Q4 2024 Navigator Holdings Ltd Earnings Call
As such 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 Securities and Exchange Commission with that I will now pass the floor to Matt's Pizza Zakho. The company's CEO. Please go ahead.
That's.
Speaker Change: Good morning, and good afternoon, and thank you very much for joining this navigator gas earnings call for Q4 2024.
At the start I will review the key data on our Q4 'twenty for performance and then I'll go over the outlook for the rest of the year.
Speaker Change: After that Gary waving and Randy will discuss the results in more detail.
Gary Waving: In the fourth quarter, we generated more revenues up 2% compared to same period previous year. This was driven by slightly higher utilization.
Gary Waving: Adjusted EBITDA for Q4 came in just over $73 million above both of the $72 million in the same period previous year as well as the $68 million of Q3.
Gary Waving: The balance sheet is strong with a robust cash position even after we repaid our final December we paid our final December installment of $50 million on the terminal expansion project and we repaid on our debt facilities and paid further installments on the Mtc new buildings.
Gary Waving: The return of capital continued in Q4 with both the <unk> since fixed dividend and share buybacks up to in combination 25% of net income.
Gary Waving: During Q4, we.
Gary Waving: We issued $100 million of new unsecured bonds at 725%.
Gary Waving: This was the tightest spread for any dollar denominated shipping bonds issued in the Nordic market since 2008.
Gary Waving: Commercially we held.
Gary Waving: TCE rates high and we secured average Q4 TCE rates of $28341, which is approximately equal to the rates of the same period previous year.
Gary Waving: We achieved utilization above 92% in light without guidance and higher than both Q3 and same period previous year.
Gary Waving: We overall pleased with our ability to maintain robust TCE rates and utilization in a market that was temporarily hit by softer ethylene transport demand.
Gary Waving: Throughput at our joint venture ethylene export terminal was 190 or 159000 tons for the quarter higher than Q3, but lower than Q4 2023 and below capacity.
Gary Waving: This was caused by U S cracker turnarounds, which reduced domestic supply.
Gary Waving: Causing higher domestic prices and a narrow arbitrage.
Gary Waving: The expansion of the terminal was completed on time on budget in December.
Gary Waving: Okay.
Gary Waving: In November we exercised our option for an additional 248500 cubic meter midsized ethylene carriers with expected delivery in November 2027, and January 2028.
Gary Waving: We also signed the time charter agreement for the first mtc vessel to be delivered.
Gary Waving: In December 24, we agreed to acquire three handy sized ethylene carriers for a total of $83 9 million to.
Gary Waving: Two of the secondhand vessels were delivered in February with the final delivery coming in the next few days.
Okay.
Gary Waving: While geopolitical tension reduces our ability to do longer term forecasting right now we maintain confident about.
Gary Waving: About the outlook for our business and for the near term.
Gary Waving: We expect vessel utilization to continue to be high in Q1 close to what we saw in Q4, and we expect to continue to see robust TCE rates.
Gary Waving: Also this time around.
Gary Waving: The ability of our vessels to transport different cockle grades prove valuable.
Gary Waving: Petrochemicals, such as ethane ethylene propylene and butadiene now make up a total of 46% of earnings days, that's higher than what we've seen previously.
Gary Waving: The vessel supply picture remains attractive with a handy size order book of about 10% of the vessels on water.
Gary Waving: In addition, now 22% of the global handy size vessels on the water and more than 20 years of age.
Gary Waving: With that summary, I'll just hand, it over to you Gary and you can give a little bit more details about our financial results. Please go ahead.
Thank you very much Madison and welcome to everybody.
Speaker Change: Fourth quarter 2000, <unk> financial Showa, another strong results as Matt was mentioning maintaining our trend over many recent quarters now not least as a result of our flexible fleet as Matt was alluding to could charter rates in our operational efficiency and control labor costs, Jimmy on slide six following another good operating quarter.
Speaker Change: <unk> EBITDA was $73 $4 million in the fourth quarter of 2024 due to those continuing robust charter rates and strong stable utilization.
Speaker Change: Probably going to lead us to record any.
Speaker Change: Unadjusted EBITDA for navigator of 290 to nearly $293 million, despite very very slightly lower time charter equivalent rates in this fourth quarter of 2020 full compared to fourth quarter of 2023.
Speaker Change: And putting some more numbers on that our total operating revenue for the quarter was $144 million with.
Speaker Change: With a robust utilization of 92, 2% and continuing healthy time charter equivalent rates as Matt just mentioned that were on average $28341 per day in the fourth quarter.
Speaker Change: In the fourth quarter 2024 vessel operating expenses was slightly down at $46 million compared to the fourth quarter of 2023 that is slightly up compared to the average of the first three quarters of 2024, but which is typical at the end of the financial year as the number of accruals of books.
Speaker Change: Depreciation is broadly in line with previous quarters in the year and general and admin costs of $9 4 million in the fourth quarter is in line with the third quarter of 2024.
Speaker Change: But both of those were slightly elevated compared to our run rates as we recorded some nonrecurring costs, mainly legal costs related to projects.
Speaker Change: Our unrealized movements on non designated derivative instruments resulted in a small loss in the fourth quarter of <unk> $3 million.
Speaker Change: This being related to movements in the fair market value of our long term interest rate swaps, which affects our net income which had no impact on our cash or liquidity.
Speaker Change: We also reported a lower net interest expense in the fourth quarter of 2024 compared to the fourth quarter of 2023 due to lower sulfur rates.
Speaker Change: We also have a noncash unrealized loss on foreign exchange in this fourth quarter of $2.8 million.
Speaker Change: Our income tax line reflects current tax mainly deferred taxes, primarily derived from our investments and share of profits in our ethylene export terminal at Morgan's point and <unk>.
