Ladies and gentlemen, thank you for standing by and welcome to today’s Navigator Holdings Conference Call on the Fourth Quarter and Year End 2019 Financial Results. I have with us Mr. David Butters, Executive Chairman; Mr. Harry Deans, Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; Mr. Oeyvind Lindeman, Chief Commercial Officer. 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, Friday the 3rd of April, 2020. And now, I would like to pass the floor to one of your speakers, Mr. Butters. Please go ahead, Sir.

Thank you, Kash and good morning, everyone and welcome to Navigator's fourth quarter earnings conference call. I hope everyone is healthy, safe and secure. But before we actually begin our formal remarks, I would like to point out, as we conduct today’s conference call, we will be making various forward-looking statements. These statements include, but not limited to, future expectations, plans and prospects from both a financial and operational perspective. These forward looking statements are based upon management’s assumptions, forecasts and expectations as of today’s date and are as such are subject to material risks and uncertainties. Actual results may differ significantly from forward-looking information and financial forecasts. Additional information about those factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission. So first, let me apologize for the late reporting of our results. I know this may have caused some concerns. The nature of delays comes from the decision made almost two years ago to change our auditors from KPMG to E&Y. We made this decision based upon good corporate governance and its practice and our continued search to improve our accounting platform. We fully understood that in doing so it would likely result in a two or possibly three-week delay in getting our year-end audit completed. That is exactly what happened. But unfortunately, this delay pushed us into a quarantine shutdown in our London office and forced everyone including the auditors to work at home. Naturally, the consequence of everyone working from home resulting in a much delayed audit process. So today our speakers will include Harry Deans, our President and CEO; Niall Nolan, Navigator’s Chief Financial Officer; and our Chief Commercial Officer, Oeyvind Lindeman. So let me pass the call over to Harry who will make introductory comments. Harry?

Thank you, David and good morning to everyone on the call. I hope you're all well and keeping safe. The world is a completely different place today compared to when we last had our Q3 call in November 2019. Since then, the COVID-19 pandemic has swept the globe with its far reaching consequences for human health, social interaction, and the world economy. The first economic effects were felt in China before spreading to the rest of Asia and now to Europe, the Americas, and beyond. All markets are experiencing huge volatility, and unprecedented turbulence with considerable headwinds in many sectors. However, amongst all the doom , there are some glimmers of hope with China slowly and purposefully starting to return to some degree of normality with both manufacturing and demand gradually starting to recover. As we speak, several Navigator vessels are en route to China and South East Asia with LPG and petrochemical cargos. At Navigator Gas, the safety, security, and welfare of all our colleagues is paramount whether that be on land or at sea. We successfully retested our business resilience procedures last month, and following government advice in both the UK and Poland, we decided on the 18th of March to temporarily close all of our offices and to run our business remotely. For just over 2.5 weeks now, we've been running our business operations remotely without disruption. I'm very pleased that all our business continuity preparations have enabled a seamless transition. Through the use of technology, we've increased the level and frequency of our communications with and between our onshore and fleet staff. Of course, our shore-based activities are only part of the equations, our seafarers continue to crew and safely operate our 38 vessels, which as we speak are plying the seas delivering their vital cargos…

Thank you, Harry, and good morning all. Revenue for the fourth quarter was $76.1 million, an increase of $0.5 million from the $75.6 million generated during the last quarter, Q3 2019, but were down 2.8% or $2.2 million from the fourth quarter of 2018. Revenue for the 12 months ended December 31 was $301.4 million, also a reduction of 2.8% from the $310 million generated during 2018. Net revenues as revenue after deducting pass through void expenses was $63.9 million for the fourth quarter, an increase from both the $62.2 million generated last quarter and the $62.8 million generated a year ago. Utilization increased significantly from 86.3% a year ago and 92.7% during the fourth quarter generating $4.3 million of additional revenue. December in particular saw utilization of 96.3% and this higher utilization continued as Harry mentioned into January 2020 with the utilization of 93 – 97.3% before folding away in February and March to levels around 85% largely as a result of the impact of COVID-19. For the full year of 2019, utilization was 86.8% against 89% for the 12 months of 2018. Although utilization increased during the fourth quarter, average charter rates reduced slightly from Q3 with an average of $20,204 per day or $614,500 per month in the fourth quarter compared to $20,920 per day for the fourth quarter of 2018. Average charter rates for the 12 months of 2019 were $20,831, an increase from the average rate of $20,284 achieved for the full year of 2018. During 2019, the company undertook a total of nine dry dockings, taking an aggregate of 262 days to complete which includes the time taken to sell to the respective yards and costing approximately $11.5 million. These three of these dockings were completed during the fourth quarter taking a total of…

