Thank you for standing by and welcome to the Capital Product Partners' First Quarter 2018 Financial Results. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today 30th of April 2018. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation, future debt levels and repayment, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings, and our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, and market and charter rates may all be forward-looking statements as such defined in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, to conform to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. And we make no prediction or statement about the performance of our common units. I would now like to hand over to your speaker for today, Mr. Kalogiratos. Please go ahead, sir.

Thank you Joardin and thank you all for joining us today. As a reminder, we'll be referring to the supporting slides available on our website as we go through today's presentation. On April 18, our board of directors declared a cash distribution of $0.08 per common unit. The first quarter common unit cash distribution will be paid in May 14 to common unit holders of record on May 2. In addition, our board of directors declared a cash distribution of $0.21375 per Class B unit for the first quarter of 2018. The first quarter Class B cash distributions will be paid on May 10 to Class B unit holders of record on May 2. The partnership’s net income for the first quarter stood at 5.3 million versus 6.8 million in the previous quarter. The partnership's operating surplus for the quarter, prior to Class B unit distribution and the capital reserve amounted 26 million, compared to 32.7 million for the first quarter of 2017 and 30.3 million for the fourth quarter ended December 31, 2017. Common unit coverage for the first quarter 2018 stood at 1 times. At the end of April, we concluded the sale of the motor tanker, Aristotelis to an unaffiliated third party for 29.4 million generating net proceeds of circa 15 million after mandatory debt repayment under 2017 credit facility. Moreover, and as previously stated, we completed in January the acquisition of the eco-type Aframax crude tanker Aristaios from our sponsor Capital Maritime for a total consideration of 52.5 million. We are pleased that we have reached an agreement with PIL to extend the charter of the motor vessel Agamemnon for an additional 12 months, while we secured new employment for its sister, the Archimidis with MSC for two years, both at significantly increased daily rates. As…

[Operator Instructions] Our first question is from the line of Jon Chappell from Evercore Partners.

Interesting on slide 6, you've already kind of walked through the -- how this vessel swap, if you will, has taken place and just wondering as you look at your fleet and maybe the suezmaxes, where the asset values have held in pretty well relative to a very poor market and probably poor near term outlook, maybe consider those non-core vessels, is it possible to do other transactions, similar to that, where maybe you can monetize some of the non-core suezmax vessels and use that then for dropdowns with contract coverage.

That's actually a great point and it's something that we have been looking into for some time now. Of course, the asset values that you have been seeing over the last, let's say, a couple of quarters or so in progress reports have been a little artificial, especially for modern ships, as there has been little liquidity and I think you'll find that there has been some sort of values capitulation on the back of the depressed spot market, but at the same time, scrap prices rising over the last again couple of quarters little or softer over the last month or so, but still have supported if you want, values up to a certain extent. So we have not seen the sort of price capitulation that we have seen, let's say, two, three years ago when we had another down cycle in the tanker market. So, this is a long way of saying that we do follow the second hand market quite closely and if we see opportunities like the one you mentioned, so whereby we could put together an attractive swap like we completed for the Anikitos and the Aristotelis and at the same time, modernize our fleet and as you say, divested a bit from the less core assets like the suezmaxes, that’s definitely something that we are very mindful of, but not something that we have currently in the books.

Great. And then just a follow up, you also mentioned, you expect the coverage ratio to pick up starting in 3Q and you kind of walked us through the dry docking for the first half of the year. Is that strictly a function of the dry docks being behind you, operating expenses then coming down and having kind of full utilization of the fleet or are there other kind of market related expectations that are expecting you to say that the coverage ratio should improve significantly in the second half?