Overall for the fourth quarter, including our share of results from our joint venture net income attributable to stockholders at Navigator holdings was $21 $6 million with a basic earnings per share to <unk> 30.
Speaker Change: 31, and adjusted net income, which excludes unrealized gains and losses on derivatives foreign exchange writeoff of deferred financing costs and any gain or loss on the repayment of bonds with $27 million or <unk> 39 per share.
Speaker Change: Ethylene terminal throughput volumes in Q4, 2004, with 159193 tons as Matt mentioned, resulting in a contribution of $5 6 million from our ethylene terminal joint venture and as usual Randy will give a little bit more detail on the terminal shortly.
Speaker Change: On slide seven our balance sheet remains very strong with a cash and cash equivalents balance of $139 8 million at December 31, 2024.
Speaker Change: <unk> paying out $35 million for scheduled loan repayments over $1 million in share buybacks in respect to the third quarter 2024.
Speaker Change: <unk> $57 million in the quarter and payments towards our ethylene terminal expansion and a further $21 million towards a full <unk> newbuild vessels.
In December 2020, full and as planned we utilized our Undrawn bank facilities to cover our share of the final major payment towards our terminal expansion project to $50 million.
Speaker Change: Based on our outlook today, we anticipate further positive cash generation framework from our operations in the first quarter of 2025 and beyond.
Speaker Change: On slide eight our recently closed financing transactions have helped us to extend our debt maturities improved our already strong liquidity reduced our interest expense and helped US fund accretive fleet expansion.
Speaker Change: In the fourth quarter of 2024, we fully drew down on our new $147 $6 million six year secured term loan and revolving credit facility, which was used to refinance our existing March 2019 skewed loan facility that would have matured in March 2025 and to repurchase in October the navigator Aurora.
Speaker Change: Pursuant to our existing October 2019 sales leaseback arrangement.
Speaker Change: We're also very pleased to repeat that the margin of 190 basis points includes the sustainability linked adjustment to five basis points, reflecting our continued commitment to concentrating our efforts on the environmental impacts of our fleets.
Speaker Change: Then on October 17, 2024, the company successfully issued $100 million of new senior unsecured bonds and as noted the bond market.
Speaker Change: <unk> 2024 bonds will mature in October 2029, and the fixed coupon of 725% per annum and.
Speaker Change: And we used the proceeds primarily to call and cancel our previous 2020 bond paid a coupon of 8% and this core transaction settled on November 1st 2024.
Speaker Change: Turning to the new year on February seven 2025, we entered into a new senior secured term loan facility of $74 $6 million to finance the majority of the purchase price of three secondhand ethylene capable vessels.
Speaker Change: We've completed the acquisition of two of the three vessels the navigator Hyperion and navigate the tightened on February 19, and February 2024, respectively.
Speaker Change: With a third vessel that will be renamed the navigate the Vesta currently due to be delivered to us on March 17.
Speaker Change: We didn't have one debt maturity due in less than 12 months, which will be the refinancing of our $210 million of bank debt facility due to mature in September 2025, and with the balloon <unk> of $136 million.
Speaker Change: Refinancing discussions for this are well underway with a supportive lender group and we expect this refinancing will result in a positive liquidity event for the company and be completed in the second quarter of 2025.
Speaker Change: On slide nine our leverage remains in a strong position in a still reducing with net debt to adjusted EBITDA. Two four times for the 12 months to December 31, 2000 to ensure and.
Speaker Change: Our net debt to capitalization was 34% at the end of the year.
Speaker Change: We're continuing to make substantial debt repayments with around $120 million of average annual scheduled debt amortization payments expected across the coming three years 2025 to 2027 and within our refinancing work streams. We continue to look for further ways to reduce our average cost of debt.
Hogans point terminal expansion, which increases the export capacity of the ethylene export terminal was completed and put into service on December 19, 2024 and.
Speaker Change: And we expect the final cost will come in at approximately $128 million just below our previous expectation of 130.
Speaker Change: On slide 10, our estimated cash breakeven for 2025.
Is $20610 per day, which shows a slight decrease compared to the final guidance. We provided back in November 2024 in relation to <unk> to ensure.
Speaker Change: This figure is orly and includes forecast scheduled debt repayments and our dry dock schedule.
Speaker Change: The breakeven level relative to today's charter rates recalling our average TCE for the fourth quarter of 2024 was $28341 per day provides substantial headroom for navigator to generate positive EBITDA throughout the shipping cycle.
Speaker Change: On the right is our Opex guidance now for 2025 across our different vessel size segments, ranging from 8050 per day for a smaller vessels up to just over $11000 per day for a larger more complex ethylene vessels.
Speaker Change: Following the lowest guidance for this year and for the first quarter of 2025 across vessel Opex General and admin depreciation and cash interest expense.
Speaker Change: The full year guidance for vessel Opex for 2025 towards the bottom is.
Speaker Change: Higher than the total for 2024 as we have three extra vessels in 2025 for the majority of the year costs relating to our crew rising.
Speaker Change: Not just for navigators, but across the shipping industry and we've increased our spend on energy saving technology compared to 2000 to ensure.
Speaker Change: Slide 11 outlines our historic quarterly adjusted EBITDA, showing this fourth quarter's solid figure and demonstrating yet another very positive and consistent results as we've reported for many quarters now despite a slightly prolonged and the ethylene arbitrage, which often will cover shortly.
Speaker Change: On the right side as we have done before we show a historic adjusted EBITA for 2023 last 12 months and an annualized adjusted EBITDA based on the full fourth quarter's results.
Speaker Change: In addition, the EBITDA loss than to Ratchet those provide some sensitivity and illustrates an increase in adjusted EBITDA of approximately $19 million for each $1000 incremental increase in average time charter equivalent rates per day. This is slightly higher than we were showing in the previous quarter, which was.
