Ardmore Shipping Corporation announced results for the three and nine months ended September 30, 2023.

Highlights and Recent Activity

Reported net income of $20.3 million for the three months ended September 30, 2023, or $0.49 earnings per basic and diluted share, compared to net income of $61.0 million, or $1.57 earnings per basic share and $1.52 earnings per diluted share for the three months ended September 30, 2022. We reported Adjusted earnings of $20.3 million for the three months ended September 30, 2023, or $0.49 Adjusted earnings per basic and diluted share, compared to Adjusted earnings of $61.6 million for the three months ended September 30, 2022, or $1.59 Adjusted earnings per basic share and $1.54 Adjusted earnings per diluted share (see Adjusted earnings in the Non-GAAP Measures section).

Reported net income and of $87.3 million for the nine months ended September 30, 2023, or $2.12 earnings per basic share and $2.09 earnings per diluted share, compared to net income of $82.0 million, or $2.27 earnings per basic and $2.22 earnings per diluted share, for the nine months ended September 30, 2022. We reported Adjusted earnings of $87.3 million for the nine months ended September 30, 2023, or $2.12 Adjusted earnings per basic share and $2.09 Adjusted earnings per diluted share, compared to Adjusted earnings of $89.6 million for the nine months ended September 30, 2022, or $2.48 Adjusted earnings per basic share and $2.43 Adjusted earnings per diluted share (see Adjusted earnings in the Non-GAAP Measures section).

Consistent with the Company’s variable dividend policy of paying out dividends on its shares of common stock equal to one-third of Adjusted earnings, the Board of Directors declared a cash dividend on November 7, 2023, of $0.16 per common share for the quarter ended September 30, 2023. The dividend will be paid on December 15, 2023, to all shareholders of record on November 30, 2023.

MR tankers earned an average spot TCE rate of $28,493 per day for the three months ended September 30, 2023. Chemical tankers earned an average TCE rate of $20,023 per day for the three months ended September 30, 2023. Based on approximately 50% total revenue days currently fixed for the fourth quarter of 2023, the average spot TCE rate is approximately $30,100 per day for MR tankers; based on approximately 60% of revenue days fixed for the fourth quarter of 2023, the average TCE rate for chemical tankers is approximately $23,000 per day.

In the third quarter of 2023, we completed the installation of modular, carbon capture-ready scrubbers on two vessels during scheduled drydockings.

Anthony Gurnee, the Company’s Chief Executive Officer, commented:

“MR and chemical tanker charter markets have remained robust through the typically slow summer months, with strong momentum leading into the seasonally stronger winter season. In addition, the combination of low refined product inventories and increasing geopolitical risk has led to recurring stretches of pronounced market volatility. Meanwhile, tanker supply growth remains constrained, with limited newbuilding deliveries and tight shipyard capacity through at least 2026.

In this operating environment, Ardmore’s strategic priorities have been very consistent, including executing on the Company’s long-standing capital allocation policy. While we continue to assess potential growth opportunities on an ongoing basis, we have instead placed emphasis on the very high returns offered by the installation of performance optimization and decarbonization technologies onboard our existing fleet, all while paying our shareholders an attractive quarterly dividend and reducing our financial leverage. We believe Ardmore’s consistent focus on performance and progress places it in a strong position to continue building value, not just via spot exposure in these robust markets, but also via operational and financial efficiency over the long-term.”
Summary of Recent and Third Quarter 2023 Events

Fleet

Fleet Operations and Employment

As of September 30, 2023, the Company had 26 vessels in operation (including four chartered-in vessels), consisting of 20 MR tankers ranging from 45,000 deadweight tonnes (dwt) to 49,999 dwt (15 Eco-Design and five Eco-Mod) and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 dwt to 37,800 dwt. The Company also commercially manages one of Carl Büttner’s 24,000 dwt chemical tankers.

MR Tankers (45,000 dwt – 49,999 dwt)

At the end of the third quarter of 2023, the Company had 20 MR tankers in operation, all of which were trading in the spot market. The MR tankers earned an average TCE rate of $28,493 per day in the third quarter of 2023. In the third quarter of 2023, the Company’s 15 MR Eco-Design tankers earned an average TCE rate of $25,932 and the Company’s five MR Eco-Mod tankers earned an average TCE rate of $36,362 per day.

