You have joined the meeting as an attendee and will be muted throughout the meeting.

Navigator Holdings Conference Call for the Second Quarter 2023 Financial Results. We have with us Mr. Mads Peter Zacho, Chief Executive Officer; Mr. Oeyvind Lindeman, Chief Commercial Officer; and myself, Randy Giveans, Executive Vice President of Investor Relations and Business Development in North America. I must advise you that this conference is being recorded today. As we conduct today's presentation, we'll be making various forward-looking statements. These statements include, but are not limited to, the future expectations, plans and prospects from both a financial and operational perspective, and are based on management assumptions, forecasts and expectations as of today's date and are subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecast. Additional information about these factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission. With that, I now pass the floor to Mads Peter Zacho, the company's Chief Executive Officer. Please go ahead, Mads.

Good morning, and thank you for dialing in to the Navigator Gas earnings call. I'll start off by providing a brief overview of our Q2 results and then hand over to Oeyvind and Randy for greater details on business drivers and recent events. Our second quarter results came in similar to Q1 and much stronger than Q2 2022, with revenues of $135 million. Adjusted EBITDA, just below $70 million and net income of $27 million. The result was mainly driven by higher charter rates, whereas vessel utilization was below that of Q1. Our balance sheet is robust with cash of $180 million at the end of the quarter. The initial $50 million share purchase program was completed in Q2 and a further $25 million authorized as part of our new capital return program, opening up for both dividend payments and for further share buybacks. Utilization came in Q2 at 89%, below the 96% seen in Q1, but higher than Q2 2022 of 87%. Terminal throughput ran well above nameplate capacity of 278,000 tonnes. As previously announced, we grew our vessel capacity through the acquisition of five efficient modern secondhand vessels. The takeover was completed faster than originally planned and completed mid-April. Expansion of the Ethylene Export Terminal at Morgan's Point has come off to a good start. And the first installment of $9 million have been paid, we're expecting to pay another $9 million in August. The expansion will give us up to 2 million tonnes of additional export capacity. Total CapEx for our share is expected to be around $125 million and completed by the end of next year. We sold Navigator Orion in May, above book value, and we also formed Bluestreak, a joint venture with Bumi Armada to transport CO2 from a UK-based stranded emitters. Outlook is…

Thank you, Mads, and good morning, all. Moving to Slide 12. After a small drop in US natural gas liquids production during the first quarter, the EIA statistics are currently showing a strong return to US production. The final figures from May came in at a record level of nearly 200 million barrels per day production. US price of LPG is therefore attractive against oil equivalents, measured both in price and energy content. This will continue to support export fundamentals. So far, LPG exports for the month of August, this month, is up 12% compared to August of '22. These volumes are happening simultaneously to inventory build in Mt Belvieu, Texas. Typically, during summer, inventory-build exports are soft, but that's not the case for this year. The impact of recent US natural gas production growth can be seen on the price of ethane on Page 13. It has decreased over the last two months, further increasing the competitive price production of American ethylene. The price arbitrage of ethylene to Europe and Asia is widening. The current spread at least to Asia is about $400 a tonne, which is sufficient to allow for terminal handling and freight at decent returns. Asia Pacific consumers are importing about 65% of total US ethylene exports, with the remaining 35% heading to Europe. Our ethylene market conditions benefit with every cargo heading through the Panama Canal and across the Pacific Ocean due to the long duration of these voyages. Similar to ethylene, ethane as a feedstock also enjoys US domestic excess supply. Therefore, it is cheap and its exports are increasing. And remember, all our ethylene capable ships can also carry ethane. On Page 14, please. Ammonia has become an important commodity for us. Despite natural gas prices are starting (ph) to return to normal…

