Key Financial Results
Second Quarter of 2020 compared to the Second Quarter of 2019
Earnings by product sales Six months ended June 30,
Net sales volumes per product 2020 2019
Crude Oil Sales $ 749,200 $ 1,917,178
Gas Oil Sales 622,000 300,000
Lubricants Sales 143,501 -
Hires & Freights Sales 218,000 298,500
Other Revenues / Discounts 34,080 11,000
Totals $ 1,766,781 $ 2,526,678
Net loss attributable to
(
Refer to the “Results of Operations” section beginning on page 14 for a
discussion of our financial results.
Executive Overview
conducts its business through its wholly-owned subsidiaries:
LLC
tanker fleet; and Petrogress Int’l LLC., which is a holding company for
subsidiaries currently conducting business in
provides management of crude oil purchases and sales;
Business Environment and Outlook
activities in the following countries:
currently depend primarily on the profitability of our crude oil sales. The
biggest factor affecting the results of operations is the price of crude oil.
The price of crude oil has fallen significantly since mid-year 2019. The
downturn in the price of crude oil has impacted the company’s results of
operations, cash flows, leverage, capital and exploratory investment program and
production outlook. A sustained lower price environment could result in the
impairment or write-off of specific assets in future periods. We have reacted to
the downturn by effecting reductions in operating expenses, pacing and
re-focusing of capital and exploratory expenditures. We anticipate that crude
oil prices will increase in the future, as continued growth in demand and a
reduction in supply growth should bring global markets into balance. However,
the timing or sustainability of any such increase in prices is unknown. In the
Company’s downstream business, crude oil is the largest cost component of
refined products. Nevertheless, it is our objective to deliver competitive
results and shareholder value in any business environment.
Our midstream segment relies and depends on our crude oil sales contracts to
keep our vessels employed. We rely primarily on the revenues generated from our
business of physical supply of crude oil and marketing of refined products to
our end customers.
The company continually evaluates opportunities to dispose of assets that are
not expected to provide sufficient long-term value or to acquire assets or
operations complementary to its asset base to help augment the company’s
financial performance and value growth. Asset dispositions and restructurings
may result in significant gains or losses in future periods. The company
continually evaluates opportunities to dispose of assets that are not expected
to provide sufficient long-term value or to acquire assets or operations
complementary to its asset base to help augment the company’s financial
performance and value growth. Asset dispositions and restructurings may result
in significant gains or losses in future periods.
——————————————————————————–
——————————————————————————–
* On
Merger in
and into a
reincorporation. On
“Amendment”) to the Company’s Certificate of Incorporation with the
Secretary of State to increase the number of authorized shares of Common Stock
from 19,000,000 to 50,000,000. The Amendment took effect on
was no change in the par value of the Company’s Common Stock or Preferred Stock
as a result of the Amendment.
Page | 12
--------------------------------------------------------------------------------
Response to Market Conditions and COVID-19
During the second quarter of 2020, travel restrictions and other constraints on
economic activity were implemented in many locations around the world to limit
the spread of the COVID-19 virus. As a result, demand for our products has
fallen steeply and commodity prices, including crude oil and other petroleum
products, have followed suit. The drop in commodity prices is expected to
negatively impact the company’s future financial and operating results. Due to
the rapidly changing environment, there continues to be uncertainty and
unpredictability around the impact of the COVID-19 pandemic on our results,
which could be material.
balance sheet and low cash liquidity. Accordingly, to protect its long-term
health and value, the company is responding to such market condition by
adjusting items it can control. Additionally, the company has suspended its
repayments of short-terms debts and reduced also the purchase of the crude oil
from its suppliers. A number of our vessels crew dismissed to mitigate the daily
non-operating expenses of our fleet. Together, these actions are consistent with
our financial priorities: to protect our ongoing projects, to prioritize capital
spend that drives long-term value and to maintain our position in the energy and
shipping market. The company relies in its receivables in order to continue with
a sufficient liquidity on its operations.
Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on
Page 3 and to “Risk Factors” in Part II, Item 1A, on page 19 for a discussion of
some of the inherent risks that could materially impact the company’s results of
operations or financial condition.
