Navigator Holdings Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference call for the third quarter 2022 financial results. We have with us Mr. Mads Pieterzakko, Chief Executive Officer, Mr. Niall Nolan, Chief Financial Officer, Mr. Oiven Lindemann, Chief Commercial Officer, and myself, Randy Givens, 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 will be making numerous 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 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. With that, I now pass the floor to Mads Peter Zacco, the company's chief executive officer. Please go ahead, Mads.

Thank you so much, Randy. And good morning, everyone. Thank you for joining our call. The third quarter of 2022 was an exciting period of growth for Navigator. We have announced two joint ventures to expand our operational capabilities in the global liquefied gas supply chain. In September, we announced that the company has entered into the Greater Bay Gas joint venture to acquire a total of five ethylene-capable liquid carriers. The first vessel is expected to be acquired next month. The joint venture with Greater bay gas will result in a reduction in the average age of navigator's fleet and will allow us to take advantage of more efficient vessels that is lowering our emissions and also offering improved economics for our customers. We'll see the rest of the fleet being acquired during the course of 2023. What's more, yesterday we announced our participation in an expansion project at our existing export terminal joint venture with enterprise product partners. in which we own a 50% shareholding. The expansion project consists of modification to an existing ethane refrigeration unit, which will provide the capability to refrigerate both ethane and ethylene alongside providing additional ethylene refrigeration capacity to our export terminal joint venture, the world's largest ethylene export terminal. Looking at the quarter overall, our operating revenues for the third quarter increased by 7.9% in comparison to the same period last year. And that was mainly due to an increase in vessel available days in fleet utilization, average monthly time chart equivalent rates, and pass-through voyage costs. Notably, the demand from ethylene from Europe that we witnessed in the second quarter of 2022 continued into July and August. So with About 80% of U.S. exports was transported to Europe. And that, of course, highlights the growing importance of energy security both nationally and locally in Europe. Utilization for our fleet in Q3 was 85%, which was in line with the same period last year and in line with our guidance for the quarter. I'd like to thank all the staff of Navigator for the excellent work and contributions during this period and just hand it over to Niall, who will take you through the financial performance of the quarter. Please now.

