Pyxis Tankers Inc., an international pure play product tanker company, announced its unaudited results for the three and nine month periods ended September 30, 2022.
Summary
For the three months ended September 30, 2022, our Revenues, net were $17.0 million. For the same period, our time charter equivalent (“TCE”) revenues were $12.0 million, representing an increase of approximately $8.5 million or 248% over the comparable period in 2021. Our net income attributable to common shareholders for the three months ended September 30, 2022 was $5.1 million, representing an increase of $8.8 million from a net loss of $3.7 million in the comparable period of 2021. For the third quarter of 2022, the net income per share was $0.48 basic and $0.42 diluted compared to net loss $0.39 (basic and diluted) for the same period in 2021. Our Adjusted EBITDA for the three months ended September 30, 2022 was $8.0 million, which represented an increase of $9.2 million over the third quarter of 2021. Please see “Non-GAAP Measures and Definitions” below.
Valentios Valentis, our Chairman and CEO commented:
“We are pleased to report the continuation of strong financial results for our third fiscal quarter in 2022 with Revenue, net of $17 million and Net Income of $5.3 million. Expanding mobility in many parts of the world has resulted in solid demand for transportation fuels. Low inventories of many petroleum products combined with the war in the Ukraine has led to further market dislocation, including arbitrage opportunities, shifting trade patterns and ton-mile expansion of seaborne cargoes that continued to support robust chartering activity for product tankers and allowed us to effectively capture the strong market.
We continue to employ our five Eco- MR’s under a mixed chartering strategy of short-term time charters and spot voyages. During the three months ended September 30, 2022, our daily TCE rate almost grew by a factor of four to $29,062 compared to the same period in 2021. As of November 10th, 82% of the available days in Q4, 2022 for our MR’s were booked at an estimated average TCE of $36,800 per vessel, including three vessels contracted under short-term time charters at an average rate of $32,600 and two MR’s employed in the spot market at an average rate of $47,700.
We expect charter rates to stay elevated due to seasonal demand which should be amplified by the impact of the EU ban on Russian refined products effective early February, 2023 as well as the Chinese government authorization for its refineries to export approximately 120 million barrels of diesel, gasoline and jet fuel starting this month. A leading research analyst recently estimated that EU embargo could result in an incremental 8% growth in vessel demand. The additional Chinese exports can be viewed in context of the magnitude of the 180 Mb aggregate release from the Strategic Petroleum Reserve by the US government starting May of this year. Our positive outlook is further supported by longer-term supply/demand sector fundamentals, such as, the historically low order book for MR’s. We expect MR tanker supply to grow about 2% net in 2023. However, we do have concerns about the potential negative impacts of rising global inflation, higher interest rates, possible global recession and, of course, the ongoing war.
Given the recent high asset value environment, it continues to be very challenging to develop opportunities for fleet expansion, especially for the purchase of modern eco-efficient MR’s. In view of this, we maintain our disciplined approach to capital allocation until more attractive situations materialize which may further enable us to maximize shareholder value. In the meantime, we expect to continue to use free cash flow to enhance our balance sheet liquidity and reduce leverage.”
Results for the three months ended September 30, 2021 and 2022
For the three months ended September 30, 2022, we reported Revenues, net of $17.0 million, or 143% higher than $7.0 million in the comparable 2021 period. Our net income attributable to common shareholders was $5.1 million, or $0.48 basic and $0.42 diluted net income per share, compared to a net loss of $3.7 million, or $0.39 basic and diluted loss per share, for the same period in 2021. The weighted average number of basic share count had increased by 1.0 million shares from 9.6 million common shares in the third quarter of 2021 to approximately 10.6 million common shares in the same period of 2022. The average MR daily TCE rate during the third quarter of 2022 was $29,062 or 297% higher than the $7,326 MR daily TCE rate for the same period in 2021, due to improved market conditions. The revenue mix for the third quarter of 2022, was 35% from short-term time charters and 65% from spot market employment. Our Adjusted EBITDA increased by $9.2 million to $8.0 million for the three months ended September 30, 2022.
Results for the nine months ended September 30, 2021 and 2022
For the nine months ended September 30, 2022, we reported Revenues, net, of $40.0 million, an increase of $22.7 million, or 132%, from $17.2 million in the comparable period of 2021 primarily due to higher spot charter rates. The revenue mix for the nine months of 2022, was 29% from short-term time charters and 71% from spot market employment, resulting in an overall MR daily TCE rate for our fleet of $23,079.