Thank you, Niall, and good morning, all. Clarksons 12-month time charter assessment for handysize semi-refrigerated gas carriers increased by 20% during the fourth quarter from $540,000 a month at the beginning to $645,000 a month at the end of December. As one would expect in a rising market, our utilization across the fleet similarly rose from an average of 85% and during third quarter to an average of 92.7% during fourth quarter. The increased utilization was generally due to an uplift in the transportation need of LPG during the first winter months. LPG has the proportion of earnings based rose by 4% to $2,100 in four days during the quarter compared to the previous quarter amounting to two thirds of our total fleet turning days, deep sea petrochemical voyages similarly picked up in demand and reverted back to the more traditional trading routes; ethylene from US to Asia and butadiene from Europe to Asia bringing additional 10 miles to the handysize segment. The Chinese petrochemical manufacturing demand rose during this period in order to replenish inventory levels prior to China Lunar New Year. This resulted in our petrochemical earning days during the quarter to rise by 26% to 877 days compared to the previous quarter. As you heard earlier in the call, Navigator Europa went all fast alongside Morgan’s Point Terminal during the Christmas period to commence the inaugural ethylene commissioning cargo for the Enterprise Navigator ethylene joint venture. She successfully completed loading operations of 11,500 tons of ethylene, for in Americans speak, 25 million pounds of ethylene and delivered on-specification ethylene to Taiwan on the 10th of February. Since then, the terminal has loaded four additional vessels. In the run up to our expectation of full utilization of the ethylene terminal and in a move to create a larger…

We can open the call up for the Q&A, Kazz if that’s okay with you.

[Operator Instructions] First question comes from the line of Randy Giveans from Jefferies. Please ask your question.

All right, so starting on the shipping side, you know in your press release, you stated the company has not experienced any significant decrease in charter earnings thus far but realization has fallen from 97% in January to the mid-80% range. So a couple of questions. What kind of charter rate levels are you seeing for the spot propane and/or ethylene ships and then what was the average utilization for 1Q 2020? Should we just maybe take the midpoint of the 97% and mid-80% to around 90%

Hi Randy, so you have the utilization rate for the quarter in the press release there. But I think at the backend of January, quoted time charter earnings from Clarksons were at its peak at $695,000 a month, so that was at end of January. At the end of last week, it was quoted at $665,000, so down a tad bit, but we are not seeing a drop off the cliff if that was the question. So, I'd say it's a slight reduction from its peak at the end of January to what we are seeing today. It is smaller, so the rates are impacted less so, but its utilization as you pick up on which is somewhat lower than what we had in December and January, because of just dampening effect from -- on the demand side.

Thanks for that Oeyvind. And then a question for Niall, looking at the sale-leaseback debt transaction freed up around, I don’t know, 30 million in liquidity net of the debt repayment. Any specific use for those proceeds? Is that just kind of staying on the balance sheet and then two other questions, what is the effective interest rate on that transactions and/or additional sale leaseback kind of as an available options, is that market still open could possibly repay that 100 million next February?

Yeah. So the - the existing sale leaseback transactions first, this is with Ocean Yield in Norwegian outfit. The rate was 4.3% plus LIBOR. And we have 25.25 million as I mentioned of surplus cash. That's really just strengthening the balance sheet, providing additional liquidity that we did in -- so that transaction was closed in October last year, October 28 of last year. With respect to any future sale leaseback that we're considering to pay off the 100 million bond in the event that the market stays closed or the capital markets stay closed and we're looking at alternatives to market. Certainly, the Japanese leasing market is very much open, which has remained open throughout and the rates would probably be less than the 4.3% that I mentioned in the relating to the existing leaseback.

Perfect. Niall, thanks for that. And then one more little topic to cover here for the ethylene export terminal. I know there’s still kind of commercial acceptance and those things are hopefully coming say in the next few days, if not weeks. With that, what is kind of the expected maybe EBITDA guidance update for the second quarter or –just the full year 2020, and then kind of on a full run for the full year 2021? And then can you remind us of the total debt Navigator has on its books for the terminal?

I’m not happy to start off on that. The debt that -- at least the payments that we have are $125 million so far which is -- which is all debt. We expect to pay the other $24.5 million generally throughout 2020 this year. They -- those payments principally relate to the tank which as Harry mentioned is due to come on in November of this year. In terms of -- I did mention that we are not expecting to be profitable from that terminal until the throughput agreements ramp up or come into play after which we would expect to be. We've given guidance before about the full operations of the terminal in mid-teens around the $22 million, $23 million -- yes $22 million $23 million EBITDA level. That's based on -- on the full million ton capacity of the terminal when the tank comes into play.

