Pyxis Tankers: Lockdowns Bound to Hit Product Tanker Market

Pyxis

Pyxis Tankers, a growth-oriented pure play product tanker company, announced unaudited results for the three and nine months ended September 30, 2020.

Summary

For the three months ended September 30, 2020, our Revenues, net were $5.1 million. For the same period, our time charter equivalent (“TCE”) revenues were $4.4 million, a decrease of approximately $1.8 million or 29.3% over the comparable period in 2019 primarily due to fewer operating days of our fleet reflecting the sale of our oldest MR in early 2020, the lower utilization of the small tankers and the Pyxis Epsilon’s first special survey. Our net loss increased by $1.1 million to $1.9 million, from $0.8 million in the comparable period in 2019. For the third quarter 2020, loss per share (basic and diluted) was $0.09 and our Adjusted EBITDA was $0.6 million, which represented a decrease of $1.5 million over the comparable period in 2019. Please see “Non-GAAP Measures and Definitions” below.

Valentios Valentis, our Chairman and CEO commented:

“The chartering environment for product tankers in the third quarter of 2020 continued to be very challenging, reflecting the normal seasonal softness which was further compounded by the negative impact of COVID-19 on the demand for refined petroleum products. Through our short-term time charters, we were able to achieve an average TCE of $14,565/day for our MRs during the quarter, which approximates 10 year industry averages.

The short-term demand outlook for our sector continues to be cloudy. Despite this summer’s start of a gradual but uneven economic recovery worldwide from the pandemic, a drawdown of high product inventories has resulted in lower vessel demand. In November, we typically start to experience a seasonal boost in demand due to the movement of home heating oil cargoes and weather delays. However, recent announcements of lockdowns, especially in Europe, and other governmental restrictions due to the resurgence of the virus have created further uncertainty. Consequently, we expect the product tanker sector to continue to experience significant volatility due to the unpredictable recovery from the COVID-19 pandemic. We have continued to focus on our employment strategy for our MRs on shorter-term, staggered time charters which have benefited the Company. As of November 11, 2020, we had booked 68% of available days for the fourth quarter of 2020, exclusive of charterers’ options, at an average rate of $14,680 for our MRs.

During these challenging times, we have concluded some important operating and financial objectives. We recently completed scheduled special surveys on three of our vessels – on time and on budget. We spent $1.6 million in aggregate for these drydockings, including the installation of a Ballast Water Treatment System (“BWTS”) on our 2015 built Pyxis Epsilon. Fortunately, we have no major drydockings until 2023 when the Pyxis Theta undergoes her second special survey. Equally important to the Company were recent long-term debt and equity financings. In July, we refinanced the Pyxis Theta with a new 5 year secured loan with Alpha Bank, a new lender to the Company. The new loan provided us approximately $3.7 million of incremental working capital, after existing debt repayment, on more attractive terms, including pricing at LIBOR + a margin of 3.35%. In October, we completed a $5 million offering of units consisting of our new 7.75% cumulative convertible preferred shares and detachable warrants to purchase common stock over a five year period. Both of these securities have a strike price of $1.40 per share. The net proceeds of $4.3 million from this public offering are targeted for general corporate purposes, including working capital and further debt repayment. Overall, we raised long-term capital at a reasonable cost and lengthened our debt maturities while improving balance sheet flexibility and liquidity.

We still maintain a positive outlook about the long-term prospects for the product tanker sector. Solid global GDP growth is expected to return with rising demand for seaborne transportation of a broad range of petroleum products. In the meantime, the supply picture continues to look better due to the aging global fleet, continued low ordering of new tankers and delays in newbuild deliveries. Also, lower charter rates should result in more vessel scrapping as the number of MR2 vessels aged 20 years or more is roughly equal to the orderbook.

Lastly, we continue to appreciate the crews on board our vessels and onshore personnel for their professionalism during the pandemic. We were encouraged by the announcement earlier this week about the positive late stage, large scale clinical trial results of a highly effective vaccine. Good availability soon of approved vaccines and antibody treatments should be a blessing for all.”