No. That assumes mostly rates not dissimilar to what we experienced today in the suezmax market and otherwise a fairly flat product tanker market, but it does take into account the fixtures of the two 8000 DU container vessels. So it's mostly the dry docks, but maybe here, it might be worth elaborating a bit on what drove the miss this quarter, because it was a number of factors. And some of them were a bit unique, so a bit of a perfect storm if you want. I mean as far as the revenue side is concerned, there were two main drivers. One was the offhire and the other one was the reduced TC. The offhire as I think mentioned in my prepared remarks, had -- part of the offhire related to the sale of the Aristotelis. Typically, we were hoping to reposition the vessel with an aromatics cargo from the continent to the Far East and then sort ballast to Singapore where the delivery of the vessel was scheduled. However, that arbitrage closed on the back of certain regulatory changes in China. It was quite sudden and then the vessel had to incur a fairly long ballast leg, which not only meant increase the voyage expenses, but also of course no earnings during that ballast leg. So that was quite sizable. Then we had the offhire related to the dry docking of the Amoureux, the suezmax, while it was passing special surveying and then we had offhire related to a number of smaller unscheduled repairs that affected at least seven of our vessels this quarter. So that part, if you want, is not normal. I mean, you always have some small repairs or unscheduled offhires, but this was quite unusual to have so many vessels at the same time. To give you an idea, we lost the three anchors this quarter, so definitely not a typical quarter. And then finally, you had also of course the suezmaxes that they were simply redelivered to us until we find proper period employment to have to trade in the spot market and of course spot market, you can see for yourself, it was not a great market.

Okay. And then just super quick follow up on that part, I mean can you help us kind of quantify the scheduled, the unscheduled repairs on those seven ships. I mean, are we talking like a couple of hundred thousand that reach over the aggregate into $1 million as we kind of think about rightsizing the forecast going forward.

Well, I can tell you that if you look at the Aristotelis’ impact including voyage expenses and loss of revenue, that was just north of $1 million. So one big part was there. The -- on the OpEx side, I think it's difficult to, it is entangled, what is one-off and what is normal. You might have two high quarters and then suddenly four low quarter. So, OpEx must be seen on average across a period of time. So I wouldn't want to go there, but again dry dock over as suezmax will cost you probably of what vintage, around $1 million or more and a big part of that is expense. So that gives you an idea as to what drove the miss.

Our next question today is from Ben Nolan from Stifel.

So on the -- for the two container ships with the new contracts, obviously, those are a meaningful step up from the prior rates. I’m curious if you could maybe give some color as to whether or not there's much depth or capacity to do contracts with a little bit more duration than that. Just in in terms of how you guys would think about it and turn to lock in the longer term cash flow, but first of all I guess is that something that you would want to do and then secondly what do you think is the appetite among the liner companies to go a little longer in duration.

Look, to give you a bit of color first with regard to the container market, I think the fundamentals outlook appears better than it has for a very long time. It's the third year in a row with higher demand than supply. You've seen the idle fleet fall drastically to around 2%. And if you look at analyst projections, you would expect that next, at least the next couple of years, we’ll remain positive if demand growth continues at today’s pace. The contracting on the other hand has picked up compared to last year. We have about 440,000 TEU ordered. So -- in 2017 and in the first quarter ’18, we have about 240,000 TEU. But as we had a number of operators finalizing projects for large donors, but all in all, it points to a tighter market, and especially for post-Panamax vessels that saw a solid recovery last year, but also since the beginning of the year. Now, it's a very delicate market, especially in the bigger sizes. So when you have, suddenly a few liners come and pick up donuts like they have done over the last couple of months, you'll see charter rates increase and then also people willing to give you a longer period. But then that can also turn very quickly as soon as there is a surplus of one or two post-Panamax vessels, especially of 8000 TEU plus in the market. So we are, I think, a little market opportunity driven. If we see market opportunity to fix longer term at what we perceive to be rates that makes sense, we would definitely look at it. It's not necessarily on offer at this point to fix, let's say, for three years or longer, but in any case, while these rates that we fixed are quite high compared to the historical average of 30 plus thousand, they still come at a discount. So the answer is twofold. Yes. We would look at it, but not necessarily at these levels and you will need also better market for these longer term period deals to appear.

