Imperial Petroleum Inc. ($IMPP)

Good day, and thank you for standing by. Welcome to the Q1 2026 Imperial Petroleum Results Conference Call. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today, Imperial Petroleum CEO, Mr. Harry Vafias. Please go ahead.

Good morning, everyone, and thank you all for joining us for our first quarter '26 conference call of Imperial Petroleum. I'm Harry Vafias, the CEO of Imperial Petroleum. And joining me on the call today is Ms. Sakellari, who will be discussing our financial performance. Before we commence our discussion, we'd like all to read the safe harbor disclaimer on Slide 2. In essence, it's made clear that this presentation may contain some forward-looking statements as defined by the Private Securities Litigation Act. We raise the attention of our investors the fact that such forward-looking statements are based upon the current beliefs and expectations of Imperial Petroleum and are subject to risks and uncertainties which could cause future results to differ materially from these forward-looking statements. In addition, we'd like to clarify that during this call, we will quote monetary amounts, unless explicitly stated otherwise, all in U.S. dollars. In Slide 3, we summarize our key operational and financial highlights for Q1 '26. The year '26 commenced in an extremely favorable way for Imperial Petroleum. Our enhanced fleet of tankers and drybulk ships fully capitalized upon the firm rates prevailing throughout the period. This quarter, with revenues of $61.7 million and a net income of $28 million, we marked our second best quarterly performance in our history. We view our results as a solid proof that our strategic decision to expand our fleet was sound as a larger fleet allows us to leverage favorable market conditions and generate material results. The tension in the Middle East, which commenced close to the end of February '26, brought upon a global turbulence and heavily affected seaborne trade. The closing of the Strait of Hormuz tightened the tanker market, causing tanker rates to boom. It's worth to mention that our daily net revenue from tankers dramatically increased in Q1 '26 to about $43,000 a day, compared to $27,000 a day in Q4 '25. Drybulk market also remained firm. Our daily net revenue from our drybulk ships increased in Q1 '26 to about $16,000. Looking briefly at our operational highlights. Our fleet operational utilization came in at 88.7%, a bit lower than in Q4 '25 due to increased ballasting activity of our vessels traveling to their next employment. Looking at our fleet subsegments, operational utilization for Q1 '26 was 87.8% for our tankers and 89.5% for dry vessels. About 59% of the total fleet calendar days in Q1 '26 were dedicated to time charter activity, while the remaining approximately 40% is spot activity. Following the delivery of our drybulk vessel, the Post Marvel, in the beginning of January '26, in April '26, we took delivery of a Handysize drybulk ship, the Eco Crossfire, increasing our fleet on the waters to 21 vessels. Providing more color on our financial performance, our revenues of $61.7 million were 21% higher than in Q4 '25 and about 92% higher compared to the same period of '25. The increase of our operating income was impressive. In Q1 '26, income from operations came in at $26.5 million, marking a $12.8 million increase or 94% against Q4 '25 and an $18.7 million or 240% compared to Q1 '25. As already mentioned, our net income of $28 million was our second best performance of all times. The basic earnings per share generated in 1 single quarter was in the order of $0.60, which based on our current share price levels, gives us an earnings yield for the quarter in excess of 12%. Our profitable operations continue to fuel our liquidity. As of March 31, '26, our cash and cash equivalents including time deposits were about $213 million, versus $179 million as of end of year '25. Our activity on the share buyback scheme has been robust. As to date, the company has repurchased, up to May 21, a total of 855,769 common shares, for an aggregate amount of about $3.8 million. On Slide 4, we are providing a summary of our current fleet employment. About 48% of the fleet is currently under time charter. We employ 6 MR product tankers and 2 Suezmax vessels in the spot market, capitalizing on the prevailing strong market environment, and achieving average daily rates of about $29,000 per day for MR ships and close to $95,000 per day for Suezmaxes. In addition, 1 MR product tanker is employed under a period charter through September '27. As customary, the majority of our drybulk ships are on short-term time charters. The commercial strategy we currently follow for our drybulk vessels provides healthy cash flow while minimizing idle time and voyage costs. On Slide 5, we are discussing the evolution of market rates for both tankers and bulkers. In Q1 '26, market rate surged for tankers and strengthened further for drybulk ships. Even before the U.S.