Just making sure that that range is still intact, and I guess you mentioned it there. So last question for me. Any updates on that remaining 25% capacity in terms of contracts?

Thank you. Are you ready for the next question?

Harry, did you want to answer that question?

I was waiting for Oeyvind, but he might have dropped off. Yeah, we are still in – it is still work in progress Randy. We’re still trying to get as you remember, phase one is already sold out and it’s phase two we’re talking about once the tank comes on stream. We’re -- Oeyvind and the team people on Enterprises are in lots of discussions and those discussions are being a bit halted to be honest given the COVID-19 situation, but we’re still hopeful that we’ll get the terminal sold out imminently.

I think the best answer for that Randy would be what Jim Teague at Enterprise had said in his conference call that they were very close to signing the last documents that would result in that terminal being sold out completely. Now, since that conference call that they had a month and a half ago, there have been a lot of changes in the world. I think knowing the background of those comments, I would suggest that that interest and that potential signature on the documents will be coming. But I think no one is in a rush to put their name on the document right now. So, I think it’s coming, there's a lot of confidence that, that will be signed, but it's not signed yet.

Okay. Yeah. Got to hear from all four of you so well-covered.

Thank you.

Thanks, Randy. Is there another question?

Your next question comes from the line of Sean Morgan from Evercore. Please ask your question.

Hi guys. Yeah. Sean Morgan. So, the unrealized loss on the cross currency for the interest rate swap, you guys had to cash collateralize that. What was the total amount that had to be posted, and is there sort of like an upward limit that would need to be posted and how much liquidity headroom do you have, sort of taken that into account.

So the loss at the end of – the unrealized loss at the end of December was $6.3 million and the – hedge provider bears the first $5 million, so we had to put up the $1.3 million into a collateral account. And there isn't actually a headroom, that there isn't a cap on that.

Okay. So, it's sort of like a dollar-for-dollar that you have to match to the unrealized loss, so if we go up another $5 million, you'd have to post another $ million effectively.

Correct. Yeah.

Okay. And then you talked a little bit about the sort of spotting demand you're seeing around the world and maybe a little bit of improvement in China, with India, I think I read that they're now planning to do subsidies for Indian retail consumers for cooking gas. Is there going to be able – in your opinion it would be able to offset some of the some of the loss demand from the industrial sector in a year or so I guess to make – are you sort of thinking this is going to be a negative for a while in India or possibly improving demand there.

Hi, Sean, it’s a good question, it’s a complicated question. So the LPG – at least what is subsidized, it's for marginally economic people in India. So they use the LPG for domestic for heating, not so much heating perhaps for cooking, so that the demand is still there but it's unchanged. It's just that it get subsidized. Another impact of India is that our petrochemical industry are the downstream demand in India is lower. So the Indian production has to find them out elsewhere in Asia and had some knock on effect on other trades. But for LPG in India obviously there's the security of supply on the national interest which is important. So what we've seen over the last couple of weeks but at the national oil companies in India have gone out to secure larger stems of LPG for the security of supply to the various ports, but they won't get caught short in this corona lockdown. So, I think for handysize, net effect is neutral and there's not that much handysize LPG business in between the Middle East and India. There's a couple of ships, but those will be unaffected. And the more impact is that there are new petrochemical cargos being imported from India, it will go to Asia, which has a positive effect so be it a smaller volumes. So, I think net-net is mostly neutral shown, so not too big impact on plus minus.

Okay. That's helpful. Thanks. I'm going to turn it over.

Thank you. Next question comes from the line of Omar Nokta from Clarksons Platou. Please ask your question.

Hi, David, Harry, Niall, and Oeyvind. And I hope you and your families are safe as well as everyone at Navigator.

True.

Thank you. You know you guys have given a very good overview I thought obviously in the comment…

Sorry, question, can you ask your question again. It appears your line has dropped off. [Operator Instructions] Thank you.

Yes, maybe you can take the next one. And if Omar can hear us, he'll call back with his question.

Thank you. I’ll ask Omar to continue with his question.

Can you hear me?

Yes, now we can. Thank you.

Okay. Yeah. Sorry about that. Not sure what happened. I just wanted to just a couple…

It’s the bug.

It is it's going around. Maybe just first half you talked about the operational challenges and this is definitely something that industry wide that they're shipping, say everyone is facing and that is the crew changes and needing to delay that. When you guys think about it, how long do you think it's feasible, because you guys have specialized vessels and they have very sophisticated equipment on board.

Yeah.

How long do you think it's feasible to keep the crews on board without making a change. Is this week -- number of weeks type of thing or can this go on for months, you think?

