Q3 2021 Navigator Holdings Ltd Earnings Call
Speaker 1: Welcome to the Conferencing Center. Calls may be recorded for the purpose of quality and training. Please hold and an operator will be with you shortly. Thank you for calling, can I have your passcode please?
Welcome to the Conferencing Center calls may be recorded for the purpose of quality and training.
Please hold and an operator will be with you shortly.
Okay.
Okay.
Yeah.
[music].
Thank you for calling in I have ever BASCO. Please.
Speaker 1: I don't have the passcode. However, I'd like to attend Navigator Holdings earnings call, please. Thank you. First and last name? David Brown. Entry number?
I don't have any pass code over I'd like to times navigate through holdings earnings call.
Thank you your first and last name.
David Brown.
And your company name.
Error AI.
E R.
Yeah.
<unk> conference is showing progress somebody says it all.
Speaker 2: It delays the voyages by more than 15 days, which increases the tonnemile demand and which also helps rates.
Okay delays to the voyages by more than 15 days, which increases the ton mile demand.
Which also helps rates.
Speaker 2: When the larger gas carriers do well, they compete less with the medium-sized.
When the larger gas carriers do well they compete less with the medium size segment and the <unk>.
<unk> segment does well, you're less likely to look for LPG cargo opportunities in the handy size segment.
Speaker 2: The less downward pressure through the gas carrier segments, the better, and we are seeing the positive impact of this today.
The less downward pressure through the gas carrier segment, the better we are seeing the positive impacts of this today.
Okay.
Speaker 2: It is important to note that in addition to less downward pressure from the larger ship size segments, we also see less encroachment within the handy size segments.
It is important to note that in addition to less downward pressure from the largest ship five segments. We are also we also see less encroachment within the handy size segment.
Speaker 2: Today, all of our lunar pool ethylene vessels are trading ethane or ethylene.
Today, all of our lunar pool ethylene vessels are trading ethane or ethylene.
Speaker 2: This is the first time this has happened since the pool was launched in April 2020.
This is the first time this has happened since it was launched into pool was launched in April 2020.
Speaker 2: It means that these vessels are not looking for LPG or other petrochemical cargoes, leaving the handy-sized semi-refrigerated gas carriers to pursue these opportunities without interference.
It means that these vessels are not looking for LPG or other petrochemical cargos, leaving the handy sized semi refrigerated gas carriers to pursue these opportunities without interference.
Speaker 2: It also means that the smaller ethylene units in the 12,000-cubic class and below are doing better as the lunar pool vessels are less likely to look for smaller part cargoes.
It also means that the smaller ethylene units in the 12000 cubic cloth and below are doing better as the Luna pool vessels are less likely to look for smaller part cargos.
Therefore looking ahead.
Speaker 2: Our fundamentals look very encouraging, but we expect another good quarter in this fourth quarter as we see.
Our fundamentals look very encouraging first that we expect another good quarter in the fourth quarter as we see.
Speaker 2: less competition in the sector due to strong demand for LPG transportation, and less competition within the hand-designed sub-segments.
Less competition in the sector due to strong demand for LPG transportation and less competition within the handy size sub segments.
Incremental ammonia handy size demand.
Speaker 2: continued robust export both to Europe and to Asia.
Continued robust ethane exports, both to Europe and to Asia.
Speaker 2: The joint venture Ethylene Marine Export Terminal has kicked into action as U.S. ethylene prices are normalized.
The joint venture ethylene Marine export terminal has kicked into action as U S ethylene prices are normalizing.
Speaker 2: Majority of ethylene demand is now coming from Asia.
Majority of ethylene demand is now coming from Asia.
Speaker 2: And the order book continues to be at a low level.
And.
The order book.
Continues to be at a lower level.
Speaker 2: Before I hand over to Niall for the financial commentary, I would like to highlight our efforts in pushing the frontiers for potential new business streams.
Before I hand over to Niall for the financial commentary I would like to highlight our efforts in pushing the frontiers for potential new business stream.
The first being ammonia as fuel.
Speaker 2: The concept of ammonia fuel has been brought to life due to the possibility of zero carbon emission energy, both for the vessel itself, but also for onshore use.
The concept of ammonia stool has been brought to life due to the possibility of zero carbon emission energy bought for the vessel itself, but also for onshore use.
However, ammonia is highly toxic which represent some challenges.
Associated with the handling and application of ammonia as fuel.
Speaker 2: We have worked together with industry specialists such as BNVGL over the last two years and have finally been awarded an approval in principle.
We have worked together with industry specialists, such as DNV GL over the last two years and I finally been awarded an approval in principle.
Speaker 2: This means that we can confidently engage our customers and shipyards in the development of ammonia-fueled vessels.
This means that we can confidently engage our customers and shipyards in the development of ammonia fueled vessels.
The second is C O two transportation.
Speaker 2: It is clear that carbon capture storage and sequestration have a role to play as a stepping stone to reduce greenhouse gas emissions.
It's clear that carbon capture storage and sequestration.
Paul to play as a stepping stone to reduce greenhouse gas emissions.
Speaker 2: Through our joint venture, Dan Unity, we have similarly, as with the previous example, been awarded an approval in principle by the American Bureau of Shipping for a containment system and ship design for the transportation of liquefied CO2.
Through our joint venture Dan Unity, we have similar layoffs with the previous example been awarded an approval in principle by the American Bureau of shipping for a containment system on chip design for the transportation of liquefied.
<unk>.
Speaker 2: Both projects fit with our own strategic objective for industrial shipping, being the logistics partnered directly with producers and end users.
Both projects fit with our own strategic objective for industrial shipping being the logistics partner directly with producers and end users.
Speaker 2: Both opportunities are project-based, meaning long-term contracts if and when successful.
Both opportunities are project based meaning long term contracts, if and when successful.
