Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's Second Quarter 2021 Earnings Conference Call. Today's call is being recorded, and an audio webcast and presentation are available in the Investor Relations section of the company's website, ardmoreshipping.com. A replay of the conference call will be accessible anytime during the next 2 weeks by dialing 1877-344-7529 or 1412-317-0088 and entering passcode 10158719. At this time, I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore Shipping.

Thank you, and good morning, and welcome to Ardmore Shipping's Second Quarter 2021 Earnings Call. First, I'll ask Paul Tivnan, our CFO, to describe the format for the call and discuss forward-looking statements.

Thanks, Tony, and welcome, everyone. Before we begin our conference call, I would like to direct all participants to our website at ardmoreshipping.com, where you'll find a link to this morning's second quarter 2021 earnings release and presentation. Tony and I will take about 15 minutes to go through the presentation and then open up the call to questions. Turning to Slide 2, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from the results projected from those forward-looking statements and additional information concerning factors that could cause the actual results to materially differ from those in the forward-looking statements is contained in the second quarter 2021 earnings release, which is available on our website. And with that, I'll turn the call back over to Tony.

Thanks, Paul. So in terms of the format for today's call, to begin with, I'll discuss financial highlights and recent product market activity. After which Paul will provide an update on product tanker fundamentals and financial performance. And then I'll conclude the presentation and open up the call for questions. So turning first to Slide 4. We're reporting an adjusted net loss of $7.6 million or $0.23 per share for the quarter compared to $8.6 million or $0.26 per share for the first quarter. The results of extremely challenging trading conditions as a result of the pandemic, but with a recovery now on site later this year, which we will discuss in depth later on. Charter rates improved in the second quarter, representing continued sequential improvement from the lows seen in the fourth quarter of last year, but we're now into a seasonally soft summer period. Our MRs earned $11,600 per day in the second quarter compared to $11,200 in the first quarter and $9,700 in the fourth quarter of last year. For the third quarter to date, we've earned approximately $10,000 per day with 40% of the quarter fixed and expected decline given the time of the year regarding the seasonal slowdown. Our chemical tankers continue to perform well relative to MRs, with earnings of $12,300 per day or $14,000 on a capital-adjusted basis, but are now following the product tankers down in a seasonally soft summer period. Meanwhile, in the face of these challenging market conditions, we continue to focus on operating performance, financial strength and executing on our energy transition plan. Operationally, we're performing well relative to the market and our peers, and in anticipation of improving market conditions are looking to build earnings upside, most recently by adding another TCN MR for a period of up to 1 year at a rate of $11,850 per day.

Thanks, Tony. On the next 2 Slides, we will take a look at the product tanker demand drivers, primarily underlying oil consumption and increasing ton mile demand as a result of accelerated refinery dislocation. So looking firstly at global oil demand on Slide 8. The global oil demand recovery is well underway. Current oil consumption is expected to increase by approximately 4 million barrels a day by the end of the year. Road fuel demand is coming back strongly and expected to exceed pre-COVID level this September, while the recovery in aviation fuel remains constrained by border closures. Overall, demand across all refined products is expected to return to pre-COVID levels this winter as the vaccine rollout continues. At the same time, oil production is expected to increase to meet demand. OPEC Plus are reversing their cuts, while other producing regions are gradually increasing their output. Finally, oil product inventory surpluses have been worked through with current stock levels in line with the 5-year trailing average. Moving to Slide 9, we take a look at refinery dislocation developments, which is a key driver of ton mile demand growth. Dislocation means shoving down of locally oriented refineries in developed areas and subsequently supplying those markets with refined products transported by sea from refineries which are opening in the Middle East and China. As you can see on the map on this slide, there is a very clear trend in where the refineries are closing and where refineries are opening. Over the past few years, we have seen a redrawing of the global refining map, specifically closures in less efficient refineries in the U.S., Europe and Australia and Japan and at the same time, significant refinery capacity expansions in the Middle East and Asia. These new refineries are larger and much more efficient. And while the trend has been ongoing for some time, the pandemic has accelerated the closure of smaller refineries. Approximately 4 million barrels a day of refinery capacity has been closed or announced since the start of last year. Most recently in June, it was announced that the 200,000 barrel a day refinery in St. Croix will close again indefinitely. And meanwhile, the new 400,000 barrel a day Jazan refinery in Saudi Arabia and the 600,000 barrel a day refinery in Al Zour in Kuwait are scheduled to come online later this year. Overall, refinery dislocation developments are providing a significant boost to our market, which will become more evident in the coming months as oil consumption returns to more normalized levels.

