Michael Jolliffe – Chairman Harry Vafias – Chief Executive Officer Fenia Sakellaris – Finance Officer

Sam Schaefer – Global Value Investment Corp. David Sachs – Hocky Capital

Good day and welcome to the StealthGas Third Quarter Results 2017 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Michael Jolliffe, Chairman of the Board. Please go ahead, sir.

Thank you very much. Well, good morning everybody and welcome to our third quarter 2017 earnings conference call. I'm Michael Jolliffe, the Board Chairman of StealthGas and joining me on the call today is our CEO, Mr. Harry Vafias; and our Finance Officer, Mrs. Fenia Sakellaris, who will provide commentary on our financial performance during the period. Before we commence our presentation, 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 2 of this presentation. It is noted that risks are further disclosed in StealthGas' filings with the Securities and Exchange Commission. I would also like you all to note that all amounts quoted, unless otherwise clarified, are implicitly stated in U.S. dollars. Slide 3 summarizes our key highlights for the third quarter of 2017. In spite of the week seasonal period, demand for our vessels was strong this quarter allowing us to achieve an operational utilization of 95.5%, a greatly improved number both compared to the previous quarter and the third quarter of 2016. It is worthy of mention that our operational utilization in the third quarter of 2016 was as low as 88% while commercial idle days were 63% higher than those we achieved this quarter. Our solid earnings visibility continues as we have about 90% of our fleet days secured for the remainder of 2017 with a total of about $177 million in contracted revenues. Following our fleet renewal strategy, we proceeded with the sale of two of our – two more of our oldest vessels: The Gas Moxie, 1992 built, and the Gas Nirvana, 1996 built. Both sold for further trading and at a very good premium above their scrap values, 78% and 220% respectively. It is worth mentioning that our vessels that were sold in the previous quarter, the Gas Emperor, which was 1994 built, and the Gas Icon also 1994 built were both sold at about 150% premium above scrap value. In terms of our financial performance, our revenue for the third quarter of 2017 came in at $38.5 million, an increase of 12% compared to the third quarter of 2016. Our adjusted EBITDA amounted to $15.3 million. As per our leverage and cash position, our gearing remains at moderate levels, a shade below 40%, while we still maintain a healthy unrestricted cash balance of approximately $42 million. Side number 4 provides an analysis of our fleet employment. In terms of charter types, out of a fleet of 52 operating vessels, we have 14 of these on bareboat, 33 on time charters, and 5 in the spot market, 3 of which are employed in the series of consecutive spot voyages leaving in that essence only 2 vessels operating in the spot market. Our reduced presence in the spot market is another evidence of improved market conditions as charters commit to booking more vessels, even older ones, due to an increase in demand for LPG and also rising freight rates. Since our last announcement and in spite of the weak seasonal period, we managed to secure 16 new charters and charter extensions, the majority of which were booked at rates about 15% higher than where the market was six months ago. In the past six months, we have announced 31 new charters and charter extensions, meaning that we have renewed freight contracts for more than half of our fleet and all at improved rates. Currently, the average duration of our charters is around nine months, as we strategically do not want to commit our vessels for long periods now that the market fundamentals and day rates are finally improving. We have strong period coverage, which currently stands at about 90% for the remainder of 2017 and 63% so far for 2018. I will now turn the call over to our CEO, Harry Vafias, who will discuss our fleet geography and our capital expenditure program. Thank you.

With regards to fleet geography on Slide 5, 50% of our fleet trades in the Middle and Far East, 28% in Europe, 11% in America, 5% in Australia and about 6% in Africa. Compared to the previous quarter and the third quarter of 2017, we have slightly increased our presence in the Americas and Africa. Moving to Slide 6, I'll provide you with the analysis of our remaining capital expenditure program. Following our first 22,000 semi-ref new build vessel, we have another three of these innovative vessels yet to be delivered, two in Q1 2018 and the last one in April 2018. Looking on the table on the left hand side, our remaining CapEx excluding any related advances paid to date is in the order of about $100 million. In terms of advance payments, we paid $5.2 million installment for the last semi-refrigerated new building earlier than previously stated as its construction was ahead of the initial estimate. At the bottom of the table, we provide you with a detailed breakdown of our remaining capital expenditure depicting advances and final payments for our future deliveries. In relation to the financing of this capital expenditure, which is presented in the graph on the right, from a total contract value of $156 million $57 million are advances paid to date, $93.5 million is committed loan amounts, leaving us with an additional required equity of about $5.4 million. I'll now turn it over to Mrs. Fenia Sakellaris for the financial performance.

