Q2 2021 Navigator Holdings Ltd Earnings Call
Thank you for standing by navies, and gentlemen, and welcome to the Navigator Holdings conference call on the second quarter 'twenty to 'twenty, one financial results, we have with US Mr. David Butters Executive Chairman, Mr. Harry Deans, Chief Executive Officer, Mr. Niall Nolan Chief Financial Officer.
And Mr <unk> Chief commercial officer.
At this time all participants are in a listen only mode.
Be a presentation followed by a question answer session at which time if you wish to ask a question. Please press star and one on your telephone keypad and wait for an automated message, stating your line is open.
I must advise you that this conference is being recorded today.
And now I pass the floor to one of your speakers Mr. Butters cheese go ahead Sir.
Thank you Manny and good morning, everyone and welcome to the Navigator second quarter earnings 2021 Conference call.
As we conduct today's conference call, we were making various forward looking statements. These statements include but not limited to.
Future expectations plans and prospects for both financial.
And operational perspective.
These forward looking statements are based upon management's assumptions and forecasts.
Patients.
As of today's date and as such are subject to material risks and uncertainties.
Actual results may differ significantly from our forward looking information and financial forecast additional information about these factors and assumptions are included in our annual and quarterly reports.
Filled with the security and Exchange Commission.
Yeah.
Sure I hand off the call to Harry <unk>.
Just have some brief comments and observations.
You know, it's just about two weeks ago, when we closed the acquisition of the Altra gas.
Entity, the owner of 18 high quality LPG vessels.
Harry on the rest of our team will have more to say about the importance of these trends actions later on the call but first.
I want to personally welcome the former ultra gas employees, who have recently joined navigate us.
From everything I've heard N.
I haven't seen you possess the same professional skills and enthusiasm demonstrated by our own navigate the team over many years.
We need you.
And trust you will continue to enjoy a work environment that.
It excites.
Hugh and stretches Europe professional talent.
I would also like to formally welcome three new directors Pete.
Peter Stokes and does not happen.
Join us.
Got it.
<unk> represent a deep down op and family the ultimate owner of now, 20%, 28% up navigate as common stock.
I have known these two gentlemen for over two decades, and I can attest that these two gentlemen.
Good business people and have strong judgment and find character.
Also joining our board as Andreas Sloman POW. Mr. Powell has also has it comes from a long.
History in shipping that goes back many decades and crosses several continents.
We are very pleased that all of these three gentlemen, this have agreed to join the board and I am confident that they will contribute significantly to the ongoing success of the company.
And I make an observation.
That navigator is now a very special entity with two companies.
Two storied shipping companies in the business for many many years, each owning a 28% interest and navigate it.
It shows tremendous confidence and vision of what navigate it can do.
We've had great belief they couldn't do it on its own but now with two real pillars beside us I think it is a mix driver in every situation.
And it can only be a sign of success.
So Harry let me.
Pass the call over to you and the rest of the team to fill us in on what transpired over these last three months.
Thank you David and good morning to everyone on the call I hope you're well.
As you will have seen from our statements today. This quarter has continued to be impacted by the hangover from the southern freeze on the other macroeconomic events, which have impacted income.
Despite this however, this is our fifth profitable quarter in succession with income translating into an earnings per share of one on.
When combined with our Q1 performance navigate to Gaza side, the best start to the year since 2016.
Further our operating revenues increased to 85.9 million and we have achieved an adjusted EBITDA of $28.2 million.
Looking into the market more generally Q2 'twenty one reflects the volatility in the U S orphans market caused by the well documented weather related issues on the U S Gulf coast, which significantly reduced cracker outputs in the region I've led to substantially just.
Some draw down of inventories on the curtailment of exports from the U S Gulf.
Although production rates offers increased they are not restaurants as quickly as predicted.
Therefore, taking some time to replenish the ethylene pipeline.
This coupled with continued production hiccups paci Crocker reliability on strong domestic demand and pricing.
His favorite U S domestic supply over exports.
Which has had a knock on impact on our shipping business.
The overall handy sized utilization rates.
These production headwinds have continued into Q3 on currently show no sign of abating.
They have been partially offset by the U S ethane exports on the U S. Propylene import tailwind, which have helped to increase block co opportunities for vessels returning to the U S. Gulf.