Speaker Change: An increase of approximately $18 million.
Speaker Change: And finally on slide 12, we have 15 vessels scheduled for dry docking during 2025 of which the first one has already successfully completed on March 7th and in total for the 15 vessels were expecting 413 off hire days and total drydocking capex of approximately $30 million all of which is scheduled for the call.
And included in our cash flow plans.
Speaker Change: As we set out before some further detail on the expected timing and cost of these drydocks as mentioned below.
Speaker Change: And we continue to take out drydocks as opportunities to install these energy saving technologies on our vessels and this will continue in 2025 as I mentioned before.
Speaker Change: At <unk> total cost of around $5 $6 million. Many of these technologies have a very short payback period, helping us to improve our environmental impact and improve operating efficiency and also got better data to make further future improvements.
Speaker Change: So with that I will hand, you over to <unk> to take us through a commercial update and outlook.
Speaker Change: Thank you Gary.
Speaker Change: And good morning to everyone.
Speaker Change: Let's take a look at the current rate environment, which you'll find on page 14.
Speaker Change: There are two key trends to highlight on this page first.
And the fully refrigerated markets, we're seeing a downward pressure on rates you can see this in the chart very large gas carriers and black medium gas carriers and grade and handy sized gas carriers much blue.
Speaker Change: Although we only have six of these I'm only to answer Paul.
Speaker Change: The main reason.
There is an oversupply coming from the VLCC segment, putting pressure on rates for fully refrigerated ships.
Speaker Change: This is part of the market is really waiting for a lift from the U S terminal expansions that are currently being constructed which we'll discuss in a few slides.
Speaker Change: Boosting demand should start to take effect later this year.
Speaker Change: Secondly, semi refrigerated handy sized vessels, where we have most of our assets are holding up much much better.
Speaker Change: That's the dark Blue line in the chart.
Speaker Change: Unlike truly refrigerated segment. This part of the market remained stable at historically healthy rate levels why <unk>.
Speaker Change: Because these vessels and balanced between LPG ammonia uneasy petrochemicals.
Speaker Change: Keeping demand steady.
Speaker Change: One additional key takeaway here.
Speaker Change: Since the handy sized ethylene rate benchmark was introduced three years ago shown in green.
Speaker Change: This vessel class has now become the highest earner among all the vessel classes.
Speaker Change: Yeah.
Speaker Change: And that is something.
Speaker Change:
Speaker Change: That's directly linked to U S ethylene and ethane exports as well as the physical restrictions other vessel types.
Speaker Change: To carry them.
Speaker Change: And this is of course, good news for us.
Speaker Change: Our petrochemical capability is proving to be a strong advantage in the current market.
Speaker Change: Beyond that thing in ethylene.
Speaker Change: Bolinas do design are also helping to support rates.
Speaker Change: Petrochemical Congress are making up a bigger share of our total fleet, earning stage compared to previous years. So if you look at page 15.
Speaker Change: Youll see that petrochemicals now represent 46 of our total 46% of our total earnings days. So that's the two bars compared to LPG at 36% animal now holding steady at 18%.
Speaker Change: This growing share of petrochemicals is a key reason why have you been able to maintain strong fleet utilization during the last few months.
Speaker Change: Now turning to the outlook and what to look out for.
Speaker Change: The first thing to keep an eye on as the U S natural gas liquids production and U S. Midstream takeaway capacity. So there are no surprises here.
Speaker Change: If you look on page 16, the EIA data.
Speaker Change: Shows NGL production continues to climb.
More NGL production means more ethane supply and it means more LPG supply.
Speaker Change: However, American terminal takeaway capacity is already close to Max levels.
Speaker Change: To keep up with growing output midstream companies, such as enterprise product partners and others.
Speaker Change: Need to build more gas processing plants more pipelines more fractionator is and more export terminal capacity.
Speaker Change: And that is exactly what is happening.
Speaker Change: Over the next four years U S. Export capacity is expected to increase by at least two thirds are an additional 40 million tons of annual throughput compared to today's levels, that's a big deal.
Speaker Change: It signals a strong growth through the rest of the decade benefiting all segments of gas shipping.
Speaker Change: For navigator the biggest advantage comes from competitively priced ethane and ethylene.
Speaker Change: So take a look at the bottom left graph on page 17.
Speaker Change: The Gray line.
Speaker Change: <unk> U S ethylene prices I mean these are quoted by August.
Speaker Change: A couple of months ago prices spiked above $750 per ton due to production turnarounds and maintenance.
Speaker Change: At that time.
Speaker Change: With European and Asian delivered prices around $900 per tonne there wasn't much export activity.
Speaker Change: Arbitrage.
Speaker Change: Effectively clubs for ethylene from the U S. Now U S. Ethylene prices are gradually correcting driven down by cheaper ethane.
Speaker Change: And increasing production.
Speaker Change: Yesterday.
Speaker Change: U S ethylene last quarter that $580 per tonne nearly 200.
Speaker Change: So our difference since the peak a few months ago.
Meanwhile, international prices remain stable.
Speaker Change: This should lead to more exports in the second quarter and beyond because the arbitrage is widening.
Speaker Change: In the meantime, our vessels are being switching grades two carrier at the ethane.
Speaker Change: It's been a major factor in maintaining our high utilization.
Speaker Change: You can see on the right hand graph that our fleet utilization started the year very slightly ahead of where we're at at this time in 2024.
Speaker Change: On page 18, it shows the current fleet and upcoming vessel supply across all segments.
Speaker Change: The handy sized segment in particular is very little new tonnage coming in over the next three years, let alone the next 12 months, which.
