Good day, and welcome to the StealthGas First Quarter 2018 Conference Call. This conference is being recorded. At this time, I'd like to turn the call over to your host today, Mr. Harry Vafias, Chief Executive Officer. Please go ahead, sir.

Good morning everybody and welcome to our first quarter 2018 earnings conference call. This is Harry Vafias, the CEO of StealthGas. And joining me on the call today is our Finance Officer, Mrs. Fenia Sakellaris, who will provide commentary on our financial performance for the period. Before we commence, I would like all of you to be reminded that we will be discussing forward-looking statements, which reflect current views with respect to future events and financial performance. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. Risks are further disclosed in StealthGas’s filings with the SEC. I would also like to point out that all amounts quoted unless otherwise clarified are implicitly stated as U.S. dollars. Slide 3 summarizes our key highlights for the first quarter of this year. This quarter's performance, both in terms of operational utilization and profitability did not reflect our company's full potential and was an outcome of specific events combined with the change in the market's economic variables, all of which will be explained in detail during the course of this call. In the first quarter of 2018, we achieved an operational utilization of 93.3%, 3% lower than our utilization in Q1 2017, mostly due to the ballasting of three newbuild vessels and operational days lost due to the positioning of spot trading vessels. Despite this, we continue our chartering strategy to the extent the market permits us to do. We have 73% of fleet days secured for the remainder of 2018 with a total of about $171 million in contracted revenues. One of the most interesting aspect of this past quarter was in essence our sale and purchase activity. In May 2018, we took delivery of our last 22K semi-ref newbuilding LPG ship,…

Thank you, Harry. And good morning to everyone. As explained at the beginning of our call for the first quarter of 2018, although we were still operating in a favorable market for the small LPGs, we faced several setbacks that led to lower net revenues unanticipated. Let us move on to Slide 6, where we see the income statement for the first quarter of 2018 against the same period of the previous year. Voyage revenues came at about $39.7 million, an increase of 4.2% compared to the first quarter of 2017. This increase is attributed to improved rates for the small LPGs, which partially covered their revenue reduction stemming from the operation of oil tankers. One of our product tankers was operating for the majority of the first quarter in the spot market, whereas known rates for these vessels are quite weak. Overall this quarter compared to the fourth quarter of 2017, the revenue from our tanker operation were about $700,000 lower. We need to stress that we achieved higher revenue despite of a low utilization figure compared to the first quarter for 2017 and the sale of LPG vessels in 2017 and understanding that the market for the small LPGs is indeed improving. Voyage costs amounted to $5.6 million, marking a 58% increase compared to Q1 2017 due to the higher number of vessels operating in the spot market, a quarter-on-quarter increase of average bunker prices by 20%, but most importantly, the ballasting of three newbuild vessels in this quarter added to our voyage costs about $600,000. Net revenues, that is revenues after deducting voyage costs, came at $34.1 million. Running costs at $15.4 million marked about $460,000 increase compared to Q1 2017. This increase was an outcome of the operation of three 22,000 semi-ref vessels, which is more…

Let’s continue on Slide 10. Global trade of LPG has grown by an average of 6% over the last decade, driven largely by growth in U.S. exports to Asian destinations. Indeed, LPG exports from the U.S. have shown a positive trend, increasing by an average of 35% per annum over the past 10 years. Leading LPG importers are China, Japan, India and South Korea, with Asia accounting for half of the overall trade. China has eight PDH units currently in operation and will commence the operation of two more in 2019. This PDH plants use about 40% of the propane imported by China. As for other major importers in the first quarter of 2018, LPG imports in South Korea rebounded due to strong demand from the country’s petrochemical sector. In March 2017, we saw the opening of the third PDH plant in South Korea. In fact, that is a major contributor to the country’s increasing demand for LPG. Other countries like, for instance, Indonesia have exerted strong LPG import growth, which for 2017 was 17%. This is the outcome of the country’s program to substitute kerosene with LPG. On Slide 11, we see that during Q1 2018, rates for all small LPG segments continued to be on the rise, exerting in most cases an annual increase of about 20%. Our market fundamental still stands strong and it’s believed that the market will continue to strengthen for at least the next two years. This positive long-term market forecast is due to the very small order book and the aging fleet of our segment. According to Gibson Shipbrokers, it’s envisioned that rates for the 3,500 cubic meters ships will move towards $300,000 per month, while for the 5,000 cubic meters ships rates will climb to the mid-$300,000. Focusing on our segment’s trade…

Certainly, thank you, sir. [Operator Instructions] We now move to our first question today, which comes from Randy Giveans of Jefferies. Please go ahead.