In the fourth quarter of 2023, the Company expects to have all revenue days for its MR tankers employed in the spot market. As of November 7, 2023, the Company had fixed approximately 50% of its total MR revenue days for the fourth quarter of 2023 at an average TCE rate of approximately $30,100 per day, which includes MR Eco-Design tankers at $30,800 per day and MR Eco-Mod tankers at $28,500 per day.

Product / Chemical Tankers (IMO 2: 25,000 dwt – 37,800 dwt)

At the end of the third quarter of 2023, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the third quarter of 2023, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $20,023 per day.

In the fourth quarter of 2023, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of November 7, 2023, the Company had fixed approximately 60% of its Eco-Design IMO 2 product / chemical tankers revenue days for the fourth quarter of 2023 at an average TCE rate of approximately $23,000 per day.

Drydocking

The Company had 151 drydocking days in the third quarter of 2023. The Company is currently scheduled to have 108 drydocking days in the fourth quarter of 2023.

Dividend on Common Shares

Consistent with the Company’s variable dividend policy of paying out dividends on its shares of common stock equal to one-third of Adjusted earnings, as calculated for dividends (see Adjusted earnings (for purposes of dividend calculations) in the Non-GAAP Measures section), the Board of Directors declared a cash dividend on November 7, 2023, of $0.16 per common share for the quarter ended September 30, 2023. The dividend will be paid on December 15, 2023, to all shareholders of record on November 30, 2023.

Scrubber Installations

In the third quarter of 2023, the Company completed the installation of modular, carbon capture-ready scrubbers on two vessels during their scheduled drydockings. Prior to the end of 2024, the Company intends to install scrubber systems on an additional seven vessels during their scheduled drydockings.

Geopolitical Conflict

The ongoing conflict in Ukraine has disrupted energy supply chains, caused instability and significant volatility in the global economy and resulted in economic sanctions by several nations. The ongoing conflict has contributed significantly to related increases in spot tanker rates.

Geopolitical tensions have escalated further on a global basis, including the ongoing Israel-Hamas conflict. Escalation or expansion of hostilities or such crisis, interventions by other groups or nations, the impositions of economic sanctions, disruption of shipping trade routes, or similar outcomes could affect the price of crude oil and the oil industry, the tanker industry, demand for the Company’s services, its business, results of operations, financial condition and cash flows.

Please see “Item 3. Key Information–Risk Factors” in the Company’s Annual Report on Form 20-F for information about risks to the Company and its business relating to political instability, terrorist or other attacks, war or international hostilities and the conflict in Ukraine.

Results for the Three Months Ended September 30, 2023 and 2022

The Company reported net income of $20.3 million for the three months ended September 30, 2023, or $0.49 earnings per basic and diluted share, as compared to net income of $61.0 million, or $1.57 earnings per basic and $1.52 earnings per diluted share for the three months ended September 30, 2022.

Results for the Nine Months Ended September 30, 2023 and 2022

The Company reported net income of $87.3 million for the nine months ended September 30, 2023, or $2.12 earnings per basic share and $2.09 earnings per diluted share, as compared to net income of $82.0 million, or $2.27 earnings per basic and $2.22 earnings per diluted share for the nine months ended September 30, 2022.

Management’s Discussion and Analysis of Financial Results for the Three Months Ended September 30, 2023 and 2022

Revenue. Revenue for the three months ended September 30, 2023 was $86.9 million, a decrease of $55.5 million from $142.4 million for the three months ended September 30, 2022.

The Company’s average number of operating vessels was 26.0 for the three months ended September 30, 2023, compared to 27.0 for the three months ended September 30, 2022.

The Company had 2,185 spot revenue days for the three months ended September 30, 2023, as compared to 2,374 for the three months ended September 30, 2022. The Company had 26 vessels employed directly in the spot market as of September 30, 2023 and 2022. Changes in spot rates resulted in a decrease in revenue of $42.9 million and the decrease in spot revenue days resulted in a decrease in revenue of $11.2 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.