Speaker Change: Which is a positive factor for us.
Speaker Change: Clear visibility of the supply picture over the near and medium term is very helpful. When thinking about supply and demand balance going forward.
Speaker Change: So the bottom line, despite market uncertainty and geopolitical risks, our core segments of ethylene capable and semi refrigerated vessels.
Speaker Change: Forming a better compared to other gas carrier segments.
Speaker Change: And while ethylene exports haven't been as strong recently.
Speaker Change: We successfully pivoted to carry more ethane, while we wait for the arbitrage to return.
Speaker Change: With that I'll hand things over to Randy to walk through the latest developments brannen.
Randy Brannen: Thank you OIBDA following up on several announcements we made in recent months, we want to provide some additional details on updated developments regarding some of those announcements so turning to slide 20.
Randy Brannen: We're pleased to announce our return of capital for the fourth quarter of 2024, but before we get to that I want to highlight that during the fourth quarter, we repurchased more than 69000 common shares of NDS in the open market totaling $1 1 million for an average price of $15 88 per share now looking ahead in line with our recent.
Randy Brannen: We announced the return of capital policy and the illustrative table below we're returning 25% of net income or five $4 million to shareholders. During this first quarter. The board has declared a cash dividend of <unk> <unk> per share payable on April 3rd to all shareholders of record as of March 24th equating to a quarterly cash.
Randy Brannen: <unk> payment of $3 5 million. Additionally.
Randy Brannen: Additionally, with our shares trading well below our estimated <unk>.
Randy Brannen: Of greater than $27 per share we will use the variable portion of the return of capital policy for share buybacks.
Randy Brannen: As such we expect to repurchase one $9 million of N V. G. S. Common shares between now and quarter end in the next two and a half weeks such that the dividend and share repurchases together equaled 25% of net income or $5 4 million for the quarter as seen over the past few years returning capital to shareholders.
Randy Brannen: <unk> will remain a primary focus for us going forward.
Randy Brannen: Now turning to our recently completed ethylene export terminal expansion on slide 21.
Randy Brannen: Following up on a previous announcement regarding the expansion of the ethylene export terminal. The project was completed on time and on budget in mid December and has been officially put into service. The flex trained triples, the ethylene refrigeration capacity at Morgan's point from 125 tons per hour to 375 tons per hour.
Randy Brannen: Sure <unk>.
Randy Brannen: Creasing the annual throughput capacity.
Randy Brannen: 155 million tons per year or 130000 tonnes per month.
Randy Brannen: That said due to the U S cracker turnarounds and the resulting reduction in domestic supply the ethylene arbitrage remains relatively tight but we continue to sell spot cargoes and we expect the throughput capacity to increase in the coming months, especially as the domestic ethylene forward curve is forecasting a wider arbitrage going forward.
As already been diluted to.
Randy Brannen: And in terms of Capex, we paid $124 million through December 31st and have completed the final payment of $4 million in January for a total capex of $128 million of what you might get a small rebate following some of the final tuning.
As for contracting the expansion Italians, the second and larger new multi year offtake contract has been side and we continue to expect that additional off take capacity will be contracted sometime in the coming months.
Randy Brannen: Now turning to slide 22.
Randy Brannen: Following the terminal expansion and the expected increase in ethylene volumes in the coming quarters and years. We recently agreed to acquire three second hand, German Delta handy sized ethylene carriers for a total purchase price of $83 9 million.
Randy Brannen: Two of the vessels were delivered in February and the third vessel is expected to be delivered next week to note navigator Hyperion burst cargo as a part of our fleet was loading ethane at Morgan's point and its currently en route to Asia as you can see in the map to the right.
Randy Brannen: The vast majority of the Capex has been financed through new debt totaling $74 6 million. So the acquisition is only requiring $10 million or so in total of our cash.
Randy Brannen: Now, finishing on slide 23, the secondhand vessels that we recently acquired will support the terminal expansion in the near term, but we also want to support the terminal expansion in the longer term. So in November we exercised our options for two new 48500 cubic meter capacity liquefied ethylene gas carriers at a price of $102 9 million.
Randy Brannen: The vessels are scheduled to be delivered in late 2027 and early 2028.
Randy Brannen: Note. These new building vessels will be the largest in our fleet have dual fuel engines that can burn ethane and will be made retrofit ready for using ammonia as a fuel there will also be able to transit through the old Panama locks as well as the new Panama Canal locks most.
Randy Brannen: Most importantly, these ethylene carriers will support the terminal expansion as customers who are looking at signing offtake contracts are also looking at securing their shipping needs as such we have signed a time charter agreement for the first vessel to be delivered and discussions are ongoing with multiple customers interested in chartering. The other vessels. So we expect the fixed <unk>.
Randy Brannen: Our vessels on time charters prior to delivery in 2027 and early 2008.
Randy Brannen: Now lastly in terms of vessel financing, we have already paid the initial 10% deposit totaling $42 million in September and in December and we expect to complete financing arrangement sometime next year. So with all of that I will now turn it back over to Mike for some closing remarks.
Mike: Thanks, a lot Randy.
Mike: So then in summary, we delivered another solid quarter with strong operating cash flows and we have in front of US a Q1 that has come off to a good start.
Mike: If we stay on our toes and we refinance well ahead of maturities at lower margins and better terms, we continue to pay quarterly cash dividends and buybacks yes.
Mike: We have in the past sort out opportunities for additional share buybacks and we will continue to look for opportunities to increase capital distributions to our shareholders.
Mike: Despite the current geopolitical tension we remain confident about the demand fundamentals of our business.
Continued growth in U S natural gas liquids production and the significant build out U S export terminal capacity over the next four years will support exports and thereby also transport demand.
