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Soft Tanker Market Hurt Pyxis Tankers’ First Quarter Results

Pyxis Tankers Inc., an international pure play product tanker company, today announced unaudited results for the three months ended March 31, 2022.

Summary

For the three months ended March 31, 2022, our Revenues, net were $6.9 million, while our time charter equivalent (“TCE”) revenues were $3.8 million, a decrease of $0.4 million, or 10.1%, compared to the same period in 2021. Net loss attributable to common shareholders for the three months ended March 31, 2022 was $3.7 million, or a loss per share (basic and diluted) of $0.09, which was greater than the results from the comparable period of 2021. Our Adjusted EBITDA was negative $0.7 million which represented a decrease of $1.5 million over the comparable 2021 quarter. For a definition and a reconciliation of Adjusted EBITDA, please see “Non-GAAP Measures and Definitions” below.

Valentios Valentis, our Chairman and CEO commented:

“Our results for the three months ended March 31, 2022 reflected the lingering effects from the Covid-19 Omicron variant on mobility and economic activity which resulted in a continuation of a soft spot chartering environment. Moreover, our quarterly results were impacted by non-recurring operational events, including the sale of two vessels and an accidental grounding of one of our medium range product tankers (“MR”), which resulted in reduced operating days for revenue opportunities. Consequently, the average daily TCE and utilization for our MR’s were lower than the same period in the prior year.

As previously discussed, we completed various initiatives over the last couple of years to position the Company to take advantage of better markets. Just as the recovery of global economies was gradually picking-up since the outbreak of Omicron, the war in the Ukraine created new challenges and opportunities which have been positive for our sector and the Company. Improving demand for refined petroleum products and low global inventories have been met by the effects of the war which has resulted in market dislocation, arbitrage opportunities, ton-mile expansion and higher charter rates for product tankers starting in March. After a prolonged, difficult period, we began to see a recovery of the sector with healthier rates that initially occurred in the Atlantic basin. Furthermore, over the last month, most of the Pacific basin has also shown significant improvement. In order to address high demand for transportation fuels, many refineries, including those located in the U.S. Gulf Coast, are running at high utilization and achieving near-record crack spreads. Greater global demand of diesel/gasoil, especially from Europe and Latin America, is competing with rising demand of jet fuel and gasoline as summer travel unfolds in the northern hemisphere, further stressing tight inventory positions. Increasing cargoes from U.S., Middle East and certain Asian refineries to end markets reflect expanding ton-mile voyages. This situation has been further compounded by the closure of older, less efficient refineries, primarily located in the Organization for Economic Co-operation and Development countries (OECD).

The recent dramatic improvement in demand for product tankers is further supported by long-term fundamentals. Despite recent headwinds of slowing economic activity, including the impact of Covid-19 on China, rising inflation and tightening monetary policies, we believe the chartering environment should remain favourable for the near-term given demand for refined products. Reasonable economic activity is supported by data from the International Monetary Fund (IMF) which still forecasts annual global GDP growth of 3.6% for this year and 2023. A leading research firm recently estimated that seaborne trade of refined products would grow 4% to 1.05 billion tons in 2022. The vessel supply outlook continues to look very positive with little new ordering of product tankers. We estimate that annual net supply growth for MR’s should be approximately 2% over the next two years.

From a risk/return standpoint, we continue to employ a mixed chartering strategy of short-term time and spot charters on a staggered basis to a diverse customer base. Three of our MR’s are currently trading spot and the remaining two tankers are under time charters. We have chosen not to pursue any Russian cargoes. With improving market conditions, we are pleased to report that as of May 13, 2022, 67% of our available days for the second quarter were booked at an average estimated daily TCE of $27,900. While our optimism for the charter market has improved, the uncertainties surrounding the global economy and the impact of the war as well as other geo-political events, temper our enthusiasm.”

Results for the three months ended March 31, 2021 and 2022

For the three months ended March 31, 2022, we reported Revenues, net of $6.9 million, an increase of $1.7 million, or 31.7%, from $5.2 million in the comparable period of 2021 primarily due to higher spot employment for our fleet. During the first quarter of 2022, two of our MR’s were under short time charters and three under spot voyages resulting in a daily TCE for our MR fleet of $11,227.

