Thank you for standing-by, ladies and gentlemen and welcome to the Navigator Holdings Conference Call on the Third Quarter 2018 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. [Operator Instructions] I must advise you the conference is being recorded today. And I'll now, pass the floor to your first speaker, Mr. Butters. Please go ahead, sir.

Thank you, Carton, and good morning everyone. And welcome to Navigator's third quarter earnings call. We will begin our call with a commentary from our Chief Financial Officer, Niall Nolan, who will cover the financial highlights of the past three months. This will be followed by Oeyvind Lindeman's review of the commercial and marketing environment encountered during the period, some of his observations on the near-term outlook. I will finish our formal remarks with some commentary on Navigator's role and business opportunities being developed as a result of the emergence of the midstream factors dominance and near-total control of hydrocarbon logistics in the United States. So let's start with Niall. Niall?

Thank you, David. Good morning, all. We made some positive progress during the third quarter with charter rates trending upward across the fleet. Revenue for the quarter was $80.8 million, $10.6 million higher than the $70.2 million generated during the third quarter of 2017 and $7.6 million greater than the $73.2 million generated last quarter Q2 of 2018. Net revenue, revenue after deducting pass-through voyage expenses was $63.6 million for the quarter, $5.6 million higher than the $58 million generated during the third quarter of 2017. This $5.6 million increase comprised of $1.6 million generated by having an extra vessel in the fleet during this quarter relative to the same quarter last year, a further $2.2 million generated as a result of an increase in charter rates which rose to $20,987 per day or $638,450 per month compared to $20,226 per day for the third quarter of 2017, as well as $1.8 million extra been generated as a consequence of utilization increasing from 85% a year ago to 87.5% during the third quarter. During this quarter time charters accounted for 63% of all vessel operating days with LPG time charters making up the majority of those days, and 37% of operating days been spent undertaking spot or voyage charters and contracts of a fragment 82% of those days occupied in the transportation of petrochemical gases, and 18% of all spot charter days transporting LPG. Our fleet now consists of 38 vessels on the water and no new buildings on order. We have the largest global fleet of 14 ethylene or ethane capable vessels, 17 refrigerated vessels - semi-refrigerated vessels, and 7 fully refrigerated LPG carriers. Two vessels underwent their schedules drydocking during the third quarter accounting for an acreage of 32 days off-hire and costing the total of $2.2 million.…

Thank you, Niall and good morning. The overall gas carry market went through a small transition during the third quarter of 2018. The general feeling across the various gas segments are positive to what the future holds. We believe that the anticipation of various infrastructure projects and associated incremental volume needing to be transported around the world is starting to feature in people's minds. Each day we are getting closer to commissioning of new project and the bookmaking of existing infrastructure. The various stakeholders including our shipowners, they are keeping close watch on shipping dynamics attempting to forecast supply demand balance. The very large gas carriers segments of an example is quoting 12 month time charter levels at the end of the quarter at $725,000 a month or $24,000 a day which is an increase of 30% compared to the beginning of the quarter. The same trend is seen in the medium-size gas carrier segment. Increasing demand for LPG and ammonia transportation during the quarter resulted in a 10% update of quoted time charter rates to $450,000 a month or $15,000 a day at the end of the quarter. Today short-term charters in this segment are up 20% on this. The LPG pool from the larger segments have yet to trickle down to the handy-size segment. We experienced a steady state during the quarter but LPG time charters quoted in the region of $450,000 a month or $15,000 per day. The petrochemical deep-sea trades however continue to provide a premium with average rates at high $600,000 a month or about $22,000 a day. Our charter profile makes remain to be about 40% petrochemicals, 50% LPG, and the remaining 10% in ammonia. We had a slight uptick in time charter committed days for the full year to round about 55% mainly…