Speaker 2: It also fits with our own ambitions to do the right thing about maritime emissions – reduce wherever and whenever possible.
It also fits with our own ambitions to do the right thing about maritime emissions reduce wherever and whenever possible.
Speaker 2: With those few remarks, I would like to hand over to our CFO , Niall Noll.
With those few remarks, I would like to hand over to our CFO Niall Nolan.
Speaker 3: Thanks, Ivan, and good morning, everybody. As both Dag and Ivan have already mentioned, the company generated a net income of $6.7 million for the third quarter 2021, the best result for almost five years.
Thanks Oliver.
Good morning, everybody.
As both Doug and <unk> have already mentioned the company generated a net income of $6 7 million for the third quarter of 2021. The best result for almost five years.
Speaker 3: This $6.7 million compares favourably to the $1.3 million for the third quarter of last year and $300,000 for last quarter, the second quarter of 2021.
This $6 7 million compares favorably to the $1 $3 million for the third quarter of last year and $300000 four last quarter in the second quarter of 2021.
Speaker 3: Adjusted EBITDA for the third quarter was $40.3 million against $29.6 million for the third quarter a year ago and $28.2 million last quarter.
Adjusted EBITDA for the third quarter was $43 million against against $29 6 million for the third quarter, a year ago, and $28 2 million last quarter.
Speaker 3: Total operating revenue from the vessels during the quarter was $102.7 million, compared to $81.4 million for the comparative period last year, and $85.7 million generated last quarter Q2 2021. The year-on-year increase in revenue was mainly achieved as a result of the additional vessels following the combining of the fleets of both Navigator and Ultragast on August 4th of this year.
Total operating revenue from the vessels during the quarter was $102.7 million compared to $81 4 million for the comparative period last year and $85 7 million generated last quarter Q2 2021 the.
The year on year increase in revenue was mainly achieved as a result of the additional vessels. Following the combining of the fleets of both navigator and ultra gas on August 4th of this year.
Speaker 3: Ultragas's fleet consists of 18 vessels, 7 of which are handy-sized 22,000 cubic metre semi-refrigerated vessels, similar to those operated by Navigator, and 11 are smaller LPG or ethylene vessels between approximately 4,000 cubic metre and 12,000 cubic metre.
Ultra gas fleet consists of 18 vessels seven of which our handy sized 22000 cubic meter semi refrigerated vessels similar to those operated by navigator and 11 are smaller LPG or ethylene vessels between approximately 4000 cubic meter in 12000 cubic meter.
Speaker 3: These 11 smaller vessels are independently commercially managed by the Unigas Pool, a well-respected pool that has operated for over 50 years.
These 11 smaller vessels are independently commercially managed by the union gas pool of well respected tool that has operated for over 50 years.
Speaker 3: Their contribution for the two months of Navigator ownership was $8.2 million and is detailed separately on the face of the income statement.
Their contribution for the two months of navigate our ownership was $8 $2 million and as detailed separately on the face of the income statements.
Speaker 3: As well as additional vessels, part of the increase in revenue was generated as a result of increased utilisation, which rose from 78.8% in Q3 2020 to 84% this quarter, adding an additional $4.4 million to revenue.
As well as additional vessels as part of the increase in revenue was generated as a result of increased utilization.
Which rose from 78.8% in Q3 2022, 84% this quarter.
An additional $4 $4 million to revenue.
Speaker 3: As I've mentioned, we expect utilisation to trend upwards in Q4 to at or above 90%.
As already mentioned, we expect utilization to trend upwards in Q4.
To at or above 90%.
Speaker 3: Average charter rates, however, reduced to approximately $21,900 a day or $666,000 per month from around $22,900 a day or $696,000 a month a year ago, which negatively impacted revenue on the quarter by $3 million.
Average charter rates, however, reduced to approximately $21900 a day or 666000 per month from around $22900, a day or nine or $696000 a month a year ago.
Negatively impacted revenue in the quarter by $3 million.
Speaker 3: Four vessels were in dry dock for scheduled surveys during the third quarter, taking a total of 101 days, thus reducing revenue. In total, 11 vessels have been dry docked during the nine months of 2021, the cost of which was approximately $15.3 million.
Four vessels were in dry dock for scheduled surveys during the third quarter, taking a total of 101 days, thus reducing revenue.
In total 11 vessels have been dry dock during the nine months of 2021, the cost of which was approximately $15.3 million.
Speaker 3: Other than dry docking, the company does not have any planned capital maintenance.
Other than dry docking and the company does not have any planned capital maintenance.
Speaker 3: Operating revenue from the Luna Pool was $7.5 million for the third quarter and represents our share of the other participants' revenues.
Operating revenue from the Luna pool was $7 $5 million for the third quarter and represents our share of the other participants revenues.
Speaker 3: Whereas voyage expenses from the Luna Pool of $4.8 million represents the other participants' share of our revenues from the pool.
Whereas voyage expenses from the Luna pool of $4 $8 million, representing the other participants share of our revenues from the pool.
Speaker 3: net net we had a benefit of 2.7 million dollars from the pool during the third quarter.
Net net we had a benefit of $2.7 million from the pool during the third quarter.
Speaker 3: Other voyage expenses increased by $2.2 million during the third quarter to $16.8 million from $14.6 million for the third quarter of last year. These are pass-through costs reflected in increased revenue and primarily rose as a result of an increase in the price of bunkers for our vessels.
Other voyage expenses increased by $2 $2 million during the third quarter to $16 8 million from $14 6 million for the third quarter of last year and these are pass through costs reflected in increased revenue and primarily rose as a result of an increase in the price of bunkers for our vessels.
Speaker 3: Vessel operating expenses increased significantly to $34.9 million for the third quarter from $27.2 million for the third quarter of last year.
Vessel operating expenses.