Hey, Harry. How is it going?

Hi, Randy.

So I've got a couple of questions, starting with the sale of the vessels. So as I asked in the last quarter, you had seven vessels or so over 20 years of age. You sold three vessels, two of them older, one of them kind of more modern, as you mentioned. So how did you kind of choose these three? Were these three that you have earmarked for sale or there are a buyer that specifically wanted these vessels?

As discussed, all of our over-aged vessels are sales candidates. Obviously, the older the ship, the more difficult it is to trade it. The more – the older the ship, the more difficult it is to get all major approvals. The older the ship, the higher OpEx you have. So all our old ships might be sales candidates, and obviously, when you see this kind of premium over demolition value, I guess there's no question you have to take the money. On the slightly modern ship, again, it was a matter of price. We were not actively seeking a buyer, but we got a very good price for a small 12-year-old ship. And we decided that, with the permission of the board, to sell her.

Okay. And then for use of proceeds for these. Obviously, you're paying on some debt on them. What about the incremental kind of net cash? And as a follow-up to that, what is kind of your ideal –your needed cash balance going forward? Is $50 million kind of your base level or do you only want to hold $30 million on balance sheet?

Good question, Randy. First of all, the total debt on these three ships was four point something million, so the debt was very minimal. Use of proceeds, there is no use of proceeds at the moment. We’re following the market. If, of course, there’s a very good opportunity to buy something younger, it will be discussed at board level. We just finished our huge CapEx program, so obviously, we are no short of modern ships. And having a cash balance of about $50 million, as you said when you have a fleet of 50 to 60 ships, I think, is safe enough. So again, with the board’s permission, we think we should always have between $40 million and $60 million as cash for rainy day or if something goes wrong.

Got it. Okay. Now looking at the supply side. It appears that the small LPG sector actually shrink year-to-date with zero deliveries, I think, or maybe six scraps. So do you expect this trend to continue throughout 2018? Like a net supply shrinkage in the small LPG segment?

This is what the numbers show, Randy. I mean, forecasting scrapping is not an easy thing because if, let’s say, by September the rates are up by another $1,000, then some people might prefer to pass a special survey and buy and pay $400,000 on scrapping the ship. But with 20% of the fleet over 20 years of age, sooner or later, you’ll see more scrapping going on, especially with the two new obligatory regulations coming in force from now until 2020, as you know well. So I think it looks good, and comparing with other shipping segments in LPG or other completely different segments, dry and tankers, I don’t think you’ll see such attractive demand and supply fundamentals, especially from a fleet point of view.

Got it. And then the order book only has maybe seven vessels at most. So speaking of the order book, if you or any owner per se, were to make an order today for a 3,500 cbm vessel, when do you think that could get delivered? Is it 12 months, 18 months, 24 months?

These ships, as you know well, cannot be ordered in your typical huge Chinese yard that can build 20, 30 ships per annum. These are mainly built by small Japanese yards with an annual output of two to three ships. If you order a ship now, I guess, the earliest you can take delivery is 18 months from the signing date. But I hope we don’t see many new contracts. And up to now, despite the market strengthening, we have not seen a big newbuilding surge, which actually is very good news for the owners of such vessels.

Okay. Two more quick questions. Sorry to – not sure I hold the call here. But speaking of charters, you’ve locked in a bunch of one-year charters, booked time charter, bareboats in recent months. Now were these at relatively comparable or higher rates than previous charters? And if higher, are we talking $100 a day, $1,000 a day? What is kind of the rate of change there?