Thank you, Oeyvind. So following up on some several announcements we made in recent months, we want to provide additional details on those updated developments regarding a few of these announcements. So as you can see on Slide 19, we are pleased to announce our return of capital for the second quarter of 2023, including our first-ever dividend as a public company. In line with our recently announced return of capital policy and the illustrated table below, we are returning 25% of net income or $6.7 million to shareholders this quarter. The Board has declared a cash dividend of $0.05 per share, payable on September 22, 2023, to all shareholders of record as of September 8, 2023, equating to a quarterly dividend payment of $3.7 million. Additionally, with NVGS shares trading well below our NAV of above $20, we will use the variable portion of the return of capital policy to repurchase sales. As a reminder, between December and this past May, we repurchased 3.8 million shares at an average price of $13.12 per share for a total of $50 million. Subsequently, the Board authorized a new $25 million repurchase program. As such, we will repurchase approximately $3 million of common shares between now and quarter end, such that the dividend and share repurchase together equal 25% of net income, $6.7 million. Returning capital to shareholders is relatively new to Navigator, but something we see as a requirement for a shareholder focused on. Now turning to Slide 20. Following up on our previous announcement regarding the expansion of our Ethylene Export Terminal, under our existing 50-50 joint venture with Enterprise Products Partners over at Morgan's Point, we agreed to a capital project to increase the export capacity from approximately 1 million tonnes per year as it is today, to at…

Perfect. Thanks a lot, Randy, perhaps. Yeah, just to round it off and I just wanted to clarify that to emphasize here that Navigator is on a good path, earnings are trending in the right direction with robust utilization and gradually higher charter rates. Both are supported by the high utilization of our ethylene export facility at Morgan's Point, with more to come once the expansion is complete by end of '24. The balance sheet is in its best shape ever with an appropriate level of debt and also recently refinanced in portfolio. This gives us capacity for further growth, balancing growth, redistribution of capital through dividends and further share buybacks, and now we will do both with dividends to be received on the 22nd of September and share buybacks to be initiated imminently. We published our annual ESG report in June. I hope you had a chance to read it. Our efforts in making our business more sustainable and significant and were quickly picked up by the Webber Research 2023 ESG Scorecard. We now ranked seventh among 64 shipping companies and we have more initiatives ready to climate up further. So looking forward to seeing you in November in Houston, and thank you very much. Back to you, Randy.

Thank you, Mads. So, operator, we will now open the lines for some Q&A. [Operator Instructions] So first question, your line should be live.

Hey, guys. Did I -- can you hear me? Am I unmuted?

Loud and clear.

[indiscernible]

Hey, good. Figured it out. Hey, good quarter. I have a couple of questions. First, Oeyvind, you talked about, it seems like more and more of cargoes of all varieties are going to Asia. But at the same time, I mean, we're seeing seemingly news every day about congestion around the Panama canal water levels and so forth. I assume that's a positive for your business, but is there any way to sort of think about the implications or how positive it is? Is it modest or something that's making a meaningful difference?

Ben, excellent question. It's something we're looking at on a daily basis, because we -- our ships transit there every week. And it has an impact positive. Now for the industry, for the gas industry, any inefficiencies or from a shipping point of view, takes capacity out of the available market. So that is -- if you look at it from a shipping point of view, that's a good thing. And that is very much applicable for the bigger ships that has to transit through the new Panama locks. And the new locks only allow for nine transit each way each day. And the gas carriers are competing with the bigger ships of containers and LNG and so forth. So we're starting to see large delays there, whereby ships are being deviated around the Cape, if they go to Asia. So clearly, a positive from a shipping capacity point of view. For us, some of our midsized ships that are trading on ethane, so taking ethane from US to also Asia, have also started to move via Suez or Cape, so that is an immediate impact on our business. Our handysize ethylene ships are quite nimble. So they -- we have a pretty fixed schedule on them, so we can reserve canal slots and so forth in advance. So, we see less of an impact on the handysize ethylene ships going across the Pacific. But I think, it is definitely one to watch, the more delays, the less shipping capacity, and that's a good thing. Now, the other question that you might be thinking of, if that's the case and that is going to be for a long time, then does the market lack vessels to get back in time to load LPGs, ethane, ethylene and that's an entirely different question. But for now, it brings some positive implications to our freight market.

