Q3 2022 Navigator Holdings Ltd Earnings Call
And operational perspective, and are based on management assumptions forecast and expectations as of today's date and are assets subject to material risks and uncertainties actual results may differ significantly from our forward looking information and financial forecast additional information about these factors and assumptions are included in our annual and quarterly reports filed with the.
The Securities and Exchange Commission with that I'll now pass the floor to match Peter Zakho, The company's Chief Executive Officer. Please go ahead and answer thank.
Thank you so much Randy and good morning, everyone.
For joining our call.
The third quarter 2022 was an exciting period of growth for navigator, we have announced two joint ventures to expand operational capabilities and the globe.
Liquefied gas with Daiichi.
In September we announced that the company has entered into the greater Bay gas joint venture to acquire a total of five ethylene capable liquid carriers.
The first vessel is expected to be flat next month.
The joint venture with greater Best Creative Acas will result in a reduction in the average age of navigators fleet and will allow us to take advantage of more efficient vessels.
Lowering our emissions and also offering improved economics for our customers.
We'll see the rest of the fleet being acquired during the course of 2023.
Yesterday, we announced our participation in that expansion projects at our existing export terminal joint venture with enterprise product partners in which we own 50% shareholding.
The extension project consists of modification to an existing ethane refrigeration units, which will provide the capability to refrigerate, both ethane and ethylene alongside providing additional ethylene refrigeration capacity to our export terminal joint venture the world's largest ethylene export terminal.
Looking at the quarter.
<unk>.
Operating revenues for the third quarter increased by seven 9% in comparison to the same period last year and that was mainly due to an increase in vessel available days and fleet utilization average monthly time charter equivalent rates and pass through voyage costs.
Notably the demand from ethylene from Europe that we witnessed in the second quarter of 2022 continued into July and August so with about 80% of U S. Ethylene exports was transported to Europe , and then of course highlights the growing importance of energy security, both nationally and locally in Europe .
Utilization of fleet in Q3 was 85% which was in line with the same period last year and in line with our guidance for the quarter.
I'd like to thank all staff with navigator for their excellent work and contributions during this period and just hand, it over to Niall who will take you through the financial performance of the quarter. Please.
Thank you Mike some good morning all.
The operating performance for the third quarter of 2002 generated an adjusted EBITDA of 41, and a half million dollars compared to $45 million for the third quarter of last year. Although this is lower than the $55 million achieved in the first two quarters of 2022. It is expected that the fourth quarter would return to our.
<unk> seen those earlier quarters of.
This year.
The total operating revenues for the third quarter were $106.8 million compared to $102 7 million compared to third quarter of last year.
$2 2 million of this increase was primarily as a result of the additional 100 size lessens joining our fleet as parts of the ultra gas transaction.
2021, and a further $9 $6 million generated from the <unk> smaller vessels and operate within the independent independently run unit gas also acquired as part of the ultra cost transaction.
Vessel utilization improved slightly joined the quarter.
Okay.
Four 9% relative to the third quarter of last year.
Which achieved utilization of 84% and this contributed.
$800000. Additionally, I'm.
Charter rates to improve slightly relative to the third quarter of last year accounted for an additional half million.
Overall increase in revenues average charter rates for just over $22000, a day or $670000 per month for this quarter compared to $21 900 per day or 665.
Dollars per month for the third quarter of last year.
For vessels entered dry dock production June survey has joined this third quarter. In addition to the seven during the first half of this year, taking a total of 106 days and with the capital cost of $3 7 million.
The dry docking of two of these vessels either finished or will finished during the fourth quarter along with a final single vessel to enter dry dock during this coming fourth quarter.
As there are no new builds on order these dry docking costs on the only capital expenditures. The company has for the remainder of 2022.
The operating revenue from the Luna pool was $3 2 million.
For the quarter, representing our share of the other participants net revenues with voyage expenses from lunar protocol $3 6 million, representing the other participants share of our net revenues from the <unk>.
Consequently, our vessels contributed 400000 to the other pool participants showing the third quarter. However, we achieved a net benefit of 600000.
That's over the course of the first nine months of 2022, but overall this number should net to zero over the longer term.
