Navigator Holdings Ltd. Q1 FY2023 Earnings Call

With us today are Mr. Mads Peter Zacho, Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; Mr. Oeyvind Lindeman, Chief Commercial Officer; and I am Randy Givean, Executive Vice President of Investor Relations and Business Development for North America. I want to inform you that this conference is being recorded. As we proceed with today's presentation, we will be making several forward-looking statements. These will cover future expectations, plans, and prospects from both a financial and operational standpoint and are grounded in management assumptions, forecasts, and expectations as of today. These statements are subject to significant risks and uncertainties. Actual results could vary widely from our forward-looking statements and financial forecasts. More details about these risks and assumptions can be found in our annual and quarterly reports filed with the Securities and Exchange Commission. Now, I will hand over to Mads Peter Zacho, the company's Chief Executive Officer. Please continue, Mads.

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 results and then hand it over to Niall, Oeyvind, and Randy for more color on our results and recent events. Our first quarter results 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 we raised for the secondhand 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% 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 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 Morgan's 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 bode well for earnings in Q2. The terminal throughput in Q2 is expected to remain strong, around 265,000 tonnes, and ethylene is in high demand in both Europe and Asia. This current robust demand for seaborne gas transport is well complemented by a modest Handysize order book and also an aging global fleet of gas tankers. With this brief overview, I'll hand it over to Niall for a more detailed review of our financials. Go ahead, Niall.

