Okeanis Eco Tankers Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 4 speakers on the call.

Operator

Hello, and welcome to the OET's Third Quarter 2023 Financial Results Presentation. We will begin shortly. Aristides Alafousos, CEO Iraklis Barovonis, CFO And Konstantinos Economopoulos, Chief Development Officer of Okeani Seco Tankers, will take you through the presentation. They will be pleased to address any question raised at the end of the call. I would like to advise you that this session is being recorded.

Operator

Jarak Lis will now begin the presentation.

Speaker 1

Thank you. Hi, everyone. Welcome to the presentation of Okeanese Eco Tankers results for the Q3 of 2023. We will discuss matters that are forward looking in nature and actual results may differ from the expectations reflected in such forward looking statements. Starting on Slide 4 and the effective summary.

Speaker 1

I'm pleased to present you the highlights of the Q3 of 2023. Q3 is a historically shorter quarter due to seasonality. Our fleet achieved fleet wide time charter equivalent of almost $49,000 Per vessel per day and that includes our time charter vessels, spot rates for VXCCs stood at about $58,000 while Pursuis MAX is at about $39,000 We report net TCE revenue of approximately $60,000,000 Adjusted EBITDA of about $45,000,000 and adjusted net profit of $0.63 per share. Our Board has declared a 6th consecutive capital distribution of $0.60 per share, which is 100% of our reported quarterly EPS. We continue to deliver on our promise to distribute all available value to our shareholders.

Speaker 1

And in relation to the last three quarters, we have distributed $3.70 per share or a total of approximately $120,000,000 This quarter Also mark a very important milestone for our journey as we have publicly filed the registration statement with the SEC to list our shares at the New York Stock Exchange. On Slide 5, we dive into the details of our income statement for the quarter that I summarized on the previous slide, as well as the 9 month period. For the 1st three quarters, we achieved TCE revenue of close to $240,000,000 that's a 115% increase year on year EBITDA is close to $200,000,000 that's over 150% increase year on year and reported profit of approximately 124,000,000 That's over 2 40 percent year on year. Moving on to Slide 6. As of the end of September, we had cash on our balance sheet of approximately dollars 82,000,000 Our debt stood at $704,000,000 Book leverage came in at 60%, while market adjusted LTV based on broker values stands at more than comfortable 46%.

Speaker 1

On Slide 7, we're bridging our cash flow for the 9 month period, essentially delivering all of it to our shareholders. The next slide, Slide 8, fully demonstrates our commitment and strategy towards maximizing shareholder value. On the left hand side, we have recalculated our total shareholder returns since inception, which sits at an astonishing 4 73%. This assumes distributions are conservatively invested into the stock yielding a $48 per share return to a 2018 investor That's when we executed our IPO. And this does not actually include the distribution we expect to pay out later this month.

Speaker 1

On the right hand side, we show our history of distributions against our reported EPS. Since Q2 of 2022 with a fully delivered fleet, We have been able to gear up to an average payout of 90% of our earnings. In relation to the last three quarters, this amounts to 96%. Moving on to Slide 9. This summarizes our corporate and capital structure as well as our employment profile.

Speaker 1

Last quarter, we had just announced the refinancing of 2 Suezmaxes and 1 VLCC at sub 2% margin levels. I'm pleased to confirm the most recent refinancing we did in September over 2 Suezmaxes, the NISO Sichinos and the NISO Sichinos at accretive terms at 185 basis points over software and extended maturity to 2029. As we have talked about in the past, a key milestone in our capital structure is the opportunity to refinance our legacy and expensive leases on the Millers and the Polyolgos. We are already in discussions with financiers and are confident that we can achieve tremendously accretive terms versus the current financing terms, in line with the momentum we have from our last two recent transactions. We expect to be in acquisition to announce at least the plan for the Milos in advance of our next quarterly call.

Speaker 1

We of course continuously utilize our strong banking relationships to explore opportunities that enhance our capital structure and create value with both existing and new financials. On the employment front, the initial Signos and the initial Signos are still employed under the long term time charters and we expect them to be delivered to us towards the end of the quarter. On Slide 10, I wanted to spend some time on the New York Stock Exchange direct listing process. As discussed, we made a public filing over 20 F last week. Our takeout in New York is expected to be ECO, while in Oslo will continue with OITI.

Speaker 1

We will be keeping the market updated with all developments over the next weeks as we're tying up mostly mechanical steps Before we can request effectiveness by the SEC, we currently expect the listing itself to take place sometime during December. We're excited to have this important milestone behind us and look forward to expanding our reach with U. S. Investors and over time enhance liquidity for our stock. We aim to continue on our track record of shareholder trust as we have done since our IPO in Oslo in 2018.

Speaker 1

On that note, I pass over the presentation to Aristides for the commercial and market update.

Speaker 2

Thank you, Rekley. So on Q3, Q3 was a weak quarter in the context of the last 18 months and it was the Q1 where there were quite weak Suezmax rates as well, We have dropped significantly into the summer. Our strategy of keeping vessels in the West was useful As we did commit 4 of our vessels on Front Haul Voyages East to lock in much higher returns than the round voyage equivalent. As part of our strategy, we would then reposition the ships back to the West to keep our preferred balance of tonnage. The Suezmax earnings were also negatively affected as we had to position the vessels for dry dock.

Speaker 2

To do this, we have to choose suboptimal voyages near the dry dock location. In addition, when a vessel exits the dry dock, it is not preferred for her next voyage. So again, post drydock, we were forced to choose suboptimal voyages in order to get the vessel cleared of its ex drydock status. If we did not have the 2 dry docks in Q3, obviously, the earnings would be materially higher. During the quarter, we achieved a fleet wide TCE $48,900 per operating day including our time charter.