Voyage expenses increased by 25% or $3 4 million during the quarter.
$222 million, primarily as a result of the addition of the vessels in the fleet most of which were on voyage charters.
Thereby incurring these pass through voyage expenses higher fuel costs, which form part of voyage expenses are passed onto our customers through higher charter rate revenues.
Our vessel operating expenses or Opex increased by 10, 6% to $38 7 million for the third quarter compared to the third quarter of last year much of which was as a result of the additional vessels in the fleet during the quarter relative to last year.
Vessel operating expenses per vessel per day did increase quarter on quarter by four 2%, but remained below $8000 a day at 7900 <unk> per day.
This third quarter compared to 7607 per vessel per day during the third quarter of last year.
Depreciation on our vessels increased by 46, 5% or $8 8 million compared to the third quarter of last year as.
As I stated previously this is in part due to the 16 additional vessels that joined the fleet in August 2021, which accounted for $1 3 million of this increase but also $6 2 million as a result of the company's decision to reduce the estimated useful lives of all of our vessels from 30 years to 25 years as of Jan.
The first 2022.
General and administrative expenses decreased by 23, 2% or approximately $1 8 million to $6 1 million relative to the comparative quarter of last year and.
And other income being management fees earned from the other participants.
For the management of the Luna pool.
Reduced to $60000 for the quarter as a result of reduced revenue generated by the booth.
And unrealized foreign exchange gain on the translate the re translation of our.
$600 million Norwegian kroner bond at September 30th was $5 1 million and this was fully offset by an unrealized loss on the foreign exchange swap that we have in place which is included in gains and losses on derivative instruments.
In addition to this foreign exchange loss the unrealized gains on derivative instruments also includes a $7.6 million gain for the quarter relating to further gains on the interest rate swaps with LIBOR.
Rates continue to rise during the quarter as central banks around the world increased interest rates as they are trying to grapple with rising inflation.
We have fixed interest rates on approximately 55% of our debt.
September 30th <unk> train two at levels between 0.36% and 2% significantly below current levels.
Interest expense for the quarter was $13 2 million compared to $10. One for the third quarter of last year as a result of rising interest rates on that portion of the debt that is subject to floating interest rates as well as interest on the additional debt assumed as part of the <unk> transaction.
Our share of results from the ethylene terminal was were $4 $7 million for the quarter based on throughput charges relating to a 189000 tons of ethylene exports through the terminal during the third quarter lower throughput than the past three quarters, but higher than the 128.
Tons of ethylene throughput during the third quarter of last year, which generated $3 3 million.
For our share of the profit.
Terminal depreciation amounts to approximately $1 $3 million per quarter, giving an EBITDA for our share of the total of approximately $6 million during this third quarter.
Our net income for the third quarter was $2 $4 million a reduction from the earlier quarters, but with the expectation of significant improvement during the fourth quarter of this year.
On the balance sheet on slide seven the company had cash of $157 1 million on September 30th with a further $20 million available from Undrawn revolving credit facilities.
Our minimum liquidity covenant.
<unk> bank loans and credits ranges remains a maximum of $50 million, thus providing significant headroom.
Our total debt, which stood at $881 4 million at September 30, It was reduced by $38 8 million during this third quarter our debt.
Comprises of loan facility secured on our vessels of approximately $666 million of credits associate associated with the terminal.
At $44 million and two Norwegian bonds, which in aggregate totaled to 171 $7 million.
We are currently documenting the refinancing of our 215 vessel loan facility into a new six year facility as well as converting our September 2020 facility from U S LIBOR to software.
And at the same time, extending its maturity by one year to September 2025.
In addition to the 600 million Norwegian kroner denominated bond equivalent to approximately $71 $7 million, which has a maturity of November 2023 has a call option, enabling the company to exercise that.
Call on this fund, which would result in.
In a redemption payment premium of 179%.
On slide nine we outlined the estimated cash breakeven for 2022.
$18570 per day.
This lower level enables us to generate positive EBITDA and even in the toughest of market conditions, and we remained cash generative throughout the shipping cycle.
In the box on the right side of slide nine we provide our expected daily opex across the vessel segments ranging from $6 nine six $900 per day for the smaller vessels to $9100 per day for the larger more complex some older ethylene vessels.
