ARDMORE SHIPPING CORPORATION

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes contained in this Report on Form 6-K (this “Report”) and with our audited consolidated financial statements contained in “Item 18. Financial Statements” and “Item 5. Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended December 31, 2022. The unaudited interim condensed consolidated financial statements included in this report have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements (“U.S. GAAP”) and are presented in U.S. dollars as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022. Unless the context otherwise requires, the terms “Ardmore,” the “Company”, “we,” “our” and “us” refer to Ardmore Shipping Corporation (NYSE: ASC) and its consolidated subsidiaries.

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GENERAL

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Ardmore owns and operates a fleet of Medium Range (“MR”) product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes (“dwt”). We provide through our modern, fuel-efficient fleet of mid-size tankers, seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies. As of September 30, 2023, we had in operation 26 vessels (including four chartered-in vessels), consisting of 20 MR tankers ranging from 45,000 dwt to 49,999 dwt (15 Eco-Design and five Eco-Mod) and six Eco-Design (IMO 2 product / chemical tankers) ranging from 25,000 dwt to 37,800 dwt. Since March 1, 2021, we have been commercially managing one of Carl Büttner’s 24,000 dwt chemical tankers.

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We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (“CPP”) and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers.

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Our fuel-efficient operations are designed to enhance our operating performance and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy includes continuing to build our fleet with Eco-design newbuilds or Eco-design second-hand vessels and with modern second-hand vessels that can be upgraded to Eco-mod.

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We believe that the global energy transition will have a profound impact on the shipping industry, including the product and chemical tanker segments. While this transition will unfold over years, the impact is already being felt through anticipated Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations and constraints on newbuilding ordering activity. We view energy transition as less of a compliance challenge and more of an opportunity, which we have set out in our Energy Transition Plan (“ETP”). The information in our ETP is not incorporated by reference into this Report.

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We are an integrated shipping company. All of our 22 owned vessels are technically managed by a combination of Ardmore Shipping Services (Ireland) Limited and Anglo Ardmore Ship Management Limited, a joint venture entity that is 50% owned by us. We have a resolute focus on both high-quality service and efficient operations, and we believe that our expenses are very competitive with those of our peers.

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We are commercially independent, as we have no blanket employment arrangements with third-party or related-party commercial managers. Through our in-house chartering and commercial team, we market our services directly to a broad range of customers, including oil majors, national oil companies, oil and chemical traders and chemical companies. We monitor the tanker markets to understand how to best utilize our vessels and may change our chartering strategy to take advantage of changing market conditions.

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As of September 30, 2023, our fleet consisted of the following 22 owned vessels, excluding four chartered-in vessels.

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SIGNIFICANT DEVELOPMENTS

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Capital Allocation Policy, Including Dividends

Consistent with our variable dividend policy of paying out dividends on our shares of common stock equal to one-third of Adjusted Earnings, our Board of Directors declared a cash dividend on November 7, 2023, of $0.16 per common share for the quarter ended September 30, 2023. The dividend will be paid on December 15, 2023, to all shareholders of record on November 30, 2023.

Scrubber Installations

In the third quarter of 2023, we completed the installation of modular, carbon capture-ready scrubbers on two vessels during scheduled drydockings. Prior to the end of 2024, we intend to install scrubber systems on an additional seven vessels during their scheduled drydockings.

Geopolitical Conflict

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The ongoing conflict in Ukraine has disrupted energy supply chains, caused instability and significant volatility in the global economy and resulted in economic sanctions by several nations. The ongoing conflict has contributed significantly to related increases in spot tanker rates.

Geopolitical tensions have escalated further on a global basis, including the ongoing Israel-Hamas conflict. Escalation or expansion of hostilities or such crisis, interventions by other groups or nations, the impositions of economic sanctions, disruption of shipping trade routes, or similar outcomes could affect the price of crude oil and the oil industry, the tanker industry, demand for the Company’s services, its business, results of operations, financial condition and cash flows.

Please see “Item 3. Key Information--Risk Factors” in the Company’s Annual Report on Form 20-F for information about risks to the Company and its business relating to political instability, terrorist or other attacks, war or international hostilities and the conflict in Ukraine.

RESULTS OF OPERATIONS

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Factors You Should Consider When Evaluating Our Results

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There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects. We use a variety of financial and operational terms and concepts when analyzing our results of operations. Please read “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2022 for additional information.