Operating sectors
Our business operates in the downstream and midstream sectors of the energy
industry, where we acquire and supply crude oil, and engage in the refining and
marketing of refined products and lubricants. As a supplier, we procure crude
oil from our direct sources and deliver by our tankers fleet to buyers’
destinations. With service centers in East Mediterranean and
believe that we are one of a limited number of independent physical suppliers
that owns and operates a fleet of supplying vessels and conducts physical supply
operations in multiple jurisdictions.
We provide our customers with services that require sophisticated logistical
operations designed to meet their strict oil quality and delivery scheduling
needs. We believe that our extensive experience and management systems allow us
to meet our customers’ specific requirements when they purchase and take
delivery of crude oil, refined products and lubricants around the areas in which
we operate. We have devoted our efforts to building a global brand and believe
that our customers recognize our brand as representing high quality service and
products at each of our locations. We also perform our technical ship operations
in-house, which helps us maintain high levels of customer service. Throughout
our history, we have expanded our business capabilities through strategic
alliances, select business and vessel acquisitions, and the establishment of new
service centers.
The company maintain its principal marketing and operating offices at 1, Akti
Xaveriou, 18538 Piraeus,
(210) 459-9741 and our corporate address and registered agent in
Other Businesses
Effected as on
three Gas refilling stations in the Mainland of
the obtaining the operating licenses from the local authorities are in progress,
simultaneously with the preparation of gas stations designs and drawings in
order to commence the modernization and renovation under our brand names. We
estimate to complete and have them ready for operations within six months’ time.
The gas Stations shall be operated by our Hellenic branch in
expect to be ready by
Our key business segments
The following are descriptions of our recent initiatives undertaken in each of
our key business segments:
Upstream; Earnings for the upstream segment are closely aligned with industry
prices for crude oil. Crude oil prices are subject to external factors over
which the company has no control, including product demand connected with global
economic conditions, industry production and inventory levels, technology
advancements, production quotas or other actions imposed by the
Petroleum Exporting Countries
weather-related damage and disruptions, competing fuel prices, natural and human
causes beyond the company’s control such as the COVID-19 pandemic, and regional
supply interruptions. The company is actively managing its schedule of work,
contracting, procurement, and supply chain activities to effectively manage
costs, ensure supply chain resiliency and continuity, and support operational
goals. The spot markets for many services and materials are softening in
response to the economic impact of the COVID-19 pandemic, including the drastic
reductions in demand for petroleum products, including gasoline and fuel, among
others, and in crude oil prices, which have resulted in significant reductions
in economic activity and associated spending in the energy sector. Commodity
prices have fallen below break-even levels in many regions.
Page | 13
--------------------------------------------------------------------------------
Downstream: As on
Refinery
annual basis and pursuant its terms
oil for storage, refinement, marketing and distribution in
PGOR. The storage capacity under the Partnership Agreement is 24,000 tons and
the monthly processing capacity of the refinery is 10,000 tons.
Platon both plans to invest additional funds to upgrade the processing monthly
capacity into refined products of Gas Oil, Naphtha, and fuel in view of the high
local demand. Under the Platon Partnership Agreement, all expenses of the
partnership operations are shared by both
the operating/processing expenses, the net profits from the sale of the products
are split evenly between Petrogres and Platon. As of the date the Platon
Partnership Agreement was executed,
third customers in
operations to other sectors, engaging into gas-stations operator and lubricants
distributor.
Earnings for the downstream segment are closely tied to margins on the refining,
manufacturing and marketing of products that include gasoline, diesel, fuel oil
and lubricants additives, and petrochemicals. Industry margins are sometimes
volatile and can be affected by the global and regional supply-and-demand
balance for refined products and petrochemicals, and by changes in the price of
crude oil, other refinery and petrochemical feedstocks. Industry margins can
also be influenced by inventory levels, geopolitical events, costs of materials
and services, refinery or chemical plant capacity utilization, maintenance
programs, and disruptions at refineries resulting from unplanned outages due to
severe weather, fires or other operational events. Other factors affecting
profitability for downstream operations include the reliability and efficiency
of the company’s refining, marketing, the effectiveness of its crude oil supply
functions, and the volatility of tanker-charter rates for the company’s shipping
operations, which are driven by the industry’s demand for crude oil and product
tankers. Other factors beyond the company’s control include the general level of
inflation and energy costs to operate the company’s refining process and
marketing, including the changes in tax laws and regulations.
