ARDMORE SHIPPING CORPORATION ANNUAL 2017REPORT ARDMORE SHIPPING CORPORATION 2017 ANNUAL REPORT Contents Our Company and Strategy 03 Letter from the Chairman 05 Letter from the CEO 07 Our Philosophy 11 Directors & Senior Management 13 Our Fleet 17 Ardmore’s Role in the Oil Value Chain 19 Corporate & Social Responsibility 21 Form 20F 23 | 02 Our Company Ardmore Shipping owns and operates a fleet of mid-size product and chemical tankers. We provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our modern, fuel- efficient fleet of tankers. Ardmore’s core strategy is to develop a modern, high-quality fleet of product and chemical tankers, build key long-term commercial relationships, maintain our cost advantage in assets, operations and overhead, while creating significant synergies and economies of scale as the Company grows. We provide our services to customers through voyage charters, commercial pools and time charters enjoying close working relationships with key commercial and technical management partners. We view the continued development of these relationships as crucial to our longterm success. Ardmore strategy Long-Term Value Creation Disciplined Capital Allocation Conservative Balance Sheet High-Quality Fleet Transparent Corporate Structure Focus Mid-Size Product Tankers Fleet Performance and Service Excellence Voyage Optimization Fuel Efficiency and Emissions Reduction Low Cost Structure Assets Acquired at Cyclical Lows Operational Cost Advantage Low Corporate Overhead Disciplined Investment 03 | 04 Fellow Shareholders, strengthens, our shareholders will benefit from Ardmore’s low-cost structure, modern fleet and continued growth in revenue days Over the course of 2017, Ardmore in 2018. continued to make substantial progress across several strategic Disciplined capital allocation, astute market timing and optimized cost of capital are priorities focused on creating critical components in creating long-term long-term value for all shareholder value in the shipping sector. stakeholders. The Company Ardmore continued to capitalize on softer market conditions through the acquisition THE CHAIRMAN LETTER FROM maintains a strong balance sheet of a high-quality MR at an attractive price, and liquidity profile, designed financed with a highly efficient, low- cost lease structure. The Company also to allow us to capitalize on expanded per share earnings power through opportunistic growth and value a repurchase of 4% of the outstanding creation as accretive common shares at a discount to net asset value as part of the GA Holdings LLC opportunities arise. secondary offering. The offering further diversifies the shareholder base with Additionally, Ardmore continues to invest increased free float and share trading in the organization to further enhance its volume, which benefits all shareholders. top-tier operational performance. Continued successful execution of these principles Sound corporate governance and has allowed us to strengthen our value transparency remain paramount to the proposition to all stakeholders, and has Company, and our management team positioned Ardmore for continued success remains fully aligned with our shareholders. heading into 2018. Our internal management structure precludes related party and affiliated Ardmore benefits from a focused and transactions, and management bonus and consistent strategy, strong commercial and equity incentive plans are tied to shareholder technical operations, and an adherence returns. These corporate governance to disciplined capital allocation. Our team principles are core to our philosophy of continues to pursue operational excellence value creation, and we are proud that these and has developed numerous initiatives practices continue to be recognized and set focused on improving quality and efficiency the standard in the industry. to our customers. The newly established technical management joint venture, Looking forward, we are building on our operating under Ardmore’s integrated accomplishments and driving long-term organizational structure, will further shareholder value in a dynamic market. enhance our service offering, tighten risk We own a modern, high-quality fleet built management, and enhance our earnings at leading yards and designed for optimal potential. commercial flexibility and fuel efficiency, thereby enhancing our earnings profile while Ardmore’s overhead per ship remains reducing our carbon footprint. Ardmore amongst the lowest across our peer group, has built a high-performance, integrated and is supported by our long-term and commercial and operating platform and is consistent focus of building a modern fleet well positioned to deliver industry-leading of similar ship types. As the charter-market results in an expected improving charter ANNUAL REPORT 2017 market with an increasingly attractive multi- year supply-demand outlook. Once again, we appreciate the strong support we have received from our shareholders, financiers, customers and business partners. On behalf of the Board of Directors, I thank you for the confidence you have placed in our Company. Reginald L. Jones III Chairman Ardmore Shipping Corporation 4 05 | 06 Dear Shareholders strength as well as periods of soft chartering conditions. Hurricane Harvey proved to be particularly disruptive, shuttering 5 million It is my pleasure to report on the barrels of US refining capacity and reducing seaborne product flows. The effect was a performance of Ardmore Shipping sustained period of lower than expected Corporation for the year ended charter rates in September, October, and November as cargo volumes returned and December 31, 2017. tanker markets gradually improved. 2017 proved to be a challenging year for Oil demand remained strong in 2017, growing THE CEO LETTER FROM the product tanker market, with elevated oil 1.5 million barrels or 1.6% year on year. inventories curtailing trading activity and According to PIRA Energy, oil inventories petroleum product flows. In spite of market declined 370 million barrels during the year, conditions, Ardmore remained focused on aided by robust demand and widespread executing its strategy of delivering superior refinery outages, and are now back within shareholder returns through the cycle. During range of 2014 levels. Overall, despite 2017, we took advantage of the soft market challenging market conditions, product by acquiring a high-quality secondhand MR tanker demand continued to grow, with at an exceptionally low price, while at the seaborne product volumes increasing 2.6% same time maintaining a focus on operational to 24.1 million barrels per day. Looking and chartering performance, cost control forward, we expect demand growth to revert and balance sheet strength. Additionally, the to historic CAGR of 4.3% recorded over the Company completed a highly accretive share past decade. repurchase at a steep discount to net asset value as part of GA Holdings LLC’s secondary Commercial and operational performance offering; Ardmore shares are now widely Ardmore, at its core, is focused on held with no share overhang and improved operations and customer service. During trading liquidity. 2017 we successfully completed several key initiatives to further enhance the Refined product inventory overhang Company’s commercial and operational curtailed trading activity during 2017 capabilities to improve performance. Since The refined product market has experienced inception, Ardmore has maintained a close low levels of trading activity for the past relationship with its crew and technical 18 months, largely attributed to elevated managers and in October we established inventory levels, which reached a peak a joint venture arrangement with Anglo in 2016 as a consequence of increasing Eastern Ship Management Limited to oil production and collapsing prices. This increase our connectivity with our crew, had a softening effect on product tanker improve operational risk management and markets as onshore inventory reduction took further enhance the interface between precedence over seaborne shipments, while chartering and operations. At the same also reducing oil pricing volatility and oil time, our operations team continues to be traders’ ability to trade profitably. at the forefront of new developments in fuel efficiency and service excellence, utilising These short-term oil market dynamics have the latest technological developments offset otherwise strong underlying demand and industry-leading practices, including fundamentals and falling vessel supply. advanced weather routing tools and real- Outside elevated inventories, during 2017 time voyage data analysis to optimize there were periods of both charter rate efficiency. This ensures a consistently high- quality service offering, while maximizing Frontline in operation; these vessels were cost efficiency and reducing carbon acquired at a highly attractive price, which emissions. We also established an internal has not been matched and contributed $3.0 MR pool, providing a footprint to enhance million in net income in 2017. commercial performance gains. In November, our main shareholder GA We had a very successful year on operating Holdings LLC sold their remaining holdings expenses and drydockings, with both coming in Ardmore through a secondary offering. in below budget and remaining among the The timing of the exit and market conditions lowest across the industry - a testament provided a unique