Q2 2022 Navigator Holdings Ltd Earnings Call
As we transition into our next and very exciting period of growth.
I joined navigators crucial time in.
In the companies and also the industry's history, the rising importance in demands required to fuel the energy transition.
Stated in tandem neither can the pace at which is required.
In addition.
Important energy security nationally and locally has taken on a whole new level of significance.
This is emphasizing the importance of strong infrastructure and reliable supply chain.
I believe that we have navigated ideally placed to support this transition and hence my brand excitement about joining this company.
Not only do we have the skills and expertise developed over years of exceptional service.
We also have an extraordinary determined workforce and critically a young fleet with.
Which continues to lead the enterprise market.
Having worked across the industry in multiple functions I believe that by continuing to build on our market position.
Contracts and ingenuity, we can take this company to further heights and more specifically navigator has a successful track record in making accretive vessel acquisitions and further consolidating the handy size and smaller LPG shipping fleet.
We remain engaged in the market and we will continue to pursue accretive secondhand acquisitions that will complement our fleet and reduce our average fleet age.
In addition, we are working closely with our partner enterprise and reviewing options to best expand our ethylene export terminal in Houston.
To note the terminal set another quarterly record in the second quarter in terms of both throughput volumes as well as financial performance.
Our guidance for 2022 remains intact.
Together with our partners, we will continue to service, our growing target markets, and importantly, deliver growth and value to our shareholders and with that I'd like to hand, it over to Niall who will talk you through our financial results from Q2 2022, please take over.
Thank you Russ and good morning, everybody.
The operating performance for the second quarter was not actually dissimilar from that of the first quarter. Although there were some important differences in the constituent parts.
Net income for the quarter was $14 million or <unk>, 18 per share, which which when compared to the 300 patents.
<unk> generated in the second quarter of 2021 per share provides an indication of the trajectory of the company has taken over the past 12 months and hope to continue in the coming quarters.
The adjusted EBITDA for the second quarter up $55 million compared favorably to the $28 $8 million for the second quarter of 2021 and is the third consecutive quarter with EBITDA in excess of $55 million.
The total operating revenues for the second quarter were $123 9 million.
Compared to $85 7 million for the second quarter of 2021.
$12 3 million of the $37 3 million increase in revenue was generally as a result of the additional 700 size vessels, joining the fleet as part of the ultra cost transaction with.
With a further 11 4 million generated from the nine smaller vessels acquired operate within the independently run Union gas.
Charter rates to continued to improve during the quarter, which accounted for $8 $3 million of the overall increase in revenues with an average charter rate rising to 2000 and $4633 per day or just under $750000 per month.
The highest daily time charter equivalent since Q2 of 2016.
That compares to $22169 per day or approximately 674.
Dollars per month for the second quarter of 2021.
And importantly, this $24633 per day was also an increase from the $22900 per day achieved last quarter, the first quarter of 2022.
Although vessel utilization improved to 87, 4% during the second quarter compared to 85.
4% for the second quarter.
Second quarter of last year. It does represent a slight deterioration from the 89, 5% utilization achieved during the first quarter of this year.
A further three vessels entered into dry dock scheduled service during the second quarter. In addition to the four vessels during the first quarter, taking a total of 50.
53 days and with a capital cost of $3 8 million.
A further five vessels are scheduled to enter dry dock for the planned store visit over the course of the second half of 2022 unexpected aggregate cost of $7 million.
As we have no new builds on order.
<unk> are the only capital expenditures the company has for the remainder of 2022.
The.
<unk> revenue from the Luna pool was $6 7 million for the quarter, representing our share of the other participants net revenues with voyage expenses from newly pool of $7 million, representing the other participant share of our net revenues from the pool.
Consequently, we had a net deficit of $300000 from the pool during the second quarter, Although we did achieve a benefit of $1 3 million during the first quarter and overall this should generally nets to zero over time.
The voyage expenses.
<unk> expenses increased by 17, 6% to three or $3 1 million during the second quarter to $28 million.
Primarily as a result of the additional vessels in the fleet most of which are on voyage charters, thereby incurring these pass through voyage expenses.
