Imperial Petroleum Q4 2024 Earnings Call Transcript

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February 13, 2025

There are 3 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Imperial Petroleum Inc. Q4 twenty twenty four and twelve months twenty twenty four Financial and Operating Results Conference Call and Webcast. All participants will be in listen only mode during the conference with no question and answer session. Please note that today's conference is being recorded.

Operator

I would now like to turn the conference over to your speaker, Mr. Harry Vafiya, CEO of Imperial Petroleum. Please go ahead.

Speaker 1

Good morning, everyone, and thank you all for joining us at our Q4 and twelve months twenty four conference call. I'm Harri Vasias, the CEO of Imperial Petroleum, and joining us today is Fanias Akhilaj, who will be discussing our financial performance. Before we commence our discussion, please read the Safe Harbor disclaimer on Slide two. Enenciences is 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 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.

Speaker 1

In addition, before we commence our discussion, we'd like to clarify that during this call, we will quote monetary amounts, unless explicitly stated otherwise, all in U. S. Dollars. In Slide three, we summarize our key highlights for Q4 'twenty four and twelve months 'twenty four. As a general remark, market conditions during the last quarter of 'twenty four were somewhat atypical as expected seasonal strengthening failed to materialize.

Speaker 1

Geopolitical tensions, mild winter along with OPEC delays in unwinding, The production cuts brought upon a softness in the tanker market. In spite of a lack of strong market momentum in the fourth quarter of 'twenty four, we managed to attain a strong operational utilization of 86% are attributed to an increase in time charter coverage with negligible quarterly technical off hire. Indeed, in Q4, compared to the fourth quarter of 'twenty three, our time charter coverage increased by 180% as two of our product tankers were under time charter deployment for the whole period. Looking at the twelve month results, our operational utilization came in at 78.3%. About 69% of our fleet calendar days were dedicated to spot activity while almost 29% to time charter activity.

Speaker 1

We continue to grow our fleet. In early January 'twenty five, we took delivery of the product tanker cleaning period and with this additional tanker fleet totals nine ships for a total fleet equals 12 vessels. Touching briefly upon our financial performance, softer market conditions led to somewhat lower quarterly revenues when compared to the same period of last year. However, solid operational utilization of fleet coverage led to higher income from operations. From the fourth quarter of 'twenty four, our revenues came in at close to 26,000,000 leading to an operating income of close to $5,000,000 Our net income was in the order of $3,900,000 sharply undermined by the $3,300,000 foreign exchange loss incurred in the quarter.

Speaker 1

Looking at our performance for the whole of the year, this is quite satisfactory as we managed to end the year with a hefty profit of about $50,000,000 and an annual operating cash flow close to $78,000,000 These results are outstanding while taking its considerations that were generated by a small fleet of close to 10 ships. Our recurring profitability and debt free capital structure facilitate robust cash flow generation and low breakeven. Slide four will provide summary of our current fleet employment. As mentioned, we have increased our time charter coverage, which for the remainder of 25% is in the order of 23%. In more detail, our 300 size bulkheads are employed on short TCs, while three of our product tankers are under time charter employment up until May 25, January '20 '6 and August 27, respectively.

Speaker 1

Let us briefly comment on the tanker spot rates. 24% started off strongly both in terms of demand and rates, but this trend gradually subsided leading to a mild second half of the year. In more detail from the summer period onwards, the Red Sea situation combined with increased Iranian exports and softer Chinese oil demand contributed to the closing of the West East arbitrage for crude tankers. For product tankers, weaker rates for the second half of 'twenty four were brought upon by reduced refinery runs. We did, however, witness a rise in product rates and higher cargo flows following the end of the refinery maintenance season.

Speaker 1

In January '5, rates for both crude and product tankers were positively affected by the sanctions imposed on the dark fleet, while recently rates for tankers have been affected by The U. S. Trade war and respective retaliations. On Slide five, we review the tanker market. It was overall positive for the tanker market even though we witnessed in excess of 30% year on year decline in rates from multi year highs.

Speaker 1

Vessels rerouting around the Cape Of Good Hope due to the risk free disruptions, long haul Russian Asia trade flows and limited fleet expansions sustained rates and trade activity at firm levels compared to historical averages. From '25, oil demand is expected to grow steadily driven predominantly by emerging economies and the anticipated recovery of Chinese oil demand. Indeed, China is expected to adopt monetary policies to stimulate consumption and continue to invest in domestic infrastructure, which support crude oil demand. However, the recent depreciation, the one, which raises the cost of imports might affect crude import volumes in the short term. Looking at oil supply for this year, this is expected to be driven mostly by non OPEC countries.

Speaker 1

Largest growth is anticipated to come from The U. S, followed by Brazil, Canada, Norway. In terms of oil tanker trade growth for 2025, this is anticipated to reach 2%. However, various ongoing geopolitical events could impact this expectation. On Slide six, we are providing additional information on tanker market outlook for this year.

Speaker 1

Oil trade patterns remain complex and dynamic. In terms of crude oil, USA is emerging as a significant exporter, while China remains a top source for demand. On the other hand, Asia Pacific accounts for over a third of global clean product exports with China and South Korea leading the way. Various geopolitical risks, especially recent developments have the power to alter current trade, thus affecting rates and toll miles. For instance, sanctions on the dark fleet imposed in January '5 favor demand for non sanctioned vessels, but affect trade as Chinese coastal region of Shandong, which accounts for 50% of China crude imports and 81% of crude imports from Iran and Venezuela, announced it will not receive vessels that are sanctioned by OFAC.

