Thank you for standing by, and welcome to the Stelvogas Second Quarter 2021 Results Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by question and answer I must advise you the call is recorded today, Wednesday, 25th August, 2021. I would now like to hand over to Mr. Harry Vavaez, CEO, StealthGas.
Please go ahead, sir.
Good morning, everyone, and welcome to our Q2 'twenty one earnings conference call and webcast. This is Haiv Vafi as CEO of StealthGas, and joining me on our call today is our Finance Officer, Mrs. Sakellaris. Before we commence our presentation, I'd like to remind you that we'll 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 Stelgrass filing with the Securities and Exchange Commission. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in U. S. Dollars. Slide 3 summarizes the key highlights of our Q2 2021 results that we released today.
Our performance in the Q2 of this year was governed by 2 conflicting events, improved revenues combined with increased costs. Even though the COVID-nineteen pandemic is still persisting, we managed to limit our spot exposure compared to the Q1 of this year and most importantly, lower commercial off hires. However, we still incurred high voyage costs also affected by the increase in oil price. In addition, we faced high operating costs and dry docking expenses due to the COVID-nineteen pandemic. As a result, our higher revenue did not culminate in our operating profitability.
Even though the 2nd quarter is seasonally low for LPG demand, our operational utilization came in at 96.3%, a better performance compared to the Q1 of 2021, mainly due to decreased spot activity along with the reduction of off hire days by about 45%. We have about 74% of fleet days secured on pure charters for the remainder of 2021, with total fleet employment days for all subsequent periods generating approximately $66,000,000 excluding our JV vessels in contracted revenues. Period coverage for the remainder of Q3 2021 is as high as 87%. In terms of our sell and purchase activity, we agreed to sell 2 of our small LPG vessels, the Gas Imperial and the Arco Loyalty for further trading. These sale proceeds will further enhance our liquidity.
Focusing on our financial performance and compared to the Q2 of 2020, our revenues came in at $39,200,000 an increase of €3,000,000 compared to the same period of last year, mainly due to a 55% reduction of bareboat chartering activity, where revenues are by default lower than time charter spot earnings. In conjunction with a slight improvement of revenues stemming from the spot market, Escalated voyage costs nullified our revenue boost. Our daily time charter equivalent in the Q2 of 2021 decreased by about $260 a realistic outcome given that we had about 121% higher spot presence and 72% higher daily banker costs compared to the same period of last year, thus leading to an almost $4,000,000 rise in voyage costs. Our EBITDA, including noncash items, came in at $17,300,000 Our net income, again, including noncash items and driven mostly by one off gains arising from our JV S and P activity came in at $4,800,000 corresponding to an EPS of $0.13 In terms of capital structure and liquidity, our gearing remains low in the order of 37% and our total cash base is about 48,000,000 dollars Slide 4 provides an analysis of our fleet employment. In terms of charter types out of a fleet of 42 operating ships, excluding our 7 JV vessels, We have 5 of those on bareboat, 32 on time charter and 5 in the spot market.
Regardless the uncertain market, we have regards the uncertain market, we have managed to significantly reduce our spot exposure. Compared to our previous announcement, we successfully concluded 9 new charters and charter extensions. We have 16 vessels concluding their period charters up till the end of 2021, which will be a real opportunity should the market improve. Our period coverage for the remaining of 2021 is in the order of 74%, while currently our period coverage for the Q2 of this year is as high as 87%. We have close to $66,000,000 of secured revenues and including our JV vessels, total secured revenues increases to about $76,000,000 On Slide 5, I'd like to provide an update as to our 2 joint venture performances.
Our first joint venture, which comprises mainly of small LPG ships, currently has only 1 vessel, vehicle lucidity trading in the spot market. Since our last announcement, we managed to lock the gas defiance on a 6 month time charter and extend the time charter for the gas silicon for an additional 2 months. Focusing on our 2nd JV comprising of 2 medium gas carrier vessels, these are all under time charter contracts, thus producing steady cash flows. Following the recent sale of the Gas Chem Hamburg, which produced considerable gains, our JV outfit looking to expand further in the MGC market proceeded with the order of a 40,000 cubic meter medium gas carrier vessel to be delivered mid-twenty 23. This JV outfit has sufficient cash to cover all equity requirements with regards to this upcoming vessel delivery in about 2 years' time.