And then secondly for me, there was not, in slide presentation, there wasn’t sort of the update of potential dropdown candidates, could you maybe just frame in what you view as the portfolio or roughly what’s the portfolio of candidates to maybe do something like you're talking about, which on is swapping assets, what's available from the sponsor.

Sure. The only reason that we did not include those slides is because I think it would have become a little repetitive, but very much what we discussed and last time around, it's very much in place. So the vessels with employment are the ones where we have the right to first refusal amount to around 240 million in value and that includes MRs, eco MRs. It includes the sister of the Aframax again with another four years of charter or so. As you might recall, in the last earning slides, we also had a VLCC with almost 4.5 years of bareboat charter and so in addition to this 240 million, if you look at the other type of assets, that's about another 400 plus million dollars. So when you look at the combined value of the potential dropdowns from our sponsor, this is well in excess of 700 million or 50% of the book value of our existing fleet. So there are plenty of opportunities. It's not – the reason that we not included was simply not to be repetitive.

But there wasn’t any major changes though in that backlog growth?

No major changes. No major changes.

Thank you very much. Our next question today is from the line of Randy Giveans from Jefferies.

So a few quick question for re-chartering for the MRs with the charter expirations. It looks like current one and three year time charters around 14000 a day for the MR IIs. So how deep are those time charter markets? Is it pretty easy to find counterparties at those terms, both for one or three years?

Hi, Randy. So on the -- I would call the non-eco MR product tanker market between 13.5 to 14, maybe 13.250 to 13.750 as of the last quarter. It was a slight weakening or our product tankers’ period rates and 14.5 to 15 for eco vessels. Q1 and also April was a little slower than usual in the period, but there is more liquidity than for any other tanker segment for sure. We are working on certain transactions, potentially also in block transactions and hopefully we would be able to give more details on that. Soon maybe over the next couple of months, but yeah, the answer is that there is liquidity and -- and especially for one year deals. Again, we are not always in a rush to fix. We are trying to get a better deal when we can.

Okay. Makes sense. And now, one quick modeling question. So for the voyage expenses, you stated that the increase is mainly attributable to the increase in the number of voyage charters during 1Q and it has been trending higher in each of the last four quarters or so. So going forward, do you expect that number to continue to climb or should be model in around a 9 million run rate kind of quarterly for the rest of this year?

It's very much driven by the number of vessels as you say that trade in the spot market. I think, it would be -- happy to take this also offline to have a more detailed discussion, but let's wait it out as I said until maybe the next quarter where we can give you a little more hopefully color with regard to employment of the product tankers. But with regard to the suezmax tankers, I think at least for the two or three vessels, maybe 50% to 75% of them, I would expect that they will be trading in the spot until we see a more sustained recovery. So that line will remain elevated, but happy to take this offline and maybe go through the rationale.

[Operator Instructions] The next question is from Ben Brownlow from Raymond James.

You actually touched both on the product tanker side and the containership side in terms of the kind of two to three year charters and congrats on the containership charters that you secured this morning. Can you just kind of translate that around to what you're seeing in the suezmax market? I know you mentioned earlier that you aren’t seeking long term charters, but just given that seems to be one of the biggest spreads kind of a 20% to 25% premium versus one year time charter rates. Can you just talk about what you're seeing around the opportunity there?

Well, if you look at what brokers will quote you in terms of one year charters or three year charters, it would be around 15,000 for one year and maybe $18,000, $19,000 for three years, but it's really very, very liquid. Mostly, you see shorter term charters which are also very much position dependent and as I alluded to in my prepared remarks, there is a lot of profit sharing or index related chartering as well when it comes the period. So these numbers are probably quite artificial if you wanted to fix something with profit share, I would expect that you would need to look at $12,000, $13,000 plus profit share and then it also pretty much depends on what indices you look at. And the three year deals are, we haven't really seen much being reported. I think there's very little that is being discussed. So that number is very artificial and in any case, even if it wasn’t other thing, we would be rushing to fix. The prospects for suezmaxes remain bright, despite the depressed spot market. I think, we are going through this capitulation phase where the supply side has to rationalize itself, but demand is actually quite robust and I think we are saying a number of negative short term factors that could quickly turn. So not in a rush there and in any case little liquidity to what is being reported.