<unk> expenses increased significantly to $34 $9 million for the third quarter from $27.2 million for the third quarter of last year, but all of this increase was as a result of additional vessels in the fleet in fact vessel operating expenses per vessel per day reduced by.
Speaker 3: but all of this increase was as a result of additional vessels in the fleet.
Speaker 3: In fact, vessel operating expenses per vessel per day reduced by $179 per day to $7,607 compared to $7,786 per vessel per day during the same quarter of last year.
$179 per day to $7607 compared to $7786 per day per vessel per day during the same quarter of last year.
Speaker 3: General and admin costs were $7.7 million for the three months.
General and admin costs were $7 $7 million for the three months.
Speaker 3: an increase from $6.5 million incurred during the third quarter of last year and was largely as a result of additional audit fees of a half a million dollars and the additional point six or six hundred thousand dollars of gna costs associated with ultra gas.
An increase from $6 5 million incurred during the third quarter of last year and was largely as a result of additional audit fees of a half a million dollars and the additional 0.6 or $600000 of G&A costs associated with ultra gas.
Speaker 3: Other revenue was $98,000 for the third quarter and represents management fees received from the other participant of our management of the Lunapool.
Other revenue was <unk>.
$98000 for the third quarter and represents managements management fees received from the other participants of our management of the Luna pool.
Speaker 3: Interest expense for the third quarter was $10.4 million, 11% up on the third quarter of last year, all of which was as a result of interest on the additional debt taken on as part of the UltraGas transaction.
Interest expense for the third quarter was $10 $4 million, 11% up on the third quarter of last year, all of which was as a result of interest on the additional debt taken on as part of the ultra gas transaction.
Speaker 3: That debt amounted to approximately $200 million and attracts interest at US LIBOR, which is the subject of a fixed rate swap of around 2%, and a bank margin which varies between 1.9% and 2.65%.
That amounted to approximately $200 million and attracts interest at U S labor, which is the subject of the fixed rate swap of around 2% and the bank margin, which varies between 1.9% and $2 six 5%.
Speaker 3: Our share of result from the ethylene terminal was a profit of $3.3 million for the quarter based on 128,400 tonnes of ethylene throughput. In addition, depreciation for the terminal was $1.4 million, giving an EBITDA of $4.7 million for the quarter.
Our share of results from the ethylene terminal was a profit of $3 $3 million for the quarter based on 128.4 million, sorry, 128400 tons of ethylene throughput.
In addition to depreciation for determined was 1.4 million, giving an EBITDA of $4.7 million for the quarter.
Speaker 3: On the balance sheets, the company had cash at September 30th of $105.8 million and a further $30.2 million available from undrawn revolving credit facilities associated with secured vessel loans, taking total available cash resources to $136 million against a minimum liquidity covenant of a maximum of $50 million.
On the balance sheet the company had cash at September 30.
$5.8 million and a further $30.2 million available from Undrawn revolving credit facilities associated with this with secured vessel loans, taking total available cash resources to $136 million against our minimum liquidity covenant of a maximum of $50 million.
Speaker 3: Our total debt at September 30th grew to approximately $1 billion, comprising loan facilities secured by our vessels of approximately $785 million, which incorporates additional debt assumed as part of the ultra-gas transactions, the details of which are outlined in page 9 of the Supplemental Information Presentation.
Our total debt at September 30th grew to approximately $1 billion comprising loans loan.
Loan facility secured by our vessels of approximately $785 million, which incorporates additional debt assumed as part of the ultra gas transactions. The details of which are outlined in page nine of the supplemental information presentation.
Speaker 3: A credit facility associated with the terminal office is approximately 58 million dollars and two Norwegian bonds, which in aggregate amount to approximately 170 million dollars.
A credit facility associated with the terminal of approximately $58 million and two Norwegian bonds, which in aggregate amount to approximately $170 million.
Speaker 3: There is only one facility that matures next year, 2022.
There is only one facility that matures next year 2022.
Speaker 3: which is for an amount of $50 million and relates to three vessels.
Which isn't for an amount of $50 million and relates to three vessels.
Speaker 3: The new ultra-gas related debt consists of five bank loans, secured on a total of 13 of the 18 acquired vessels. The other five vessels are unencumbered.
The new ultra gas related debt consists of five bank loans secured on a total of 13 of the 18 acquired versus the other five vessels are unencumbered.
Speaker 3: The bank loans, which in aggregate have biannual repayments of approximately $13.6 million, mature from June 2026 to December 2029.
Bank loans, which in aggregate have biannual repayments of approximately $13 $6 million mature from June 2026 to December 2029.
Speaker 3: As part of the transaction process, we renegotiated the financial covenants on these bank loans to conform with those of Navigator, namely minimum liquidity, as referred to a moment ago, and debt-to-total capitalisation ratio. There is also a requirement to maintain minimum security vessel values ratio.
As part of the transaction process.
We negotiated the financial covenants on these bank loans to confirm with those of navigator, namely minimum liquidity as referred to a moment ago and debt to total capitalization ratio. There is also a requirement to maintain minimum security vessel values ratio.
Speaker 3: under each facility, consistent with Navigator bank loan facilities.
Under each facility consistent with navigator bank loan facilities.
Speaker 3: Since the completion of the ultra-gas transaction on August 4th, we have sold one of the older acquired vessels, the Happy Bride, a 1999 built 6,400 cubic meter LPG carrier to a third party for $4.75 million and the sale was completed on October 12th of this year.
Since the completion of the ultra gas transaction on August 4th we have sold one of the older acquired vessels happy bride in 1999, built 6400 cubic meter LPG carrier to a third party for $4 $75 million and the sale was completed on October 12th of this year.
Speaker 3: At September 30th, the total book value of the assets of the company was $2.2 billion, comprising of 55 vessels and the 50% ownership in the marine export terminal in use.
