Performance Shipping Inc. Reports Financial Results for the Second Quarter and Six-Months Ended June 30, 2024

Rhea-AI Summary

Performance Shipping Inc. (NASDAQ: PSHG) reported financial results for Q2 2024:

- Net income: $10.2 million
- Revenue: $20.5 million
- Earnings per share: $0.79 (basic), $0.26 (diluted)
- Average TCE rate: $30,970
- Cash balance: $62.7 million

The company owns 7 operating Aframax tankers and has orders for 4 newbuild tankers. Six vessels are on time charters, with a fixed revenue backlog of $61.1 million. The company secured 5-year charters for 3 newbuilds, adding $169.8 million to the backlog.

CEO Andreas Michalopoulos noted a solid tanker market supported by trade pattern shifts and supply growth. The company focuses on a balanced fleet deployment strategy and expansion with fuel-efficient, low-emission vessels.

Positive

• Net income of $10.2 million for Q2 2024
• Strong cash position of $62.7 million, 1.2x outstanding bank debt
• Secured 5-year time charters for 3 newbuilds, adding $169.8 million to revenue backlog
• Total revenue backlog of $230.9 million, covering 109% of remaining newbuilding capital expenditures
• Fleetwide average TCE rate of $30,970 per day in Q2 2024

Negative

• Decrease in revenue from $31.5 million in Q2 2023 to $20.5 million in Q2 2024
• Lower TCE rates compared to Q2 2023 ($30,970 vs $41,868)
• Reduction in fleet size from 8 to 7 vessels following the sale of P. Kikuma in December 2023

Insights

Financial Analyst

Performance Shipping Inc.'s Q2 2024 results reveal a mixed financial picture. While the company remains profitable, there's a noticeable decline in performance compared to the same period last year:

• Net income decreased to $10.2 million from $18.4 million in Q2 2023
• Revenue fell to $20.5 million from $31.5 million
• Average TCE rate dropped to $30,970 from $41,868

This downturn is primarily attributed to lower TCE rates and reduced fleet size following the sale of P. Kikuma. However, the company maintains a strong liquidity position with $62.7 million in cash, 1.2 times its outstanding bank debt.

The company's strategic focus on fleet renewal and expansion is noteworthy. The order of four new tankers, including three LNG-ready LR2 Aframax tankers, demonstrates a commitment to fuel efficiency and environmental sustainability. These newbuildings, coupled with secured 5-year charters, will significantly boost the company's revenue backlog to $230.9 million.

While current performance has dipped, the company's forward-looking strategy and solid backlog suggest potential for future growth. Investors should monitor how effectively Performance Shipping navigates the evolving tanker market landscape.

Market Research Analyst

The tanker market in Q2 2024 presents a complex picture with several key trends:

• Fleet supply grew marginally by 0.1% quarter-over-quarter and 1.0% year-over-year
• Tanker demand is projected to increase by 4.3% in 2024, driven by long-haul shipments and Red Sea-related trade flow shifts
• Fleet utilization is expected to average 85.5% over the next three years, up from 84.6% in 2023
• The orderbook-to-fleet ratio stands at 10.8%, indicating moderate fleet growth

Despite OPEC+ production cuts, the market remains relatively robust, supported by changing trade patterns and increased ton-mile demand. The fleet growth forecast (0.8% in 2024 and 2.0% in 2025) suggests a potentially favorable supply-demand balance.

However, Aframax spot rates have declined both quarter-over-quarter (9.2%) and year-over-year (14.6%), indicating some market softening. This aligns with Performance Shipping's lower TCE rates.

The increase in asset values (10-year-old Aframax up 15.4% YoY) and reduction in floating storage (down 24.3% YoY) suggest underlying market strength. With global oil consumption and production both showing modest growth, the overall outlook for tanker demand remains cautiously positive.

ATHENS, Greece, July 25, 2024 (GLOBE NEWSWIRE) -- Performance Shipping Inc. (NASDAQ: PSHG) (“we” or the “Company”), a global shipping company specializing in the ownership of tanker vessels, today reported net income of $10.2 million and net income attributable to common stockholders of $9.7 million for the second quarter of 2024. The 2024 second quarter results compared to a net income of $18.4 million and net income attributable to common stockholders of $17.9 million for the same period in 2023. Earnings per share, basic and diluted, for the second quarter of 2024 were $0.79 and $0.26, respectively.