What's the ethylene inventories at five year lows on the Hurricane season is still upon us producers have prioritized building inventory over exports.
As a result of these headwinds utilization rates during the peds were impacted and that to the mid eighties, what the overall fleet utilization ended the quarter at 85, 4%.
These rates have continued into Q3 as orphan capacity restarts on the U S. Domestic orphans pipeline begins to be replenished, bringing both a strong domestic demand on pricing.
All of us puts pressure on export volumes on the ethylene arbitrage, which has been extremely volatile.
Although we are now willing to Argus, the anticipated bonus Bakken export volumes and the reopening of the U S to Asia ethylene arbitrage has yet to materialize in a substantive way as can be seen on slides 10 to 12 in the supplemental part.
It's moving it's going to Europe, which brings with it diminished ton miles on a corresponding reduction in the number of vessels required to service that business.
This is a short term had a couple of Germany.
Despite the lumpy orphan export supply our business remains on track to capitalize on further growth.
Mark with trading environment improves and as we've previously announced we integrate the ultra gas fleet in business with navigators.
This transformative combination, which solidifies navigate to gas as the market leaders in this space.
<unk> created a stronger larger and more diverse fleet of 56 vessels.
The winter months, our market offering and provided much needed flexibility and support to our customers.
Oh Gosh this fleet of seven more than 22000 cubic meter handy size semi refs vessels 512000 cubic meter ethylene vessels on six gas carriers under 9000 cubic meters will position us to engage new clients and markets through increased coverage and geographical reach.
<unk>.
The enhanced scale and combined fleet will provide cost savings significant synergies increased buying power on efficiencies throughout our business.
Which will allow us to capitalize on the structural growth of LPG and petrochemical gases being exported from re Parnell Pamela and of course, our own Morgan's point JV terminals, all of which are known stream.
These incremental volumes combined with the extremely low level upon besides newbuild activity as can be seen on slide 19 of the supplemental part well when olefin supply balances normalize and when the U S to Asia ethylene arbitrage reopens tighten the market increased utilization and further.
Improved TCE rates.
The combination of our two businesses on the required due diligence went well our businesses and teams are so complementary and we were very pleased to complete the transaction on the fourth of August on exactly the same commercial terms as agreed in the LOI.
In addition.
The combination has introduced ultra hubs as well as the BW group as another major investor with long standing experience in the maritime industry, which will benefit all of us shareholders.
Tomatoes by David.
We welcome to the board the three new directors, who bring with them a wealth of modest time experience and financial knowledge.
As previously.
Discuss the transaction is accretive to navigate to Standalone and budget in terms of anticipated revenue EBITDA and EPS.
Yeah.
Now moving on from them out to our core business remains strong.
In addition to the 412 month time charter as we previously announced we are pleased that Mitsui has once again chose navigator to increase the capacity of propane moving from the permanent terminal in Canada to customers in Asia.
Already in Q2 over 125000 tons of product that's been moved along this brand new trade route between the West Coast of North America and Asia.
Thus demonstrating why going directly across the Pacific bypassing the need for.
Panama Transit on minimizing transit Titans is so compelling.
In addition.
The underlying ethylene fundamentals remain unchanged, yes produced tons because of the advantaged ethane feedstock costs generate some of the best margins in the world.
This will ensure products as price for export when the supply demand balance for tons to normal bringing with it a resumption of export volumes normalized pricing differentials between the U S and Asia.
Production from the U S. Gulf Coast Olefin crackers continues to be very lumpy on many facilities are still suffering from poor reliability fallen the numerous.
Outages.
This has led to a number of unplanned technical stoppages, and shutdowns, which is rapidly swung pricing unbalances.
In the face of this our diverse fleet has moved record ethane and propylene volumes, which have helped to partially offset this reduction in volume.
As always we expect stronger winter volumes to underpin digitalization rates going forward.
Our market is point, asking JV terminal export to the 155000 tons in the quarter and return to profit.
Ramped up following the Q1 pipeline outage.
Furthermore, our unique I'm not increased market position also remains unchallenged with the forward order book for new bells, notwithstanding around 5%.
With minimal vessel deliveries in 'twenty, one 'twenty two.
20%, Yeah, that's right, 20% off the entire handy size fleet is now more than 20 years old.
So there's really no pressure vessel oversupply in a growing market.