At September 30th the total book value of the assets of the company was $2.2 billion comprising of 55 vessels and the 50% ownership in the marine export terminal in Houston.
Speaker 3: There were 77.2 million shares in issue following the issue of 21.2 million shares as consideration for the ultra-gas businesses and assets.
There were 77 2 million shares in issue following the issue of $21 2 million shares as consideration for the ultra's gas businesses and assets.
Speaker 3: Thank you and I will now hand you back to the operator, Sian, who will open the call for questions.
Thank you and I will now hand, you back to the operator, who will open the call for questions.
Speaker 4: Thank you. As a reminder ladies and gentlemen if you wish to ask a question please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request please press star 2. Once again please press star 1 if you wish to ask a question.
Thank you.
Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request. Please press star two once again. Please press star one if you wish to ask a question.
Speaker 4: Your first question today comes from the line of Sean Morgan from Evercore. Please go ahead, your line is open.
Your first question today comes from the line of Sean Morgan from Evercore. Please go ahead. Your line is open.
Speaker 5: Hey, guys, so on slide 11, I...
Hey, guys. So.
On slide 11 I appreciate this.
Speaker 6: a clear presentation of upcoming maturities, but it does sort of raise the question. We're about a month out from 2022, and then we'll start kind of rolling these 2023 maturities into the current portion of debt. So is there a strategy for potentially extending some of those 2023 maturities, especially with rates at low levels right now?
We are presentation of upcoming maturities, but it does sort of raise the question.
We're about a month out from 'twenty to 'twenty, two and then we'll start kind of rolling These 'twenty three maturities into the current portion of debt. So is there is there a strategy for potentially extending some of those 2023 maturities, especially with what kind of rates.
At low levels right now.
Speaker 3: Yes, we're already looking at refinancing those. There are a number of, well there's three bank loan facilities in there which we are looking at and the Norwegian Kroner bond.
Yes, we're already we're already looking at refinancing does there are a number but the three.
Bank loan facilities in there.
Which we are looking at and the Norwegian kroner bond.
Speaker 3: So we are developing a strategy to refinance those early part of next year.
So we are developing a strategy to refinance those early part of next year.
Speaker 3: Okay, and is there any kind of make whole or early repayment provisions that we should be kind of thinking about on those, or can you kind of take them out without any kind of punitive payment to the debt holders? There is, well, two things. The bank loans we can repay at any time without any penalty. The bond is now callable at 102.84 since earlier this year.
Okay and is there is there any kind of a make whole or early repayment provisions that we should be kind of thinking about on those are they.
Can you kind of take them out with without a kind of punitive a payment to them. So the debtholders there is.
Well two.
Two things that the bank loans, we can repay at any time without without any penalty.
The bond is now callable at a one.
2.84 since earlier this month.
Speaker 3: and goes till next November and thereafter it falls to slightly over 101 of par.
And goes till next November and thereafter it falls.
Two.
Slightly over 101 of path.
So they are all they are all callable.
Speaker 6: All right. And then another area that I think, you know, it contributes a lot to the bottom line is the Marine Terminal Joint Venture, which has been a little bit difficult to forecast. I mean, the volumes have kind of varied quarter by quarter. And the last 4Q was pretty weak relative to 3Q, and I think that may have been kind of environmentally related with storms and whatnot.
Alright, and then another area that I think.
Tribute has a lot to the bottom line is the marine terminal joint venture, which has been a little bit difficult to forecast when the volumes are kind of buried quarter by quarter in Alaska last <unk> was pretty weak relative to re queue and I think that may have been kind of environmentally related with storms and whatnot, but.
Speaker 6: Should we be expecting a continued ramp into 4Q? Is there any seasonality that might dampen that in terms of the export terminal in Texas?
Should we should we be expecting a continued ramp into <unk> is there any seasonality to that might dampen that on in terms of the <unk>.
Export terminal in Texas.
Speaker 2: Hi, Sean. It's an appropriate question and the answer is yes, the terminal for fourth quarter is ramping up more than what we've seen earlier in the year for the reasons we discussed. So the volumes are definitely up. I mean, we're two months in and the prospects for December are looking healthy as well. So we expect the terminal to kick in and produce.
Hi, Sean.
It's an appropriate question and the answer is yes determined off of fourth quarter is ramping up more than what we've seen earlier in the year and for the reasons we've discussed so.
The volumes are definitely up I mean, we are two months in.
The prospect for December looking healthy as well so we expect the terminal.
And to kick in and produce.
Speaker 2: Okay, and are the results kind of linearly related with the volumes, or is there like a commodity R component that can kind of be additive to what we saw in 3Q with the strong call? No, it's more of a linear. These are fixed fees terminal contracts, so they are not linked to any sort of arbitrage or product pricing. Now any spot opportunity will...
Okay and are the results kind of linearly related with the volumes or is there is there like a commodity or components that can kind of be additive to what we saw in <unk>.
It's more of a linear.
These are fixed fees terminal contract. So they are not linked to any sort of arbitrage or.
Product pricing now and if spot opportunity will.
Speaker 2: have a different rate, potentially have a higher rate and the terminal can earn more. But as you recall, 94% of the terminal capacity, nameplate terminal capacity of 1 million tons is contracted at various rates, so it's what we can produce in addition to which is potentially icing on the cake and you can derive.
I have a different rate potentially have a higher rate than the terminal can earn more.
But as you recall 90, 94% of the terminal capacity nameplate terminal capacity of 1 million tons is contracted that are at various rates. So it's the less if the is what we can produce in addition to which are potentially icing on the cake and you can derive.
Speaker 2: a more value depending on what the arbitrage is.
The more value depending on what the arbitrage is.
Speaker 7: Okay, so that 6% would be floating? Yeah, that's nameplate. So in November , the terminal proved... I mean, we've been talking about it for the last 12-24 months, but the concept of having exports above nameplate capacity is definitely real. And for November , it was 10-15% of what is nameplate capacity. So, yeah.
