Pyxis Tankers reports Q2 EPS 23c vs. 38c last year

Reports Q2 revenue $9.5M vs. $16.1M last year. Valentios Valentis, our 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.”