Thank you, Mads, and good morning all. The operating performance for the third quarter of 2022 generated an adjusted EBITDA of $41.5 million compared to $40.5 million for the third quarter of last year. Although this is lower than the $55 million achieved in the first two quarters of 2022, it is expected that the fourth quarter will return to or exceed those earlier quarters of this year. The total operating revenues for the third quarter were $106.8 million compared to $102.7 million for the comparative third quarter of last year. $2.2 million of this increase was primarily as a result of the additional handy-sized vessels joining our fleet as part of the UltraGas transaction in August 2021, and a further $9.6 million generated from the nine smaller vessels that operate within the independent independently run Unigas pool, also acquired as part of the Ultragas transaction. Vessel utilization improved slightly during the quarter to 84.9% relative to the third quarter of last year, which achieved utilization of 84%. And this contributed an additional $800,000 of additional income. And charter rates too improved slightly relative to the third quarter of last year, accounting for an additional half million dollars of overall increase in revenues. Average charter rates were just over $22,000 a day or $670,000 per month for this quarter compared to $2,1900 per day or $665,000 per month for the third quarter of last year. Four vessels entered dry dock for their scheduled surveys during this third quarter, in addition to the seven during the first half of this year, taking a total of 106 days and with a capital cost of $3.7 million. The dry docking of two of these vessels either have finished or will finish during the fourth quarter, along with a final single vessel to enter dry dock during this coming fourth quarter. As there are no new bills on order, these dry docking costs are the only capital expenditures the company has for the remainder of 2022. The operating revenue from the Luna pool was $3.2 million for the quarter, representing our share of the other participants' net revenues, with voyage expenses from Luna pool of $3.6 million, representing the other participants' share of our net revenues from the pool. Consequently, our vessels contributed 400,000 to the other pool participant during the third quarter. However, we achieved a net benefit of 600,000 in aggregate over the course of the first nine months of 2022. But overall, this number should net to zero over the longer term. Voyage expenses increased by 20.5% or $3.4 million during the quarter to $20.2 million. primarily as a result of the additional vessels in the fleet, most of which were on voyage charters, thereby incurring these pass-through voyage expenses. Higher fuel costs, which form part of voyage expenses, are passed on to our customers through higher charter revenues. Our vessel operating expenses, or OPEX, increased by 10.6% to $38.7 million for the third quarter compared to the third quarter of last year. much of which was as a result of the additional vessels in the fleet during the quarter relative to last year. Vessel operating expenses per vessel per day did increase quarter on quarter by 4.2%, but remained below $8,000 a day at $7,930 per day for this third quarter compared to $7,607 per vessel per day during the third quarter of last year. Depreciation on our vessels increased by 36.5% or $8.8 million compared to the third quarter of last year. As I stated previously, this is in part due to the 16 additional vessels that joined the fleet in August 2021, which accounted for 1.3 million of this increase, but also 6.2 million as a result of the company's decision to reduce the estimated useful lives of all of our vessels from 30 years to 25 years as of January 1, 2022. General and administrative expenses decreased by 23.2% or approximately $1.8 million to $6.1 million relative to the comparative quarter of last year. Another income being management fees earned from the other participants for the management of the Luna pool reduced to $60,000 for the quarter as a result of reduced revenue generated by the pool. An unrealized foreign exchange gain on the retranslation of our $600 million Norwegian kroner bond at September 30th was $5.1 million, and this was fully offset by an unrealized loss on the foreign exchange swap that we have in place, which is included in gains and losses on derivative instruments. In addition to this foreign exchange loss, the unrealized gains on derivative instruments also includes a $7.6 million gain for the quarter relating to further gains on the interest rate swaps as LIBOR swap rates continue to rise during the quarter as central banks around the world increase interest rates as they try to grapple with rising inflation. We have fixed interest rates on approximately 55% of our debt as of September 30th, 2022, at levels between 0.36% and 2%, significantly below current levels. The interest expense for the quarter was $13.2 million compared to 10.1 for the third quarter of last year, as a result of rising interest rates on that portion of the debt that is subject to floating interest rates, as well as interest on the additional debt assumed as part of the UltraGas transaction. Our share of results from the Ethylene Terminal were $4.7 million for the quarter, based on throughput charges relating to 189,000 tonnes of ethylene exported through the terminal during the third quarter. Lower throughput than the past three quarters, but higher than the 128,000 tonnes of ethylene throughput during the third quarter of last year, which generated $3.3 million for our share of the profits. Terminal depreciation amounts to approximately $1.3 million per quarter, giving an EBITDA for our share of the terminal of approximately $6 million during this third quarter. A net income for the third quarter was $2.4 million, a reduction from the earlier quarters, but with the expectation of significant improvement during the fourth quarter of this year. On the balance sheet on slide seven, The company had cash of $157.1 million at September 30th, with a further $20 million available from undrawn revolving credit facilities. Our minimum liquidity covenant from our various bank loans and credit arrangements remains a maximum of $50 million, thus providing significant headroom. Our total debt, which stood at $881.4 million at September 30th, was reduced by 38.8 million during the third quarter. Our debt comprises of loan facilities secured on our vessels of approximately 666 million, a credit facility associated with the terminal at 44 million and two Norwegian bonds which in aggregate total 171.7 million dollars. We are currently documenting the refinancing of our 215 vessel loan facility into a new six-year facility. as well as converting our September 2020 facility from US LIBOR to SOFRA, and at the same time extending its maturity by one year to September 2025. In addition, the 600 million Norwegian kroner denominated bond, equivalent to approximately $71.7 million, which has a maturity of November 2023, has a current call option, enabling the company to exercise the call on this bond, which would result in a redemption payment premium of 1.79%. On slide 9, we outlined the estimated cash breakeven for 2022 at $18,570 per day. This low level enables us to generate positive EBITDA even in the toughest of market conditions, and we have remained cash generative throughout the shipping cycle. In the box on the right-hand side of slide 9, we provide our expected daily OPEX across the vessel segments. ranging from $6,900 per day for the smaller vessels to $9,100 per day for the larger, more complex and older ethylene vessels. We also provide a range of expected annual spends for vessel OPEX, G&A, depreciation and interest expense on that slide. On slide 10, we outline our historical quarterly EBITDA showing an uplift in Q3 2021 and in Q4 2021, the quarters in which the positive impact of the Ultragas transaction were achieved. It also shows a consistent EBITDA of approximately 55 million over the prior three quarters, with only a dip in the third quarter to 41.5 million, which we anticipate will be remedied in the fourth quarter. And with that, I'll hand you over to Ivan for his remarks.