Thank you, Mads, and good morning. The quarterly net income of $18.8 million and the adjusted EBITDA of $69 million are the highest quarterly results for several years, since the first quarter of 2016, and we expect this positive trend to continue. This improvement in results was driven by increased total operating revenues, which reached $136 million for the quarter, $16.2 million higher than the $119.8 million reported for the same quarter last year. Importantly, this also reflects a 10.3% increase from the $123.3 million revenue achieved in the fourth quarter of 2022. The quarter-on-quarter increase was attributed to rises in charter rates, which increased to $25,620 per day from $22,933 per day compared to the first quarter of last year. This quarter's average charter rate also saw a $2,000 per day rise from the $23,621 achieved last quarter. Alongside increased charter rates, utilization rose during the quarter to 96.2% compared to 89.5% for the same quarter last year, and it increased by 2% from the strong 94.1% achieved in the fourth quarter of 2022. Our Greater Bay joint venture, which we own 60%, acquired three additional vessels in the first three months of this year. The second 17,000 cubic meter 2018-built ethylene-capable gas carrier, Navigara Solar, was acquired on January 17, and two 22,000 cubic meter 2019-built ethylene carriers, Navigator Caster and Navigator Equator, were acquired on March 24 and March 27, respectively. This acquisition also increased available vessel days, contributing to the revenue growth during the quarter. The joint venture acquired its fifth and final vessel on April 13, named Navigator Viga. We had two vessels in dry dock for scheduled surveys during the first quarter, which totaled 30 days and incurred costs of $3.3 million. For the rest of 2023, we expect 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, which represents our share of the net revenues from the other participants, with voyage expenses from the loan pool totaling $5 million, representing the other participants' share of our net revenues. The other participants' vessels contributed $2.2 million to us this quarter. However, following the acquisition of the fifth vessel by the Greater Bay joint venture last month, which was owned by the other participant in Luna's pool, future revenue from these vessels will be fully consolidated into our financial statements and will not appear as revenue or operating revenues or voyage expenses from the Luna Pool collaborative arrangements. Plot expenses decreased by $3.6 million or 17.2% during the first quarter to $17.2 million, which correspondingly reduced revenue since voyage expenses are pass-through costs. Our vessel operating expenses increased by 9.5% to $41.7 million for the first quarter compared to the same period last year, leading to a quarter-on-quarter increase in vessel operating expenses per vessel per day by 9.4% to $8,580 per day. However, this was a decline from the $9,058 per day incurred in the fourth quarter of last year as we continue to manage our vessel operating costs. Depreciation of our vessels rose slightly by $500,000 or 1.6% due to the addition of vessels from the Greater Bay joint venture to our fleet. For 2023, we expect depreciation to be approximately $132 million following the acquisition of these Greater Bay vessels. We depreciate our vessels to their scrap or recycling value on their 25th anniversary. Other income, which amounted to $96,000, pertains to management fees earned from other participants for our management of the Luna Pool. We will not receive these third-party management fees going forward as the five vessels related to them have been purchased and will be fully consolidated. There was an unrealized loss of $4.5 million on our derivative instruments during the first quarter as the fair value of our fixed interest rate swaps decreased. This contrasts with a $15.2 million gain in the first quarter of last year, reflecting expectations of a 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 due to further increases in interest rates on the portion of our debt subject to floating rates. We have fixed interest rates or have entered into interest rate swaps for 45.1% of our debt as of the end of March at LIBOR or SOFR levels that are fixed between 0.36% and 2.07%. The tax charge for the quarter was $1.2 million, which primarily relates to both cash and deferred taxes on our share of the profits from the ethylene export terminal. Our share of profits from the terminal was $5.1 million for the quarter, down from $6.5 million for the same quarter last year due to throughput of 250,731 tons compared to 267,100 tons in the first quarter of last year, as well as some reduced charges per ton related to U.S. domestic natural gas prices. Therefore, the net income for the first quarter was $18.8 million or $0.25 per share. However, when adjusted for the unrealized losses on the derivative instruments, the adjusted net income was $23 million, resulting in an earnings per share of $0.30. The balance sheet remains very strong with a cash balance of $190.9 million as of March 31, exceeding the minimum liquidity covenant on our bank loans and credit agreements of $50 million. This cash balance comes after the purchase of 2.6 million shares of common stock for a total of $33.6 million at an average price of $12.73. The robust cash balance will be used for capital redistribution, our ethylene terminal expansion project, and we are monitoring the market for any attractive secondhand vessel acquisitions. As of March 31, our debt stood at just over $1 billion, an increase of $141.8 million since December 31, primarily from drawdowns on the loan to partially fund the acquisition of the three vessels mentioned earlier by the Greater Bay joint venture. We also secured a new $200 million term loan on March 20 to refinance 10 vessels that were previously secured by two existing loans due to mature later this year. The new loan has a term of 6 years maturing in 2029, with interest set at SOFR plus a margin of 2.1%, and was fully drawn down on March 28. After these two loans, the company does not have any loan maturities until 2025. We have estimated the cash breakeven for 2023 to be $19,470 per day, and this low figure relative to the charter rate market allows us to generate positive EBITDA throughout the shipping cycle. We outline our daily operating expense expectations for 2023 across different vessel size segments, ranging from $7,500 per day for smaller vessels to $10,100 per day for larger, more complex ethylene vessels. We also provide a range for expected annual spending on G&A costs, depreciation, and interest expense. Our historical EBITDA shows a consistent increase over the past six quarters, with a further rise this quarter, a trend we expect to continue at least in the short term. Additionally, we depict the historical 2022 EBITDA alongside a 12-month bar that includes the last quarter and an annualized EBITDA based on this quarter's results. The EBITDA projections also illustrate the effects of incremental increases in charter rates by $1,000 per day. Finally, as I hand over to Oeyvind, I want to take this opportunity to thank you for listening to me over the past decade since the company's IPO in November 2013. I wish the company and my successor the very best for the future. Over to you, Oeyvind.

