Highlights from the Capital Link Presentation Series
Capital Link hosted a presentation by the senior management of Pyxis Tankers Inc. (NASDAQ: PXS) on Wednesday, January 18, 2023. During the 36-minute session, Valentios (Eddie) Valentis Valentis, Chairman & CEO, and henry williams, CFO, described the factors contributing to a strong product tanker market, the Company’s focus on eco vessels and its financial highlights as part of Capital Link’s Company Presentation Series.
Full Replay of the Session
Highlights from the Pyxis Tankers session at the Capital Link Presentation Series include the following:
Pyxis Tankers is an international pure play product tanker company engaged in seaborne transportation of refined petroleum products such as naphtha, gasoline, jet fuel, kerosene, diesel and fuel oil, as well as other liquid bulk items, such as vegetable oils and organic chemicals. Its fleet, which consists of 5 medium range product tankers (MR2s) with eco features, has a weighted average age of approximately 9.4 years and an aggregate carrying capacity of 249,554 dwt.
During the presentation, Henry Williams, CFO, mentioned that the Company had preliminary average fleet TCE of $33,400 per day in Q4 of 2022. As of January 16, 2023, 53% of available days in the first quarter of 2023 are booked at an average estimated TCE rate of $32,500 per day.
“We have a very competitive total daily operational cost structure,” Eddie Valentis, CEO, stated. The Company’s total daily operational cash costs per Eco-efficient MR2 totaled $8,908 in in the third quarter ended September 30, 2022, compared to our larger U.S. listed peers which averaged of $9,654.
Mr. Williams stated that in 2022, the Company experienced a “dramatic improvement in revenue” compared to the previous year. This increase in revenue was “driven by” an improvement of charter rates and the contribution from the acquisition of two MR’s. Pyxis’ EBITDA for the third quarter of 2022 was nearly $8 million. The Company’s near-term focus is “building further liquidity and strengthening its balance sheet,” stated the CFO. As of September 30, 2022, Pyxis’ net funded debt to total capitalization equaled 51.5%.
Market Update – Sanctions on Russian Products & China’s Reopening to Bolster Market
Generally, demand for refined petroleum products has increased in the past two years, due to post-pandemic global economic recovery as well as increased personal and commercial mobility. Impacts of the Russian-Ukrainian War and, more recently, China’s reopening have led to stronger chartering conditions for MR2s. Even though macro-economic conditions and geo-political events may create added volatility for the sector, demand for such vessels is expected to remain solid for the longer term.
When asked if the upcoming price cap on Russian refined products will impact the product tanker sector, Mr. Valentis stated “this remains to be seen, but inventories are quite low for refined products in many locations…Overall, we expect that the market will improve in the coming months despite the recent unusually warm weather in the Northern Hemisphere and the temporary pull-forward of cargoes within Europe prior to the upcoming ban on Russian products.” Also, a significant portion of the refined products transported out of China, under new government approved quotas, will likely be “carried on MR vessels, especially to other Asian ports,” Mr. Valentis said.
In terms of supply, Mr. Valentis noted that the MR2 orderbook is decreasing, with very little new ordering. Attractive vessel supply and demand fundamentals make for a strong market for MR2s. As Mr. Valentis pointed out, Russia provided a large quantity of refined products to Europe before the war in Ukraine; a fact which is changing after the sanctions levied on the country and the EU/G-7 ban effective February 5th. These regulations should force many countries to seek out alternative sources of refined products that should travel longer distances, which “will create an increase in ton-mile demand,” he stated.
Pyxis’ fleet is about 2.5 years younger compared to the global industry fleet. All of its vessels have eco features, which provide for lower fuel consumption and emissions than standard tankers, and fully comply with environmental regulations. Rather than fitting its vessels with scrubbers, Pyxis runs its ships on compliant low-sulphur bunker fuel. It is more than a simple economic analysis. “We have taken the decision of not installing scrubbers…a scrubber investment in an MR vessel is not an easy installation,” and can create technical problems, Mr. Valentis stated.
“Going forward, regarding alternative fuels, we haven’t seen substantial changes in our industry,” Mr. Valentis said when asked about the future of green fuels in the sector. What exactly the new, alternative fuel will be for middle-sized vessels “remains a question mark,” Mr. Valentis expressed.
The debate surrounding alternative fuels and environmental technology tie into the Company’s strategy regarding newbuilds. “We will not order new vessels with existing technology. We would rather wait and see” regarding alternative fuels, the Pyxis CEO said. Rather, the preference remains the acquisition of secondhand modern eco vessels. Pyxis is focused on opportunistic fleet growth, particularly in terms of acquiring younger, eco-efficient IMO II & III MR2’s, which can “carry more types of cargoes to many ports worldwide,” Mr. Valentis stated.