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StealthGas Inc. (NASDAQ:GASS)

Q3 2012 Earnings Call

November 27, 2012 10:00 am ET

Executives

Harry Vafias – President, Chief Executive Officer

Konstantinos Sistovaris – Chief Financial Officer

Analysts

Jim Fronda – Sidoti & Co.

George Berman – JP Turner & Co.

Ben Sexson – First Wilshire Securities

Jeff Gogin (ph) – (Unknown)

Operator

Thank you for standing by and welcome to the StealthGas Inc. Third Quarter 2012 Results call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question you will need to press star, one on your telephone. I must advise you that this conference is being recorded today on Tuesday, the 27th of November, 2012.

I would now like to hand the conference over to your speaker today, Mr. Harry Vafias. Please go ahead.

Harry Vafias

Thank you and good morning everyone. Welcome to our conference call and webcast to discuss the results for the third quarter and nine months 2012. I’m Harry Vafias, CEO of StealthGas, and I would like to remind you that we’ll be discussing forward-looking statements in today’s call and presentation. Regarding the Safe Harbor language, please refer to Slide No. 1 of the presentation as well as to our press release on our third quarter and nine months results. With me today is Konstantinos Sistovaris, our CFO, and if you need any further information on the call or the presentation, please contact Konstantinos or myself.

Before I start with the slides, I would like to comment on the third quarter results released which, as we had expected, highlight a considerable year-on-year improvement. Our adjusted net income went from about 2 million last year for the same period to about 6 million this year, representing 180% increase. On a per-share basis, our adjusted figures show a huge increase year-on-year from $0.10 last year to $0.28 this year, and on a nine-month basis an increase from $0.39 in 2011 to $0.85 in 2012. That’s approximately a 120% increase year-on-year. That excludes the losses and gains on the vessel sales and hedging. This shows once again significant improvement in the LPG market in contrast to the continuing difficult environment for more shipping companies whereby few are reporting earnings at all, if not filing for Chapter 11.

Although in the summer there is a typically seasonal weakness, this quarter’s results were again very satisfactory and we expect activity to pick up as we enter into the winter season. As a result of our focus on the (inaudible) LPG market, we continue to operate profitably and we are confident that the fundamentals in our core segment point to further market improvements in the future. Our conservative management and consistency have laid solid foundations for the company and our cash position has enabled us to continue looking for strategic opportunities to consolidate our fleet and increase our market share.

Let’s begin our presentation with Slide No. 2 to give you an overview of the implementation of our strategy. As we have said in the past, our medium term goal is to renew our fleet, buy new vessels and sell gradually older ones. Since last year, we have taken delivery of five new building LPG ships from Japan. We’ve also sold two vessels so far this year. The big news for the third quarter was that we acquired four LPG ships that are being built in South Korea and will be delivered to us between January and June, 2014. So in roughly a year’s time, vessels are normal 2.5 lead time, we will start taking delivery brand-new eco-type LPG ships, and more importantly we’ll be able to make adjustments to the design to improve them according to our needs as well as to our charterers’ needs. We wish to keep the average age of our fleet low with more modern vessels which are more appealing to charterers and can achieve savings up to 20%.

In terms of leverage, the company has already arranged for bank financing at the time of the delivery of the new ships. We have always been cautious to maintain moderate leverage in the range of 50%. At the end of the third quarter 2012, our net debt capitalization ratio was at 47.9%. Our debt is about 350 million and based on the current projections, our debt level will remain at these levels after we have concluded all the acquisitions in 2014.

We continue to strive to obtain a secure and visible revenue stream with stable and predictable cash flows, especially amid the current environment. At the moment, fixed employment for our fleet for 2012 stands at 86%, for ’13 at 68% and for ’14, 42%. In comparison, the equivalent charter coverage numbers in the same quarters last year were 80%, 55% and 33% respectively, so we have managed to increase considerably the visibility of our revenue stream.