Thank you, Niall, and good morning, all. If we move to the next slide, please. So we'll usually start off with the U.S. natural gas liquids production. NGL gas liquids production is constituted of ethane and LPG being the major commodities of that. As you can see on the graph on the left-hand side, it is 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 handysize 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 Handysize 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 U.S. ethane for ethylene production. Ethane continues to have excess supply and reinjection continues in a big way. The yellow line in the first graph on Page 13 illustrates this point. Ethane is becoming cheaper and cheaper, which typically translates to cheaper ethane production and therefore, cheaper U.S. ethylene pricing. The recent ethylene price is shown by the gray line. The price differential to international markets remains with the possibility to purchase ethylene in the U.S. 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 U.S. ethylene exports were shipped to Europe. However, recently, alongside a slight rejuvenation in the Chinese economy, we have seen an increase in ethylene being shipped across the Pacific. About 65% of U.S. ethylene is today exported across the Pacific, which is a positive change from last quarter due to the longer distances needed to reach discharge ports compared to Europe. The ethylene export trend has consistently been exporting at nameplate capacities since September last year. 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 Handysize spot opportunities in the Atlantic basin servicing ethylene crackers that can take advantage of gas cracking over naphtha. We have previously 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, so you can see the change in seaborne imports as shown on the first graph on Page 14. However, there are other positive trends worth noting for the future of the ammonia markets. In the middle graph, we can see that during the last 12 months, Horizon North American ammonia exports, shown by the light blue line, are 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, particularly the handysize segment. Despite a reduction in European ammonia imports and paid vessels, we still maintain a fair proportion of our vessels in ammonia. On Page 15, we see that the ammonia proportion of our charter portfolio has declined slightly over the last quarter; however, it is still maintaining about 20% of our earnings base. Q1 utilization of 96% was pretty robust. All three of our markets created a favorable environment for us, with strong LPG demand during the winter months, strong petrochemical exports from the U.S., 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, indicating that market fundamentals remain healthy. On Slide 16, we can see the general rate environment has improved slightly across all the gas carrier segments, including Handysize over the last period. On the next slide, we show a final positive dynamic, reminding people that the Handysize segment has a very modest order book. Considering the pressure on supply chains at various shipyards, we have clear visibility of the tonnage situation within our segment for the next three years, which is quite important. Randy will take over from here, given an exciting rundown of the latest developments from Ship short to a return of capital policy over to you, Randy.

Thank you, Oeyvind. Following up on several announcements we made in recent months, we want to provide additional details on updated developments regarding many of those announcements. 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 2, 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; we continue to engage buyers who are showing interest in acquiring those older assets. On the acquisition side, in September of 2022, Navigator Holdings announced that we entered into a joint venture agreement with Greater Bay to acquire five ethylene-capable vessels. Following this announcement, our new joint venture, 60% owned by us and 40% by Greater Bay, has now taken delivery of all five vessels, completing the acquisitions earlier than previously expected. The total cost was $233 million, 65% of which has been financed by the $151.3 million bank loan, with 60% of the remaining costs of about $49 million paid from available cash. As a result of all 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. In October of 2022, we announced the Board's authorization for a share repurchase program of up to $50 million of NVGS common stock. 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. Regarding that percentage payout, we aim to balance capital redistribution and growth and believe that at 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 Oeyvind 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. Looking at the yellow box in the bottom right, we are modifying the train closest to the storage tank and 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, 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. The company expects to fund using a combination of cash on hand and additional debt financing. Long lead items have already been ordered, construction is underway, and is expected to be completed by the fourth quarter of 2024. As shown 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. We expect to contract the majority of the offtake volumes prior to the project's completion next year. With that, I'll now turn it back over to Mads for closing remarks.

Thanks a lot, Randy. If you go to Slide 22, Navigator 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 '24. 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 provides 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 heartfelt 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 Handysize 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 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.

Thank you, Mads. Operator, we will now open the lines for some questions. So first question, your line should be open.

Okay, sorry. Hey, guys. It's Omar Nokta from Jefferies. Can you hear me?

We can.

Okay. Great. Well, yes, Niall, first off, congratulations from my side. I'll miss working with you. It's been a pleasure. I wish you the best of luck in the next chapter. But definitely, you're leaving Navigator on very solid footing.

Thank you, Omar.