Thank you, Naim. Before we get into the detail, I just want to highlight that... Hold on one second. I just want to highlight that the third quarter will be challenging, met our guidance of 85% utilization. However, Q4 is shaping out in a very positive way, which we will talk a little bit more about. But it's really a tale of two quarters and quarter four with higher volumes of ethylene exports, destinations being in the Asia-Pacific region, and 10 ships now fully employed on their time charges in ammonia, is really driving utilization up above 90%. But we'll spend a little bit more details on that later. If we move to slide 12, we are seeing increasing production of U.S. natural gas liquids, being ethane, propane, and butane. And U.S. domestic demand remains flat which is driving the growth in U.S. exports, which in turn has a positive impact on gas carrier demand. In addition, U.S. propane has widened its competitiveness compared to oil as a fuel or as a feedstock to the petrochemical industry. Both increased production and relative competitiveness to alternative sources of energy and feedstock continue to drive U.S. exports of LPGs. We can see an uptick for handy-sized exports in the graph to the lower right, where October had 40% higher handy-sized LPG export volumes compared to September of this year. Similar to LPG, ethane remains competitive as feedstock to the production of ethylene. Cheap ethane translates to low-cost production of ethylene for US producers. The graph on page 13 shows ethylene arbitrage opportunities to international markets. The one next to it shows U.S. exports of ethylene, which is increasing from about 70,000 tons in September to about 110,000 tons in October. There's a big increase for a small market. Not only do we see export volumes go up, but we also see changes, as Mats mentioned, to the importing locations. During third quarter, The majority of the ethylene volume is heading to Europe, whereas during the first weeks of fourth quarter, we see this shifting to primarily Asia-Pacific destinations, which more than doubles the nautical miles sailed for each ton exported. The underlying demand for additional ethylene exports is evident. Just to give you an example, during October, we maxed out on our export capacity at the terminals. Had we had more capacity, we would have exported more. With NGL production increasing, continued ethane rejection, we are firm believers that expansion of this capacity will add value to the ethylene supply chain, including producers and international consumers. Frankly, the industry needs it, and Randy will shed a little bit more color on this later on in this presentation. The other major story is ammonia. Due to the supply constraints of traditional ammonia exports from Ukraine and high natural gas prices, Europeans are facing low domestic production and no proximity of supply. It's a double negative for Europe, but demand is still there. And people need fertilizer for food production and food security. Therefore, European countries need to look further afield to source the supply of ammonia. Europe is now sourcing ammonia from location we would never have dreamt of in the past. From China, from Australia, from Bangladesh and Middle East. You can clearly see European decrease of ammonia imports from February of this year on page 14. And then a sharp increase thereafter. However, from places outside of Europe, as you mentioned. As a consequence, We have increased our ammonia employment during third quarter from 7 to 10 vessels, which equates to about 20% of our earnings days across the fleet, and 25% if you consider only the handy size portion of our fleet. This is a big change. And these vessels are removed from the normal market. So they are not now competing for LPG or other easy petrochemical cargoes, improving the supply-demand balance in those segments. you can clearly see the impact on our earnings days on the following page, page 15. If you look at the dark blue portion at the bottom, it clearly illustrates the rapid increase of ammonia in our earnings days. And that is alongside ethylene pushing utilization up to 95% in October, a big change from third quarter. In conclusion, third quarter and fourth quarter is extremely straightforward. Today, we have high volume from the terminal at the lead, with the majority of the volumes heading Asia Pacific. Third quarter, we did not. Today, we have 10 vessels fully employed in ammonia at the beginning of fourth quarter, removing tonnage availability for other cargoes. Third quarter, we had 30% less of this. In addition, we see higher exports of ETN and LPG from North America for the first month of fourth quarter compared to the last month or September in third quarter, which positively underpins the supply and demand balance. All this is driving utilization above 90% and rates are following. The rate increase is illustrated by a sharp uptick during October on the following page for handy-sized semi-refrigerated and handy-sized fully refrigerated vessels. And in this environment with very low order book, there won't be many ships being added to the fleet. We are pretty excited about what Fort Quarter can bring to Navigator. With that, I will hand it over to Randy. Randy, please.