Hi Omar, this is Harry, good morning, I'll take that one. Omar, in many respects the safest place to be at the moment is on one of our vessels to be honest. And to answer your question, yeah, it can go indefinitely, but as countries start to open up, and this way you start moving again, then we’ll -- what we’re trying to do is seek to refresh the crews as quickly as possible.

Yeah. Okay. Thanks for that. And then just as a point of [Audio Gap] you mentioned the utilization being down into the mid-80s at this point. Would you say that that's a blended average across the spot in time chart or is that just the spot market utilization?

That is a blended cost of all fleets, which we always quote our utilization numbers basis.

Okay. Thank you. And then just one other thing I wanted to ask and, Niall, clearly the sale leaseback, you’ve unlocked a good amount of cash and – as I just think about it, and looking at the way it's classified in the balance sheet, I may have missed it, but is there a reason why it appears to me that it looks like it's a related party transaction. Is that the case with this?

Yeah. This is - this is – this unfortunately is a consequence of US GAAP because the vessel is owned by a company, which has no equity involvement by Navigator, but Navigator is the sole beneficiary of that company, because we've got buy options at the end of various years 2005, 2007 and 2010. We are required to consolidate that subsidiary into our books, and therefore on the balance sheet, it's called a related party and on the income statement there is an amount of net income attributable to the non-controlling interest which is again sale and leaseback. So it’s – it’s the most bizarre accounting treatment that we’ve come across to date. It is now how IFRS accounts for sale and leasebacks. But it's -- it's a requirement of US gov. But you're right the non-controlling interest does -- does relate to this sale and leaseback.

Okay. Yeah. All right. So but effectively just from the big picture obviously ocean yield and navigator, there's no…

There is – there is absolutely zero commonality or Navigator equity participation in that subsidiary. But – and effectively from the balance sheet perspective look on the balance sheet amount as the amount of the outstanding loan.

Yeah. Okay. I'll do that. And – and I know I'm bouncing around but I just want to ask one more and Oeyvind I think you gave a good overview despite the drop off in oil prices there still is a fairly decent gap between ethylene or petrochemical prices in the US, Europe and in Asia. From what you're seeing right now in the market it's everything's changing and it's dynamic, but basic -- based off of that spread and yes it's coming, are you still seeing a good amount of movements or has that -- or has sort of the overall pandemic really started to impact the movements based off of this pricing?

Yeah, I mean the downstream demands in Far East is not helping because obviously it’s come off and it’s big time in February and March, although March is looking slightly better than February. But the point was that we're filling up Far East and companies were filling up their storages before the Chinese linear comments. So they were already – their inventories were already full. So and then you have February-March come in downstream demand was low because workers were at home and so forth, nobody will consuming. But that had an impact on the inventory consuming, so that’s had an impact on the inventory management on the availability where you could place cargos and at the same time you have the Europeans and the Americans still running their crackers at the high rates, so they're producing their domestic situation similar to China. So they're ramping up inventory so as soon as we see tonnage being available in Asia, the cargos will move and they have been moving albeit a little bit on reduced scale. So I mentioned it was 50,000 tons of ethylene going from Europe to Asia in March and that is quite unprecedented. So but pricing the narrowing of the arm is also a challenge. So on paper it works today but producers and end users and traders they have to then find outage, so therefore you drop off 12,000 tons of ethylene it is a big cargo. Can they go to one place or do they have to mix up and go to two or three locations and what are the pricing do in the meantime because you know their wages are quite long it takes from you load to you get to the destination is 30, 40 days. So you have a lot of complexities in those trades but they haven't stopped but of course the corona situation does make it easier.

Yeah just to that end, it’s floating storage any sort of is that a viable option these trade where there is a

Yeah we haven't seen that yet now we have some larger ships being available on the spot market and that can take 20,000 tons and that might come, so we haven't seen – seen those market calls yet I think blocking storage situation is more applicable in the early commodities. So if it's propane or crude doing or something like this when you come to petrochemicals, it’s a refined products petrochemicals, it’s a refined product. So it’s less of a scope to -- for floating storage.

Okay. Got it. Well, appreciate the color guys. Thank you very much and stay safe.

Good to hear from you.

Thank you, gentlemen. In the interest of time, I’d now like to hand the conference back to you, for your closing statements.

Well, great. Troubling and in difficult times, even making this conference call has been a challenge. So I hope we’re -- the info given for that as well. Look forward to our next quarterly call, which I hope is not as delayed as this year end call and thank you for joining us.

Thank you. That does conclude our conference for today. Thank you for participating. You may now all disconnect.