Harry Vafias - CEO Fenia Sakellaris - Finance Officer Michael Jolliffe - Chairman

Donald McLee - Wells Fargo Charles Rupinski - Seaport Global

Good day and welcome to the StealthGas third quarter 2015 results conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Harry Vafias, CEO of StealthGas. Please go ahead.

Good morning, ladies and gentlemen and welcome to our third quarter and nine months 2015 earnings presentation and webcast. This is Harry Vafias, the CEO of the company and joining me today on the call is Finance Officer, Fenia Sakellaris, and Mr. Michael Jolliffe, the Chairman of the company. Before we briefly present our today’s topics of discussion, I would like for 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, please take a moment to read our disclaimer on slide two of this presentation. It’s noted that risks are further disclosed in StealthGas’ filing with the Securities and Exchange Commission. Let’s proceed in summarizing today’s agenda. I will begin with an overview of our company’s highlights for the third quarter of this year, then we will discuss our financial performance and provide an update on our LPG market segment. Finally, after a close look at our stock performance, I will share our views on our company’s outlook. I would like to note that all amounts, unless otherwise clarified, are stated in U.S. dollars. Let's move to slide 3 as to summarize our company's key highlights for the period. As an opening statement, I would like to point out that in terms of market condition, the third quarter of ‘15 was quite challenging as freight rates for coastal LPG ships still remained weak and oil price fell from $60 a barrel to approximately $40 a barrel. In spite challenging market conditions, we believe that our company should strongly demonstrating a considerable growth in revenue, preserving technical efficiency and successfully concluding the rigorous capital investment plan for 2015. During Q3, we took delivery of an additional five eco-LPG ships, Eco Galaxy, Eco Czar, Eco Dream, Eco Nemesis and the Eco Green, all from top-quality non-Chinese yards. With these deliveries, we reached the total number of 10 new buildings delivered this year, nine of which we managed to fix on period charters. Focusing at our third quarter operational performance, our fleet utilization came at 99.3%, translated to 8 days of technical off hire, excluding the scheduled dry docking of one vessel out of a fleet of 55 operating ships. Although the third quarter is always a seasonally weak period for our segment, we managed to increase our operational utilization to 94% from 89% in the second quarter of ‘15, taking advantage of all market opportunities that appeared in the spot market. Proceeding to our financial highlights, in the nine months of ‘15, we recorded revenues of $104 million, increased by $7 million compared to the same period of ‘14, while our adjusted EBITDA, a measure which excludes non-cash items, amounted to $43.5 million. In terms of our leverage and cash position, we maintained a low gearing of only 39% in spite of our company being in an intensive capital expansion phase, while our cash balance was also preserve at high levels of about $77 million. Looking at our company's positioning against peers in slide 4, StealthGas with an estimated market share of about 20% remains the leader in the small LPG carrier segment. Our company has the highest number of owned LPG ships and has materialized one of the heaviest fleet expansions compared to any other of our market peers. In terms of our average fleet age, it was reduced in Q3 ‘15 to 9.2 years from 9.5 years in Q2 ‘15. I would like to point out that the age mix of our fleet, the 75% of our vessels is below 15 years of age, while only 11% of our fleet is over 20 years, compared to 24% in our market segment. It's noteworthy our proven capability of fixing our fleet as 50% of our vessels are above 15 years of age are currently on period charters. Slide five, this slide presents our fleet employment in more detail. In terms of charter types, out of a fleet of 53 owned vessels and as of November 15, we had 16 of those bareboat, 25 on time charters and 12 in the spot market. The two vessels at the charter didn’t buy our company and the gas cost or in gas premiership are also sublet on time charters. Based on pre-aggregate contracts some of which extended until year 2022, committed revenues amounted to 215 million. Our average charter duration is currently 2.3 years, while 40% of our pre-contracted revenues will be received up until the end of 2016. Again this quarter, our charting strategy was adjusted as to the prevailing soft market conditions. Although as known, we follow conservative charting strategy with a preference to have more than 75% of our fleet on period charters, this quarter, we preferred short to medium term charters so as not to commit our vessels for a long period at softer rates. In spite of market conditions, taking advantage of our market experience and growing market share by utilizing our eco-new vessels, we managed to fix 90% of this year's deliveries on period charters. In terms of new fleet employment contracts, since our Q2 results announcement in August, we concluded one short time charter, two charter option extensions, three time charters of one-year duration and a 20 most time charter. These charters were concluded within October, increasing our fleet utilization for the remainder of 2015 to 77% from 75% as the end of September ‘15. With regards to our fleet geography in slide six, 56% of over fleet trades in Middle East and Far East, 28% in Europe, 9% in South America and 7% in Australia. In comparison to our fleet composition presented in the previous quarter, during Q3, we had some expiring charters in South America and we relocated them in the European Union region. As far as our trading composition is concerned, I would like once again to note that our company focuses on regional trade and local distribution of gas with the majority of the LPG, we carry covering household needs. This is the main reason why Middle and Far East is the area of highest presence as the urbanization activity in the region is quite intense and will continue to be shown in the years to come. Slide 7 demonstrates our fleet breakdown and development plans. As of end of September ‘15, our company owned a total of 53 ships. As presented in the table to the left, during Q3, ‘15, we took delivery of five eco-LPG vessels. For ‘16, we have two scheduled deliveries of two larger size 7500 pressurized vessels, one in Q1 and one in Q4 ‘16 and in 2017, we plan on taking delivery of four 22,000 cubic meter eco larger semi vessels aiming to reach a total fleet of 59 owned vessels. With regards to our feet characteristics, taking into account the addition of our new billings, our average vessel size is 4785 cubic meters, with about 72% of our fleet falling in the sub-5000 cbm category. Moving to slide eight, I will briefly comment on the remaining of our capital expenditure program scheduled to take place in the period 2016, 2017. Excluding the approximately $40 million advances paid to date for our upcoming deliveries, we have an ongoing CapEx plan of another 211 million until the end of ‘17 for the delivery of an additional six new LPG vessels. In ‘17, we expect the delivery of the four larger semi-ref ships, an investment which corresponds to 84% of our remaining capital expenditure. We are happy to have taken the decision to invest in this segment as currently these vessels trade at the rate of north of 30,000 a day. In addition, this investment will place us in a position to offer our customers more integrated services at a lower cost, while adding to our company an element of asset diversification. Semi-ref vessels of this size are able to carry bigger variety of gases on medium haul routes. As presented in the capital expenditure analysis to the right, about $40 million of our CapEx has already been paid as equity advances, another $33.6 million is committed bank debt, while a further $125 million of debt is under negotiation for the largest semi-ref ships and we expect to conclude on that by the end of Q1 16. This leaves us with $52 million of equity funding requirement. Taking into account that cash on our balance sheet stands at about $77 million, StealthGas is in a comfortable position to fund this capital expenditure requirements and more if need be. I’ll now turn you to Mrs. Fenia Sakellaris for our financial performance during the second quarter and nine months and I later will discuss the market and industry outlook.

