Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference Call on the Second Quarter 2017 Financial Results. We have with us Mr. David Butters, Chairman, President and Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; and Mr. Oeyvind Lindeman, Chief Commercial Officer of the Company. At this time all participants are in listen-only mode. There’ll be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. And I now pass the floor to one of your speakers, Mr. Butters. Please go ahead sir.

Thank you Lara, and good morning everyone, and welcome to Navigator’s second quarter earnings conference call. We are being joined today by my colleagues in London, Niall Nolan and Oeyvind Lindeman. And as usual, after our brief remarks, we will open up the call to a Q&A period. As outlined in our press release last night, difficult trading conditions continued through midyear pushing down revenue and earnings. Favorable utilization and rates in our petrochemical gas sector were not sufficient to offset poor LPG trading, caused in part I suppose by vessel overcapacity in that sector. Our reported earnings of $2.3 million for the quarter may not seem much, but considering the market environment in which we operate it is a serious accomplishment. On our last conference call I was not sure we could continue to generate positive earnings, although positive cash generation was never in doubt. But after seeing how our management team has continued to adjust utilizing the unique flexibility and inherent versatility of our semi-refrigerated fleet, I am much more confident today about our outlook for the remainder of the year. And while we do not expect much in the way of short-term market improvements, in October we will begin to commence a long-term charter with Braskem on 2 of our handy-sized ethylene carriers. And in addition from what we understand, the Mariner East pipeline will start up this fall adding approximately 250,000 barrels of LPG capacity that can flow east from the Marcellus to Marcus Hook on the Delaware River. Now depending on the timing of the lines completion and the actual amount of LPG shipped, Mariner East 2 could be a real positive for all LPG sectors, although very large gas carriers should benefit the most from that opening. We also expect to see continued growth…

Thanks David, and good morning. Revenue for the 3 months ended June 30, 2017 at $74.4 million was 2% higher than the $72.5 million generated during the second quarter of 2016. Revenue less voyage expenses however, a measure which enables voyage and our spot charters to be compared with time charters was $60.9 million for the second quarter against $63.2 million for the second quarter of last year. The decrease in quarter-on-quarter net revenue was as a consequence of the weak LPG market, which caused charter rates to reduce appreciably over the past year. Our average charter rates for the 3 months ended June 2017 were $21,601 per day or $657,000 per month compared to $27,233 per day or $828,000 per month during the second quarter of 2016 reducing quarter-on-quarter revenue by $15.8 million. However, the average charter rate for the second quarter was only $100 per day less than the average for Q1 2017 perhaps indicating a bottoming out in charter rates. Vessel utilization remained broadly consistent with the second quarter of 2016 at 86.2% for the 3 months ended 30th of June 2017. During this second quarter, we had 36 vessels in operation compared to an average of 30.8 during the comparative period in ‘16, contributing an additional $13.4 million to revenue. Navigator Nova, Navigator Luga, Navigator Yauza were delivered from shipyards earlier this year, the latter 2 going straight on long-term time charters following delivery. Since the quarter end on July 20th, we took delivery of Navigator Jorf which will go on a long-term time charter later this month when she arrives in the Mediterranean. Navigator Prominence, the last vessel in our newbuild program, has had its delivery rescheduled from July to October this year. There were no drydockings undertaken during the first half year and none…