Near term volumes through the exports ethylene terminal I expect it to gradually recover with a widening ethylene arbitrage.
Mike: The vessel supply picture remains attractive with a small handy size order book and an aging global fleet fleet.
Thanks, a lot for listening and now I'll just hand.
Mike: I hand, it back to you Randy So you can coordinate the Q&A.
Randy Brannen: Sure. Thanks, Thank you Matt operator, we'll now open the lines for some Q&A to raise your hand, you can press star nine and then you'll have the Unmeet yourself by also pressing star six or if using the zoom app just use the raise hand function.
Mike: So first question your line should be open.
Randy Brannen: Alright.
Ben Nolan: Can you hear me Ray I see you Ben Nolan from Stifel Alright. Thank you.
Ben Nolan: Well you know just another day in Paradise.
Ben Nolan: Aye.
Ben Nolan: I have a couple of questions. So the first.
Speaker Change: Well the first is maybe around the chartering I know there was probably about a dozen or so of your ships that are coming currently on contract to come off over the next.
Speaker Change: Six months or so just curious if you could give a little color as to sort of where the contract market is relative to where those assets are currently contracted or is that something that you.
Speaker Change: We anticipate there, possibly being an uplift as you are.
Speaker Change: New contracts are signed.
Speaker Change: But I think the slide in the Powerpoint gives a very good indication of where the semi refrigerated market is.
Speaker Change: Also the fully refrigerated marketing, which is quite small for us.
Speaker Change: Just on the two ships that are trading in the spot market there but.
Speaker Change: I believe that the ethylene.
Speaker Change: Italy and <unk>.
Speaker Change: <unk> market for handy sized will strengthen.
Speaker Change: Alongside the arbitrage so the arbitrage as I mentioned for U S produced ethylene to the world has widened by almost $200 over the last two months. So it is continuing to slides and with that I think that the demand for handy sized ethylene ships will increase and therefore push.
Speaker Change: That market in a more.
Speaker Change: Tight position.
Speaker Change: Yeah.
Speaker Change: Can I follow up I guess I'm asking more about.
Speaker Change: You and some of the existing time charter contracts roll off are they at levels that are sort of below current market levels or like the existing contracts or are they how do they compare to where you know where we.
Speaker Change: We are less.
Speaker Change: So good for us that we don't our core is not fully refrigerated shipping. So you can see on that the correlation on the time charter.
Speaker Change: Right graph.
Is that all the fully refrigerated segments are sliding, but not our core semi ref.
Speaker Change: Two needs so.
Speaker Change: No.
Speaker Change: I think thats pretty good and.
Speaker Change: And the rates that we are discussing are around those levels that you see so yes.
Speaker Change: Think we're pretty comfortable so higher.
Andrew: Hey, Andrew.
Speaker Change: And then the more they had been.
Speaker Change: Okay.
Speaker Change: But the ethylene rigs, but we're not going to give away ethylene ships on cheap rates because we believe that once the arbitrage is backhaul I think that market will tighten too so.
Speaker Change: We shall see on next quarter, you'll probably have the same question.
Speaker Change: Well.
Speaker Change: By then you will have re contracted a few of them. So we will know but.
Speaker Change: Okay.
Speaker Change: And well I guess I had two more quickly.
Speaker Change: Is there to get an understanding of the contribution from the expansion should we expect given that the arbitrage on ethylene is still.
Speaker Change: For the first quarter.
Speaker Change: Isn't been opened very much should we expect the contribution from the joint venture it could be similar to what it would or what it was in the fourth quarter is that a fair assumption.
Speaker Change: So for the fourth quarter. We also got some deficiencies a lot from <unk> right. So the <unk> volumes will be a little lower than the <unk> volumes, we will get some deficiencies from the fourth quarter that roll into the first quarter, probably not as much so.
Speaker Change: Results during the first quarter of 2025 will be softer than the fourth quarter of 2024 from the terminal.
Speaker Change: Okay.
Speaker Change: And then lastly for me or even or March.
Speaker Change: There is a there's a lot going on.
Speaker Change: Geopolitically around the World just curious if you could maybe frame in how to think about what the impact on on your business would be if you know as the Red sea to the extent that it remains open and also if there is.
Speaker Change: A piece that comes around in the Ukraine, how do we think about.
Speaker Change: What does that do to or what in theory would that do to the underlying dynamics of the market.
Speaker Change: Maybe I can just kick us off and then you can chime in.
Speaker Change: And add to it I think when it comes to the Red Sea.
Speaker Change: We hope that there'll be a piece of code that will can continue and but it's not going to affect our business very much. We don't do a lot of transit through the Red Sea and it doesn't impact the overall capacity utilization of our segments very much when it comes to the war in Ukraine.
It's pretty much a similar picture I would be very surprised if we saw a full restoration of the flows that we sold before the war.
Speaker Change: In the near term.
Speaker Change: We did see some some pickup in ammonia transportation.
The effect of the wall, but we think that thats going to stay active for quite a period. When it comes to trade friction that's publicly a little bit more of a potential impacts. So far we haven't seen any of the products that we carry that have been subject to tariffs, it's mainly been on coal on oil and on.
Speaker Change: Natural gas between China, and the U S. So far the commodities. We are transporting have have not been affected but obviously if it turns out that a large terrace is put on by China onto let's say some of the cargos, we transport now it would be negative for the arbitrage negative for the U S product competitiveness.
Speaker Change: And that would have a negative effect on our rates.
Speaker Change: Rates, but we haven't seen that and we haven't seen any indication that they will show up.
Evan: Hi, Evan.
Yes, I concur.
Speaker Change: I think not only for the handy size booked for the entire gas carrier segment not that much traffic through the red sea or or there so less of an impact for us compared to containers and other.
Evan: Other industries.