Thank you, Oivind. So yes, it's been a very busy few months for us recently with the company announcing three meaningful announcements regarding our uses of cash. First, On September 30th, we announced that we entered into a joint venture agreement with Greater Bay Gas Company. The joint venture owns 60% by Navigator and 40% by Greater Bay Gas and tends to acquire five ethylene vessels listed in the table below. Two of the vessels are 17,000 cubic meters built in 2018, and three of the vessels are 22,000 cubic meters built in 2019. The vessels are expected to be acquired on a staggered basis between December 2022 and November of 2023. The total purchase price for the five vessels is $233 million, and our 60% portion of that is a little under $140 million. For capital outlay, assuming 65% debt financing, around $90 million of Navigator's $140 million commitment, the total cash needed for the acquisitions will likely be less than $50 million spread out upon vessel delivery over the next 12 months. Secondly, on October 18th, we announced the board's authorization for a share repurchase program of up to $50 million of NVGS common stock to be implemented via open market purchases, privately negotiated transactions, or in accordance with an approved trading plan. Now, there are numerous reasons for this, primarily that repurchasing shares below NAV is an accretive use of cash and boosts our NAV per share. Also, our share price was above $15 just as recently as June, but has been sold off with the broader markets in recent months. Additionally, this program diversifies our uses of cash, which will likely be split between debt repayment, terminal expansion, fleet renewal, and capital returns to shareholders. So most recently, yesterday afternoon, we announced a project. under our existing 50-50 joint venture with Enterprise Products Partners, to expand the ethylene export terminal at Morgan's Point. Construction is expected to commence in the first quarter of 2023 and end in 2024, at which time the expansion project is expected to be fully operational. Current limited spot cargo availability is leading new customers to discuss multi-year off-take contracts, so we expect to contract the majority of the off-take volumes prior to project completion. Now, in terms of specific volumes, capex, and timeline, we will not be able to provide exact details today, but we do expect to publish a joint press release with all of these details in the coming weeks, so please stay tuned. With that, I'll turn it back over to Mads for closing remarks.

Thank you, Randy. If you look at our financial position in Navigator right now, you can see that we have built cash and reduced debt during the past quarter, and we now have the flexibility that our robust balance sheet gives us that we can pursue both growth opportunities and capital repatriation. In Q3, our fleet utilization was pretty subdued, as expected, and so was the terminal throughput. Ammonia, though, was strong, and now we see that we have 10 vessels transporting ammonia. In Q3, we did announce two exciting growth prospects and a share buyback. And looking into Q4 now, we can see that there's significantly higher utilization than what we saw in Q3, with October running above 94%. So we think we are on reasonably solid ground when we expect that our utilization will exceed 90% for the full quarter of Q3. for the full portal here. All the three product segments that we are transporting show strength in demand. And as we speak, the terminal is running above main plate capacity. So we think that the outlook for the coming months look pretty robust and we'll be happy to take some questions from you. So back to you, Randy.

Yes, thank you, Matt. So operator, we'll now open the lines for some Q&A. To raise your hand, press star nine, and then you'll have to unmute yourself by pressing star six. Or if you're using the Zoom app, just use the raise hand function. So first question, your line should be open.

