Ardmore Shipping Corporation · NYSE:ASC
Ardmore Shipping — Investor Day (May 2019)
52 slides from Ardmore Shipping's investor day presentation, May 30, 2019
Slide 1: Analyst and Investor Event New York May 30, 2019
Analyst and Investor Event New York May 30, 2019
Slide 2: Forward-looking statements
2 2 This presentation contains certain statements that are deemed to be “forward - looking statements” within the meaning of applicable U . S . federal securities laws . All statements, other than statements of historical facts, (including, without limitation, statements that address activities, eve
Slide 3: Welcome
3 3 Welcome
Slide 4: Presenter introductions
4 Name Experience 4 ▪ CEO of Industrial Shipping Enterprises, COO of MTM Group and CFO of Teekay Shipping Corp. ▪ Shipping financier with Citicorp and U.S. Naval Officer ▪ MBA, CFA, Fellow of the Institute of Chartered Shipbrokers ▪ Formerly at Ernst & Young, Financial Services Advisory ▪ BA, MBS, F
Slide 5: Introduction and Agenda
5 5 I. Welcome and Presenter Introduction Anthony Gurnee II. Ardmore Shipping Anthony Gurnee and Paul Tivnan o Company Overview o Finance and Operations o Recent Market Activity and Performance o Product Tanker Fundamentals III. Market Outlook and IMO 2020 Anthony Gurnee and Andy Lipow o Introductio
Slide 6: Agenda
6 6 IV. Questions and Answers II. Ardmore Shipping III. Market Outlook and IMO 2020 V. Closing Remarks I. Welcome and Presenter Introduction Agenda
Slide 7: Company Overview
7 7 Company Overview
Slide 8: Our Company
8 8 Our Company High Quality Fleet: 25 x “Eco” Product Tankers Fully Integrated Shipping Company Financial Discipline and Focus on ROIC Low Cost Platform & Focus on Performance Highly Attractive Market Outlook Shareholder Friendly Corporate Governance
Slide 9: Our Business
Our Business DISTRIBUTION
Slide 10: High Quality Vessels
10 10 x Modern, highly fuel efficient fleet of MRs x Average age of 5.9 years (1) x Built at high - quality yards in Korea and Japan x Quality fleet = lower operating costs, higher utilization and maximum value appreciation x Complementary fl eet High Quality Vessels Vessel Name Type Dwt Tonnes IMO
Slide 11: MRs Trade Everywhere And Are The Ship Of Choice For Oil Traders
11 11 MRs Trade Everywhere And Are The Ship Of Choice For Oil Traders Due To Their Versatility MR VLCC LR1 LR2 1. Vessels Value AIS Data, November 9, 2018 MRs are the “Yellow Cabs” of the World Tanker Fleet (1)
Slide 12: Shipping Corporate Governance Ranking
12 12 ▪ Corporate governance and transparency remain key to the company and our investors ▪ ASC ranked in the top tier of public shipping companies (1) ▪ Fully independent Board of Directors (2) ; decades of experience in shipping and finance ▪ No related party and affiliated transactions Commentary
Slide 13: Board of Directors
13 Name Experience Curtis McWilliams Chairman of the Board Brian Dunne Chair of Audit Committee Mats Berglund Director Helen Tveitan de Jong Director Peter Swift Director ▪ Director of Ardmore since 2016 and appointed Chairman of the Board effective January 2019 ▪ President and CEO of CNL Real Estat
Slide 14: Finance and Operations
14 14 Finance and Operations
Slide 15: Finance: Recent Developments
15 15 Finance: Recent Developments ▪ Strong balance sheet and liquidity position at 1Q19: o $52 million in cash plus $22 million in net working capital (approx. 9% of total balance sheet) o Corporate leverage of 52% (1) o All debt and finance leases are amortizing; repaying $40 million per year (~10
Slide 16: Operations: Key Metrics
16 16 Revenue Days: 2019 - 2021 No. of Scheduled Drydockings and BWTS: 2019 - 2021 (1)(2) ▪ 86% of 2019 drydockings completed in 1H19; revenue days expected to increase in 2H19 ▪ 10 of Ardmore’s 25 ships have Ballast Water Treatment Systems (“BWTS”) installed; o Remaining to be installed in 2019 – 2
Slide 17: Diversified Sources of Finance
17 17 ▪ “Barbell” approach to debt profile through a mix of finance leases and senior debt o Improves financial flexibility, repayment profile and diversifies Ardmore’s pool of finance sources ▪ Attractively priced finance lease financing in China and Japan in 2018 o Chinese financing only suited to
Slide 18: Strong Balance Sheet and Liquidity Position
18 $452.1 $418.7 $379.0 $379.0 $339.2 $335.7 $33.4 $29.9 $39.7 $39.7 $39.7 $39.7 $3.6 $3.6 Gross Debt @ 1Q19 2Q19 - 4Q19 Repayments Gross Debt @ 2019 2020 Repayments Gross Debt @ 2020 2021 Repayments Gross Debt @ 2021 Gross Debt Debt Repayments Balloon Repayments 18 ▪ Cash of $52.3 million plus $21.
