GASS

StealthGas Inc. Form 20-F Summary (Fiscal Year Ended December 31, 2011)

Business Context and Reporting Period

Company: StealthGas Inc.
Jurisdiction: Republic of the Marshall Islands
Reporting Period: Fiscal year ended December 31, 2011
Business Overview: StealthGas is a shipping company specializing in the seaborne transportation of liquefied petroleum gas (LPG). As of December 31, 2011, the fleet consisted of 33 LPG carriers, three medium-range product carriers, and one Aframax crude oil tanker. The company is managed by Stealth Maritime, an affiliate of the Vafias Group.

Key Financial Metrics

Operational Metrics: Average daily Time Charter Equivalent (TCE) rate was $7,514 in 2011, up from $7,064 in 2010. Fleet utilization was 97.5% in 2011.

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 6.2% to $118.3 million, driven primarily by higher prevailing charter rates despite a decrease in the average number of vessels (37.6 in 2011 vs. 38.6 in 2010).
• Net Income Decline: Net income decreased 23% to $8.5 million. This was primarily due to a $5.7 million net loss on the sale of four vessels (Gas Shanghai, Gas Chios, Gas Czar, and Gas Nemesis) and increased voyage expenses (up 29.9% due to higher bunker prices).
• Expense Management: Vessel operating expenses decreased 4.4% to $36.6 million, largely because more vessels were deployed on bareboat charters where the charterer bears operating costs.
• Derivatives: Loss on derivatives improved significantly to $2.9 million in 2011 from $6.1 million in 2010, aided by a $6.3 million cash gain on foreign currency forward contracts due to the weakening of the U.S. dollar against the Japanese Yen.

Guidance, Outlook, Risks, and Contingencies

Outlook and Guidance: The company does not provide specific numerical guidance. Management expects to fund operations and capital commitments (including the delivery of newbuilding vessels) through cash flows from operations and existing credit facilities. Dividends remain suspended since 2009 due to market conditions and loan covenants.

Key Risks:

• Covenant Compliance: The company obtained a waiver for a loan-to-value covenant with Deutsche Bank until March 31, 2012. Upon expiry, the company is not in compliance and may be required to prepay debt or provide approximately $2.0 million in additional collateral (classified as restricted cash).
• Market Cyclicality: The LPG carrier market is cyclical. While rates improved in late 2010 and 2011, they remain below 2007-2008 peaks. A decline in global economic growth could reduce demand and charter rates.
• Charter Expirations: As of April 2012, nine vessels had charters expiring in 2012. Renewal at favorable rates is not guaranteed.
• Sanctions: The company faces risks related to U.S. sanctions on countries like Iran, Sudan, and Syria. Two port calls in Iran were made by a vessel under bareboat charter during the three-year period ended December 31, 2011.

Investor Verification Checklist

• Covenant Breach Resolution: Verify how the company intends to cure the Deutsche Bank loan-to-value covenant breach expected after March 31, 2012, and confirm the availability of the $2.0 million restricted cash.
• Vessel Sales Impact: Assess the impact of the $5.7 million loss on vessel sales in 2011 and the expected gain on the sale of the Gas Tiny (delivered Jan 2012) and Gas Kalogeros (scheduled May 2012).
• Charter Renewals: Monitor the renewal rates and terms for the nine vessels with charters expiring in 2012, particularly in the spot market where rates are volatile.
• Derivative Exposure: Review the remaining unhedged exposure to Japanese Yen for the final newbuilding vessel delivery and the impact of interest rate swaps on future earnings.
• Dividend Policy: Confirm the continued suspension of dividends and the specific restrictions imposed by loan agreements (dividends limited to 50% of free cash flow).