The company’s most significant marketing areas are the
East Mediterranean where
interests, representations and partnership agreements, in these areas.
Midstream; The outbreak of COVID-19 pandemic occurred the ceased of our entire
fleet operations and employments which resulted the complete elimination of
freight and hire incomes, while the fleet expenses remained on the same levels
during and March, April and
industry will be rectified and return to the normal levels, therefore we still
seek to expand our midstream operations in other international ocean routes by
adding to our fleet larger and younger tanker vessels. We are monitoring the
vessel market for opportunities while we are also working to secure the
necessary funding for expansion. Our business strategy is based in part upon the
expansion of our business to new, or within existing, markets. In order to fund
future vessel acquisitions, expansion into new and existing markets and
products, increased working capital levels, or capital expenditures, we will be
required to use cash from operations, incur borrowings or raise capital through
the sale of debt or equity securities in the public or private markets.
The company closely monitors developments in the financial and credit markets,
the level of worldwide economic activity, and the implications for the Company
of movements in prices for crude oil and refined products. Management takes
these developments into account in the conduct of daily operations and for
business planning.
The company continually evaluates opportunities to dispose of assets that are
not expected to provide sufficient long-term value or to acquire assets or
operations complementary to its asset base to help augment the company’s
financial performance and value growth. Asset dispositions and restructurings
may result in significant gains or losses in future periods.
Results of Operations
The following section presents the results of operations and variances on a
before-tax basis for the company’s business operations, as well as for “All
Other.”
Our operating revenues are driven primarily of the commodities trading sales and
our tankers fleet employment days during which our vessels are generating
revenues, while our financial results are subject to a number of sectors and
reflects to the following factors:
Cost of commodities; is the cost we purchase the oil products -mainly the crude
oil- and such cost is based either on Brent Index prices or Fixed price, the
quality and quantity of the product.
Commodities Operating Expenses; relates to products surveys before and after the
shipment, bunkers supplied to the employment vessel, cargoes surveys,
loading/unloading expenses, agency and representative services.
Shipping & Logistic Expenses; includes the sea freight and mobilization cost,
the performed loading and discharging of the product, and any expenses occurred
during the shipping time from the loading point up to unloading facilities.
Page | 14
--------------------------------------------------------------------------------
Vessels Operating Expenses; includes crew wages and bonuses, their medical
support and travelling, maintenance and repairs to the vessels hull and their
machineries, expenses for supplies of spare-parts and consumable stores, paints,
lubricants, fresh water, bunkers, agency services, etc.
General and Administrative Expenses; relates to our directors, officers and
managers salaries and compensations, shore staff wages, employee’s federal
insurance, offices lease and utilities, telecommunications, travelling and
representations of our officers, our agency fees we pay to our branch’s offices
in
Corporate Expenses; are all company’s expenses and includes, our executive’s
compensations, attorney’s fee, Auditors and accountant fees, Consultant’s and
P/R fees, Transfer agents of our stock, miscellaneous.
Other factors may affect our Results of Operations; In addition to the said
expenses there are factors beyond of our control which may affect seriously our
operations results. Inasmuch as we trade also
as high risky area, we are expose in a serious amount of risks, such as piracies
and hijacks, civil wars, stolen of properties, economy distress, and credit
risks.
EBITDA and Adjustment; EBITDA represents net income before expenses, taxes and
depreciation. Adjusted EBITDA represents net income before expense, taxes,
taxes, depreciation and amortization of dry-docking.
Six months ended
June 30,
2020 2019
Operating Earnings / (losses)
Operating losses of during the second quarter of 2020 amount to
compared to operating losses of
decrease was primarily due to lower crude oil sales prices and the cease of
operations as of
© Edgar Online, source
