Navigator Holdings Ltd.

Q1 2023 Earnings Conference Call

5/23/2023

spk00: Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings first quarter 2023 earnings call. With us today, we have Mr. Maz Peterzako, Chief Executive Officer, Mr. Niall Nolan, Chief Financial Officer, Mr. Oiven Lindeman, Chief Commercial Officer, and myself, Randy Givens, Executive Vice President of Investor Relations and Business Development in North America. I must advise you today that this conference is being recorded. Now, as we conduct today's presentation, we will 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 as such subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial results. 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 Zatko, the company's chief executive officer. Please go ahead, Mads.
spk02: Thank you. Good morning and thanks a lot for taking part in our earnings call today. I'll start off by providing a brief overview of our Q1 result and then hand it over to Niall or even Randy for more color on our results and recent events. Our first quarter result came in stronger than the previous quarters with revenues at $136 million, adjusted EBITDA just below $70 million and net income of $19 million. The result was mainly driven by higher charter rates and higher vessel utilization. Our balance sheet is robust with cash of $191 million at the end of Q1. Net debt increased slightly due to the financing that we raised for the second-hand vessel acquisitions that we made in the quarter. The initial $50 million share purchase program has been completed and a further $25 million authorized as part of our new return of capital program. So this is opening up for both dividends and further share buybacks. commercially our utilization was very high just over 96 percent compared to our guidance of 95 and the 94 that we reached in q4 2022 terminal throughput ran above nameplate capacity right above 250 000 tons as previously announced we grew our vessel capacity through the acquisition of five efficient modern secondhand vessels vessels that we commercially managed for the past few years The takeover was completed faster than originally planned, a strong effort and result created by our team. Expansion of our ethylene export terminal at Morgans Point has started. This flex train will allow for up to 2 million tons of additional export capacity. The capex for Navigator's share is expected to be around $125 million and to be completed by the end of next year. outlook continues to look good q2 utilization is expected to hover around 90 it's below q1 but it's high in a historical context time charter rates are robust and voting well for earnings in q2 the terminal throughput in q2 is expected to remain strong around 265 000 tons and the ethylene is in high demand in both europe and asia This current robust demand for seaborne gas transport is well complemented by a modest handy size order book and also an aging global fleet of gas tankers. With this brief overview, I'll just hand it over to Niall for a more detailed review of our financials. Go ahead, Niall.
spk01: Thank you, Mads, and good morning. The quarterly net income of $18.8 million and the adjusted EBITDA of $69 million, as we show on slide six here, are the highest quarterly result for many years. In fact, since the first quarter of 2016. And we expect that trajectory to continue. This improvement in results was positively impacted by increased total operating revenues, which were $136 million for the quarter, $16.2 million greater than the $119.8 million for the comparative first quarter of last year, but also importantly, a 10.3% increase from the $123.3 million revenue achieved during the last quarter, Q4 of 2022. The quarter-on-quarter increase was as a result of increases in charter rates, which rose to $25,620 per day from $22,933 per day for the first quarter of last year. This quarter's average charter rate was also $2,000 a day increased from the $23,621 achieved during the last quarter. In addition to increases in charter rates, utilization also increased during the quarter to 96.2% compared to 89.5% for the comparative quarter of last year, and an increase of 2% from the strong 94.1% achieved in Q4 of 2022. Our Greater Bay joint venture, which is 60% owned by us, acquired three additional vessels during the first three months of this year. The second 17,000 cubic meter, 2018-built ethylene-capable gas carrier, Navigator Solar, on the January 17th, and two 22,000 cubic meter, 2019-built ethylene carriers, Navigator Castor and Navigator Equator, on March 24th and March 27th, respectively. This also increased vessel available days, which contributed to an increase in revenue during the quarter. And the joint venture acquired its fifth and for now final vessel on April the 13th, a further 22,000 cubic meter 2019 built ethylene carrier named Navigator Vega. We had two vessels in dry dock for the scheduled surveys during the first quarter. And these were in dry dock for a total of 30 days and cost $3.3 million. For the remainder of 2023, it is expected that seven vessels will enter dry dock at a total budgeted cost of $8.6 million. The operating revenue from the Luna pool was $7.2 million for the quarter, representing our share of the other participants' net revenues. with voyage expenses from the Luna pool of $5 million representing the other participants' share of our net revenues from the pool. Consequently, the other participants' vessels contributed $2.2 million to us during the quarter. But following the acquisition of the fifth vessel by the Greater Bay Joint Venture last month, which was owned by the other participant in the Luna pool, Going forward, the revenue from these vessels will become fully consolidated into our