StealthGas, Inc. ( GASS)

Q3 2011 Earnings Call

November 16, 2011 11:00 a.m. ET

Executives

Harry Vafias – President, CEO

Konstantinos Sistovaris – CFO

Analysts

Bruce Berger

George Berman – JP Turner

Jeff Geygan – Milwaukee Private Wealth Management

Presentation

Operator

Thank you for standing-by and welcome to the StealthGas Inc. Third Quarter 2011 Results Call. (Operator Instructions) I must advise you that this conference is being recorded today on Wednesday 16 th of November 2011. I would now like to hand the conference over to your speaker today, Mr. Harry Vafias. Please go ahead sir.

Harry Vafias

Thank you and good morning everyone. Welcome to our conference call and webcast to discuss the results for the third quarter 2011. I’m Harry Vafias, the CEO of StealthGas, and I’d like to remind you that we will be discussing forward-looking statements in today’s conference call and presentation.

Regarding the Safe Harbor language, I would like to refer you to slide number one of this presentation as well to our press release on our second quarter results. With me today is Konstantinos Sistovaris, our CFO, and if you need any further info on the conference call or the presentation, please contact Konstantinos or myself.

Let’s begin from slide number two to review how we are implementing our business strategy now. Our medium-term goal is to renew our fleet with a delivery of five newbuilding gas ships. In the first two quarters of 2011 we took delivery of the first two vessels, the 5,000 CBM Gas Elixir and Gas Cerberus, which we then fixed on long term time charters. We also proceeded with the sale of four older ships, the average age of the four ships sold was 16 years of age, and three were operating in the spot market.

Then in the third quarter of September 21 we took delivery of the third newbuilding the Gas Myth which we deployed on a three year time charter to a European oil company. We wish to maintain a strong focus on the operational chart and that is the reason behind the sale of these four older ships. We believe that as we remove older vessel from the fleet and replace them with brand new larger, more efficient and high specification ships the overall performance of the company will improve.

We have already seen a healthy interest from charters for using newbuilding vessels and as a result we manage to conclude long term charters for all three of them.

As far as our newbuilding program is concerned we have two more even bigger ships to take delivery of. One is scheduled for delivery January 2012 and the second one May 2012. After taking into consideration the total fleet of 37 ships at the end of third quarter ’11 our net debt to capitalization ratio stood at 44.3%, similar to the previous quarter. Taking into consideration the scheduled vessel deliveries, we estimate that we will continue to have a moderate ratio of below 50%. Our gross debt, which stood at approximately $360 million at the end of the quarter, will peak at about $370 million in the second quarter of 2012. So we do not expect any significant increase in our debt level from the delivery of the next 12 newbuildings in 2012.

We continue to strive to obtain a secure and visible revenue stream with stable and predictable cash flows.

At the moment, fixed employment for our fleet for the remainder of 2011 is at 80%. We have almost 55% fixed already for 2012 and 33% fixed for 2015. We will seek to increase these forward coverage numbers with more long term charters. By the end of the first quarter 2012 we aim to have around 70% of the fleet fixed one year forward. Our first goal has been to own and operate a modern fleet of gas carriers, and in this respect the average age of today is 11 years, not including the tankers that we have, which is rather young compared to the industry average.

Including the product tankers and the Aframax and the newbuilding vessels that we are building, we estimate that at the end of 2011, our fleet will have an average age of about 10.5 years. We continue to believe that, within our core sector, this gives us a competitive advantage, as younger vessels have less operating expenses, consume less bunkers and are more appealing to blue chip charters, and that’s the factor which will be more important as we move forward into 2012 and beyond.

Our next objective has been to maintain close customer relations. The quality of our customer relationship is exemplified by the quality of our charters, which also lowers our counterparty risk. Out of a total fleet of 37 vessels as we previously announced, we had only one incident whereby we agreed a minor rate reduction. Because of the strength of the LPG market and the participation of more established names in it, we don’t expect to have any issues with our counterparties.

Our sixth goal has been to maintain cost efficient operations. I’m pleased to report yet another good performance in the second quarter. Our net income breakeven level per day, excluding losses on derivatives, was $5,175 per vessel per day, compared to $6,161 in the second quarter and $6,426 in the first quarter.

As we had expected, we managed to decrease our daily operating expense compared to the first quarter where there was an unexpected increase and we expect further decreases in the next quarter. We continue to concentrate heavily on managing our cost base and we expect that with five vessels going on bare boat charters during the year, and the addition of brand new vessels to the fleet, we would be able to contain upward pressures on operating expenses. Crew (ph) remains one of the most challenging issues for the most shipping companies, but so far in 2011 we have managed to contain crew costs.

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