Results for the three months ended September 30, 2019 and 2020

For the three months ended September 30, 2020, we reported a net loss of $1.9 million, or $0.09 basic and diluted loss per share, compared to a net loss of $0.8 million, or $0.04 basic and diluted loss per share, for the same period in 2019. The daily TCE of $11,783 during the third quarter of 2020 was 4.7% lower than the relevant period in 2019, due to fewer operating days, from 500 days during the three months ended September 30, 2019, to 371 days in the comparable period in 2020. The increase in our net loss was mainly the result of lower operating results, from $0.7 million operating income during the three-month period ended September 30, 2019, to $0.6 million operating loss for the same period in 2020. Lower revenues, net, by $2.2 million, primarily attributable to fewer available days (i.e. from 552 days during the three months ended September 30, 2019 to 444 in the comparable period in 2020), following the sale of the 2006 built MR, Pyxis Delta, in the first quarter of 2020 and the first special survey of Pyxis Epsilon that took place in the third quarter of 2020. The decline in our revenues, net, was partially counterbalanced by an approximate $0.7 million aggregate decrease in costs principally associated with that vessel sale including vessel operating expenses, general and administrative expenses, management fees and depreciation along with lower interest and finance costs, net, compared to the same figures in 2019. The decline in our revenues, net was also partially offset by $0.4 million decrease in voyage related costs and commissions, as a result of the fewer operating days of our small tankers which were employed under spot charter arrangements. Our Adjusted EBITDA was $0.6 million, represented a decrease of $1.5 million from $2.1 million for the same period in 2019.

Results for the nine months ended September 30, 2019 and 2020

For the nine months ended September 30, 2020, we reported a net loss of $4.3 million, or $0.20 basic and diluted loss per share, compared to a loss of $4.7 million over the comparable period in 2019. Despite 251 fewer operating days during the nine-month period in 2020 compared to the same period in 2019, higher daily TCE during most of the 2020 period, $11,825 versus $11,540 for the same period in 2019, mitigated the net loss. A reduction of 16.1% in Revenues, net, or $3.3 million for the nine months ended September 30, 2020, was primarily offset by a decrease of $3 million in vessel operating expenses, management fees, depreciation and interest and finance costs, primarily reflecting the impact from the sale of Pyxis Delta and the repayment of its associated loan. Our Adjusted EBITDA was $3.0 million, a decrease of $0.9 million from $3.9 million for the same period in 2019.

Management’s Discussion and Analysis of Financial Results for the Three Months ended September 30, 2019 and 2020 (Amounts are presented in U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)

Revenues, net: Revenues, net of $5.1 million for the three months ended September 30, 2020, represented a decrease of $2.2 million, or 30.6%, from $7.3 million in the comparable period in 2019, as a result of fewer available days and related revenue contribution for the 2020 period versus 2019. This decline was mainly attributed to the sale of our oldest MR in the first quarter of 2020 and the first special survey of Pyxis Epsilon in the third quarter of 2020.

Voyage related costs and commissions: Voyage related costs and commissions of $0.7 million for the three months ended September 30, 2020, represented a decrease of $0.4 million over the comparable period in 2019. The decrease was primarily attributable to lower operating days of our small tankers during the three month period ended September 30, 2020 compared to the same period in 2019. Our small tankers were employed under spot charter arrangements where all voyage expenses are typically borne by us rather than the charterer and as a result a decrease in spot chartering activity caused a decrease in voyage related costs and commissions.

Vessel operating expenses: Vessel operating expenses of $2.8 million for the three months ended September 30, 2020 represented a decrease of $0.3 million, or 8.7%, from $3.1 million in the comparable period in 2019, mainly attributable to the vessel sale in the first quarter of 2020.

General and administrative expenses: General and administrative expenses of $0.7 million for the three months ended September 30, 2020, represented an increase of less than $0.1 million, or 10.8%, from the comparable period in 2019 due to timing of certain incurred costs.

Management fees: For the three months ended September 30, 2020, management fees paid to our ship manager, Pyxis Maritime Corp. (“Maritime”), an entity affiliated with our Chairman and Chief Executive Officer, Mr. Valentis, and to International Tanker Management Ltd. (“ITM”), our fleet’s technical manager, also decreased as a result of one less vessel, by $0.1 million from $0.4 million in the comparable period of 2019.