And efficiencies are also on the up.
With increased transit times, and the Panama Canal prolonged dry dockings and more COVID-19 scares delaying vessel transits.
With the three incremental U S export terminals that completed with Marcus Who's Marcus Hook, Amy to now running at 50% and ramping up <unk> scheduled for startup in Q4, we expect volumes to firm in the next few months.
It's therefore, no surprise that we maintain a positive outlook on short and medium term TCE rates on the handy sized market in general is there a lot of factors that should exert upward pressure on rates.
Yeah.
To summarize.
The market trends are all pointing in the right direction, we have strengthened our business through our merger with ultra gas and created the clear market leader in this space.
We expect the imagine will deliver many synergies and we will make our business safer and more efficient.
This coupled with our 56 vessels, our scale and our flexibility and diversity of our fleet.
Together with the unparalleled infrastructure investment.
Our business is uniquely placed to seize new market opportunities.
This enviable position will ensure that we are well poised to capture the market upside when the short term ethylene supply issues are resolved.
What's the C remarks, I'd like to hand, you over to our CFO Niall Nolan, who will take you through our Q3 financials.
No.
Thanks, and good morning, everybody.
We generated a net income of $300000 for the second quarter of 2021 compared to $3 million for the second quarter of last year, Although last year's profit was in large part as a result of the reversal of foreign exchange losses made in the first quarter of last year 2020, following the global markets.
Initial reaction to Covid.
Adjusted EBITDA for this second quarter was $28.2 million as Hari mentioned and the EBITDA from the tunneling operations was $3.4 million, resulting from revenue relating to <unk>.
55400 ethylene tons during the second quarter.
Total operating revenue from the vessels during the quarter was $85.9 million.
Similar to the $85.7 million generated last quarter, Q1, 2021, but a 4% or $3.4 million increase from the $82.5 million during the second quarter of last year.
This year on year increase was achieved as a result of an increase to average charter rates, which rose to approximately $22200 per day or $675000 per month.
From around $21600 per day or $657000 per month, a year ago.
But also this quarter's average charter rates were an increase from last quarter Q1, 2021, when the average charter rates were $21950 a day.
Utilization, However remained a challenge as Hari mentioned at 85, 4% for the second quarter compared to 88 point to an 88, 3% for Q2 last year and Q1 of this Europe respectively.
Seven vessels were in dry dock for their scheduled surveys during the second quarter, taking a total of 158 days, thus reducing revenue.
This compared to only two vessels during the second quarter of last year as the effects of Covid prohibited.
At least restricted ships going into dry dock.
The cost of the five dockings were completed during the second quarter was approximately $75 million.
In total 14 vessels are scheduled to be dry docked during 2021, two of which were undertaken in the first quarter seven this quarter and five remaining over the course of the next number of months.
The aggregate cost of the 14.2021 dry dockings is estimated to be $19.3 million.
Other than dry dockings. The company does not have any planned cash outlay for capital expenditures during 2021.
Voyage expenses increased by $3 million during the quarter to $17.7 million.
From $14.7 million for the second quarter of last year. These.
These are pass through costs reflected in increased revenue.
I rose primarily as a result of an increase in the price of bunkers or fuel for our vessels.
With respect to operating revenue and voyage expenses from the Luna pool, the operating revenue from the pool of $5 million to $6 million for the second quarter represents our share of the other participants revenues.
Voyage expenses from the pool of $5.5 million.
It represents the other participants share of our revenues from the pool.
Vessel operating expenses increased.
To $28.2 million for the second quarter equating to $8336 per vessel per day compared to $7000.707661 per vessel per day during Q2 of last year.
Operating expenses were $8115 per day during the first six months of 2021, although this is an increase which although this is an increase from last year. It is primarily as a result of the effects of Covid, which has resulted in some vessel operating expenses being deferred.
Two this year.
General and administrative costs were $6.3 million for the quarter, a significant increase on the $4.5 million during the second quarter of last year.
However, the reduced G&A costs of last year were largely as a result of the reversal of the foreign exchange gains that I just mentioned from the first quarter of last year and this second quarter as general admin costs of $6.3 million were consistent with those incurred during the first quarter of this year.
The other income of $88000.
For the second quarter was $160000 for the first six months relates to management fees received from the other participants.
The management of the Luna pool.