Thank you, Niall, and good morning all. Broker assessments for a new 12-month time charter basis on LPG semi-refrigerated handy-size vessel declined slightly from $420,000 a month at the end of March to $395,000 a month at the end of June. Our average earnings across the fleet stood at $660,000 per month for the quarter -- for this quarter, just shy of the average $663,000 a month for the first quarter of this year. Our time charter and contract for affreightment portfolios provide a cushion against a day-to-day market which is experiencing headwinds, particularly in the LPG segment. Our time charter coverage at the end of June stood at 50%, which was recently boosted by new period business opportunities in Mexico and the southern parts of Africa as well as a delivery of one new build which went on contract. We continue our journey to diversify our product mix and the quarter earnings split -- earning day split across the three cargo types as follows, 6% came from ammonia, 41% from petrochemicals and 53% derived from LPG. We are working towards petrochemicals taking up 50% of our average earning days, so there’s still some ways to go. For the spot voyage charter opportunities, as Niall mentioned, 89% of the earning days came from petrochemical trade and 11% from LPG. Now these petrochemical voyages, nearly 80% of these were loaded in Europe, United States of America and South America, and subsequently discharged in Asia. Asia seems to be leading the demand for olefins and its customer-base is increasingly looking for ways to secure reliable, competitively priced petrochemicals in large quantities as an alternative to the sourcing from traditional locations such as the Middle East. This is very much the case for butadiene, propylene and recently ethylene. Our ethylene volumes have doubled…

Lara, you can open up the call now for Q&A.

Thank you. [Operator Instructions] Your first question comes line of Doug Mavrinac of Jefferies.

I just had a few follow-through obviously with the first one being on the Enterprise project announcement and I’m not going to try to get you guys into trouble in terms of violating any confidentiality agreements, so I’m going to try to keep my questions very big-picture and broad, but is it safe to say that if you guys are going to be a JV partner with Enterprise that you all should be in a pretty good spot to handle most, if not all, of the transportation requirements out of Morgan’s Point? I mean is that something that you can talk about in broad terms without, like I said, violating your confidentiality agreement?

Our understanding for the health -- I looked at the terminal as a standalone, how can we navigate if we had nothing involved in it, how could we benefit? And I love the project on its own merits, great returns, it has all these features that I like on the safe investment. It is a perfect example of what Enterprise whole business model is about, low-risk, controlled environment, long-term contracts, tolling arrangements. I love it, that’s what I like. Now, had no interest in screwing that up with insistence that we would do the shipping. Now, we -- together we are talking about to the customers and as conversations continue about what kind of vessels that they need, where they’re going, what kind of short-term requirements that they may need, what kind of long-term, what kind of diversity, it is natural that those conversations move into specific vessels and the length of any kind of contracts. It’s just a natural thing. It’s not forced, but it becomes a part of what that conversation is all about. Now, you could assume that you have that kind of relationship and knowledge that odds are you’re going to wind up with a disproportionate amount of contracts to cover those ships. I think that’s the best way to answer, Doug, and honest way of answering it.

David, I think that that’s exactly right. Like I said without getting you guys into trouble, that’s what I would have assumed, but -- so yes, I think that makes 100% sense. I just wanted to make sure that those assumptions seem well grounded. So kind of taking the not necessarily a step further, but Oeyvind, you did some of the calculations around what those requirements could be in terms of obviously where the destination is, whether it’s EU, Asia, etcetera. But I would imagine just given the sheer size of that particular project that when we look at say Navigator’s fleet, this may exceed kind of what -- you have one more new building coming, but this may exceed kind of what you have in place. So could this potentially be -- when you look at maybe the types of ships that need to be ordered, given who the customers are, what their requirements are, where they’re headed, could this be a decent growth opportunity over and above what you guys have planned for in terms of what your new buildings coming in place are and what your existing fleet is?

I’ll let Oeyvind take that.

Yes, Doug, so as I said, it’s a mixed bag, so it’s highly dependent on where the tons are headed. We have 14 ships, 3 available on the big size, and then 10 on handy-size. So the fleet itself should be able to cover most of it. Now, time will tell whether we need to add more or not, but those conversation -- clarity on that will come in the few months ahead. But on paper, with those -- the scenarios, the color I gave you on terms of the volume which ship and so forth, we should be able to cover it, what’s already on the water. But let’s see.

Okay. That’s helpful, Oeyvind. And so switching gears a bit to maybe other markets, kind of some developments, you guys mentioned you have 2 new time charters that you secured on a couple of your fully ref [ph] ships. So when we look at kind of as we head into second half of 2017, a, should we expect maybe a couple more additional time charters just to secure some revenue? Is that something that you guys would consider? And then, b, Oeyvind, you also mentioned about kind of when you look at say your spot exposure by commodity versus your time charter contract coverage by commodity, time charter is more LPG spot, more petrochemical gases. Should we expect that to shift towards where your time charter coverage is reflective of bringing more petrochemical gases online or is there something about that market that doesn’t allow for more time charters?