Thank you, Harry and good morning to everyone. Let us move on to slide nine where we see the income statement for the third quarter of ‘15 and the nine months results against the same period of the previous year. Looking at the third quarter results, our voyage revenues came at $35.8 million, marking a considerable increase of 14.6% compared to the same period of ‘14. Indeed, this quarter, in spite rates being close to their all-time low, we managed to increase our fleet utilization, take advantage of our fleet expansion and exploit high opportunities, particularly in the spot market. We must note that since rates have marked a year-on-year decline in excess of 20% in the 3000 and 5000 cbm segments, our revenue increase could have potentially been stronger. Voyage costs amounted to $5.2 million, marking a 30% increase compared to Q3, ‘14 as this quarter, we had 12 vessels operating in the spot market compared to 7 in the same period last year, a 50% increase in spot days and the ballasting of two new buildings from Asia to Europe. Our voyage costs reflect the intensification of our fleet usage as in Q3 ‘15, we achieved a fleet operational utilization of 95%, which is high given the very weak market. In Q3, ‘14, our operational utilization was 88.6%. Net revenues came at $32.5 million. Running costs marked a moderate given our fleet expansion increase of 8.4%. Key drivers of operating costs are the additional six vessels and one vessel coming off bareboat. In terms of cost categories we had an increase of crew cost as a result of our fleet expansion and a slight increase in officers’ wages effected in June ‘15. Store costs also marked an increase due to the initial supply of this quarter’s new delivery and the full supply of consumables for 10 vessels up to December 2015. With regards to drydocking cost, they amounted to $528,000 given the completion of the drydocking of Gas Nirvana. Overall, our schedule for 2015 has two more vessels to be drydocked in the first quarter of the year. However, this number might increase as some vessels are scheduled to be drydocked at the beginning of ‘16 could potentially be accommodated at the end ‘15. Our EBITDA for this quarter of the year came at $13.4 million, increased by $400,000 compared to the third quarter for ‘14. Interest and finance cost marked an increase of $341,000 as a result of the increase in our leverage. With a net gain close to $1 million, our EPS $0.03 on 41.2 million outstanding shares compared to $0.04 on 41.8 million outstanding share in Q3 ‘14. So as to briefly summarize our nine month results of 2015, we managed to generate net revenue of almost $104 million increased by $7 million compared to nine months ‘14. Our adjusted EBITDA came at $43.5 million while our adjusted EPS at $0.22 compared to $0.34 in nine months ‘14. We are confident that should the market makes even the modest improvement, it will be, given our technical efficiency and good positioning, automatically translated in increasing our earnings. Slide 10 demonstrates our performance highlights for the period examined. As mentioned earlier, in spite of soft market condition our operational utilization was increased. It was 94.4% in Q3 ‘15 compared to 88.6% in Q3 ‘14 with 50% more spot days as we had 12 vessels in the spot market compared to 7 vessels in Q3 ‘14. Our increased activity in the spot market was deliberately chosen in order not to commit to high number of vessels on time charters during a very weak market period. Focusing on the average daily results, adjusted time charter equivalent is lower by 10% period-on-period, indicating the weak state of the market is in. At this stage we would like to note that despite of hard market conditions, as a result of our efficient management and expansion of our fleet with eco vessels that we see for yet one more period the reduction to our daily operational expenses. Looking at our balance sheet in slide 11, our asset base has past 1 billion and that number will grow in the upcoming years as our fleet expansion schedule progresses. Compared to end of year ‘14 we have added to our asset base 10 new eco LPG vessels while we have divested two of our oldest vessels for demolition in April ‘15.Our strong liquidity continues in spite of our ongoing expansion plan. As at the end of the nine month ‘15 we are approximately at 77 million. That decrease is solely attributed to the partial equity financing for our new deliveries. Focusing on the equity and liability side, our gearing still remains low in the order of 39% as our company leverage increased by $88 million from last quarter as a result of our CapEx program. We said with these all scheduled debt repayments and we have approximately 10 vessels unencumbered. During 2015 we have repaid a total of $45 million of debt which is equal to 11% of our outstanding debt balance. In addition we would also like to note that in light of potential LIBOR increase and as we increase our gearing, we have increased our interest hedging. Currently we have 20% of our loan portfolio hedged aiming to reach 25% in the upcoming months. Slide 12 proves our company finance financial strength. Although LPG charter rates are close to the bottom of the rate cycle and as presented to the top graph to the left, our daily TCE follows a declining trend but so does our daily breakeven. For the nine months ‘15 our daily breakeven was 6,071 compared to 6,464 in the same period of ‘14. This decrease is primarily driven by a reduction in our daily OpEx. In addition, it is evident from the brief fleet contribution analysis that our company utilizes all its vessels regardless of age and most importantly that our TCE earnings were hit by the weak rates prevailing particularly in the spot market. I will now hand you over to our CEO, Mr. Harry Vafias who will discuss market and company outlook.