Thanks, Paul. So to sum up on Slide 17. Product tanker charter rates improved quarter-on-quarter, but we're now in a seasonally slow period. Chemical tanker rates are performing very well on a relative basis with rates outperforming product tankers for the last 3 quarters, a trend we expect to continue. We also expect product and chemical tankers to lead an overall tanker market recovery, given the very -- the expected very rapid recovery in CPP demand. While the exact timing of the market recovery is unclear, we do expect to see meaningful improvement in tanker rates towards the end of the current quarter and into the next as economies reopen in earnest and international air travel begins again. Meanwhile, the MR supply outlook is very positive with the scrapping rate now 3x to 4x the level of 2020 and ordering whom in other shipping sectors taking up yard capacity and been driving up pricing. As we way to market recovery, operational performance and financial strength remain our top priorities, we also continue to pursue our ETP initiatives. We closed the Element 1 transactions in June and are working on other initiatives to drive improvement in fleet performance and emissions reduction And as a final point, we recognize just the purpose of these calls is to discuss economics, but we must remember the very real impact of COVID-19 on our operational growth. In particular, our thoughts remain with our seafarers and their families and we're working every day to ensure their health and safety through the pandemic. We're very pleased to have co-led the Seafarers International Relief Fund, fund-raising effort initiated in May, and we want to thank those of you who participated. And with that, we're happy to open up the call for questions.

The first question comes from Jon Chappell with Evercore.

Paul, my first one is for you. The Seawolf and the Seahawk refinancing, they freed up a fair amount of cash relative to the size of your balance sheet. Just curious, did you have to change the terms of those financing taking a bigger spread? And then also, are there any other ships in your fleet where you have the potential to do a similar refinancing and free up the same type of liquidity?

Good question, Jon. So on the -- specifically on those 2 ships, they've actually -- it's an existing financier, but they've moved from a bank facility to sale and leaseback structure. So the terms and the pricing of that would reflect the more leasing type structure. So a slight increase on the margin there. And yes, we would have a number of other ships in the fleet that we could put into those type structures if we need to. But as Tony pointed out and I pointed out in my comments as well, we've got a strong liquidity position now, and there's no -- doesn't feel like there's any immediate needs for any financings like that for the next quarter or so.

Okay. I mean, could you just say how many ships, because it's good to know you have that option without a more dilutive necessity if need be?

Yes. No, we have -- I think it's approximately 8 ships on -- 8 or 10 ships on senior bank financing, which we would transfer to if the need be.

Great. And then my second question, I know you said you have 80 dry dock days coming up. But as I read about the Lean Marine's FuelOpt propulsion and installing it on the entirety of your fleet, is this something that could be done in voyage? Is it something that's done just during the normal dry dock? Will there be an acceleration of dry dock days in the quarters forthcoming to do this? And then also maybe if you can just explain a little bit more of the financial benefits of using this technology?

Sure. I'll answer and then pass it over on to Tony. But no, the Lean Marine system, we've had it on one of our existing ships trialing it for a period of time. That doesn't require any additional drydocking. It can be done on the run. And the drydocking days, yes, we had ships scheduled for drydocking in the second quarter, but yard constraints they all now would be done in the third quarter. So the 80 days would be pretty standard for that. And then in terms of the fuel benefits and payoffs, the payback on these things is a matter of months. I don't know, Tony, if you've got any further comments?

Yes. I mean it's probably close to $2 million across the fleet. We'll roll it out over time. There's no meaningful time out of service, and it can be done on the round, as Paul said. And the IRR is about 75%.

The next question comes from Randy Giveans with Jefferies.

So looking at the 1-year time charter and I really like that deal, the under $12,000 a day for the 2009 built MR. Is there a big discount there relative to maybe a modern or Eco 2015, '16 built MR? Any further appetite for further time chartering here?

We're pretty selective in what we do. Probably an Eco design would cost maybe $1,000 more because that's what -- that's the additional incremental earnings from the fuel efficiency and a bit of commercial flexibility in the design. So yes, I mean, we -- time chartering now is, you could consider it a core part of our business.

Great. And then I guess, second question, obviously, the E1 deal is complete. You raised the $25 million in the preferreds. Congrats on that. Any updates on timing for the additional $15 million in preferred equity and maybe the use of capital, that $25 million or even $40 million?

Thanks, Randy. I'll take that. So no update on timing. It's in the works. It's likely after the summer break at this point. And in terms of use of proceeds, there's nothing earmarked for it right now. I think maintaining financial flexibility is a key priority for us. But in terms of use of proceeds, debt reduction or opportunistic acquisitions or just investment in the energy transition. So I think the main priority right now is maintaining a strong liquidity position and maximum financial flexibility.

The next question comes from Magnus Fyhr with H.C. Wainright.

Just couple of questions left. Just on the hydrogen joint venture. I mean it's been 6 months in now. Do you have any -- can you kind of give us a little update on what's going on there? And what our expectation should be over the next 12 months?

Thanks, Magnus. So I guess E1 Marine, it officially closed at the end of June on June 17. So the management team there, we have a Managing Director in place and a Marketing Director will be joining in the next few weeks. So they're busy. Right now, they're working on class approval for the system and getting it marinized I suppose, for the one of a better phrase. I think it's possible we could have sales on the board this year, but more likely it will be in 2022. So I think right now, they're working on the regulatory modernization and -- but significant inbound interest from the shipping community as well across all sectors. So I think it bodes very well for that business, but I would say likely 2022 before we get proper sales on the Board.

This concludes our question-and-answer session and today's Ardmore Shipping Second Quarter 2021 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.