Our net loss attributable to common shareholders for the period ended March 31, 2022, was $3.7 million, or a loss per share of $0.09 (basic and diluted), compared to a net loss of $2.1 million, or a loss per share of $0.07 (basic and diluted) for the same period in 2021. Lower daily TCE of $11,227 and lower MR fleet utilization of 74.3% for our MR’s during the quarter ended March 31, 2022, were compared to $12,738 and 100%, respectively, during the same period in 2021. Operating expenses and vessel management fees were comparatively higher in the 2022 period as a result of the vessel additions in the second half of 2021, the “Pyxis Karteria” and “Pyxis Lamda”. The first quarter of 2022 was further negatively impacted by a $0.5 million non-recurring loss, or $0.01 per share, associated with repositioning costs for the sale of the two small tankers, the “Northsea Alpha” and “Northsea Beta”. The vessels were delivered to their buyer on January 28, and March 1, 2022, respectively. Furthermore, the Q1 2022 results were impacted by the absence of revenues from unscheduled off-hire days, substantially associated with the grounding of the Pyxis Epsilon in February and resultant vessel repairs. The Company’s 2015 built vessel returned to commercial employment at the end of March.

Management’s Discussion and Analysis of Financial Results1 for the Three Months ended March 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 $6.9 million for the three months ended March 31, 2022, represented an increase of $1.7 million, or 31.7%, from $5.2 million in the comparable period of 2021 as a result of higher spot employment for our MR’s, a 320-day increase in spot operating days, from 4 days in 2021 to 324 days during the same period in 2022. The increase in Revenues, net was partially counterbalanced by a decrease of 25.7% in fleet utilization from 100% in the comparable period of 2021 to 74.3% for the three months ended March 31, 2022. In Q1 2022, our daily TCE rate for our MR tankers was $11,227, a $1,511 per day decline from the comparable 2021 period as a result of the lower market rates, and the $2.1 million increase in the voyage related costs and commissions discussed below.

Voyage related costs and commissions: Voyage related costs and commissions of $3.1 million in the first quarter of 2022, represented an increase of $2.1 million, or 218.1%, from $1.0 million in the comparable period of 2021. This increase was substantially due to the 320-day increase in our MR’s spot employment and a decline in MR’s fleet utilization as well as significantly higher bunker fuel costs. Under spot charters, all voyage expenses are typically borne by us rather than the charterer and a decrease in time chartering results in increased voyage related costs and commissions

Vessel operating expenses: Vessel operating expenses of $3.4 million for the three months ended March 31, 2022, represented an increase of $0.9 million, or 34.4%, compared to the same period in 2021 which was 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. Fleet ownership days for the three months ended March 31, 2022 was 536 days compared to 450 days for the same period in 2021.

General and administrative expenses: General and administrative expenses of $0.6 million for the quarter ended March 31, 2022 were 5.3% lower than the same period in 2021 primarily due to lower professional fees.

Management fees: For the three months ended March 31, 2022, management fees were 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, increased by $0.2 million to $0.5 million as a result of the increased average number of vessels in our fleet, versus the comparable period in 2021, and the increase in the daily management fee paid to Maritime which increases annually in line with the inflation in Greece.

Amortization of special survey costs: Amortization of special survey costs of $0.1 million for the quarter ended March 31, 2022, remained flat compared to the same period in 2021.

Depreciation: Depreciation of $1.5 million for the quarter ended March 31, 2022, increased by $0.4 million or 37.8% compared to $1.1 million in the comparable period of 2021. The increase was attributed to the acquisition of vessels “Pyxis Karteria” and “Pyxis Lamda” after the first quarter of 2021 partly offset by the seizure of depreciation for vessels “Northsea Alpha” and “Northsea Beta” which were classified as held for sale at the end of 2021.

Loss from the sale of vessels, net: During the three months ended March 31, 2022, we recorded a non-recurring 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. No such expense was recorded for the comparable quarter in 2021.

Loss from debt extinguishment: In the first quarter of 2022, we recorded a loss from debt extinguishment of approximately $34,000 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 most recent period. For the three months ended March 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 three months ended March 31, 2022, we recorded a gain from financial derivative instruments amounted to $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 March 31, 2022, were $0.9 million, compared to $1.1 million in the comparable period in 2021, a decrease of $0.3 million, or 23.4%. This decrease was primarily attributable to lower interest costs derived from the refinancing on March 29, 2021, of the Eighthone Loan, which was partially counterbalanced by higher LIBOR rates paid on all the floating rate bank debt.
Source: Pyxis Tankers

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