We continue to operate a relatively modern fleet with an average age of about 10.5 years, including the tankers, which is still relatively young compared to the industry average, which is about 16 years. With the delivery of 12 brand-new vessels in the past five years, we have managed to maintain the average age of our LPG fleet between 10 and 11 years. We continue to believe that within our core sector, this gives us a competitive advantage as younger vessels have less operating expenses, concern less bankers, and are more appealing to blue-chip charterers.

We continue to have strong charters, which lowers our counterparty risk. Because of the strength of the LPG market and the participation of more established names in it, we don’t expect to have any issue with our LPG counterparties, which is not the case for many other shipping companies.

Now in terms of the cost efficiency of our operations, I’m pleased to report yet another good performance year-over-year in the third quarter. Our net income break-even level per vessel per day, excluding losses on (inaudible), was $5,991 per vessel per day compared to $6,161 in the same quarter of last year and $5,816 in the previous quarter, which puts us comfortably in profit-making territory. We continue to concentrate heavily on managing our cost base and the economies of scale we have allowed us to contain costs as much as we can. During the past quarter, we did not see any significant increase in any expense category apart from some of our vessels which were running over-budget due to a need for upgrading conditions still at a reasonable cost in order to obtain more or major approvals. Hence, there was a change in the technical management of those vessels that we decided to manage in-house by our affiliate companies, Stealth Maritime and Brave Maritime to control budget costs. With that regards, I would also like to remind you once more that our general and administrative expenses are amongst the lowest in the public shipping sector.

Finally, regarding our 15 million share buyback program, since the program’s inception we have bought back approximately 1.8 million shares or 8% of our shares outstanding at a cost of about 8.5 million, and we did not buy any shares in the third quarter of 2012.

Slide No. 3 – this slide demonstrates the development of our fleet. Our new building program of 12 LPG carriers has been completed with the latest two deliveries we had in the first and second quarters, 2012. The company made selective sale of older and smaller tonnage in 2011 and 2012. Following our strategy to renew our fleet, we have acquired four eco-type new building LPG ships to be delivered in 2014, for which we have already committed financing, as mentioned before. Our total fleet at the end of the quarter comprised 33 gas ships, 3 product tankers and one Afromax crew tanker, and we remain a worldwide leader in the owned LPG ships in our strategic segment of 3,000 to 12,000 CBM.

Slide 4 – this slide demonstrates our fleet deployment profile and provides you with the earnings visibility for each of the 37 ships that are currently in our fleet. At the bottom of the employment profile chart, we have included the percentage of fixed employment dates for ’12, ’13 and ’14. This enables you to assess the stability and predictability of our earnings. For ’12, 86% of voyage days are already fixed while 68% are fixed for ’13 and 42% are fixed for ’14, excluding the new buildings. We have a number of charters extending beyond 2014.

We continue to see opportunities to employ our vessels on long-term charters. For the past nine months, we have announced the conclusion of 18 charters. The latest charter extensions we announced were for some of our older vessels such as Gas Icon, for example, whose charter was extended by two years by an oil major, while some other older vessels got a one-year extension. Total contracted revenues are approaching 200 million up to 2017 and we estimate that this equivalent for the LPG ships on long-term charters is about $9,500 per day.

In terms of charter type, out of the fleet of 37 vessels we have 14 of the vessels on verbal charters, 17 of the vessels on time charters, and six in the spot market. We will continue to keep some vessels in the spot market while at the same time seeking opportunities for long-term charters in order to secure our cash flow. With 37 vessels in our fleet, we always have some vessels coming off charters, and as a result our charter coverage is fairly staggered. For the next year, 10 of our vessels will complete their current chartering arrangements.

We now pass to our financial highlights for the third quarter and nine months, so I will pass you on to our CFO, Mr. Sistovaris.