And interest costs for the second quarter were $8.6 million $20 million to $3 million less than the same quarter last year, primarily as a result of reductions in U S. LIBOR.
Think about the U S. LIBOR remains low today at approximately zero point to one 5%.
And our share of results from the ethylene marine export terminal, where a gain of $2 million for the quarter based on the 155000 tonnes mentioned earlier.
And in addition, depreciation far determined was 1.4 million, giving an EBITDA of $3.4 million for the quarter from the terminal.
The company had cash of 96.4 million at June 30th against the minimum liquidity covenant of $41.4 million.
In addition, we had a further $37.6 million available from Undrawn revolving credit facilities associated with our secured personal loans, taking total cash available to $134 million.
Our total debt at June 30th stood at $828.3 million, which incorporates six bank loan facility secured by our vessels a credit facility associated with the terminal and two Norwegian bonds.
Of this amount.
There are no loan maturities during the remainder of this year and only an aggregate of $50 million repayable during 2022.
For the third quarter, we would be incorporating the results and balance sheet of ultra gas with effect from August 1st.
The effective date of the transaction.
Pro forma details.
Are included in the supplementary information pack on our website.
And with that I'll hand, you over to Ivan.
Thank you Niall and good morning to all the callers.
Operationally the second quarter of 'twenty one.
Has been characterized by both commodity price volatility due to the lasting impact of the Texas three.
Well likely short term shift of off takers from the far east to European shores.
If we turn to the U S ethylene pricing first we saw a peak of 64 cents per gallon at the height of the Texas freeze in February.
Before then seeing a low of 26 cents per gallon. During April as you can expect this in itself created unique market dynamic during this period and increased focus on ethylene inventories.
With that previously wasn't further increasing volatility during the period.
Looking at more recent prices.
U S ethylene ethane rallied from lowest increasing to 55 per GAAP and following unscheduled shutdowns.
Three plants combined.
Combined with the delay in the start of a new cracker. However, corrections in pricing are slower than we previously estimated.
Despite this the.
The current know ethylene price, which is one of the benchmarks in this state.
Adjusted from 52 cents per gallon Monday last week to 39 cents per gallon five days later.
Which is quite a substantial drop which is good and.
And the price of ethane as a piece of it remains competitive on a global basis.
Other oil above $60 per barrel further supports the international demand for U S and Italy.
Despite the volatility the U S increased second quarter ethylene exports by 40000 tons to a total of 175000 tons compared to the first quarter.
Our rule of thumb is a name plate capacity of about 100000 per month.
Proportionate, 80% enterprises navigate their export terminal and 20% Targa terminal and so we there was a lot of unrealized upside.
Okay.
Well, our ethylene earnings are influenced by the amount of physical come that are being exported. It is also influenced by the final destination.
During 2020, and first quarter of 'twenty, one about three quarters of the cargoes, we shipped across the Pacific.
Far east off takers.
Most of the volumes during the second quarter, however, headed the other way to European off takers, resulting in Shawcor voyage.
Until the U S ethylene prices revert back to a more normal and less volatile date, we estimate continued exports to Europe.
The arbitrage remain viable which can be seen on page 11 in the pack.
Most of our handy sized ethylene carriers and the Luna pool are trading in the spot market.
When we have when we have open capacity, we actively seek employment opportunities across the different petrochemical trades.
One important opportunity lies with FK.
Year to date, we have exported the same volume of ethane as of ethylene from Houston.
It is becoming an increasingly important part to our earnings date.
In total <unk>.
Fleet loaded a record 90000 tons of ethane during the month of June.
And increased ethane and ethylene proportion of our petrochemical earnings stay to 60%.
For the quarter compared to 53% during the first quarter.
Further we are fit to export a record amount of ethane from Marcus Hook for 2021.
With additional volume coming from the new energy transfer or beef export terminal in Nederland, Texas.
We have the pleasure of having both the inaugural handy sized medium sized ethane load operations at this terminal during April.
It is also the first time, whereby all of our four ethane medium five GAAP carries are time chartered connecting the three American ex ethane export terminal with international market.
During the period, we saw additional demand in propylene.
With navigator or rabbit exceeding the number of propylene earnings space for the first seven months compared to full year 2020.
The arbitrage from east to West is predicted to continue into next year, providing additional ton mile demand to our now expanded semi refrigerated fleet.
