Pyxis Tankers Announces Investment in Drybulk Joint Venture

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Pyxis Tankers, an international product tanker company, announced its unaudited results for the three and six month periods ended June 30, 2023.

Summary

For the three months ended June 30, 2023, our Revenues, net were $9.5 million. For the same period, our time charter equivalent (“TCE”) revenues were $8.6 million, representing a decrease of approximately $2.7 million, or 23.7%, over the comparable period in 2022 when we operated more vessels. Our net income attributable to common shareholders for the three months ended June 30, 2023 was $2.8 million, representing a decrease of $1.8 million from net income of $4.6 million in the comparable period of 2022. For the second quarter of 2023, the net income per share was $0.25 basic and $0.23 diluted compared to the net income per share of $0.43 basic and $0.38 diluted for the same period in 2022. Our Adjusted EBITDA for the three months ended June 30, 2023 was $5.2 million, which represented a decrease of $2.0 million over the comparable period in 2022. Please see “Non-GAAP Measures and Definitions” below.

Valentios Valentis, Chairman and CEO, commented:

“We are pleased to report solid results for our second fiscal quarter 2023 with Revenues, net of $9.5 million and Net Income attributable to common shareholders of $2.8 million. Despite inflationary pressures, resilient economic activity and increasing mobility in many parts of the world have resulted in what we believe is good demand for transportation fuels. Favorable market fundamentals have been supported by continued low inventories of many refined products and more significantly, the impact of the war in the Ukraine has led to further market dislocation, including arbitrage opportunities, as well as the redirection of trade flows from shorter-haul to longer distances resulting in ton-mile expansion of seaborne cargoes, thereby reducing available capacity. Consequently, chartering activity for product tankers remains healthy and asset values high, reflecting a sustainable and constructive environment for the sector.

After completing the sale of our 14-year-old tanker in March 2023 at a relatively high historical price as compared to the sale prices of similar vessels, we now own and operate four modern Eco-efficient MR’s. For the three months ended June 30, 2023 our daily TCE rate for these vessels increased 18.6% to $24,980 compared to the same period in 2022. While we expect summer to be a seasonally softer chartering environment, our bookings remain strong. As of July 26, 2023, 55% of the available days in the third quarter of 2023 for our MR’s were booked at an estimated average TCE of $27,800 per vessel. Three of our tankers are currently under short-term time charters and one in the spot market. We expect to prudently maintain our mixed employment strategy.

For the near term, we expect volatility to continue, yet believe charter rates to stay above five-year average levels given the modest inventories of refined petroleum products in a number of locations worldwide as well as the global effects of the G-7 and European Union ban and price caps on seaborne cargoes of Russian refined products. Despite ongoing concerns about slowing economic activity globally, additional OPEC+ crude oil production cuts, tighter monetary policies, persistently high inflation and destabilizing geo-political events, supply-side fundamentals reinforce a positive outlook underpinned by steady volumes and longer sailing distances. In its July 2023 update, the International Monetary Fund revised upward its outlook for annual global GDP growth in 2023 to 3% due to resilient economic activity, primarily within the OECD, offset by the headwinds of stricter monetary policies and high, but decelerating inflation. GDP growth for advanced economies is forecasted at 1.5% this year, while emerging and developing economies are expected to achieve growth of 4%. In July 2023, the International Energy Agency revised its forecast for global oil demand to increase 2.2% or 2.2 million barrels per day (“Mb/d”) to 102.1 Mb/d in 2023. Refinery runs have been revised upwards to 82.5 Mb/d and crack spreads remain above 5 year averages. The processing of cheaper Russian Urals crude has benefitted a number of refineries in India and China, leading to significant increases in refined product exports to capture arbitrage opportunities and further expand ton-mile shipments. In mid-June, 2023, a leading research firm forecasted that global product tanker ton-miles would increase 12% this year and another 7% in 2024. Additionally, cargo volumes are expected to grow 4% annually in both years. Over the long-term, scheduled changes in the global refinery landscape, led by capacity additions outside of the OECD, should provide added longer-haul volumes. Although new build ordering has picked-up, the MR orderbook still remains relatively low by historical standards with deliveries now moving into 2026. Moreover, the large number of inefficient 20+ year old tankers exceed the orderbook and are demolition candidates during the next five years. At June 30, 2023, Drewry, an independent industry research firm, estimated the orderbook to be 6.6% or 111 MR2 in the global fleet, with 144 or 8.5% to be 20 years of age or more. Overall, we continue to expect MR tanker supply to grow annually at less than 2% net, through 2024.

