Pyxis Tankers Inc.

Good day, and welcome to the Pixis Tankers conference call to discuss the financial results for the second 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 Valentis. Sir, please go ahead.

Hello, everyone, and thank you for joining our call for results of the three months ended June 30th, 2024. The disruption on global seaborne trade from the Russia-Ukraine war and the conflict in the Middle East continues. Global economic activity remains resilient despite the tight monetary policies by many central banks. Inflation is decelerating and interest rate cuts are expected starting this fall. The fundamental outlook for our two markets, product anchors and dry bulk carriers, remain positive characterized by healthy charter rates and rising asset values. But market conditions are dynamic and can be significantly influenced by macroeconomic and geopolitical events which are beyond our control. Before commenting on our operating and financial results for the most recent period, please let me draw your attention to some important legal notifications on slide two that we recommend you read, including our presentation today, which will include forward-looking statements. Thank you. Turning to slide three. Our most recent quarterly results reflected strong financial performance in revenues and profitability, driven by healthy market conditions and our successful expansion into the dry bulk sector. With the acquisition of the 2015-built Camsar MAX in late June, our fleet of six modern mid-sized ecovessels consists of three MR2 product tankers, one Ultramax, and two larger Camsar MAXs bulk carriers. In the quarter ended June 30, 2024, we generated consolidated time-chartered equivalent revenues of 12.2 million, marking an increase of almost 42% over the same period in 2023. Our daily time-shutter equivalent for our fleet in Q2 2024 was approximately 29,150, of which the Mars averaged close to 32,900, and our mid-sized bulkheads averaged $22,300 per day. For the most recent period, we reported net income of 5 million or 48 cents basic EPS, substantially better than Q2 2023. Our adjusted EBITDA in the most recent period rose to 8 million. The product tanker chartering environment remains strong throughout the second quarter of 2024. Despite slower global 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 worldwide. This has led to changing trade patterns, expansion of tonne miles and arbitrage opportunities due to dislocation in certain end markets. Global refinery activity remains constructive in spite of moderating crack spreads and consumption, especially as we move further into the historically seasonally slower third quarter. Many of these developments reinforce a positive outlook for product anchor charter rates. As of August 9th, 68% of available days in Q3 2024 were booked for our MRs at an average estimated TCE rate of 33,850 per day, similar to what we reported in the three-month period ended June 30th. Two of our remars are employed under short-term time charters and one in the spot market. The supply-demand fundamentals for the dry bulk sector continue to be relatively balanced for 2024. Our positive view on the dry bulk sector is further reflected by the recent acquisition of the Concur Venture, a sister ship to the Camsomax we purchased back in February. As of August 9th, our three modern bulk carriers were booked for 76% of available days in Q3 at an average estimated TCE of 17,200 per day, all employed under short-term time shutters. 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, accretive investment opportunities. However, we have yet to find compelling acquisitions of modern MRs given current prices which are reaching 10-year historical highs. While dry bulk values have also continued to appreciate, we have grown more selective in pursuing acquisitions in this sector. In the meantime, we expect to strengthen our balance sheet, amortizing scheduled debt, and repurchasing additional shares. 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, five of our vessels are under staggered short-term time charters, which provide us with attractive fixed revenues over defined periods of time and optimize 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 materially below the industry averages, with our MRs at 9.9 years and 8.7 years for our bulkers. The next special surveys are scheduled to occur during the first half of next year for the Concar Asteri and the Concar Venture. Please turn to slide 6 to review several macroeconomic and global oil market considerations which support fundamental product anchor demand. Market conditions, especially for refined petroleum products, continue to be very healthy and drive a positive outlook for the balance of 2024. Over the longer term, we expect demand for the product anchor sector to be boosted by refinery additions led by the Middle East and Asia, as you can see on slide 7. According to Drury, 3.7 million barrels per day of net new refinery capacity is scheduled to come online this year through 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-Ukrainian war and the Israeli-Hamas conflict have continued to sustain strong charter aids, lengthen sailing distances, and expand ton miles. Unfortunately, escalating tensions in the Middle East are directly affecting the oil markets, adding to the overall market uncertainty. Let's move on to slide nine. The combination of robust chartering conditions over the last two and a half years and continued positive outlook by owners has resulted in a significant increase in orders for the construction of new product anchors. According to Drury, since the beginning of 2023, there have been orders for the construction of 231 new MR2s with the order book standing at 274 vessels or 16.1% of the global fleet at July 31st. By the end of 2025, 104 MRs are scheduled for delivery. Surprisingly, only 11 MRs have been delivered during the first seven months this year, according to Drury. So, slippage may further affect the actual number of deliveries. Due