We also provide a range of expected annual expense for our vessel Opex G&A depreciation and interest expense on that slide.
On slide 10.
We outline our historical quarterly EBITDA, showing an uplift in Q3 2021 and in Q4 2021 quarters in which the positive impact of the <unk> transaction were achieved it also shows a consistent EBITDA of approximately $55 million over the prior three quarters with.
The dip in the third quarter to $41 5 million, which we anticipate will be revenue in the fourth quarter.
And with that I'll hand, you over to <unk> for his remarks.
Thank you.
Before we get into the detail.
I just want to highlight that.
Okay.
Just want to highlight that the third quarter will be challenging met our guidance of 85% utilization. However, Q4 is shaping in shipping out in a very positive way.
Which we will talk a little bit more about.
But it's really a tale of two quarters in quarter, four and with higher volumes of ethylene export destinations being in the Asia Pacific region, and 10 ships now fully employed under time charters and ammonia is really driving utilization above 90%, but we'll spend a little bit more details on that.
In nature.
If you move to slide 12.
We are seeing increasing production of U S natural gas liquids being ethane propane and butane and.
In U S domestic demand remains flat, which is driving the growth in U S exports, which in turn has a positive impact from gas carrier demand.
In addition, U S propane and widen its competitiveness compared to oil.
And the fuel the feedstock to the petrochemical petrochemical industry.
Both increased production and relative competitiveness to alternative sources of energy and feedstock continued to drive U S exports of LPG.
We can see an uptick our handy sized exports in the graph the number right for October around 40% higher handy sized LPG export volumes compared to September of.
This year.
Similar to LPG.
<unk> remains competitive as feedstock.
Production on Italy, cheap ethane translates to low cost production of ethylene for U S producers the.
The graph on page 13.
Ethylene arbitrage opportunities in international markets.
The one next three shows U S exports of ethylene, which is increasing from about 70000 tons in September to about 110000 pumps in October .
It was a big increase for a small market.
Not only do we see export volumes go up.
But we also see changes as months I mentioned to the importing locations during third quarter. The majority of the ethylene volume is heading to Europe .
During the first weeks of fourth quarter, we see this shifting to primarily Asia Pacific destinations.
More than doubles, the nautical miles same for each ton export.
The underlying demand for additional ethylene exports is evident.
Just to give you. An example during October we maxed out on our export capacity at the terminal.
Had we had more capacity, we will have exported more.
With NGL production, increasing continued ethane rejection, we are firm believers that expansion of this capacity.
<unk> ethylene supply chain.
<unk> produces and international consumers.
Frankly, the industry needs it and Randy will shed a little bit more color on this later on in this presentation.
The other major stories ammonia.
Due to the supply constrains of traditional ammonia exports from Ukraine.
And high natural gas prices Europeans are facing low domestic production and no proximity of supply.
Is a double negative for Europe , but demand is still there.
And people need fertilizer for food production and food security Therefore European countries.
We need to look further afield to supplant two source of supply of ammonia.
Europe is now sourcing ammonia from location, we would never had ramped up in the past.
From China from Australia, Bangladesh in Middle East you can clearly see European decrease of ammonia imports from February of this year on page 14.
And then a sharp increase thereafter, however from places outside of Europe as you mentioned.
As a consequence.
We have increased around ammonia employment during third quarter from seven to 10 vessels.
Equates to about 20% of our earnings base across the fleet 25 percentage to consider only behind these brands portion.
This is a big change.
And these vessels are removed from the normal market.
So they are not now competing for LPG or other easy petrochemical cargoes, improving the supply demand balance in those segments.
You can clearly see the impact on our earnings days on the following page page 15.
If you look at the dark blue portion of the bottom.
Clearly illustrates the rapid increase in ammonia in our earnings base.
And that is alongside ethylene pushing utilization up.
95% in October are.
The big change from third quarter.
In conclusion.
Third quarter and fourth quarter is extremely straightforward.
Today, we have high volume from the terminal ethylene with the majority of the volumes heading Asia Pacific third.
Third quarter, we didn't know.