financial statements and will not feature as operating revenues or voyage expenses from the Lunapool collaborative arrangements. Voyage expenses decreased by $3.6 million or 17.2% during the first quarter to $17.2 million, which had the effect of reducing revenue by the same amount as voyage expenses are passed through costs. Our vessel operating expenses increased by 9.5% to $41.7 million for the first quarter compared to the first quarter of last year, which resulted in vessel operating expenses per vessel per day, increasing quarter on quarter by 9.4%. to $8,580 per day. However, this was a reduction from the $9,058 per day incurred during the fourth quarter of last year as we continue to focus on our vessel operating costs. Depreciation of our vessels increased slightly by $500,000 or 1.6% as the additional Greater Bay joint venture vessels joined the fleet. depreciation for 2023 is expected to be approximately $132 million following the acquisition of these Greater Bay vessels, and we depreciate our vessels to their scrap or recycling value on their 25th anniversary. Other income, which is $96,000, relates to management fees earned from the other participants, the other participant for our management of the Luna pool. We will not receive these third party management fees going forward as the five vessels to which they relate have been purchased and will be fully consolidated, as I mentioned. There was an unrealized loss on our derivative instruments of $4.5 million during the first quarter as the fair value of our fixed interest rate swaps reduced. This compares to a $15.2 million gain for the first quarter of last year as a consequence of the then expected future spike in interest rates following the initial Russian invasion of Ukraine. Interest expense for the first quarter was $13.3 million compared to $11 million for the first quarter of 2022 as a result of further rises in interest rates on that proportion of our debt that is subject to floating rates. We have fixed interest rates or have entered into interest rate swaps for 45.1% of our debt at the end of March at LIBOR or software levels that are fixed at rates between 0.36% and 2.07%. The tax charge for the quarter was $1.2 million, which predominantly relates to both cash and deferred taxes on our share of the profits from the ethylene export terminal. And our share of profits from the terminal was $5.1 million for the quarter, down from $6.5 million for the comparative first quarter of last year, as a result of a throughput of 250,731 tons compared to 267,100 tons during the first quarter of last year, as well as some reduced charges per ton, as some of the charges are correlated to U.S. domestic natural gas prices. Net profit, net income for the first quarter, therefore, was $18.8 million or $25 cents per share however adjusting for the non-realized losses on the derivative instruments adjusted net income was 23 million dollars giving an earnings per share of 30 30 cents per share On slide seven, the balance sheet remains very strong with an increased cash balance of $190.9 million at March 31st against a minimum liquidity covenant on our bank loans and credit agreements of $50 million. This cash balance is after the purchase of 2.6 million shares of common stock for a total of $33.6 million, or an average price of 12.73 cents. The strong cash balance will be utilized for capital redistribution, our ethylene terminal expansion project, and also we keep the market under review for accretive secondhand vessel acquisitions. At March 31 our debt stood at just over a billion dollars, an increase of $141.8 million since December 31, principally as a result of drawdowns on the loan to partially fund the acquisition of the three vessels referred to earlier acquired by the Greater Bay Joint Venture. We also executed a new $200 million secure term loan on March 20th, refinancing 10 vessels previously secured across two secure term loans that were due to mature later this year. The new loan is for a term of six years, maturing in 2029. An interest on it is at software plus a margin of 2.1%. And the loan was fully drawn down on March 28th. Following the entering into these two loans, the company now has no loan maturities until 2025, as shown on slide eight. We outlined the estimated cash break-even for 2023 on slide 9 at $19,470 per day. This low level relative to the charter rate market enables us to generate positive EBITDA throughout the full shipping cycle. In the box on the right-hand side of slide 9, we provide our daily OPEX expectations for 2023 across the differing vessel size segments, ranging from $7,500 per day for the smaller vessels to $10,100 per day for the larger, more complex ethylene vessels. We also provide a range for the expected annual spends of G&A costs, depreciation and interest expense. On slide 10, we outline our historical EBITDA, showing a step up over the last six quarters and a further step up this quarter, a trajectory, as I mentioned at the outset, that we expect to continue at least in the near term. On the right hand side of that slide 10, we show our historic 2022 EBITDA bar. Next to it, we have the last 12 months bar, which incorporates the last quarter. and an annualized EBITDA based on the first quarter's results. In addition, the EBITDA bars to the right of those show the effects of an increase on EBITDA were charter rates to increase by increments of $1,000 per day. And finally, before I hand over to Ivan, as this is my last earnings call as CFO of Navigator, I would like to say thank you for listening to my Irish tones over the past decade since the company's IPO in November 2013. And I wish you, the company, and my successor the very best for the future. With that, over to you, Ivan.