Thank you, Oeyvind, and thank you Niall. During our last conference call I outlined four milestones I believe we would touch on the road to 2020, a year in which we believe our business could begin to produce record results and now as Oeyvind just mentioned we believe we may have reached the first milestone that is the opening of Mariner East 2 pipeline. If all goes well we will be loading our inaugural ethane cargo in just two weeks time and begin a regular voyages to the Borealis Sweden cracker. Furthermore, energy transfer has told us that the completion of the second part of the pipeline expansion into Marcus Hook Mariner East 2x is now expected to be operational in the third quarter of next year this will bring pipeline capacity to move liquids including ethane from the Marcellus and Utica region of Western Pennsylvania and Eastern Ohio into the Delaware River to approximately $600,000 a day and potentially more. The opening of Mariner East 2 will benefit a very large gas carriers and to a lesser extent midsize and handysize vessels. The other milestones are also on track, we expect propylene cargos out of the Texas Gulf Coast to ramp up in the nearly 2019 and our joint venture with enterprise remains on target to begin exports in about a year from now. Recent discussions but the payment of pipeline group has given support to our belief that the fourth milestone the opening of payment export terminal on the West Coast of British Columbia will be online by the summer of 2020. So while our current business environment remains somewhat sluggish. The key elements of the major improvement are in place, but this will take time perhaps 12 to 18 months to be fully implemented and there is…

[Operator Instructions] Your first question today is from the line of Jon Chappell from Evercore. Your line is open.

David very interesting commentary there for the last five to 10 minutes. So just I know that this is going to evolve over time. But bigger picture question as we think about how you’re going to deploy capital over the next couple of years, should we think about more of the terminal asset joint ventures and more of the - I guess transition into bit more of the midstream or do you still think that there's a fleet growth opportunity within the traditional business?

I hate this to say it Jon but I think it’s all of those. First understand that with the milestone that we look at in the road to 2020, there is really nothing we have to do. Everything that will evolve into a successful 2020 is in place and being built by other parties. Now that said, we’re not going to sit because it isn't really a dramatically changing market it’s structurally changing. And I'd like and we’ve been asked to look at really extending our logistical reach. We have a lot of the capabilities that others don't have and if you look at the mid-stream companies you'll find something very interesting. The midstream companies are perhaps the most parochial companies that you'll ever run into. And there's a very simple reason they're provincial, I mean they have no real experience, expertise, knowledge or have had any interest in the international markets and that is because as MLP's their focus was in the United States because of the tax reasons. Suddenly they are emerging with all this capability and control of the liquids and products. They have the infrastructure in the United States. The United States is tapering off in it's growth demands and the market's are external are strong. So they want to bridge it, we have more international experience than all of these guys. And I think we can begin with infrastructure in the United States as we have done with enterprise, extend that into the transportation needs and assist when necessary and find the opportunities where we can, continue to bring infrastructure expertise on the international markets to facilitate the export into those areas. So I think all of this will develop in time, this is after 2020, Jon. But it's there and it's likely to be able to be done without a lot of risk capital i.e. that will be done with good contracts secured by good rates with high quality companies. So it's hard to define, Jon, but I think it's all of those things.

No, it's helpful. And it was big picture and I know it's probably a 3 to 5 to 7 to 10 year plan, so understood. More immediate and to your point about risk capital and long-term contracts, I think you've done a very good job laying out exactly the capital expenditure plan surrounding the terminal but as we look to get a bit more clarity on 2020 financials, any information you can give on cash flow or returns or how we should think about modeling the financial impact once the terminals up and running?

Sure. And with that I think this is good question for Niall, please.

Jon, we've mentioned before that the return on the terminal at EBITDA is around the sort of mid-teen level. So based on our $155 million, that should we expect to generate those sort of cash numbers.

And does that start as of - I know you said the terminals are going to really start in 2019, but realistically probably the real financial impact starts first quarter of 2020?

Indeed, yes.

And Jonathan, just to clarify something. We will begin that operation by delivering the product from the chiller directly onto the ships. It will be a slower process of loading until storage is completed. Now there's a shortage of - the storage is probably the most complicated and time consuming element of that terminal. There's a lot of hand welding to be done and so on and that probably won't be completed until six months after the opening of the initial phase of the terminal. So for the first six months of operation the loading will be somewhat restricted into the storage. So it may take us four days to load the vessel directly from the chiller. But once the storage is erected and operational, then it's a one-day process. So it will ramp up after six months. So it begins let's say a year from now but six months later it kicks into high gear.