The rise in secondhand values for modern eco-efficient product tankers have recently stabilized. However, asset prices are still too high for us to aggressively pursue fleet expansion of our MR’s. In order to enhance shareholder value, we have continued to improve our balance sheet, repurchased shares to a limited extent and selectively considered investments in other shipping segments. After due consideration, our Board, consisting of a majority of independent members, unanimously approved a $6.8 million equity investment in a newly formed company, which has agreed to acquire a 2016 Japanese built 63,520 metric tons deadweight Ultramax bulk carrier from an un-affiliated third party. We will own 60% of this joint venture and the remaining 40% will be owned by a company related to our Chairman and Chief Executive Officer, Mr. Valentis. This scrubber-fitted eco-vessel is geared with four cargo cranes and a ballast water treatment system which provide optimal operating flexibility, lower environmental emissions and attractive fuel economics. The purchase price of the bulk carrier will be $28.5 million, that we anticipate to be partially funded by a $19.0 million five-year secured bank loan priced at SOFR plus a margin of 2.35%. The vessel will be managed by Konkar Shipping Services, S.A., a company that is related to our Chairman and Chief Executive Officer, which is a long-time successful owner and manager of dry bulk vessels. The transaction is expected to close by late August, 2023 and is subject to the execution of definitive documentation and standard closing conditions. We believe this counter-cyclical investment opportunity should provide attractive returns to us through a well-managed structure.”

Results for the three months ended June 30, 2022 and 2023

Amounts relating to variations in period–on–period comparisons shown in this section are derived from the interim consolidated financials presented below.

For the three months ended June 30, 2023, we reported Revenues, net of $9.5 million, or 41% lower than $16.1 million in the comparable 2022 period. Our net income attributable to common shareholders was $2.8 million, or $0.25 basic and $0.23 diluted net income per share, compared to a net income attributable to common shareholders of $4.6 million, or $0.43 basic and $0.38 diluted net income per share, for the same period in 2022. The weighted average number of basic shares had increased by approximately 188 thousand common shares from the second quarter 2022 to approximately 10.8 million shares in the same period 2023. The weighted average number of diluted common shares in 2023 of approximately 12.6 million shares assumes the full conversion of all the outstanding Series A Convertible Preferred Stock in the most recent period. The average MR daily TCE rate during the second quarter of 2023 was $25,000 or 5% lower than the $26,270 MR daily TCE rate for the same period in 2022, due to lower spot chartering activity. The revenue mix for the second quarter of 2023 was 90% from short-term time charters and 10% from spot market employment. Adjusted EBITDA decreased by $2.0 million to $5.2 million in the second quarter, 2023 from $7.3 million for the same period in 2022.

Results for the six months ended June 30, 2022 and 2023

For the six months ended June 30, 2023, we reported Revenues, net of $21.1 million, a decrease of $1.8 million, or 8%, from $23.0 million in the comparable period of 2022. During the first half of 2023, our MR’s were contracted mainly under short-term charters resulting 620 days and for the rest of the period employed in the spot market resulting in an overall MR daily TCE rate for our fleet of $24,207.

Our net income attributable to common shareholders for the six months ended June 30, 2023, was $11.5 million, or income of $1.06 per share basic and $0.94 per share diluted, compared to a net income of $0.9 million, or an income of $0.09 per share (basic and diluted) for the same period in 2022. An $8.0 million gain on the sale of one MR was recognized in the 2023 period. Higher MR daily TCE rate of $24,207 and higher MR fleet utilization of 93.5% for our MR’s during the six months ended June 30, 2023, were compared to a MR daily TCE rate of $19,814 and MR fleet utilization of 84.7%, respectively, during the same period in 2022. Our Adjusted EBITDA of $9.4 million represented an increase of $2.8 million from $6.6 million for the same six month period in 2022.

