Interview With The President And CEO: StealthGas Inc. (GASS) - Harry N. Vafias
December 20, 2011 - The Wall Street Transcript has just published Transportation and Logistics Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Harry N. Vafias, President and Chief Executive Officer of StealthGas Inc., founded the company in 2004. StealthGas was listed on Nasdaq in October 2005, and since its inception has raised about $300 million from the capital markets. StealthGas owns roughly 40 liquefied petroleum gas carriers and three tankers and is the largest company, in number of vessels, in gas transportation worldwide. Mr. Vafias founded Stealth Maritime Corp. S.A. in 1999. Stealth Maritime has invested about $1.2 billion from 2006 to 2009 for the renewal of the tanker fleet, and today operates 22 50,000 to 120,000 dead weight tonnage modern double-hull tankers, all under long-term charters with oil companies and traders. In 2005, he founded Estates Corporation Inc., a real estate company, investing in Greece, London, New York and Geneva. In 2007, Mr. Vafias became CEO of the Vafias Group, which today is the fourth-largest shipping group in Greece with 65 owned vessels, two of which are under construction. In 2008, he was awarded by Nasdaq for being the youngest CEO of a listed shipping company worldwide. In 2010, Mr. Vafias was elected Vice Chairman of the INTERTANKO's Hellenic Mediterranean Panel. In the same year, he was given the Seatrade Young Person in Shipping award.
TWST: When we spoke last February, you were at that time the largest LPG shipper in the world.
Mr. Vafias: We are still the same, the largest LPG shipper - by number of owned vessels - in the world with approximately 37 ships. Our capacity for those ships is about 168,000 cbm. For the LPG carriers, we are number one in the world in the 3,000 to 8,000 cbm LPG segment. We still also have a very young fleet with the average age about 11.7 years old. This is younger than the rest of the industry by quite a bit, as the industry average is almost 20 years old. What we do is carry propane, butane and petrochemical gas products in liquid form. We handle it this way to reduce the volume and to facilitate handling. Some of the other products we carry include butadiene, isopropane, propylene and vinyl chloride monomer. All of these are byproducts from the production of oil and natural gas.
TWST: Where is your strategic focus and why did you select that area?
Mr. Vafias: Our strategic focus is the handy-size LPG segment. We selected that market for a number of reasons. Firstly, we selected the area because it's a very closed market. There are not many competitors and these ships are quite expensive and quite difficult to manage. Therefore, the barriers to entry are quite high. And secondly, because there's a small order book, meaning not many such ships are being built. There is very strong demand for those ships, and because there is limited capacity, the freight rates go up, and therefore they're quite profitable assets.
And do not forget that the earnings for these ships are quite stable, meaning that during the bad times, like now, for example, they can make about $7,000 to $7,500 a day. And during the good times, they will make about $11,000 and $11,500 a day. So they are not very volatile assets. For comparison, big oil tankers can make you minus earnings in the bad times and very, very big earnings - like $100,000 - in the good times. It's a very, very volatile market. We chose the small LPGs because exactly even in the bad times you can still make decent return.
TWST: Are most of your vessels still under contract at this time?
Mr. Vafias: Under time charters, yes. As always, we keep the biggest chunk of the fleet on period contract, yes. All but maybe eight of the vessels are under contract right now. We just had one of our ships, Gas Legacy, start a one-year charter with an international gas trader, and we have had others extend their charters. Our goal is obviously to always have the ships under contract, and the majority of the time, this happens easily. To give you an idea of the value, the average rate for a one-year time charter is approximately $300,000 per month.
TWST: Would you explain, in general, the operation at StealthGas?
Mr. Vafias: Basically, we purchase the asset and provide the ship and the crew, which we charter to major oil companies and national gas companies and so on for a year or year and a half or two years or whatever that is that they need. Those companies decide where to send the ship, where to load, how much to load, where to discharge. We just get paid an amount per day to provide the ship and the crew. The operations and the itinerary and all of these things are handled by the charter. We have nothing to do with the day to day of the what the ship does or where it goes.
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