In terms of our fleet geography in Slide 6, our company focuses on regional trade and local distribution of gas. This graph is a snapshot of the position of our LPG vessels, excluding our JV vessels, as of August 23. Currently, 17 vessels trade in Europe, 13 vessels in the Middle East and Far East, 4 vessels in South America and 4 vessels in Africa. Now I'll turn to Ms. Sofia Sanchinlaris for our financial performance.
Thank you, Harry, and good morning to everyone. I will continue the presentation focusing on financial performance for the Q2 of 2021. As mentioned earlier in our call, on the one hand, we managed compared to the Q1 of this year to improve revenues, decrease the number of vessels in the spot market and reduce commercial load higher. On the other hand, and compared especially to the same period of last year, all of our cost items were burdened from vessels leaving variable charters and additional costs attributed to the pandemic. Thus, we did not manage to translate our revenue generation to operating profitability.
Let us move on to Slide 7, where we see the income statement for the Q2 of 2021 against the same period of the previous year. Voyage revenues came in at €39,300,000 marking a €3,000,000 increase compared to the same period of last year. This increase is mainly attributed to 6 fuel vessels on bareboat now operating in Aerosport or on a time charter contract. In terms of voyage costs, this amounted to EUR 6,000,000 marking a EUR 4,000,000 increase compared to Q2 2020 as our spot days increased by 121%, equivalent to about 500 days. And our daily bunker cost increased by 70% due to the increase in oil prices.
We need to note though that compared to the Q1 of this year, we did manage to reduce our spot prices and improve revenues stemming from the spot market. However, we faced higher bunker costs and additional bunker expenses for the ballast of 1 of our product tankers, hence, we did not mark the anticipated decline of voyage costs. Based on all of the above, our net revenues for the period were $33,300,000 Running cost at $15,800,000 marked about 36% increase compared to Q2 'twenty, mostly attributed to 6 fewer vessels on bareboat, for which now we incurred operating costs, along with a $400 daily rise, in excess of 50%, at least, in our daily crew cost, mainly for crew medical and crew flight expenses, which are is attributed to the COVID-nineteen pandemic. Dry docking charges amounted to $2,000,000 and corresponded to the dry docking of 3 small LPG vessels and the dry docking preparation of yet another 3 LPG vessels. Due to the COVID-nineteen pandemic, dry docking costs have increased in the sense that Asia, particularly China, is closed for dry docking and the remaining Asian yards have significant restrictions, which increased dry docking duration and related costs.
Impairment loss was $3,100,000 relating to 3 vessels, 1 all day vessel plus 2 vessels for which the company has entered to separate agreements to sell them to third parties. Based on all of this, our EBITDA, including noncash items such as impairment, is in the order of $17,300,000 Interest and finance costs marked close to $700,000 decrease, mainly attributed to LIBOR decrease. With regards to income from our JVs, both of our JV arrangements ended the quarter with an operating profit. However, it is a $3,500,000 gain on sale the Gaske and Harbock that drove this quarter's profitability. Based on all the points analyzed above, we ended the Q2 of 20 21 with a net income, including noncash items, of $4,800,000 corresponding to an EPS of $0.13 Slide 8 demonstrates our performance indicators for the period examined.
As mentioned earlier on, our operational utilization for Q2 'twenty one was in the order of 96.3 percent due to increased port activity compared to the same period of last year, that is. However, compared to the previous quarter of this year, we noticed considerable decline, 45% decline of commercial off hire, a sign that spot activity was firmer. With regard to our daily TC in Q220, this marked a gradual decline over the quarters. In Q2 'twenty one, we noticed an obvious increase. The market, mostly due to the COVID-nineteen pandemic, is still fragile, though.