Bunker costs, along with all global energy prices continued to be significantly higher than at the beginning of the year and.
And these higher fuel costs, which form part of voyage expenses are passed onto our customers through higher charter revenues.
Our vessel operating expenses or Opex increased 34% to $38 6 million for the second quarter compared to the second quarter of last year, all of which was as a result.
The additional vessels in the fleet during this quarter relative to last year.
Daily operating vessel operating expenses per vessel.
Actually reduced quarter on quarter to <unk> <unk> has the $9 per vessel per day for the second quarter of this year compared to $8336 per vessel per day during the second quarter of last year.
Depreciation on our vessels increased also by 61, 6% or $12 million compared to last year.
As I stated in the last earnings call. This is in part due to the 16 additional vessels in the fleet, which accounted for $5 9 million of this increase but also $6 1 million.
Of additional depreciation as a result of the Companys decision to reduce the estimated useful life of all of its vessels from Turkey years 25 years as of January the first of 2022.
General and administrative cost increased by 35 million, 35% or approximately $2 million to $7 8 million.
Relative to the compared to quarter of last year, one 5 million of this increase relates to the two additional administrative costs associated with the ultra gas and also in addition to unfavorable exchange movements on our Indian Rupiah accounts, we received the Indonesian rupiah from <unk>.
For two of our long term charters for vessels trading in Indonesia.
Other income being the management fees earned from the other participants are.
For our management of the Luna pool.
Was $109000 for the quarter.
On the unrealized losses on derivative instruments was $5 3 million for the quarter relating to movements in the fair value of a foreign currency swaps associated with our Norwegian kroner volumes and this was offset by further gains on our interest rate swaps as five year LIBOR swap rates.
<unk> to rise during the quarter, although not at the same rate as during the fourth quarter.
Our Norwegian kroner bond is fully hedged against.
Against movements in foreign currency exchanges, so any gains or losses on the translation of the principal bond amount are generally offset by an equal and opposite movement in fair value of the related currency swaps.
We have fixed interest rates on two of our bank loans, that's 0.36% and one 3% and the loans assumed as part of the ultra desk transaction each have LIBOR fixed up approximately 2%.
Interest for the quarter was 11 and a half million dollars.
An increase of $2 $8 million in the second quarter, all of which was as a result of interest on the additional debt assumed as part of the <unk> transaction.
Our share of results from the ethylene export terminal was a part of our record breaking profit of $6 8 million for the quarter.
Based on throughput charges relating to 268444 tons of ethylene exports of joining the second quarter. This.
This compares to a profit of $2 million for the second quarter of last year, which was based on 155 and a half thousand tons export to the terminal and this quarterly performance is the <unk> consecutive quarterly profit of approximately six 5 million.
Terminal depreciation amounts to $5 $2 million per year three.
$3 million per quarter, giving eniva EBITDA for our share of the terminal somewhere between seven 8% to $8 $2 million per quarter.
Under the balance sheet on slide seven the company had cash of $151 2 million at June 30th and a further $20 million available undrawn revolving credit facility.
Our minimum liquidity covenant from the various bank loans.
Remains a maximum of $50 million, thus providing significant headroom.
Our total debt reduced by $45 $9 million during the second quarter, which stood at.
905 8 million at June <unk>.
<unk> comprises of loan facilities relating to our vessels of approximately 686 million.
The credit facility associated with the terminal of $47 5 million and two Norwegian bundles, the principle of which amounted to $171 7 million.
One of these bonds, the 600 million Norwegian kroner denominated bond equivalent to $71 7 million and the majority of them in November .
<unk> 2023, and currently there is a call option on this bond at a redemption premium up to a six 4% falling to 179% in November of this year.
On slide nine we outlined the estimated cash breakeven for 2022.
$18280 per day.
This low level enables us to generate positive EBITDA and even the toughest of markets and we remain cash generative throughout the shipping cycle.
In the box on the right hand side.
This slide nine we provide our daily I expected daily opex across the vessel segments, ranging from $6 $6800 per day for the smaller vessels to $9000 per day for the larger more complex and older ethylene vessels.
We also provided a range of expected annual spend from vessel Opex G&A costs, depreciation and interest expense guidance.