Revenue was $20.5 million ($19.7 million net of voyage expenses) for the second quarter of 2024, compared to $31.5 million ($30.5 million net of voyage expenses) for the same period in 2023. This decrease was attributable to the decrease in time-charter equivalent rates (“TCE rates”) realized during the quarter, and to the decrease in the ownership days following the sale of the vessel P. Kikuma in December 2023. Fleetwide, the average TCE rate for the second quarter of 2024 was $30,970, compared with an average rate of $41,868 for the same period in 2023. During the second quarter of 2024, net cash provided by operating activities was $14.4 million, compared with net cash provided by operating activities of $22.1 million for the second quarter of 2023.

Net income for the six months ended June 30, 2024, amounted to $21.6 million, compared to a net income of $34.1 million for the six months ended June 30, 2023. Net income attributable to common stockholders for the six months ended June 30, 2024, amounted to $20.7 million, and resulted in earnings per share, basic and diluted, of $1.68 and $0.55, respectively. Net income attributable to common stockholders for the six months ended June 30, 2023, amounted to $22.5 million, and resulted in earnings per common share, basic and diluted, of $2.43 and $1.00, respectively. The difference between net income and net income attributable to common stockholders for the six month period ended June 30, 2023, mainly reflects aggregate non-cash items of $10.6 million, as per US GAAP accounting standards, which did not affect the Company's operating cash flows.

Commenting on the results of the second quarter of 2024, Andreas Michalopoulos, the Company’s Chief Executive Officer, stated:

“During the second quarter of 2024, the tanker market remained solid, supported by the ongoing shift in trade patterns arising from the Russian oil trade and disruptions in the Red Sea. These factors resulted in longer haul tanker voyages. The increased ton-mile demand, in conjunction with limited supply growth, continues to sustain firm tanker charter rates. This enabled our Company to achieve a fleetwide average time charter equivalent rate of $30,970 per day, corresponding to quarterly revenues of $20.5 million and quarterly net income attributable to common stockholders of $9.7 million.

“Going forward, we believe that the profitable tanker market environment will remain firm, prompting our continued focus on a fleet deployment strategy that emphasizes balanced exposure to short- and medium-term time charter contracts and the spot market. Specifically, one of the seven Aframax tankers in our operating fleet trades in the spot market under a pool arrangement, while the remaining six vessels are currently operating under time charter contracts with first-class charterers, securing a remaining fixed revenue backlog of approximately $61.1 million as of the beginning of the third quarter of 2024. One of these time-charter contracts expires in August. We expect to maintain exposure in the promising spot market into the seasonally strong fall and winter periods. As a result, we anticipate employing this vessel at even more lucrative rates, thus capitalizing on the prevailing robust freight rate environment for Aframax tankers.

“Looking ahead, we remain focused on our fleet expansion and renewal strategy, which prioritizes fuel efficiency and low emissions and reflects our commitment to participating in the energy transition. As previously announced, we have entered into shipbuilding contracts for the construction of three LNG-ready LR2 Aframax tankers and one LR1 chemical/product oil tanker, with expected delivery to our Company between late 2025 and early 2027. These vessels, which were ordered at very attractive contract prices, as values have since appreciated considerably, will be equipped with scrubbers and water ballast treatment systems and will feature the latest high-specification engines. By taking constructive steps towards complying with stringent emission requirements, we aim to provide our customers with environmentally sustainable operations.

“The already secured 5-year time charter employment contracts for our three newbuilding LR2 Aframax tankers, which will generate gross revenues of $169.8 million and supplement our existing revenue backlog of $61.1 million, are considered indicative of our competitive fleet structure supported by the unique features of our newbuilding tankers. We believe that our financial position is strong, with a quarter-end cash balance (including restricted cash) of approximately $62.7 million, representing 1.2x our outstanding bank debt, and an aggregate revenue backlog of $230.9 million, corresponding to 109% of all our remaining newbuilding capital expenditures.”

Corporate Developments

Update on Outstanding Shares and Warrants

As of July 24, 2024, the Company had outstanding 12,432,158 common shares. In addition, the following common share purchase warrants were outstanding as of such date:

• Class A Warrants to purchase up to 567,366 common shares at an exercise price of $15.75 per common share;
• Warrants issued July 19, 2022, to purchase up to 1,033,333 common shares at an exercise price of $1.65 per common share;
• Warrants issued August 16, 2022, to purchase up to 2,122,222 common shares at an exercise price of $1.65 per common share;
• Series A Warrants issued March 3, 2023, which are exchangeable for up to 14,300 common shares; and
• Series B Warrants issued March 3, 2023, to purchase up to 4,097,000 common shares at an exercise price of $2.25 per common share.
  