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In accordance with U.S. GAAP, we report gross revenues in our condensed statements of operations and report voyage expenses separately. Ship-owners base economic decisions regarding the deployment of their vessels upon actual and anticipated time charter equivalent, or TCE rates (which represent net revenues divided by revenue days) and industry analysts typically measure rates in terms of TCE rates. This is because under time charters the customer typically pays the voyage expenses, while under voyage charters, also known as spot market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue below focuses on TCE rates where applicable, as TCE provides meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it allows Ardmore to evaluate its revenue on a consistent basis, regardless over whether Ardmore chooses to employ its vessels on voyage charters or time charters. Our calculation of TCE may not be comparable to that reported by other companies. Net revenues, a non GAAP financial measure, represents revenues less voyage expenses. Voyage expenses are all expenses related to a particular voyage, which include, among other things, bunkers and port/canal costs. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP. Under discharge to discharge, revenue is recognized beginning from the discharge of cargo from the prior voyage to the anticipated discharge of cargo in the current voyage, and voyage expenses are recognized as incurred.

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Statements of Operations for the Three Months Ended September 30, 2023 and September 30, 2022

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The following table presents our operating results for the three months ended September 30, 2023 and September 30, 2022.

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Revenue. Revenue for the three months ended September 30, 2023, was $86.9 million, a decrease of $55.5 million from $142.4 million for the three months ended September 30, 2022. Our average number of operating vessels was 26.0 for the three months ended September 30, 2023, as compared to 27.0 for the three months ended September 30, 2022.  

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We had 2,185 spot revenue days for the three months ended September 30, 2023, as compared to 2,374 for the three months ended September 30, 2022. We had 26 vessels employed directly in the spot market as of September 30, 2023 and 2022. Changes in spot rates resulted in a decrease in revenue of $42.9 million and the decrease in spot revenue days resulted in a decrease in revenue of $11.2 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

We had no product tankers employed under time charter as of September 30, 2023 compared to one as of September 30, 2022. There were no revenue days derived from time charters for the three months ended September 30, 2023, as compared to 92 for the three months ended September 30, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $1.4 million.

Voyage Expenses. Voyage expenses were $30.6 million for the three months ended September 30, 2023, a decrease of $15.4 million from $46.0 million for the three months ended September 30, 2022. The overall decrease included a $14.6 million decrease from lower bunker prices and a $1.0 million decrease in port and agency expenses plus commission costs.

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TCE Rate. The average TCE rate for our fleet was $26,347 per day for the three months ended September 30, 2023, a decrease of $13,961 per day from $40,308 per day for the three months ended September 30, 2022. The decrease in average TCE rate was primarily the result of lower spot rates for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP.

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Vessel Operating Expenses. Vessel operating expenses were $14.4 million for the three months ended September 30, 2023, an increase of $1.1 million from $13.3 million for the three months ended September 30, 2022. This increase was driven by a change in technical manager for four vessels, as well as the timing of certain vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods.

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Charter Hire Costs. Total charter hire expenses were $4.1 million for the three months ended September 30, 2023, a decrease of $0.4 million from $4.5 million for the three months ended September 30, 2022. This decrease is the result of our having an average of 4.0 vessels chartered-in for the three months ended September 30, 2023 compared to an average of 4.5 vessels chartered-in for the three months ended September 30, 2022. Total charter hire expenses in the third quarter of 2023 were comprised of an operating expense component of $2.1 million and a vessel lease expense component of $2.0 million.

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Depreciation. Depreciation expense for the three months ended September 30, 2023 was $6.9 million, a decrease of $0.4 million from $7.3 million for the three months ended September 30, 2022. This is attributable to the change in the scrap value of each vessel from $300 per lightweight ton (“lwt”) to $400 per lwt during the first quarter of 2023.  

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Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended September 30, 2023 was $0.7 million, a decrease of $0.3 million from $1.0 million for the three months ended September 30, 2022. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

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General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended September 30, 2023 were $5.1 million, a decrease of $0.7 million from $5.8 million for the three months ended September 30, 2022. The decrease in costs was driven by non-recurring items, including refinancing-related fees of $0.4 million, incurred during the three months ended September 30, 2022, which did not occur during the three months ended September 30, 2023.