On the following slide Slide 10, we outlined in our historical quarterly EBITDA showing an uplift in Q3 2021 and a further increase in Q4 2021 quarters in which the positive impact of the ultra gas transaction was achieved.
It also just shows consistent EBITDA of approximately $55 million over the most recent three consecutive quarters.
And finally on the right hand side of Slide 10, we outline with a bar on the left of that graph and annualized EBITDA based on the Q2 performance.
Thereafter, each bar moving rights shows the potential EBITDA as charter rates across the fleet were to rise by $1000 per day, giving an EBITDA in excess of $300 million in.
If charter rates were to rise to approximately $40000 per day.
And with that I will hand, you over to OIBDA for his remarks.
Thank you Maria and good day to all the listeners.
The U S is the main global locomote them for natural gas liquids production and exports.
And it does not disappoint.
Page 12, we can see.
Feet of North American LPG exports reached new highs during the second quarter of this year.
Record exports during June .
A larger proportion of these exports deviated from Asia destinations to discharge ports low case of MBS Atlantic base.
And the additional volume needing maritime logistics in this region is generally positive for medium and handy sized vessels due to the short term.
As a result, and besides LPG cargoes from the U S grew during the last few months.
We're not yet near the high of January 'twenty, 'twenty, one, but it's showcasing a degree of volatility as well as a proven upsides to our segment.
In parallel victims, increasing LPG exports, we're also seeing a similar trend for ethane.
Ethane exports from the U S are reaching new highs with additional volumes, adding both across the Atlantic.
As well as the <unk>.
Our vessels offer a faithful or by an efficient pipeline service in both directions.
We believe this will continue for the long term in the ethane market.
While ethane continues to be the cheapest feedstock for the production of ethylene.
U S propane remains competitive compared to naphtha.
Production appropriately.
This can be seen on page therapy.
Most of the European petrochemical producers have the capacity to switch from.
From oil to gas should the price is sufficiently attractive.
As there is today.
Consequently, Europe is importing larger volumes of propane from the U S. A propylene production.
However in addition, LPG is extremely versatile.
And it's also used for energy.
Europe is struggling with high energy prices due to issues with natural gas supplies.
Makes L. P. G a viable additional source to the energy mix and it's pulling supply from North America.
Another more market change effect of the ammonia supply chain.
Europe by three quarters of its own demand.
In February this year and the Black sea exports via Ukraine scope.
Ammonia self sufficiency is dramatically reducing in Europe of the results and European consumers are looking further afield to secure supply.
We have rarely seen ammonia mooring from Asia to Europe .
However, today business that required reality.
This brings with it increasing ton mile demand.
An incremental vessels entering the ammonia trade.
We have now seven vessels transporting ammonia, which is double that of one year ago and we are.
Expect more to come.
I'm old enough part of food security is becoming strategically important for <unk>.
But also perhaps more importantly in addition to the promise of Blue and Green ammonia.
Part of our journey to net zero carbon emission is driving the ammonia industry into overdrive.
And navigators her to lead and support these changes.
The rate environment has stabilized during the typically slower months of farmer.
However, three vessel categories attract different rates assessment as you can see on page four.
And at current levels are ranging from 29000 Boes per day for ethylene time charters with $21000 per day per fully refrigerated truck.
It is worth noting that these levels are well above our cash breakeven of $18280 per day.
Our earnings base mix kick this conflict constantly evolve.
We can illustrate some of the points already mentioned in the graph on page five.
I will now being the dark blue at the bottom up to graph is trending up.
Having a period utilization points.
For July and we expect this trend to continue as we go forward.
Navigators LPG transportation has increased slightly over the last couple of months due to additional demand in the Atlantic Basin.
Most of the volume tends to move on time charters with some spot opportunities throughout the months.
Petrochemical demand.
Principally linked to GDP and consumer spending.
There is a thing stating that everything that moves after China and containers to come into China raw materials.
This holds true for petrochemical commodities that we transport.
Today U S ethane has the widest arbitrage to Europe .
As opposed to far east and China.
As seen on page 16.
Whereas the majority of ethylene for transported across the Pacific into past.