Finally, looking at the general Global LPG trade, we have seen a sideways movement historic high U S. LPG prices are not helping export trade.
Similar to ethylene the U S needs to build up inventories for the winter, which combined with the high price has reduced export despite increase in production.
That somewhat dampened demand for LPG has a resulted in time charter assessment to be adjusted across all GAAP segment during the quarter.
With the mid sized segment growing from $720000 per month to $685000 per month, and handy size semi refrigerated moving from $670000 per month to $635000 per month at the end of the quarter.
Despite this we believe the trends should stabilize and turn over the next few months.
This is based on eight items.
First the order book as Harry mentioned it is continued historically low order book in our segment, which is always a positive for any shipping segment.
Second the U S natural gas liquid according to the EIA U S recorded its highest level of production in its latest figures, which is set to continue.
Third ethane the new export opportunity for ethane from Nederland, Texas, adding opportunity to are already increasing involvement with ethane trade.
Fortis ethylene North America ethylene pricing is forecasted to revert back to arbitrage territory to Asia.
However, while we wait the volumes hit for Europe.
And inventory levels for first half 2021 is the lowest compared to the last five years, but is set to change.
Propylene.
The record volumes of propylene from east to West is expect to continue.
And the handy sized LPG exports is on the rise from east coast, including from both Marcus Hook and re Parnell and in addition, we have one additional vessel heading for the Pacific Coast.
To enter the Canadian export program from Prince Rupert terminal.
Consolidation navigator and ultra GAAP handy size fleet in a marketed under one umbrella improving average service platform towards our customers and enable us to better optimize our fleet planning.
And lastly, but let's not forget ammonia.
We have doubled our ammonia time charter coverage from two vessels at the beginning of the year before vessels at end of this quarter.
We recorded the highest amount of ammonia carrot.
Last month totaling 135000 tons.
We expect ammonia to take a more prominent role to our contract coverage going forward.
This includes the operational segments and I would like to hand, it back to David Butters. Thank you.
I think we can take.
<unk> now.
If that's appropriate.
Thank you ladies and gentlemen, we will now begin the question answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for the automated message advising your line is open.
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And we will now take our first question. Please go ahead. Your line is now open.
Hi, guys. This is Sean Morgan from Evercore.
So regarding Oh, hey, good morning so.
Regarding the terminal throughput I think you guys said you did about 155000.
With I think the kind of space nameplate capacity is supposed to be about 1 million.
Tons per annum.
Sorry, I have a little bit of a noise on the street here in Manhattan.
Yes.
So I guess what was the.
The difference between the 250000 tons, you should be able to do any kind of the base nameplate versus what was done during the second quarter was that was that operational limitation or was that due to I.
I guess due to a lack of our slower demand relative to those are that you kind of discussed on the call.
Mhm.
Yeah, Sean it was not operationally work relating to the pricing of U S produced ethylene so the reasons that Harry went into some detail on the.
The price was too high so it made more sense for the producers to sell in the U S compared to exporting now.
And that has all to do and of course. The reason why it was because of the Texas freeze in all the havoc that that cost with the production unit.
So that had a lingering effect into second quarter, but it's all to do with U S domestic production low inventory level.
Rob there down at the terminal itself.
Mhm.
Okay. So it would.
Half of the quarter on the books now.
Are you seeing the run rate currently is that is that close to <unk> or have you kind of gotten a little bit of an improvement is that is that demand issue still I guess going to be a problem for for Q3 in terms of the terminal exports.
Yes.
Continuing in the same vein at the second quarter for the throughput themselves.
August was low because.
Scheduled outages are various plan.
Three plants in particular, and there was a delay of a new one however.
I just mentioned last week from Monday to Friday, the Nova ethylene price in U S went from 52 to 39 in one week. So clearly something is happening. So the market is trying to get back to normal state now some of the consumers of ethylene are building.
<unk> paying up in building inventory in just to hedged himself for hurricane season, So fingers crossed that it's not happening, but so there is several dynamics happening in the U S. At the moment, so the pricing wants to come down however, the inventory levels are low costing this volatile.
But our expectation is that September how we look now with the customers and so forth is higher than August, but not near Max capacity as we would like.
