Thank you for standing by, ladies and gentlemen and welcome to the Navigator Holdings Conference Call on the Third Quarter 2021 Financial Results. We have with us, Mr. Dag von Appen, Chairman; Mr. Niall Nolan, Chief Financial Officer; Mr. Oeyvind Lindeman, Chief Commercial Officer; and Mr. Michael Schroder, Operating Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. And now, I pass the floor to one of your speakers, Mr. Dag von Appen. Please go ahead, sir.

Good morning, everyone. Welcome to the Navigator third quarter earnings call. As we conduct today’s conference call, we will be making various forward-looking statements. These statements include, but are not limited to future expectations, plans and prospects from both, the financial and operational perspective. These forward-looking statements are based on management assumptions, forecasts and expectations as of today’s date and are 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. Today’s call will include comments from our senior executive team running the Company, which is Niall Nolan, our Chief Financial Officer; Oeyvind Lindeman, our Chief Commercial Officer; and Michael Schroder, our Chief Operating Officer. First, I would like to thank everyone in the Company for their exceptional dedication and support during the very busy third quarter. It’s been hard work running operations whilst completing the merger between Navigator and Ultragas. When we originally set out to merge these two companies, we could only have hoped that our first quarter of combined operations would be as positive as is evidenced today and that our two teams would work very well together. This has been our best quarter since 2016 and the Board and I look forward to further synergies being extracted from the merger during coming months, and I also expect an improving gas tanker market going forward. I’m honored to be both, a shareholder of Navigator Gas since early August and the Chairman of the Company since September. I can with confidence say we find ourselves in a unique position in the global gas and petrochemical logistics market, because we are the maritime link that connects the…

Thank you, Dag, and good morning, everyone. As you have seen from our third quarter statement, this has been our best quarterly result since the fourth quarter of 2016 and the sixth consecutive positive quarter in a row. This is an exceptional achievement for the company and represents the significant work we’ve done to complete our merger and synergize our two businesses. Looking at our financials. During the quarter, we have posted a quarterly net income of $6.7 million or $0.10 earnings per share. Our operating revenue has increased to $102.7 million, and our EBITDA has increased significantly to $40.3 million. This performance is in spite of industry headwinds, which we faced during the quarter, just kept our utilization stubbornly flat around the mid-80% level into the third quarter and continued impact of the Texas freeze earlier in the year. In addition to these headwinds, the U.S. ethylene arbitrage to international markets narrowed during August due to domestic inventory build as a precautionary action prior to the annual hurricane season during the late summer. Thankfully, the ethylene industry experienced minimal impact from the various hurricanes that made landfall with the domestic price adjusting downward. Ethylene export volumes picked up towards the end of the quarter and the joint venture Marine Export Terminal posted its best three months since it became operational January of 2020. As many of you are aware, this quarter saw the completion of the cashless business and fleet merger with Ultragas on August 4th. Of the 18 vessels, 11 continued to be managed in the Unigas Pool and the 7 handysize semi-refrigerated vessels seamlessly joined the Navigator managed fleet. One smaller 1999 built vessel was subsequently sold. With the merger now complete, we are now seeing the combined company better positioned to offer flexibility and logistic service…

Thanks, Oeyvind, and good morning, everybody. As both, Dag and Oeyvind have already mentioned, the Company generated a net income of $6.7 million for the third quarter 2021, the best result for almost five years. This $6.7 million compares favorably to the $1.3 million for the third quarter of last year, and $300,000 for last quarter, the second quarter of 2021. Adjusted EBITDA for the third quarter was $40.3 million against $29.6 million for the third quarter a year ago and $28.2 million last quarter. Total operating revenue from the vessels during the quarter was $102.7 million compared to $81.4 million for the comparative period last year, and $85.7 million generated last quarter, Q2 2021. The year-on-year increase in revenue was mainly achieved as a result of the additional vessels following the combining of the fleet for both Navigator and Ultragas on August 4th of this year. Ultragas’ fleet consists of 18 vessels, 7 of which are handysize 22,000 cubic meter semi-refrigerated vessels, similar to those operated by Navigator; and 11 are smaller LPG or ethylene vessels, between approximately 4,000 cubic meter and 12,000 cubic meter. These 11 smaller vessels are independently commercially managed by the Unigas Pool, a well-respected pool that has operated for over 50 years. Their contribution for the two months of Navigator ownership was $8.2 million and is detailed separately on the income statement. As well as additional vessels, part of the increase in revenue was generated as a result of increased utilization, which rose from 78.8% in Q3 2020 to 84% this quarter, adding an additional $4.4 million to revenue. As I mentioned, we expect utilization to trend upwards in Q4 to at or above 90%. Average charter rates, however, reduced to approximately $21,900 a day or $666,000 per month from around $22,900 a day…