Slide 19: Significant Potential Earnings Power with 25 Ship Fleet
19 19 Vessel Type Base TCE per day Rates FY2015 TCE per day Upside Rates – 3Q15 TCE per day MR Product (50k Dwt) $17,761 $21,500 $25,000 MR Chem (25 - 37k Dwt) $15,000 $17,500 $18,000 Illustrative Earnings Per Share (1) Every $1,000 / day increase in rates ≈ $0.27 / share in EPS $0.58 $1.52 $2.28 Ba
Slide 20: Share Price Disconnected from Asset Values
20 $20.0 $22.0 $24.0 $26.0 $28.0 $30.0 $32.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 Vessel Value ($ Million) ASC Share Price ($) ASC Share Price MR 5-Yr Value ($ Mln) 20 Share Price Disconnected from Asset Values - MR Values +20% (2) Continued Disconnect between Share Price & Asset Values (2) (1) 1.
Slide 21: Recent Market Activity and Performance
21 21 Recent Market Activity and Performance
Slide 22: Market Review: From Adversity to Opportunity
22 22 Market Review: From Adversity to Opportunity 1. IEA, Oil Market Reports; OECD Product Stocks taken as total of OECD Motor Gasoline, Middle Distillate and Residual Fuel Oil S toc ks 2. Bloomberg as at May 24, 2019 3. Clarksons Shipping Intelligence Network and Management’s estimates as at May 1
Slide 23: Charter Rates Bottomed in 3Q18 – Recovery Underway
23 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 1Q14 2Q14 3Q14 4Q14 1Q15 2Q 15 3Q 15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 $ / Day 23 Oil price drop end of 2014; significant rate increase in 2015 Rates troughed in 3Q18; recovery underway
Slide 24: Refined Product Inventory Overhang Eliminated
24 8,100 8,300 8,500 8,700 8,900 9,100 9,300 9,500 9,700 9,900 950 1,000 1,050 1,100 1,150 1,200 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18
Slide 25: Oil Price Volatility (OVX Index)
25 0 10 20 30 40 50 60 70 80 90 OVX Index 25 ▪ Oil price volatility is a key driver of trading activity; historically high oil price volatility has resulted in demand spikes for tankers o We expect price volatility to be higher over the next 24 months; IMO 2020 expected to cause significant disrupti
Slide 26: Refinery Maintenance Frontloaded in 1H19
26 ▪ Refineries are frontloading maintenance in preparation for fuel demand in the run up to IMO 2020 implementation 2H19 (2) ; throughput expected to peak in August (approx. 85 mbd ) (1) ▪ Global refinery throughput is increasing; expected increase by 1.2 mbd y - o - y (3) 26 0.0 1.0 2.0 3.0 4.0 5.