Let’s proceed now with the market update on slide 13. Domestic usage is the main driver of LPG consumption. Taking into consideration the increased urbanization activity which is primarily led by the rise of the Asian LPG residential usage it is bound to increase in the years to come. Such an element is beneficial to our company because as operators of coastal ships we deliver the products close to the end user. The increased activity in developing areas will increase in turn the volume of our operations. In terms of LPG consumption by countries, the US is currently the largest consumer of LPG accounting for about 20% of global LPG consumption followed by China, India and Japan. Moving to slide 14, LPG demand which will exhibit a growing trend in the years to come will be affected by several factors. The first one is the expansion of the Panama Canal which will primarily affect the ton mile demand for the larger ships. Second is China's demand for LPG as the countries affected by the recent economic slowdown in the opening of several PDH facilities. However, recent economic analysis indicates that China will mark a satisfactory growth in 2016 of 6.2%. In addition, the opening of the PDH plants will negatively affect the demand for propylene, but will positively affect LPG demand. The third factor affecting LPG transportation is the lifting of the Iranian sanctions and the rising demand of LPG exports from the US to Asia. Slide 15 shows the evolution of the LPG charter rates. As evident by the table presented, the small LPG segment has expressed declining rates during the past year. The most affected segment in time has been the 3,500 cubic meters with a year-on-year decline to the order of 24% which is worth noting, however, that during Q3 ‘15 the quarter-on-quarter drop-off rates have slowed down. One of the main reason of seeing such low rates and being in the bottom of the rate circle is apart from the slowing global economy and the oil price volatility, the excess tonnage prevailing in the coastal carrier segment including a number of overage ships. Moving to slide 16, in the graph to the left, we see that almost a quarter of the small scale LPG fleet is above 20 years of age implying that scrapping activity must intensify in the near future. Indeed scrapping has increased during the past months from the end of June ‘15 to-date, five additional coastal LPG ships have been scrapped reaching a total of nine for the year, which might be positive for our segment. We also have a limited order book in our market. As presented in the right side graph, in the 1,000 to 7,500 segment, there are further nine ships to be delivered up until the end of ‘15, eight in ‘16 and only four vessels in ‘17 and the crucial point is that we have zero schedule order book after 2017 and only one new order placed so far in 2015. I will now continue to discuss further our company's outlook commencing with our share performance in slide 17. The performance of the stock is presented along with selected gas carriers peer group. It's very evident that oil price volatility strongly affects energy related stocks. As we closely monitor the market, we feel that for energy related stocks, price volatility reflects more oil and broader economy movements rather than specific company fundamentals. This fact is evident by the high year-to-year decline that our stock and other stocks of most of our peers have experienced. Proceeding to slide 18, we are showing different scenarios for the company's performance for year ‘16 when the company will be operating a total of 57 ships. In general we hold a conservative view while making such predictions. The different scenarios were built based on the existing fixed charters plus open days with current market rates as evident from the table presented which indicates the effect of various time charter rates on our EBITDA, low rates narrow our EBITDA potential. With our strong modern fleet in place, we have the capacity in 2016 to reach an EBITDA of $90 million should the market condition permit so. To summarize, we have the infrastructure, the technical superiority, the market share and the solid balance sheet to navigate safely even during weak times and this can be deemed as our company's biggest success. On slide 19 we can see some valuation multiples of StealthGas against comparable companies. Most peer group companies trade at a discount to NAV while asset values exceed current enterprise values. In that respect, LPG carrier shares including StealthGas offer an attractive entry point. Our shares trade at a discount to the peer group and since we are greatly undervalued but we do have a strong company fundamental, we feel that we are currently offering an interesting opportunity for medium term investors. In addition, given these market conditions, we as a company are taking into consideration the interest of our shareholders and we continue with the implementation of a share buyback program having spent a total of $17.7 million from December ‘14 to-date. Concluding our presentation, slide 20 will summarize all the reasons why we feel StealthGas is a good investment. The company has proved its leading position in the coastal LPG segment having acquired a total of 44 ships since its IPO, while it maintains a healthy capital structure and conservative charting strategy. We operate good quality vessels and collaborate with top tier charters. Most importantly, we managed to maintain profitability even in very poor market conditions. I will pass it now to Mr. Jolliffe for his concluding remarks.