Thank you. [Operator Instructions] Your first question today comes from the line of Sean Morgan from Evercore. Please go ahead. Your line is open.

So, on slide 11, I appreciate this clear presentation of upcoming maturities, but it does sort of raise the question, we’re about a month out from 2022, and then we’ll start kind of rolling these ‘23 maturities into the current portion of debt. So, is there a strategy for potentially extending some of those 2023 maturities, especially with kind of rates at low levels right now?

Yes. We’re already looking at refinancing those. There are a number of -- three bank loan facilities in their which we are looking at and the Norwegian kroner bond. So, we are developing a strategy to refinance those early part of next year.

Okay. And is there any kind of make whole or early repayment provisions that we should be kind of thinking about on those? Are they -- or can you kind of take them out without a kind of punitive payment to the debt holders?

Well, two things. The bank loans, we can repay at any time without any penalty. The bond is now callable at 102.84 since earlier this month and goes until next November and thereafter it holds to slightly over 101. So they are all positive.

All right. And then, another area that I think it contributes a lot to the bottom line is the Marine Terminal joint venture, which has been a little bit difficult to forecast, and the volumes have kind of varied quarter-by-quarter. And the last 4Q was pretty weak relative to 3Q. And I think that may have been kind of environmentally related with storms and whatnot. But, should we be expecting a continued ramp into 4Q? Is there any seasonality that might dampen that in terms of the export terminal in Texas?

It’s an appropriate question. And the answer is yes, the terminal in the fourth quarter is ramping up more than what we’ve seen earlier in the year for the reasons we discussed. So, volumes are definitely up. I mean, we’re two months in and prospects for December looking healthy as well. So, we expect the terminal to kick in and produce.

Okay. And are the results kind of linearly related with the volumes, or is there like a commodity component that can kind of be additive to what we saw in 3Q with the strong...

It’s more of a linear. These are fixed fees terminal contracts. So, they are not linked to any sort of arbitrage or product pricing. Now, any spot opportunity will have a different rate and potentially have a higher rate and the terminal can earn more. But as you recall, 94% of the terminal capacity -- nameplate terminal capacity of 1 million tons is contracted at various rates. So, if the -- if what we can produce in addition to, which is potentially icing on the cake and you can derive more value depending on what the arbitrage is.

Okay. So, that 6% would be…

Yes. That’s nameplate. So, in November, the terminal proved, I mean we’ve been talking about it for the last 12, 24 months, but the contract of having exports above nameplate capacity is definitely used, for November, it was 10%, 15% of what is nameplate capacity. So, yes.

Thank you. Your next question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.

I wanted to follow a little bit on Sean’s question there. Now, is it possible, you mentioned just now that in November you were 10% to 15% above nameplate. How should we think about -- is there a way to frame in the economic impact of what the spot cargoes might be, or how much extra benefit from a EBITDA perspective or whatever you might get from the terminal when it is running above its contracted volume?

Yes. I mean, we -- in conversations with our joint venture partner and also our own budgets and the terminal budget is really based on nameplate capacity of the 1 million tons. So, we see that it will bring fruit of what we’ve been saying before about $25 million EBITDA for our share. And then, any additional tons is over and beyond that. So, it’s still a marginal impact. But, if we can squeeze out the handy cargo per month extra or 20,000 tons extra above what we have contracted in the throughput agreement, then of course, A, the terminal reached a higher revenue, but more importantly, perhaps, the big kicker for the utilization and rates in the handysize ethylene space. So yes, we kind of base our expectations on the forecasted name plates, and anything above that we take as a bonus.

Okay. But at this point, there’s no way to sort of quantify that yet...