Most of the volume are now heading to Europe .
This resulted in half the demand for vessels do half the distance needing to face pretty logical.
Taking all these things into account petrochemical demand is expected to be soft in the short term.
Specifically, China returns to a more normal state of consumption on production.
In the meantime, Europe will continue to import most of these programs.
LPG is stabilizing with traditional demand and the various various intra regional trade names.
There is some upside should Europe further increase imports of LPG for petrochemical production, but perhaps more importantly, increasing its use of LPG.
Energy subsidiary.
For natural gas.
We expect ammonia to continue its strong growth due.
Due to the increased disparity between supply and demand locations.
As an example DSS.
If the restricted use of natural gas at one of the German ammonia pumps. They are doing this to fit the energy deficiency in Germany.
Ammonia is still needed. However on the only alternative is important by sea from other complements such as North America and Asia.
So in sharp.
Petrochemicals.
No.
Short term because of GDP.
LPG is sideways.
Very good.
With an upside but ammonia is so.
The biggest and most positive as we see it right now.
With that I'll leave it back to Ryan.
Excellent. Thank you, Oregon, operator, we'll now open the lines. This in Q&A with raise your hands press star at nine <unk> on mute yourself by pressing star six or accusing him just use the raise hand function. So with that first question your line should be.
Okay.
Audi team navigator how's it going.
This is omar from Jefferies.
Alejandro.
That's the standard that Jeffrey screening for those who don't know Randy installed that while he was here.
Matt welcome to navigator.
First off.
I just wanted to ask you maybe ointment on your on your latest commentary regarding ammonia you mentioned, the blue and Green.
Yes.
I guess from a sort of a bigger picture perspective, the ammonia trade has been somewhat I guess inconsistent over the past many years with some up some down years. So it's really no major change to overall tons moved.
Do you think thats changing are you seeing that shift.
And maybe it starts to get into high gear like we've seen with more and more broader propane and butane trades.
Maybe I can just start out and then you.
Can take over.
<unk>.
From my perspective, there are some some of you could say you could say a.
Short term.
Okay.
You can say GDP related fluctuations and so on but structurally and if you look at the longer term there'll be some some very significant changes taking place at first of all.
The food security situation has changed dramatically just over.
The course of this year and that means that the.
The need for ammonia it's virtualized.
With growth.
Secondly, secondly, ammonia is very very important.
Energy carrier for carrying and transporting hydrogen between continents, it's much more efficient to carry and hydrogen.
S ammonia.
And then it can be be spitz.
And then of course thirdly ammonia in itself is going to be an important tool for the future not only for shipping but also potentially for other industries. So there are some some very.
There's a ton of projects that are already under development to produce both the blue and green ammonia, but.
You can elaborate please.
Omar.
Thanks for your question.
12 months ago.
There was lackluster.
Demand from on the <unk> It was pretty traditional 17 million pumps being transported by sea went up a level, where they went down a little bit today in comparison, it's night and day in terms of compensation interest and serious companies who want to expand.
Bend more production production, then means more exports demand for shipping so shipping and the additional incremental production.
And that goes hand in hand.
They are very worried it will go.
We shall see but definitely a very exciting area. It would be part of this in our own segment.
Never had this many of them on their ships on charter in before and I don't think that's going to end anytime soon.
If you've seen one of the charts there we haven't.
I mean.
What is happening.
A more now everybody who needs ammonia are looking around the world.
Within the region, but around the world globally defined.
Going out today, and the distance with car bosque, increasing I need even more ships, which is a great thing for us and we are a big player in that space, So more to come I'm sure.
Thanks, a lot.
So from all talk to now activity, we'll see we'll see how things develop there.
Second sort of a follow up just wanted to ask about the ethylene movements that you're highlighting.
And how it's been more geared towards Europe here, the past couple of quarters, instead of maybe being a bit more balanced to Asia as well.
And.
You said that that creates more supply of ships because of the shorter ton mile.
Obviously, it sounds like it leans negative, but your realized rate during the quarter at 24, plus was at the highest level since 2016 so.
Did you see an effect or an impact of the shorter ton-mile wasn't fleet utilization or is that.
Or is that maybe something still to be seen.
