Pioneer Marine CEO Jim Papoulis expects that the recovery due to COVID-19 will likely be more gradual than initially anticipated

August 17, 2020

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Pioneer Marine a leading shipowner and global drybulk handysize transportation service provider announced its financial and operating results for the second quarter ended June 30, 2020.

page1image1206290144 Jim Papoulis, Chief Executive Officer commented: “The COVID-19 pandemic affected significantly the activity in the first half of 2020 and the recovery will likely be more gradual than initially expected. However, by the end of June 2020 the drybulk freight market showed positive signs of recovery, and we remain optimistic that we are slowly paving our way to normality.

It has become evident that the COVID health crisis has affected and continues to impact world economies and various sectors worldwide. This resulted in the weak performance in terms of TCE rates achieved, which however remain above market levels.

Additionally, we must highlight that the Company reported historically low OPEX – below $4,000 – as well as G&A’s rates. Given these exceptional circumstances, Pioneer remained focused on delivering the best possible results taking advantage of the Company’s solid fundamentals and reported a positive EBITDA of $0.8 million for the second quarter of 2020 and $3.3 million for the six months ended June 30, 2020.

On August 13, 2020 we successfully completed the sale of the M/V Falcon Bay boosting our Company’s liquidity by $6.3 million in free cash. This transaction accompanied with the agreement reached with our Lender to defer a significant portion of the debt principal due within 2020 allows us to further strengthen our cash position.

Finally, we are positive that the much anticipated recovery is indeed around the corner and we have placed our fleet in the right position to benefit from the upturn in TC rates aiming to cover part of our fleet to period time charter contracts securing healthy cash flow for the foreseeable future.”

COVID-19 Outbreak:

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On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “COVID-19”) outbreak a pandemic. Many countries, ports and organizations, including those where Pioneer conducts a large part of its operations, have implemented measures such as quarantine and travel restrictions to combat the outbreak.

Pioneer having as a primary concern the safety and wellbeing of all our employees ashore and onboard the vessels whilst at the same time serving our clients’ needs, has taken precautionary measures early on. Currently, we are working closely with our technical managers to arrange the soonest possible changing the overdue crew on board, opting also for deviation of our vessels when this is required.

We are constantly monitoring the developing situation and taking actions to address and mitigate, to the extent possible, the impact of COVID-19 to our Company’s financial position via cost rationalisation projects and continued efforts to optimise our efficiencies and revenue earning capacity. As always, we remain in close cooperation with our Business Partners in order to ensure smooth operation of the Company.

Recent Events:

On August 13, 2020 the M/V Falcon Bay was delivered to her new owners pursuant to a Memorandum of Agreement (“MOA”) dated June 19, 2020. Following the sale of the M/V Falcon Bay and the repayment of its’ respective outstanding loan balance, Company’s liquidity is positively impacted by an amount of $6.3 million.

On June 12, 2020, the MOA dated October 24, 2019 for the sale of M/V Fortune Bay was cancelled and the amount of $1.0 million was retained by the Company in accordance to the MOA.

On June 12, 2020, the Company reached an agreement with one of its Lenders to defer a portion of the three next quarterly instalments against a prepayment of $2.95 million which was effected on June 15, 2020. The next principal payment for this facility is scheduled for March 2021. This preventive measure reduces significantly the debt service requirement for the second half of 2020 and ensures sufficient liquidity for the Company to confront adverse market conditions.

The Company has entered into a contract for the purchase of the Ballast Water Treatment System (“BWTS”) equipment for five vessels of its fleet. On May 22,2020 the Company signed an addendum in order to cancel the supply of the system for the remaining two vessels under this contract that the system was yet to be delivered. The advances already provided up to thedate of the cancellation will be used against any future orders for Company’s fleet.

Liquidity & Capital Resources:

As of June 30, 2020, the Company had a total liquidity of $18.6 million inclusive of $10.4 million in restricted cash. The Company has no capital commitments.

Financial Review: Six months ended June 30,2020

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Adjusted EBITDA totalled $3.3 million for the first half of 2020, 61% decreased as compared to first half of 2019 affected by the poor performance of the dry bulk market post COVID-19 pandemic outbreak.