Hey, can you hear me? We can hear you, Ben. How are you? There we go. Thanks. I'm clearly not technologically sophisticated enough. I'm good. Thanks. So I have a couple. Just really quickly, I appreciate that you can't or that you're not in a position to be able to talk too much about the terminal, but congrats for finally getting it. But I'm curious how, if you could, maybe, Niall, how are you thinking about funding you know we'll see how much it is or whatever but but clearly it's going to be some capex what's what's the what's the source of funds for this do you think

Yeah, Ben, hi. The capex, as Randy has said, is likely to be spent over the next two years, so it's quite spread out. And with our starting point in terms of cash as to where we are now, we actually have sufficient cash, existing resources to pay for our share of the extension. That said, having a... an asset which has cost north of 250 million dollars in total and having no debt is not particularly good use of capital so we are exploring options as to how we can best finance it using the lowest cost of capital. You'll be aware that there is no debt allowed within the joint venture itself so therefore traditional bank financing is more difficult to come by. Okay.

Yeah, that makes sense. And I've got three questions. But I wanted to dig in a little bit on utilization. Obviously, it sounds like it's getting a lot better, which is good to hear. But if I just think of this from the perspective of or think of your utilization, especially after adjusting for vessels that are on time charter. So utilization for those not on time charter would appear to be well below 80%. It seems to me that from a net basis, you'd be doing a whole lot better to just put those vessels on time charter and have full utilization, even if you give up a little bit on rate. Can you help me as to why that might not make sense?

Ben, on page 15 in the presentation, I don't know if you have it in front of you, but that's the one that shows the earnings days and where the ships are employed and which segments. And if you see in October with the big spike there, you have ammonia time charter, LPG time charter, petrochemical time charter is the fair chunk of those vessels. So they're mostly on time charter. So we have been working on some of the logic that you're talking about. You can see that LPG spot is not really there. Petrochemical spot will typically be there because that is more of a spot play and not as structured as some of the other segments. But that is where you can capture upside and so forth. So I think that graph, if you look at October kind of explains our journey towards kind of the topic that you're talking about.

Okay, and assuming that ammonia continues to be a bigger piece of the pie, you would expect, let's say next year or into the future, better utilization across the fleet. Is that fair?

I mean, if you're the, generally the larger time charter portion you have, generally you have a higher utilization. So that is correct. We believe that ammonia is going to grow. It's definitely not going to reduce for us how we see the world and what's happening in Europe and everything with energy prices. So I think that is there to stay, which will obviously prop up utilization overall at a higher level than had we not. So I think that's the road forward.

Okay, and then lastly for me, just strategically, I appreciate that you sold another one of the older planet vessels. As I think about sort of where the business is and you're shifting a little bit more towards or increasing your footprint on things related to infrastructure and connecting the dots with respect to supply chains, et cetera, And then I compare it to, let's say, the LNG business where, especially in the last number of years, you've seen a number of LNG carriers that are being converted into things like floating storage or regasification units or whatever. Is there any possibility of being able to do that with your fleet, maybe even some of those older vessels? Or are the dynamics too dissimilar and it's not really practicable? Mats, will you take a go?

Yeah. When it comes to our overall strategy about the mix between shipping and terminal kind of business, it is certainly an area that we are looking into and that we would like to expand on. We see some very, very good synergies between, yes, in this vertical integration, you could say so, that we are able to deliver a better service through having a broader piece of the total supply chain. So we would be working with some of our existing partners to see if we can explore further opportunities for doing more of this kind of business. And I think we've talked about this also before, Ben, that there will be opportunities coming, maybe more than we can see right now on both the import and the export side. And I think Navigator would be really well positioned to engage in those discussions. And we see it as attractive business. And then maybe I'll leave it to you to talk a little bit about how we can use our existing tonnage for that.