Slide 27: Product Tanker Fundamentals
27 27 Product Tanker Fundamentals
Slide 28: Market Absorbed Excess Supply from 2015 – 2017
28 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Product Tanker Fleet Growth (%) Trailing 12M Net Fleet Growth 28 Supply growth now well below long - term tonne - mile demand growth Tonne - mil
Slide 29: Supply: Product Tanker Orderbook at Record Lows
29 - 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Orderbook as % Fleet Fleet (million dwt) Fleet Orderbook (%) 29 Orderbook 6.1% of
Slide 30: Scrapping Set to Continue: Estimate 35-40 Ships Per Year
30 0 20 40 60 80 100 120 140 160 180 200 Number of Vessels 30 +27% YoY +37% YoY >20 years old: 207 vessels ( 7.2 % Fleet) …Increasing regulations could accelerate vessel scrapping ▪ 6 Vessels Scrapped YTD (3) ▪ 61 Vessels Scrapped 2018 Product Tanker Fleet Profile (2) Scrapping Set to Continue: Esti
Slide 31: Product Tanker Fleet Development
31 (4%) (2%) - 2% 4% 6% 8% (30) (20) (10) - 10 20 30 40 50 60 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20E Net Fleet Growth T4Q (%) Vessel Deliveries / (Scrap) Product Tanker Deliveries Product Tanker Scrap Net Fleet Growth (T4Q) 31 ▪ Net fleet growth for next two years estimate at approx. 1.7% per year (1)
Slide 32: Product Tanker Demand Drivers
32 32 Increased Volumes Refinery throughput Oil price volatility returning Low inventory levels Oil consumption growth Growing imbalances; regional and grades Increased refinery throughput Voyage Distances IMO 2020 Trading Activity Refinery dislocation Increased volumes of distillates / other produc
Slide 33: Oil Consumption Growth Remains Robust
33 97.9 99.2 105.4 1.4 1.4 1.3 1.2 94 96 98 100 102 104 106 2017 2018 2019E 2020E 2021E 2022E 2023E Million Barrels / Day Total Global Oil Consumption Consumption Growth 33 Oil Consumption Growth Remains Robust Avg. +1.2 million bpd annually (2018 – 2023) ▪ Oil consumption forecast to continue to gr
Slide 34: Refinery Capacity to Grow in Export Oriented Locations
34 34 ▪ Refinery capacity growth in line with oil demand growth: o Almost 90% of incremental capacity expected to be export oriented refineries in Asia and the Middle East leading to increasin g t onne - miles 100.4 108.8 2.6 0.9 1.5 1.2 80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0 2018 2019E 2020E 2
Slide 35: Tonne-Mile Demand for Product Tankers
35 35 Import Export Net Middle East 1.6 3.7 2.1 North America 2.0 3.6 1.6 China 0.7 1.0 0.3 Asia (ex China) 7.2 5.3 - 1.9 Europe 6.9 5.9 - 1.0 Latin America 2.5 0.6 - 1.9 Africa 1.5 0.5 - 1.0 FSU N/A 2.4 2.4 Australasia 0.7 N/A - 0.7 Other 0.1 0.1 0.0 Total Trade ( mbd ) 23.1 23.1 0.0 Tonne - Mile D
Slide 36: Agenda
36 36 Agenda IV. Questions and Answers II. Ardmore Shipping III. Market Outlook and IMO 2020 V. Closing Comments I. Welcome and Presenter Introduction
Slide 37: Introduction to IMO 2020
37 37 Introduction to IMO 2020
Slide 38: Background to IMO 2020
38 38 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Sulfur Content (%) World EU Ports ECA 1.5% 4.5% 3.5% 0.5% 1.0% 0.1% 0.1% 2015: Set 0.1% sulfur cap for fuel oil used in Emission Control Areas (ECA) 2020: From Jan 1, 2020 glo
Slide 39: Alternatives for Shipowners