I think, Doug, in 2 years’ time, the whole portfolio will look very, very different. So the time charter petrochemicals and so forth, so that’s where it’s heading. But right now today, petrochemicals predominantly all the contracts are based on contract of affreightment or spot voyager opportunity. So just on your first question on time charter, I think we are happy with 50%. Now as a conundrum, yes, we’re happy we -- coverage is good, but when you have a time charter asking about long-term contracts I’m talking LPG now, today maybe we are not so keen to go along because the market is down. So that’s a balance we are constantly looking at. And on petrochemicals today, in the next 6 months, yes, it’s predominantly voyage charters. However, as David mentioned, I think the earnings days, the proportions will be more leaning towards favoring petrochemicals because of propylene and more activity as we see coming from Europe and the Mediterranean on [indiscernible]. So I think the -- as I said on my -- sort of in the introduction, the petrochemical earning days stood at -- average at 41%. I think that will go up.

Got you. Very helpful. And final question.

And Doug, just let me qualify something. Remember when looking at those percentages, the LPG is not necessarily LPG in the spot business. Remember, we can include LPG business for the 4 vessels we have doing business on long-term charters. With the Russians, we include the LPG trade with the three vessels we have in Indonesia which in long-term contracts and we include the vessels we have in Venezuela which are doing long-term contracts in LPG. So if you look at how much business we have already tied up in LPG which is included that and then exclude that and how much we really have for spot exposure, it’s not that great. Okay? So yes, LPG is a dirty word at the moment, but not when -- it’s not a dirty word when we have great contracts as we have with the Russian contracts, the Indonesian et cetera.

Right. Got you. That’s very helpful. And actually that’s a good segue to my third and final question is talking about that dirty word LPG, I mean it’s been something that we’ve been trying to avoid here for the last handful of months given some of the negative dynamics, but I’m sitting here looking at an order book that’s now down to less than 10%. You still have some non-deliveries taking place that could reduce that. You’ve got U.S. field production up of NGLs, European economic activity getting better. I mean are those the types of ingredients -- I mean in Niall’s commentary we talked about utilization levels being firm, rates kind of maybe bottoming out, kind of given those dynamics I just described, are those the necessary ingredients for maybe the LPG market to finally start showing some signs of life or is there something outside of those things that would maybe prolong some of the weakness in the current market?

I tried to make that point with the Mariner East 2. That’s a lot of volume potentially heading into the east coast, Doug. And let’s understand that as we take these vessels, for example two vessels out of the spot market to go to Braskem on ethylene and as the ethylene terminal develops you’re going to shrink the available vessels in that could possibly trade LPG. So the dynamics are reasonably good and then why don’t you pick up on that concept for a comment or two.

Yes, Doug, there’ll be more supply on LPG mostly benefiting the larger ships, but you’re right, supply/demand scenario on LPG shipping is very much influenced by the tonnage side. And you’re also correct that we’re now halfway through 2017. The order activity obviously has been quite low the last two years because the previous years, there was a lot of ships ordered. So I think we’re beyond the mountain, we’re climbing down a bit now in terms of orders. So that can only be good.

Yes, yes, I totally agree. Actually that’s all I had this morning guys.

The next question comes from Ben Nolan of Stifel. Please ask your question.

This is Frank Gautee on for Ben. I want to just ask about the revenue mix of the petchem cargos, basically the operating -- or the revenue mix was pretty much in line this quarter. I want to see how that lined up with the operating days from last quarter.

Niall, can you handle that?

I’m not sure. I’ve got the numbers for last quarter, but I know you’re referring to the 89% on petrochemicals on the spot voyages?

