Pyxis Tankers Inc. an international pure-play product tanker company, announced unaudited results for the three months and year ended December 31, 2022.
Summary
For the three months ended December 31, 2022, our Revenues, net were $18.4 million. For the same period, our time charter equivalent (“TCE”) revenues were $13.8 million, an increase of approximately $10.0 million or 256% from the comparable quarter in 2021. Our net income attributable to common shareholders for the three months ended December 31, 2022 was $6.5 million, representing an increase of $12.1 million from a net loss of $5.6 million in the comparable period in 2021. For the fourth quarter of 2022, the net income per share was $0.61 basic and $0.53 diluted compared to a net loss of $0.58 (basic and diluted) for the same period in 2021. Our Adjusted EBITDA for the three months ended December 31, 2022 was $9.7 million, which represented an increase of $10.4 million over the same quarter in 2021. Please see “Non-GAAP Measures and Definitions” below.
On March 9, 2023, the Company announced the sale of its oldest tanker, the 2009 built “Pyxis Malou”, for $24.8 million in cash. The closing of the vessel sale is expected to occur by the end of March and is subject to customary closing conditions. We expect to receive cash proceeds of $18.0 million after the vessel’s loan repayment and transaction fees and expenses. Assuming the closing occurs on schedule, we should realize a one-time gain on vessel sale of approximately $8.0 million or $0.75 per common share, basic.
Valentios Valentis, our Chairman and CEO, commented:
“We are pleased to report strong sequential growth in our fourth fiscal quarter, 2022 financial results with Revenues, net of $18.4 million and Net Income attributable to common shareholders of $6.5 million. Increasing mobility in many parts of the world has resulted in solid demand for transportation fuels. Modest inventories of many petroleum products combined with the war in the Ukraine has led to continued market dislocation, including arbitrage opportunities, shifting trade patterns and ton-mile expansion of seaborne cargoes that supported strong chartering activity for product tankers and allowed us to effectively capture market opportunities.
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 December 31, 2022, our daily TCE rate grew by a factor of 3.8 to $33,182 compared to the same period in 2021. We are also pleased to report that we continued to maintain a disciplined cost structure throughout our operations despite inflationary pressures. For example, the daily vessel OPEX for our MR’s declined slightly in the fourth quarter, 2022 to $6,672 as compared to the same period in 2021. Positive momentum has continued into 2023, indicating another buoyant year. As of March 14th, 80% of the available days in Q1, 2023 for our MR’s were booked at an estimated average TCE of $28,000 per vessel, including four vessels contracted under short-term time charters at an average rate of $29,400 and one MR employed in the spot market at an average rate of $26,400.
At this junction, we expect charter rates to stay at solid levels given the modest inventory levels of refined petroleum products in a number of locations worldwide, the global impact of the new G-7 and EU ban and price caps on seaborne cargoes of Russian refined products which went into effect in early February, 2023 as well as the re-opening of China as severe Covid- 19 restrictions have recently been lifted after three years. Despite certain headwinds, including slowing economic activity, tighter monetary policies, high inflation and major geo-political events, the IMF recently upgraded its outlook for global GDP growth in 2023 to 2.9%. The 2023 estimate for China’s GDP growth was revised to 5.2%, up from a 47 year low of 3% last year. Industry research analysts have also revised their views on the impact of the new Russian sanctions which could result in incremental growth in product tanker demand of up to 12% this year primarily due to ton-mile expansion. In February, the IEA revised its forecast for global oil demand to increase 2% or 2.0 Million barrels per day to 101.9 Mb/d in 2023. Our positive outlook is further supported by constructive longer-term supply and demand sector fundamentals, such as, the historically low order book for MR’s and the number of older tankers. A leading independent research firm reported that the orderbook for newbuild MR’s was 5.8% of the worldwide fleet as of February 28, 2023 and that 10.4% of that fleet was 20 years of age or more. We expect MR tanker supply to grow annually at less than 2% net over the next two years. However, the rising level of complexity within the sector and the uncertainty from the headwinds of macro-economic conditions and global events on the demand for refined petroleum products, compels us to operate prudently.