Sean It's hotter here. So as you remember the terminal, we have take or pay contracts and the terminal. So if the contracted parties decided not to put the volume done the tableau. They still have to pay for the capacity, but there is a bit of a lag effect or not but the those deficiency payments.
Our contracted partners will have to pay if they don't use the capacity as per the contract. So theres a bit of a balancing mechanism as well on the terminal profitability Sean.
Okay, and then but those those.
Those take or pay contracts were option affect last quarter. So we should probably I guess gauge our expectations similar to Q2 and not terribly optimistic on I.
I guess, yes, I don't think throttle by taking that assumption Shaun.
Okay Alright.
Alright, Thanks, guys I'll turn it over in the interest of time I appreciate it.
Thank you we will now take our next question. Please go ahead. Your line is now open.
Oh, Hey, gentlemen, it's Randy given from Jefferies. How are you Hello, Ryan boundary.
And by a couple of questions you mentioned on the last call that fleet utilization is expected to be 90% plus and <unk> 21 is that still the guidance for this quarter and what is utilization currently.
So utilization is.
Moving sideways similar to second quarter mid Eighty's.
Due to the reasons that we have.
Discuss that.
Ethylene that is moving from the terminal is going to Europe as opposed to Asia and there is less volume from the terminal itself. So that is one.
Feature that has impacted the S. T lean side of things. However, some of the slack has been that we've been pivoting.
Carrying ethane instead, but it hasnt outweighed the loss of some of the ethylene ton mile demand.
Okay.
And then I guess following up there.
Can you give guidance for what's your expected throughput will be for the third quarter and even net income for the JV for this third quarter I know you did 155000.
In the second quarter, what kind of number are we looking at for <unk>.
Yes, yes, I think.
Hi, Randy it's Andy here, Yeah with regards to the terminal I think we are going to be in the same sort of ballpark as we were for Q2.
Okay.
Alright, and then last question just looking at the ultra gas merger.
So 11 of the 18 vessels acquired it could be considered noncore are certainly smaller than your focused kind of handy size segment. So do you want to operate those smaller vessels, where you look to sell some of your peers seem to be in the market for buying those smaller 5000 to 11000.
TVN vessels or if you want to operate it on the other hand any interest in gaining further scale by acquiring additional small LPG vessels from another operator.
Hi, Randy it's starting it again.
The smaller vessels are operated through the unit gas pill, which is well established and one of the market leaders.
<unk> in fact has been abated. Thank for almost as long as I have sort of over 50 years, which is things online. So they are pretty specialist that operate in those smaller gas carriers up to 15000 cubic meters.
It seems to be working well, we've got two great partners and Sloman, Neptune and <unk> and not only are we part of that would actually have an owner as well. So it's in our interest to optimize the efficiencies of that pool and to maximize the dividend back to the company in terms of the strategy for those vessels I think it's too heavily.
To see.
We will continue with the accrual will continue to evaluate our options.
Opposite those vessels and also because of Europe recall, Randy because of our competitors, we want <unk> JV sensitive commercial information with ultra gas.
Power to the manager or otherwise would be accused of jumping the gun on get ourselves and Luxor.
Hot water with competition authorities. So we're really only had two weeks to actually get them down half a week.
The good thing is when once we did the merits or the very first thing that we did is made sure XI even said that we had one face to market whats the customers on the commercial team worked really hard on day, one to make sure that nothing went wrong, we kept all the lights on but more importantly that the customers.
Our serviced with one voice and one team.
The amount is going extremely well as David said, we've got great people great assets great processes.
As well, we're looking forward to sharing those across the company and see what we can get synergies and where we can optimize and boost efficiencies.
The two companies.
Got it.
Right well thanks, so much.
Okay.
Thank you we will now take our next question. Please go ahead. Your line is now open.
Hey, guys.
So I I have a couple first.
As I was going through the fleet list.
I remember a number of the <unk>.
Vessels are there.
There there were had been contracts or problem may still be contracts on a number of vessels and I was just going to check on where those stand specifically I believe the seeber.
Contracts are up for or there is an option for those to be renewed just curious where those stand also there was the brass Kim ethane contract curious if that's still exist and then also there was.
Always on a number of our ethylene vessels.
I'm curious if that goes to the pool or how to think about that so any color on those.
Yes.
Good question spend so if you talk about the ethylene contracts they fall in under the Luna pool.