I guess, broadly, first off, to the team, congrats on a very strong result. Clearly, as we look at just the numbers as they've 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, things definitely here in the past couple of quarters look like they've kind of stepped up to a new threshold. I wanted to ask, you spent a good amount of time talking about the market, and I 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 for us what's been driving this overall improvement?

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. I think that's in 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 have been no additions to the Handysize 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 Handysize fleet has just not followed suit. But I'll invite my colleagues to add to this.

One of the important factors is the consistent performance of ethylene exports from the U.S. That has taken quite a few of our ethylene ships, which were doing other non-ethylene cargoes, higher this year. This consistency and also an even-steven trade between Europe and China is helpful. Another 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 those two factors, in particular, are keeping the fundamentals quite strong, Omar.

What you mentioned, Omar, about the export facility in Morgan's Point is, of course, an important contributor, ensuring supply pushed on ethylene from North America, which has to go long distance. That's, of course, very important as our ships were built to transport ethylene. I think that is one of the reasons why we are reasonably constructive 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 good overview. Thanks, Mads and Oeyvind. Just a follow-up, Randy in his comments or your comment, sorry, about the terminal and feeling confident of being able to secure a lot of the offtake capacity ahead of the completion of the project. Just in terms of what we're seeing in the shipping market. Is there that same type of maybe first call it for chartering? We have seen, obviously, a stronger market. Rates have continued to evolve higher. How has the time charter market developed for the ethylene carriers that are available? 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?

I think we mentioned this before, Omar, and it still remains the same. Petrochemical commodity trading and transportation are generally voyage charter-based and are of a short-term nature. However, ethylene consumers, particularly in the Far East, are becoming more familiar with the consistency of U.S. exports. So this is a new factor. What we'll see in the future is it's going to be a little bit more time charter-based than just voyage charter, but it's a journey, and it's not very firm yet.

One thing we are currently seeing is forward fixing a little further in advance. Vessels are being fixed instead of two-three-four weeks in advance, maybe six-eight, or even ten weeks in advance.

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.

Thank you.

Thanks again, Omar. All right, operator, we're open for the next question.

All right, I guess not the operator. But can you guys hear me?

Howdy Ben, we can hear you.

All right, guys, I appreciate it. I 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 I appreciate that 2Q is normally a little bit lower. One of the things that had been an issue is that for a lot of the ethylene that was going to the Far East, charters knew that those ships were going to be coming back to the Gulf Coast to refill. They were not chartering during the ballast voyage, and the laden voyage was at much higher rates, but it was having an impact on utilization. So has that changed? Are we now seeing contracts for both the ballast and laden portions of the trip?

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 we're doing from Houston, Morgan's Point to Asia Pacific consumers are generally based on rental and voyage economics. Whether they are laden 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 mentioned, the earlier the charters or our customers' contracts are fixed, the better it is in terms of utilization. What we're seeing today is that some of the voyages in route laden to, say, China, are concluded from another voyage before they are discharged. Therefore, you have 100% utilization on those things. By the way, some of the vessels that previously experienced downtime dragged down the utilization numbers by penalties.

Going forward, we should expect utilization to be seasonally adjusted in the low to mid, and potentially even upper 90s, along with periods of strength. Is that fair?

Regarding Q2 utilization, I mentioned it will hover around 90%. What is interesting is that despite utilization being lower, the average rates so far in the second quarter are higher than the first quarter.

It's not common to run at close to 97% utilization. There will inevitably be times when we have a vessel for sale, which then needs to sit idle while that process is unfolding or there are technical issues with the ship. 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.

Your ethylene terminal is running pretty close to full capacity. I think the ethane terminals generally are running close to full capacity. Are we at an ethylene ethane plateau until some of the expansion projects hit next year? Or is there a little bit more that can be squeezed out, do you think?