Okay. So does that 6% would be would be quoted nameplate.
Nameplate so in November the terminal crude.
Talking about it for the last 12 24 months.
The concept of having exports above nameplate capacity is definitely real.
For November it was 10, 15% of what what these nameplate capacity.
Yeah.
Okay. Thank you.
Thanks, Sean.
Thank you your next.
Speaker 4: Your next question comes from the line of Ben Nolan from...
Question comes from the line of Ben Nolan from Stifle. Please go ahead. Your line is open.
Speaker 8: please go ahead. Your line is open. Hi. Actually, good morning, everyone. I wanted to follow a little bit on Sean's question there. Now, is it possible, you mentioned just now that in November you were 10 to 15 percent above nameplate. How should we think about
Hi.
Good morning, everyone.
I wanted to follow a little bit on Sean's question there.
Now is it possible you mentioned just now that in November you were 10% to 15% above nameplate. How should we think about is it is there a way to frame in the economic impact of.
Speaker 8: Is there a way to frame in the economic impact of what those spot cargos might be, or how much extra benefit?
What the spot cargoes might be you know are or how how much extra benefit.
Speaker 8: from an EBITDA perspective or whatever you might get from the terminal when it is running above its contracted volume.
EBITDA perspective, or whatever you might get from from.
From the terminal when it is running above it's contracted.
Contracted volume.
Speaker 2: I mean, we, in conversations with our joint venture partner and also our own budgets and the terminal budget, it's really based on nameplate capacity of the 1 million tons. So we see that it will bring fruit of what we've been saying before about 25 million EBITDA for our share.
I mean, we.
We are in conversations with our joint venture partner and also our own budgets on the terminal budget. It is really based on nameplate capacity of two 1 million tonnes. So so we will see that it will bring fruit of what we've been saying before about 25 million EBITA for four hours sure.
Speaker 2: and then any additional time to go around beyond that so you know it's still marginal marginal impact but uh... you know if we can squeeze out the handy cargo per month extra or twenty thousand pounds extra above what we have contracted in the
Yeah.
And then any additional tons is all run beyond that so you know it still marginal marginal impact, but a you know if we can squeeze out the handy cargo per month extra or 20000 tonnes extra above what we have contracted in the.
Speaker 2: in the TRIPOD agreements, then of course, A, the terminal reaps a higher revenue, but more importantly, perhaps, is the big kicker for the utilization and rates in the hand-sized ethylene space.
And the throughput agreements and of course, a the terminal.
The higher revenue, but more importantly, perhaps is the big kicker for the utilization and rates in the handy sized ethylene space. So.
Speaker 2: So yeah, we kind of base our expectations on the forecasted nameplate. And anything above that, we take as a bonus.
So we kind of based on our expectations on the forecasted nameplates and anything above that we'd take as a bonus.
Speaker 2: OK, but but at this point, there's no way to sort of quantify that yet. Because we're talking for next year. We don't know. I mean, it hasn't materialized yet. Right. So what we what we have in the books today contracted will be the those ninety four, ninety five percent of nameplate capacity. And that's contracted. And anything above that in the future will be a bonus.
Okay, but but at this point theres, no way to sort of quantify that yet.
Because we're talking for next year, we don't know I mean, it hasn't materialized yet right. So.
What we have in the books today contracted it will be the those 90, 495% of nameplate capacity on that Conor.
Tractor and anything above that in the future will be a bonus alright, okay.
Speaker 8: OK, so shifting gears a little bit, Niall, one of the things that I believe you guys were sorting out with respect to the merger with UltraGas was how to think about the useful life of the assets from a depreciation and accounting standpoint. If I'm not mistaken, they were on two different basis of useful life. Any color as to how you're thinking about handling that going forward?
Okay.
Shifting gears, a little bit now one of the things that.
I believe you guys are.
Sorting out with respect to the merger with ultra gas so as how to think about the useful life of the assets from a depreciation and accounting standpoint.
And if I'm not mistaken they were on a different basis.
Useful life.
Any color as to how youre thinking about handling that going forward.
Speaker 3: I think Ben, I think that conversation probably started within Navigator prior to any involvement with ultra-gas and as you will be aware, we have historically depreciated our assets, our vessels over 30 years.
I think Ben I would say I think that conversation probably started within navigate her prior to any involvement with ultra gas and as you will be aware, we have historically depreciated our assets our vessels over 30 years.
Speaker 3: And I guess if the lockdown has taught us anything of the last two years, it is the escalation in views about conservation and environmental. And I think that conversation, or that trend, created a conversation internally as to whether really our vessels...
And I guess, if any if the lockdown has taught us anything of the last two years. It is the escalation and views about conservation and and environmental and I think that conversation or that trend creators of conversation within internally as to where.
Our really our vessels can continue for 30 years technically they would be capable, but they are clearly less efficient than.
Speaker 3: can continue for 30 years. Technically, they would be capable, but they are clearly less efficient than modern day vessels. And particularly, I'm thinking of the five planets, as we call them, the original five navigator vessels. So that discussion is ongoing, and we will conclude it by the end of the year. But it would not be unreasonable to consider that we would reassess.
Modern day vessels, and particularly I'm thinking of the five planets as we call them. The original five navigate our vessels.
So that discussion is ongoing and we will conclude by the end of the year, but it's it would not be unreasonable to consider that we would reassess.
Speaker 3: the useful economic life as it's called from 30 years to 25 years.
The useful economic life as it's called from 30 years to 25 years.
Speaker 8: OK. And then two more, although one of them is real quick. So just quickly, do you have any update on the Navigator Neptune? I know that it had some.
Okay.
And then.
Two more although one of them is real quick. So just quickly do you have any update on the the navigator Neptune I know that it had some.