So just to be clear on that mid-teens annual return on the 155 capital maybe start with that kind of mid 2020 but for the first half of 2020 maybe half or even a quarter of that EBITDA run rate given the four days versus the one-day loading period, is that right?

No, I mean what David was mentioning is the speed at which the product loads, it doesn't affect the output or the capability of the terminal. But the terminal can still without a tank has a capacity of 1 million tons, it just means it's more efficient from a vessel perspective once the tank is there, it can load a thousand tons an hour rather than 115 tons or 115-ish tons per hour without the tank. It should kick in from the beginning of 2020.

Your next question today comes from the line of Donald McLee from Berenberg. Your line is now open.

I wanted to dig in a bit into the financing, could you discuss the decision that's happened NOK to let the terminal over the near-term. It sounds like it was a bit of a pro active move with the additional financing expected sometime next quarter. I was just curious if you can provide some color on the rationale between the NOK bond market today versus potentially more attractive financing package next quarter? And then along with that maybe how the level of contracted capacity on the terminal might have factored in there?

We said in previous calls that there were quite a number of options to finance the terminal. We were just looking for the most cost effective. And it was all really about sequencing, the thought process was about the sequencing of getting the throughput agreed with the terminal getting the financing in place and the financial calls that would be made on the terminal itself. So we have gone out and secure this bond for the $70 million odd, which as I mentioned will take us into the second-half of next year in terms of calls or capital contributions towards the terminal. And then we will finance the rest of it with this project finance facility.

And then could you provide an update on where the level of contracted capacity is for the terminal? Is it still in that 50% range?

Yes, it remains there for the time being. Discussions are ongoing with various off takers for that, it's a long process. But discussions are there and we fully expect the terminal to be up and running at 100% capacity before it commences operation.

And then just one more, could you provide an update on where the fleet stands from a spot versus time charter basis and maybe how you expect that mix to shift over the coming quarters with the recent strength in rates and ME2 and AltaGas coming online too?

Yes, the proportion between time charter and spot charters. And the textbook example in a rising market which we believe we're in then charters would like to go a long time charters and we as owners will go short. So it's not a straight forward answer to our expectation of that split going forward, we generally maintain 50/50 from quarter-to-quarter, how that's going to be. I don't think it's going to change much over the next few months or few quarters. So I would think about the 50/50 mark.

Your next question is from the line of Michael Webber from Wells Fargo. Your line is now open.

I just wanted to dig in just a bit more on the NOK financing. Looking to the terms, I think Donald just asked about the contracted capacity and the fact that might actually redeemable by the end of Q1 if you guys actually don't have the bank financing secured on that. Considering this I'm just trying to make sense of the fact that it looks like that's over - the NOK is over collateralized to begin with. Is your ability to secure - and if your conversations on the bank debt at least the first 50% on that facility, is that contingent in any way on securing additional term business for the project, are the banks you talked would be comfortable financing it at 50%?

Those discussions are still ongoing Mike, but the bank would be comfortable at providing some but not all of the funds at the current level.

Right, so when I see $70 million of anticipated bank financing, when you say some but not all, would that be 70% equal to some of the financing you are talking about or you talking about a portion of the 70 they'd be comfortable lending?

At the current level, a portion of the 70.

A portion of the 70, so you need to go out -- you need to get more term business secured on the ethylene facility to get the $70 million of bank financing as you're looking for?

Yes. And we've got no fears on that front with the current conversations that are ongoing.

Right, if this is with the time stamp on it trying to do it by the end of the first quarter of 2019, which makes it a bit interesting, I guess, can you maybe talk to maybe some of the unique challenges that this presents? I think when I and I think when most people look at this and they look at an ethylene JV with enterprise that's 50% covered and it looks really strong when you look at the income with a high level details on paper, but if you need more than 50% forward contracting to get even to get the 50% bank financing on it, it does seem like there is a bit of disconnect there. I'm just curious can you maybe talk what the biggest – are there any challenges that have surprised you or what's different about this processes than maybe you were expecting?