Okay. That's helpful. And I appreciate all the color there, Oeyvind. I guess, for my second question and I'll turn it over. We did see -- there's hardly anything in order, but we did see a different shipping company, or as a multi-gas carrier in last month or so that can do ammonia, CO2, LPG, all sorts of different things. I'm curious if that is something that you guys have considered doing just you're going through the fleet renewal program as Randy have outlined, there's not much on order. You still have some older assets that you're looking to divest. Any thoughts about maybe replacing them with something like that?

If I can just start out and then you can complement me, Oeyvind and Randy. It's unlikely at this point in time that we'll be building ships that can transport CO2, as well as other gases. Right now, there's still some uncertainties around the technology. It's far from certain that given CO2 technologies such as low pressure or mid pressure is going to be the right one. And we will be working with a number of projects as we do through our Bluestreak joint venture. And here, we will be working very closely with the emitters to ensure that the technology and the capacity that we will be building for will be matching what is required here. We don't think that the risk of building that on speculation right now it's worthwhile.

Sorry. Excuse me. All right. I appreciate. Thank you, guys.

Thank you, Ben. Okay, operator, I see Omar has his hands up.

Hi. Thank you. Hi, Randy. Hi, team. Good morning. Thanks for the update. And obviously, as you have continued to highlight, it seems like the past few quarters, the business continues to thrive and EBITDA is pushing higher. I wanted to ask, the TCE rate you guys captured on the handy fleet this past quarter was at 27,000-plus number. Even with utilization, having come off towards 89%, which is historically still fairly decent. How can we think about, say, the very near term? I know it's too short-term. But in general, about the -- you've mentioned utilization for 3Q now being above 90%. What do you think of -- what can you give us in terms of guidance on the rate? Can we expect the rate to also be climbing with utilization here in the near term?

Thanks, Omar. We're very -- the prepared remarks was really about, we typically have guided on utilization. And you might have picked up that the bottom in utilization during the summer months was higher than in previous years during the same period, and it also has shopped up. So we mentioned in the slide deck that July was close to 94%. So that's a big jump from the total of Q2. So in that respect, rates should also move. But in the handysize segment, things take a little bit of time. Generally, in the summer months, the rate environment is a little bit soft. It's less than this year. So I think this is why we're being confident or talking about forward guidance on EBITDA, because it is likely, it will continue to rise because of our confidence in utilization. And the rate level is also robust. I can't give you more guidance on the specific rates that we are seeing right now, except what your colleagues are -- what the different ship progress and so forth are putting out in the market. So, there's a slide deck on that, and you can take a look, but it's moving in the right direction.

Thanks. Thanks, Oeyvind. I appreciate that. And maybe just one follow-up in terms of the fleet renewal and your activity in the S&P market. I wanted to ask about your non-handy ships, in terms of, I know the small LPG carriers perhaps aren't necessarily core to the main business, but what about the five 12,000 ethylene carriers? How are those since the merger? How are those transitioned into the fleet? Or do you view those as a meaningful piece of Navigator going forward? Or do you think those are monetizable?

We're very happy with our midsized vessels. We think they have built with a rapid technology. They are very efficient ships, and we think they have a bright future ahead within Navigator to serve the ethylene and ethane market. So it's definitely core. And we do see, in general, that the infrastructure over long periods of time, it's been operated globally, so that larger and larger ships. I mean, you see that in pretty much all segments. So we will think over time that there would be also gradually larger ships serving the markets that we're currently well positioned in. So I think that we define on -- for sure, our only four markets have been in the handysize, but also the midsize segment.

Okay. Got it. Thanks, Mads for that. That's it from me. I'll turn it over.

Thank you, Omar. Okay, I do not see any other hands. So I think that concludes our Q&A time. Thank you again for dialing in. We look forward to speaking soon and certainly seeing you in a few months. Have a great day.

Thank you.

Good-bye.