Performance Shipping Inc. Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2023 November 27 2023 - 09:28AM
Performance Shipping Inc. (NASDAQ: PSHG) (“we” or the “Company”), a global shipping company specializing in the ownership of tanker vessels, today reported net income of $10.4 million and net income attributable to common stockholders of $9.9 million for the third quarter of 2023. The 2023 third quarter results compared to a net income of $10.7 million and net income attributable to common stockholders of $10.4 million for the same period in 2022. Earnings per share, basic and diluted, for the third quarter of 2023 were $0.88 and $0.27, respectively.
Revenue was $24.1 million ($23.4 million net of voyage expenses) for the third quarter of 2023, compared to $22.1 million ($18.8 million net of voyage expenses) for the same period in 2022. This increase was attributable to the increase in ownership days, which more than offset the slight decrease in time-charter equivalent rates (“TCE rates”) achieved during the quarter. Fleetwide, the average TCE rate for the third quarter of 2023 was $31,787, compared with an average rate of $34,411 for the same period in 2022. During the third quarter of 2023, net cash provided by operating activities was $17.9 million, compared with net cash provided by operating activities of $11.8 million for the third quarter of 2022.
Net income for the nine months ended September 30, 2023, amounted to $44.5 million, compared to a net income of $12.5 million for the nine months ended September 30, 2022. Net income attributable to common stockholders for the nine months ended September 30, 2023, amounted to $32.4 million, and resulted in earnings per share, basic and diluted, of $3.26 and $1.25, respectively. Net income attributable to common stockholders for the nine months ended September 30, 2022, amounted to $2.6 million, and resulted in earnings per common share, basic and diluted, of $2.35 and $0.60, respectively. Net income for the nine-month periods ended September 30, 2023 and 2022, has been adjusted to arrive at net income attributable to common stockholders mainly by aggregate non-cash items of $10.6 million and $9.3 million, respectively, as per US GAAP accounting standards, which do not affect the Company's operating cash flows.
Commenting on the results of the third quarter of 2023, Andreas Michalopoulos, the Company’s Chief Executive Officer, stated:
“During the third quarter of 2023, our Company maintained its remarkable profitability and strengthened its financial position by capitalizing on the solid tanker market fundamentals. We achieved a fleetwide average time charter equivalent rate of $31,787 per day and $38,183 per day during the three and nine-month periods ended September 30, 2023, respectively. As a result, we generated revenues of $85.1 million and net income of $44.5 million during the nine months ended September 30, 2023, representing increases of 80% and 257%, respectively, from the equivalent period of 2022. Our cash balance at the end of the third quarter was approximately $85.4 million, corresponding to a 115% increase from the 2022 year-end cash balance.
“Reflecting our confidence in the strength of our business as well as in our ability to generate significant cash flow by operating our expanded fleet in the prevailing profitable charter rate environment, following the completion of an initial $2 million share repurchase program commenced in April of this year, in August the Company’s board of directors approved a second $2 million share repurchase program, which we intend to deploy opportunistically in a manner that enhances shareholder value.
“We believe that the overall positive developments in the tanker sector and the firm freight rate environment will be sustainable in the foreseeable future. Our fleet employment strategy focused on a balanced exposure to short to medium term time charter contracts as well as the spot tanker market, has well positioned our Company to secure, beginning the fourth quarter of 2023, a fixed revenue backlog of approximately $39 million, as five of our Aframax tankers are currently operating under time charter contract arrangements with reputable counterparties, while in parallel we are able to capture the upside potential of the Aframax spot tanker market, through the operation of our remaining vessels under pool arrangements.