Given the current high asset value environment, it continues to be very challenging to develop viable opportunities for fleet expansion, especially for the purchase of modern eco-efficient MR’s. In light of this, we maintain our disciplined approach to capital allocation until more attractive situations materialize which may further enable us to enhance shareholder value. In the meantime, we have recently taken the opportunity to optimize our fleet and increase capital resources. Last week, we announced the sale of our 14 year old product tanker, the “Pyxis Malou”, at a price of $24.8 million, which is almost double the average of the last 5 years for a vessel of this age. Upon scheduled closing later this month, we should increase our cash position by approximately $18 million after repayment of associated debt and transaction fees. In addition, we just completed the debt refinancing of the 2013 built “Pyxis Karteria” with a new bank on more attractive terms, including a significant reduction in interest costs. Cash on hand combined with modest bank debt should provide us the funds and flexibility to pursue strategic initiatives at the right time. Over the near-term, we expect to continue to use free cash flow to further increase balance sheet liquidity and reduce leverage.”
Results for the three months ended December 31, 2021 and 2022
For the three months ended December 31, 2022, we reported Revenues, net of $18.4 million, or 127% higher than $8.1 million in the comparable 2021 period. Our net income attributable to common shareholders was $6.5 million, or $0.61 basic and $0.53 diluted net income per share, compared to a net loss attributable to common shareholders of $5.6 million, or $0.58 basic and diluted loss per share, for the same period in 2021. The weighted average number of basic share count had increased by approximately 900 thousand common shares from 9.7 million common shares in the fourth quarter 2021 to approximately 10.6 million common shares in the same period 2022. The weighted average number of diluted common shares in 2022 of approximately 12.6 million shares reflects 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 fourth quarter of 2022 was $33,182 or 281% higher than the $8,706 MR daily TCE rate for the same period in 2021, due to improved conditions. The revenue mix for the fourth quarter of 2022, was 41% for short-term time charters and 59% from spot market employment. Adjusted EBITDA increased by $10.4 million to $9.7 million in the fourth quarter, 2022 from negative $0.7 million for the same period in 2021.
Results for the years ended December 31, 2021 and 2022
For the year ended December 31, 2022, we reported Revenues, net, of $58.3 million, an increase of $33.0 million, or 130%, from $25.3 million in the comparable period of 2021 primarily due to higher spot charter rates. The revenue mix for the year of 2022, was 33% from short-term time charters and 67% from spot market employment, resulting in an overall MR daily TCE rate for our fleet of $25,739.
Our net income attributable to common shareholders for the year ended December 31, 2022, was $12.5 million, or $1.18 basic and $1.06 diluted net income per share, compared to a net loss of $12.9 million, or a loss of $1.43 per share (basic and diluted) in 2021. Higher MR daily TCE rate of $25,739 and lower MR fleet utilization of 87.5% for our MR’s during the year ended December 31, 2022, were compared to an MR daily TCE rate of $10,195 and MR fleet utilization of 91.8%, respectively, during the same period in 2021. Our Adjusted EBITDA of $24.3 million in 2022 represented an increase of $25.1 million from an Adjusted EBITDA loss of $0.8 million in 2021.
On December 20, 2021, we took delivery from a related party the “Pyxis Lamda”, a 50,145 dwt MR product tanker built in 2017 at SPP Shipbuilding in South Korea. After her first special survey, the “Pyxis Lamda” launched commercial employment in early January 2022. For 2021, the vessel contributed nil available days and, consequently, voyage and related costs of $10 thousand have been excluded from the above data.
Management’s Discussion and Analysis of Financial Results for the Three Months ended December 31, 2021 and 2022
(Amounts are presented in million U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)
Revenues, net: Revenues, net of $18.4 million for the three months ended December 31, 2022, represented an increase of $10.3 million, or 127%, from $8.1 million in the comparable period of 2021 as a result of significantly higher charter rates and greater spot employment for our MR’s. In the fourth quarter of 2022, our MR daily TCE rate for our fleet was $33,182, a $24,476 per day increase from the same period in 2021 as a result of the improvement in charter rates, partly offset by a $1.4 million increase in the MR voyage related costs and commissions, due to greater spot employment.
Voyage related costs and commissions: Voyage related costs and commissions of $4.5 million in the fourth quarter of 2022, represented an increase of $0.3 million, or 7.6%, from $4.2 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 month period ended December 31, 2022, represented a decrease of $0.4 million, or 11.6%, from $3.5 million in the comparable period of 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 the two small tankers “Northsea Alpha” and “Northsea Beta” which occurred during the first quarter of 2022. Fleet ownership days for the three months ended December 31, 2022 was 460 days, compared to 564 days for the same period in 2021.