spk06: Thank you, Niall. And good morning, all. If you move to the next slide, please. So we'll usually start off with the US natural gas liquids production. NGL gas liquids production is constituted of ethane and LPG being the major commodities of that. And as you can see on the graph on the left-hand side, it's increasing during the first quarter of this year. LPG exports rose in the same time period, helped by the increased production, but also by declining U.S. domestic consumption, creating an export-oriented environment benefiting all gas carrier segments. More specifically for the handy size segment, looking at the graph in the middle, it is the first time that we can show three months in a row where we, on the handy size side, have exported more than 100,000 tons each month. Increasing natural gas liquids production combined with limited incremental domestic consumption of ethane reinforces the competitiveness of US ethane for ethylene production. Ethane continues to be an excess supply and reinjection continues in a big way. The yellow line in the first graph on page 13 illustrates this point. Jan-Willem Wasmann, At then, is becoming cheaper and cheaper thing typically translates to cheaper Italy production and therefore cheaper us at the in price. Jan-Willem Wasmann, The reason ethylene price is shown by the Gray line. The price differential to international markets remain with the possibility to purchase ethylene in the US for $400 a ton, with consumers in Europe and Asia Pacific buying at $900 a ton, leaving a delta sufficient to cover terminal fees, as well as freight transportation. During the end of the fourth quarter last year, the majority of US ethylene exports were shipped to Europe. This is shown by the gray line in the middle graph. However, recently, alongside a slight rejuvenation in particular of the Chinese economy, we have seen an increase in ethylene being shipped across the Pacific. This is shown by the yellow line. About 65% of US ethylene is today exported across the Pacific, which is a positive change from last quarter due to the longer distances needed to reach the discharge ports compared to Europe. The ethylene export terminal has consistently been exporting at main plate capacities in September last year, and Randy will give some more details regarding the exciting expansion project shortly. In addition to ethylene, U.S. ethane exports are also showing a rising trajectory. Ethane handling, which requires an ethylene-capable vessel, provides handy-sized spot opportunities in the Atlantic basin, servicing ethylene crackers that are able to take advantage of gas cracking over NAFTA. We have on previous earnings calls discussed in detail the impact of the war in Ukraine on international ammonia flows. With the normalization of natural gas prices, European producers have restarted their production, causing a reduction in European ammonia seaborne imports. The change in seaborne imports is shown on the first graph on page 14. Having said that, there are other positive trends worth noting about the future of the ammonia markets. In the middle graph, we can see that during the last 12 months or so, North American ammonia exports, showing the light blue line, is on the rise. We believe that U.S. ammonia production and exports over the next few years will become an extremely positive demand driver for the gas carrier market, and in particular the hand-designed segment. Despite the reduction in European ammonia in porcelain handy-sized vessels, we still maintain a fair proportion of our vessels in ammonia. On page 15, we see that the ammonia proportion of our charter portfolios declined a little over the last quarter. However, it's still maintaining about 20% of our earning states. Q1 utilization of 96% was pretty robust. All three of our markets created a nice environment for us, strong LPG demand during the winter months, strong petrochemical exports from the US, and continued ammonia demand. Looking ahead, the second quarter has historically been impacted by seasonality, and this year is the same. However, One important point to highlight for this year is that the utilization rate has declined less compared to comparable periods in the past. In addition, the average rate for our earnings days is higher so far compared to the first quarter, which indicates market fundamentals remains healthy. On slide 16, we can see the general rate environment has improved slightly across all the gas carry segments, including hand size, over the last period. On the next slide, which is showing the final positive dynamic, which we like to remind people, is that the hand size segment has a very modest order book. Considering the pressure on supply chains at the various shipyards, we have a clear visibility of the tonnage situation within our segment for the next three years, which is fairly normal. Randy will take over from here, give an exciting rundown of the latest developments from ship short to return of capital policy.