Thank you, Harry, and good morning to everyone. In the third quarter of 2017, we experienced strong demand, solid operational utilization and rising rates. All these factors assisted our performance, which was likely impacted by an increase in our OpEx base due to increased store cost and rising our maintenance cost due to higher utilization especially for the 15-year-old class ships. Let us move on to Slide 7 where we see the income statement for the third quarter of 2017 against the same period of the previous year. Voyage revenues came at about $38.5 million, an increase of 12% compared to the third quarter of 2016. This increase is attributed to the high utilization of our fleet as our operational utilization was close to 96% compared to 88% for the same period of last year. Voyage costs amounted to $3.7 million, marking a 9% decreased compared to Q3 2016, due to fewer vessels operating in the spot market, which led to decreased port and bunker costs. Net revenue, that is revenues after deducting voyage costs, came at $34.9 million, corresponding to a net revenue margin of 91%. Running costs at $15.1 million, marked a $550,000 increase compared to Q3 2016. This increase is attributed to the operation of one of our product tankers at the time charter, which was previously on bareboat during the third quarter of 2016. In comparison with the second quarter of 2017, the increase in OpEx is all due to increased store costs and the increased maintenance of many older vessels that previously faced significant idle days. With regards to drydocking costs, this amounted approximately $600,000, which corresponds to the drydock of one vessel. In terms of noncash item, this quarter we incurred an impairment loss of $3.1 million for four vessels, two of which are classified in the third quarter financial as held for sale. The average age of these vessels is 23.5 years. Our EBITDA for the third quarter of the year came at $12 million, while our adjusted EBITDA measure, which excluded noncash items, came at $15.3 million marking a $4 million rise compared to Q3 2016. Interest and finance costs marked an increase of about $700,000, mostly as a result of an increase in LIBOR rates. With an adjusted net income of $1.1 million, our adjusted earnings per share for the second quarter of 2017 were $0.03. Slide 8 demonstrates our performance indicator for the period examined. As mentioned earlier, all our operational utilization for Q3 2017 was in the order of 95.5%, higher demand and an improved in day rates with respect to our stronger adjusted time charter equivalent of about 8,250, marking a 14% increase against the same period of last year. Looking at our balance sheet in Slide 9. In the first nine months of 2017, we managed to preserve good liquidity of $42 million in free cash and maintain our gearing at moderate levels, a shade below 40%. We have signed the term sheet for the refinancing over $12 million balloon payment due in December 2017 and, therefore, as stated, short-term debt will be reduced by this amount. In addition, our stated current portion of long-term debt balance includes an amount of $26.3 million of balloon payments due in 2018, for which we have already commenced refinancing discussions. Slide 10 presents, on a daily basis, the evolution of our breakeven against our average time charter equivalent. What we noticed is that our average time charter equivalent has stabilized at higher levels compared to previous quarters. Looking briefly at our debt coverage from an adjusted EBITDA standpoint, it's very clear that as our earnings generation profitability improved so does our debt coverage capacity. I will now hand you over to our CEO, Mr. Harry Vafias, who will discuss market and company outlook.