39 39 Alternatives for Shipowners Open Loop (1) Est. Cost: $2 - 3 mln Marine Gas Oil (“MGO”) 0.1% Very Low Sulfur Fuel Oil (“VLSFO”) 0.5% Options for Shipowners Burn Compliant Fuels Burn High Sulfur Fuel Oil (“HSFO”) 3.5% Install Scrubber: Open or Closed Loop? Closed Loop (2) Est. Cost: $5 mln 1. Op
Slide 40: Switch to Compliant Fuels - Major Change to Bunker Market
40 40 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2018 2020 Demand (Million Barrels / Day) HSFO HSFO MGO / VLSFO MGO Switch to Compliant Fuels - Major Change to Bunker Market Option 1: Increase refinery throughput Option 2: Feedstock taken from existing products Impact: » Shortage of feedstocks » Inventory draw
Slide 41: IMO 2020: Demand for MGO Set to Spike
41 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2018 2019E 2020E 2021E 2022E 2023E HSFO MGO VLSFO 41 ~2x increase in expected demand for MGO in 2020 VLSFO demand to increase; refineries re - adjust to low sulfur fuel production / compatible blends manufactured 2.0 mbd 1.9 mbd 1.9 mbd 1.8 mbd 1.0 mbd
Slide 42: Estimated 5%+ Incremental Demand for Product Tankers
42 ▪ Refinery throughput + 2.2mbd (1) in order to meet incremental demand from IMO 2020 ▪ Demand for MGO to increase substantially (2) as the most reliable source of compliant fuel ▪ Increased volumes of distillates and other refined products (2) 42 ▪ Movement of blending components plus shift in tr
Slide 43: IMO 2020: Impact on CPP Cargo Flows and TCEs
43 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E Million Barrels / Day MR TCE Rate?? 43 MR TCE Rate (2) : $31,700/day MR TCE Rate (2) : $33,100/day IMO 2020: Impact on CPP Cargo Flows and TCE’s (1) 1. Clarksons Shi
Slide 44: Compliant Fuels: Guest Speaker
44 44 Compliant Fuels: Guest Speaker
Slide 45: Agenda
45 45 IV. Questions and Answers II. Ardmore Shipping III. Market Outlook and IMO 2020 V. Closing Remarks I. Welcome and Presenter Introduction Agenda
Slide 46: Questions and Answers
46 46 Questions and Answers
Slide 47: Agenda
47 47 Agenda IV. Questions and Answers II. Ardmore Shipping III. Market Outlook and IMO 2020 I. Welcome and Presenter Introduction V. Closing Remarks
Slide 48: Closing Remarks
48 48 Closing Remarks
Slide 49: Appendix
49 Appendix 49
Slide 50: Summary Refinery Process
50 Summary Refinery Process (1) 50 ▪ Jet ▪ Kerosene ▪ Diesel ▪ Heating Oil Atmospheric Distillation Unit Vacuum Distillation Unit Hydrocracker Delayed Coker Fluid Catalytic Cracker Final Treating & Blending Gasoline Distillate Fuel Oils Lubes LPG Naphtha Kerosene / Jet Diesel L.S.S.R. L.S./H.S. Stra
Slide 51: Origin of Product and Chemical Cargos
51 51 Crude Oil NGL Plant Gas Refinery Ethylene Cracker Naphtha Cracker Reformate Ethane Propane Butane Naphtha Pygas Ethylene Propylene Butylene ▪ Ethylene Dichloride ▪ Ethylene Glycol ▪ Linear Alcohols ▪ Vinyl Acetate ▪ Styrene ▪ Misc chemicals Manufacturing • Polystyrene • Fibres • Resin • Latex
Slide 52: IMO2 Ships Are Essentially More Sophisticated Product Tankers
52 52 Gasoline Diesel Kerosene Jet Fuel Naphtha Clean Petroleum Products (CPP) Chemicals* IMO 3 Tankers • Cargo • Tank Coating: • Tank Size: • Inerting: • Crewing: IMO 2 Tankers • Cargo: • Tank Coating: • Tank Size: • Inerting: • Crewing: IMO 2 (Coated) IMO 3 CPP + Vegoils Epoxy >3,000 m3 Required (