Okeanis Eco Tankers Corp.

Hello, and welcome to the OAT's fourth quarter and fiscal year 2023 financial results presentation. We will begin shortly. Aristides Salafouzos, CEO, and Heracles Barounis, CFO of Okeanis EcoTankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. I would like to advise you that this session is being recorded. Herakles will now begin the presentation. Thank you.

Hi, everyone. Welcome to the presentation of KMA Cycle Tankers results for the fourth quarter and fiscal year 2023. We will discuss models of the forward-looking nature and actual results may differ from the expectations reflected in such forward-looking statements. Please read the relevant disclaimer on slide two. We're going to start on slide four and the executive summary. I'm pleased to present the highlights of the fourth quarter of 2023, finishing off a record year for us. We achieved fleet-wide PCE of over $45,000 per vessel per day, and that includes, for most of the quarter, our last two legacy Suez Maxx time charters. Spot rates for VLCCs of $45,000 and spot Suez Maxxes of $52,000. We report adjusted EBITDA of $44.2 million, adjusted net profit of $20.4 million, and adjusted EPS of $0.63. Our board declared a seventh consecutive capital distribution of $0.66 per share, which is 100% of our reported EPS, continuing the promise to deliver value to our shareholders. Over the last four quarters, we have distributed $4.36 per share against earnings of $4.50 on both an adjusted and reported basis, approximately 97%. On a nominal basis, that's $140 million. Our fourth quarter was of particular importance to us, as in December, we affected the listing at the New York Stock Exchange. We're quite pleased with the early signs coming from New York. We have already seen an increase of approximately 50% in trading volume since we became dual listed. And what is interesting to observe is that within two and a half months, approximately 40% of total volume is traded out of New York. In February alone, this was already 45%. This gives us the confidence that expanding our investor reach in the U.S. is in the right direction as we take the platform forward. I will talk about our latest refinancing at a later slide. So, moving on to slide five. I've already went through the highlights of the fourth quarter, so let's spend a bit of time on 2023. We achieved record results in terms of revenue, EBITDA, and net income. PCE revenue for the year stood at almost $300 million. That's a 54% increase from a strong 2022. EBITDA of $242 million, that's 72% increase year-on-year, and net profit of $145 million, also 72% increase from 2022. Our results took advantage of the strong tailwinds coming from the tankers market, our particularly modern and fuel-efficient fleet, and as more of our vessels during the course of the year ended their time charters, our competitive commercial performance in the sport market. Moving on to slide six and our balance sheet, As of year-end, we have cash of approximately $55 million. That's complemented by a particularly larger-than-usual trade receivables balance of $57 million, attributed to timing of payment of freight by our clients. Most trade receivables have since been collected, of course. Our debt as of end December stood at $693 million. Book leverage came in at 61%, while market-adjusted LTV based on broker values stood at approximately 45% to 50%. On slide 7, we summarize our corporate and capital structure as well as our employment profile. On that front, since late December, our entire fleet is trading in the spot markets. In the last quarter, we talked about gaining momentum from our two refinancing transactions from the summer and October of last year, as we negotiated the upcoming purchase options of the Milos and the Polyegos from the legacy expensive leases. As promised, in February, we closed the transaction of purchasing back the Milos, executing a bank debt facility priced at 175 basis points over software, with maturity in 2030. We have formally declared the purchase option for the Polyagos, which is due to close in June of this year. We're optimistic that we can continue utilizing the positive momentum, the excellent relationships with our financiers, both existing and new ones, as well as the position of the company in achieving at least similarly significant improvement in our capital structure, as we did with the Milos. separately, but indicative of our ability to source accretive transactions within our capital structure. We also announced in January a set of transactions with our Chinese leasing financiers. We essentially negotiated the deal where on our two existing leases, on the Nisos-K and the Nisos-Nikuya, We reduced pricing by approximately 60 basis points, extended maturities by seven quarters to 2030 and 2031, respectively, and also increased flexibility for the future by dropping certain penalties in case of earlier financing. We also brought in a third vessel in the portfolio of our Asian lease vessels, the Nisos Anafe, financing it at 190 basis points over SOFR with maturity in 2031. The transactions for all four vessels, Nilos, Nisoskea, Nisos Nikuliai, Nisos Anafi, all closed earlier this month. Overall, the transactions executed in the last nine months have improved their cost of debt on average by approximately 1% on nine of our 14 vessels. We expect a polyagous milestone to further improve our interest costs, and we are continuously on the lookout for deals to opportunistically optimize our capital structure. I'm now passing over the presentation to Aristides for the fund part.