Finally, the Company had 50,726 shares of its Series B Convertible Cumulative Perpetual Preferred Stock and 1,423,912 shares of its Series C Convertible Cumulative Redeemable Perpetual Preferred Stock outstanding.

Tanker Market Update for the Second Quarter of 2024:

• Tanker fleet supply was 692.2 million dwt, up 0.1% from 691.3 million dwt from the previous quarter and up 1.0% from Q2 2023 levels of 685.4 million dwt.
• Tanker demand in billion ton-miles remains steady despite the extension of OPEC+ crude oil production cuts and it is projected to increase by 4.3% in 2024, supported by export growth observed in long-haul shipments from the Americas towards Asia as well as by Red Sea related trade flow shifts which increase average distance traveled and further support ton-mile demand growth.
• Tanker fleet supply in deadweight terms is estimated to grow by just 0.8% in 2024 and by a moderate 2.0% in 2025.
• Crude oil tanker fleet utilization is expected to average 85.5% over the next three years, as compared to an average of 84.6% in 2023.
• Newbuilding tanker contracting was 9.4 million dwt in the second quarter, resulting in a tanker orderbook-to-fleet ratio of 10.8%.
• Daily spot charter rates for Aframax tankers averaged $51,140 down 9.2% from the previous quarter average of $56,338 and down 14.6% from the Q2 2023 average of $59,855.
• The value of a 10-year-old Aframax tanker at the end of the second quarter was $60.0 million, up 3.5% from $58.0 million in the previous quarter, and up 15.4% from $52.0 million in Q2 2023.
• The number of tankers used for floating storage (excluding dedicated storage) stood at 115 (14.3 million dwt) in the second quarter, up 27.8% from 90 (10.9 million dwt) at the end of the previous quarter and down 24.3% from 152 (20.8 million dwt) in Q2 2023.
• Global oil consumption was 102.6 million bpd, up 0.9% from the previous quarter level of 101.7 million bpd, and up 0.8% from Q2 2023 levels of 101.8 million bpd.
• Global oil production was 102.7 million bpd, up 0.5% from the previous quarter level of 102.2 million bpd and up 1.2% from Q2 2023 levels of 101.5 million bpd.
• OECD commercial inventories were 2,765 million barrels, up 0.2% from the previous quarter level of 2,760 million barrels, and down 0.6% from Q2 2023 levels of 2,782 million barrels.

The above market outlook update is based on information, data, and estimates derived from industry sources. There can be no assurances that such trends will continue or that anticipated developments in tanker demand, fleet supply or other market indicators will materialize. While we believe the market and industry information included in this release to be generally reliable, we have not independently verified any third-party information or verified that more recent information is not available.

Summary of Selected Financial & Other Data
	(in thousands of US Dollars, except per share data, fleet data and average daily results)		For the three months ended June 30,						For the six months ended June 30,
			2024			2023			2024			2023
			(unaudited)			(unaudited)			(unaudited)			(unaudited)
STATEMENT OF OPERATIONS DATA:
	Revenue	$	20,508		$	31,456		$	42,879		$	60,984
	Voyage expenses		780			976			1,584			2,515
	Vessel operating expenses		5,049			5,189			9,924			10,332
	Net income		10,185			18,388			21,616			34,083
	Net income attributable to common stockholders		9,727			17,909			20,699			22,533
	Earnings per common share, basic		0.79			1.53			1.68			2.43
	Earnings per common share, diluted		0.26			0.46			0.55			1.00
FLEET DATA
	Average number of vessels		7.0			8.0			7.0			8.0
	Number of vessels		7.0			8.0			7.0			8.0
	Ownership days		637			728			1,274			1,448
	Available days		637			728			1,274			1,408
	Operating days (1)		634			713			1,258			1,390
	Fleet utilization		99.5	%		97.9	%		98.7	%		98.7	%
AVERAGE DAILY RESULTS
	Time charter equivalent (TCE) rate (2)	$	30,970		$	41,868		$	32,414		$	41,526
	Daily vessel operating expenses (3)	$	7,926		$	7,128		$	7,790		$	7,135

_________________

(1)	Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire. The specific calculation counts as on-hire the days of the ballast leg of the spot voyages, as long as a charter party is in place. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(2)	Time charter equivalent rates, or TCE rates, are defined as revenue (voyage, time charter and pool revenue), less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel) expenses, canal charges and commissions. TCE is a non-GAAP measure. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels despite changes in the mix of charter types (i.e., voyage (spot) charters, time charters and bareboat charters).
(3)	Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the costs of spares and consumable stores, lubricant costs, tonnage taxes, regulatory fees, environmental costs, lay-up expenses and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.