Yeah.
Okay.
Okay.
Okay.
The common and if GDP, some sort them and consumers are not.
Pending on household items and so forth.
Their disposable income is under stress because of inflation and other things.
Of course demand and GDP.
Yes.
So we are plugged into the global trade and we see that there is.
The pie is smaller.
And what does that mean it means that it's a little bit more tricky to do trades.
Trace are happening takes more time.
Sure.
Squeezed on utilization, but I think this is a short term.
In fact today at all.
On China, and when they are getting out of their malaise with a zero covered this pathogen.
But.
It is good to see that that leaves Europe .
We should have their own issues are importing or taking the role of China in terms of etsy.
That is softening on the petrochemical side, which is ethylene and butadiene propylene.
It's a matter of fact.
Okay, alright, thanks, a lot and then I'll I'll leave it there thanks guys.
And so mark.
Question, nor line should be open operator, you can.
Open the line.
Hey can you guys hear me to spin Nolan Stifel Nathan we can hear it Jed.
So my first question you guys.
A little bit to what you were talking about.
In your prepared remarks.
<unk>.
Is it really relates to how we're thinking about Europe .
Through the winter.
There's a lot of discussion in Germany, and elsewhere about rationing of natural gas.
And maybe petrochemical plants being down or having to dramatically cut their output.
How does this impact what you guys do if there is gas rationing or say Scott. The work, we've done in three days or or what's the impact.
On demand for what you guys do.
Thank you Ben.
Deep question there so at least for our LPG I think its up off of the LPG transportation from any other location that you can buy LPG from whether the Mediterranean.
Or more importantly, North America, North America has declined.
So that brings shipping into the picture.
In Rome rationing situation, then you would expect.
The nations are Europe to look for other energy sources, and as I mentioned Mpg's extreme diversified.
And it's an excellent source of earnings.
So perhaps if you used to run your cooker on natural gas and if there is lack of natural gas.
You could see.
LPG being spike into the natural gas stream, although you have to be careful about btu levels. However, it can also perhaps.
<unk> be more likely to buy a canister of cylinder of LPG and habit of you know the camping deadlines.
Its very versatile and I think.
Youre getting into that for winter temperatures.
Temperatures in Europe generally gets colder.
How do you get a pinch on that you need more LNG and LPG could be part of.
Alleviating some of the pain and that means more transportation across all segments, except medium statements chips honored by shifts in the Atlantic base. So.
We haven't seen we've seen a little bit now you saw them on the slide a little bit more LPG from the U S and the science.
U S exporting record volumes more of its proportionately is in the Atlantic Basin, meaning Europe Africa, and Latin America, I think that is kind of stay if not increase because of everything that's happening here.
Alright I appreciate the answer there and then my next question.
Maybe for margin.
Okay.
The.
And the last number of years, obviously, the ethylene terminal has come online and Theres been a lot of discussion about the expansion of that.
Appreciating that that really is permanently more in the hands of your <unk>.
Infrastructure partner in terms of the expansion in timing, but.
Maybe big picture, how you guys think of the evolution of navigator.
In terms of that infrastructure element.
Where do you see the company going in let's say the next five years in terms of how you are allocating capital to shipping versus.
Versus.
Petrochemical and LPG infrastructure.
Maybe I can just kick us off and then I'll invite my colleagues.
I know I can also to.
Yes, we are.
Extremely pleased with the cooperation that we're having with enterprise.
The whole process around building the terminal getting it on stream and seeing the effects of having that integration together with our fleet and then having the.
On land.
Export volumes.
Hence together with enterprise, that's worked really well for us.
It has been a project that has been.
Run on.
Time and budget and also one that is truly lived up to our expectations. So it would be natural for us to want to continue.
Pending that relationship with enterprise and we'll certainly state in these extremely fruitful discussions that we're having with them right now to see how we can best expanded.
Because it is strategically very very important for us and something that supplements now at <unk>.
On shipping as well.
Just to add thanks.
Thanks, Matt just to add.
Thanks, Matt for the question.
That.
USA shale gas estimate North America amazingly competitive.
And Youre seeing great.
Lots of projects and.
Many.