Thank you, Ekli. Looking at our commercial performance from Q4, Q4 rebounded with seasonal volatility after a week in relative terms Q3. Due to the extended OPEC Plus cuts, we didn't get the Q4 that we were all dreaming of. But the silver lining of this is that the OPEC Plus continues to focus on managing inventory levels, which we believe will continue to draw and eventually require more barrels to be brought back to the market. This will lead to the explosive market that we're all waiting for. And we'll expand on this a bit later in the presentation. We continue to employ our strategy of predominantly positioning our fleet in the West and taking the opportunity when the market firms to fix longer voyages to the East. Nisosipnos and Nisosekinos were re-delivered from their long-term time charters, and now the OET fleet is 100% exposed to the spot market. We also concluded our final dry dock of the first special survey of Kimo Losar 2018-built Japanese Suez Max. We upgraded the paint specification on this vessel, which is currently performing about 7% better than the previous paint. The vessel is actually more efficient today than she was when she was first delivered to us from the yard. We intend to use a similar specification of paint on our VLCCs that are going through their dry docks this year, the five 2019 build ships, the six, and one in 2025. During the quarter, we achieved a fleet YTC of $45,400 per day, including our time charges. Our VLCs generated $45,200 per day in the spot market, a 4% outperformance relative to our tanker peers who have reported Q4 earnings. Our Suez Maxes generated $51,800 per spot day, a 17% outperformance relative to our tanker peers who have reported Q4 earnings. These numbers reflect our actual book PC revenue within the quarter, as per our accounting standards, which includes several days, especially related to our SWIFT matches of ballot days, for which we did not record any revenue. Moving on to slide 10 for guidance on Q1. Q1 started with strength and volatility, which we're luckily able to capitalize on. The Red Sea deviations have so far benefited other segments of the shipping industry more than the crude fleet. Although, due to the additional cost of diverting crude around Africa, this situation created most opportunities for VLCCs within the crude fleet. We saw usual Suezmax stems from the AG West either being parceled up and moving on to VLCC, like we fixed on the Nisha Sanathi, or being sold east instead and again being parceled up on VLCCs. Another effect was med-based cargoes that are sold east and transported via Suez Canal and Suez Maxes are also being parceled up on VLCCs and sailing around Africa, like we fixed on Nisos Vespotiko. There's some random music playing. We diverted three Suez Maxes that were originally fixed in AG West via Suez to sail around Africa. One second while we try to turn off the music. Sorry, everyone. I mean, hopefully the service who provides us the conference will solve this in a couple of seconds, minutes. Just give us a moment.

Abby? Abby?