Konstantinos Sistovaris

Thank you, Harry. Good morning everyone. Let me continue the presentation with Slide No. 5 to give you the financial highlights for the third quarter and nine months of 2012. With an average 37 vessels owned and operated in the third quarter, we realized net income of 6.6 million from voyage revenues of 30.4 million. This was the first quarter this year and the third time over the past two years that with roughly the same number of ships, our revenue surpassed the 30 million mark.

EBITDA was 16.4 million and earnings per share for the quarter were $0.32. Our adjusted net income for the quarter was 5.8 million or $0.28 per share, the adjustment being deducting from our reported net income 0.8 million as the gain from the fair value changes in our interest rate derivatives. The free cash balance at the end of the quarter was approximately 41 million. We also had about 6.1 million in restricted cash as part of our loan agreements.

For the nine months of 2012, with an average of 37 vessels our net income for the nine months was 21.2 million or $1.03 per share compared to net income of 4.1 million or $0.20 per share for the same period last year. Voyage revenues were 88.6 million and EBITDA was almost 50 million. Adjusted net income for the nine month period was 17.5 million or $0.85 per share. We adjust our net income figure by deducting the gains we had from the sales of two of our vessels and the changes in the fair value of our derivatives.

We now turn to Slide No. 6 for a summary of our income statement in order to compare results for the third quarter versus the previous quarter and the third quarter of last year. Compared to last year, our revenues increased approximately $3 million or 10% despite having more vessels switch to bareboat charters. The increase in revenues can be attributed to the higher rates achieved by most vessels due to the improving market conditions. While our revenues improved, our expenses were reduced. Compared to last year, our voyage costs were reduced from 4.1 million to 3.5 million while our operating costs were reduced from 8.4 million to 7.7 million, a year-on-year 1.4 million reduction in total. We also had the reduction of drydocking costs of 0.6 million, but that was because we only drydocked one vessel during the third quarter of this year. Our total expenses were reduced from 22 million last year to 21 million this year. As a result, our operating income increased from 5.4 million last year to 9.4 million for this quarter, a 73% increase.

Interest expenses increased by 0.3 million partly due to the higher inter-bank rates and partly due to higher average margins on our loan balances. From derivatives and foreign exchange, we incurred losses of 0.4 million compared to an extraordinary gain of 2.8 million last year that was mainly from the foreign exchange yen derivatives that we had at the time. Net income rose from 6.2 million to 6.6 million, or 7%; however, excluding the derivative instruments in foreign exchange, our adjusted net income was 5.7 million compared to 2 million last year, which is a 108% increase. Compared to the previous quarter with roughly the same number of vessels in the fleet, our revenues slightly increased from 29 to 30 million. Our voyage costs also increased by 0.8 million as more vessels were operating in the spot market during the summer, and our operating costs decreased by approximately 0.2 million. Our adjusted net income compared to the previous quarter was lower by approximately 700,000.

Slide No. 7 – looking at our balance sheet, in terms of cash we continue to maintain a healthy cash balance with more than 47 million, including the restricted cash. That is after having paid 19.2 million during the third quarter as advances for the acquisition of the four vessels being built in Korea. As of September 30, our vessels’ book value net of depreciation stood at 642 million compared to 614 million at the end of last year.

In terms of liabilities, the current portion of our long-term debt – that is what loan repayments are scheduled over the next year – increased to 35.2 million. We have around 9 million of principal debt repayments per quarter that we can meet comfortably from our internally generated cash flow. We have no debt maturing for the rest of 2012 nor for 2013. The first balloon payments on our loans are due in mid-2014, around $32 million, and they relate to some fairly young vessels so we expect to refinance these loans in due course. Our long-term debt, which stood at the beginning of the year at 317 million, increased by 1 million to 318 million as of September 30. We have no covenant breaches in our loans and have obtained a waiver from one bank for a mild minimal value breach.

Other liabilities of 5.9 million relate to the fair value of interest rate swaps we have with our banks to protect us from increases in LIBOR rates. This has been reduced from 9.4 million at the end of September because these interest rate swaps are amortizing. As of today, we have around 35% of the interest rate exposure on our loans hedged. On average, by 2013 we would expect half of our swaps to have expired or amortized unless by this time we enter into new agreements.