Today, we have 10 vessels fully employed in ammonia at the beginning of fourth quarter, removing tonnage availability of other cargoes.
Third quarter, we have 30% less of it.
In addition, we see higher exports of ethane and LPG from North America for the firm.
First month fourth quarter compared to the last month on September 3rd quarter, which positively underpins the supply demand balance all this is driving utilization above 90% and rates aren't parliament.
The rent increase as illustrated by our sharp uptick during October .
On the following page for handy sized semi refrigerated handy sized securely refrigerated vessels.
And in this environment and very low order book, there won't be many ships, having being added to the fleet.
Dave.
Is it above what the fourth quarter it can bring to navigator.
With that I will hand, it over to Randy Randy Reece.
Thank you Lloyd so yes, it's been a very busy too much for us recently with the company announcing three meaningful announcements regarding our use of cash.
On September 30, we announced that we entered into a joint venture agreement with greater a gas company. The joint venture owned 60% by navigator and 40% by great gas intends to acquire five ethylene vessels listed in the table below.
Two of the vessels are 17000 cubic meters built in 2018 and three of the vessels are 22000 cubic meters built in 2019.
So I expect it to be acquired on a staggered basis between December 2022, and November of 2023 a.
The total purchase price for the five vessels of $233 million and our 60% portion of that it's a little under a $140 million.
For capital outlay, assuming 65% debt financing around $90 million of navigators, a 140 million commitment. The total cash needed for the acquisitions will likely be less than $50 million spread out upon vessel delivery over the next 12 months.
Secondly on October 18th we announced the board's authorization for a share repurchase program of up to $50 million.
Of MTGE common stock to be implemented via open market purchases privately negotiated transactions or in accordance with an approved trading plan now there are numerous reasons for this primarily at repurchasing shares below NAV as an accretive use of cash and boosts. Our NAV I. Appreciate Ya also our share price was above $15.
Just as recently as June but has been sold off with the broader markets in recent months. Additionally, this program Diversifies our uses of cash which will likely be split between debt repayment terminal expansion fleet renewal and capital returns to shareholders.
So most recently yesterday afternoon, we announced a project under our existing 50 50 joint venture with enterprise products partners to expand the ethylene export terminal at Morgan's point.
Construction is expected to commence in the first quarter of 2023 and in 2024 at which time the expansion project is expected to be fully operational.
Current limited spot cargo availability is leading new customers to discuss multiyear I'll take contracts. So we expect to contract the majority of the offtake value prior to project completion.
Now in terms of specific volumes Capex and timeline, we will not be able to provide exact details today, but we do expect to publish a joint press release with all of these details in the coming weeks. So please stay tuned with that I'll turn it back over to Marge for closing remarks.
Thank you Randy So if you look at our financial position and navigator right. Now you can see that we have build cash and reduce debt during the past quarter and we now have the flexibility to.
Our robust balance sheet gives us that we can pursue both growth opportunities and capital repatriation.
In Q3.
Our fleet utilization was pretty subdued as expected and and so what's the terminal throughput.
There was strong and now we see that we have 10 vessels and floating ammonia.
In Q3, we did announce two exciting growth prospects and a share buyback and looking into Q4 now we can see that there are significantly higher utilization than what we saw in Q3, whereas October running about 94%. So we think we are reasonably solid ground when we expect that all of us.
This station will exceed 90% for the full quarter effect.
For the full quarter ago.
All the three product segments that we are transporting show strength in demand.
And as we speak the terminals is running above nameplate capacity. So we think that the outlook.
Coming months look pretty robust.
We'll be happy to take some questions from yourself back to you Randy.
Yes. Thank you Matt So operator, we'll now open the lines for some Q&A to raise their hand press star.
And then you'll have done mute yourself by pressing star six or using the zoom app just use the raise hand function.
So first question your lines your deal.
Yeah.
Hey can you hear me.
We can hear you Ben how are you.
So.
I am clearly not technologically sophisticated enough.
I am good thanks.
So I have a couple.
<unk>.
Just really quickly I appreciate that you can't or that youre not in a position to be able to talk too much about the terminal, but ah congrats for finally getting it but I am curious how if you could maybe now.