Amortization of special survey costs: Amortization of special survey costs was less than $0.1 million for the three months ended September 30, 2020 and remained stable compared to the three months ended September 30, 2019. This was due to the sale of Pyxis Delta that caused its remaining unamortized balance to be written-off, but on the other hand, the recognition of a new amortization schedule from the Pyxis Epsilon’s first special survey that was completed in the third quarter of 2020.

Depreciation: Depreciation of $1.1 million for the three months ended September 30, 2020, represented a decrease of $0.3 million or 19.4% compared to the three months ended September 30, 2019, due to a five vessel fleet during the third quarter of 2020, compared to a six vessel fleet during the comparable period in 2019.

Interest and finance costs, net: Interest and finance costs, net, of $1.3 million for the three months ended September 30, 2020, represented a decrease of $0.2 million, or 13.8%, from $1.5 million in the comparable period in 2019. The decrease was mainly attributed to the prepayment of the debt following the sale of Pyxis Delta and to the lower LIBOR rates paid on floating rate bank debt compared to the same period of 2019.

Management’s Discussion and Analysis of Financial Results for the Nine Months ended September 30, 2019 and 2020 (Amounts are presented in U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)

Revenues, net: Revenues, net of $17.2 million for the nine months ended September 30, 2020, represented a decrease of $3.3 million, or 16.1%, from $20.5 million in the comparable period in 2019. The decrease in revenues, net during the nine-month period ended September 30, 2020, was mostly attributable to the vessel sale which resulted in the decrease of our total available days from 1,610 days during the nine months ended September 30, 2019, to 1,342 days during the same period in 2020.

Voyage related costs and commissions: Voyage related costs and commissions of $3.3 million for the nine months ended September 30, 2020, represented a decrease of $0.7 million, or 17.9%, from $4.1 million in the comparable period in 2019. For the nine months ended September 30, 2020, our MRs were on spot charters for 29 days in total, compared to 48 days for the respective period in 2019. Furthermore, the decrease was also attributable to fewer operating days of our small tankers during the most recent quarter. The lower spot chartering activity contribute to less voyage costs as under spot charters, all voyage expenses are typically borne by us rather than the charterer.

Vessel operating expenses: Vessel operating expenses of $8.0 million for the nine months ended September 30, 2020 represented a significant decrease of $1.4 million, or 15.2%, from $9.5 million in the comparable period in 2019. This was mainly attributed to the sale of Pyxis Delta.

General and administrative expenses: General and administrative expenses of $1.8 million for the nine months ended September 30, 2020, were flat compared to the comparable period in 2019.

Management fees: For the nine months ended September 30, 2020, management fees payable to Maritime and ITM of $1.1 million in the aggregate, represented a decrease of $0.1 million compared to the nine months ended September 30, 2019, as a result of the vessel sale in the first quarter of 2020.

Amortization of special survey costs: Amortization of special survey costs for the nine months ended September 30, 2020 represented a decrease of 13.3%, compared to the same period in 2019 primarily due to the write-off of the amortization of special survey costs for Pyxis Delta, after vessel sale.

Depreciation: Depreciation of $3.3 million for the nine months ended September 30, 2020 represented a decrease of $0.8 million, or 19.2%, compared to the same period in 2019, due to a five vessel fleet in 2020 as compared to a six vessel fleet for the same period in 2019.

Interest and finance costs, net: Interest and finance costs, net, of $3.8 million for the nine months ended September 30, 2020, represented a decrease of $0.6 million, or 13.5%, from $4.4 million in the comparable period in 2019. The decrease was attributable to lower LIBOR rates paid on floating rate bank debt compared to the same period in 2019 and the prepayment of the associated outstanding loan of Pyxis Delta upon its sale. The total borrowings outstanding (exclusive of promissory note and deferred financing costs) decreased to $55.1 million at September 30, 2020 from $60.1 million a year earlier.

Source: Pyxis Tankers

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