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General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the three months ended September 30, 2023 were $1.1 million, an increase of $0.2 million from $0.9 million for the three months ended September 30, 2022.

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Unrealized Gains / (Losses) on Derivatives. We had no unrealized gains or losses on derivatives for the three months ended September 30, 2023, as compared to an unrealized gain of $3.4 million for the three months ended September 30, 2022. The interest rate swap agreements expired in July 2023.

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Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended September 30, 2023 were $3.0 million, a decrease of $1.5 million from $4.5 million for the three months ended September 30, 2022. The decrease in costs was primarily due to lower aggregate outstanding obligations following the refinancing of 19 vessels completed during the second half of 2022. The flexibility of our revolving facilities, with only $5.0 million drawn down as of September 30, 2023, has minimized the impact of the rising interest rate environment. Amortization of deferred finance fees for the three months ended September 30, 2023 was $0.3 million, a slight decrease from $0.4 million for the three months ended September 30, 2022.

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Statements of Operations for the Nine Months Ended September 30, 2023 and September 30, 2022

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The following table presents our operating results for the nine months ended September 30, 2023 and 2022

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Revenue. Revenue for the nine months ended September 30, 2023, was $297.1 million, a decrease of $15.8 million from $312.9 million for the nine months ended September 30, 2022. Our average number of operating vessels was 26.2 for the nine months ended September 30, 2023, as compared to 27.0 for the nine months ended September 30, 2022.  

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We had 6,866 spot revenue days for the nine months ended September 30, 2023, as compared to 6,846 for the nine months ended September 30, 2022. We had 26 vessels employed directly in the spot market as of September 30, 2023 and 2022. Changes in spot rates resulted in a decrease in revenue of $10.1 million and the increase in spot revenue days resulted in an increase in revenue of $0.9 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

We had no product tankers employed under time charter as of September 30, 2023 as compared to one as of September 30, 2022. There were no revenue days derived from time charters for the nine months ended September 30, 2023, as compared to 445 for the nine months ended September 30, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $6.6 million for the nine months ended September 30, 2023.

Voyage Expenses. Voyage expenses were $98.7 million for the nine months ended September 30, 2023, a decrease of $15.5 million from $114.2 million for the nine months ended September 30, 2022. While spot revenue days decreased, bunker consumption, port and agency expenses plus commission costs increased by $5.8 million, which was offset by a decrease in bunker prices of $21.3 million for the nine months ended September 30, 2023.

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TCE Rate. The average TCE rate for our fleet was $29,114 per day for the nine months ended September 30, 2023, an increase of $1,219 per day from $27,895 per day for the nine months ended September 30, 2022. The increase in average TCE rate was primarily the result of higher spot rates for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP.

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Vessel Operating Expenses. Vessel operating expenses were $44.6 million for the nine months ended September 30, 2023, a decrease of $1.2 million from $45.8 million for the nine months ended September 30, 2022. This decrease is attributable to the completion of the sales of the Ardmore Sealeader , Ardmore Sealifter and Ardmore Sealancer in 2022, as well as the timing of certain vessel operating expenses between quarters partially offset by an increase in costs related to the change in technical manager for eight vessels during 2023. Vessel operating expenses, by their nature, are prone to fluctuations between periods.

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Charter Hire Costs. Total charter hire expenses were $13.9 million for the nine months ended September 30, 2023 an increase of $4.9 million from $9.0 million for the nine months ended September 30, 2022. This increase is the result of our having an average of 4.2 vessels chartered-in for the nine months ended September 30, 2023 compared to an average of 3.0 vessels for the nine months ended September 30, 2022. Total charter hire expenses in the nine months ended September 30, 2023 were comprised of an operating expense component of $7.2 million and a vessel lease expense component of $6.7 million.

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Depreciation. Depreciation expense for the nine months ended September 30, 2023, was $20.7 million, a decrease of $1.3 million from $22.0 million for the nine months ended September 30, 2022. Of this decrease, $0.6 million is a result of the sale of one vessel in June 2022, and two additional vessels in July 2022, and $0.7 million is attributable to the change in the scrap value of each vessel from $300 per lightweight ton (“lwt”) to $400 per lwt during the first quarter of 2023.  