How are you thinking about.
Funding.
We'll see how much it is or whatever but.
Clearly, it's going to be some capex.
What's what's the what's the source of funds for US do you think.
Ben Hi.
The Capex is as Randy has said is likely to be spent over the next two years. So it is quite spread out.
And with our starting point in terms of cash as to where we are now we actually have sufficient cash.
Existing resources to pay for the students.
Our share of the extension.
<unk> having a.
And assets, which has costs north of $250 million in tofu.
And having no debt is not particularly good.
A couple of so we are exploring options.
As to how we can best.
Financing using the lowest cost of capital.
You'll be aware that there is no debt allowed within the joint venture itself. So therefore financing traditional bank financing as is.
The more difficult to come by.
Okay, yes that makes sense.
And.
If.
I've got three questions.
But I wanted to dig in a little bit on.
On utilization, obviously, it sounds like it's getting a lot better with just a bit here, but if I just think of this from the perspective or think of your utilization.
Especially after adjusting for vessels that are on time charter so.
Utilization for those not on time charter what would appear to be well below 80%.
It seems to me that from a net basis you'd be doing a whole lot better to just put those vessels on time charter and have full utilization, even if you'd give up a little bit on rate.
Can you help me as to why that might not make sense.
So Ben on page 15 in the presentation I don't know if you have anything from.
That's the one that shows the earnings base of murder ships are employed in which segments.
And if you see in October with the Big Spike there.
On the on time charter LPG time charter petrochemicals time charter is to pay a chunk of those.
Those vessels, so they're mostly on time charter. So we have been working on some of the logic.
Talking about you can see that LPG is fault is not really in their petrochemical spot.
Typically to be there because that is it's more of a play.
Not a structured on some of the other segments, so that but that is Mary can capture upside and so forth.
I think I think that graph. If you look at October kind of explained our.
Our journey towards kind of the topic that you were talking about.
Okay, and assuming that ammonia continues to be a bigger piece of the pie.
You would expect lets say next year or into the future.
Better utilization across the fleet is that fair.
I mean, if youre the generally the larger prime charter portion you have generally you have a higher utilization. So so thats that is correct. We believe that ammonia is going to grow is definitely not going to reduce or us.
How do you see the world and what's happening in Europe , everything with energy prices. So so I think that is there to stay which will obviously.
Prop up utilization overall at the higher level than had we not so.
So I think that that's true.
Going forward.
Okay, and then lastly for me just strategically I appreciate that you sold one of the another one of the older planet vessels.
As I think about sort of where the business is and you're shifting a little bit more towards or increasing your footprint on things related to infrastructure.
Connecting the dots.
With respect to supply chains et cetera.
And then I compare it to let's say, the LNG business, where especially in the last several years, you've seen a number of LNG carriers that are being converted into things like floating storage or.
Regasification units or whatever is there any possibility of being able to do that with the with your fleet.
And maybe even some of those older vessels.
Or are the dynamics too dissimilar and it's not.
Really practicable.
Mark when you take a go.
Yes.
When it comes to our overall strategy about the mix between shifting and terminal kind of business. It is certainly an area that we are looking into and that we would like to expand on received some very very good synergies between yes.
Vertical integration to potential <unk>.
<unk> to.
Deliver better service, who are having a broader piece of the total supply chain. So so we would be working with some of our existing partners to see if we can explore further opportunities, but doing more as kind of business and I think.
We've talked about this before.
There will be opportunities.
Maybe more than we can see right now in both the import and export side and I think navigate it would be really well positioned to to engage in those discussions and we see this attractive business and then maybe I'll leave it to you I want to talk a little bit about how we can use our existing tonnage for that.
And it's definitely.
Opportunities for using asset even older assets for infrastructure projects. So.
And just to give you an idea we are in discussions with them.
In the location whereby you can use the tanks the gap.
And the ship one of our older ships and.
Storage, either floating or you take them out and put them ashore and because the ship hull has a finite life.
But the ship tanks can live for a very long time. So there are.
Added value and I suppose in those and having those assets with our own income or interest to develop infrastructure on some of the older assets.
Okay, So a possibility maybe.
Maybe nothing.
