Navigator Holdings Ltd.

All right, well, hey, thank you for standing by, ladies and gentlemen. Welcome to the Navigator Holdings conference call for the first quarter 2022 financial results. This is our inaugural Zoom call as we're stepping into the modern digital era and want you to not only hear, but also see our optimistic outlook for the future. So we have with us Mr. Dag Pondappan, Chairman, Mr. Niall Nolan, Chief Financial Officer, Mr. Oyvind Lindemann, Chief Commercial Officer, Mr. Michael Schroeder, Chief Operating Officer, and myself, Randy Givens, Head of Investor Relations and Business Development in North America. So let me share my screen here. have to announce this real quick we are this must advise you that the conference is being recorded today as we conduct today's presentation we will be making various forward-looking statements these statements are including but not limited to 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 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. So with that, I will now pass the floor to our chairman, Mr. Van Appen. Please go ahead, Doug.

Thanks, Randy. Good day to everyone. Welcome to the Navigator First Quarter Earnings Call. First, I would like to thank the navigator staff and ships crews for their hard work and dedication to delivering high quality service to our customers. We are very grateful to all our seagoing staff that continues to be impacted by the pandemic and part of it being strongly affected by the Russia-Ukraine conflict. Thanks to strong teamwork, the merger integration is smoothly moving ahead. We keep capturing synergies and our results continue to improve. A special thank you goes for the management committee comprised by Niall, our chief financial officer, Oivind, our chief commercial officer, and Michael, our chief operation officer, as they have been leading the company and working together as a high performance team throughout the merger. And we're very glad to have the new Houston office up and running with Randy in charge of our business development in North America and investor relations. Second, on behalf of the board, I would like to extend our huge appreciation and gratitude to our longest service board member, Alexander Oetker, and to the valuable support of Andreas Peroutsos. Both have stepped down from the board when we decided to reduce from nine to seven members. Although no longer serving on the board, both remain committed to the ongoing growth and development of Navigator Gas as active and supportive shareholders. The world is going through special times with amazingly volatile markets, huge pandemic and geopolitical disruptions, and at the same time going green. The European energy crisis, the Russia-Ukraine conflict, the highest inflation in 40 years, multiple interest rate rises in short order, and the latest Chinese lockdown have all created material economic headwinds and have impacted trade. But the profile of the COVID-19 economic recovery has been supportive of shipping markets with returning volumes, important supply chain disruptions, changing trade patterns and inefficiencies that may mitigate and even create further disruption upside for freight rates. Despite recent financial market jitters, several global market observers believe the economic expansion continues and expect commodity, energy and shipping markets to stay healthy well into 2023. Emission reduction policies reduce ship speeds as from next year, together with a low order book for our petrochemical gas tanker segment, I believe will impact the market supply-demand balance, creating additional volatility and improving freight rates. Of course, time will tell. Turning to the quarterly highlights on slide four, we are pleased to report a much improved financial performance for the first quarter of 2022 compared to the first quarter of last year. We achieved a quarterly adjusted DBA of $55.7 million, resulting in a strong balance sheet with $168 million in liquidity, roughly twice as much as last year. we continue to reduce our debt levels through programmed debt amortization on the commercial front we see the market steadily improving our utilization at nearly 90 percent and an improving time trade equivalent of nearly 23 000 the rising freight rates can be explained by three underlying factors first u.s Natriure gas liquids production and exports are on the rise. American propane production for April was 7% above last year and now at the highest level on record since shale gas production started. In addition, ethylene exports reached an all-time high of 137,000 tons during April, resulting in incremental demand for C1 logistics. and throughput at the enterprise navigator ethylene export terminal at Morgan's Point totaled approximately 267,000 tons, achieving record profitability in the first quarter. Second, the Russia-Ukraine conflict is disrupting traditional supply sources and trade routes. The typical sourcing from the closest geographical supplier is being challenged as European customers are increasingly looking further afield in sourcing petrochemical gases. which translates into more ton-mile demand for gas tankers. The same is happening to all products we transport, namely LPG, petrochemical gases and ammonium. Third, there is less substitution effect across gas tanker segments. Increased US propane export activity is providing higher ton-mile demand for larger gas carriers, which in turn reduces the intra-ship segment competition. The same can be seen in the handy-sized gas carrier segment, with ships