The Company had no product tankers employed under time charter as of September 30, 2023, as compared to one as of September 30, 2022. There were no revenue days derived from time charters for the three months ended September 30, 2023, as compared to 92 for the three months ended September 30, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $1.4 million.

Voyage Expenses. Voyage expenses were $30.6 million for the three months ended September 30, 2023, a decrease of $15.4 million from $46.0 million for the three months ended September 30, 2022. The overall decrease included a $14.6 million decrease from lower bunker prices and a $1.0 million decrease in port and agency expenses plus commission costs.

TCE Rate. The average TCE rate for the Company’s fleet was $26,347 per day for the three months ended September 30, 2023, a decrease of $13,961 per day from $40,308 per day for the three months ended September 30, 2022. The decrease in average TCE rate was primarily the result of lower spot rates for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, which was partially offset by a decrease in bunker prices. TCE rates represent net revenues (a non-GAAP measure representing revenue less voyage expenses) divided by revenue days. Net revenue utilized to calculate TCE is determined on a discharge-to-discharge basis, which is different from how we record revenue under U.S. GAAP.

Vessel Operating Expenses. Vessel operating expenses were $14.4 million for the three months ended September 30, 2023, an increase of $1.1 million from $13.3 million for the three months ended September 30, 2022. This increase was driven by a change in technical manager for four vessels, as well as the timing of certain vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods.

Charter Hire Costs. Total charter hire expense was $4.1 million for the three months ended September 30, 2023, a decrease of $0.4 million from $4.5 million for the three months ended September 30, 2022. This decrease is the result of the Company having an average of 4.0 vessels chartered-in during the three months ended September 30, 2023, compared to an average of 4.5 vessels chartered-in for the three months ended September 30, 2022. Total charter hire expense for the three months ended September 30, 2023 was comprised of an operating expense component of $2.1 million and a vessel lease expense component of $2.0 million.

Depreciation. Depreciation expense for the three months ended September 30, 2023 was $6.9 million, a decrease of $0.4 million from $7.3 million for the three months ended September 30, 2022. This decrease is attributable to the change in the scrap value of each vessel from $300 per lightweight ton (“lwt”) to $400 per lwt during the first quarter of 2023.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended September 30, 2023 was $0.7 million, a decrease of $0.3 million from $1.0 million for the three months ended September 30, 2022. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended September 30, 2023 were $5.1 million, a decrease of $0.7 million from $5.8 million for the three months ended September 30, 2022. The decrease in costs was driven by non-recurring items, including refinancing-related fees of $0.4 million, incurred during the three months ended September 30, 2022, which did not occur during the three months ended September 30, 2023.

General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to Ardmore’s chartering and commercial operations departments in connection with its spot trading activities. Commercial and chartering expenses for the three months ended September 30, 2023 were $1.1 million, an increase of $0.2 million from $0.9 million for the three months ended September 30, 2022.

Unrealized Gains / (Losses) on Derivatives: We had no unrealized gains or losses on derivatives for the three months ended September 30, 2023, as compared to an unrealized gain of $3.4 million for the three months ended September 30, 2022. The interest rate swap agreements expired in July 2023.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended September 30, 2023 were $3.0 million, a decrease of $1.5 million from $4.5 million for the three months ended September 30, 2022. The decrease in costs was primarily due to lower aggregate outstanding obligations following the refinancing of 19 vessels completed during the second half of 2022. Amortization of deferred finance fees for the three months ended September 30, 2023 was $0.3 million, with a slight decrease from $0.4 million for the three months ended September 30, 2022.

Liquidity

As of September 30, 2023, the Company had $273.7 million in liquidity available, with cash and cash equivalents of $50.8 million (December 31, 2022: $50.6 million) and amounts available and undrawn under its revolving credit facilities of $222.9 million (December 31, 2022: $170.0 million). The following debt and lease liabilities (net of deferred finance fees) were outstanding as of the dates indicated:
Source: Ardmore Shipping Corporation