Our net income attributable to common shareholders for the nine months ended September 30, 2022, was $6.0 million, or $0.57 basic and $0.53 diluted net income per share, compared to a net loss of $7.3 million, or a loss of $0.83 per share (basic and diluted) for the same period in 2021. Higher MR daily TCE rate of $23,079 and lower MR fleet utilization of 86.4% for our MR’s during the nine months ended September 30, 2022, were compared to a MR daily TCE rate of $10,729 and MR fleet utilization of 95.3%, respectively, during the same period in 2021. Operating expenses and vessel management fees were comparatively higher in 2022 as a result of the vessel additions of the “Pyxis Karteria” and “Pyxis Lamda” during the second half of 2021, partly offset by the sales of the two small tankers during the first quarter of 2022. Our Adjusted EBITDA of $14.5 million represented an increase of $14.7 million from an Adjusted EBITDA loss of $0.1 million for the same nine month period in 2021.
Management’s Discussion and Analysis of Financial Results for the Three Months ended September 30, 2021 and 2022
Amounts relating to variations in period–on–period comparisons shown in this section are derived from the unaudited interim consolidated financials presented below.
Revenues, net: Revenues, net of $17.0 million for the three months ended September 30, 2022, represented an increase of $10.0 million, or 143%, from $7.0 million in the comparable period of 2021 as a result of significantly higher charter rates and higher spot employment for our MR’s. In the third quarter of 2022, our MR daily TCE rate for our fleet was $29,062, a $21,736 per day increase from the same period in 2021 as a result of the improvement in charter rates, partly offset by a $1.5 million increase in the voyage related costs and commissions discussed below.
Voyage related costs and commissions: Voyage related costs and commissions of $5.0 million in the third quarter of 2022, represented an increase of $1.5 million, or 40.6%, from $3.6 million in the same period of 2021, primarily as a result of increased spot employment for our MR’s and substantially higher average bunker fuel costs. Under spot charters, all voyage expenses are typically borne by us rather than the charterer and an increase in spot employment results in increased voyage related costs and commissions.
Vessel operating expenses: Vessel operating expenses of $3.1 million for the three months ended September 30, 2022, represented a decrease of $0.6 million, or 15.2%, compared to the same period in 2021, which was mainly attributed to more normalized operating costs of the Pyxis Karteria which was acquired in the third quarter of 2021 and the sales of “Northsea Alpha” and “Northsea Beta” which occurred during the first quarter of 2022. Fleet ownership days for the three months ended September 30, 2022 was 460 days, compared to 537 days for the same period in 2021.
General and administrative expenses: General and administrative expenses for the quarter ended September 30, 2022 were $0.6 million, compared to $0.7 million in the comparable period in 2021, represented a decrease of $0.1 million 2021, primarily attributed to higher legal fees in the prior period.
Management fees: For the three months ended September 30, 2022, management fees charged from 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, remained relatively flat at $0.4 million from the comparable period in 2021.
Amortization of special survey costs: Amortization of special survey costs of $0.1 million for the quarter ended September 30, 2022, remained relatively flat compared to the same period in 2021.
Depreciation: Depreciation of $1.5 million for the quarter ended September 30, 2022, increased by $0.2 million or 15.3% compared to $1.3 million in the same period of 2021. The increase was attributed to the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” during the second half of 2021 partly offset by the ceasing of depreciation for vessels “Northsea Alpha” and “Northsea Beta” which were classified as held for sale at the end of 2021 and were sold during the first quarter of 2022.
Gain from financial derivative instruments: During the three months ended September 30, 2022, we recorded a gain from financial derivative instruments of $0.2 million related to the valuation of the interest rate cap purchased in July 2021, for the amount of $9.6 million at a cap rate of 2% with a termination date of July 8, 2025.
Interest and finance costs, net: Interest and finance costs, net, for the quarter ended September 30, 2022, were $1.2 million, compared to $0.7 million in the comparable period in 2021, an increase of $0.5 million, or 62.3%. This increase was primarily attributable to higher debt balances accompanying the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” and higher LIBOR rates paid on all the floating rate bank debt.
Management’s Discussion and Analysis of Financial Results for the Nine Months ended September 30, 2021 and 2022
Amounts relating to variations in period–on–period comparisons shown in this section are derived from the unaudited interim consolidated financials presented below.
Revenues, net: Revenues, net of $40.0 million for the nine months ended September 30, 2022, represented an increase of $22.7 million, or 132%, from $17.2 million in the comparable period of 2021 as a result of significantly higher spot market rates and greater spot employment for our MR’s, including a 535-day increase in spot operating days, from 161 days during the same period in 2021. The increase in Revenues, net was partially offset by a decrease of 8.9% in fleet utilization from 95.3% in the same period of 2021 to 86.4% for the nine months ended September 30, 2022. In the nine months of 2022, our MR daily TCE rate for our fleet was $23,079, a $12,350 per day increase from the same 2021 period as a result of higher charter rates, partly offset by a $7.4 million increase in the voyage related costs and commissions discussed below.