Hence, it's difficult to predict if this upward trend will be sustained. Looking at our balance sheet in Slide 9, our free cash is in the order of $33,000,000 while to date, we have no further direct capital expenditure, I. E. No cash commitments in the near future. Our gearing is now in the order of 37.1%.
Based on our scheduled principal repayments, we will reduce our leverage by around $42,000,000 per year. We have no balloon obligation in 2021, with minimal balloon refinancing in the order of R20 1,000,000 that is for the period 2022 to 2023. I will now hand you over to our CEO, Mr. Harry Drafries, who will discuss market and company outlook.
On Slide 10, given the ongoing COVID-nineteen pandemic, it's quite difficult to firmly assess how the market will behave in the years ahead. However, the current market conditions and as per the analysis cut by Poten and Partners, demand for LPG is predicted to increase in the years ahead. Chinese imports will be driven mostly by the petrochemical sector as there are 13 PDH plants units planned to commence operations up until 2023. The rise of the petchem sector will also drive European LPG imports, which are forecasted to grow by 8% until the end of 2022. Overall LPG pricing will likely remain at high levels as they are greatly correlated to oil prices.
However, there is an increase of COVID-nineteen cases due to the delta variant might lead to a decrease in demand and, consequently, oil and LPG price decline. On Slide 11, we see that during Q2 2021, charter rates for small LPGs remained relatively unchanged compared to the previous quarter, but still remain much lower than pre pandemic levels. Looking at the small LPG trade west of Suez, the spot market firmed particularly towards the end of the second quarter. Owners faced less competition for cargoes, thus limited downtime and spot rates marked a slight rise as a result of the increase in oil prices. Charter employment in the region was more active, particularly driven by the demand for petrochemicals.
East of Suez market in the 2nd quarter exerted a stable LPG demand, but at a rather discouraging petchem product market. Nevertheless, spot rates remained firm and several vessels, mostly larger than 5,000 cubic meters, were fixed on period employment, particularly short term time charters. Looking ahead, it's a delta variant and the opening of crackers in Korea that will affect demand in the second half of twenty twenty one. Focusing on our market fundamentals, a small LPG LPG pressurized segment has substantial oil tonnage. 31% of the fleet is currently above 20 years of age, which is a driving force behind the increased scrapping activity.
Since the beginning of the year, we have seen the demolition of 6 small pressurized ships. Indeed, we are witnessing a heightened demolition activity, which we view as a positive macro trend for our segment. Aspiration published orders, there are 19 vessels on order, 11 to be built in Japan and Korea and 8 to 8 to be built in China and to be delivered until the end of 2023. Slide 12 presents our share performance since the beginning of the year. The performance of our stock is presenting along with selected Gas Cars P Group and the price of oil.
Since the beginning of this year, the majority of shipping stocks followed a correlation to oil price. But however, in the past few months, we noticed that shipping stocks have deviated from this pattern. With regards to oil, in July 2021, OPEC and several non OPEC members are going to increase monthly production starting this August. However, recent concern about decreased demand because of increasing delta cases have recently driven crude oil prices down. It remains to be seen how oil price will behave and affect the market going forward.
In Slide 13, we are outlining the key variables that will affect our performance in the quarters ahead. Given the market turmoil, it's quite difficult to make firm predictions. We have isolated a few key points that may assist our financial performance in the upcoming quarters. First point is that we have a total period coverage of about $66,000,000 in precontracted revenues, a total cash base of about $50,000,000 dollars sufficient cash in both JVs and an additional cash inflow arising from the sale of the 2 small LPG vessels. Hence, we can argue that our liquidity is strong.