So the ships that are in the Luna pool, performing Florida, Luna pool that goes to two that entity, which we commercially manage so the ethylene contracts, particularly with might've been the remains there for a number of years.
Which is great and that will continue so in terms of the LPG questions you.
As regarding seaboard, so they I think it's a covered on page 10.
In the documents.
So they they run into 4045, so it's still too early to discuss renewal extensions and so forth. They are trading in the North Sea program for them for the time being and they've been there since the delivery.
In terms of ethane there is renewed interest strong renewed interest in ethane projects ethane contracts, particularly on the spot market.
And this not because of the opening of our third ethane terminal in the U S.
So the brass came on in particular.
Is running on a spot basis and between U S and Mexico.
And so that that trade so.
It's a dynamic situation. There is no time charters, we have had that has gone off of work of note sorry.
We maintain our position about 50% coverage on time charters, which is good reserving that the remaining four uptake in the market towards the end of the year that we haven't been talking about so we are ready to take action on that.
So nowhere does that answers your question.
No it does and well it sort of leads into the second one being <unk>.
Utilization all sorts of things are sort of cropped up from weather and all this kind of thing that have had impacts on utilization is there any thinking that you guys might have about maybe.
Seeing about putting in a greater percentage of the fleet on time charter contracts just to.
Yeah.
Just to ensure that your utilization can stay wherever 90% or higher than it has been.
We evaluate every time charter opportunity that comes across the desk and also when we're out talking to clients.
Trying to figure out what is the best contract pipe for them, but that is a contract of affreightment now we have a much larger platform to service clients on particularly on the LPG side. So is it a time charter is that a contract of affreightment is it us Paul is that bulk.
Is it contract that are in direct continuation. So all of those items are evaluated and assessed.
In order to sort of position the fleet.
In the right way for the uptick so.
It's a good question, it's something we think about every day about what should what is the optimal coverage for navigator and for sure.
There is there a trade off right versus coverage, which have some implication of utilization.
It's something we think about the loans.
Okay.
And then and then lastly for me and I'll turn it over you talked about the fleet now 20% of the fleet is over 20 years old and only 5% of the fleet relative to 5% hopefully being on order.
You guys do you have some of those 20 year old vessels.
Notice the Magellan is 23 and then.
The.
Some of the legacy ethylene vessels are 21 years old well, how do you think about the useful life of those or at what point you have to start to think boom.
Or.
You know.
Candidates for sale of recycling or something.
Hum.
No longer part of the fleet.
Thanks, Thanks, Brian Yeah, we do have some of that some of the vessels are that we have.
And not 20 year plus bracket.
We continue.
Reassessed and then make sure that they are worth more to us than they might be to someone else are worth more to us.
And then it might be if we decided to recycle them.
As you can see from our earnings over the past couple of years those those vessels.
Well utilized in the land and the return of the company.
Now can give to you chartered in vessel.
Depreciation strategy.
As it is today, but we depreciate the vessels offer useful life of theft Ceos.
And.
As we've done for many years.
So if.
My guess is it fair to extrapolate then that if you're depreciating them over 30 years in 'twenty three is still there is still some.
Some you would anticipate or its fair to anticipate there some useful lifestyle then from your perspective.
Ben Hi.
That is something that we will review that we are reviewing at the moment. So certainly 30 years. When these ships came into service and particularly with the exceptions and again on that you mentioned the other ships are the five original plants the ethylene ships.
They are still carrying ethylene all of them are carrying ethylene or have been throughout this year and therefore are part of that.
<unk>.
Our strategy of servicing the.
Enterprise navigate our terminal.
So that will continue.
Obviously, the world has moved on in terms of ecology and weather weather of ships will be able to survive part to years technically they will.
But whether that will be acceptable to oil majors and the like is something that we are looking at and maybe 25 years.
It may be the same with the current norm.
Yeah.
Alright cool.
Alright that does it for me thanks.
Thanks Pam.
Thank you we have no further questions at this time I would now like to hand back to management for closing remarks.
Well thank you.
And it was a good call out.
Look forward to another one in three months time, when we may have an update.
Around the development of the of the ethylene and particularly the ethane segment of our business.
So thank you for joining us this morning, and look forward to talking to you again.
Thank you.
Yeah.
That does conclude our conference for today. Thank you for participating you may all disconnect.
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