Stockholders equity for the third quarter was 334.3 million, a 21.2 million increase since December 31.

Please turn to Slide No. 8. These are our operating highlights for the third quarter of 2012 and 2011. In terms of fleet data, we had an average of 37 vessels in the fleet versus 36.3 vessels for the same period last year; hence, the number of days for the fleet increased by 69 days to 3,388. The bigger difference is in our utilization ratio that has increased to 95.7% as a result of new charges and the reduced idle time due to repositioning between charters. In terms of average daily results, we can see that our average TC rates have improved from last year. The average rate we achieved was $9,800 per day per vessel compared to $8,691 per day per vessel in the same quarter of 2011 and $9,853 in the previous quarter. Our total operating expenses year-over-year decreased from $4,297 per day last year to $4,122 per day this year. We still operate comfortably above break-even levels in terms of income and cash flow.

We now turn to Slide No. 9. As usual, we are going to provide you with some estimates for the fourth quarter. We have contracted revenues under time and per-boat charges of approximately 24 million. Non-contracted voyage days for the vessels operating in the spot market or are coming off their charters are approximately 546. We have six vessels operating in the spot market. We expect our operating expenses to remain stable at around 8 million for the next quarter.

As far as drydock expenses, we have drydocked five vessels this year during the first three quarters compared to nine last year. There was one more vessel we expected to drydock before the end of the year, but now it’s drydock has been rescheduled for January so it will affect our first quarter results of next year.

Interest payments on our loans and cash payments on our swaps for the remainder of the year we estimate to be 3.3 million, and depreciation expenses will be 7.3 million approximately.

Thank you very much, and now I will hand you back to Harry for some further comments on the market.

Harry Vafias

Let’s move to Slide 10. As we have said in the past, one of the key drivers in the LPG market is the supply of the product. LPG is a byproduct of natural gas, and with all the ongoing gas projects being developed, we expect that as more natural gas producing facilities are being built there will be more LPG available for shipment, particularly because it’s too costly to store. The Middle East is a main exporter of LPG and usually VLGCs are used to carry the product from the Middle East to hubs in Asia, such as Singapore, where our vessels take care of the local distribution. We can see the growth in seaborne LPG trades has been relatively strong in 2012, not too far from 2011 levels. It’s being predominantly driven by the rise of emerging economies in Asia, and the combination of increasing consumption and limited production capacity in these countries is expected to still drive demand for the remainder of 2012 and of course beyond as people are gradually improving their living standards as well. Moreover, LPG products at low prices lead to almost all importer nations to fill up stocks, making Asian imports expected to rise by 12% in 2012 and thereby contribute to 90% of the growth rate in the LPG ship borne trade.

On Slide 11, we can see that in 2012, the Middle East remains the main supplier and the single largest contributor to growth in total LPG exports with LPG supply from Middle East exports expected to increase by 12% this year. On the other side of the equation demand, especially for propane, is steadily increasing in developing nations, especially in the Far East where two-thirds of our fleet is trading, while some usually operate in the Middle East, the Mediterranean, northwest Europe and Latin America. A recent trend we have seen is increasing demand for LPG for petrochemical plants, especially in Europe. Moreover, new prospects in the U.S. for oil and natural gas output growth are expected to change regional dynamics and future seaborne global energy flows in the next decades to come.

Positive news for pressurized ships like ours is that the U.S. Coast Guard confirms that pressure vessel-type tanks, based on the ICG Code stress factors are acceptable, 18 bars instead of 12.75; hence it will be possible for pressurized owners to load propane in the U.S. This can lead to several smaller export terminals being develop in the U.S. based on less expensive and quicker to build pressurized terminals, especially for the Caribbean market which to a great extent have pressurized receiving terminals.