No, we don't have any particular concerns about it. There is proportionality to the facility but we do have existing cash from within the facilities. The bond agreement if you've looked at the relevant paragraph, says, as long as there's financing in place from frankly wherever it comes. So there are undrawn revolving facilities that we currently have plus cash flow that's generated between now and the end of March of next year, and some capability to drawdown on this facility. So all combined we've got no particular concerns that this is not going to be fully financeable by that time.

I can dig in through it a bit more offline. If it pertains to maybe other opportunities, I mean, it sounds like this is a big step for you guys and kind of moving into land base infrastructure so to on to get ahead of myself but there's some other ethane projects – there's an ethane project rather that made headlines in the first-half of the year. It seems like some of the shipping opportunities there might have fallen by the wayside or had a hard time getting the orders that they wanted. Is there an opportunity for you guys to step into other ethane projects or ethane projects in the next – probably next year, year and a half or do you think you need to get this down and done before you look at anything kind of more strategic and termed out?

I'll answer that if I could. Look, ethane is very likely to become an important export product in time. The United States has ample ethane, there are now two existing export facilities, the third one being built, and there is a huge demand particularly in China for ethane as a feedstock for ethylene. Economics are good, environmental issues are great. We could expect to see a substantial trade in that. How much? I'm not quite sure. My guess is 7 million to 9 million incremental tons of what we have today and that would require maybe 25 or 30 vessels. That is - first of all, it would be – it's kind of unusual for ethane to go and not ethylene to go. If you are a country and in need for more ethylene, you may want to import ethylene as opposed to import ethane and build ethylene crack. It's logical to do that. The only place it is not logical to do it is China. China, because it's a controlled economy and they're determined and very focused on where plants will be located and how many jobs it will create and they want to be built there. So ethane, the big volumes will go to China. They will go in large volumes on large vessels but they require permits. They require permits from the central government in China and of course provincial permits. In our opinion those permits will not be issued and there won't be much of a trade until there is a resolution between Beijing and Washington on the tariffs. Once those tariffs are resolved, they can sit down and develop what might be a logical trade. That is a timing issue that I'm not quite sure I can give you, but it is very likely to happen. We have been engaged not only in the first publicly one for China that is the satellite, and a transfer one. We felt there was about that and we stepped back. But that may emerge somewhat earlier than expected. It's all about tariffs right now. But now the rest of the world I think with some exceptions where there is a conversion, a part conversion of an existing ethylene cracker internationally whereby they would like to use some ethane from the U.S., most of the stuff we would see would be ethylene as the basic product being exported. So for us we're indifferent, ethylene or ethane it requires the same complicated large vessels that we have, and it may require some infrastructure on the receiving end particularly. So it's just kind of what I'm been talking about is having this basket of opportunities that cannot be easily defined. And if they could be, I would be reluctant to find them because I don't want to talk about things that are not on our plate confirmed and under contract. But it's that trend that's important. And I don't know if I have answered the question or not.

No, you have. And the satellite project is what I was actually referencing. So the breakdown there, you think it's purely driven by tariffs and kind of geopolitical issues opposed to any major kind of underlying issue for you in order to get the tonnage and how do you think ship owners think about this?