Or it's early stages I suppose is how im hearing that correct in terms of using existing assets for that.
Correct.
Okay, Alright I appreciate it. Thank you then just one point of clarification you mentioned the <unk>.
Youre, referring to navigate them together.
Chip. This is our oldest ship, which is 24 years of age. It is not one of the ethylene capable ship. So it's just a regular semi refrigerated ship and now 24 years given that we built a 25 year policy to sell it with one year of its economic life left at $12 $7 million was considered to be a good deal.
Right.
Alright with that next.
Color.
Yeah.
E Commerce, I think you're on mute.
Matthew Press Star sticks.
Okay, sorry about that can you hear me now we can hear you.
Okay. Thanks, Andy Hey, guys Omar <unk> from Jefferies.
One quick one for you Randy you mentioned the share repurchase program as a way to take advantage of this kind of stock price relative to NAV.
How are you thinking about the buyback at the moment maybe.
And maybe one how do you put that to work since announcement I know there's blackout periods.
It hasnt been put to work in into how do you think about deploying that capital while you await.
Yes.
With the Finalization of the agreement with enterprise product.
On the on our Capex plan for the for the build out of the terminal.
Yes. Good question. So first we are still in the blackout period, obviously, we had the project announcements as well as this earnings call. So following these two things we should be lifted in the near term. So we have not repurchased any shares yet.
In terms of balancing the two as Nigel said, the capex payments for the terminal expansion will be spread out over the next 18 to 24 months. So we certainly have room for both so I would expect a simultaneous use of cash.
Okay.
Okay. Thanks, Randy and then just as a quick follow up I know you mentioned and you were pretty clear that you cant give specific details on the expansion.
Is there anything you can give us sort of big picture magnitude, where it if we think about what's coming is a.
A doubling of the size of the facility and any color you can give just to give us a frame of reference.
Alright, thank you.
So that it would be good for us to wait.
I think that discussion once we do that joins announcement together with enterprise. This is really when will slow down.
More detail.
I figured I would ask.
And Randy you Aman.
Okay. Thanks, that's it for me I'll turn it over.
Thanks Omar.
All right next caller.
Yeah.
Hey, Jim can you hear me this is Sean Morgan.
Audi Sean Yes, we can hear you well.
Alright.
So given the constraints on.
Our ability to talk about the current terminal expansion, maybe we can kind of shift.
Gears and sort of look at the.
The broader possibility brother.
Jbs or other partnerships across.
The U S Gulf and other existing maybe brownfield sites that you think or partners that you could you could do expansions of the ethylene exports beyond.
The Morgans point location.
Hi, Sean I think ethylene we have the most efficient the largest ethylene export terminal in the world together with an enterprise product partners in the U S. Gulf So.
We are expanding it any additional ethylene infrastructure beyond that.
Don.
So we are on the ethylene side, we're focused together at enterprise now there are other products.
See for see please.
And I'm.
We are looking into.
Not to mention ammonia ambler ammonia green ammonia and <unk>. So there is my name infrastructure opportunities.
Beyond Italy enrichment, taking very seriously.
Okay, so potentially partnerships with different products.
Maybe kind of more focused on existing.
Yes.
Enterprise got it.
And then in terms of the production.
Exports out of that terminal for.
Flagged a little bit was that primarily driven by sort of.
We've talked before about the bottlenecks of having to ensure that you have the capacity to meet it.
Contractual requirements for for throughput.
Was that kind of more demand driven or was it more constraints on on that kind of latter factor of making sure you have enough.
Billable capacity too.
Your Q4 obligations in Q3.
I think it's a very complex question.
And it's quite difficult because you are.
Partly ethane is partly ethylene is partly domestic production inventory management.
Demand worldwide.
Polymers so in the summer.
There was.
Readjustment from the Europeans.
My name.
Nations, the Asia Pacific didn't buy because they had enough already and their inventory levels.
And the Europeans came in however, the rules there on Europe is much smaller markets in Asia Pacific So from degenerative demand went down.
On the buying side and then at the same time.
If there were any issues with storage.
Storage and throughput in the U S. So there was some I don't know there was a whole myriad of issues, but then seemingly have been in sort of now definitely for Q4 October or November we also seeing robust nominations for December so.