During the third quarter of 2015, our market remained weak. Since June 2015 to-date, the price of oil declined from $60 to around $40 per barrel, a fact which did not help our segment, particularly the spot market activity. Nevertheless, StealthGas continued to implement and refine its strategy. Our performance was strong in terms of operations, but did not produce the desired results in terms of profitability. In more detail, we managed to achieve a 94.4% operational utilization, increased in terms of the previous quarter by 5 percentage points. All vessels in our fleet were utilized to the maximum capacity that the market permitted regardless of age. We concluded with success our expansion plan of 2015 taking on the delivery of five eco-modern LPG vessels within the third quarter reaching a total of 10 new deliveries for the year. In spite of lead times, based on our experienced chartering policy, we managed to fix 90% of our new deliveries on period charters. We continued the implementation of technical and operational management policies being for yet one more quarter efficient as we had only eight days of technical off-hire in a fleet of 55 operating vessels while our daily operational expenses decreased. Our asset base surpassed $1 billion and we maintained a moderate leverage of about 39% in spite of being in a capital intensive phase. Although, we managed to increase our revenues, it is due to the weak rates, particularly in the spot segment that we did not see our potential growth in our bottom line. Rates have decreased on an annual basis by more 20% narrowing profitability margins. We strongly believe that our company is well-managed and well-positioned such that should rates mark even the slightest improvement, this will be automatically reflected in our earnings. In terms of our stock performance, as we trade close to one-third of our NAV, we strongly see that all energy related stocks are driven by oil price fluctuation rather than company fundamentals. In this market environment, we continued a dynamic pace of stock repurchase program having spent about $18 million from December 1, 2014 to-date. Our sentiment for the year is that as scrapping in our segment has increased and as we feel we have reached the bottom of the market, we might see a slight improvement in rates and we are confident and well-positioned to grasp this opportunity to the fullest. We have now reached the end of our presentation and we would like to open the floor for your questions. So operator, please open the floor. Thank you, and happy Thanksgiving. Q - Donald McLee: Good morning, guys.

