Navigator Holdings Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference call on the first quarter 2020 financial results. We have with us Mr. David Butters, Executive Chairman, Mr. Harry Deans, Chief Executive Officer, Mr. Niall Nolan, Chief Financial Officer, and Mr. Oeyvind Lindeman, Chief Commercial Officer. At this time, all participants are in the listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. 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. And good morning, everyone, and welcome to Navigator's first quarter 2020 earnings call. As we conduct today's conference call, we'll 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 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 forecasts. Additional information about these factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission. Now, we are a few weeks later than normal in reporting our first quarter 2020 results, but considering that we only filed our 2019 20F about 20 days ago, we believe that the coordination with our new accounting team at E&Y is improving. and we will be able to progress from here. Now many of you know that for the last 18 months or so we have been talking about Navigators Road to 2020. We believe and still believe that during 2020 our operational fate would improve dramatically as various infrastructure projects would be completed and lead to a significant pickup in our export volume on our specialized vessels. Those projects are namely the Mariner East 2 and Mariner East 2X project along the Delaware River, the completion of the Rapano, the new Rapano export terminal again on the Delaware River, our important ethylene export terminal in the joint venture with Enterprise in the Gulf of Mexico along the Houston Ship Channel. And lastly, the important West Coast Canada and British Columbia export terminal that is expected to be completed next year. Now, unfortunately, shortly after we exited 2019 and entered 2020, we were hijacked by the insidious and unexpected novel coronavirus which shut down global trade and slowed down but did not stop our voyage. Ironically, we, the victims of the hijack, are now wearing the face masks. But our team will outline this morning why we believe and have hope that we are now back on the road, albeit somewhat delayed. To give us a better insight on all of that, we will have speaking this morning Harry Deans, our Chief Executive Officer, Niall Nolan, our Chief Financial Officer, and Oeyvind Lindeman, our Chief Commercial Officer. So why don't we have Harry begin and give us an outline of what has happened over the last quarter. Harry?

Thank you, David, and good morning to everybody on the call. I hope you're all well and keeping safe. It's hard to believe that we are now entering our 11th week of lockdown. Our offices around the world remain closed and our business is now run remotely from numerous home offices in several countries around the globe. This is our new normal. Remote working, with all it entails, has become our new modus operandi. I am pleased to say our investment in robust information technology platforms and systems has paid off, allowing our team to interact seamlessly with each other Our customers and our vessels. Thankfully, the COVID-19 pandemic shows some early signs of abating. China and several other economies, especially in Southeast Asia, have reemerged from their lockdowns and have restarted manufacturing, thus providing a much needed stimulus for the global economy. North America and Europe, albeit a few months behind, are also beginning to cautiously ease the draconian lockdown measures. and to talk about plans for a phased opening up. When this happens, it should jumpstart both production and consumer demand. It's indeed early days on the road to recovery. However, the gradual lifting of lockdown will benefit the global economy, which has been severely buffeted by the effects of the pandemic. And may we have witnessed the resurgence of a healthy ethnic arbitrage to Asia, with differentials doubling from record all-time lows in the month. We've also seen an uptick in both propylene and butadiene export cargoes as producers attempt to balance local supply and demand with global export opportunities to maintain high cracker utilisation rates. In anticipation of the restrictions being lifted by national governments, Navigator Gas is working hard on a phased return to work plan for our onshore personnel. This plan is not entirely straightforward as it must respect both social distancing guidelines and other measures. We will only return when legislation allows and when the company believes it is safe to do so. Safe, reliable and efficient operations are at the very heart of what we do as a company. Our vessels continue to safely ply their trade, traversing the world's oceans with much needed cargoes to keep the global economy ticking over. Single-handedly, seafarers have kept global trade moving and in so doing helped feed, clothe and warm humanity. This has come at some considerable personal cost as the ubiquitous travel restrictions and quarantine regulations, together with the suspension or heavy curtailment of many flight routes, has forced the company and our third party managers to temporarily suspend all crew changes until it was safe and feasible to do so. I'm very pleased to report that in the last few weeks we have carefully, with meticulous planning, managed to relieve almost three dozen crew from around ten of our vessels. This is real progress. However, with many more crew waiting for well-deserved overdue leave, this unfortunately is currently the exception rather than the rule. Again, I want to pass on my heartfelt thanks to all our officers and crew for their professionalism. for their dedication and assured determination to keep product flowing and people safe during the current crisis. Talking about safety, it would be remiss of me if I didn't say a big, big thank you to all our in-house managed vessels, which collectively have now gone well over 548 days without a lost time incident. To our fleet, I say, keep looking after each other. Well done and stay safe. Our teams continue to work with the flag states, the classification societies, the various inspection institutions and of course our charters to extend the validity of current inspections and certificates or to postpone or alter mandatory dry dockings and inspections as they become due. This pragmatic approach coupled with the additional measures our ports of call have put in place has ensured our operations continue without any major disruptions at comparable levels to 2019. Inevitably, some routine maintenance work has had to be postponed, as current restrictions have prevented qualified third-party personnel from boarding the vessels. I'm very pleased to announce that our Morgan's Point joint venture at Ethling Terminal is now 95% sold out, with another take-or-pay off-take agreement being signed in April. The terminal is now fully functional, and throughput is ramping up, with the monthly throughput expected in June. With this ramp up, we expect to see improving financial returns from our terminal and see them filter through to our bottom line. As is evident from the photographs in the supplemental information pack, phase two of our terminal joint venture, which is the construction of the Essling tank, is progressing safely, on time and on budget. From the internal tank picture, You can get some feel for the huge scale of our cathedral-like ethylene storage tank. The tank is on track to be fully operational by the end of the year. Previously we announced the lunar pull with greater gas and Pacific gas and that is now up and running. Live operations began in the second quarter with all 14 vessels expected to have joined the lunar pull by the end of Q2. We have high hopes for the pull. which will provide customers with increased flexibility and improved access to ethylene-ready vessels. As previously discussed, as the COVID-19 pandemic and its economic impacts became apparent, our utilisation rates dropped from those achieved in January, running at mid-80% levels in February, March and April, rates last seen in mid-2019. At its early days, and too early to call it a trend, but our May utilization rates have improved and are expected to reach around the 90% level, which is very encouraging. This is testament to the increasing global economic activity as lockdown measures are eased, coupled with improving arbitrage activities and the ramping up of the throughput of our Morgan's Point export terminal. Thankfully, Handy-sized TCO rates are less volatile than other sectors and have been pretty resilient, with only a marginal 5% reduction in rates at the end of Q1. As a company, we continue to reduce discretionary spend while minimising working capital in capex and thus preserving cash and liquidity. In the following weeks and months, we will take further steps to increase our liquidity in the markets, more of which will be outlined by Niall in his prepared remarks. Navigator is a robust, resilient and innovative company. Our terminal is now starting to get fully into its stride.