TCE rate of $5,891 for the six-month period ended June 30, 2020 is decreased by 21% compared to TCE rate of $7,461 for the same period in 2019. The current COVID-19 pandemic has had a global impact with negative results among almost all sectors of economic activity. The shipping industry is unavoidably affected by this unprecedented financial environment, however despite the current weak market conditions, the Company managed to achieve a TCE rate well above market indices while maintaining a high utilisation rate at 98.6%.

However, the six-month ended June 30, 2020 general and administrative expenses include also one-off charges, excluding those the current period figure would be $1.5 million or 5.8% lower from the comparative prior year period. Daily G&A expenses of $404 per day for first semester of 2020 are 6.5% lower compared to first semester of 2019.

Vessel impairment charge for the six-month period ended June 30, 2020 amounted to $5.3 million. It relates to the write down of the carrying value of M/V Falcon Bay to its fair value following the impairment exercise performed. There was no impairment charge in the same period in 2019.

Gain on contract termination of $1.0 million for the six-month period ended June 30, 2020 relates to the amount received following the termination agreement for the cancellation of the sale of M/V Fortune Bay with an unaffiliated third party.

Depreciation cost amounts to $4.2 million and was impacted downwards due to fleet reduction from 19 vessels in the six-month period of 2019 to 16 vessels in the same period in 2020.

The Company devaluated its bunkers inventory by $ 0.3 million for the six-month period ended June 30, 2020 as a result of the reduced bunker prices. No such charges were recorded in the comparative prior year period.

Interest and finance cost of $1.9 million was decreased by 38% compared to the same period of 2019, mainly affected by the reduced Libor rates combined with reduced loan balances.

The continuous cost-reducing initiatives and optimisation of cost control procedures developed by the Company achieved a healthy OPEX rate of $4,158 per day, reduced by 3.3% compared to the same period in 2019.

General and administrative expenses are at the same level for the first semester of 2020 as for the comparative period in 2019.

Financial Review: Three months ended June 30, 2020

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Adjusted EBITDA totalled $0.8 million for the quarter, decreased as compared to second quarter of 2019 by $1.6 million.

TCE rate of $5,101 for the second quarter of 2020, decreased by 20% compared to TCE rate of the same period in 2019. Despite the current weak market heavily affected by COVID-19 outbreak, the Company achieved a TCE rate well above market indices.

Daily vessel OPEX, are reduced to $3,977 per day for the three months ended June 30, 2020 compared to $4,267 during the same period in 2019. This is the lowest OPEX rate historically reported by the Company evidence of the effectiveness of the cost reduction initiatives implemented throughout the fleet.

Vessel impairment loss for the second quarter of 2020 amounted to $5.3 million. It relates to the write down of the carrying value of M/V Falcon Bay to its fair value following the impairment exercise performed. There was no impairment charge in the same period in 2019.

Gain on contract termination of $1.0 million for the three-month period ended June 30, 2020 relates to the amount received following the termination agreement for the cancellation of the sale of M/V Fortune Bay with an unaffiliated third party.

Depreciation cost amounts to $2.1 million and is impacted downwards due to fleet reduction as Pioneer fleet consists of 16 vessels, while in the same period in 2019 the Company owned on average 18 vessels.

Interest and finance cost of $0.8 million was significantly decreased by 43% due to reduced libor rates combined with reduced loan balances.

Cash Flow Review: Six months ended June 30, 2020

Cash and cash equivalent, including restricted cash decreased by $8.7 million as at June 30, 2020 and amounted to $18.6 million as compared to $27.3 million as at December 31, 2019.

The decrease is attributable to $19.2 million cash used in financing activities partially offset with $8.3 million cash provided by investing activities and $2.2 million cash provided by operating activities.

Cash flow activities highlights during the six-month period include:

▪ $7.3 million cash inflow from vessel disposal completed within the first quarter;
▪ $1.0 million cash inflow from cancellation of vessel disposal;
▪ $11.6 million scheduled loan repayments and prepayments due to vessel sale, and ▪ $7.6 million dividend distribution.