Probably coming on stream soon.
Growing the exports of ethane ethylene and other pet Chem gases.
You are seeing with this competitive edge USA.
American.
Shale gas.
Kind of a reindustrialization of.
The U S. Gulf area. So this is good news because it will be exported it will be shipped.
We will be present.
And that.
Great.
Am I allowed one more Randy as Ed is that okay.
Okay. That's helpful.
Thank you.
My last question is around utilization youre sort of in the high eighties, but last time, we were at these kind of day rates.
Closer to the mid nineties is there something structurally a little bit different about how the business operates today versus how it operated in the previous cycle and we were at these kind of rates or or.
Maybe maybe even high nineties achievable again.
Hum.
That graph.
And on page.
Page 15, you can say you can see that utilization points.
Per month going.
Going back a couple of years.
So.
That's now structurally for them today.
But you see throughout that time period in that crash, except of course, the ethylene terminal kicked in really this year.
Which is great.
However.
You have nuances.
Where those cargos go is it Asia Europe that sort of stuff.
What it doesn't show as well.
Propylene and butadiene is a sharp sees it from Europe to Asia or Europe . The U S.
Propylene et cetera, so the pet chem side of that.
Kim.
Utilization pet Chem trade is really what is driving that utilization between but its a 90 plus or minus see below.
What is good to see now is the.
Ammonia is backing up from below so that is creating.
Sustainable floor for us in terms of utilization. So the more we do in an ammonia or LPG time charter reduce that volatility, but is the petrochemical side, which.
It's been volatile volatility causes utilization.
But again as both structurally different today.
A year ago two years ago.
Our term.
Participating.
Alright I appreciate it thank you guys.
Thanks, Dan.
Alright next question your line should be open.
Hey, guys can you hear me this is Sean Morgan with Evercore.
Shlomi can hear it.
So I think that's pretty pretty helpful detailed chart on slide nine.
Just wondering.
The ultra gas merger now being about a year and you've had some time to sort of look at synergies is there any.
As most of the low hanging fruit sort of executed or is or is there kind of more we can sort of find in terms of G&A or just other kind of share cost between the two fleets to kind of bring down the cash breakeven to I guess sort of help the margin a little bit kind of a.
Amid this sort of moderately strong rate environment you guys have.
Hello.
Yes.
Now I will just speak to that one please.
Yes, sure so so Sean.
There are some synergies, but it's a bit of a.
A bit longer than just a sprint there are.
Some synergies that we've already made a lot of it I think as we discussed perhaps some calls ago related to the technical management and prudent management of the vessels and as you'll appreciate.
That takes changing crew on chips takes some time and that is that.
The largest benefit of.
That we foresee in the.
Synergy synergistic effect.
Merging the two the two businesses, but there are some there are some of the low hanging fruit has already been.
Lowered and accepted but there is yes quite a lot more to come.
Alright, thanks miles.
And then just kind of just touching again.
On the European and Chinese demand for ethylene that's right I think people talked about but maybe asking a little bit differently.
We had almost surprisingly high utilization of U S exports from Europe, and do you think that that's if you had that sort of weigh out whether it's the COVID-19 related sort of industrial slowdown in China or is there maybe a little bit of demand destruction.
In Asia happening, because they're sort of getting crowded out of the trade by European buyers willing to pay just really access of premiums because of their energy and security.
So a little bit the bulk Sean.
Talk about China first.
Ethane as a feedstock to produce ethylene is going very strong through Chinese crackers.
So the demand is there on their competitive competitor.
The vast majority in Chinese crackers are run on Master oil oil has been very hot.
So they have reduced operating rates.
On one of the graphs ethane has gone from strength to strength to Chinese crackers, the cracker, but comp right.
So that shows the strength of ethane to ethylene in China.
Now of course, if consumption is down or reduce.
<unk> in China that impacts petrochemical trade flows.
As we see today, so Conversely in Europe then.
They have offered.
Inefficient.
Wow.
Crackers, but produce ethane so if they are unable to use or I'm, sorry, if oil is very expensive on their inefficient crackers and if they cannot switch to gas like pain, some do but some of them there.