I think they've learned its getting kind of back to track for ethylene point of view and today. There was an announcement by the Chinese government that they are reducing their quarantine restrictions for travel international travel from whenever they have today to three days after lunar new year, and then zero from first of April So I think.
I think demand generally picks up again.
Before Chinese lunar year, So I think I think around the right times.
Some of our most of our awkward play generally a little bit of lag from the web.
More in Europe .
Okay. So then if I'm sort of understanding correctly then.
The biggest barometer for for kind of demand and throughput than even though Europe is kind of gathering lots of headlines is still going to be China, and greater Asia and so we should have you focusing on that.
As we forecast.
I think gave you forecast.
The ethylene demand for.
For shipping.
If we go back to the general rule of thumb rehab is 25% to Europe 75 to Asia. So I think if you look at one of the graphs. We have it clearly shows that we are kind of in that arena again.
Okay, alright, thanks, a lot.
Yeah.
Thanks, Shar next caller.
Yeah, Hey, good morning, guys et cetera from Clarksons.
So just listening to the prepared remarks, there were a couple of comments about about fourth quarter.
Being an improvement tour.
Significant improvement can you can you give us a sense of magnitude of the snap back we could see in Q4.
See you on the adjusted EBITDA level in the mid fifties as that kind of a benchmark that we should be thinking about.
Mr Nolan.
I think I talked about I think I think it is I think we would be disappointed if it didn't achieve that level. We're obviously halfway through.
November so halfway through the quarter right now.
Certainly the what we've seen in October .
To date in November is indicating that that would be the case.
Yeah.
Okay. Thank you and then a question for Luca important, but yes of course the utilization yes.
And the extra day of revenue goes straight to the to the bottom line. So so that's the very direct impact which is also why we have guidance guiding on utilization because it's such an important factor in this.
Understand I appreciate it.
For Avon.
The ammonia ships I mean, if I understand correctly those are generally at higher rates.
Correct me, if I'm wrong, but you had a big increase there and you talked about some of the structural drivers in Europe .
For ammonia demand I mean, obviously, you still need to grow food, but 70% or so of the capacity in Europe is to shut down and it just seems like structural at this point.
But what do you see as the potential for the number of shifts you could put on ammonia as you look over the next the next few quarters.
I think we don't have.
Penn National growth already this year so far.
10 five.
Our handy sized ships and the amount has been extraordinary.
Is it going to stop there.
There are still some opportunities that we are exploring I don't think we will have 20, you've asked the question, but a few more in a small segment every other shaped up we take away from the normal market into an ammonia is a good thing. So there are still some opportunities there, but I think I.
The real point is.
Longevity of it.
I don't think this is going to drop off tomorrow.
This is going to be a structural change for some time, which is good for us.
Having 10 plus ships in a moment as you can see already have them.
The impact from some of the other.
Business Gen sphere, we do and can.
Kickoff as well so the stars are aligning a little bit.
Yeah.
To continue with that theme on that restructuring demand factors for shipping.
A lot of talk about the terminal certainly in terms of the cash flows that that that could generate on its own.
Its own right, but in terms of demand for shipping for your ethylene carriers.
What could that what could that mean.
And so as additional volumes come online in terms of shipping demand.
The number of vessels are.
However, you want to think about it.
I think it's a it's more of a value chain going back to the value chain of ethylene.
So the producers in the U S needs to enter.
Our partner Enterprise product partners are creating.
Patient six in <unk> connect.
Connecting crackers, expanding the pipeline network, creating indices in Mont Belvieu, so people can manage their risk.
The.
Forward curves and so expanding the terminal is all connected.
And making the production of ethylene.
In the U S more efficient and competitive.
And the other markets International markets are now, particularly now in a file or high oil environment contemplating.
Should I continue.
<unk> my own ethylene from MOFCOM.
Or should I actually diversify and buy and import some parts of ethylene from U S. So it's really getting into a more <unk>.
Structural thinking we're buying should have been there should I buy and that is quite evident and of course, we are connecting the two.
And it depends a little bit on on how structural this will be we are a big believers that it's going to move transition away from.
Paul.