Let’s now proceed with a market update in Slide 11. Global LPG trade has grown by an average of about 5% per annum over the last decade, driven largely by the growth in U.S. exports to Asian destinations. Indeed, U.S. gas exports are heading for a new record in 2017 as NGL exports rose 21% year-on-year to 1.2 million barrels per day. This growth is expected to persist well into the next decade as NGL output continues to grow. As stated above, production of LPG is dominated by the U.S., which produces more than the combined yield of China and Saudi Arabia, the second and third largest producers. Other large producers such as Qatar, Russia, Canada, Nigeria and Iran also showed growth in LPG output. In terms of LPG demand, India and China will continue to be the key drivers well into the next decade. Indian demand growth has underpinned the wave of import and pipeline infrastructure projects, and these are needed to extend the reach of LPG as cooking fuel to replace the use of biomass and wood in the rural areas. Focusing on our segment for the methodology in Slide 12, we see that during Q3 2017, rates have demonstrated an upward trend nearly across all categories. Since the beginning of 2017, the rates have increased by an average of 10%. Should this upward trend continue throughout 2018, this will be a very strong market signal. Another factor that might assist rates to strengthen further is the rising oil prices witnessed during the past quarter. In terms of trade west of Suez, the recovery of the pressurized spot market has been less noticeable than east of Suez, but there has been still a noticeable improvement. In the East, the spot market has tightened significantly through the last few months. This comes as a result of a lot of charters taking time charter coverage leaving little tonnage available for the spot market. We expect a tight winter market on the spot side. We've already seen charters having to drop cargoes due to nonvessel availability, and we expect this to continue through the winter. Charters must move their cargo and do not have – and those that don't have time charter tonnage, which most likely face increased day rates. In terms of scrapping activity in our markets, since the beginning of 2017, we have seen the demolition of 10 vessels, including some small semi-ref vessels. Taking into account the 22% of the small LPG fleet is above 20 years of age, it's anticipated that scrapping will accelerate further in the years to come. As per published orders, there are six vessels on order that is only 1.7% of the total fleet to be delivered in the period 2018-2019. The limited order book of our segment is another positive factor for rates and existing tonnage demand. On Slide 13, we discuss our company's outlook, commencing with our share performance for the last four months. The performance of our stock is presented along with a selected gas carriers' peer group. It’s evident that all stocks presented follow a broad correlation with oil price movement. During this period, we show a rise in oil prices largely driven by crude output cuts from producing nations led by OPEC, Russia but also affected by Middle East tensions. It's noted that OPEC will discuss oil output at a meeting in November 30th and is expected to extend that production limits beyond the expiry dates of March 18, a factor that may boost oil prices even higher, thus positively affecting energy-related stocks. On Slide 14, we are showing different scenarios on the company's performance for 2018. The different scenarios were created based on the existing fixed charters, plus vessels' open days on the spot market. Assuming no new charters upon the expiration of the fixed vessels, revenues were calculated using an estimated spot rate based on current market and then individual utilization rate for each vessel. This forecast includes all 22,000 cbm semi-ref vessels, for which we have used very conservative assumptions. We can see throughout the quarters examined that our hypothetical $500 increase in the spot daily rates will significantly leverage our earnings, while a $2,000 hike in daily rates will lead to a boost of approximately $16.5 million to our annual EBITDA. This table shows our company's potential if there is a further rate strengthening, a realistic scenario given current market conditions and the fact rates climbed by almost 10% in the past quarter. At this stage, our Board Chairman, Mr. Jolliffe, will discuss our valuation multiples and summarize our concluding remarks.

Proceeding to Side 15, we can see some valuation multiples of StealthGas against comparable companies. Nearly all peer group companies trade at a discount to NAV, while in most cases, asset values exceed current enterprise values. As evidenced, our company trade at a greater discount than its peers in terms of net asset value despite it's very safe capital structure, less gearing with its peers and a market leading share with a pressurized market. We believe that our stock is substantially undervalued as our company has solid fundamentals, improved in earnings growth potential, which become stronger as our market improves. We would like to point out that this selected peer group is comparable in terms of broader seaborne LPG trade, as actually no other company in the small LPG segment that we operate in is listed on any U.S. stock exchange. The lack of a true comparable company and also low share volume are additional reasons why we think our stock is undervalued. Concluding our presentation with Slide 16, we summarize all the reasons why we feel StealthGas is a good investment as a market-leading company in a niche market with promising fundamentals. We feel that in the past quarters, our company's exerted strong performance, taking advantage of the market improvements and we strive to improve upon our performance in the quarters yet to come. Now at this stage, I will summarize our concluding remarks for the period examined, concluding remarks. In the third quarter of 2017, our market continued the positive momentum noticeable since the beginning of the year. As a result, we witnessed a further strengthening of the freight rates, strong demand in spite of the weak seasonal period and managed to decrease our idle days by 63% compared to the same period of last year. Our revenues were 12% higher than the third quarter of 2016, but our profitability, excluding noncash items, were somewhat impacted by a slight increase of our operating cost base. This increase was mostly attributed to a rise in maintenance cost due to the higher utilization of many older vessels that previously faced a lot of idle days. We proceeded with the sale of two more of our older vessels at a 78% and 220% premium over scrap value, respectively. These sales took place in order to further boost our liquidity, ease our operating cost base. We still maintain strong earnings visibility and have a strong contract coverage of 63% for next year. As our market fundamentals are improving and look promising for the future, we hope to further improve upon our performance increase our revenues, strengthen our profitability, and continue to contain our costs. 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.