Because we’re talking for next year. We don’t know -- I mean, it hasn’t materialized yet, right? So, what we have in the books today contracted will be those 94%, 95% of nameplate capacity, and that’s contracted. And anything above that in the future will be a bonus.

Okay. So, shifting gears a little bit, Niall. One of the things that I believe you guys were sorting out with respect to the merger with Ultragas so as how to think about the useful life of the assets from a depreciation and accounting standpoint. If I’m not mistaken, they were on two different bases of useful life. Any color as to how you’re thinking about handling that going forward?

I think, Ben -- I think that conversation probably started within Navigator prior to any involvement with Ultragas. And as you will be aware, we have historically depreciated our assets, our vessels over 30 years. And I guess, if the lockdown has taught us anything over the last two years, it is the escalation in views about conservation and environmental. And I think that conversation or that trend created a conversation internally as to whether really our vessels can continue for 30 years. Technically, they would be capable, but they are clearly less efficient than modern day vessels. And particularly, I’m thinking of the five standards [ph] as we call them, the original 5 Navigator vessels. So, that discussion is ongoing, and we will conclude it by the end of the year. But, it would not be unreasonable to consider that we would reassess the useful economic life as it’s called, from 30 years to 25 years.

Okay. And then two more, although one is real quick. So, just quickly, do you have any update on the Navigator Neptune? I know that it had some -- there was a fire or something, and it was -- it looks like it’s still in repairs, but when should we expect that? But then the other question is, when you talked about sort of the four points that were driving utilization and rate higher ammonia, ethane, ethylene and LPG, as you look at those, how much of that do you think is just a function of good pricing for resulting in arbitrage windows being open or demand for ethane because LNG is so expensive or whatever? And how much of that do you think is a structural shift that is not necessarily exclusively price-dependent?

Yes. So, I’m going to take the second question first, Ben. Fundamentally, in the U.S., ethane is cheap because of the NGL production. NGL production is increasing. There’s more rig count. So, if you look at one of the graphs we have in the presentation, you can see that ethane is declining in price, which makes it even more competitive. And that underpins first and foremost, ethane exports, which we are actually doing quite a bit off. So, I think that is not arbitrage dependent because all the people we talk to expect ethane to remain competitive. So, I think that is a structural thing that will continue. And if that is the case, then the ethylene coming from the U.S. should for the long term be competitive to international pricing. It’s a little bit more price-sensitive than ethane globally, but the production is there in the U.S. If the ethane as a feedstock is cheap and competitive, the U.S. producers will run their crackers to their max. If they can reap value from exporting that excess production, they will. The terminal is there to offer that optionality for the U.S. producers, and we are there to -- as partners to ship it out. So, I think ethane is going to be there, no matter what ethylene as well, although slightly more price sensitive. However, the terminal throughput agreements are there hell or high water. The LPG part, I think the point I was making, perhaps more for price sensitive because U.S. has increasing production, the domestic consumption of LPG in U.S. remains stable, so it needs to be exported. The point with LPG is that when the larger ships are doing well, which they are today, there’s less downward pressure towards the handysize LPG business. And I think that…

Great. And the Neptune?

Yes. Maybe I can take that question. Hi, Ben. My name is Michael Schroder. The Neptune, as you well mentioned, had a main engine fire in June of this year. It was an extensive fire, which took quite a lot to repair. By now repairs have almost completed. The vessel is currently navigating to China, where we’ll get installed the last piece of equipment, which is an alternator. And we expect that the vessel should be ready to resume operations by around the 18th of December. So, still within this year, the situation of the vessel.

Thank you. [Operator Instructions] Your next question comes from Randy Giveans from Jefferies. Please go ahead. Your line is open.

So, you mentioned record kind of throughput for the ethylene terminal, assuming that’s around 90,000 tons for November. Was there something special about that month, or could December be in that similar range?