Voyage related costs and commissions: Voyage related costs and commissions of $12.8 million for the nine months ended September 30, 2022, represented an increase of $7.4 million, or 139%, from $5.4 million in the same period in 2021. For the nine months ended September 30, 2022, our MR’s were on spot charters for 696 days in total, compared to 161 days for the respective period in 2021. This higher spot chartering activity for our MR’s contributed higher 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 $9.4 million for the nine months ended September 30, 2022, represented a $0.4 million or 4.8% increase compared to $9.0 million for the same period in 2021. This increase mainly attributed to the addition of the “Pyxis Karteria” and “Pyxis Lamda” to our fleet in the second half of 2021, partially offset by the sales of “Northsea Alpha” and “Northsea Beta” which occurred during the first quarter, 2022.
General and administrative expenses: General and administrative expenses of $1.9 million for the nine months ended September 30, 2022, remained flat compared to the same period in 2021.
Management fees: For the nine months ended September 30, 2022, management fees payable to Maritime and ITM of $1.3 million in the aggregate, represented an increase of $0.2 million compared to the nine months ended September 30, 2021, as a result of the vessel additions in our fleet and the increase in the daily management fees paid to Maritime which increases annually in line with the inflation rate in Greece.
Amortization of special survey costs: Amortization of special survey costs of $0.3 million for the nine months ended September 30, 2022, remained flat compared to the same period in 2021.
Depreciation: Depreciation of $4.6 million for the nine months ended September 30, 2022, increased by $1.0 million or 29.3% compared to $3.5 million in the comparable period of 2021. The increase was attributed to the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” after the second half of 2021 partly offset by the ceasing of depreciation for vessels “Northsea Alpha” and “Northsea Beta” which were classified as held for sale at the end of 2021 and were sold during the first quarter of 2022.
Loss from the sale of vessels, net: During the nine months ended September 30, 2022, we recorded a transaction loss from the sale of the “Northsea Alpha” and “Northsea Beta” of $0.5 million related to the reposition costs for the delivery of the vessels to their buyer on January 28, 2022 and March 1, 2022, respectively. No such expense was recorded for the comparable period in 2021.
Loss from debt extinguishment: During the nine months ended September 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 repayment of the “Northsea Alpha” and “Northsea Beta” loans during the first quarter of 2022. For the nine months ended September 30, 2021 we recorded a loss from debt extinguishment of $0.5 million primarily reflecting a prepayment fee and the write-off of the remaining unamortized balance of deferred financing costs, both of which were associated with the loan on the “Pyxis Epsilon” that was refinanced at the end of the first quarter in 2021.
Gain from financial derivative instruments: During the nine months ended September 30, 2022, we recorded a gain from financial derivative instruments amounted to $0.5 million related to the valuation of the $9.6 million interest rate cap purchased in July 2021.
Interest and finance costs, net: Interest and finance costs, net, was $3.0 million for the nine months ended September 30, 2022, compared to $2.5 million in the comparable period in 2021. This increase was primarily attributable to higher average outstanding debt balances in 2022 accompanying the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” and higher LIBOR rates paid on all the floating rate bank debt.
Liquidity, Debt and Capital Structure
Pursuant to our loan agreements, as of September 30, 2022, we were required to maintain a minimum liquidity of $2.25 million. Total cash and cash equivalents, including the minimum liquidity amount and the retention account of $0.35 million for one of our loans, aggregated $6.85 million as of September 30, 2022.
Our weighted average interest rates on our total funded debt for the three and nine month periods ended September 30, 2022 were 5.9% and 4.8%, respectively.
Following the Company’s Annual Shareholder Meeting of May 11, 2022, the board of directors of the Company approved the implementation of a reverse-split of our Common Shares at the ratio of one share for four existing Common Shares, effective May 13, 2022 (the “Reverse Stock Split”). After the Reverse Stock Split, we had 10,613,424 Common Shares (the “Common Shares”) outstanding and trading continued on the Nasdaq Capital Markets under its existing symbol, “PXS”. The Reverse Stock Split was undertaken with the objective of meeting the minimum $1.00 per share requirement for maintaining the listing of the Common Shares on the Nasdaq Capital Markets. Furthermore, following the Reverse Stock Split, (a) the Conversion Price, as defined in the Certification of Designation of the Company’s 7.75% Series A Cumulative Convertible Preferred Shares (NASDAQ Cap Mkts: PXSAP), was adjusted from $1.40 to $5.60 and (b) the Exercise Price, as defined in the Company’s Warrants to purchase Common Shares (NASDAQ Cap Mkts: PXSAW), was adjusted from $1.40 to $5.60. All the share and per share information for all periods presented has been adjusted to reflect the one for four Reverse Stock Split.
On September 30, 2022, we had a total of 10,613,424 Common Shares issued and outstanding of which Mr. Valentis beneficially owned 54.0%.