Thank you, sir. [Operator Instructions] We can now take our first question that comes from [indiscernible]. Your line is open. Please go ahead.

Thank you for the presentation so far. I was wondering if you could talk a little bit about how you see the market and from a kind of capital allocation perspective, say, for example, if you were to have more capital or if a new person wanted to enter this industry in terms of thinking about asset prices versus the current rate so he could get what are people sort of incentivized to do? Are they incentivized to buy existing vessels or order new ones? Thank you.

Thank you. Are you talking for existing LPG players or new ones?

Well, I mean, I guess, I was thinking for the market as a whole, but say, if people didn't have any vessels or if you needed new vessels, for example. I mean, obviously I appreciate the lag time with getting deliveries, new deliveries perhaps, but I guess, I wasn't asking specifically, but just a more sort of general overview as to how asset prices are trending and the returns you get on those both maybe on newbuilds and in the secondary market?

Yes, okay. So first of all, as you know, for a new entrant, this market is very difficult market because if they don't have the operational knowledge, no major charter will take their ships. So this is a very important point. But in any case, let's say that they have the operational knowledge or they can buy the operational knowledge, I guess, buying a secondhand ship makes more sense because if you buy a secondhand ship means that you buy it right now, and then you can ride the upward wave. Whereas if you order a newbuilding, you will wait for about two years and you might miss the good times as it seems, which is going to be 2018 and 2019. So if we are not in the market to buy anything, unless it's a fantastic opportunity, but if we were, we would go for more than secondhand ship.

Perfect. Perhaps just as a follow-up question, do you see any transactions in the secondary market in the sort of size you're enjoying? Because I mean, I appreciate there are not very many players and we may be having even less visibility as there's very few in the listed space. I was just wondering if you see any trends in asset prices if people are starting to do that already or not yet really?

Arash, if you're very carefully listening to the presentation, you would have heard that we sold four of our older ships at between 80% and 220% premium over scrap, which means that those ships that were destined to go for scrap if the market haven't recovered, they fetched really, really good prices. So that means that there's a shortage of good ships, and that people that have the cargoes need to get ships of any age to move their cargoes.

Okay, great. Thank you. Sorry, I wasn't too sure where sort of scrap prices were at versus market prices if you see what I mean.

Yes, scrap prices were calculated basis $400 a ton, which is a historically high figure.

Okay. I mean, I get to the scrap value versus the secondhand trade value for a ship. And I know it sort of depends on how you can use the vessel and so on. Were those vessels – that you sold did you say they were basically at the end of their usable life for the major customers if you like?

Again, Arash, as you know very well, there is no time limit on a ship. It all depends on the condition and the market. If the condition of the ship is good and the market is good, you can keep them trading. If the market is bad, you have to lay them up or scrap them. So ships that we had in our minds that they would go for demolition, four of them got sold at huge premium over demolition, which shows the direction of the market.

Okay. I think I better understand what you mean now. Thank you very much guys. Very good presentation.

Thank you.

Thank you. We can now move along to our next question. It comes from Sam Schaefer of the Global Value Investment Corp. Please go ahead.

Hi, thanks for taking my questions today guys.