spk00: Over to you, Randy. Thank you, Oivind. So following up on several announcements we made in recent months, we want to provide additional details on updated developments regarding many of those announcements. So yes, starting on slide 19, our fleet renewal program continues to be implemented as we sell our oldest vessels and replace them with modern secondhand tonnage. Starting with the sale on May 2nd, 2023, we sold our oldest vessel, Navigator Orion, a 2000 built 22,000 cubic meter LPG carrier to a third party for $20.9 million. That leaves us with only three of our original vessels built in 2000. And we continue to engage buyers who are showing interest to acquire those older assets. On the acquisition side, as a reminder, in September of 2022, Navigator Holdings announced that we entered into a joint venture agreement with Greater Bay to acquire five ethylene capable vessels. Now, following this announcement, our new joint venture, owns 60% by us and 40% by Greater Bay, has now taken delivery of all five vessels, completing the acquisitions earlier than previously expected. As a reminder, the total cost was $233 million, 65% of which has been financed by the $151.3 million bank loan, with 60% of the remaining cost, about $49 million, paid from available cash. So as a result of all of this S&P activity, our current fleet consists of 56 vessels with an average age of only 9.9 years and an average size of 21,032 cubic meters. Now to the good part, we are pleased to announce our new return of capital policy on slide 20. So in October of 2022, we announced the board's authorization for a share repurchase program of up to $50 million of NVGS common stock. And between December and May, we repurchased 3.8 million shares at an average price of $13.12 for a total of $50 million. Subsequently, the board has authorized a new share repurchase program of up to $25 million of NVGS shares of common stock as part of a new return of capital policy. Furthermore, for the first time ever, Navigator Gas is announcing a dividend payout. Starting in the second quarter of this year, we will pay a fixed quarterly cash dividend of $0.05 per share, likely payable in late August, with additional return of capital to equal at least 25% of net income. As for that percentage payout, we aim to balance redistribution of capital and growth and believe that that 25% level supports both of these goals. Now, returning capital to shareholders is new to Navigator, but something we see as a requirement. for a shareholder-focused company. For payout examples, as you can see in the table below, we plan to pay a fixed $0.05 quarterly cash dividend, regardless of earnings. And whenever quarterly adjusted EPS is greater than $0.20 per share, additional capital will be returned via a larger dividend and or share buybacks, depending on share price. Now, finishing on slide 21, as Oiven alluded to earlier, Last quarter, we announced additional details for the expansion of our ethylene export terminal under the existing 50-50 joint venture with Enterprise Products Partners over at Morgan's Point. We have agreed to a capital project to increase that export capacity from approximately 1 million tons per year to at least 1.55 million tons and up to 3.2 million tons per year by converting an existing ethane refrigeration train to also refrigerate ethylene. So looking at the yellow box in the bottom right, we are modifying the train closest to the storage tank and are using some of the adjacent land for additional equipment such as chillers and compressors. Importantly, the ethylene refrigeration capacity is set to triple from 125 tons per hour currently to 375 tons per hour post-expansion, providing substantial optionality and flexibility in terms of loading the storage tank and the timing of exports. The total capital contribution required from us to the joint venture for this project is expected to be around $125 million, the majority of which will be paid next year in 2024. And the company expects to fund using a combination of cash on hand and additional debt financing. Long lead items have already been ordered and construction is underway and expected to be completed by the fourth quarter of 2024. As you can see on the bottom left chart, the terminal continues to run at or above nameplate capacity. And current and limited spot cargo availability is leading new customers to discuss multi-year offtake contracts. So we do expect to contract the majority of the offtake valuations prior to the project completion next year. With that, I'll now turn it back over to Mods for closing remarks.
spk02: Thanks a lot Randy. If you'll go to, yeah, 22. Navigate is on a good path right now. Our 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 N24. The balance sheet is in its best shape ever with appropriate levels of net debt and a recently refinanced loan portfolio giving a long runway until next maturities in 2025. This gives us capacity for further growth, balancing growth with redistribution of capital through the dividends and further share buybacks as outlined in our new return of capital policy. Our work on positioning Navigator for the future continues and you will hear back from us in June when we release our ESG report. By the end of June, Niall will step down as CFO after almost 19 years in the position. I'd like to take this opportunity to say a deep felt thank you to Niall for having taken Navigator from a small five vessel gas tanker company in a difficult financial position to where we are today as a global leader in the handy size segment with a large modern fleet complemented by our infrastructure assets with a strong organization and a highly recognized brand in our industry. Thank you, Niall. You'll be sorely missed by colleagues, and I'm sure that also analysts and investors will miss your safe pair of hands when it comes to managing our financials. With that, I'll hand it back to you, Randy.