Slide 12 – this slide shows the one-year time charter rates for our market. The figures are based on independent estimates by Lorentzen & Stemoco. We have updated this slide with last year’s data for the third quarter rates, current average rates, and future estimates for the fourth quarter. Looking at this table, you can deduce what we’ve been experiencing in our charter operations and yet managing to report satisfying results. In the segment, we operate the 3,000 to 8,000 cubic meter segment. We have seen a slight softening in the market on a year-over-year basis in the region of only between 1 and 3%, while estimates for the fourth quarter are softer in the region of 1 to 5%, all depending of course on the size and the area of the trade. Nevertheless, according to (inaudible), rates in the crude tankers, which usually are much more volatile, have been in an upward trajectory. One million per month rates for VLGCs are very solid numbers. Although we do not own these types of ships, we provide complementary services to VLGCs, mostly trading on long-haul routes as mentioned earlier, like from the Middle East to the Far East where we perform the local distribution of the cargoes. This highlights once more how much increasing volumes of LPG products are coming out of the producing companies.

As previously announced, we have recently extended eight charters, including four of our oldest vessels, among which one of them – the Gas Icon – got a two-year extension with a blue-chip international oil major. We expect that as we enter into the winter months, we will receive more inquiries for long-term business as the market will hopefully tighten.

On the next slide, 13, I will discuss the LPG shipping market with a longer term view. We believe that the fundamentals in our core segments, which relate to supply and demand, are favorable and as a result the recovery will be sustainable despite any short-term seasonal ups and downs. The order book for (inaudible) LPG ships is fairly small at the moment; on the other hand, we expect the order book over the next years to decline. So far, we have seen few orders for pressurized ships and new building prices have not come down. Most of the orders we have seen so far have been on the ethylene side and for very large gas ships. The Japanese yards quoting for new vessels are not competitive and we don’t expect this situation to change drastically as long as the yen remains at the levels that it currently is. The Chinese have so far limited capacity to build high specification vessels for international trade, and the Koreans have received some orders but they are not particularly active in this segment.

LPG trade is a niche segment and there are barriers to entry, so we would expect mostly established players to show an interest in ordering vessels and not newcomers that would order on a speculative basis. On the other hand, the existing fleet is relatively old, which means more vessels will need to be scrapped. Around 10% of the fleet is over 20 years of age. Overall net fleet growth is small, suggesting that demand for vessels will be higher than supply. If this projection materializes, we believe that we have a fleet of modern ships, we will command premium rates, and we are positioning our company to take advantage of the strong fundamentals in our segment.

Slide 14 – we have included this slide to re-emphasize the point about the order book. The order books in this slide are spread over a period of at least three years, although in most cases deliveries are front-loaded. As you can see for the main shipping segments, although the numbers have come down quite a bit since the previous quarter, especially for drybulk, the order book continues to be elevated and the huge number of vessels delivering this year in the drybulk, tanker and container segments are the culprits for the horrific chartering market that we are seeing today. We have also seen interest in LNG new buildings due to the current solid chartering market. At this point, increasing LNG volumes may absorb the increase in the order book, but unless there is a restraint in the ordering of new ships, this pace could also be oversupplied in the coming years.

In the LPG segment, the order book slightly increased from 9% to 12%, but this is mainly from order for larger ships that do not compete with us. We continue to have one of the smaller order books, and the (inaudible) does not get as much attention. Out of a rough total 250 pressurized assembly of ships in our size category, excluding the Chinese fleet that does (inaudible) straits, there are 20 vessels on order to be delivered over the next three years, and at the same time, as I previously mentioned, around 24 vessels are older than 20 years and either do not directly compete with us or will need to be scrapped in the near future. At this point, if (inaudible) increases at an annual rate of 5% as some reports suggest, this could be easily absorbed.