Hi Sam.

Given the pickup in chartering activity, we noticed it appears that some of the older ships, early 2000, that are getting these charters rather than are newer really one-year-old to three-year-old ships, what conclusions can we draw from this?

Sorry. I didn't understand the question, what do you mean the older ones are getting the charter?

On the report, it looks that when you broke out which vessels were on which charters, it appeared that a lot of the longer charters, the three-year, two-year charters are 1997, 2008 build but when you look some of our newer charters – newer ships, sorry, they're really one, two, three months for a 2017, 2014, 2015 built ships. So I'm wondering if there is a…

Okay. Yes now I get the question. Thank you. Basically, it's more easy to agree a longer rate for an older ship than a longer rate for a newer ship because the premium we ask for a newer ship is more difficult for the charterer to swallow if that makes sense.

Definitely. And that's what we assume but good to know. There are multiple comments in the prepared remarks discussing the increased demand, strengthening rates, really just the fundamental improvement in the industry. Given the change that’s occurred over the last few months and really 2017 as a whole, will StealthGas start to reinitiate their stock buyback program?

Very good question. The Board has decided that we will see how the strong quarters will go and the strong quarters seasonally are Q4 and Q1, also examine the share price after those quarters. And if indeed we're still trading at this big discount and we have the money to do a share buyback like we've done in the past, it will be proposed to the Board.

Great. That’s all I had today. Thank you for taking the questions. And good luck with Q4 and Q1.

Thank you, Sam.

Thank you. [Operator Instructions] We can now move along to our next question, it comes from David Sachs of Hocky Capital. Please go ahead.

Hey Harry, good morning.

Hi David.

So I wanted to discuss the slide that you titled outlook time charter equivalent sensitivities. Just wanted to understand what rates you were using in that for the new semi-refrigerated that you're taking in and what the operated and utilization percentage for those assets were assumed in that table?

Yes good question David. I don’t know if I'm allowed to say that over the phone because it will be selective data release. But I have to tell you that we used very, very low rates and very, very low utilization in order to be on the conservative side. Of course, we don't know if the market in 2018 will be the same or better than 2017, but we used very low rates, I repeat, and very low utilization because we don't want to overestimate the earnings of these vessels that have not experienced a big market improvement like the smaller ships.

So is there a way to – are we thinking maybe $12,000 to $15,000 a day for the SRs? Are we thinking $10,000 to $12,000? I'm just kind of getting a sense of what your consideration is low versus…

To be able to give you a general number, for me, if I was doing the calculation, I wanted to be conservative I would use below $10,000 as a number.

And to refresh, 18 months ago, those same vessels were trading at over $30,000 a day?

Two years ago, they were trading at over $30,000 correct.

Okay. And I should assume that you're using a number or ten or less in the sensitivity analysis. Second question…

As I said, they cannot give you specific information. But us being conservative and you know how we think, we use the lowest number that we could think of.

Okay, second question. So if I were to book-to-market today, you have 90% of the fourth quarter sold out, and you've got 63% of 2018 sold in charter. Those are baked into the sensitivity analysis, the charter rates that you've achieved for those, that 63%, is that at approximately today's market, 5%, 10% below today's market since rates have been moving up over the course of the time?

It a very difficult question, David, because as you know, our charters are staggered. So some older contracts are at higher rates. Whatever the rates are, they're already injected in the sensitivity analysis. So the sensitivity analysis has all the real data inside, and it's only up to play with the three – with the open days of the ships that are not fixed.

Okay. Thanks Harry.

So every $1,000 sorry $1,000 that the market improves, our EBITDA goes up by about $10 million.

It’s a good report card in and hopefully the start of a good strong season for you in the fourth quarter.

It seems so, it seems so. David, it's in the beginning, fingers crossed and we hope to see an even stronger Q4.

Okay. Very good. Happy holiday. Thank you.

Thank you.

Thank you. We have no further questions at this time. [Operator Instructions] We now have another question Donald Bech [ph] of [indiscernible]. Your line is open. Please go ahead.

Good morning guys. And I apologize if you've answered this question before, I came in late on the call. Simple question, what is your best estimate of net asset value?