Definitely disadvantage therefore, those guys will reduce operating rates.
And then commercial pay.
Payout or ethylene should they need.
But demand.
And consumption in Europe too just.
Consumption and household items and so far the results are under pressure.
Europe is still buying because they kind of.
Okay.
Alright, Thanks, that's it for me.
Thanks, Sean.
Alright next question your line should be open.
Hello, everybody just Turner from Clarksons.
With the traditional grading infarctions when Omar was here so.
Notice.
So we will continue without a bit of musical chairs on this conference call.
So I just wanted to.
Touch on the on the TC Fleet I guess you have quad.
Quite a few ships that are that are rolling over just looking at the appendix I think I counted 11.
Ships that have been on time charter that that will roll over the next six months can you give us some.
Its color flavor.
In terms of.
How those negotiations are going how youre thinking about.
Time charter coverage versus versus spot and what the rates may look like compared to what they're currently thanks.
Yeah. Thanks, Thanks Sumner.
The time charter market in the <unk> space.
Its typically 12 months so invariably.
Six to 12 months invariably at any point in time, you would have negotiations like renewals are people customers are thinking about okay. How does the future look.
How can we are in partnership with navigator come to agreement to make the supply chain more efficient et cetera on a time charter basis from our.
So we have those internal discussions every week.
We've had the 50.
50% coverage today, we have a little bit more.
Because of the ammonia has pushed up.
On a good note.
Uh huh.
The rate environment is Europe for Clark's can be typically a peg our hour.
Estimates and so forth publicly on the Clarksons estimates so you can take cues from Bob.
The tech sector.
Textbook and shipping as you know if the market.
If the market expects.
They are up or down it depends on whether the customer on the ship owner wants one time charges for where we are we're in a little bit of a mix.
Thanks, a lot.
Alright, So I guess, just looking at the public rates to be up about 10% versus last year.
The rates for this year.
Alright.
If that's what the graph sense, yes.
Sure.
Well just the clarksons that okay. Thanks.
And then I guess.
Yes.
Could you talk a little bit more about the supply side hasnt been a lot of discussion.
On this call so far on that element on especially as we're looking into next year.
Newbuild prices continue to go up as far as I can see marginally not a lot of ordering.
It's a quite modest order book in the handy size segment.
And I guess Theres some environmental regulations.
Coming into play and some older ships as well so you know over the next year or two started within the.
View of the order book, how do you how do you see the fleet developing thanks.
Yes, so we havent visibility.
On the supply side for the next three years.
The order a ship today used to be funny for 28 months now its longer because of the supply chain issues.
So we have visibility over the next few years the order book for the hundreds Sciences quite limited.
Okay.
Uh huh.
And there are about 10 10 vessels, but are more than 20 years of age for 25 years of age which will invariably.
From the other side so.
Supply side as Paul said there is violence.
It's a good platform to start off with but when we're talking about the future.
So.
We don't we.
We don't foresee.
Any rush to order in the handy sized space or any space really depending if it's project based.
In the gas segment.
Calls as you say it's expensive today.
Delivery times, along but also.
There are units have concentration of Bob but few of engines to use what do you think you have an.
An opinion about box is the fuel of the future and so forth.
If you Havent ships today, which now will get navigate if you do do the situation is good.
Great.
Okay, and if I could squeeze one last one in dog goodness.
<unk> just talking about that the U S.
Just incredible competitiveness, especially in the midst of the European energy crisis, which just seems to get worse day by day.
And exports out of the U S. I guess and the consequence of that and higher production increasing are there any bottlenecks on the infrastructure side.
That could kind of hit the brakes in terms of U S exports I mean, they're at high levels, you've been running your terminal at quite high levels close to capacity.
<unk>.
But do you see any do you see any bottlenecks that gets Livingston.
Yes.
I wouldn't be able to answer in detail about.
Operating bottlenecks.
Pipelines storage I think there is no.
Theres always a black Swan he in there that can hit.
Weather or other issues.
I think not.
Do also see that that developing terminals.
New infrastructure.
Investing in an expansion.
<unk> and export expansion projects.
It's easier and USA than in other parts of the world.
Especially if you look into Europe for example, so I do sense that.