spk00: Thank you, Mats. Operator will now open the lines for some Q&A. So you can raise your hand and press star nine. And then you'll have to unmute yourself by pressing star six if you're dialed in. Or obviously, if using Zoom, just hit the raise hand function. So first question, your line should be open.
spk05: OK, sorry. Hey, guys, that's Omar Nocta from Jefferies. Can you hear me? We can. Okay, great. Well, yeah, Niall, first off, yes, also congratulations. From my side, I'll miss working with you. It's been a pleasure. Yeah, I wish you the best of luck in the next chapter, but definitely you're leaving Navigator on a very solid footing.
spk01: Thank you, Omar.
spk05: Yeah, and I guess, you know, broadly, you know, first off, I guess to the team, you know, congrats on a very strong result. And clearly, you know, we'd say as we look at just the numbers as they've kind of evolved here, there's been a step change, I would say, in Navigator's earnings power, at least relative to what we've been seeing in prior years. But things definitely here in the past couple of quarters look like they've kind of stepped up to a new threshold. And I wanted to ask, and Oivind, you spent a good amount of time talking about the market, but just wanted to ask maybe just kind of holistically, What do you think has been driving this overall improvement in your earnings power? Is it the market? Is it a shift in how you've been deploying your fleet? Is it the terminal giving you some additional insight? Is there a way that you can just maybe calibrate to us what's been driving this overall improvement?
spk02: I think from our perspective, it's a little bit of all. Clearly, the global economy has recovered after the COVID meltdown. And we've seen also now that China is coming back. And I think that's a great contrast to what you saw during the middle part of last year. I think there's a part of the supply-demand picture also that plays into this. For a number of years, there's really been no additions to the handy size fleet or the smaller gas tanker vessels. But we've seen gradually growing production of Most of the commodities that we're transporting, the production out of North America has gradually grown and the global handy-sized fleet has just not followed suit. But I'll invite my colleagues to add to this.
spk06: One important factor is consistent performance of ethylene exports from the US. And that has taken quite a few of our ethylene ships, which were doing other non-ethylene cargoes prior to this. So this consistency and also sort of an even-steven trade between Europe and China, it's helpful. And that's another one. And then the other development is, of course, ammonia. Ammonia is quite sticky now. So I made a little commentary about, despite Europe, Importing less seaborne ammonia, our charter parties remain, or the market demand for our ammonia transport services is quite sticky. So that is a new thing that we haven't seen before. So those two factors in particular are keeping the fundamentals quite strong on the market.
spk02: But I think what you mentioned, Omar, about the export facility in Morgan's Point, it is, of course, an important contributor making sure that there is supply pushed on ethylene from North America, which has to go long distance. And that, of course, has ensured that what our ships were built to do, transport ethylene, is now happening. So that's, of course, a very important one. And I think also one of the reasons why we are reasonably uh constructive on on the future with this additional capacity that's going to come on stream by the end of next year thank you that's a very very good uh overview thanks martin oyvind i
spk05: Just to follow up, Randy, in his comments or your comments, sorry, about the terminal and being able to, you're feeling confident of being able to secure a lot of the offtake capacity ahead of completion of the project. Just in terms of kind of what we're seeing then in the shipping market, is there that same type of, You know, maybe thirst call it for for chartering because we have seen obviously a stronger market rates continue to evolve higher. How has the how has the time charter market developed for the ethylene carriers that are available? Is it still is it still more of a short term spot approach or are you able to now secure or are you seeing interest to secure for two or three years at a time?
spk06: So I think we mentioned this before, Omar, and it still remains the same, whereby petrochemical commodity trading, transportation is generally voyage charter-based, so short-term of nature. However... The ethylene consumers, particularly in Far East, are getting familiar with the consistency of US exports. So this is a new factor. So they are getting more familiar with pricing, with the contractual types and so forth. So I think... But what we'll see in the future is it's going to be a little bit more time charter-based than just voyage charter spot. But it's a journey, and it's not there yet.
spk00: And one thing we are seeing currently is forward fixing, so a little further in advance, right? So vessels being fixed instead of two, three, four weeks in advance, maybe six, eight, ten weeks in advance.
spk05: Okay. Yeah. Thanks. That clearly speaks to at least the pace of the market. Great. All right. Well, I'll leave it there. Congrats again, guys. And Niall, I'll be seeing you.