Speaker 8: uh... there was a fire something and it was uh... looks like it's still in repairs but mom should we expect that but then the other question is when you talk about sort of the the four points that were driving utilization in rate higher ammonia at pain at lane and lpg if you look at those uh... how much of that do you think is just a function of good pricing for you know uh... resulting in arbitrage windows being open or or demand for a thing because
There was a fire or something and it was.
It looks like it's still in repairs, but when should we expect that but then the other question is when you talked about sort of the four points that we're driving utilization and rates higher ammonia ethane ethylene and LPG as you look at those.
How much of that do you think is just a function of good pricing for you know, resulting an arbitrage windows being open or or demand for ethane because LNG is so expensive or whatever and how much of that do you think is.
Speaker 8: is a structural shift that is not necessarily exclusive.
You're a structural shift that is not necessarily.
Exclusively price dependent.
Speaker 2: Yeah, so I'll take the second question first, Ben. Fundamentally, in the US.
Yeah, So I'll take the second question first.
Mentally.
In the U S.
Speaker 2: FN is cheap because of the NGL production. NGL production is increasing. There's more rig count.
Attendees cheap because of the NGL production NGL production is increasing there's more rig count.
Speaker 2: So if you look at one of the graphs we had in the presentation, you can see that ethane is declining in price, which makes it even more competitive. And that underpins.
So if you look at one of the graphs, we have in the presentation.
You can see that ethane is declining in price, which makes it even more competitive.
And that underpinned.
Speaker 2: First and foremost, ethane exports, which we are actually doing quite a bit of. So I think that is not arbitrage-dependent, because all the people we talk to...
First and foremost ethane exports, which we're actually doing quite a bit.
So I think that is not arbitrage dependent because all the people we talk to.
Speaker 2: expect that thing to remain competitive. So I think that is a structural thing that will continue.
I expect ethane to remain competitive so I think that is a structural thing that will continue.
Speaker 2: And if that is the case, then the ethylene coming from the U.S. should, for the long term, be competitive to international pricing. It's a little bit more price sensitive than ethane globally, but the production is there in the U.S. If the ethane as a feedstock is cheap and competitive, the U.S. producers will run their crackers to their max.
And if that is the case then the ethylene.
Coming from the U S should for the long term be competitive to international pricing is a little bit more price sensitive than ethane globally.
But the production is there in the U S.
If the ethane as a feedstock is cheap and competitive the U S produces will run their crackers do their Max if.
Speaker 2: If they can reap value from exporting that excess production, they will. The terminal is there to offer that optionality for the U.S. producers, and we are there as partners to ship it out.
If they can reap value from exporting that excess production. They will determine was there to offer that optionality for the U S producers and we are there to as partners to ship. It out. So I think ethane is is going to be there no matter, what ethylene as well although slightly.
Speaker 2: So I think ethane is going to be there no matter what, ethylene as well, although slightly more price sensitive.
More price sensitive however.
Speaker 2: the terminal throughput agreements are there, hell or high water. The LPG
Terminal throughput agreements out there Hello high water.
The LPG part.
Speaker 2: I think the point I was making, perhaps not so price-sensitive because the U.S. has increasing production, the domestic consumption of LPG in the U.S. remains stable, so it needs to be exported.
And I think the point I was making perhaps more for price sensitive because the U S.
Increasing production domestic consumption of LPG in U S remained stable so it needs to be exported.
Speaker 2: The point with LPG is that when the larger ships are doing well, which they are today, there's less downward pressure towards the handy size LPG business. And I think that remains as long as the VLGCs, the very large gas carriers, the medium gas carriers are doing what they're supposed to do and not looking towards smaller cargoes that we do on the handy side.
The point with LPG is that when the larger ships are doing well, which Dr. Today.
There's less downward pressure towards the handy sized LPG business and I think that remains as long as the V. L. D. C is the very large gas carriers. The medium gas carriers are doing what they're supposed to do.
And not looking towards smaller cargoes that we do on the handle sides.
Speaker 2: So I think that structure is there. We are seeing it now. It hasn't, for the LPG, hasn't been there until now. But the forecast for LPG exports from the US and the canal delays in Panama has such a tremendous impact to push rates and utilization up for the larger segments that that is very meaningful for us.
So I think that structure is there we are seeing it now in house for the for the LPG Hasnt been there until now but the forecast for LPG exports from the U S and the canal delays in Panama is has such a tremendous impact.
Push rates and utilization up for the largest segments that that is very meaningful for us.
Speaker 2: And ammonia is not price sensitive as such, it's a fundamental need for crop production and it's more industrial linked whereby you have production, consumption, long term, so kind of slightly different fundamentals.
And ammonia is is not price sensitive as such is a fundamental need for crop production.
And if more industrial link whereby you have production consumption long term, so kind of slightly different fundamentals going.
Speaker 2: It's a long-winded answer, but I hope I answered some of your questions. I mean, all the four points I mentioned, ammonia, LPG, ethane, and ethylene, the stars are aligned.
That's a long winded.
But I hope I answered some of your questions I mean, all the four point, we talked I mentioned.
ONEOK LPG.
At 10 and ethylene the stars are aligned.
Today.
Speaker 8: for December , and our forecast for next year is the same. So we have a pretty robust opinion here at Navigator going forward, with a slight caveat being this Omnicon new variant and what's going to happen with that. But time is too early to tell.
For December and our forecast for next year thing so.
We were pretty pretty robust our opinion here at <unk>.
Navigate to going forward.
With a slight caveat being this omnicom, a new variant and what's going to happen with that but.
So it's too early to tell.
Great and then Neptune.
Speaker 9: Yes, maybe I can take that question. Hi Ben, my name is Michael Schroeder.
Yes, maybe I can take that question Hi, Ben My name is Michael Schroeder.
Speaker 9: The Neptune, as you well mentioned, had a main engine fire in June of this year.