We’ve added Slide 15 just to compare our company with some of the other U.S.-listed shipping companies operating in different sectors, such as gas tankers and dry. As one can see, there are many comparable stock trades above net asset values. Although there may be a variety of reasons for that, as I have mentioned in the past, I still do not believe that any U.S.-listed company operates in a sector that has better fundamentals than our own LPG segment, and yet our stock continues to trade far below our NAV. I would like to close this presentation by saying that so far this year, we have been reporting record-breaking results and in general we keep posting solid operational profits amid a rate-challenged environment for most shipping companies for the past years. Don’t forget that for every $1,000 increase in our charter rates for our LPG fleet, our EBITDA increases by about 15 million. Our bottom line operational results have improved by over 100% this quarter. The gas market is steadily improving and we can be optimistic about the future based on the market fundamentals we presented to you today.

Looking beyond the bottom line into qualitative aspects of our business, we have managed to renew our fleet and kept its average age low. We will continue to seek opportunities to solidify our leading position, and with a fleet of 33 gas ships in the water plus four that will be delivered to us in about a year, we have by far the largest in the world fleet in our niche segment. It’s our strategic decision to hold onto this position and improve it as much as we can, because we believe it will give us a significant advantage in a rising market.

We have now reached the end of our presentation and would like to open the floor for your questions, so Operator, please open the floor. Thank you.

Question and Answer Session

Operator

Thank you. That’s star then one if you wish to ask a question. Your first question comes from Jim Fronda of Sidoti & Co. Please go ahead.

Jim Fronda – Sidoti & Co.

Good morning. I just have one question. With your plan to expand your fleet, do you have a specific strategy you follow with respect to new buildings versus acquiring secondhand vessels, and how do you evaluate that?

Harry Vafias

Unfortunately it’s not a very liquid market where you can find lots of new building berths and lots of secondhand modern ships in order to be able to compare and decide; therefore, we have our eyes open for both options, i.e. modern secondhand ships and new buildings. And when it’s time to decide, we obviously weigh the pros and cons – for example, the waiting time on a new building versus the prompt delivery of a secondhand ship, and also not forgetting the new eco-type fuel efficiency of a new building versus the older technology of a secondhand ship, and obviously decide what’s best.

Jim Fronda – Sidoti & Co.

Great, thank you.

Operator

Once again, it’s star, one to ask a question. The next question is from George Berman of JP Turner & Co. Please go ahead.

George Berman – JP Turner & Co.

Morning gentlemen. Thank you for taking my call. Congratulations, first of all – great quarter. I have a quick question on Slide No. 9. At the bottom, you have given some EBITDA guidance on various day rates, which range from 11 up to 12 to $13,000. No comment was made. Is this sort of the direction you think day rates are moving over the next couple of years?

Harry Vafias

I made a comment in the end where I said that for every $1,000, the EBITDA rises by 15 million. We are very conservative on our forecasts. At the moment, we are slightly below the first box, the 11,000. Nobody knows what the future holds, but we are saying if the analysts are right and there’s a shortage of new ships and demand keeps rising, I’m sure we can get to the second or even the third box; but I wouldn’t like to guarantee that, of course.

George Berman – JP Turner & Co.

Obviously. So on those numbers and on the fact that the four new builds to be delivered in 2014 are basically financed already, you would be increasing your cash flow tremendously. And there’s two ways of having shareholders in the company participate. One would be through either stock buybacks to continue, or through the re-initiation of a cash dividend. I believe you did at one time pay a cash dividend. How is your view on those two items?

Harry Vafias

George, you probably don’t remember the previous call. We said on the previous call that we will examine these options at Christmas and revert with some decisions in the first quarter.

George Berman – JP Turner & Co.

Okay, thank you.

Operator

The next question is from Ben Sexson of First Wilshire Securities. Please go ahead.

Ben Sexson – First Wilshire Securities

Good afternoon. The question was already asked, but I was wondering on Slide 12, you gave us the fourth quarter forecast for some of the various vessel types. Do you have any more long-term forecasts that you can give us, or--?