spk00: Cheers. Thanks again, Omar. All right, operator. We're open for the next question.
spk04: All right. I guess I'm not the operator, but can you guys hear me? Howdy, Ben. We can hear you. All right. Hey, guys. I appreciate it. Have just a couple. Well, three. But the first, I wanted to follow up a little bit just on the state of the market, especially the utilization. It's been a long time since we've seen high 90s utilization and appreciate the 2Q is normally a little bit lower. But one of the things that had been... a little bit, my understanding is one of the things that had been an issue was that, uh, for a lot of the ethylene that was going to the far East, um, charters knew that you were, you know, those ships are going to be coming back to the Gulf coast to refill. And so they were not chartering during the ballast voyage and, and the, uh, the laden voyage was, was much a higher rate, but it was having an impact on utilization. So, uh, Has that changed? Are we now seeing contracts for both the ballast and and laden portions of the trip?
spk06: Ben, the holy grail is, of course, triangulation. At some instances, we are able to reload propylene from Asia. We're talking about Asian destinations. However, that hasn't happened for some time. It occurred last year. So the ethylene voyages that we're doing from Houston, Morgan's Point, to Asia Pacific consumers, they are generally based on round, well, they are based on round voyage economics. So whether they are in Leyden or Ballast, the earnings are decent. However, the utilization is the timing of when those contracts are fixed that impacts utilization, not necessarily the earnings. But to add on to what Randy was talking about, the earlier the charters or our customers contract, the better it is in terms of utilization. Because what we're seeing today is that some of the voyages that are en route laden to, say, China, before they are discharged, they are concluded for another voyage. and therefore you have 100% utilization on those things. So what dragged down or penalized a couple of percentage points on utilization was that we have some technical issues on a couple of the bolts and et cetera, which they were unavailable to be employed, and therefore there was a penalty there. Nothing to do with the market per se.
spk04: Okay. But going forward, we should assume utilization, seasonally adjusted low to mid, maybe even upper 90s and periods of strength. Is that fair?
spk06: I mean, we're going to 90% for a second quarter. As I mentioned, which is interesting, is that despite utilization a bit lower, the average rate so far in the second quarter are higher than in the first quarter, which is
spk02: So I think that's a good point you're making here, Ben, that it's not normal to run at close to 97% utilization. There will inevitably be times when we have a vessel for sale, which is then it needs to sit idle while that process is unfolding, or there are some technical issues with a ship or two and so on. So during the normal course of business, we would probably often say that if we can hit around 90% or a little bit above, we are very pleased with that.
spk04: Okay. And then just sort of sticking with the state of the market, your ethylene terminal is running pretty close to full capacity. I think the ethane terminals generally are running pretty close to full capacity. Are we at a sort of an ethylene-ethane plateau until some of the expansion projects start to hit next year, or is there a little bit more that can be squeezed out, do you think?
spk06: On the ETA inside, Ben, I know for a fact that both Morgan's Point and Marcus Suk and Midland, they have spare capacity. at least for handy size. So handy size ETEN cargo is quite small in the sort of capacity availability sense. So we, depending on the NAFTA price and the competitiveness of ETEN, we do see ETEN spot cargos, which are outside the term contracts at those terminals, and they do pop up. So for handy size spot opportunities, there are capacity for ETEN.
spk04: Okay. But ethylene is pretty much fully utilized, I guess.
spk06: Ethylene is pretty much fully named to late capacity. At Morgan's point, there's two handy-sized cargos at target terminal generally every month, but that is then max capacity. You're correct, for ethylene.
spk04: Okay. Okay. And then lastly, for me, maybe this one's for you, Randy. I mean, I am increasingly having inbounds from infrastructure companies asking me for references about you guys. Can you maybe fill me in a little bit on sort of what incremental... development looks like for new projects outside of the ethylene terminal? I mean, I'm hearing a lot on on ammonia projects. Where are you? Where are you sitting with respect to how you're doing incremental infrastructure development on the navigator level?
spk00: Sure. Hopefully you're doing some positive recommendations there. But yes, we are certainly certainly interested in, frankly, vetting blue ammonia, green ammonia out of the U.S. Gulf. looking at some other CO2 transportation projects, some terminals in and around Europe, as well as obviously on the export side here in the US Gulf. So all of that is on the table and certainly projects that we are actively looking
spk02: And here, maybe you could say that we are very comfortable with the structure of the joint venture with enterprise, where we have the joint venture on the port part of it, the infrastructure between the ship and the pipeline system they're operating in. And those would be natural places to search for other joint venture opportunities, find something where we have something to add and something that can bring synergies to our vessel operations. So we're still a shipping company. We expect to continue to be a shipping company, but finding ways where we can optimize the supply chain and where we can see the synergies between the ship side and the land side, we are certainly looking for that.