It's definitely opportunities for using assets, even older assets for infrastructure projects. So, for instance, just to give an idea, we are in discussions in a location whereby you can use the tanks, the gas tanks in a ship one of our older ships has storage, either floating or you take them out and put them ashore because the ship hull has a finite life, but the ship tanks can live for a very long time. So there are added value, I suppose, in having those assets with our link or interest to develop infrastructure on some of the older assets.

Okay. So a possibility, maybe nothing that, you know, or it's early stages, I suppose, is how I'm hearing that. Is that correct in terms of using existing assets for that? Correct. All right, I appreciate it. Thank you.

Ben, just one point of clarification. You mentioned the sail. You're referring to the Navigator Magellan as a planet ship. This is our oldest ship, which is 24 years of age. It is not one of the ethylene capable ships. So it's just a regular semi-refrigerated ship. And that 24 years, given that we've got a 25-year policy to sell it with one year of its economic life left at $12.7 million was considered to be a good deal.

All right, with that, next caller. Omar, I think you're on mute. You might have to press star six. Okay, sorry about that. Can you hear me now?

We can hear you. Okay, thanks, Randy. Hey guys, Omar Naka from Jefferies. Just a couple of quick ones for you. Randy, you mentioned the share purchase program as a way to take advantage of a discounted stock price relative to NAV. How are you thinking about that buyback at the moment? Maybe one, have you put that to work since announcement? I know there's blackout periods, but has it been put to work? And then two, how do you think about deploying that capital while you await the, you know, the finalization, the agreements with enterprise product on a CapEx plan for the build out of the terminal?

Yes, good question. So first, we are still in the blackout period. Obviously, we had the project announcement as well as this earnings call. So following these two things, we should be lifted in the near term. So we have not repurchased any shares yet. In terms of balancing the two, As Niall said, the CapEx payments for the terminal expansion will be spread out over the next 18 to 24 months. So we certainly have room for both. So I would expect a simultaneous use of cash.

Okay. Thanks, Randy. And then just as a quick follow-up, I know you mentioned and you're pretty clear that you can't give specific details on the expansion. Is there anything you can give in sort of just big picture magnitude where if you think about what's coming, is it A doubling of the size of the facility in any color you can give just to give us a frame of reference.

I think here maybe it would be good for us to wait having that discussion once we do the joint announcement together with Enterprise. This is really when we'll fold out that more detail for you.

I tried. I figured I would ask. And Randy, you warned me. Okay. No, thanks. That's it for me. I'll turn it over to you. Thanks, Omar. All right, next caller.

Hey, team. Can you hear me? This is Sean Morgan. Howdy, Sean. Yes, we can hear you well. All right. Okay, so given the constraints on your ability to talk about the current terminal expansion, maybe we can kind of shift gears and sort of look at the broader possibility for other JVs or other partnerships across the the U.S. Gulf and other existing maybe brownfield sites that you think or partners that you could do expansions of ethylene exports beyond the Morgan's Point location?

Hi, Sean. I think ethylene, we have the most efficient, the largest ethylene export terminal in the world together with enterprise product partners in the U.S. Gulf. We are expanding it. Any additional ethylene infrastructure beyond that, I sincerely doubt. So we are on the ethylene side, we're focused together with enterprise. Now, there are other products, C4, C3s, that we are looking into, not to mention ammonia, blue ammonia, green ammonia, and CO2. So There's many infrastructure opportunities beyond Italy in which we are taking very seriously.

Okay, so potentially partnerships in different products that may be kind of more focused on existing enterprise products. And then in terms of the production of exports out of the terminal for, it flagged a little bit. Was that primarily driven by sort of, I know we talked before about the bottlenecks of having to ensure that you have the capacity to meet contractual requirements for throughput. Was that kind of more demand driven or was it more of constraints on on that kind of ladder factor of making sure you had enough available capacity to kind of hit your Q4 obligations in Q3?