The competitive edge is not only on the competitive.
Availability, the availability of natural gas and change yes.
<unk> also.
The network that already exists the pipelines that already exist a couple of large companies, including our good partners enterprise, who have an amazing grid.
So in general terms I see.
Definitely more strength than bottlenecks of trumpets, but maybe randy or or or.
<unk> can complement.
Having toward.
Toward North America.
Some of the midstream company recently.
They are acquired.
About the future.
They are revising their capex program.
People are talking about new Fracs majors, because production is going up you must have a fraction makers.
To facilitate all of it.
So the industry in North America up from.
Very optimistic about the future.
Yes.
Also there was a question of the conference I think rounded vis a vis earlier this.
This week on the question of Red tape.
Brokers see permitting in North America.
<unk>.
It's available.
I mean, it's there.
Our new expansion for production and midstream and then ultimately exports.
Yeah, and as Doug mentioned enterprise I think on their recent call announced six or seven different growth projects energy transfer the same Kinder Morgan painful American midstream.
Midstream pipeline companies are focused on that very day more pipeline more terminal capacity.
And a lot of those hydrocarbons are going through the water, Mike for European or Asian imports.
I think that growth is coming.
Okay. Thank you very much I'll turn it back.
Thanks, Jeremy.
Our next question your line should be open.
Good morning team. This is Kim <unk> from value Investor's edge. Thank you for taking my questions.
Okay.
You've been clear on your willingness to pursue the expansion of your ethylene terminal.
And I was wondering if you could provide some commentary on whether you are looking into potentially participating in other infrastructure projects.
And following up on that.
Did you find any attractive opportunities do you believe your current fleet would be enough to service them.
Uh huh.
Excellent questions infrastructure.
Infrastructure should be.
We look at yes.
Will it have a positive impact on the fleet that we need more transportation.
Yes.
Alright, that's helpful.
And you're still trading at a sizable discount to <unk> and I was wondering is there any appetite to pursue share repurchases in the current environment, how would you balance share repurchases with potential capex, if attractive opportunities come along.
Maybe I can just add.
Talk to that one.
We constantly evaluate all projects measure up about two other ways of.
Returning.
Making returns.
The investors. So so we keep it very high.
Close look at that and we are definitely evaluating all the options and that will be super happy to revert back to you during the second half of this year to make more clarity around how we do that but we.
Yes definitely.
Observations about the discount that we're trading at and that certainly goes into two hour consideration around how we best secured that that's a good return to the shareholders.
Alright, that's it from me. Thank you for taking my questions and congratulations for the quarter.
Thanks for that all right. We have time for one more question operator, if there's any more we can now open there.
Thanks. This is Tom Mckay I wanted to ask Niall.
What.
A question about the debt level the company has.
Reducing debt since the ultra gas combination last year and could you comment on what your target debt level youre ideal debt level would be.
Hi, Tom.
The.
<unk>.
The debt level is is an amalgam of different things as you may recall, the terminal was financed pretty much 100% on that.
The ultra gas ships on the other hand, we're actually got quite a long gearing. So we've got kind of a mixed bag and a lot of the recent significant reduction in debt is associated with the terminal not surprisingly given the the.
The cash distributions were getting from that in terms of in terms of the targets I think somewhere we're at about 43% net debt to capitalization net loans I think somewhere around there we are reasonably comfortable with it could come off another couple of points down to say, 40%, 39% or something around that.
And those nodes.
Okay, great. Thanks.
Yes.
Thanks, Tom, Let's say for the call I'd like to turn it back over to Mark for some closing remarks, yes.
Yes, just wanted to thank you all for the great questions that you asked and also for a good discussion we really appreciate the dialogue with you.
And it was a good portion of it was a strong quarter and that was it means that the the whole first half of 2022 came out Jay.
Really well so we look forward to continuing the momentum that we have had.
Also look forward to continuing to keeping you updated on both the.
Growth opportunities that we are seeing right now and there are several and also although exciting developments that that may come.
That can strengthen secure debt.
The returns to the shareholders remains strong as long term as well. So thank you so much for joining us.
Look forward to keeping you updated as we go.
Thank you.