Business context and reporting period
Performance Shipping Inc. filed an annual report on Form 20-F for the fiscal year ended December 31, 2023; it is not a standalone fourth-quarter report. The Marshall Islands-incorporated company owns and operates Aframax tanker vessels and reports under U.S. GAAP. Its financial statements received an unqualified audit opinion from Ernst & Young (Hellas).
At year-end, the company operated seven tankers. It reported 98.7% fleet utilization and an average daily time charter equivalent (TCE) rate of $36,954 for 2023. Five vessels were on time charters and two operated in pool arrangements, according to the filing’s fleet discussion.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $108.9 million | $75.2 million |
| Operating income | $75.5 million | $40.0 million |
| Net income from continuing operations | $69.4 million | $36.3 million |
| Net income attributable to common shareholders | $56.9 million | $12.0 million |
| Operating cash flow | $68.0 million | $33.8 million |
| Cash, cash equivalents and restricted cash at year-end | $68.3 million | $39.7 million |
| Long-term debt, net of financing costs | $54.9 million | $127.7 million |
| Working capital | $64.6 million | $27.4 million |
Cash and cash equivalents on the balance sheet were $67.3 million, with a further $1.0 million of restricted cash. The reported cash figure includes compensating cash balances required under loan agreements. Investing activities provided $25.7 million, largely from vessel-sale proceeds; financing activities used $65.1 million, primarily reflecting debt repayments. The company paid $1.9 million in preferred dividends and no common dividends in 2023.
Basic and diluted earnings per common share were $5.43 and $1.91, respectively, versus $6.49 and $3.02 in 2022. These figures are affected by the company’s convertible preferred shares, warrants, and substantial potential dilution. The filing does not present a single headline margin measure.
Material changes versus 2022
- Revenue rose 44.8%, supported by higher TCE rates, improved utilization, and more operating days as the fleet expanded. Average TCE increased to $36,954 from $29,579.
- Operating cash flow approximately doubled. Vessel operating expenses rose to $21.9 million from $13.8 million, and daily operating expenses increased to $7,537 from $6,683.
- Interest and finance costs increased to $9.6 million from $4.0 million; the weighted-average loan interest rate rose to 7.60% from 4.85%.
- The company recorded a $15.7 million gain on vessel sales, including the sale of P. Kikuma, compared with a $9.5 million gain in 2022 from P. Fos.
- Debt fell substantially after repayments and the December 2023 voluntary prepayment of approximately $44.6 million of Piraeus Bank loans. The company said it was in compliance with loan covenants at year-end.
- Common shares outstanding increased to 12.28 million from 4.19 million, reflecting equity issuance and conversions, partly offset by share repurchases. The company repurchased approximately $2.7 million of common shares during 2023.
Outlook, commentary, risks and unusual items
Management said working capital should be sufficient for liquidity needs and banking-covenant compliance for at least 12 months after year-end. Scheduled obligations over the following 12 months included $7.5 million of debt amortization and an estimated $1.8 million of preferred dividends, assuming the preferred share count remained unchanged and dividends were paid in cash. These are management estimates, not earnings guidance.
The company had contracted for three LNG-ready Aframax newbuildings, with deliveries expected from October 2025 through April 2026 and aggregate remaining installments of approximately $183.5 million at year-end. It subsequently reported paying $19.5 million of installments for two vessels in January 2024. In March 2024, it announced five-year time charters for all three newbuildings at a gross rate of $31,000 per vessel per day, with charterer options to extend for a sixth and seventh year.
Management cited a potentially supportive 2024 tanker market, including industry-source forecasts of higher Aframax demand than fleet growth, but cautioned that forecasts are uncertain. Russia-related sanctions and Red Sea disruption had supported longer routes and tanker demand, while the longer-term effects of geopolitical events remain unclear. Key risks include volatile charter rates and vessel values, higher interest costs, customer concentration, refinancing and covenant exposure, operating and environmental compliance costs, and possible shipping disruptions. Four charterers accounted for 84% of 2023 revenue.
Two lawsuits remain pending, including a securities class action dating to 2017 and a 2023 Sphinx lawsuit alleging fiduciary-duty violations related to a 2021 exchange offer. The company disputes the claims; outcomes and potential costs are uncertain. No related provision was reported. The estimated aggregate charter-free market value of vessels was $98.7 million below their carrying value at year-end, although management reported no impairment indicators and recorded no impairment charge. This difference is an estimate, not a recognized loss.
Other notable items include a $9.8 million deemed dividend from the Series C preferred-share down-round feature, which reduced income available to common shareholders but was not an operating cash expense. The board chair, Aliki Paliou, was reported to control more than 88% of voting power through Series C preferred shares. Management assessed disclosure controls and internal control over financial reporting as effective; the external auditor did not attest to internal controls because the company is a non-accelerated filer.
Most important facts for investors to verify
- Reconcile cash and liquidity disclosures, including restricted cash and the $10.0 million compensating cash balance, against near-term debt service and shipbuilding installments.
- Review the newbuild contracts’ remaining payment schedule, delivery assumptions, and the economics and conditions of the announced five-year charters.
- Assess potential dilution from Series C conversions, warrants, and future equity financing, and how preferred dividends and down-round terms affect common shareholders.
- Evaluate vessel valuations, collateral coverage, loan covenants, and exposure to floating SOFR-based borrowing costs.
- Monitor the Sphinx tender offer and litigation, the older securities class action, and any resulting cash, governance, or ownership effects.
- Test the sustainability of earnings excluding vessel-sale gains, interest income, and preferred-stock or warrant accounting effects; compare those results with operating cash flow.