employed in ethylene and ethane trades, fully refrigerated vessels employed in ammonia trades, and therefore fewer vessels available for LPG and easy petrochemicals. Lastly, on the commercial front, we completed the sale of two of our oldest vessels during the first quarter at good prices, further reducing the average age of our operating fleet. Looking forward, Our outlook remains optimistic as shipping utilization and rates are on the rise. North American NGL production and exports continue to climb, supported by strong prices and supply and demand of ships becoming tighter. Sorry, and supply and demand of ships becoming tighter. Following the record Q1 ethylene export through our terminal, we expect similar levels in the second quarter as April and May volumes have remained approximately at 100,000 tons per month. This reflects a robust end-user demand in Asia and Europe for competitively priced US ethylene. In summary, we continue to see large geographical price differentials across almost all the commodities we export. And because of this, several US metering companies have recently announced large investments targeted at NGL infrastructure, processing and exports. Because of these developments and the cost advantage of the US production, we are evaluating the expansion of our ethylene export terminal in Houston, together with our partners at Enterprise. The increased size of our company, more efficient ship operations, reduced overheads and improving market conditions are helping us to deliver stronger results. 2022 has begun with good signs for Navigator Gas, which should translate into stronger cash flows, positive earnings momentum and value creation for all our shareholders. We have the vision, the best people, the right ships, the terminal, the integrated business model the correct strategy, and the financial health to position Navigator Gas well for the future. Now, I would like to hand over to Niall, who will give you a more detailed financial review. Thank you.

Thank you, Dag. And good morning, everybody. During the first quarter, the company generated a net income of $27 million, which equates to $35 a share. or $12.6 million or $0.16 per share if the unrealized gains on derivative instruments and foreign exchange losses are eliminated. This strong operational performance compares to a net income of $2.8 million or $0.05 per share for the first quarter of last year. The adjusted EBITDA for the first quarter was $55.7 million, a record for the company, which compared to $31 million for the first quarter of 2021 and to $55.2 million for last quarter, Q4 of 2021. Total operating revenues for the quarter were $119.8 million compared to $85.7 million for the comparative first quarter of last year. Rupert Clayton- 10.2 million of this 34.1 million increase in revenue was principally as a result of the seven additional handy size vessels joining the fleet as part of the ultra gas transaction. Rupert Clayton- offset by a slight reduction following the sale of navigator Neptune on January the 14th of this year. There was an additional $13.5 million generated as a result of the revenues derived from the Unigas pool, representing revenues from the now nine smaller Unigas vessels following the sale of the Happy Bird and 1999 built 8,600 cubic meter LPG carrier in March 2022. We also continue to see an increasing charter rate environment during the quarter, which accounted for $3.4 million of the increase in revenues this quarter, as average charter rates rose to $22,933 per day, or $697,500 per month, compared to $21,956 per day for the first quarter of 2021. And this was an increase from approximately the $22,500 a day achieved in the last quarter of 2021. Vessel utilization, too, nudged up to 89.5% for the quarter, compared to 88.2% a year ago, contributing an additional $1.1 million to revenues. We had four vessels in dry dock during this quarter for their scheduled surveys. taking a total of 94 days and with a capital cost of $4.6 million. A further nine vessels are scheduled to enter dry dock for their planned surveys over the course of the remaining nine months of this year at an expected aggregate cost of $12.9 million. And dry docking costs are the only scheduled capital expenditures we have in 2022. The operating Revenue from the Luna pool was $5.9 million for the quarter, representing our share of the other participants' net revenues, with voyage expenses from the Luna pool of $4.6 million, representing the other participants' share of our net revenues from the pool. Consequently, our vessels had a net benefit of $1.3 million from the pool during this quarter, similar to the $1.1 million benefit in the first quarter of last year. Voyage expenses increased by 33.2%, or 5.2 million during the quarter, to $21.9 million, primarily as a result of the seven additional handy-sized vessels in the fleet, most of which were subject to voyage charters. thereby incurring these pass-through voyage expenses. Bunker costs, which is the vessel's fuel and forms part of the voyage expenses, continues to increase significantly in line with surging energy prices globally. Our vessel operating expenses, or OPEX, increased by 41% to $38.1 million for the first quarter compared to the first quarter of 2021. all of which was as a result of the additional vessels in the fleet during the quarter. In fact, vessel operating expenses per vessel per day reduced again this quarter by $51 per day to $7,841 per day, compared to $7,892 per day for the first quarter of last year and approximately $8,000 a