-Iran-Israel conflict outbreak towards the end of February, tanker rates were strong at the back of added OPEC supply, the return of Venezuelan cargoes and long-haul trades for product tankers from the Atlantic to Pacific so as to meet shortage supply in Asia. The blockage of the Strait of Hormuz led to oil trade disruptions, longer haul voyages, oil supply shortages and increase of risk premiums, leading to a spike in tanker rates. Indeed, at the end of Q1 '26, rate for Suezmaxes were in excess of $250,000 a day, while rates for product tankers were close to $60,000 a day. For the drybulk ships, the positive trend witnessed in Q4 '25 continued throughout the first quarter of '26. Global shipment growth momentum was supported in Q1 by the uncertain macroeconomic environment, the congestion of the Panama Canal and recently a rise in coal demand. It's interesting to note that as of the end of Q1, the BDI Supramax Index was up 40.3% year-on-year, while the BDI Handysize Index was up 36.7%. Touching briefly upon the current levels of market rates. Tanker rates are still firm but have undergone a degree of normalization, particularly during the ceasefire period in April, which is, for a brief period, debottleneck of vessels at the Strait of Hormuz. Following April 20, rates for tankers picked up as hostilities in the area resumed. For the drybulk ships, rates have picked up further and are now close to $20,000 per day, mostly due to gas supply shortages, which have increased market demand for coal. Market update on 6. In Q1 '26, the disruption in the Middle East was a key focal point of the shipping industry, heavily affecting all shipping segments, but especially tankers. The blockage of the Strait of Hormuz has caused major trade disruptions. About 10% of the compliant tanker fleet was stranded in the Middle East in Q1, causing vessel shortage, output supply shortages and oil prices to surge. In this environment, the International Energy Agency took the decision at the beginning of March to release 400 million barrels of oil and refined products. For the crude tankers, markets were firm even before the Middle East conflict at the back of strong cargo supply from rising Middle East gas output and increased Chinese demand. The Iran-U.S.-Israel conflict brought upon a collapse in Hormuz exports and Middle East Gulf production shut-ins. This caused significant repositioning of vessels from the Pacific and an increase of Atlantic exports to Asian buyers. Product tanker market essentially picked up after the outbreak of the Middle East conflict. The closing of the Strait of Hormuz has shut off the Middle East CPP exports, creating a shortage of crude feedstock to Asian refineries. And this led to an increase in global product prices, particularly in the Pacific for jet oil and arbitrage opportunities, especially between the Atlantic and the Pacific. Looking ahead a potential ceasefire leading to the reopening of the Strait of Hormuz, prospects of increased demand for inventory rebuilding. Middle East producers will commence production above pre-war levels while we may see sanctions lifted on Iran, thus adding more barrels to the market. In terms of tanker market fundamentals, total order book for Suezmax vessel stands at 25.6%, with 16% of the fleet above 20 years of age. For the MRs, total order book stands at 15.8%, while close to 20% of the fleet is above 20 years of age. On Slide 7, discussing the drybulk market, Q1 had a strong start in both volumes and rates in spite of the seasonal factors such as the Chinese New Year, which typically causes a market slowdown. Global shipment volumes increased year-on-year both by vessel and commodity types. Coal trade marked a marginal increase in the first month of '26, particularly due to reduced imports from China and India, offset by the rise of imports from Korea. Following the outbreak of the U.S.-Iran-Israel conflict, Asian countries are boosting coal-fired generation in response to the disruptions to oil and gas supplies as the countries need to replace lost Middle East LNG cargoes. This increased resilience in coal is expected to continue in the future, supporting a rebound in coal trade in Q2 '26. Iron ore departures to China were up in Q1 by about 4%, while Guinean bauxite exports to China stood strong, marking an 18% year-on-year increase. Wheat trade surged by 18% year-on-year supported by elevated prices. And looking ahead, there's a concern about the impact of the Iran conflict on the global economy, which might have an adverse impact on the drybulk demand. The global drybulk fleet continues to expand, growing 3% in '25 and a further 1% in '26. However, reduced newbuilding orders, but most importantly, an aging fleet, close to 16% of the fleet is currently above 20 years of age, in conjunction with low demolition, could bring upon a future supply imbalance as older vessels retire without sufficient replacement. A vessel supply shortage is expected to support market rates. I will now pass the floor to Mr. Sakellari in order to summarize the financial performance.