The Neptune as you well mentioned.
<unk> mentioned that the.
Main engine fire and in June of this year.
Speaker 9: It was an extensive fire which took quite a while to repair by now.
It wasn't extensive fire, which took quite a while to repair right now.
Speaker 9: Repairs have almost completed. The vessel is currently navigating to China, where it will get installed the last piece of equipment, which is an alternator.
Repairs have almost completed the vessel is currently navigating to China, where work gets installed the last piece of equipment, which is an odd to nature.
Speaker 9: And we expect that the vessel should be ready to resume operations by around the 18th of December , so still within this year.
And we expect that the vessel should be ready to resume operations by around the 18th of December so still within this year.
Look I've got intervention the situation of the vessel.
Perfect I appreciate it thank you.
Speaker 4: Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question today, please press star 1 on your telephone keypad.
Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question today. Please press star one on your telephone keypad.
Speaker 4: Your next question comes from Randy Givens from Jeffreys. Please go ahead, your line is open.
Your next question comes from Randy given from Jefferies. Please go ahead. Your line is open.
Speaker 10: Howdy, Team Navigator. How's it going? Good, Randy. How are you?
How do you team navigate or has it gone.
Good.
Speaker 10: Great, great. So you mentioned record throughput for the ethylene terminal, assuming that's around 90,000 tons for November . Was there something special about that month? Or could December be in that similar range?
Great Great. So you mentioned record kind of throughput for the ethylene terminal.
Assuming that's around 90000 tonnes for November.
Was there something special about that month or could December be in that similar range.
Yeah.
Speaker 2: There was nothing special in November , aside from...
There was something special in November aside from <unk>.
Speaker 2: ethane being cheap, and Europeans and Far Eastern consumers wanting ethylene. So we've been talking about this normalization of domestic ethylene pricing, which is what you're seeing. So there's nothing extraordinary about November , it is as it should be. December is slightly...
I think being cheap and Europeans.
Far eastern consumers wanting ethylene so we've been talking about this normalization of domestic ethylene pricing, which is what you're seeing.
So theres nothing.
Extraordinary about November eight it is as it should be.
December is slightly less.
Why.
Speaker 2: Frankly, it's because all the Ethelene ships, the Lunapool ships, and other competing ships
Frankly, it's because all of the ethylene ships the Luna pool ships another competing ships.
Speaker 2: I'm moving away from Europe , discharged to Asia for November . And they're not back, because it takes two months to get back to US after you're loaded. And of course, then you're skipping December , right? So there's actually a little squeeze on ship capability for December , parts of December .
I'm moving away from Europe discharged to Asia.
For November and Theyre not back because it takes two months to get back to U S. After you load in.
Of course, then you're skipping does.
Remember right so there's actually.
We've a little squeeze on ship capability for December parts of December.
Speaker 2: which is quite interesting and of course positive for Navigate.
Yeah, which is quite interesting and of course positive for for navigator.
Speaker 2: So, nothing special in November , as per normal, December slightly less, but I guess people go on holidays too, I don't know, but that's the story.
So nothing nothing especially in November as per normal December slightly less but I guess people go on holidays to iron out but.
Yes, yes.
Yes.
Speaker 10: All good. Well, hey, that's it for me. Thanks again, and congrats on the solid quarter. Bye, everybody.
All right that's it for me, Thanks, again, and congrats on the solid quarter.
Got it.
Speaker 4: Thank you. Your next question comes from the line of Mick and Elaine from Sefton. Please go ahead, your line is open.
Thank you. Your next question comes from the line of Nick Linnane from Sefton. Please go ahead. Your line is open.
Speaker 11: Hi, thanks for taking my questions. I had two. The first one was, is there any impact or roughly what is the impact in TCE rate just from the change?
Hi, Thanks for taking my questions I had two.
First one was the east is there any impact what roughly what is the impacting in TCE right.
Just from the change.
Speaker 11: As a result of the merger, does that sort of push down a bit the average TCE rate we should expect, all things equal?
As a result of the merger.
Like does that sort of pushed down a bit the average TCE rate, we should expect all things equal.
Speaker 2: So I think if you, I don't know if you've seen the supplementary pack, but if you look at page 14, you can see the Clarkson's 12-month charter assessment, which we use as a barometer for the health of at least LPG part of handicides.
So I think if you I don't know if you've seen the supplementary pack, but if you look at page 14, you can see the.
Clarksons 12 month charter assessment, which we use as a barometer for the health of these LPG part of handy size.
Speaker 2: So you can see that it was steadily declining from May, June , July , August , and September . And the merger happened in August on the 4th of July .
So you can see that is a steadily declining from May June July August and September.
And the merger happened in August.
On the fault and of course.
Speaker 2: the industry was trending downwards at that time.
The industry was trending downwards at that time.
Speaker 2: And we, you know, alone with the Navigator and Utragas, cannot magically turn by ourselves.
And we are.
Along with the navigator and neutral gas cannot magically turn by ourselves.
Speaker 2: It, of course, is helpful to have a consolidated segment and company.
Of course is helpful to have a consolidated segment and company.
Speaker 2: but you can see that the rates then turned from since August into September , October so the increase in freight rates at least
But you can see that the rates then turn from since August into September October so the increase in freight rates at least.
Speaker 2: with the opinion of third-party shipbrokers, didn't happen until a month or two after. And that is why in the third quarter...
With the opinion of third party ship brokers didn't happen until a month or two after and that is why.
In the third quarter.
Speaker 2: you know, the rates didn't move up.
The rates didn't move.
Up.
If that makes sense.
Speaker 2: So really what happened then in the beginning of fourth quarter was this effect that our ethylene ships were doing ethylene, they were not competing within the handy-sized segment for LPG cargoes. We have more ammonia on the books.