Management’s Discussion and Analysis of Financial Results for the Three Months ended June 30, 2022 and 2023

Amounts relating to variations in period–on–period comparisons shown in this section are derived from the interim consolidated financials presented below. (Amounts are presented in million U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)

Revenues, net: Revenues, net of $9.5 million for the three months ended June 30, 2023, represented a decrease of $6.6 million, or 41%, from $16.1 million in the comparable period of 2022. In the second quarter of 2023, our MR daily TCE rate for our fleet was $25,000, a $1,270 per day decrease from the same period in 2022. The aforementioned variations were the result of the lower spot chartering activity in the second quarter of 2023, which were offset by the higher utilization of 98.6% in the second quarter of 2023 in comparison to the 94.7% in the same period of 2022. Also, due to the sale of the “ Pyxis Malou ” in the first quarter 2023, we only operated four MRs during the most recent period, significantly reducing revenue days for our fleet.

Voyage related costs and commissions: Voyage related costs and commissions of $0.9 million in the second quarter of 2023, represented a decrease of $3.9 million, or 82%, from $4.7 million in the same period of 2022, primarily as a result of the decreased spot employment for our MR’s from 249 days in the second quarter in 2022 to 42 days in the same period in 2023. Under spot charters, all voyage expenses are typically borne by us rather than the charterer and a decrease in spot employment results in decreased voyage related costs and commissions.

Vessel operating expenses: Vessel operating expenses of $2.5 million for the three month period ended June 30, 2023, represented a decrease of $0.5 million, or 17%, from $3.0 million in the same period of 2022, as a result of lower operating expenses due to the sale of “ Pyxis Malou ”.

General and administrative expenses: General and administrative expenses of $0.7 million for the quarter ended June 30, 2023, remained flat compared to the same period in 2022.

Management fees: For the three months ended June 30, 2023, management fees charged by Pyxis Maritime Corp. (“Maritime”), our ship management company which is affiliated with our Chairman and Chief Executive Officer, Mr. Valentis, and by International Tanker Management Ltd. (“ITM”), our fleet’s technical manager, overall decreased by 19.5% from $0.4 million to $0.3 million as a result of the sale of vessel “Pyxis Malou” and the sales of “Northsea Alpha” and “Northsea Beta” during the first quarter of 2022.

Amortization of special survey costs: Amortization of special survey costs of $0.1 million for the quarter ended June 30, 2023, remained flat compared to the same period in 2022.

Depreciation: Depreciation of $1.2 million for the quarter ended June 30, 2023, decreased by $0.3 million or 19% compared to $1.5 million in the same period of 2022. The decrease was attributed to ceasing of depreciation due to the sale of vessel “Pyxis Malou” during the first quarter of 2023 and the sales of “Northsea Alpha” and “Northsea Beta” during the first quarter of 2022.

Interest and finance costs, net: Interest and finance costs, net, $1.0 million for the quarter ended June 30, 2023, remained flat compared to the same period in 2022. The lower average debt levels counterbalanced the higher LIBOR/SOFR indexed rates paid on all the floating rate bank debt.

Management’s Discussion and Analysis of Financial Results for the Six Months ended June 30, 2022 and 2023

Amounts relating to variations in period–on–period comparisons shown in this section are derived from the interim consolidated financials presented below. (Amounts are presented in million U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)

Revenues, net: Revenues, net of $21.1 million for the six months ended June 30, 2023, represented a decrease of $1.8 million, or 8%, from $23.0 million in the comparable period of 2022. In the first half of 2023, our MR daily TCE rate for our fleet was $24,207, a $4,393 per day increase from the same 2022 period as a result of the improvement in fleet utilization from 84.7% in the same period of 2022 to 93.5% for the six months ended June 30, 2023 and the $4.5 million decrease in the voyage related costs and commissions discussed below.