In addition, we have reduced our spot exposure to 5 ships, thus shielding our voyage costs going forward. Moreover, we remain under a very low LIBOR environment, hence our finance costs will decrease further. Our biggest concern is the future of the COVID delta variant as it seems that the outbreak of different variants pose a threat for both global health and economy. Concluding our presentation with Slide 14, we present a brief summary of company's and market strong points. As mentioned in prior earnings calls, we are firm believers that our healthy capital structure, strong market fundamentals, along with our market expertise will help us grasp the benefits of the small LPG market recovery when it arrives.
At this stage, I'll summarize our concluding remarks for the period examined. During the Q2 of 2021, we managed to improve our revenues and reduce our commercial off hire. In addition, period activity picked up, particularly for vessels above 5,000 cubic meters. And Coccinkli, we were able to conclude an extend period charters and therefore reduce our number of spot vessels, reaching nearly pre pandemic levels. However, compared to the same period of last year, we had 6 additional vessels concluding the bareboat charters, thus adding to our operating cost base.
We faced additional costs due to the COVID-nineteen, particularly crew expenses related to medical and crew changes. Additionally, our voyage expenses were burdened as daily bunker costs increased by 70% compared to the same period of last year. Added to this, we underwent 3 dry dockings at the time of strict yard restrictions, again, due to the COVID-nineteen pandemic, thus adding further to our costs. Due to these reasons, our revenue generation was not reflected in an operating profitability. It's difficult to predict how our market will behave in the quarters ahead as the global economy due to the COVID pandemic and related violence still remains fragile.
Nevertheless, we own a strong and diversified fleet across the broader LPG spectrum, who enjoy adequate liquidity, further enhanced by recent agreement to sell 2 small LPG vessels and low debt levels that allow us to gain leverage regardless of how the global economy will respond to the recent COVID delta pandemic escalation. We have now reached the end of the presentation. We'd like to open the floor for your questions. So please, operator, open the floor.
Thank And your first question today comes from the line of Randy Giveans from Jefferies.
Hello, gentlemen. How's it going?
Hi, Andy. Hope you're well.
Yes, sir. All good, all good. A handful of questions here. So first, for those 9 recently extended charters, can you provide either an average rate or the rate change from previous charters? And then with the 87% of 3Q 'twenty one now complete, how do you expect 3Q 'twenty one earnings or revenue to compare with 2Q 'twenty one?
On the first question, because it's, as you know, different sizes of ships and different ages of ships, giving an average number would not, I think, help. It would confuse matters. I think in most cases, I would say the rates were stable. So nothing fancy, huge on the increase side, but no major reduction either. So in the circumstances, I think we're happy.
On the second question, the problem, as you might have seen from this quarter, is not the income side. The income side is somewhat secure. The problem is the costs. We have delays. We have very expensive crew costs.
We have quarantine. We have cases where a ship has a single COVID case and must stop and quarantine for 14 days and things like that, which can make a quarter very profitable or not. So obviously, we can't really say too much for Q3. I would expect and be happy with all these things being considered if we are profitable in Q3.
Got it. Okay. And then you mentioned you agreed to sell 2 small vessels, right? One was built in 2,008, the other in 2015. So why did you sell those 2 specifically?
Yes, good question. As we have seen the last couple of years and excluding COVID as well, the better earners, I would say, are the ships that are 5,000 cubic meters and above, which is the bulk of our fleet anyway. Both of these ships are 3,500 cubic meters, where their earnings are on the low side, even in the upcycle. Of course, they have some increase, but the increase is small. So we found the opportunity to sell both of those ships.
The more modern ship with forward delivery. So on one hand, we are selling ships that are not big earners. We are selling ships that even if the market improves, are not going to add significantly to the bottom line. And secondly, the modern ship, we have agreed forward delivery. Thus, we have the opportunity to exploit that ship a bit longer if indeed we see in Q4 or slightly later a better market.
In addition, we think that having a significant cash balance in today's environment is very, very, very important. And you know from our past calls how conservative we are on that side. We think you should have between $750,000,000 to $1,000,000 per ship cash for a rainy day, and we don't know how long the COVID delta and all those other variants will last. So by selling those ships and having a small book loss, but adding to our cash pile, I think it's a conservative and defensive move to protect our shareholders.