Hello. Apologies for that. So I guess I had just finished explaining that we've seen some changes in the way that the crude is moving. Due to the Red Sea diversions, it was moving on Suez Maxes, and because of the efficiency of using a VLC when you sail around Africa, we've seen more VLCCs being substituted into two Suez Max cargoes. and that we've done one on Nisus-Sanafi to go AG West. That should have been two Suez Max cargos, and we've also fixed one similar on Nisus-Disposito that originally would have been two Suez Max cargos from the Black Sea to Korea. It's now one VLCC cargo that's been STS in Malta and go around Africa. We also diverted three Suez Maxes that were originally fixed from the Arabian Gulf West via Suez. and instead these ships, they have sailed around Africa. This did benefit us by prolonging the voyage and also increased the TCE because of the larger flat rate. I'm increasingly positive about the supply balance of the VLCC fleet. As we see, the recent spike in rates two weeks ago, this was led by tightness in the east rather than the west, which is the usual way it's been happening these past 18, 24 months, and then the east follows. I think this bodes very well for when OPEC Plus decides to bring back rails to market, because these rails will predominantly be supplied from the AG, so we could see a lot more volatility driven out of the AG, while we will also see volatility out of the West, and this will be very good for higher earnings. We fixed some excellent longer voyages this quarter, locking in some great numbers. Our 2019-built VLCCs will go through their first special survey, as I mentioned earlier this year, and we will have the benefit of positioning these ships to the dry dock location in China via very profitable front-haul voyages, as most of our ships are in the West. This is like we've done on Nisos de Sputnikó, and we're going to do on Nisos Riñona soon. So far in Q1, we have fixed 81% of our fleet-wide spot days at $66,800 per day, 76% of our VLCC spot days at $73,900, which is a 37% outperformance relative to our tanker peers who have reported Q1 earnings, not including international seaways, though I think we've probably outperformed as well. And 88% of our Suezmax spot days at $58,800 per day, a 9% outperformance relative to our tanker peers who have reported Q1 earnings, again, not including international seaways. Moving on to slide 11, OET is in the unique position of being the only pure EcoScrubber-fitted listed tanker platform. This has been an important factor in allowing our company to outperform our peers by an average of 21% and 42% on the VLCC and SUSEMax segments. Other factors are getting quite lucky on our short-term tactical positioning ideas. Of course, the fantastic work of Chris and the commercial team and our optimum size, which is neither too small and subject to risk of volatility, nor too big that would jeopardize our ability to take advantage of differentiating strategies when we see risk-reward balance justified. On the following slide, we touched upon the OPEC Plus cuts earlier. I believe OPEC Plus' main goal is to manage inventory levels to a point that the market begins to reflect this in the oil flat price. Q1 seems to be counter-seasonally drying and an extension of the cuts into Q2, which is what we expect to happen, will put us far below historical inventory levels. This should then lead OPEC Plus bringing back barrels sometime in the second half of this year. We estimate that the complete reversal of the voluntary and OPEC Plus cuts will create an additional 48 VLCC demand equivalent, which is huge. This will have an immediate impact on the tanker market and can set us up for the market that we've all been eagerly anticipating. On slide 13, we looked a bit closer at the tension in the Red Sea and had some examples of vessel demand by either avoidance or closure. The Red Sea tension has taken longer to develop, on the crude segment than other segments in shipping. Initially, refiners needed to source immediate alternatives to delaying crude deliveries. That could affect runs, and this strengthened the Atlantic-based relative crude grade. This created opportunities for the LCCs, as we previously mentioned, with our fixtures on the NAF in this particular. Over time, I believe regional crude grades will have to adjust their pricing in order to sell into their normal outlets. and this will reflect the longer voyages and increased freight costs. This could create additional vessel demand equivalent, as estimated in the top right chart. Unlike gas, crude grades vary tremendously. Refineries are built to burn specific crudes that produce specific products, and at first, they may be forced to refine crudes that are not preferred to keep runs going, but over time, they'll have to revert to crude slates that produce economically efficient products. On slide 14, We look at another short and medium term bullish factor, and this is a normalization of Venezuelan exports. Two years ago, all Venezuelan exports moved exclusively on extremely over-aged shadow fleet vessels. This number has dropped significantly, and each normal cargo that is lifted from Venezuela creates new vessel demand for the normal fleet. We anticipate that the main benefactor of continued Venezuelan exports will be the VLCC with an expected creation of eight VLCC demand equivalent this year alone. The Venezuelan loading process is also extremely inefficient, which we have not accounted for in these graphs. A vessel may easily wait for her cargo the same period of time as the duration of the voyage, increasing vessel demand and reducing supply. On slide 15, In the short term, we have all these bullish signals and opportunities, while the long-term backdrop is even better. I strongly believe that the amount of available VLCC and SUSEMax slots for delivery at new buildings in 2027 is very limited. In Korea, Hanwha and Hyundai will be able to allocate limited births for the second half of 2027, while China and Japan are mostly fully booked until 2028. In my career, there has never been a four-year runway with such limited deliveries. Against this, in 2027, over 54% of the fleet will be over 15 years old in the VLCC segment and 56% in the Suezmax. Fifteen years is the first age hurdle where charters begin to view the vessel as overage. These ships will lose efficiency and not be able to compete on all cargoes. Twenty-five and 28% of the VLCC and Suezmax fleets will be over the age of 20, in 2027, which is the usual max age for all normal business. With this cheerful slide, we conclude the presentation. I'm happy to answer any questions and handing it back to the operator. Again, apologies for the elevator music earlier.

Thank you. Once again, apologies for the interruptions during the presentation. We will now open the line for questions. you can register your question by pressing star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two. Please ensure your lines are unmuted locally as you'll be prompted when to ask your question. The first question comes from a line of Peter Hogan from ABG. Please go ahead.

Guys, I'm curious to hear, because as you alluded to, the IFRS 15 effect is potentially substantial. And if I understand you correctly, you are showing here your TCE equivalents on the load-to-discharge basis in which you have lost some ballast discs. So the question, is there a significant difference if you were to show your TCEs on a discharge-to-discharge basis?

Hey, Peter. It varies quarter on quarter. And as you have seen, whenever there is a higher effect coming in from the ballast days and the IFRS adjustments at the end of one quarter, you usually see that effect in the figures of the next quarter. As we anticipated, and I think we alluded to it back in the previous quarter, and you've seen it since our commercial update in January and the results now, there was a bit of an effect in Q4, not as substantial as the previous quarter, which is then translated into Q1. So there is a bit of a balancing between the transition from one quarter to the next. I cannot quantify it right now. Happy to take a comment and look at it a bit more. And then it really depends. So, for example, for this particular quarter in Q1, it really depends on the position of the vessels. we do not expect that the impact may be too large as in some of the previous quarters, but it really will depend on whether some of the next voyages actually get loaded within the quarter. So it's a bit of an unknown at the moment.