Good question. As you can understand, Randy, I cannot really – I cannot give you a number because all the ships are different in ages and sizes. So obviously, they’re depending on location, there is a difference on the premium. What I can tell you is that on the LPG side, excluding of course, the very old ships, all charters were agreed at better rates. Better rates might mean from $500 up to $1,000 a day. On the tankers, it’s the opposite. All new charters, obviously, on the tanker side, because the tanker side – the tanker segment at the moment is at a very, very low point in the cycle. All new charters on the tankers are down by between $2,000 and $5,000 a day. Thank God, we don’t have too many tankers opening from now on. But we have as you saw in the presentation, another 19 LPG ships coming open from this month until December. So hopefully, this will be – most of these, excluding the old ships, will be renewed at better rates, thus improving a lot the bottom line.

Got it. All right, last question, I promise. A quick morning question. So do you expect the voyage expenses to decrease sequentially in 2Q, mainly as that $600,000 in ballast costs for those three 22,000 semi-refs were one-time items or are these ballast costs going to continue into 2Q 2018 and beyond?

Again, it’s not very easy to say, but I would suspect that it will be down, because these were one-off positioning voyages for these newbuild vessels to start their actual trading.

Right.

And so I would say that for Q2, when we announce the Q2 results, these will be found at lower levels, yes.

Got it. All right. Well, thanks for the interview there. I’ll turn it over.

Thank you, Randy.

Thank you. [Operator Instructions] We’ll now move to our next question from Arrash Zafari [Quaero]. Please go ahead.

Hi, Harry. Quick question from me. This is Arrash from Quaero. Sorry if I missed it, you mentioned the product tankers. Could you just update us on the crude oil tanker, on the Aframax, and what your strategy is for that as well?

Yes. I think it’s in our announcement, we just – in Q1; we fixed the ship on a one-year bareboat at a lower rate, obviously, from what she was on. And obviously, we chose to fix for one year, because we are at the bottom of the market, so obviously, you don’t want to lock the ship into a low rate for a long time. So, we hope by the time she comes open again in Q1 2019 that the market will be better.

Got it. Thank you very much.

Thank you.

Thank you. [Operator Instructions] We have now a question from George Berman from Raymond James. Please go ahead, sir.

Good afternoon, gentlemen. Congratulations. It looks like we’re finally going in the right direction.

George, thank you. I’m not as happy as you are. But the market is going towards the right direction. That’s true.

Yeah. The improvement is there. Just one quick question concerning the – I think you still have an open stock buyback program going on. How much sense would it make with your company trading basically at one third of net asset value to forcefully engage in further stock buybacks since your newbuild is complete?

Good question, George. We’ve discussed that in the previous quarter. The board have said that they want to see the actual improvement of the market being crystallized in our quarterly results, which has not really yet happened. And at the end of the year, depending on what the market has done and what our cash position is and what our debt position is, to decide either to continue buybacks, as you know, we have spent $21 million to buy stock already, or instead of buying back more stock, start a small dividend. These are the two options we have, but the board will discuss that in seven months from today, around Christmas time. So we have to show them that from now until Christmas, the results will improve, the bottom line will improve, the profitability will be up, and obviously, thereafter without any CapEx, it will be a good idea to discuss one of the two options and hopefully get the Board's greenlight.

Okay, that’s something to look forward to. One last quick question, the increases in fuel prices is generally passed through or taken on by the charter. Is that correct? Or do you have exposure to actual fuel price rises?

Very good question. When the ships are fixed on time charter or bareboat, then the fuel price is paid by the charter. When the price – when the ship is fixed in the spot market or on consecutive voyages, then the price is paid by the owner. So it depends on what kind of charter it is.

Okay and then maybe one quick last question. What do you contribute the recent strong rise in LIBOR rates to? Compared to the U.S., it seems like especially the short-term LIBOR rates have been rising at unprecedented levels.

Trump is doing a very good job with the economy, and that is reflected in the LIBOR rates. But I'm not an American, so you'd better not rely on my opinion.

Even though LIBOR is the London interbank rate versus U.S. rates?

Sorry, I missed that.

LIBOR is the London interbank borrowing rate, which would entail primarily the European markets versus our U.S. markets. And it seems like.

No. LIBOR is the U.S. one. It's based on the U.S.

Okay.

Thank you George.

You are welcome.

Thank you. As we have no further questions, I'd like to turn the call back over to you, Mr. Vafias, for any additional or closing remarks. Thank you.