 

Fleet Employment Profile (As of July 25, 2024)
Performance Shipping Inc.’s fleet is employed as follows:
	Vessel	Year of Build	Capacity	Builder	Vessel Type	Charter Type	Notes
Operating Aframax Tanker Vessels
1	BLUE MOON	2011	104,623 DWT	Sumitomo Heavy Industries Marine & Engineering Co., LTD.	Crude	Time-Charter
2	BRIOLETTE	2011	104,588 DWT	Sumitomo Heavy Industries Marine & Engineering Co., LTD.	Crude	Time-Charter
3	P. YANBU	2011	105,391 DWT	Sumitomo Heavy Industries Marine & Engineering Co., LTD.	Crude	Time-Charter
4	P. SOPHIA	2009	105,071 DWT	Hyundai Heavy Industries Co., LTD	Crude	Pool
5	P. ALIKI	2010	105,304 DWT	Hyundai Heavy Industries Co., LTD	Product	Time-Charter
6	P. MONTEREY	2011	105,525 DWT	Hyundai Heavy Industries Co., LTD	Crude	Time-Charter
7	P. LONG BEACH	2013	105,408 DWT	Hyundai Heavy Industries Co., LTD	Product	Time-Charter
Newbuilding LR1 and LR2 Tanker Vessels
8	HULL 1515	-	114,000 DWT	China Shipbuilding Trading Company Limited and Shanghai Waigaoqiao Shipbuilding Company Limited	Product	Time-Charter	1
9	HULL 1596	-	114,000 DWT	China Shipbuilding Trading Co. Ltd. (“CSTC”) and Shanghai Waigaoqiao Shipbuilding Co. Ltd.	Product	Time-Charter	1
10	HULL 1597	-	114,000 DWT	China Shipbuilding Trading Co. Ltd. (“CSTC”) and Shanghai Waigaoqiao Shipbuilding Co. Ltd.	Product	Time-Charter	1
11	HULL 1624	-	75,000 DWT	Jiangsu Yangzijiang Shipbuilding Group Co., Ltd.	Chemical/ Product	-
1	As previously announced, the Company has secured five-year time charter contracts for three of its newbuilding vessels, with employment to commence upon delivery of the vessels in the fourth quarter of 2025, and first and second quarter of 2026.

About the Company

Performance Shipping Inc. is a global provider of shipping transportation services through its ownership of tanker vessels. The Company employs its fleet on spot voyages, through pool arrangements, and on time charters.

Cautionary Statement Regarding Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include, but are not limited to, statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts, including with respect to the delivery of the vessels we have agreed to acquire, future market conditions and the prospective financing and employment of our vessels. The words “believe," “anticipate," “intends," “estimate," “forecast," “project," “plan," “potential," “will," “may," “should," “expect," “targets," “likely," “would," “could," “seeks," “continue," “possible," “might," “pending” and similar expressions, terms or phrases may identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including, without limitation, our management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs, or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the tanker shipping industry, changes in the supply of vessels, changes in worldwide oil production and consumption and storage, changes in our operating expenses, including bunker prices, crew costs, drydocking and insurance costs, our future operating or financial results, availability of financing and refinancing including with respect to vessels we agree to acquire, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, the length and severity of epidemics and pandemics, including COVID-19, and their impact on the demand for seaborne transportation of petroleum and other types of products, changes in governmental rules and regulations or actions taken by regulatory authorities, general domestic and international political conditions or events, including “trade wars”, armed conflicts including the war in Ukraine and the war between Israel and Hamas, the imposition of new international sanctions, acts by terrorists or acts of piracy on ocean-going vessels, potential disruption of shipping routes due to accidents, labor disputes or political events, vessel breakdowns and instances of off-hires and other important factors. Please see our filings with the US Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.
(See financial tables attached)