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Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the nine months ended September 30, 2023was $2.6 million, a decrease of $0.5 million from $3.2 million for the nine months ended September 30, 2022. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

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General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the nine months ended September 30, 2023 were $14.9 million, an increase of $0.3 million from $14.6 million for the nine months ended September 30, 2022. The increase in costs was driven by an increase in compensation and benefits and post Covid-19 lock-down increase in travel-related costs during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

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General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the nine months ended September 30, 2023 were $3.3 million, an increase of $0.4 million from $2.9 million for the nine months ended September 30, 2022. The increase in costs was driven by an increase in compensation and benefits and post Covid-19 lock-down increase in travel-related costs during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

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Unrealized (Losses) / Gains on Derivatives. We had an insignificant amount of unrealized losses on derivatives for the nine months ended September 30, 2023, as compared to an unrealized gain of $4.3 million for the nine months ended September 30, 2022. The interest rate swap agreements expired in July 2023.

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Interest Expense and Finance Costs. Interest expense and finance costs for the nine months ended September 30, 2023 were $8.7 million, a decrease of $4.8 million from $13.5 million for the nine months ended September 30, 2022. The decrease in costs was primarily due to lower aggregate outstanding obligations following the refinancing of 19 vessels completed during the second half of 2022. The flexibility of our revolving facilities, with only $5.0 million drawn down as of September 30, 2023, has minimized the impact of the rising interest rate environment. Amortization of deferred finance fees for the nine months ended September 30, 2023 was $0.9 million, generally consistent with $0.8 million for the nine months ended September 30, 2022.

LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities and capital raised through financing transactions. As of September 30, 2023, we had $273.7 million in liquidity available with cash and cash equivalents of $50.8 million (December 31, 2022: $50.6 million) and amounts available and undrawn under our revolving credit facilities of $222.9 million (December 31, 2022: $170.0 million). We believe that our working capital, together with expected cash flows from operations, will be sufficient for our present requirements.

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Our short-term liquidity requirements include the payment of operating expenses (including voyage expenses and bunkers from spot chartering our vessels), drydocking expenditures, debt servicing costs, lease payments, quarterly preferred and common stock cash dividends, interest rate swap settlements, scheduled repayments of long-term debt, as well as funding our other working capital requirements. Our short-term and spot charters contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. Time charters provide contracted revenue that may reduce the volatility (as rates can fluctuate within months) and seasonality from revenue generated by vessels that operate in the spot market. Spot charters preserve flexibility to take advantage of increasing rate environments, but also expose the ship-owner to decreasing rate environments. Variability in our net operating cash flow also reflects changes in interest rates, fluctuations in working capital balances, the timing and the amount of drydocking expenditures, repairs and maintenance activities and the average number of vessels in service. The number of vessel dry dockings tends to vary each period depending on the vessel's maintenance schedule and required maintenance.

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Our long-term capital needs are primarily for capital expenditures and debt repayment and finance lease payments. Generally, we expect that our long-term sources of funds will be cash balances, long-term bank borrowings, finance leases and other debt or equity financings. We expect that we will rely upon internal and external financing sources, including, cash balances, bank borrowings, finance leases and the issuance of debt and equity securities, to fund vessel acquisitions or newbuildings and expansion capital expenditures.

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Our credit facilities and finance leases are described in Notes 3 (“Debt”) and 4 (“Leases”), respectively, to our unaudited interim condensed consolidated financial statements included in this Report. Our financing facilities contain covenants and other restrictions we believe are typical of debt financing collateralized by vessels, including those that restrict the relevant subsidiaries from incurring or guaranteeing additional indebtedness, granting certain liens, and selling, transferring, assigning or conveying assets.  Our financing facilities do not impose a restriction on dividends, distributions, or returns of capital unless an event of default has occurred, is continuing or will result from such payment. The majority of our financing facilities require us to maintain various financial covenants. Should we not meet these financial covenants or other covenants, the lenders may declare our obligations under the applicable agreements immediately due and payable, and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. As of September 30, 2023, we were in compliance with all covenants relating to our financing facilities.

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Our debt facilities and certain of our obligations related to finance leases typically require us to make interest payments based on the Secured Overnight Financing Rate (“SOFR”). Continuing high or increases in interest rates could adversely affect results of operations and our ability to service our debt; however, as part of our strategy to minimize financial risk, at times we use interest rate swaps to reduce our exposure to market risk from changes in interest rates. We currently do not have any interest rate swaps in place. For additional information, please see Note 5 (“Interest Rate Swaps”), to our unaudited interim condensed consolidated financial statements included in this Report.