Thank you, Harry, and good morning to all. In Q1 '26, Imperial Petroleum marked a record performance. This quarter, we generated the second highest profitability of all times. Market conditions were favorable as rates, particularly for tankers, peaked. Drybulk rates were firm during the whole quarter, so we managed to capitalize upon the sizable drybulk fleet we operate. Looking at our income statement for Q1 '26 on Slide 8, revenues came in at $61.7 million in Q1 '26, marking a 92% increase compared to revenues generated in the same period of 2025. This increase is mainly due to a noticeable increase in market rates for both product and Suezmax tankers, along with the increase of our fleet by 8 vessels. As of the end of Q1 '25, rates for product tankers were close to $26,000 per day, while daily rates to Suezmax tankers was close to $47,000. As of the end of Q1 '26 though, following the outbreak of the Middle East conflict, daily rates for product tankers climbed to about $56,000, while daily rates for Suezmax tanker surged in excess of $260,000. Voyage costs amounted to $12.8 million, $2.3 million higher than in Q1 '25. This increase is attributed to higher number of spot days by about 25%, in conjunction with increased port expenses due to higher number of transits to the Suez Canal, mainly for the Suezmax tankers. Our net revenues for the quarter came in at about $49 million, compared to $21.6 million in Q1 '25. This is equivalent to 127% increase. Our net revenue generation peaked in around March following the Middle East conflict outbreak. [ Indicatively ], our monthly net revenues generated in March 2026 were about 50% higher than our net revenue generation within February '26. Running costs amounted to $11.3 million, increased by $4.1 million due to the increase of our fleet by an average of 8 vessels between the 2 periods. EBITDA for the first quarter of 2026 came in at $34.4 million, while net income of $28 million corresponding to a basic earnings per share of $0.60, versus $11.3 million corresponding to an EPS of $0.32 in Q1 '25. Moving on to Slide 9, let us take a look at our balance sheet for first quarter of '26. As of March 31, 2026, our free cash including time deposits was $213 million. Our cash to date is in the region of $221 million. We have the capital commitment for 7 vessels, 2 recently delivered and the remaining 5 to be delivered up to Q3 '26, which total about $130 million. Of this amount, about $52 million is expected to be paid through the end of Q3 '26, while the remaining $78 million is due by the end of 2026 or early '27. This target payment profile provides ample time to further enhance our cash position through our ongoing cash flow generation from our core operations. Our liquidity generation remains robust. As in Q1 '26, we generated an operating cash flow of $36.5 million. At this stage, we would like to point out that based on management estimate, most recent fleet market values, and based on our Q1 '26 financials and number of shares outstanding as at the end of Q1 '26, we computed that our net asset value per share is close to $13. Our current share price is about $5. Hence, we trade at a discount in excess of 60% while being highly profitable, debt-free and while the average price to net asset value discount of industry peer companies is about 20%. In other words, Imperial Petroleum is heavily undervalued despite the more robust balance sheet. Proceeding to Slide 10, we provide a summary of our liquidity, profitability and market considerations going forward. We have a significant cash base, which is enhanced every quarter through our profitable operations. We remain debt-free, but yet we have expanded the fleet significantly. Our profitability remains strong as in Q1 '26 our net income margin climbed to 45%. In Q1 '26, our average time charter equivalent per fleet voyage day was close to $43,000 for our tankers and about $16,000 for our drybulk fleet. This compares favorably to our cash flow breakeven levels estimated at $8,500 per day for tankers and $6,500 per day for drybulk vessels. In terms of market considerations, the focal point is the U.S.-Iran-Israel conflict, which appears to have a longer-than-expected duration. It still remains an unknown how the market, particularly the tanker market, will react when the Strait of Hormuz reopens for trade, and what will happen to the dark fleet in the event that the Russian Ukraine conflict comes to an end. Concluding our presentation, we'll repeat again once more that we are extremely pleased with our results, our proven consistency in generating profits, and most importantly, our support to our share price through our active share buyback program, and hope that these dynamics will soon correct our share price levels. At this stage, our CEO, Mr. Harry Vafias will summarize with concluding remarks for the period examined.

We are extremely pleased with our first quarter '26 results as with the net income of $28 million corresponding to a basic EPS of $0.60, we generated the second best quarterly profitability in our company's history. Geopolitical tensions persist, creating turbulence globally and in the shipping markets. The effect particularly from the Middle East Gulf conflict caused tanker markets to peak while market rates for the drybulk segment to firm. In this environment, we successfully capitalized upon our sizable fleet. We see that our expansion strategy is paying off, and hope that through our active share repurchase scheme, we will assist our share price to correct itself so as to reflect the true value of the company of 21 vessels on the water and 5 more to be delivered soon, current liquidity in excess of $220 million, continuously -- being continuously profitable, and most importantly, debt-free. We'd like to thank you all for joining us at our call today and for your interest and trust in our company. And we look forward to having you with us again at our next call for Q2 '26 results. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.