PERFORMANCE SHIPPING INC.
FINANCIAL TABLES
Expressed in thousands of U.S. Dollars, except for share and per share data
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
			For the three months ended June 30,						For the six months ended June 30,
			2024			2023			2024			2023
REVENUE:
	Revenue	$	20,508		$	31,456		$	42,879		$	60,984
EXPENSES:
	Voyage expenses		780			976			1,584			2,515
	Vessel operating expenses		5,049			5,189			9,924			10,332
	Depreciation and amortization of deferred charges		3,300			3,776			6,600			7,465
	General and administrative expenses		1,579			1,752			3,703			3,415
	Reversal for credit losses		(7	)		(39	)		(7	)		(55	)
	Foreign currency losses		-			7			10			37
	Operating income	$	9,807		$	19,795		$	21,065		$	37,275
OTHER INCOME / (EXPENSES):
	Interest and finance costs		(443	)		(2,279	)		(1,108	)		(5,364	)
	Interest income		817			858			1,649			1,206
	Changes in fair value of warrants' liability		4			14			10			966
	Total other income / (expenses), net	$	378		$	(1,407	)	$	551		$	(3,192	)
Net income		$	10,185		$	18,388		$	21,616		$	34,083
Income allocated to participating securities			-			(1	)		-			(1	)
Deemed dividend to the Series C preferred stockholders due to triggering of a down-round feature			-			-			-			(9,809	)
Deemed dividend to the July 2022 and August 2022 warrants holders due to triggering of a down-round feature			-			-			-			(789	)
Dividends on preferred stock			(458	)		(478	)		(917	)		(951	)
Net income attributable to common stockholders		$	9,727		$	17,909		$	20,699		$	22,533
Earnings per common share, basic		$	0.79		$	1.53		$	1.68		$	2.43
Earnings per common share, diluted		$	0.26		$	0.46		$	0.55		$	1.00
Weighted average number of common shares, basic			12,316,214			11,725,556			12,297,945			9,284,254
Weighted average number of common shares, diluted			39,362,532			40,008,139			39,215,897			32,366,729
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
			For the three months ended June 30,						For the six months ended June 30,
			2024			2023			2024			2023
Net income		$	10,185		$	18,388		$	21,616		$	34,083
Comprehensive income		$	10,185		$	18,388		$	21,616		$	34,083

CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Expressed in thousands of US Dollars)
		June 30, 2024		December 31, 2023*
ASSETS		(unaudited)
Cash, cash equivalents and restricted cash	$	62,744	$	68,267
Advances for vessels under construction and other vessels' costs		43,988		11,303
Vessels, net		195,765		202,108
Other fixed assets, net		36		44
Other assets		7,920		14,544
Total assets	$	310,453	$	296,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term bank debt, net of unamortized deferred financing costs	$	51,176	$	54,886
Other liabilities		5,237		8,196
Total stockholders' equity		254,040		233,184
Total liabilities and stockholders' equity	$	310,453	$	296,266
* The balance sheet data as of December 31, 2023 has been derived from the audited consolidated financial statements at that date.

OTHER FINANCIAL DATA
		For the three months ended June 30,						For the six months ended June 30,
		2024			2023			2024			2023
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net Cash provided by Operating Activities	$	14,353		$	22,130		$	31,693		$	40,809
Net Cash used in Investing Activities	$	(10,175	)	$	(11,133	)	$	(32,690	)	$	(11,511	)
Net Cash (used in) / provided by Financing Activities	$	(2,184	)	$	(6,468	)	$	(4,526	)	$	1,711

FAQ

What was Performance Shipping's (PSHG) net income for Q2 2024?

Performance Shipping Inc. (NASDAQ: PSHG) reported a net income of $10.2 million for the second quarter of 2024.

How many vessels does Performance Shipping (PSHG) currently operate?

As of July 25, 2024, Performance Shipping Inc. operates a fleet of 7 Aframax tanker vessels.

What is Performance Shipping's (PSHG) current revenue backlog?

Performance Shipping Inc. has a total revenue backlog of $230.9 million, including $61.1 million from existing time charters and $169.8 million from 5-year charters for three newbuilding vessels.

What was Performance Shipping's (PSHG) average TCE rate for Q2 2024?

Performance Shipping Inc. achieved a fleetwide average Time Charter Equivalent (TCE) rate of $30,970 per day for the second quarter of 2024.