spk04: Right, understood. I guess just to clarify a little bit, you know, in terms of this process, how far, maybe put it in baseball analogy, like are some of these getting sort of into the middle or later innings with respect to opportunities, or is it just a whole lot of early innings type work that you're doing right now?
spk00: Yeah, you know, with our affinity for the Astros, I would say somewhere in the third inning, right? The first pitch has certainly already been thrown out where we have some NDAs in place and some other kind of agreements and paperwork. But yeah, it's hard to say. It's still a multi-year process, right? These, especially blue ammonia, green ammonia, we're talking, you know, 2027 maybe later. But in terms of our participation in that, we expect something in the next, 12 to 18 months in terms of an announcement and making some capital contributions and those things. Perfect. I appreciate it. And thanks for all the color guys.
spk04: Oh, and I'll, I'll miss having another Nolan around. So good luck to you.
spk00: My email when I type Nolan, a lot of different comes up. Thanks, Ben. All right, operator. Next question, please.
spk03: Hey, guys. Niall, I think the Gaelic would be what Sloan Sloan let. So, yeah. And good luck to you and, you know, in your next role or whatever you pursue after this. It's been nice working with you. And so, you know, I'll try to come up with a couple after this. I think Ben went through quite a few, but, uh, just to sort of expound on the, uh, on the grain ammonia questions, are you guys seeing any sort of inbound from, from any of the, I know that there's some hydrogen hub activity, which is being funded by the federal government and in kind of the Houston area where you're already sort of active on the, the export, uh, side. And also, do you see that sort of developing as a handy size trade, or do you think that it would kind of follow the path of like LNG where, um, the scale of U.S. exports starts to hit levels where you would potentially grow that ammonia fleet into, say, a larger class of vessels?
spk00: Yeah, all good questions there. I think especially when you're looking at hydrogen or certainly green ammonia, I think the scale starting will be a lot smaller, obviously, than methane or MNG now. so we do think the handy size especially going over into european ports right where they're handy they can get in and out of anywhere basically um so we do think the handy size trade for those ships makes a lot of sense now we do expect larger vessels to especially move ammonia green ammonia blue ammonia west or through the panama canal or to the far east rather um so we think that will naturally come but for what the some of the projects that we're looking at the handy size vessels make a lot of sense just in terms of smaller storage is needed, right? And then again, you can fit in to multiple more ports with our size ships.
spk03: Okay. And then if there's a kind of look at the chart, just I guess we'll stay on the ammonia theme on page 15. You see the rates are rolling off a little bit, still definitely elevated kind of versus historical. Is some of that maybe some of the dislocation from Ukraine's trade getting kind of normalized in the market? Or what do you attribute that to? Because you said the volumes are very sticky.
spk06: Yeah, Sean, the volumes are trade. We still have the issue with Ukraine exports being shot. So the market hasn't recovered from that. So there's still some untraditional trade movements of ammonia, which is benefiting us. So my commentary earlier was really about the normalization of natural gas prices. So many of the European producers, ammonia producers, stopped producing when natural gas prices were extremely high during the last 12 months. Now they're producing again. So they're satisfying some of their own demand, but the Ukraine situation is not resolved. So many of the ammonia charters that we have, We expect to continue. Remember, only 12 months ago, we had three, four ships in ammonia. Now we have nine. And the stickiness seems to be, I'm surprised that it is as sticky, meaning that the charter parties are being renewed and we are getting more inbound interest for additional ammonia. So the ammonia story is not vanishing or going away, which is good for us.
spk03: Okay. All right. Thanks. Thanks, Oiven and Randy and everyone. Thank you. Thanks, John.
spk00: Okay. With that, I believe that wraps up our Q&A. So I just want to thank you again for dialing in. Obviously, if you have any other additional questions or follow-ups, feel free to reach out to myself, randy.gibbons at navigatorgast.com or anyone on the team. And I, too, want to say thank you to Niall. It has been such a pleasure working with you. So thanks again, everyone, and we will talk soon. Thank you. Thank you.
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