In the press release you guys talked about the long-haul trade for petrochem comprised 53% of revenue and the previous quarter was 52%. And I just wanted to get a sense for how much margins on the spot rates were changing, basically trying to figure out how many operating days -- how much operating days have changed on the petrochemical side.

I don’t think there’s a significant difference on -- in terms of the mix of operating days. It’s around -- it is slightly greater in Q2 than Q1, but it’s essentially the same mix.

And then just another smaller question, it looks like you guys had moved $25 million into short term investments in cash.

Yes.

And just wanted to get the rationale behind that and how liquid that was.

It’s -- it really is just something we have to -- we have to keep cash on hand at either $25 million or 5% of debt as part of the covenants in probably most of the loans and therefore it’s -- our working capital doesn’t shift that much from day-to-day or even from month-to-month, so it’s really just some place to park the cash as the short-term investments from a banking perspective is -- are considered to be cash, we can get it back at any day at a same-day notice. So it’s really just some place to earn a token gesture on the cash balance rather than earning nothing. So it’s just housekeeping. We earned 1.25% on deposit or something like that.

Your next question comes from the line of Michael Webber of Wells Fargo. Please ask you question.

David, I wanted to just circle back on ethylene projects and you guys had a project specific call for when it got announced. So I’m just curious between then and now what’s changed I guess within the project dynamics if anything? And then when you think about -- it’s great to talk about the potential transportation need associated with this project et cetera, but you still need to get to FID, all right, so what are the major landmarks in your mind towards getting the FID? I’m assuming that includes some sort of contract cover norm and has that -- whatever percentage that is, has that shifted around at all since you guys announced the project?

So couple of things that I think have given the momentum more energy than I had anticipated; first of all, I think there was a fundamental decision by the partnership and Enterprise that they wouldn’t force everyone to take a 10-year contract on the term or site. And that was a major factor that helped with the customers. 10 years is a long term partly because they can’t hedge with ethane or ethylene. The second is I think there were a couple of other companies that were talking about the potential of a specific ethylene terminal and I think some of the customers were thinking, well, let’s try to play one versus, yes, who is going to do it, what kind of better terms I can get from one or another and things were a bit slow. When we shook hands on our joint venture and announcement, suddenly the Enterprise/Navigator deal appeared to be solid. When you explain all the advantages that Enterprise has in creating a terminal because of the connectivity throughout Louisiana, Texas, Oklahoma, anywhere there is a ethylene cracker, there’s an ethylene pipeline owned by Enterprise to bring it to someplace. You recognize that this storage facility -- our common storage facility in the heart of Mont Belvieu also created a strategic advantage for producer to be able to warehouse some of that excess ethylene and now having it stored there if they found good opportunity to move it outside of the country, boy, it’s an easy little run down from Mont Belvieu to Morgan’s Point. That kind of concept was not lost on people. And the fact that it is a transaction that most people including ourselves believe is absolutely going to happen and happen more quickly, have brought in other players who say I cannot miss out because there may not be a second terminal, and indeed my guess there won’t be. This is never going to be a giant business, i.e., ethylene exports. It is not like propane. It is a market that’s much smaller and it’s a niche market, but it’s a market that if you’re there, as we are, so there is a terminal operator, an owner and you have these instruments, i.e., ships that can effectively move that product, you are having an enormous advantage to capture unusual ability -- unusual profits. But it’s never going to be -- make it clear, it’s never a giant business. It can’t be giant. But it’s a niche market with high-quality things that I love, long-term contracts, specialty-natured technical op -- top technical operations, customers that are high creditworthy customers and long-term charters and the long-term asset.

Got you. Now, that’s helpful. And obviously the size of the business and the size of the opportunity is going to be relative to the size of the company, right? So it’s -- I would argue slightly bigger deal for -- certainly for you guys and then for, say, EPD or for larger names and larger markets.

Yes, the leverage fulcrum is a lot bigger.

But hence the focus on it, right? So if you have a vague sense on how much of that gas you need to sell for before you could hit FID and has that changed since you announced the project?