Speaker 2

And our VLCCs generated 57 dollars1900 per day in the spot market. This is a 36% outperformance relative to our tanker peers that have reported Q3 earnings. Our Suezmax generated $38,700 per day, which is on par relative to our tinker peers that have reported Q3 earnings. These numbers reflect our actual book TC revenue within the quarter as per our accounting standards, which also includes several days related to the Suezmax's dry dockings, which we cannot record any revenue. Moving on to Slide 8 for guidance on Q4.

Speaker 2

Q4 started quite weak but has grown nicely now. Fixture has been concluded today and will reflect more on our Q1 earnings and the end of our Q4. So to give you an idea where the VLCC market earnings are, a round trip in the West Today is anywhere between $80,000 $100,000 Backhauls from the East to the West, whether through West Africa or the AG to Europe are around $40,000 and long haul voyages east are above 100,000. We have fixed 4 vessels this week in these ranges. We see strong long haul movements of crude with the Atlantic Basin again being the driver of VLCC After a long summer, the U.

Speaker 2

S. Gulf and West Africa woke up and became active on Suezmaxes as well with huge increase in rates. Our Q4 guidance is negatively impacted by some of these backhaul voids as we mentioned. And this we expect will be offset by positioning our vessels for Strong earnings in Q1 with front haul fixtures. So far in Q4, we have fixed 75% of our fleet wide spot days at 44,400 dollars per day, 90 percent of our VLCC spot days at $40,900 per day, which is a 13% outperformance and 49% of our Suezmax days at $44,400 per day, which is a 72% outperformance.

Speaker 2

Looking at Slide 14. Earlier this quarter, the United States announced the lifting of sanctions on Venezuelan oil exports. This is an important change in the market that will create additional ton miles. The dark fleet that was servicing the Venezuelan exports to the east We'll now have to compete for Iranian barrels, pushing pressure on freight rates in that trade as well, while the Venezuelan exports will now move on normal tonnage. I do believe that India and China will try to absorb as much of the Venezuelan volumes as they can as the refineries are designed to process this kind of crude.

Speaker 2

Each VLCC loaded for China or India is an additional VLCC voyage that has been created. India will be substituting crude from the AG to import Venezuela and then and the displaced AG crude will now by definition have to move a farther distance It is the far east of the west, which is also positive in ton miles. Moving on to Slide 15. The importance of reliable and affordable oil in our society is evidenced in the short term by the political actions by both the United States and Europe, European governments in Venezuela as well as Russia with regard to the price cap, while also in the medium term by the oil majors as we see The market consolidates. Both Chevron and Exxon have both spent over $50,000,000,000 each to acquire oil producers to support the production levels over the coming years.

Speaker 2

This trend is expected to continue by other oil majors with the market further consolidated. On Slide 16, we see the intersection where oil majors are committing and focusing their expenditure on oil production, While global shipyards are declining and the forward order book cover is at its historic high. This is an excellent setup for our company and the crude oil Thank you, and good afternoon, Steve for the coming years. On Slide 17, looking at the order book and pricing a bit more closely, We find the VLCC and Suezmax potential extremely exciting. Given the supply side of the equation, it is very difficult to see scenarios where we will not see sustained high earnings for the coming years.

Speaker 2

We strongly believe that values have a lot of upside potential, especially on modern second half. We are nearing the point of sustained high earnings and these will have to be factored in when pricing secondhand vessel versus newbuilding. Overall, Q3 and Q4 guidance were weak quarters for us, but the company achieved another milestone in its progression with the public filing and the expected dual listing in 2023 in the New York Stock Exchange. We look forward to presenting in 3 months with our Q4 earnings and Q1 guidance. With this, we conclude the presentation and happy to answer any questions.

Operator

Thank you. Our first question comes from the line of Benbik Nitinmaz from Clarksons Securities. Please go ahead.

Speaker 3

Thank you. I just wanted to touch upon the demand side. We've seen some news recently about Chinese crude import quotas or rather the lack of those, Are you seeing that as an issue for free tankers going into the 4th Q1?

Speaker 1

I mean, I didn't hear

Speaker 2

you very clearly, but my understanding was that you asked if we see issues with Chinese demand and if there has been a reduction of cargoes heading for China. At the moment, we have no I mean, October, November were very busy months for Chinese exports for Chinese imports from cargoes loaded both in the Atlantic basin, Brazil, U. S. Gulf, West Africa. So we don't see anything materially different, but these things do fluctuate month to month.

Speaker 2

So if December maybe a bit lower. I'm not sure, but we don't see any material changes in Chinese imports at the moment.

Speaker 3

And you don't expect that to change going forward as well? Because we've been reading a bit about this lack of new crude oil import quotas compared to previously? So you're not seeing any effect in the fiscal market on that side?

Speaker 2

Well, I mean the crude import quotas that they issue in the past they have issued an additional Crude import quarter for the end of the year. But at this point, if you're loading a cargo, you're working lay cans that are By the time you lift the cargo, whether you're in the AG or even more so in the West, you balance the look or lift the cargo and discharge in China, you're ready in Q in the next year. So the crude import quotas today are important the following year rather than the additional quarter that would apply for the year of 2023.

Speaker 3

Okay. Thank

Operator

There are no further questions. So I hand you back to your host to conclude today's presentation.

Speaker 1

Thank you. Thanks everyone for joining. We look forward to speaking in 3 months. Thank you. Bye bye.

Powered by Quartr
Earnings Conference Call
Okeanis Eco Tankers Q3 2023
00:00 / 00:00