent total capitalization. Our weighted average interest rate was 8.2 percent for the most recent quarter, and the next bank loan maturity is scheduled for July of 25. I should point out that at the end of March 24, our total cash machine aggregated $49 million. Most of our excess cash is invested in short-term money market instruments, which currently earn 5.4%. Lastly, as of May 16, 2024, we had repurchased in the open market 415,000 common shares in total under our initial $2 million buyback program, and there are approximately 10.5 million TXX shares currently outstanding. Please note that the planned redemption of 100,000 shares of a preferred stock will avoid potential dilution from conversion into 446,000 common shares. The approved issuance of $1.5 million of restricted stock as part of the Conquer Venture acquisition at an assumed share price of $5.60 would add about 268,000 common shares at closing. Overall, the effect of these two transactions would reduce the fully diluted share count by approximately one quarter of a million shares at March 31 to 12.1 million fully diluted shares. With that, I'd like to flip the presentation back over to Eddie.

Thanks, Henry. The outlook for the product anchor sector looks quite bullish for the near term. Supply and demand fundamentals for the dry bulk sector are expected to be reasonably balanced for the remainder of 2024. Ongoing major geopolitical conflicts continue to create operating challenges and opportunities for us. We continue to benefit from the combination of solid and market consumption, lower refined product inventories in many parts of the world, changing trade patterns, and expanding tonnage. Scheduled developments for the refinery landscape only enhance the long-term outlook for the product tanker sector. Global GDP growth over the near term supports demand for a broad list of dry commodities. Chartering conditions for dry valkyries have also benefited from these major events, including unprecedented transit restrictions of the Panama Canal, which are abating. We expect to utilize our strong financial position and extensive industry relationships to develop additional investment opportunities that maximize shareholder value, including further fleet expansion. The announced repurchase programs for our common and preferred stock will be accretive and should enhance the trading of our shares. We appreciate your interest and thank you for joining our call today. We look forward to reporting on future progress at Pixies Tankers.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.