Speaker Change: Got it and I appreciate the.
Speaker Change: The free info there.
Speaker Change: On tariffs that was helpful.
Speaker Change: Okay. That's it for me thank you.
Speaker Change: You bet.
Speaker Change: Thank you and next up we have Spiro doing this from city spear your line's open.
Spiro: Hey, good morning team. Thanks for the question Nice pronunciation there Andy appreciate it.
Speaker Change: Let me just start with Morgans point, we could you have been operating facility for a few months now so maybe just aside from the narrow our but it sounds like it's improving.
Speaker Change: The facility has been ramping if you're capable today of running sort of near Max utilization rates and Ryan you also mentioned an offtake agreement in the books now maybe just remind US is your strategy to contract all that off take out do you plan on keeping some spot and maybe just how to think about some of the gating items to getting a few more of those over the line.
Speaker Change: Sure Yes.
On the operations fully operational right.
Speaker Change: Unit the enterprise navigator both of US for the terminal have switched from builders insurance two operators insurance. So clearly the insurers are also comfortable with that.
Speaker Change: All the operational and up and running clearly not fully utilized but we have said ethylene and shielded from the flex train and put it into the storage tank. So operationally. It is there if the arb blew out next week, we could do the 130000 tons in April right. So that is not any issues in terms of the offtake contracts, yes, we did sign.
Speaker Change: Second one so we are building up to hopefully, 90% offtake now depending on rates and terms were not opposed to going to the full $1 five 5 million tonnes, but if we can get to 130 514, 90%.
Elevation offtake that gives us a 10% buffer for some maintenance or some production disruption whether it be weather related what have you, but also some spot cargos because again looking back at 2022 and 2023, we did nameplate capacity right at 1 million tons to 987000 tonnes for the full year. So we had to say no.
Speaker Change: To a lot of spot cargo opportunities and frankly, no to a lot of potential new customers. So going forward, we do want to have a little bit of that spot optionality to say, yes to new customers building out the customer base and also the spot rates are usually always higher than the term rates right so to answer.
Speaker Change: That question, yes, we'd like to get it to 90% ish of the nameplate capacity of $155 million Lastly in terms of hurdles you mentioned, yeah right now it had been vessel availability right Thats tightened. It still is but also frankly, it's really the arb right and if you are a trader and you see a tight ethylene arb.
Speaker Change: Currently.
Speaker Change: It's hard for them to look forward two or three years now and users are certainly more longer looking in terms of their focus, but we're going to have a portfolio of both traders as well as end users and we think those contracts will be signed in the coming months and quarters.
Speaker Change: Great Great. So actually quite a few things open up once that arb opens up as well so good to hear.
Speaker Change: Second question switching gears a bit maybe just go into vessel sales.
Speaker Change: It sounds like Youre still trying to sell three more of those and.
And you're in conversations now I'm just curious if you get a little more detail on the status of those conversations how far along those are is there a scenario where all three go to a single buyer and then lastly, just how to think about the use of that cash.
Speaker Change: Yes, I can kick us off here.
Speaker Change: We are looking at different options. We are looking there. Some interested buyers that are just looking on a vessel by vessel case, so where so we have a number of.
Speaker Change: Potential buyers that have been now and inspecting our vessels and we have those negotiations at different stages.
Speaker Change: There could also be a situation, where one buyer and it takes off.
Speaker Change: Two or three and we will of course welcomed at so it's ongoing.
Speaker Change: We've had some.
Speaker Change: Near fields.
Speaker Change: And it didn't come through and we have new that are coming up so it's a it's a quite so wouldn't.
Speaker Change: I wouldn't say fluid, but it's a market that is developing over time and we will continue our efforts to sell them. We think they have the right age now to exit our fleet and we also see that the vessel values are quite robust.
Speaker Change: And we have low book values and those shifts. So we think it would be a win win if we were to sell the ships right now so it's a.
Speaker Change: It's an effort that is ongoing and will continue.
Speaker Change: Very helpful. I'll leave it there thank you gentlemen.
Speaker Change: Thank you Sarah.
Speaker Change: Alright next up we've got Omar <unk> from Jefferies.
Speaker Change: Thanks Randy.
Speaker Change: Alright, Thanks, guys for the update just a couple of questions on my end, maybe just first.
Speaker Change: Just on the corporate re domicile that you've mentioned in the press release look into potentially reevaluate going from the Marshall Islands to England and Wales can you give us maybe just some context of whats the process, what's the thoughts there and then.
Speaker Change: Any tax implications as a result.
Speaker Change: I can kick us off and then Gary you can you can supplement.
Gary Waving: The idea is that we would want to move the domicile.
Speaker Change: <unk> and also the.
Speaker Change: Tonnage taxation too to way, we do our business most of our customers and also our offices in operation.
Speaker Change: The U S and in Europe. They are certainly not in the Marshall Islands. So we think it will be more natural for us to to domicile of business too.
Our ownership to where we are doing our business. We don't expect that there will be any negative consequences for our tax payments. They are very efficient Chinese taxation schemes in a country like Denmark and the UK for instance, and we are you can see in the fine leaning.
Speaker Change: Figuring out exactly how we we put our fleet into those jurisdictions.
Speaker Change: Finished fixation, so whatever tax implication that maybe there will be a very.
Speaker Change: They'll be insignificant.
Speaker Change: We also expect that given the dose.
Speaker Change: Thanks.
Speaker Change: Very efficient and professional that they will not be any say operational restrictions or changes to say in the way that we operate our ships. So so actually why didn't we do it before we probably could have.
Speaker Change: But we wanted to.
Speaker Change: Our ownership, where we do our business.
Speaker Change: Yes, I think.
Speaker Change: Good afternoon.
Speaker Change: It's a complex.