CASH FLOW DATA

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Cash Flow Data for the Nine Months Ended September 30, 2023 and September 30, 2022

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Cash provided by operating activities

For the nine months ended September 30, 2023, net cash provided by operating activities was $140.9 million compared to net cash provided by operating activities of $63.5 million for the nine months ended September 30, 2022. Although net income was relatively consistent of $89.8 million for the nine months ended September 30, 2023 compared with $84.5 million for the nine months ended September 30, 2022, the main reason for the increase was the movement in receivables with a decrease of $29.1 million for the nine months ended September 30, 2023 compared to an increase in receivables of $45.2 million for the nine months ended September 30, 2022.

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Cash (used in) / provided by investing activities

For the nine months ended September 30, 2023, net cash used in investing activities was $18.6 million, primarily driven by advances for ballast water and scrubber systems of $12.1 million, payments for vessels and vessel equipment of $5.4 million, as well as payments in relation to equity investments and other non-current assets of $1.2 million. For the nine months ended September 30, 2022, net cash provided by investing activities was $37.7 million, which included proceeds from vessels held for sale of $39.9 million, partially offset by payments in relation to vessel equipment, advances for ballast water treatment systems and other non-current assets of $2.2 million.

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Cash (used in) financing activities

For the nine months ended September 30, 2023, net cash used in financing activities was $122.0 million. Repayments of debt amounted to $77.5 million, the payment of cash dividends on our shares of common stock amounted to $40.6 million, the dividend payments on shares of our Series A Redeemable Preferred Stock were $2.5 million, and repayments of finance leases were $1.5 million. For the nine months ended September 30, 2022, net cash used in financing activities was $106.0 million. Repayments of long-term debt amounted to $138.1 million. Total principal repayments of finance lease arrangements were $84.7 million, which included the repayment of two finance lease facilities, in full, totaling $12.3 million. Dividend payments on shares of our Series A Redeemable Preferred Stock amounted to $2.4 million. Proceeds of debt amounted to $96.0 million.

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CAPITAL EXPENDITURES

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Drydock

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The drydocking schedule for our vessels that were in operation as of September 30, 2023 is as follows:

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We intend to continue to seek to stagger drydockings across the fleet. As our fleet matures and expands, our drydocking expenses are likely to increase. Ongoing costs for compliance with environmental regulations and society classification surveys (including ballast water treatment systems) are a component of our vessel operating expenses.

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(1)    Three-month period ending December 31, 2023

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Ballast Water Treatment Systems Installation

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The installation schedule for ballast water treatment systems on our vessels that were in operation as of September 30, 2023 is as follows:

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Ballast water treatment system installations are timed to coincide with the drydocking schedule.

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(1)    Three-month period ending December 31, 2023

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Scrubber System Installation

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The installation schedule for scrubber systems on our vessels that were in operation as of September 30, 2023 is as follows:

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Scrubber system installations are timed to coincide with the drydocking schedule.

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(1)    Three-month period ending December 31, 2023

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CRITICAL ACCOUNTING ESTIMATES

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We prepare our financial statements in accordance with U.S. GAAP, which require us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates. Accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties are discussed in “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2022. Effective January 1, 2023, we increased the estimated scrap value of the vessels from $300 per lwt to $400 per lwt prospectively based on the 15-year average scrap value of steel. The change in the estimated scrap value will result in a decrease in depreciation expense over the remaining life of the vessel assets. During the three and nine months ended September 30, 2023, the increase in the estimated scrap value resulted in a decrease in depreciation expense of $0.4 and $0.7 million, respectively. There have been no other significant changes to these estimates and assumptions during the nine months ended September 30, 2023.

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DISCLOSURES ABOUT MARKET RISK

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In addition to the risks set forth below, you should carefully consider the risk factors discussed in “Item 3. Key Information – D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2022, regarding risks which could materially affect our business, financial condition and results of operations.