I think it's a very complex question. And it's quite difficult because you are, it's partly attain, it's partly ethylene, it's partly domestic production, inventory management, demand worldwide. and polymers. So in the summer, there was readjustment from the Europeans, whereby the Asians, the Asia Pacific didn't buy because they had enough already in their inventory levels. And the Europeans came in. However, Europe is much smaller market than Asia Pacific. So the general demand went down on the buying side. And then at the same time, there were issues with storage and so forth in the US. So there was, I don't know, there was a whole myriad of issues that seemingly have been sorted now, definitely for October, November. We also seeing robust denominations for December. So I think the world is getting kind of back to track for Italy in point of view. And today there was an announcement by the Chinese government that they are reducing their quarantine restrictions for travel, international travel from whatever they have today to three days after Lunar New Year and then zero from 1st of April. So I think the amount generally picks up again before Chinese Lunar New Year. And so I think we're on the right track. I think this summer was just an awkward blip generally a little bit lag from the war in Europe.

Okay, so then if I'm sort of understanding correctly, then the biggest barometer for kind of demand and throughput then, even though Europe is kind of gathering a lot of the headlines, is still going to be China in greater Asia. And so we should kind of be focusing on that as we forecast.

I think if you forecast ethylene demand for shipping, I think we go back to the general rule of thumb. We have, it's 25% to Europe, 75% to Asia. So I think if you look at one of the graphs we have, it clearly shows that we are kind of in that arena again.

Okay. All right. Thanks. Thanks, Sean. Next caller.

Yeah, hey, good morning, guys. It's Turner from Clarkson's. So just listening to prepared remarks, there were a couple comments about fourth quarter being an improvement or the very significant improvement. Can you give us a sense of magnitude of the snapback we could see in Q4? I mean, you previously on the adjusted EBITDA level up in the mid-50s. Is that kind of the benchmark that we should be thinking about?

Mr. Nolan? I think it is. I think we would be disappointed if it didn't achieve that level. We're obviously halfway through November, so halfway through the quarter right now. And certainly what we've seen in October and to date in November is indicating that that would be the case.

Okay, thank you. And then a question for...

The important number here is, of course, the utilization, because, yeah, an extra day of revenue goes straight to the bottom line. So there's a very direct impact, which is also why we're guiding on utilization, because it's such an important factor in this.

I understand and appreciate it. A question for Avin on the ammonia ships. I mean, if I understand correctly, those are generally at higher rates. Correct me if I'm wrong, but you had a big increase there, and you talked about some of the structural drivers in Europe for ammonia demand. I mean, obviously, we still need to grow food, but 70% or so of the capacity in Europe is shut down, and it just seems particularly structural at this point. But what do you see as the... potential for the number of ships you could put on ammonia as you look over the next few quarters?

I think we've had exponential growth already this year so far. Having 10 of our handy-sized ships in ammonia is quite extraordinary. Is it going to stop there? I think there are still some opportunities that we are exploring. I don't think we will have 20, if that's the question, but a few more. In a small segment, every other ship that we take away from the normal market into ammonia is a good thing. So there are still some opportunities there, but I think the real point is the longevity of it. So I don't think this is going to drop off tomorrow. I think this is going to be a structural change for some time, which is good for us. Having 10 plus ships in Ammonia, as you can see, already have a big impact when some of the other business teams we do kick off as well. So the stars are aligning a little bit.

Yeah. To continue with that theme on the structural demand factors for shipping, a lot of talk about the terminal, certainly in terms of the cash flows that that could generate in its own right. But in terms of demand for shipping for your ethylene carriers, what could that mean you know, as those additional volumes come online in terms of shipping demand, in terms of, you know, number of vessels or, you know, however you want to think about it?

I think it's more of a value chain going back to the value chain of ethylene. So the producers in the U.S. needs it. Our partner enterprise product partners are creating efficiencies in U.S., connecting crackers, expanding the pipeline network, creating indices in Mount Bellevue so people can manage the risk, forward curves and so forth. Expanding the terminal is all connected in making the production of ethylene in the U.S. more efficient and competitive. And the other markets, international markets, are now, particularly now in a high oil environment, contemplating, should I continue producing my own ethylene from NAFTA or should I actually diversify and buy and import some parts of ethylene from US? So it's really getting into a more structural thinking whereby should I build or should I buy? And that is quite evident. And of course we are connecting the two And it depends a little bit on how structural this will be. We are big believers of that, that it's going to move, transition away from spot play, which we talked about, generally voyage charters for ethylene, to be more structural, i.e. the pipeline service between the US producers and fixed locations international. And if that happens, is there implication on the shipping side, etc., We shall see, we already have a large fleet, but there are opportunities in the value chain.