Michael, I’d be a little coy. I don’t think that’s going to be an issue. I think it’s a matter -- just a matter of wrapping things up here in the next couple of months. May I leave it that way? I know it’s --

Sure.

But I am not worried about those volumes. They are there, and it’s just a matter of tying up the pieces.

Okay. All right. That’s helpful. I will -- I’d say to circle back to one more question I guess on LPG, I don’t want to kind of weigh in on I guess what’s already kind of a soggy parade around LPG, but we’ve -- despite the fact there may be some maybe some incrementals are getting a bit better in terms of potential demand, it seems like you guys are seeing an up-tick in VLCC orders recently, maybe it’s a question for Oeyvind, but does that recent ordering or I guess the speculation around some recent orders, how much of that were you in terms of kind of [indiscernible] sort of longer term improvement within that space?

Well, I guess the company that made the order is Vitol. Vitol is one of the largest LPG movers and shakers in the world on the international market. So if they believe in this, then I think we should all be encouraged. They should know or at least they’re in it all day long, but there’s probably also because of asset prices generally are under pressure from the various shipyards. And I guess they got a good deal, so both on this deal, but they certainly must have belief in LPG forward, otherwise why would they do it?

You expect that that’s the same at balance sheet?

Sorry?

Do you expect those assets to stay on their balance sheet?

I have no idea.

Your next question comes from the line of Fotis Giannakoulis of Morgan Stanley.

David, I want to ask about the project with Enterprise, if there is any division of labor in this project, different operational tasks that each of the 2 companies will undertake or its everything jointly -- joint investment? I’m trying to understand which parties of the 2 companies is contributing to this project?

Okay, so it’s very straightforward, Fotis. It’s a 50-50 deal on the money side, my buck is worth just as much as their buck and we split equally. Now, they have some expertise that we don’t have. For example, I don’t want to supervise the construction of the chiller, all the storage facilities. Somebody has to be "manager" of that. They’re good at that, they just completed the ethane storage in terminal facility. So we allocate them, okay, you can be project manager. That’s not a -- that’s no favor to them, but they’re willing to do it and we’re not paying for that, they’re doing it as a service provider for the project. Operational, they’ll be on top of all the operations day-to-day. They are responsible obviously because it’s not part of the joint venture, but they’re building that ethylene pipeline from Mont Belvieu into Morgan’s Point, that’s their job that’s outside of the joint venture. So division of labor is where the expertise is. We have not carved out -- we discussed customers together, we often meet with customers because the customer needs to be able to not only determine the volumes that he needs, the timing of what he needs, but there also is an integration of the transportation needs, so that’s why we’re working with them on if you will the marketing of the terminal itself. But the division, Fotis, is really one of expertise. I don’t want to get in the way of pretending I’m a construction expert, but they do have people and that’s how it’s done. But dollar for dollar my buck is worth as exactly the same amount as their buck.

Thank you David, that’s very helpful. Can you give us a little bit more background of this relationship and how did you end up being the preferred partner for Enterprise, either your relationship with the customers, and was there any process that through which Navigator Gas was selected as the preferred partner?

No, there was no process. We have an intellectual relationship with them and a personal relationship with them as well as of course a professional. We have been talking if you heard us on these phone calls, so last year we’ve been talking about this type of pipeline. And we share very common interest, our style of business is common, our approach to risk is identical. So there were two, while the companies are disproportionate in size, the business model is not dramatically different. Our interest in the terminaling is just an extension of handling of petrochemical gases just as theirs. Now there is a difference. Enterprise is a wonderful company with an outstanding record and some of the finest people in the midstream business that you want to run into. But they are a parochial company. Their business is built successfully on U.S. centric operations. Our business on the other hand is an international business. So our dealings with the petrochemical players is much more international dealing with large companies, small companies, all sorts of different types of environment outside of what a domestic company would normally deal with. So we know the customers out there, we know the ports, we know the technical aspects of dealing with all of these countries. When we sat and compared notes, it was clear that both companies could really benefit by having a combination of the two. We are an extension of Enterprise and we, Navigator, is a beneficiary of all the work in history that Enterprise has put together, and I say the compatibility of the intellectual compatibility and the business model of how we operate our business and the way they operate their business is not too dissimilar. We’re risk-adverse, looking for industrial shipping on a long-term basis. There is…

[Operator Instructions] Your next question comes from the line of James Jang from Maxim Group. Please ask you question.