“Going forward, we expect to further solidify our market position through the renewal of our fleet and the acquisition of younger and more technologically advanced vessels. As previously announced, we have entered into a contract for the purchase of a newbuild LNG-ready LR2 Aframax tanker with a 2025 delivery date and we have agreed to sell our oldest Aframax tanker, the M/T P. Kikuma, for a gross sale price of $39.3 million and expected delivery to the seller during December 2023. We believe that our impressive financial performance, our current cash balance representing 1.6x of the remaining capital expenditures related to our newbuilding Aframax tanker, our conservative net leverage which currently corresponds to a mere 10% of our estimated fleet market value, as well as the proceeds from the sale of our oldest Aframax tanker, result in a strong balance sheet and enhance our ability to pursue selective and timely asset acquisitions.”
Corporate Developments
Share Repurchase Plan
Under the share repurchase plan announced in April 2023 (the “April Plan”), the Company repurchased during the third quarter of 2023 a total of 528,953 common shares for a total amount of approximately $0.6 million, and consequently, the April Plan was successfully completed.
Additionally, as previously announced on August 21, 2023, the Company’s board of directors approved a share repurchase plan (the “August Plan”) pursuant to which the Company may repurchase up to $2 million of its outstanding common shares. As of the date hereof, 33,333 common shares have been repurchased for a total amount of approximately $50,000 under the August Plan.
Update on Outstanding Shares and Warrants
As of November 24, 2023, the Company had outstanding 12,152,559 common shares. In addition, the following common share purchase warrants were outstanding as of such date:
Class A Warrants to purchase up to 567,366 common shares at an exercise price of $15.75 per common share; Warrants issued July 19, 2022, to purchase up to 1,033,333 common shares at an exercise price of $1.65 per common share; Warrants issued August 16, 2022, to purchase up to 2,122,222 common shares at an exercise price of $1.65 per common share; Series A Warrants issued March 3, 2023, which are exchangeable for up to 14,300 common shares; and Series B Warrants issued March 3, 2023, to purchase up to 4,167,000 common shares at an exercise price of $2.25 per common share. Finally, the Company had 50,726 shares of its Series B Convertible Cumulative Perpetual Preferred Stock and 1,451,044 shares of its Series C Convertible Cumulative Redeemable Perpetual Preferred Stock outstanding.
Tanker Market Update for the Third Quarter of 2023:
• Tanker fleet supply was 688.3 million dwt, up 0.4% from 685.6 million dwt from the previous quarter and up 2.5% from Q3 2022 levels of 671.7 million dwt.
• Tanker demand in billion tonne-miles is projected to increase by a firm 7.5% in 2023, supported by solid Chinese demand for crude oil, ongoing trade pattern shifts towards longer haul distances due to sanctions imposed on Russian exports and returning crude oil volumes to the market from Venezuela, after its partial oil sanctions lift announced in October.
• Tanker fleet supply in deadweight terms is estimated to grow by a moderate 2.0% in 2023 and just 0.6% in 2024.
• Crude oil tanker fleet utilization was estimated at 84.4%, down from 85.0% in the previous quarter and up from 79.5% in Q3 2022.
Summary of Selected Financial & Other Data (in thousands of US Dollars, except fleet data and average daily results) For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 (unaudited) (unaudited) (unaudited) (unaudited) STATEMENT OF OPERATIONS DATA: Revenue $ 24,114 $ 22,131 $ 85,098 $ 47,406 Voyage expenses 719 3,274 3,234 12,022 Vessel operating e • Newbuilding tanker contracting was just 9.2 million dwt in the third quarter, resulting in a tanker orderbook-to-fleet ratio of 6.1%, close to the lowest level observed during the past 28 years.
• Daily spot charter rates for Aframax tankers averaged $27,409, down 54.2% from the previous quarter average of $59,855 and down 47.9% from the Q3 2022 average of $52,610.
• The value of a 10-year-old Aframax tanker at the end of the third quarter was $51.0 million, down 1.9% from 52.0 million in the previous quarter, and up 21.4% from $42.0 million in Q3 2022.
• The number of tankers used for floating storage (excluding dedicated storage) was 123 (17.5 million dwt), down 17.5% from 149 (21.5 million dwt) in the previous quarter and down 30.5% from Q3 2022 levels of 177 (26.0 million dwt).