Harry Vafias

As I said before, we don’t give forecasts. This was not our forecast; this was from an independent source. I guess there are a lot of brokers both in the U.S. and the Europe that would give forecasts. We don’t like to forecast because in shipping, you never know what will happen; so we prefer for our own internal numbers and internal calculations to use always the current TC rate in order to be on the safe side. And if obviously rates go up, it’s going to be better for us and our shareholders. So we don’t give out nor we ask from our brokers for long-term estimates.

Ben Sexson – First Wilshire Securities

Okay. Can you talk a little bit about just why the rate went down a little bit this quarter versus last quarter, what some of the macro factors were?

Harry Vafias

Nothing in reality serious. Some of the vessels that are on dedicated trades for some of the oil majors and traders were not used for their specific trades because some of the terminals and the gas plants were under maintenance. These vessels were obviously then re-let in the open market, thus competing with all the other vessels, and that pushed slightly the rates down. But the rates are still very firm and we are not worried for the short term, medium term.

Ben Sexson – First Wilshire Securities

Okay, thank you.

Operator

The next question is from Jeff Gogin of (inaudible). Please go ahead.

Jeff Gogin

Morning, Harry. Two questions – number one, with respect to the new build ships that you intend to take delivery of, the eco-type, how much of a premium do these ships command in the market that would warrant the premium price that you’ll pay for those?

Harry Vafias

Number one, we are not paying a premium price, so that answers half your question Number two – how much premium? Again, I don’t know because these are prototype vessels. There are no sister ships or similar vessels there, so I hope we can get not only a high rate but you will also be able to trade them in a bigger variety of ports because except from the fuel efficiency, they have ice class so they can go to ice-infected regions, and they are also shorter in LOA which means they are accessible in smaller ports. So I think the combination of these three factors will make them quite appealing to the charterers.

Jeff Gogin

All right, thank you. And second question relates to the rolling off of your interest rate hedges, as mentioned earlier in the presentation by Konstantinos. What is your attitude about reapplying interest rate hedges, and based on that answer, what does that imply about your outlook for interest rates?

Harry Vafias

I’m not an economist, but my personal view is that we’re not going to see high interest rates very soon, at least. The hedges we had were on the expenses side, therefore the more that finish, the better for the company. We’ve discussed with the Board maybe next year to do some, but we are not going to jump on the opportunity because we don’t think that the interest rates will go up soon, so we prefer to have less hedges for now.

Jeff Gogin

Thank you, and congratulations on a very nice quarter.

Operator

The next question is from George Berman of JP Turner & Co. Please go ahead.

George Berman – JP Turner & Co.

Sorry, gentlemen, I’ve got a quick follow-up. You mentioned in your presentation the possibility of the U.S. starting to export LPG into the Caribbean. How soon would this be feasible, and how are you positioned to take advantage of this possibility?

Harry Vafias

Probably George you know this better than us. Number two, we’ve been told that this will happen in the next two to three years, and how we are positioned depends all on the location of our ships. At the moment, the biggest demand is in the Far East. That’s why the majority of the ships are actually there. If we see this trade really developing and there’s a demand, obviously we’re going to take some of the ships from the Far East or from Europe and relocate them in the U.S.

George Berman – JP Turner & Co.

Or possibly some of the new builds?

Harry Vafias

Maybe.

George Berman – JP Turner & Co.

Okay. So this will all coincide with the LNG terminal developed here by Tierney energy for natural gas, and that would also participate then with LPG, yes?

Harry Vafias

All the natural gas projects have LPG as a byproduct, so all the completion of natural gas projects is very positive for our business.

George Berman – JP Turner & Co.

Okay, brilliant. Thank you very much.

Operator

There are no more questions at this time. Please continue.

Harry Vafias

We would like to thank everybody for joining us for our conference call today and for your interest and trust in our company. We look forward to having you with us again on our next conference call for our fourth quarter results in February 2013. Thank you very much.

Operator

That does conclude our conference for today. Thank you for participating. You may now all disconnect.

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