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Operational Risk

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We are exposed to operating costs arising from various vessel operations. Key areas of operating risk include drydocking, repair costs, insurance, piracy and fuel prices. Our risk management includes various strategies for technical management of drydocking and repairs coordinated with a focus on measuring cost and quality. Our modern fleet helps to minimize the risk. Given the potential for accidents and other incidents that may occur in vessel operations, the fleet is insured against various types of risk. We have established a set of countermeasures in order to minimize the risk of piracy attacks during voyages, particularly through regions which the Joint War Committee or our insurers consider high risk, or which they recommend monitoring, to make the navigation safer for sea staff and to protect our assets. The price and supply of fuel is unpredictable and can fluctuate from time to time; fuel prices increased significantly during 2022 but have since decreased during 2023. We periodically consider and monitor the need for fuel hedging to manage this risk.

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Foreign Exchange Risk

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The majority of our transactions, assets and liabilities are denominated in U.S. Dollars, our functional currency. We incur certain general and operating expenses in other currencies (primarily the Euro, Singapore Dollar, and Pounds Sterling) and, as a result, there is a transactional risk to us that currency fluctuations will have a negative effect on the value of our cash flows. Such risk may have an adverse effect on our financial condition and results of operations. We believe these adverse effects to be immaterial and we have not entered into any derivative contracts to manage foreign exchange risk during the three and nine months ended September 30, 2023.

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Interest Rate Risk

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We are exposed to the impact of interest rate changes, primarily through borrowings that require us to make interest payments based on the SOFR. Significant increases in interest rates could adversely affect our results of operations and our ability to repay debt. We regularly monitor interest rate exposure and enter into swap arrangements to hedge exposure when we considered it economically advantageous to do so.

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We are exposed to the risk of credit loss in the event of non-performance by the counterparties to interest rate swap agreements. In order to minimize counterparty risk, we have only entered into derivative transactions with investment grade counterparties at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

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During the three months ended June 30, 2020, we entered into floating-to-fixed interest rate swap agreements over a three-year term with multiple counterparties, which swap agreements expired in July 2023. In accordance with these transactions, we paid an average fixed-rate interest amount of 0.32% and received floating rate interest amounts based on LIBOR. As interest rates generally had been increasing since March 2022, our interest costs could increase significantly.

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During the third quarter of 2022, we entered into new financing arrangements with ABN AMRO and CACIB and with Nordea/SEB. These new facilities are priced at the SOFR.

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Liquidity Risk

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Our principal objective in relation to liquidity is to ensure that we have access at minimum cost to sufficient liquidity to enable us to meet our obligations as they come due and to provide adequately for contingencies. Our policy is to manage our liquidity by forecasting of cash flows arising from and expense relating to spot voyage revenue, time charter revenue, pool revenue, vessel operating expenses, general and administrative overhead and servicing of debt.

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Credit Risk

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There is a concentration of credit risk with respect to our cash and cash equivalents to the extent that substantially all of the amounts are held in ABN AMRO and Nordea, and in short-term funds (with a credit risk rating of at least AA) managed by BlackRock, State Street Global Advisors and JPMorgan Asset Management. While we believe this risk of loss is low, we intend to review and revise our policy for managing cash and cash equivalents if considered prudent to do so.

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We limit our credit risk with trade accounts receivable by performing ongoing credit evaluations of our customers’ financial condition. We generally do not require collateral for our trade accounts receivable.

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We may be exposed to a credit risk in relation to vessel employment and at times may have multiple vessels employed by one charterer. We consider and evaluate concentration of credit risk regularly and perform on-going evaluations of these charterers for credit risk, including credit concentration risk. As of September 30, 2023, our 26 vessels in operation (including four chartered-in vessels) were employed with 19 different charterers.

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Inflation

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Since 2022, inflation has been a significant factor in the global economy, and inflationary pressures have resulted in increased operating, voyage (including bunkers) and general and administrative costs. Although inflation has been moderating, inflationary pressures could adversely affect our operating results to the extent our spot charter rates do not adequately cover the cost of any increases in bunker costs.

Geopolitical Factors

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Please see “Significant Developments—Conflicts in Israel and Ukraine” in this Report for information about risks to us and our business relating to the ongoing conflict in Ukraine and the recently-declared Hamas-Israel war.

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Ardmore Shipping Corporation

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INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Ardmore Shipping Corporation

Unaudited Interim Condensed Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Ardmore Shipping Corporation

Unaudited Interim Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and September 30, 2022

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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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Ardmore Shipping Corporation

Unaudited Interim Condensed Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended September 30, 2023 and September 30, 2022

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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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Ardmore Shipping Corporation

Unaudited Interim Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023 and September 30, 2022

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