Speaker Change: Move to take a whole business and pick it up and move it into the U K, but for the reasons mass et cetera moving.
Speaker Change: Structure closer to our actual business is a good thing to do.
Speaker Change: It's quite a legalistic process. It takes a lot of time, there's a lot of paperwork to do that.
Speaker Change: And obviously from a shareholder perspective, we want to make sure that we get all of the disclosures right and that we're looking at the all of the processes and things that we need to do in order to get this done with the stock exchange and obviously with a.
Speaker Change: Major shareholders in our entire shareholder base. So there's a lot to think about a lot to do and we're in the process of doing that now and I think on the whole it's.
Speaker Change: It's going to be a neutral financial.
Speaker Change: It's not designed to give us a particular advantage and financially I think it's designed to bring us closer to our business.
Speaker Change: And to give us a more flexible and cleanup group structure as well.
Speaker Change: Okay. Thanks, Thanks, Gary Thanks, Maths on that and then just a follow up separately.
Randy Brannen: Randy had mentioned the new building being chartered on a short term basis.
Speaker Change: Delivery.
Speaker Change: That seems to be two plus years ahead of.
Speaker Change: Delivery, so nice to get a charter or is there any color you can give on that.
Speaker Change: The type of contract <unk> entered into whether it's rate or duration.
Speaker Change: Omar I think it's too early to say what we are Super excited about is that yes, we are able to attract customers. Two years ahead for <unk>, which means that the customers. We talk to believe in Italy, and believe in U S ethylene exports and they come.
Speaker Change: So it's a beautiful match between the shipping on us and our infrastructure.
Speaker Change: Okay.
Speaker Change: So obviously, that's definitely nice but in terms of just any color on the rate.
Is it like.
Speaker Change: And any sense of what we can glean.
Speaker Change: Youre willing to share.
Speaker Change: No political.
Speaker Change: I figured.
Speaker Change: Okay.
Speaker Change: All.
Speaker Change: Okay, that's good to hear.
And then finally just separately again.
Gary Waving: Maybe maybe Gary just to you on the.
Speaker Change: <unk> financing or the financing of the terminals.
Gary Waving: Terminal expansion.
Gary Waving: You'll have to spend to $128 million or so when it's all said and done how much does that you think you can recoup quote unquote.
Gary Waving: Financing.
Gary Waving: Yes, I mean, the company put a 115 to the original we put 128 into the expansion. So it's quite a loss and none of that.
Gary Waving: Very soon by the end of <unk> will be no debt at all.
Gary Waving: There's a small loan against the original terminal.
Gary Waving: I think the.
Gary Waving: Options that we've got there.
Gary Waving: There are quite a few.
Gary Waving: It's obviously a little bit of a different asset to our fleet portfolio. So we have to think of it in a different way.
Gary Waving: The joint venture with enterprise, we need to take that into consideration our relationship with them in terms of how we how we securitize. The density if we do put that onto the investment but there are options. We're looking at and we wouldn't be pushing the envelope too much in terms of loan to value on that kind of investment, we don't need to but it <unk>.
Gary Waving: Probably isn't hugely efficient for it to just sit there with no debt.
Gary Waving: Financing on it so.
Randy Brannen: We were looking at a few different options and probably later this year, we might take a look at that and I think part of it is around the contract coverage that Randy has.
Randy Brannen: <unk> talked about.
Randy Brannen: Once we got a little bit more.
Randy Brannen: On the expansion, we can it's an easier conversation, if you likely financiers and potential than lenders in that in that respect. So we're not in a rush, but we will do something it's probably not going to be hugely highly levered.
Randy Brannen: Say, 50%, perhaps something in that kind of region.
Randy Brannen:
Randy Brannen: And it's something we'll look at later this calendar year, so it's not going to be imminent.
Speaker Change: Okay, and then just a follow up on that yes. So just looking at your release Theres just under $11 million.
Randy Brannen: Thats borrowed at the moment from the initial investment.
Randy Brannen: That initial facility and that's going to be paid off by the end of the year is the thought the thought on that 50% do you think it's 50% financing.
Randy Brannen: Both investments or is it 50% just on the on.
Randy Brannen: On the latter.
Randy Brannen: It depends I mean in some respects, we didn't want to raise money for the sake of it we want to be efficient with what we do so we're looking at timing of use of funds as well because that's going to come into our bank accounts and we're going to need to make really good use of that so a little bit of this is around timing as well so whether it's.
By then the investment will be one it won't be an old and the new.
Randy Brannen: Expansion in the original investment it would be just one terminal investments.
Randy Brannen: How much we ended up taking I think it will take a look at our cash flows will look at all of the exciting projects that keeps keeps bringing to us to take a look at.
Randy Brannen: And we'll sort of go from there, but at the moment is a little bit early to sort of be really firm with you about what we're going to do but I do think we will do something.
Randy Brannen: But at this stage, yet, we're still sort of working out exactly what that will be.
Speaker Change: Okay got it understood. Thanks, guys.
Omar: Thank you Omar.
Randy Brannen: Yeah.
Speaker Change: All right next up we have Poe fat from a GP.
Speaker Change: Good morning, Good afternoon, hopefully you have been able to hear me we.
Speaker Change: I hear you.
Speaker Change: Can you quantify where you are in the off take right. Now you said the goal is to get to 90%.
Speaker Change: Offtake from the terminal where are you right now.
Speaker Change: Yeah. So we have not quantified it and we're not yet going to because again commercially we still have capacity to sell.
Speaker Change: So the majority of the 155 is sold on offtake right. So you've seen that we had 94% of the million sold we announced that number a few times in the last couple of years. So that remains and we've signed some extensions and increased capacity offtake for some of the new capacity.