to significant backlogs, many Asian yards don't have available construction slots for MRs with deliveries in two plus years. It is important to note that 13.5% of the global MR2 fleet, or 230 tankers, 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 four MRs were demolished in 2023, and that pace has yet to pick up. Overall, we continue to estimate the net fleet growth for MRs to be about 2% this year, very low by historical standards. Turning to slide 10, we see the strong charter conditions have led to steep increases in MR2 prices across the board. Values for second-hand tonnage remain well above 10-year averages. According to RO Shipbrokers, 94 MR2s were sold in the first seven months of 2024, up 24% year-over-year, marking the largest number on record. Tanker sales continue to be concentrated in older tonnage. Construction contracts for new buildings in South Korea now exceed 52 million, excluding yard supervision and add-ons. Prices for young, eco-efficient MR2 vessels, our preference, are approaching the cost of a new build, making viable acquisition candidates difficult to find in our opinion. Now, I would like to provide some update for the dry bulk sector, so please flip to slide 12. Overall, The supply-demand fundamentals for the sector look reasonably balanced for the remainder of 2024. Considering a moderate correlation to global GDP growth of 3.2% in 2024, demand for dry bulk commodities should remain positive. The dry bulk trade is estimated to grow 2.6% to almost 5.7 billion tonnes this year, with tonne miles to increase by 3.9% due to the effects of armed hostilities and to a lesser extent port congestion and restrictions caused by adverse weather conditions. To a fair extent, the supply picture for dry bulk carriers look manageable in the near term. Drury estimates the order book for Panamax carriers, which include camps amongst class vessels, to be 406 vessels or 12.4% of the global fleet. but a similar percentage in 20 years of age or more, which should eventually lead to more scrapping. At July 31st, the order book for Supramax carriers, which include Ultramax, stood at 607 units, or 14.1% of the global fleet, of this highly versatile vessel class. As you see on slide 13, prices for dry bulk carriers have also substantially appreciated. In fact, the price of a five-year-old Ultramax now matches or exceeds a new build cost. Nevertheless, strong asset prices are another positive indicator for the sector. 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 15, let's review our unordered results for the three months ended June 30th, 2024. Our time chartered equivalent revenues for Q2, which we define as revenues net minus voyage-related costs and commissions, rose to $12.2 million, an increase of almost 42% as we benefited from higher demerge income under spot charters, better market conditions, and more operating days due to the addition of the dry bulk vessels. Strong charting rates were reflected in our daily TC for our MRs, which improved to $32,868 in Q2. Our bulkers reported an average daily TC of $22,333 for the same period. During the quarter, the overall fleet generated an average TC of $29,156 per vessel, almost a 17% increase through a mix of short-term time and spot charters. Moving to slide 16, we generated net income to common shareholders of $5 million for the three months ended June 30, 2024, or $0.48 basic and $0.43 diluted EPS, compared to net income of $2.8 million, or $0.25 basic, $0.23 diluted income per share in the same period in 2023. Please note for accounting purposes the fully diluted earnings calculations. Assume the potential conversion of all the outstanding Series A convertible preferred stock into common shares and the elimination of the associated dividend. In Q2 2024, a majority of the increase in TCE revenues of $3.6 million flowed through to adjusted EBITDA, which increased $2.8 million to $8 million for the period. Now flip to slide 17 to review our capitalization at June 30th, 2024. At quarter close, our consolidated leverage ratio of net funded debt stood at approximately 23% of total capitalization. Our weighted average interest rate was 8% for the most recent quarter, and the next bank loan maturity is now scheduled for December of 2026. I should point out that at the end of June 2024, our total cash position aggregated $44.6 million. Most of the excess cash is invested in short-term money market investments, which currently earn 5.5%. Lastly, given the recent common share buybacks, the partial redemption of the convertible preferred stock, offset by the issuance of restricted shares for the Concur Venture acquisition, we have approximately 10.7 million common shares outstanding as of August 9, and 12 million shares on a fully diluted basis. With that, I'd like to flip the presentation back over to Eddie to wrap up.

Thanks, Henry. The outlook for both the product anchor and dry bulk sectors remain positive in the near term, supported by healthy chartering environments. While the order books for our class of vessels have grown significantly since the beginning of 2023, we find solace in the large number of older vessels which are less competitive operationally and face demolition soon. The 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 tonne miles. Scheduled developments for the refinery landscape only enhance the long-term outlook for the product tanker sector. Further, global GDP growth over the near term supports demand for a broad list of dry commodities and benefits our class of bulk carriers. We expect to utilize our solid financial position and extensive industry relationships to develop additional investment opportunities that maximize shareholder value including selective fleet expansion. We also look to continue our common share repurchase program and of course repay scheduled debt. Enhancing our balance sheet remains a key priority. 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 conference. You may now disconnect your lines. Thank you for your participation.