That's helpful. And just one last one for me, on the product tanker active, that day rate, I mean, it's a pretty narrow range of 15,000 to 16,000 day rate range, but can you just talk about the factors there to determine that range.

Yes. Sure. I mean this is a charter that has some optionality baked in. So this is either a trip charter that will last 30 to 60 days or in the option of a charter that can turn to a 6 plus 6 months’ time charter and that's what will drive the, this range that we have quoted, but we will know that towards the, I think, end of May.

Our next question is from Mike Gyure from Janney.

Can you go through the dry dock schedule .I think you touched on it in your commentary, but maybe once again, I think I missed some of that kind of what you have scheduled for the second quarter and the rest of the year?

Sure. So, we have, in the second quarter, we have the dry docking of the suezmax and the Aristotelis II as is being redelivered from here, bareboat employment and we're also passing special survey for two 5000 TEU container vessels but without drydocking. So that means a bit of an increased OpEx, but not necessarily as much as you would expect from a proper drydock. Then as far as the next quarter is concerned, we have an additional vessel, the Aris II that will be dry docked and that's all really for 2018. And then in 2019, we have only two vessels scheduled at this point, the Ayrton II and the Amore Mio II.

And our next question is from the line of Hillary Cacanando from Wells Fargo.

Earlier, you talked a little bit about, you said there was a regulatory change in China that I guess affected the arbitrage opportunity for Aristotelis. Could you talk about what that regulatory change was and is this something that could impact your business in the future.

Not really, does only affect a small part of the clean product tanker market. It was with regard to the use of aromatics for certain -- for distillation in China. It is another cargo that used to come up from time to time. I understand from the continent to the Far East and it was, if you want, an ideal repositioning cargo for the vessel that we sold since the delivery range was in the Far East, but it's not the major change I think for the product tanker market. It's a bit of a niche cargo.

Is it not something that would have impacted the business in the future sense?

No.

And then just a follow-up question regarding dropdowns, so you talked about which vessels are available. Could you talk a little bit about your plans for the rest of the year, in terms of how many you are looking to do if any? What that would depend on?

Sure. As you know, we completed the acquisition of the Aristaios earlier this quarter and then we have also the swap of the Anikitos-Aristotelis. Hopefully, we will conclude that over the next few days. Now with regard to the growth and how we can take advantage of these dropdown menu, as far as that is concerned, as you might recall, a lot of these vessels have debt in place that can be innovative to CPLP. And for these vessels that do not have credit facilities of that sort, with that optionality and confidence, we’ll be able to line up the required debt. It is more of the equity side that I think it's more difficult at this point when we are discussing dropdowns. So definitely, one option will be internally generated cash flows so we will need to see our common unit distribution coverage increase going forward. In order for this to happen, on the other hand as far as external capital is concerned, to complement internal generated cash flows or fully finance the equity side of these acquisitions, we will see what sort of capital makes sense. In the end, acquisition to long term distributable cash flow remains a main criterion. Our common equity price is quite depressed and makes that quite difficult. So we will need to see what sort of capital, if any, external capital, I mean, makes sense for further dropdowns. So I think for the moment and until we solve that equation and that's I think not unique to us, I think that applies to many MLPs, the internally generated cash flows is our best bet.

[Operator Instructions] Okay, sir. There are no further questions coming through. Please continue.

Thank you all for joining us today.

Thank you very much. Ladies and gentlemen, thank you for participating. You may now disconnect your lines.