There was something special in November aside from ethane being cheap and European and Far Eastern consumers wanting ethylene. So, we’ve been talking about this normalization of domestic ethylene pricing, which is what you’re seeing. So there’s nothing extraordinary about November. It is as it should be. December is slightly less. Why? Frankly, is because all the ethylene ships, the Luna Pool ships and other competing ships are moving away from Europe discharge to Asia for November. And then back because it takes two months to get back to U.S. after you load. And of course, then you’re skipping of December, right? So, there’s actually a squeeze -- a little squeeze on ship capability for December -- parts of December, which is quite interesting, and of course, positive for Navigator. So, nothing special in November, as per normal, December is slightly less, but I guess people going holidays too, I don’t know. But that’s the story.

Your next question comes from the line of [indiscernible] Please go ahead. Your line is open.

Hi. Thanks for taking my questions. I had two. The first one was, is there any impact or roughly what is the impact in TCE rate just from the change as a result of the merger? Like, does that sort of push down a bit the average TCE rate we should expect all things equal?

So, I think if you -- I don’t know if you’ve seen the supplementary pack. But, if you look at page 14, you can see the Clarksons 12-month charter assessment, which we use as an barometer for the health of this LPG part of handysize. So, you can see that it’s steadily declining from May, June, July, August and September. And the merger happened in August on the 4th. And of course, the industry was trending downwards at that time. And we, along with Navigator and Ultragas magically turn by ourselves. It, of course, is helpful to have a consolidated segment and company. But you can see that the rates then turned from -- since August into October. So, the increase in freight rates, at least with the opinion of third-party ship brokers didn’t happen until a month or two after. And that is why in the third quarter, the rates didn’t move up, if that makes sense. So really what happened then in beginning of fourth quarter was the fact that our ethylene ships were doing ethylene, they were not competing within the handysize segment for LPG cargoes. We have more ammonia on the books squeezing the middle. Squeezing the middle meaning that the LPG part of our business, the semi-refrigerated ships were left alone to do what they are supposed to be. So, there was more structure and discipline both in the ships above handysize, but also within. And that kicked in post-merger and is what we’ve kind of been seeing in the early parts of the fourth quarter and the rates then have turned according to Clarksons.

And sorry, just for clarity, Michael, the rates that we quoted, the TCE rates of 21,900 a day or 22,900 a day do not include the 11 ships in the Unigas Pool because you are right. I suspect that was the part of the thrust of your question that if they -- the smaller ships were contributing into the average TCE rate, it would naturally bring them down because they…

Okay. That’s something that’s like for like.

But they do -- we try to make it relatively like-for-like and that the 7 vessels of the handysize semi-refs are included. So, there is a slight dilution because they are semi-refs rather than ethylene capable, and therefore, there’s a slightly less chart rate. But it would not be typically significant.

Okay. And just my other question was, what’s currently kind of the utilization of the Pembina and Repauno terminals? Has that sort of reached a stable level now, or that you would expect utilization of those two to increase a bit more in the future?

The Pembina Terminal in Prince Rupert, West Coast, Canada is limited in the throughput that they can do. So today, they have -- we have five handysize ships trading or loading LPG from that terminal, which is kind of max, because there are physical restrictions with local storage on site, the rail capacity, but perhaps more importantly, daylight restrictions to enter the channel combined with types. So, there are certain points in time that you can go in and out, depending if you’re late or not. So, those things are restricting the capacity that they can take out from that terminal. Today, I think they’re kind of running at max with five vessels continuously loading, unless they do some modification or the navigation going in and out is changed by the local port authority. I think that will remain.

Okay. And Repauno, what’s the state of that?

Yes. So, Repauno, we’re exporting from -- in the summer, they started up in April, and they did a bunch of handysize LPG export cargoes until September, then they are using the terminal as more of a -- they break bulk. They sell domestically because pricing in the states are quite high for Repauno. They have communicated to us that they will recommence exports to international markets from April again. So, it’s kind of -- it seems to me the first year of operation is more of a seasonal play.

Okay. And so, that may be an ongoing pattern. It’s used just an export facility for some part of the year, and for the rest, it’s more economic to use it kind of storage trading.

At least for the first year, they also have their own ambitions to continuously export larger volumes. But we will see for 2022. They stated that they will come back and export again from April.

I will now hand the call back for any closing remarks.

I think that then concludes the call. Thank you all for participating. And we will see you again for the fourth quarter in due course. Thank you very much. Goodbye.

Thank you. That does conclude today’s conference. Thank you for participating. You may all disconnect.