Tariffs are an important part. Then there are some people who question the ability of satellite to fund finance in over $5 billion ethylene cracker when the market capital of their company is half that. But if you understand the importance of Belt Road and the importance of the enthusiasm in backing by provincial governments as well as the central government in China. For projects like this which I think the satellite one is deemed to be a strategic asset, it's strategic initiative that financing probably will be encouraged by those governmental agencies. So it probably will get done from their standpoint, but nothing can get done until they have the permits and the permits are conditioned upon licenses from the federal government. And that's the hang-up right now, I believe. And I think it will be the same case in a number of others and most of the - Satellite is an independent company. Most of the other petrochemical companies in China, anxious to get ethane to build new ethylene crackers are state-sponsored companies. You can imagine who they are. They're all large and have deep government involvement. Financing of those will be relatively easy because they'll be under long-term contracts. But again, nothing will happen until there is a resolution, but it will happen. Remember this has a great the most immediate impact in the balance of payments of the United States and the trade deficit will be on - LNG's will take six or eight years to get up and running and make an impact on our balance of payments but liquids can be done very quickly. That thing can be done in two to two-and-half years. So that - it will have a quick fix but I'm sitting back until this clarification on how they want to proceed in Washington and how they want to proceed in Beijing, and all our logic and everyone's logic suggests that some time sooner or later it will be resolved and then that trade will open up.

Actually if you don't mind Niall, if I could just swoop back to one more on the project financing just real quick; the $70 million of anticipated bank financing, as you stand right now in terms of forward cover how much of that forward financing you think you can get?

That facility isn't in place yet. so we're still negotiating that.

Right, so if you don't - if the project sits at 50% forward cover, how much financing you think you can get out of that $70 million, so we can sort of back fill how much gas you have to draw down to keep the bonds in place?

I think we could, we can - we're striving to be able to draw down as much as we need to cover the full payment of the terminal with the revolver that we have. That's our goal.

Right now I understand, but if you're sitting at 50% of that facility termed out, what are the banks telling - how much capital is available right now?

This is what I'm saying. The facility has not agreed yet. We're still working on it. So that's a move well thought.

And your final question today is from Randy Giveans from Jefferies. Your line is now open.

So yes, two quick questions. So first you mentioned in your press release Mariner East 2 pipeline expected to become operational in December, how long will it take to ramp up to that full 275,000 barrels per day? And then once fully operational, how that affects LPG export out of markets specifically kind of on a handysize equivalent basis? I know most of the cargoes will be shipped on the LGCs but just trying to see any impact on the Navigator fleet.

Randy, that's a tough question to ask Navigator, energy transfer would be a better selection. We've tried to get that - the answer out of them, what is their schedule of production and throughput, how quickly can they ramp up. And I don't have a very good answer for them. All the facilities in markets look at there right now, the [indiscernible] operational they have been operational. There is some question of whether they'd have to work around from this temporary pipe that they've put in place or was in place that circumvents some troubled area in west coasts near Philadelphia. So the important thing is for them to get it up and running. And then that would satisfy a lot of sensibilities and legalities once that is running. We will be hauling the ethane because that's a dedicated on the pipeline and we will get as much as needed. I think ours is 10,000 barrels a day essentially for the 40 hours contract. Once - if it is up and running at 275, we expect the majority of that, well over the majority to be going to the Far East of Latin America on very large gas carriers. Some of it will go on smaller vessels, mid size, and handy's. We operated reasonably well out of that facility several years ago hauling LPG to Europe because there were a lot of smaller ports and storage facilities that needed and could only accept handysized vessels. So we would hope some of the cargoes once this thing is up and operating would be on handy. But more important for us is to see the health of the mid-size and very large gas carriers because we can't get rates that are historically high until there is some relief to the very large…

And then last question just on utilization full quarter 3Q was 87.5%, now that we’re kind of halfway through the fourth quarter what has it been for October?

I think you have to look at October what is the trend - what do you think we're going to wind up at the fourth quarter. Oeyvind?

I think the trajectory our - what we’re seeing today November/December they should be able to get around 90% level. So up from third quarter I will be very surprised not to see an uptick for fourth quarter.

Thank you. There are appear to be no further questions at this time. Speaker, please continue.

Okay, well we’re hoping that the Marcus Hook in fact opens the way it scheduled. The road to 2020 is getting shorter. So we're hopeful that we will see some tangible results maybe not this current quarter but 2019 being fundamentally transitional year. Thank you for joining us this morning and look forward to meeting you again. Bye.

Thank you. That does conclude the conference for today. Thank you for participating and you may now disconnect.