Speaker 1

In addition, U. S. Trade tariffs on China, Canada and Mexico could have a material impact on the global energy trade and affect oil tanker markets both negatively and positively. For example, the 25% tariff on oil imports from Mexico could potentially boost dirty tanker rates in The U. S.

Speaker 1

Gulf and affect trading activity in the area, while any potential tariffs imposed to the European Union could be highly disruptive as for the Transatlantic oil trade affecting East West trade volumes. On Slide seven, we touch upon the tanker fleet fundamentals. The current order book for product tankers stands at about 15%, while for Suezmax tankers are close to 16%. For both categories though, the number of vessels above 20 years of age outweighs new billing deliveries, which limits the risk of potential oversupply of vessels. Briefly to comment on the outlook for the drybulk handysize vessels, the last quarter of 'twenty four was quiet for drybulk ships.

Speaker 1

The sector performance in 'twenty five will greatly depend upon China's anticipated economic improvement. Strong dollar and the fact that China's 'twenty four buildup of inventories for commodities was significant led to a flat drybulk market. However, limited order book is considered quite positive and it can potentially assist the sector this year. I'm passing the floor to Mrs. Singa Sekilari for our financial performance.

Speaker 2

Thank you, and good morning to everyone. Let us discuss our financial performance for Q4 'twenty four and 'twelve months 'twenty four. As mentioned earlier in our call, the second half of 'twenty four was softer than anticipated. The seasonal effect of the period did not compensate for the broader decline in market conditions as compared to what prevailed in the beginning of 'twenty four. Looking at our income statement for Q4 'twenty four on Slide eight, revenues came in at $26,200,000 in Q4 'twenty four, marking a $3,500,000 decline compared to revenues generated the same period of 'twenty three.

Speaker 2

This decline stems from lower market rates. In the CapEx fleet, we mentioned that as of the end of Q4 'twenty three, daily rates for standard product tankers was close to 33%, while for standard Suezmax tankers close to 60,000. As of end of Q4 'twenty four, though, this daily rates had fallen to 22,000 for standard product tankers and above to 30,000 for standard Suezmax tankers. The effect of lower rates was offset by our quarter operational utilization of 86% and the rise in our time charter coverage. Voyage costs amounted to 8,500,000.0, down by 39% compared to Q4 'twenty three.

Speaker 2

In the last quarter of 'twenty four, we had no transit from The U. S. S. Suez Canal and overall lower spot activity. Consequently, our bunker costs declined by 16%, while our port expenses by almost 45%.

Speaker 2

Running costs amount to $6,700,000 increased by $1,000,000 due to the increase of our fleet by an average of two vessels. Overall, we do maintain across the quarters our OpEx fairly steady, maintaining a daily average per fleet calendar day of about $7,000 EBITDA for the fourth quarter of 'twenty four came in at $6,400,000 while net income at $3,900,000 We need to stress that the biggest hurdle this quarter was the $3,300,000 foreign exchange loss we incurred due to the strengthening of the U. S. Dollar. However, this is nonoperative one off item subject to currency value fluctuations.

Speaker 2

For twelve months twenty four, EBITDA came in at $59,200,000 and our net income at $50,200,000 corresponding to an earnings per share of $1.54 which is equivalent to 50% of our current share price levels. Moving on to Slide nine. Let us look at our balance sheet for the twelve months of 'twenty four. We enjoy a hefty cash base of close to $2.00 $7,000,000 and a debt free balance sheet. Within 'twenty four, we attained a 67% increase in available cash, which was smartly placed under time deposits.

Speaker 2

Within '24, we generated $6,700,000 of interest income from time deposits. We managed to increase our fleet book value by 15% as a result of our expansion strategy. Through the accumulation of earnings, our equity base increased by 16% as well. Proceeding to Slide 10, we provide a snapshot of our strong fundamental basis to 2024 annual performance. Our high liquidity is fueled by our strong operating cash flow generation, while our profitability is assisted by our low breakevens.

Speaker 2

Going forward, as already announced, we do have upcoming vessel deliveries in Q2 'twenty five and related vessel payments in the second half of 'twenty five. Concluding our presentation with Slide 11, we summarize yet once more our company's strong points and place emphasis on the discrepancy between our low share price and our true company value. At this stage, our CEO, Mr. Harry Vazquez, will summarize our concluding remarks for the period examined.

Speaker 1

For yet another year, Imperial Petroleum demonstrated exceptional results. We continue to be consistent with profitability, cash flow generation and fleet growth across the quarters. Market conditions in 'twenty four were somewhat softer than 'twenty three when tanker rates oscillated around all time high levels. Nevertheless, our debt free fleet of 11 ships managed to generate $50,000,000 of profit and maintain an enviable cash base of $2.00 $7,000,000 In the period ahead, our key focus is to materialize our ready announced fleet growth plans, sustain our profitable momentum and as always, seek opportunities to enhance the value of our company. We'd like to thank you all for joining us and for your interest and trust in our company, and we look forward to having you once again at our next call for Q1 'twenty five results.

Speaker 1

Thank you very much.

Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

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