• Global oil consumption was 101.4 million bpd, up 0.7% from the previous quarter level of 100.8 million bpd, and up 1.4% from Q3 2022 levels of 100.0 million bpd.
• Global oil production was 101.4 million bpd, down 0.3% from the previous quarter level of 101.7 million bpd and up 0.4% from Q3 2022 levels of 101.0 million bpd.
• OECD commercial inventories were 2,830 million barrels, up 0.1% from the previous quarter level of 2,828 million barrels, and up 3.4% from Q3 2022 levels of 2,736 million barrels.
The above market outlook update is based on information, data, and estimates derived from industry sources. There can be no assurances that such trends will continue or that anticipated developments in tanker demand, fleet supply or other market indicators will materialize. While we believe the market and industry information included in this release to be generally reliable, we have not independently verified any third-party information or verified that more recent information is not available.
xpenses 5,524 3,309 15,855 9,586 Net income 10,369 10,676 44,452 12,465 Net income attributable to common stockholders 9,891 10,404 32,425 2,595 Earnings per common share, basic 0.88 3.83 3.26 2.35 Earnings per common share, diluted 0.27 1.50 1.25 0.60 FLEET DATA Average number of vessels 8.0 6.0 8.0 5.3 Number of vessels 8.0 6.0 8.0 6.0 Ownership days 736 548 2,184 1,453 Available days 736 548 2,144 1,423 Operating days (1) 730 529 2,120 1,384 Fleet utilization 99.2 % 96.5 % 98.9 % 97.3 % AVERAGE DAILY RESULTS Time charter equivalent (TCE) rate (2) $ 31,787 $ 34,411 $ 38,183 $ 24,866 Daily vessel operating expenses (3) $ 7,505 $ 6,038 $ 7,260 $ 6,597 _________________
(1) Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire. The specific calculation counts as on-hire the days of the ballast leg of the spot voyages, as long as a charter party is in place. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(2) Time charter equivalent rates, or TCE rates, are defined as revenue (voyage, time charter and pool revenue), less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel) expenses, canal charges and commissions. TCE is a non-GAAP measure. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels despite changes in the mix of charter types (i.e., voyage (spot) charters, time charters and bareboat charters).
(3) Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the costs of spares and consumable stores, lubricant costs, tonnage taxes, regulatory fees, environmental costs, lay-up expenses and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
Fleet Employment Profile (As of November 27, 2023) Performance Shipping Inc.’s fleet is employed as follows:
Vessel Year of Build Capacity Builder Vessel Type Charter Type Notes Aframax Tanker Vessels 1 BLUE MOON 2011 104,623 DWT Sumitomo Heavy Industries Marine & Engineering Co., LTD. Crude Time-Charter 2 BRIOLETTE 2011 104,588 DWT Sumitomo Heavy Industries Marine & Engineering Co., LTD. Crude Time-Charter 3 P. KIKUMA 2007 115,915 DWT Samsung Heavy Industries Co Ltd. Crude Pool 1 4 P. YANBU 2011 105,391 DWT Sumitomo Heavy Industries Marine & Engineering Co., LTD. Crude Time-Charter 5 P. SOPHIA 2009 105,071 DWT Hyundai Heavy Industries Co., LTD Crude Pool 6 P. ALIKI 2010 105,304 DWT Hyundai Heavy Industries Co., LTD Product Time-Charter 7 P. MONTEREY 2011 105,525 DWT Hyundai Heavy Industries Co., LTD Crude Time-Charter 8 P. LONG BEACH 2013 105,408 DWT Hyundai Heavy Industries Co., LTD Product Pool
1 Vessel P. Kikuma has been sold and is expected to be delivered to its new owners in December 2023.
About the Company
Performance Shipping Inc. is a global provider of shipping transportation services through its ownership of tanker vessels. The Company employs its fleet on spot voyages, through pool arrangements and on time charters.
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