General and administrative expenses: General and administrative expenses of $0.6 million for the fourth quarter, 2022 remained stable compared to 2021.
Management fees: For the three months ended December 31, 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, decreased by $0.1 million to $0.4 million as a result of the sales of “Northsea Alpha” and “Northsea Beta” which occurred during the first quarter of 2022, versus the comparable period in 2021.
Amortization of special survey costs: Amortization of special survey costs of $0.1 million for the quarter ended December 31, 2022, remained relatively flat compared to the same period in 2021.
Depreciation: Depreciation of $1.5 million for the quarter ended December 31, 2022, increased by $0.2 million or 12.3% compared to $1.4 million in the same period of 2021. The increase was attributed to the acquisition of vessel “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.
Loss on vessels held-for-sale: The non-cash loss of $2.4 million for the quarter ended December 31, 2021, relates to the sales of the “Northsea Alpha” and “Northsea Beta”, which met the criteria of being classified as held for sale as of December 31, 2021, and were subsequently closed on January 28, 2022 and March 1, 2022, respectively. There were no comparable transactions in the 2022 period.
Interest and finance costs, net: Interest and finance costs, net, for the quarter ended December 31, 2022, were $1.4 million, compared to $0.8 million in the comparable period in 2021, an increase of $0.6 million, or 77.4%. 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 Years ended December 31, 2021 and 2022 (Amounts are presented in million U.S. dollars, rounded to the nearest one hundred thousand, except as otherwise noted)
Revenues, net: Revenues, net of $58.3 million for the year ended December 31, 2022, represented an increase of $33.0 million, or 130%, from $25.3 million in the comparable period of 2021 as a result of significantly higher spot charter rates and greater spot employment for our MR’s, including a 678-day increase in spot operating days, from 241 days during the same period in 2021. In the year 2022, our MR daily TCE rate for our fleet was $25,739, a $15,544 per day increase from the same 2021 period as a result of higher charter rates, partly offset by an $11.1 million increase in the MR voyage related costs and commissions.
Voyage related costs and commissions: Voyage related costs and commissions of $17.4 million for the year ended December 31, 2022, represented an increase of $7.8 million, or 81.0%, from $9.6 million in the comparable period in 2021. For the year ended December 31, 2022, our MR’s were on spot charters for 919 days in total, compared to 241 days 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 $12.5 million for the year ended December 31, 2022, remained flat compared to the same period in 2021.
General and administrative expenses: General and administrative expenses of $2.5 million for the year ended December 31, 2022, remained flat compared to the same period in 2021.
Management fees: For the year ended December 31, 2022, management fees charged from Maritime and ITM of $1.6 million in the aggregate, remained stable compared to the same period in 2021.
Amortization of special survey costs: Amortization of special survey costs of $0.4 million for the year ended December 31, 2022, remained flat compared to the same period in 2021.
Depreciation: Depreciation of $6.1 million for the year ended December 31, 2022, increased by $1.2 million or 24.5% compared to $4.9 million in the comparable period of 2021. The increase was attributed to the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” in 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 on vessels held-for-sale: The non-cash loss of $2.4 million for the year ended December 31, 2021, relates to the sales of the “Northsea Alpha” and “Northsea Beta”, which met the criteria of being classified as held for sale as of December 31, 2021, and were subsequently closed on January 28, 2022 and March 1, 2022, respectively. There were no comparable transactions in 2022.
Loss from the sale of vessels, net: During 2022, we recorded a transaction loss from the sale of the “Northsea Alpha” and “Northsea Beta” of $0.5 million related to the repositioning 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 2022, we recorded a loss from debt extinguishment of approximately $0.03 million 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. For the year ended December 31, 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” (the “Eighthone Loan”) that was refinanced at the end of the first quarter in 2021.
Gain from financial derivative instruments: During the year ended December 31, 2022, we recorded a gain from financial derivative instruments amounted to $0.6 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. Subsequently, on January 27, 2023, this cap was sold and we realized a net cash gain of $0.5 million.
Interest and finance costs, net: Interest and finance costs, net, for the year ended December 31, 2022, was $4.4 million, compared to $3.3 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 floating rate bank debt.
Liquidity, Debt and Capital Structure
Pursuant to our loan agreements, as of December 31, 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 $0.38 million for one of our loans, aggregated $10.2 million as of December 31, 2022.
Our weighted average interest rates on our total funded debt for the three and twelve month periods ended December 31, 2022 were 7.25% and 5.41%, 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.