So really what happened then in beginning of fourth quarter was this effect that our ethylene ships were doing ethylene there we're not competing within the handy size segment for LPG cargoes, we have no more ammonia on the books squeezing the middle squeezing the middle meaning that the LPG.
Speaker 2: squeezing the middle, meaning that the LPG part of our business, the semi-refrigerated ships were left alone to do what they are supposed to be. So there was more structure and discipline both in the ships above handysize but also within and that kicked in post-merger.
Part of our business the semi refrigerated ships were left alone to do what they're supposed to be so.
There was more structure and discipline both in the ships above the handy size, but also we have been and that kicked in post merger and.
Speaker 2: And it's what we've kind of been seeing in the early parts of both courts, and the rates then have turned according to Clarkson's.
And it's what we've been seeing in there and in parts of the fourth quarter and the rates then upturn according to Clarksons.
Speaker 3: And I'm just, sorry, just for clarity, Michael, the...
Okay.
Sorry, just just for clarity Michael.
Speaker 3: The rates that we quoted, the TCE rates of 21,900 a day or 22,900 a day, do not include the 11 ships in the UNIGAS pool.
The rates that we quoted the TCE rates of 21900, a day or 22900 day do not include the 11 ships in the unique as pool, because you are right I suspect that was the.
Speaker 3: Because you are right, I suspect that was part of the thrust of your question, that if the smaller ships were contributing into the average TCE rate, it would naturally bring them down because they clearly... Okay, but you're quoting something that's like for like. We've tried to make it relatively like for like, and that the seven...
Part of the thrust of your question, yes that is that if they the smaller ships were contributing into the average TCE rates it would naturally bring them down because they carry less okay.
Something that's like for like.
But they do we've tried to make it like relatively like for like and that the seven <unk>.
Speaker 3: vessels of the handy size semi-refs are included. So there is a slight dilution because they are semi-refs rather than ethylene capable and therefore there is a slightly less chart rate but it would not be typically significant.
<unk> of the hardness of the handy size semi refs are included so there is a slight dilution because they are semi refs, rather than ethylene capable and therefore, there's a slight slightly less charter rate, but it would not be typically significant.
Speaker 11: Okay. And just my other question was, what's currently kind of the utilization of the Pembina and Rapallo terminals? And has that sort of reached a stable level now or that you would expect the utilization of those two to increase a bit more in future?
Okay and just my other question was what's currently kind of 30 utilization as the 10 minute on Repowering terminals and is that sort of reached a stable level now that you would expect the utilization of those try to increase a bit more in future.
The.
Speaker 2: The Pemina Terminal in Prince Rupert, West Coast Canada
The payment terminal.
Prince Rupert West Coast, Canada is limited in the throughput that they can do so today. They have we have 505 ships trading or loading LPG from that terminal, which is kind of Max because they are physical restrictions with.
Speaker 2: is limited in the throughput that they can do. So today they have, we have, five hand-designed ships trading or loading LPG from that terminal, which is kind of maxed because there are physical restrictions with
Speaker 2: local storage on site, the rail capacity, but perhaps more importantly, daylight restrictions to enter the channel combined with
Local storage on site the rail capacity, but perhaps more importantly, they lied restrictions to enter the channel.
Combined with.
Tides.
Speaker 2: So there's certain points in time that you can go in and out, depending if you're laden or not. So those things are restricting the capacity that they can take out from that terminal. Today, I think they're kind of running at max with five vessels continuously loading, unless they do some modification or the navigation going in and out is changed by the local port authority. I think that will remain.
So there's certain point in time that you can go in and out depending on your if you layered in or not so so those things are restrict thing the capacity that they can take out from that terminal today, I think they're kind of running at Max with five vessels continuously loading.
Unless they do some modification or the navigation.
Going in and out has changed by the local Port Authority I think that will remain.
Okay, Andrew Paolo.
Speaker 2: Yeah, so Rapano were exporting in the summer, they started up in April and they did a bunch of hand-designed LPG export cargoes until September , then they are using the terminal as more of a...
We have sites with that if the Repower now we're exporting from in the summer. They started up in April and they did a bunch of handy sized LPG export cargoes until September than they are using the terminal is more of.
Speaker 2: They break bulk, they sell domestically because pricing in the States are quite high for Rapallo. They have communicated to us that they will recommend exports to international markets from April again.
They break bulk they sell domestically because pricing in the states are quite high for a panel and they have communicated to us that they will recommence export to international markets from April again.
Speaker 2: So it's kind of, it seems to me the first year of operation is more of a seasonal play.
So it's kind of it seems to me the first year of operation is more of a seasonal play.
Okay, so that might be an ongoing pattern.
Speaker 2: It's used as an export facility for some part of the year, and for the rest, it's more economic to use it for storage trading. At least for the first year, they also have their own ambitions to continuously export larger volumes, but we will see for 2022. They stated that they will come back and export again from April .
It's it's used as an export facility for some part of the year and for the rest it's more economic to use it.
I'm kind of storage trading.
At least for the first year. They also have their own ambitions to continuously export larger volumes, but we.
We will see for 2022 they stated that they will come back and export again from April.
Okay. Okay. Thanks, a lot for that.
Speaker 4: Thank you. I will now hand the call back for any closing remarks.
Thank you I will now hand, the call back for any closing remarks.
Okay.
Yes.
Speaker 4: I think that then concludes the call. Thank you all for participating and we will see you again for the fourth quarter in due course. Thank you very much and goodbye. Thank you. That does conclude today's conference. Thank you for participating. You may all disconnect.
I think that that then concludes the call. Thank you all for participating and we will see you again for the fourth quarter and.
<unk> course.
Thank you very much and goodbye.
Yes.
Thank you that does conclude today's conference. Thank you for participating you may all disconnect.
Yeah.
[music].
Speaker 12: Or.
Speaker 12: Oh.
Speaker 12: .