Good question. We take valuations, official valuations from two independent sources every June and every January. So actually, as we speak, we don't have a fresh valuation on our hands to give you precise data. But off my head, it would be around $12.

Did I hear you correctly, 12?

Yes you heard me very right.

Alright, that’s the answer I was look for. Thank you.

Thank you.

Thank you.

We have no further questions. So at this point in time I turn the call back to speakers for any additional or concluding remarks. Well actually we have another question from David Sachs of Hocky Capital. Would you like to take that question?

Okay.

Your line is open please go ahead.

Harry just following-up on one of the previous questioners and talking about capacity and capacity additions into the market. You have a slide showing a very small 1.4% contracted growth in 2018 and 0.3% in 2019. If we were of a mind to build new capacity, what would you guess the time line would be today if we started negotiating to acquire a brand-new vessel? And are there yards that are capable of producing these? Or these are assets that yards are not careful, too keen on building given the complexities and the small price tags?

You've answered, David, the question by yourself. The yards, as you know, in general, don't want to build those ships, there are, of course, a few smaller yards that are specialized that can build those ships and will build those ships if you pay them the price. That if you order a ship now, you would get delivery in about two years from now. So that is the answer to that.

And if we were buying a new vessel today, is there a way to look at our return on investment for that at current market rates? And what kind of unleveraged return exists for a…

David I haven't done the calculation because I wasn't negotiating with any yard for a new vessel. I mean, you can do the maths on your own, you know the earnings. I mean, the construction price, I don't have recent numbers. But for a 5,000 cubic meter vessel estimated at between $18 million and $20 million depending on the specification, and then you can do the math and see what it makes. I haven't done recently any such cash flows.

Okay, last question. If you could just characterize the 22,000 semi-refrigerated cbm market. Clearly, it developed a little differently than you anticipated when you contracted to build the four newbuilds. So what's your thinking now on how that market develops in terms of your view of supply growth and demand growth? And when do you see equilibrium given those trends?

Again David I’m not – I cannot guess the future. But we know the demand is there. The problem is the supply. So I would personally think that 2018 is not much better than 2017, and we are hopeful from 2019 onwards. So for these vessels, we have to be patient for 12 months. In the meantime, we hope to see very good results from the smaller ships. And don't forget, these are brand-new vessels from the best yard in the world, very economical and with very, very high specifications. So if any ship can be fixed, these are the ships. But we have to be patient for 12 months. Don't forget that we pushed them back already for a big period of time, and we save money by not operating them. So now we have to take delivery within the next three months.

Now that part of the transaction was clever. But if I stepped back, you said you can't predict the future, but you were willing to make a bet to spend significant shareholder capital, a couple of hundred million dollars, to build these four vessels. What was that thesis when you decided at that point we should build them? And what changed in that thesis that caused rates to decline by 65% or 70%.

The same that changed the thesis on the small ships, David. Exactly the same thing, the collapse of the oil price, the world economy weakening and the unexpected follow-up orders of my competitors.

Okay. So hopefully, your original vision comes to play out. We, the shareholders, have sort of been here for another….

David, we've heard exactly the same complaints on the smaller ships and we are happy that we're getting there. So we hope that we can bounce back with the four bigger ships as well.

Well, the magic of supply and demand, has it worked in the smaller ships. No one's ordering, demand remains even to better and you're seeing the sequential improvement, year-over-year improvement in rates that you've been projecting. And I'm assuming this peak season, in fourth quarter and Q1 will show a more pronounced increase given those trends.

This is what we hope for as well, David.

Well, congratulations on steering us through the difficult period in the industry and we look forward to make…

Thank you. Let's hope it continues and we can actually celebrate it in Q1 and Q2.

Alright very well. Thanks Harry.

Thank you.

We have no further questions. So at this point, I'll turn the call back to the speakers for any additional or concluding remarks. Thank you.

We would like to thank everybody for joining us at our conference call today and for your interest and trust in our company. And we look forward in having you with us again at our next conference call for our Q4 results in February and wish you all a happy Thanksgiving. Thank you.

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