Hi, Donald.

So my first question is just around your fleet and incremental growth from here given your current gearing and cash balance. And if you do add additional ships, would there be more of a focus on the small gas carriers or Handy Size?

Thank you, Donald. We are not planning to add any more ships. We are trading at one-third of NAV, thus we will continue the share buyback. We have the Board’s approval to spend up to $30 million. We have spent close to $18 million. I am sure, we will be spending another $12 million on buybacks. But that’s - our first priority is that, and not adding more ships.

Okay, that makes sense. And I guess sort of referring to the share repurchase program, I think that $18 million came pretty much over the last 12 months. Given your current discount to NAV, would we see that the pace of the share repurchase program pickup maybe in H1 ‘16?

To be honest with you, we were looking to spend the money faster, but the volume and the SEC regulations didn’t allow us. Thus again, I cannot know what the volume is going to be next year, but we are always looking for blocks of share. And therefore, if there are more sellers, we will be buying more stock. If there aren’t many sellers, I don’t think we can do much about it.

Makes sense. And then just my last question is around your chartering strategy. I think one of the slides in the back kind of - you highlighted your leverage to 2016, the 2016 rate market, I think you have 48% chartered market exposure. Is there a particular rate maybe for the SGCs where you look at fixing some of your vessels on a longer-term basis?

Obviously, basic shipping economics say that you don’t fix a big chunk of your fleet on long or medium charters at the bottom of the cycle. Thus we will try to refrain from doing exactly that. We will try to play more of the spot market than doing short charters. And obviously, when we see a better market and better rates then we will look at fixing longer. And do not forget that we have many ships that are indeed fixed on longer charters up to 2022, thus securing a very good cash flow for the remaining vessels.

All right. Thanks. That's all my questions.

Give my regards to Michael.

[Operator Instructions] Our next question comes from Charles Rupinski from Seaport Global. Please go ahead.

Hi, Harry.

Hi, Charles.

Just a quick question in general on the market. And I'm not sure how relative this is to your space, but can you talk a little bit about the new building globally for this space, and as particular in terms of the new Tier 3 regulations? And also the ballast water regulations that are coming up that could affect some of the older vessels, is this something that could be possibly a positive on the supply-demand side?

Yes, I mean, Charles, you’re absolutely right. As you know well, these regulations are not yet full in force as you know very well. And we have implemented only water ballast treatment system only in some of our new buildings, because it’s costly modification as you know well, not as costly of course as the bigger sales because the smaller the ship, the smaller the modification. But you’re right, if you have a 20-year-old or 22 or a 24-year-old ship and suddenly you have to fit an equipment, which is $200,000 plus $100,000 or $150,000 of higher plus docking costs, I think you will think twice about it. Therefore, we hope that the regulation comes in force fast so that that helps to push more of the average ships out.

Very well. Thanks for the color. I appreciate it.

Thank you, Charles.

[Operator Instructions] There are no further questions at this time.

We would like to thank everyone for joining us at our conference call today and for your interest and trust in our company. We look forward to having you again at our conference call for our fourth quarter results in February 2016. Thank you.

That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.