day for the last quarter of 2021. Depreciation on our vessels during the quarter increased by 63%, or $12.2 million, when compared to the first quarter of last year. The reasons for this increase are twofold. First, there were 16 more vessels in the fleet during the quarter compared to last year, which accounted for $5.8 million of this increase. And secondly, following the company's decision to reduce the estimated useful lives of our vessels from 30 years to 25 years at December 31st, 2021, the effect on depreciation was and will be an increase of approximately $6.1 million per quarter. General administrative expenses were approximately the same for both comparative quarters at $66.3 million, with the increase of costs relating to ultragas at $1.2 million being offset by a reallocation of technical management costs to vessel operating expenses and a reduction of costs generally associated with the closure of the New York office. And other income being management fees earned from the other participants for our management of the Luna pool was just under $100,000 for the quarter. The unrealized gains on derivative instruments were $15.2 million for the quarter, primarily relating to movements in the fair value of interest rate swaps as the five-year LIBOR swap rates have risen significantly over the course of the last quarter. We have fixed interest rates on two of our loan facilities at 0.36% on one and 1.3% on the other, and the loans assumed as part of the UltraGas transaction each have LIBOR fixed at approximately 2%. In addition, there was an unrealized gain on our Norwegian bond relating to the cross currency swap of $2.2 million. Interest expense for the quarter was $11 million, an increase of $2 million on the first quarter of last year, all of which was as a result of interest on the additional $183 million of debt outstanding associated with the ultra gas vessels. Our share of results from the ethylene marine export terminal was a record profit of $6.5 million this quarter, as Dag said, based on 267,000 tons of ethylene throughput charges during this quarter. This compared to a loss of $605,000 for the first quarter of last year, due to pipeline integrity issues at that time. The $6.5 million profit is the second consecutively quarterly profit at this level, following a profit of $6.4 million in Q4 2021. We had previously given EBITDA guidance of between $20 and $25 million per annum from the terminal But now that we better understand the capability of the terminal, the EBITDA guidance for 2022 is increased to between $30 and $35 million, based on the annualized profits of the past two quarters, in addition to annual depreciation at the terminal of $5.2 million. On the balance sheet on slide eight, we see that the company had cash of $168.1 million at March 31st. and a further $22.9 million available from undrawn revolving credit facilities associated with our secured vessels. Our minimum liquidity covenant from our various bank loans and credit agreements is a maximum of $50 million. During the first quarter in January 2022, we sold Navigator Neptune, a 2000 built ethylene carrier for $21 million. And in March 22, we sold the Happy Bird, a 1999 built 8,600 cubic meter LPG carrier for $6.1 million. Neither of these vessel disposals required any debt repayments. It is worth highlighting that both of these vessels were sold at or in excess of their respective book values, generating a small profit of just under $500,000, which supports the carrying values of the vessels on our balance sheet. Our total debt at March 31st was $910 million, and as shown on slide 9, it reduced by $22.9 million during the first quarter. Our debt comprises of loan facilities secured by our vessels of approximately $687 million, a credit facility associated with the terminal of $51 million, and two Norwegian bonds, which in aggregate amount to $171.7 million. With respect to the Norwegian Corona denominated bond in the amount of $71 million, and which has a maturity of November 2023, we have a call option at a redemption rate of 102.864%, which we are currently evaluating. On slide 10, we outline the estimated cash breakeven for 2022 at $18,300 per day. This low level enables us to generate positive EBITDA in even the toughest of markets, and we have maintained cash generative throughout the shipping cycle. In the box on the right-hand side of slide 10, we provide our expected daily OPEX across the various vessel segments, ranging from $6,500 per day for the smaller vessels to $8,800 per day for the larger, more complex midsize ethylene vessels. We also provide a range for the expected annual spend for 2022 for vessel OPEX, G&A costs, depreciation and interest expense. On slide 11, we outlined the historical EBITDA showing an uplift in Q3 2021, the quarter in which the UltraGas transaction was concluded, and a further increase in Q4 2021, which takes into account the full quarterly earnings from the UltraGas vessels, as well as a doubling of the net income from the terminal. On the graph on the right-hand side of slide 11, we outline with the bar on the left of that graph the annualized EBITDA based on Q1 2022. Thereafter, each bar moving right shows the potential EBITDA if the average charter rates across the fleet were to rise by $1,000 per day, giving EBITDA of $260 million if the charter rates were to rise to approximately $25,000 a day, and $350 million if charter rates climbed to $30,000 a day. And with that, I'll hand you over to Ivan for his remarks. Thank you, Naive, and good morning, everyone.