I just have two quick ones. So David, you mentioned the possibility of possibly loading cargos on the EPP project sooner and chilling the cargos on the voyage. So if that were to occur optimistically like are you thinking sometime in Q3, Q4 of ‘18 or would that be a 2019 event?

This isn’t part of a strategic decision as yet James. This is just -- physically this is probably doable if customers need it more quickly than we suspect. They have the infrastructure. I mean it’s mostly about is the infrastructure on the receiving side there and ready to receive the stuff. And an assumption that one, two or three of the customers are prepared to take it immediately, then there is no technical reason why we couldn’t build up the chiller portion of the terminal site, chill it and then get it into our vessels and chill it further on transportation to whatever delivery site as necessary. That would be an -- that’s a nice way of doing it and that timeframe there is nothing to do except making sure that the pipeline, the ethylene pipeline from Mont Belvieu is completed and that the chilling unit which is up and running; again the delay time for complete total terminal side is more dependent on getting the storage facilities up and built and that probably takes another year over the chilling.

Okay. Great. And yes, I know -- I think Michael asked this, but in terms of the cargo off-take, and I know you’re optimistic that will happen in a few months, so do you think we’ll have news on this sometime in Q3 or is that going to be pushed into Q4?

It’s going to happen faster than I had anticipated, James, and I would have -- think we’re going to have something not -- it’s not years, okay, it’s months, all right, and I have high degree of confidence that it’s in the right. We’ve got strong interest and interest with players that you would logically think need to do it, so -- and some players who have insisted to the world that they shouldn’t do it because it would stay here, they are in there in the queue as well.

Great. My final question is on I guess renewal. You have I think 6 vessels 17 years or older. Do you have any plans to I guess renew these vessels or are they still -- you feel confident operating these?

Given how comfortable you are in operating the vessels, we’ve been building something every year for how many years, James, we’ve rebuilding and building and expanding. We’ve got 38 of them today. But tell me, Oeyvind, how do you feel about what you would like in terms of fleet -- fleet renewal is an awkward name, it’s really understanding what is needed in the future, not what is in the past and is old, but what is in the future, what are you looking at, Oeyvind?

Well, we are a service provider to our customers and it depends a little bit where that trend is going. So it is a bit difficult to say unless mirroring what David just mentioned that you can’t look for the past, you’ve got to look for the future, where is the trend, what are the customers and what products and ports and so forth is needed in -- but also looking at technologies and what’s the latest innovation to have the most efficient pace and with high-energy management. So those are the things. I mean, it’s not one -- it’s not an easy question to answer really, but the boats we have, even though they’re 17 years old, we mentioned Navigator Mars built in 2000, she is a beauty, I mean she works wonders. So it depends a little bit.

Let me also, if I may, just put some perspective on that. The ships -- these particular gas carriers have a life of 30 years with the exception of the -- what we call the 5 planets, the Mars and so on. All of our ships are less than 10 years old. So fleet renewal doesn’t really come into it in that respect, but with respect of the 5 planets, they are all ethylene and ethane capable and therefore they are more useful or as useful as the best of our other ships right now despite their age being 17 years of age. So there’s nothing with the exception of possibly the Navigator Magellan, which is a ‘98 build, there’s actually nothing that we would want to dispose off.

We have no further questions at this time.

Well, thank you very much. As I look back at the past 3 months and the full year, it’s been a turbulent time and I am growing in confidence and hope that with worst is behind us and I think we’ll have some interesting periods of conversation over the next few months. Thank you and good-day.

That completes the conference for today. Thank you for participating. You may all disconnect.