Voyage related costs and commissions: Voyage related costs and commissions of $3.3 million for the six months ended June 30, 2023, represented a decrease of $4.5 million, or 58%, from $7.8 million in the same period in 2022. For the six months ended June 30, 2023, our MRs were on spot charters for 169 days in total, compared to 462 days for the respective period in 2022. This lower spot chartering activity for our MRs contribute lower voyage costs which are typically borne by us rather than the charterer, thus an increase in spot employment results in increased voyage related costs and commissions.

Vessel operating expenses: Vessel operating expenses of $5.8 million for the six months ended June 30, 2023, represented a $0.5 million or 8% decrease compared to $6.3 million for the same period ended June 30, 2022. This decrease was mainly attributed to the sale of the “Pyxis Malou” . Fleet ownership days for the six months ended June 30, 2023 was 806 days compared to 991 days for the same period in 2022.

General and administrative expenses: General and administrative expenses of $2.0 million for the six months ended June 30, 2023, represented an increase of $0.7 million or 53%, from $1.3 million in the comparable period in 2022, mainly due to the performance bonus of $0.6 million paid to Maritime. In addition, the administration fees were adjusted by 9.65% to reflect the 2022 inflation rate in Greece.

Management fees: For the six months ended June 30, 2023, management fees paid to Maritime and ITM of $0.7 million in the aggregate, represented a decrease of $0.2 million compared to the same period ended June 30, 2022. The decrease was the result of the sales of “Northsea Alpha” , “Northsea Beta” which occurred during the first quarter of 2022 and “Pyxis Malou” during the first quarter of 2023, partially offset by the fact that ship management fees to Maritime for the six months ended June 30, 2023 were adjusted upwards to reflect the 9.65% annual 2022 inflation rate in Greece.

Amortization of special survey costs: Amortization of special survey costs of $0.2 million for the six months ended June 30, 2023, remained flat compared to the same period in 2022.

Depreciation: Depreciation of $2.6 million for the six months ended June 30, 2023, decreased by $0.4 million or 13% compared to $3.0 million in the comparable period of 2022. The decrease was attributed to ceasing of depreciation due to the sale of vessel “Pyxis Malou” during the first quarter of 2023 and the sales of “Northsea Alpha” and “Northsea Beta” during the first quarter of 2022.

Gain from the sale of vessels, net: During the six months ended June 30, 2023, we recorded a gain from the sale of the “Pyxis Malou” of $8.0 million, which occurred in the first quarter of 2023. In the comparable period in 2022, we recorded $0.5 million loss related to repositioning costs for the delivery of the “Northsea Alpha” and “Northsea Beta” to their buyer.

Loss from debt extinguishment: During the six months ended June 30, 2023, we recorded a loss from debt extinguishment of approximately $0.3 million reflecting the write-off of the remaining unamortized balance of deferred financing costs, which were associated with the first quarter loan repayments from the sale of the “Pyxis Malou” and debt refinancing of the “Pyxis Karteria” . During the six months ended June 30, 2022, we recorded a loss from debt extinguishment of approximately $34 thousand reflecting the write-off of the remaining unamortized balance of deferred financing costs, which were associated with the repayments of the “Northsea Alpha” and “Northsea Beta” loans.

Interest and finance costs, net : Interest and finance costs, net, for the six months ended June 30, 2023, were $2.4 million, compared to $1.8 million in the comparable period in 2022, an increase of $0.6 million, or 31%. Despite lower average debt levels, this increase was primarily attributable to higher LIBOR/SOFR indexed rates paid on all the floating rate bank debt. In addition to scheduled loan amortization, we prepaid the $6.0 million 7.5% Promissory Note in full during the first quarter, 2023. On March 13, 2023, we completed the debt refinancing of the “Pyxis Karteria” , our 2013 built vessel, with a $15.5 million five year secured loan from a new lender. The loan is priced at SOFR plus 2.7%.

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