Okay, I understand. Thank you. And just in terms of sort of fleet composition here, so many of us have expected the a better sort of at least relative be able to see markets compared to at least the Afromaxis and in particular if you compare it to the product tankers which has been just stellar. So in terms of the examples you just gave, is it possible to give some sort of quantification of how much we should now expect and then in particular the Red Sea situation to be a relative improvement for the be able to see and potentially then at the expense of Zeus Maxis and or Afro Maxis. So in plain English, how many sort of ship-to-ship operations filling up the VLs from the smaller sizes could we potentially see going forward if the Red Sea situation continues to be as it is?

Hi, Peter. Thank you for the question. I mean, it's a quite complicated question to quantify, but there's a lot of changing dynamics because of this, and it also depends how long, you know, these tensions in the Red Sea last. I think that we probably will continue to see some parceling up of VLCC cargoes, especially from Kazakhstan exports from the Black Sea, STS, and Malta, because a lot of this is sold in some, you know, there are cargoes being sold into China and to Korea, and I think this will continue. So that, we can see that continuing. CBC is a huge export terminal. So whether it's two VLCCs or three VLCCs a month, I'm not exactly sure, but I wouldn't expect much more than that from CPC specifically. We could also see similar parceling up from Libya or Algeria to go around Africa. In the inverse, to come AG west, I think we won't see as much because the Mediterranean ports are not really built and designed for VLCCs. So we may see it occasionally. VLCCs are relatively cheaper to Suez Max in terms of freight, but I don't think it will be as common because once you account for STS and chartering two ships to lighter from the VLCC in Europe, you know, I don't know if the efficiency of the VLCC is that great. So I think initially it was quite beneficial for the VLCCs. I think over time as the tensions normalize, it will benefit also the Suez Maxes and Afra Maxes as well.

Okay, understood. Thank you. And then a final question in terms of, well, in the prolongment of this, in terms of adding new ships. So I'm not going to ask you if you will do that, but if you were forced to do so now, would you prefer to expand on your SUSEMAX fleet or your VLCC fleet?

Look, I think if we were to be able to receive ships today in the water and ready to operate, I think the preference would be towards VLCCs at the moment. I think that Suez Maxis have had a very strong two years, and the VLCCs have lagged behind them. And I really do believe that in the next two, three years, that, again, we'll go back to the more traditional historical markets where the leader in terms of earnings and strength will be the VLCC segments.

And we agree. Okay, thank you. That was all for me. Thank you, Peter.

Have a nice afternoon.

The next question comes from a line of Bendic Knittingness from Clarkson Securities. Please go ahead.

Hi, thank you. Yeah, I'll just have a follow-up on the Red Sea situation. We did see a slight drop in activity of crude tankers through the Red Sea after that product tankers caught fire earlier this year. But since then, activity has more or less recovered to 2023 levels. What do you think is sort of needed before operators will start going around the Cape in the crude space?

Hi, Benedict. Thanks for the question. Well, I think that if we look at what types of crudes are transiting the Suez as a percentage, you'll see that by far the biggest is the Russian crude. And I don't expect that to stop. I mean, only in extreme circumstances do I think the Russian crude will divert around. And I think in most cases the policy for this crude is that it must go through the sewers, and they don't allow it to be routed via the Cape of Good Hope. So straight off the bat we have, you know, continued Russian going through the sewers. And then you have the threats from the Houthis that have been directed that, you know, either Israeli, U.S., or U.K. interest. And, I mean, I think to the greatest extent of what we've seen from attacks have been U.K., U.S., Israeli interest means management, listing, operating. It does not include things like insurance or banking. So, you know, there's a big Greek fleet, there's a big Chinese fleet who don't have U.S.-UK-Israeli interests in terms of ownership and management. And they may feel that it's safe enough for them to transit because there is a premium to go through. And so I think that know, there's a big chunk of the market that still will go through. And until the Houthis decide that, you know, perhaps that all coalition forces involved in the Red Sea, which does include German and Greek and the Italian naval forces, Maybe that would force the Greek fleet to completely divert too. But for the time being, the focus has only been UK, US, and Israel. So I don't see much changing at the moment.

Thank you. That's a great call. And if you share some comments on those BonQ bookings with the Russian to receive those as can you repeat the question no no it wasn't the question it was more uh you said you could send over some comments uh to peter on the um pictures uh i think we would like to to have those as well as we have the mind up the same the same question uh sure benedict let's let's touch base offline when whatever you need to be uh

We're happy to do that. Thanks.

Thank you.

There are no further questions, so I'll hand you back to your host to conclude today's conference.

Thanks, everyone, for listening in. We'll speak in the next quarter. Thank you. Bye-bye.

Thanks, guys. Appreciate it. And no elevator music next quarter, or spa music, depending on.

Thank you for joining today's call. You may now disconnect your lines.