Speaker Change: So greater than that but not quite one four so I'll give you a big range there.
Speaker Change: That's helpful color and then what would you peg the asset values for the older and is that are on the market right now.
Speaker Change: I mean, you can if we look them up on that.
Speaker Change: Vessels value I mean, there are some some.
Speaker Change: Public sources say asphalt for an evaluation of the vessels.
Speaker Change: Once the tonnage is getting older I think that bid ask spread is moving a bit it's also.
Speaker Change: Not super liquid market. So I think it's you can look them up and see what the what they come out at and if Thats close to let's say.
$80 million or similar.
Speaker Change: S and assessment, there, but I think at the end of the day, we don't look much at it when we are discussing it with potential buyers.
Speaker Change: It's.
Speaker Change: It's not a liquid market.
Speaker Change: That's good and then just a couple of detailed questions for Gary.
Speaker Change: You talked about deficiency payments in the fourth quarter potentially going down would you care to quantify the deficiency payments that you received in the fourth quarter.
Speaker Change: Uh huh.
Speaker Change: It's a difficult for us to get that information out.
Speaker Change: Actually I mean that would lead us into pricing of the various.
Speaker Change: Underlying contracts with them with our customers. So it's a little bit hard for us to do that plus I think as well.
Speaker Change: The deficiency payments vary in different contracts as well, so just giving one number in isolation I am not sure how useful nowadays is certainly being.
Speaker Change: Obviously protective for us to have those deficiency payments take or pay.
Speaker Change: And it's worked very well.
Speaker Change: But it does vary some.
Speaker Change: Delayed by months some are delayed by two months delayed by a quarter.
Speaker Change: So it kind of varies and I think giving a number outs anyway I'm not sure how.
Speaker Change: Particularly useful it is but as I say in any case, it's unfortunately, I think probably a step too far for us to just give that number way Randy I don't know if you.
Randy Brannen: I feel that there is any more color, we can give really to tell yeah. No. Yeah. I think you nailed it in our in the EBITDA of $73 million, it's not a huge material number but.
Speaker Change: Yeah, we'll follow up offline.
Yes, that's good and then could you remind me how much you you put 10% down on this for new builds can you remind me what your progress payments or for 2025 and 2026.
Speaker Change: Well overall, we've got five times, 10% and it depends on the progress of the actual builds in the contract.
Speaker Change: 10% Dew and those contracts say that those 10% and not do before so it does depend slightly on the actual.
Speaker Change: Yes, if you like of the yard.
Speaker Change: So I think we can follow up offline and give you a slightly more.
Speaker Change: Accurate answer I don't have that.
Speaker Change: Data exactly to hand Unfortunately.
Okay, and then just one last quick one more detail than you probably wish.
Speaker Change: They went down.
Speaker Change: Changing the domicile, how much does that going to cost.
Speaker Change: Should we see that hit the P&L.
Speaker Change: Yes, I mean look it's.
Speaker Change: Lawyers are be honest Archie.
Speaker Change: And clearly this is a bit of a legal process, but we do a lot of the work in house.
Our legal team has been very busy with this.
Speaker Change: Trying to minimize that cost externally, where we possibly can it's taking.
Speaker Change: Obviously in amounts of external legal advice to make sure we're doing the right thing.
Speaker Change: But in terms of actual cost, it's sort of spread over many quarters. We've been doing these projects slowly in the background for quite some time now. So I don't think you should expect to see a big hit as a result of the mix I think it's already gone through and.
Speaker Change: It's not something that sort of jumps out.
Speaker Change: Great helpful. Thanks for taking my questions.
Speaker Change: No problem.
Speaker Change: Thank you Paul.
Speaker Change: All right next up we have <unk> from value investor's edge.
Hi, Good afternoon. Thank you for taking my questions. Most of that has already been covered but I wanted to follow up on the terminal with the depressed I'm guessing decent near term priority, but as we think about the $3 2 million metric tons of let's call it maximum capacity.
Speaker Change: Is there a clear path to reach it if the economics make sense.
And secondly, what is the earliest that with her.
Speaker Change: Happen again, if the economics makes sense.
Speaker Change: Yeah. So it's the flex capacity includes ethane and ethylene enterprises already sold the majority of the remaining let's call. It 165 million tons of ethane capacity for the Flextreme getting quickly into the weeds. The train that we converted has a total capacity of $2 2 million tonnes.
Speaker Change: We bought a quarter of that capacity, that's the $5 54 ethylene that means theres 165 million remaining the majority of that is already contracted for ethane liquefaction and offtake for 2025, some of that unwind in 2006, a little bit more than 27, a little bit more than 28.
Speaker Change: We all know enterprise. It's also about to open a new ethane export facility at Neches River of our Beaumont. So.
Speaker Change: It's hard to say what the outlook is and in the coming years in terms of how much were they re contract for the ethane out of Morgan's point versus shipped over two niches forever, but the plan and discussions are to have more and more of the morgans point be flexible for ethylene right because necessary if it cannot do ethylene they can only do ethane.
Speaker Change: So that is the plan. So in terms of when are we going to get to two two and a half three $3 2 million tons of ethylene coming out of Morgan's point.
I don't know it certainly won't be in the next two or three years, but potentially longer term that said, we do expect there to be more of that flexible capacity widening in coming years.
Speaker Change: Makes sense, thanks for the color I'll turn it over.
Speaker Change: It sounds good thank you connect.
Speaker Change: Alright that is at the end of the Q&A do you want to give a final goodbye no just want to say thank you very much for listening and I Hope you can see we honor on a good footing and we have been going through an exciting fourth quarter and I think the fundamental outlook is quite.
Speaker Change: Good for us so.
Speaker Change: Steady steady cruising so far thank you.
Speaker Change: Goodbye.