Okay. And then when are those vessels being delivered? Do they not have firm delivery dates?
The Imperiale is relatively prompt, will deliver within September. And the other one will deliver either before New Year or after New Year. So we have, as I told you, some time to trade her.
Got it. Okay. That's fair. All right. Bigger picture, I guess, there's been some consolidation, right, in LPG in recent years, even in recent months with BW, Epicosan, as well as Navigator and Ultragaz.
So I guess 2 questions or the same question in 1. Are you looking to buy some additional smaller LPG vessels? Or similar to the recent sales and your massive discount to NAV, are you looking to sell further vessels or even open to merging with a larger player?
Listen, Randy, you know us. We are very open minded and very flexible. But first of all, we look to protect our shareholders in a very difficult environment. And just by posting a profit in this environment, despite the book loss and the dry dockings that we had, I think for us is a significant achievement. Buying more ships, I mean, unless it's a bargain, I would say no.
Why would we buy ships at NAV when we're trading at a big discount of NAV? It's better to sell the ships at NAV and then keep the cash to protect ourselves. Or if our cash pile improves, start buying back stock again like we did last year with our tender offer. Merging, I don't know is the answer. I mean, if we see good value in such a move, definitely, it will be considered by the Board.
The recent mergers that you said, we haven't really seen yet if it's positive or not. We would need at least 2, 3 years to judge those moves. Generally speaking, the bigger, the better. We have a very big fleet on our own. So it's not a necessity for us just to merge to be big.
It must make sense numbers wise and value wise.
That's fair. All right. I guess last question. Let's put it all together, all the stuff you just said, plus everything in your financials, your balance sheet is in good place, you have a decent amount of cash flow visibility now with your charters through the Q3 and even through the Q4. You sold a couple of older vessels.
Clearly, you're trading at that massive discount to NAV, as you mentioned as well. So market capital of $100,000,000 asset base close to $1,000,000,000 right? Your book value is, I don't know, I think you say $567,000,000 So why not repurchase shares in a substantial amount kind of at these levels? I know COVID uncertainties and cash balances and what have you, but selling of ships and buying shares seems like a very accretive use of cash here.
Exactly. And I think we're one of the few companies that has done so much in the recent years, especially with our tender offer in the start of the COVID pandemic, where everybody thought that we were crazy. But we did it. And I think some of our shareholders did benefit from that. The Board will not allow any share purchases before we see some light at the end of the tunnel.
I think it's strict. But I think on the other hand, it shows how much we don't want to go and raise emergency equity and dilute everybody, like a lot of our competitors have done. So we need patience. It's been already close to 2 years of the COVID problem. It will get solved sooner or later.
We have the fleet. We have the money. We have the protection, but we need a bit more patience for this to go away. And then, of course, if we start generating more cash, obviously, at this valuation, the share buyback is a no brainer, as we've done many times before.
All right. I agree. I agree. Sounds good. Well, good luck.
Stay safe, and thanks again.
Thank you, Randy, as always.
Thank you. And we have a question from the line of Lance Gadd from Gadd Family, LLP.
Yes, good morning. I was curious, could you tell us about the exact difference between net income and adjusted net income? What is included in that difference?
It's a few things, Lance. One of the most important things, I think, is the impairment. But if you want the exact breakdown, please send us an e mail because on the phone, I might forget something and then I'll have a problem. So better send us an e mail and we'll revert in a written form, which is, I think, more proper.
Right, right. Now we our accounting is all by U. S. Accounting standards or U. S.
Standards or International?
U. S.
U. S, okay. Okay, thank you.
Thank you. Last, please send us an e mail and we'll revert as soon as we can.
Okay, thank you.
We have no further questions at this time. If you wish to continue.
Yes. We'd like to thank you for joining us at conference call today and for your interest and trust in our company. We look forward to having you again with us for our Q3 2021 results call in November. Thank you.
Thank you. That does conclude your call for today. Thank you all for participating.