Sure. But if I understand correctly, I guess it's fair to say that if you bring on another, say, million tons of ethylene export capacity, that has to move on ship. So that will move through to vessel demand as well.

It will impact the supply-demand balance, absolutely. Thank you very much, Tarek. Thanks, Tarek. Next caller, your line should be open.

Good morning. I'm from Value Investor's Edge. Thank you for taking my questions. Regarding the Bessel acquisitions you announced a month ago or so, Pricing seems quite attractive. Is this something you could maybe repeat going forward or was it more of a one-off opportunity you took advantage of given the existing relationship with the seller from the Luna pool?

Mats, will you have a go at that? I can kick us off here. And we are definitely looking to continue to consolidate the market, I mean if you look at navigators history it's it's something that has been done throughout history by buying ships whenever they became available in the market second hands. And this is something that we're looking at looking at new build prices, they are very high, the. lead time before delivery of a new build ship today is long. So it doesn't seem very attractive to go out and build new builds for fleet renewal or just ordinary beefing up the fleet. So we would much rather be looking around in the second-hand market and see if there's some owners that would be interested in selling. That being said, it's not a huge market, this one. I mean, there is a small handful of people And some of them are quite content where they are. And if we see a market that's showing a little bit more firmness as it is right now, it may be that that discussion doesn't get any easier. But it's clearly part of our overall strategy to continue to be a consolidator. And we'll be looking at whatever transactions that are there. Again, we're not going to go out and buy top dollar just to be the consolidator. We will only do accretive deals.

That's helpful, thank you. And you've been clear you cannot provide much commentary into the concrete numbers of expansion, but should we expect existing capacity to continue operating normally, or should we expect some kind of impact while the expansion is constructed?

No, we should expect that the current capacity is continuing so that the build-out period would be separate and yeah, so there should be an impact.

Thank you. That's all from me. Thanks, Clement. I believe we have one more caller.

Hi, this is Benedict from CityBC. Am I clear?

You are clear. How are you?

Hi, first, we'd like to thank you for the clear presentation. And here I have two questions. First is that I noticed that you just announced you would like to buy five vessels from Greater Vegas, which was operated in Lunapur. But on page six, just noticed that operating revenue from Lunapur is actually half compared to the Sampere Red in 2021. So is there any reason for the decrease? Yeah, that's my first question.

Would that be you, Niall, maybe just talk a little bit about how that shows up in our P&L?

Yeah, it's more of a commercial question. This is the spot market of the ethylenes, and it was just less utilization on those ships that accounted for that.

Okay. Thanks. And then move on to my second question, also the final one. I would like to raise a question about the price gap on Russian oil and oil product. We also have customers who are from Russia, and the time charter would be ended until 2023. So I would like to know if the price gap would have any effect on the LPG and gas carrier market.

The two ships you referred to are on a 10-year charter, so they have one year remaining.

Yes.

The products they transport, those two vessels, is generally propane and butane, and the buyers are in Morocco or Turkey. So they are trading between the Baltic to those countries with LPG. The price, we don't take the title of products. So the pricing that our customer and the buyers agree, we don't know.

So there won't be any effect, right?

No, not really. Not over the next 12 months in terms of the supply-demand balance of what ships are available and which ships are not. That's correct.

Okay, thanks. And that's all for my question.

Thank you so much. Mads, closing comments?

Yeah, good. No, thanks a lot for listening in. It was great. And thanks for a lot of good questions. Some of them were answered online and some of them during our dialogue will, of course, be available to just follow up with any more questions that you may have. And otherwise, we look forward to seeing you either at conferences or investor meetings. Thank you.