Navigator Holdings Ltd.

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. Dagvan Appen, Chairman, Mr. Niall Nolan, Chief Financial Officer, Mr. Ivan Lindemann, Chief Commercial Officer, and Mr. Michael Schroeder, 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, 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 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 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 risk 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. Today's call will include comments from our senior executive team running the company. which is Brian Nolan, our Chief Financial Officer, Oliver Lindemann, our Chief Commercial Officer, and Michael Schroeder, 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 while completing the merger between Navigate 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 evident 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 am 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 global petrochemical industry. What interested us in merging UltraGas into Navigator was the unique opportunity to become a larger and integrated global logistics provider to our customers, the producers and end users of the products we transport. I have referred my impression of its staff, highly competent gas experts, always pushing the status quo, with the UltraGas team and its vessels complementing very well with Navigator. and in particular, experiencing first-hand the company's close relationship with key stakeholders, such as our joint venture partner enterprise, crowds of partners, and other companies like Energy Transfer. Working closer with midstream companies, producers, and end users will be immensely important for the company going forward. One thing is clear. Reducing commoditization of shipping through long-term industrial partnerships Underpinned by safe, reliable and efficient terminal and shipping logistics is the way forward in our journey to become a more efficient, cost-effective and profitable company. In addition, we shall increasingly focus on innovation, finding effective solutions to reduce greenhouse gas emissions for our company and our customers. I would especially like to thank our former chairman, David Butters, who resigned during the period after leading Navigator Gas for 15 years and developed Navigator into the leading company in our segment. David's oversight and guidance to the board and myself has been invaluable. It is in part thanks to his legacy and vision that we are able to present today's improving results. In addition, we would like to thank our former CEO, Dr. Harry Deems, who oversaw the Ultragas and Navigato gas merger during his tenure and has left the company to pursue new ventures. The Board and I wish him well going forward. Today, the company is in the very experienced and seasoned hands of our senior executive committee members, Niall, Orvind, and Michael. Finally, let me say I am very excited to be part of the larger and stronger Navigator Gas and will, to the best of my capabilities, give guidance for the interesting journey ahead. With that, I would like to hand the call over to Eugen Lindemann, Chief Commercial Officer of Navigator Gas, who will take you through the relevant commercial matters of the past third quarter.

Thank you. Thank you, Doug, 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 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 10 cents 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 face 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 seven hand-designed 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 to our customers due to our broader platform of homogeneous vessels. We are also starting to see an impact in terms of utilization as we are more likely to have a vessel in the right place at the right time, avoiding post-merger unnecessary ballast days. Looking ahead, the fourth quarter to date is showing a strong utilization at around the 90% level. The market assessment by third-party SHIB brokers have turned from negative to positive in September and is now trending upwards. This is illustrated on page 14 in the supplementary presentation. There are four key factors driving this positive change. First, there is more ammonia needing to be transported on handy-sized vessels. At the beginning of the year, we had two handy-sized vessels on time charters for the transportation of ammonia. Today, we have doubled our contracts and have four vessels in this trade. These two vessels were trading LPG in the past, and other handy-sized vessels are therefore needed to fill the gas. U.S. ethane continues to be competitively priced. It attracts international buyers wanting to transfer the competitiveness to their own production facilities overseas. We are developing alongside new customers the U.S. to Europe virtual pipelines and have contracted incremental ethane with a European oil major during the quarter. Moreover, Ethane is not only shipped for the purpose of being used as feedstock. It is now also shipped to be used as energy. Several European customers are seeking to import American ethane to spike the natural gas stream, essentially selling ethane as natural gas and making a profit. Further, we announced earlier in the month three long-term ETAIN charters for our medium-sized gas carriers with our existing partner satellite to connect the U.S. with the cracker in China. That means that all of our four medium-sized ETAIN carriers are now on time charters, which in total will be contributing $40 million EBITDA on an annual basis. Thirdly, Ethylene is finally flowing from our joint venture Ethylene Marine Export Terminal. We are set for a record throughput for November and healthy levels for December. The total U.S. exports of ethylene will therefore be in excess of our anticipated rule of thumb of 100,000 tons per month. Not only is the absolute volume of exports up, but the final destinations are changing. More than two-thirds of the volume is heading to the Far East, as seen on page 15 of the PAC. This is an important change compared to the summer when most of the volume went to Europe. Voyages across the Pacific more than doubles the ton-mile demand for each ton exported. This is clearly helpful for our utilization and market assessments. Finally, there is no let-up in North American LPG exports. The continent is continuing its robust export program, consistently putting 4.5 million tons of LPG per month on the water. Today, the rig count is up from a low of 250 in September 2020 to 550 in September 2021. And the EIA is forecasting a 5 million ton incremental NGL production for next year. The forecasted total LPG exports for 2021 is expected to reach 51 million metric tons of LPG, a 10% growth from last year. constituting 47% of the global seaborne LPG market. New inefficiencies impacting the larger gas carrier segments, such as extensive delays in transiting the new Panama Canal, delays the voyages by more than 15 days, which increases the ton mile demand and which also helps rates. When the larger gas carriers do well, They compete less with the medium-sized segment. When the medium-sized segment does well, they are less likely to look for LPG cargo opportunities in the handy-sized segment. The less downward pressure through the gas-carrier segments, the better, and we are seeing the positive impact of this today. It is important to note that in addition to less downward pressure from the larger ship-sized segments, We also see less encroachment within the handy size segment. Today, all of our Luna pool ethylene vessels are trading ethane or ethylene. This is the first time this has happened since the pool was launched in April 2020. It means that these vessels are not looking for LPG or other petrochemical cargoes, leaving the handy-sized semi-refrigerated gas carriers to pursue these opportunities without interference. It also means that the smaller ethylene units in the 12,000 cubic class and below are doing better, as the lunar pool vessels are less likely to look for smaller part cargoes. Therefore, looking ahead, our fundamentals look very encouraging, such that we expect another good quarter in this fourth quarter, as we see Less competition in the sector due to strong demand for LPG transportation and less competition within the hand-sized sub-segments. Incremental ammonia hand-sized demand. Continued robust ethylene exports both to Europe and to Asia. The joint venture ethylene marine export terminal has kicked into action as U.S. ethylene prices are normalizing. Majority of ethylene demand is now coming from Asia, and the order book continues to be at a low level. Before I hand over to Niall for the financial commentary, I would like to highlight our efforts in pushing the frontiers for potential new business streams. The first being ammonia as fuel. The concept of ammonia as fuel has been brought to life due to the possibility of zero carbon emission energy, both for the vessel itself, but also for onshore use. However, ammonia is highly toxic, which represents some challenges associated with the handling and application of ammonia as fuel. We have worked together with industry specialists such as DNV GL over the last two years, and have finally been awarded an approval in principle. This means that we can confidently engage our customers and shipyards in the development of ammonia-fueled vessels. The second is CO2 transportation. It is clear that carbon capture storage and sequestration have a role to play as a stepping stone to reduce greenhouse gas emissions. Through our joint venture, DAN Unity, We have similarly, as with the previous example, been awarded an approval in principle by the American Bureau of Shipping for a containment system and ship design for the transportation of liquefied CO2. Both projects fit with our own strategic objective for industrial shipping, being the logistics partner directly with producers and end users. Both opportunities are project-based, meaning long-term contracts if and when successful. It also fits with our own ambitions to do the right thing about maritime emissions, reduce wherever and whenever possible. With those few remarks, I would like to hand over to our CFO, Mal Nolven.