Play, which we talked to Bob generally voyage charters for ethylene to be more structural I end the pipeline service between the U S producers.
Fixed locations international.
And if that happens is the implication on the shipping side et cetera, and we shall see we already have a large fleet.
There are opportunities in the value chain.
Sure.
If I understand correctly and I guess, it's fair to say that.
If you bring on another 8 million tons.
Vaseline export capacity in.
That has to move on chips, so that will.
Does that still demand as well.
Okay.
It will impact the supply demand balance absolutely.
Okay. Thank you very much.
Thanks Peter.
Next caller your line should be open.
Yeah.
Good morning, Ken emblems on somebody Mr. Zhang.
Thank you my questions.
We are adding to the vessel acquisitions, you announced a month ago or so pricing seems quite attractive is it something you could maybe repeat going forward or was it more of a wonderful opportunity you took advantage of given the existing relationship with Senator from Luna.
Mark when you have a go at that.
I can kick us off here.
We are definitely looking to continue to consolidate the market I mean, if you look at navigators history, it's something that has been done throughout history by buying ships when they when they became available in the market secondhand.
And this is something that we're looking at looking at Newbuild prices. They are.
Hi.
Lead time before delivery.
We'll ship today is long so it doesn't seem very attractive to go out and build new bills for keeping you will just ordinary beefing up their fleet. So we would much rather be looking around in the second type of occupancy if theres some illness.
Would be interested in selling that being said, it's not a huge market. This one I mean, there is a small handful of people.
And then some of them are quite content, where they are.
If we see a market that's showing a little bit more firmness as it is right now it may be that that discretion doesn't get any easier.
But it's clearly part of our overall strategy to continue to be.
Consolidator.
We'd be looking at whatever transaction setup.
Again, we are not going to go out and buy a tough dollar just to be the consolidator, we would only do accretive deals.
That's helpful. Thank you.
You've been clear you cannot provide much commentary aimed to complete numbers of expansion but.
Should we expect the existing capacity to continue operating normally.
Or should we expect some kind of investment while the expansion here.
Constructed.
We should expect that the that the acre.
At current.
<unk> is continuing so that the build out period would be.
Separately.
Yes.
It would be an impact.
Thank you that's all for me.
Thanks go ahead I believe we have one more caller.
Okay.
Hi, Alicia spanned from CBC am I clear.
And when you are clear how are you.
First I'd like to thank you for the presentation and yes I have two questions first is that I noticed that you're addressing now he would like to buy five vessels from Greg <unk>.
And therefore, but on page six.
Just noticed that the operating revenue from the NEPOOL exactly half compared to the same correct.
And just help on 'twenty one is there any reason for the decrease.
Yes, that's my first question.
Would that be you know.
Maybe just talk a little bit about how that shows up in our P&L.
Yes, its more its more of a commercial question.
Is the spot market don't see ethylene and there were it was just less.
Utilization on those ships that accounted for that.
Okay.
Thanks, and then.
My second question I also have a final one.
And as I would like to raise a question about the price gap on Russia in audio and audio products.
We also have the customers.
Who are from Russia.
And the time charter with me.
And until 2023, so I would like to know as the price gap would be.
Has any effect on that.
Our AG and gas carrier markets.
The the two ships you referred to are on.
10 year charter.
So they have one year remaining.
Yeah the products they transport those two vessels.
Generally propane and butane.
And the buyers are.
Morocco and Turkey.
So they are trading in between the Baltic to those countries.
Priced we don't take for pipeline.
Products.
So the pricing that.
Our customer around the buyers agree we don't know.
Okay. So there wont be any effect right.
No not not really enough to over the next 12 months in terms of the supply demand environment.
What ships are available on <unk> or not.
That's correct.
Okay. Thanks, Thanks, and that's all for my question.
Thank you so much.
Lots of closing comments.
Yeah.
No. Thanks, a lot Felicia.
Listening in it was it was great and thanks for a lot of good questions. Some of them go ahead and spend online and then some of them doing all along our dialogue we will of course be available.
Two to just follow up is there any more questions that you may have.
Otherwise, we look forward to seeing you guys conferences or investor meetings.
Thank you.