On the ethane side, I know for a fact that both Morgan's Point and other terminals have spare capacity, at least for Handysize. So Handysize ethane cargo is quite small in the sort of capacity availability sense. Depending on the naphtha price and the competitiveness of ethane, we do see some spot cargoes outside term contracts at those terminals, and they do pop up, particularly for Handysize spot opportunities there. Ethylene, however, is pretty much fully utilized. At Morgan's Point, there are two Handysize cargoes on target terminals generally every month, but that is the maximum capacity, you're correct for ethylene.

Lastly, this one's for you, Randy. I am increasingly having inbound interest from infrastructure companies asking me for references about you guys. Can you maybe fill me in a little bit on what incremental development looks like for new projects outside of the terminal? I'm hearing a lot on ammonia projects. Where are you sitting with respect to how you're viewing incremental infrastructure development on the Navigator level?

Sure. Hopefully, you're getting some positive recommendations there. But we are certainly interested in, frankly, bedding, blue ammonia, and green ammonia out of the U.S. Gulf, looking at some other CO2 transportation projects, some terminals in and around Europe, as well as on the export side here in the U.S. Gulf. All of that is on the table and certainly projects that we are actively looking at.

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 systems they're operating. Those would be natural places to search for other joint venture opportunities, find something where we can add value and find synergies to our vessel operations. We are still a shipping company. We expect to continue being 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.

Understood. Just to clarify a little bit. In terms of this process, far maybe put it in a baseball analogy, 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?

With our affinity for the shows, I would say we are somewhere in the third inning. The first pitch has certainly already been thrown out, where we have some NDAs in place and some other agreements in paperwork. But yeah, it's still a multi-year process. With those especially blue ammonia and your green ammonia, we're talking 2027 maybe later. But we expect something in the next 12 to 18 months in terms of an announcement and making some capital contributions in those projects.

Perfect. Yeah, appreciate it. Thanks for all the color, guys. I'll miss having another Nolan around. So good luck.

Thanks, guys. My email will be open for a lot of different inquiries. Thanks, Ben.

Hey, guys. Niall, I think the Gaelic would be what soon let. Good luck to you in your next role or whatever you pursue after this. It's been nice working with you.

Thanks.

I will try to come up with a couple of points after Ben covered many topics. To expand on the green ammonia question, are you receiving any interest related to the hydrogen initiatives that have been funded by the federal government in the Houston area, where you are already involved in exports? Do you see this developing as a Handysize trade, or do you believe it will follow a similar path to LNG, where the scale of U.S. exports reaches a level that could lead to the expansion of your ammonia fleet into larger vessels?

Yeah, all good questions there. I think especially when you're looking at hydrogen or certainly green ammonia, the scale starting will be a lot smaller obviously than methane or LNG now. We do think the Handysize, especially going over into European ports, is where they are handy, and they can get in and out of any port basically. We do think the Handysize trade for those ships makes a lot of sense. Larger vessels will move ammonia, green ammonia, and blue ammonia, especially west or through the Panama to the Far East. Those will naturally come. For what the projects we are looking at, the Handysize vessels make a lot of sense just in terms of needing smaller storage, and then again, you can fit into multiple more ports with our size ships.

Great. Then as we 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 compared to historical levels. Is some of that maybe some of the dislocation from Ukraine's trade getting normalized in the market? Or what do you attribute that to? Because you said the volumes are very sticky.

Sean, we are still facing challenges with Ukraine and the disruption of exports, which has prevented the market from recovering. However, there are still some traditional ammonia movements that are benefiting us. My earlier comments focused on the normalization of natural gas prices. Many European and ammonia producers had halted production when natural gas prices peaked over the past year. They are now resuming production to meet some of their demand, but the situation in Ukraine remains unresolved. We anticipate that many of the ammonia charters we have will continue. Keep in mind that just a year ago, we operated with three or four ships for ammonia, and now we have nine. The demand appears to be consistently strong, indicating a significant interest in additional ammonia.

Okay, thanks, Oeyvind, Randy, and everyone. Thank you.

Thanks, Sean. Okay, with that, I believe that wraps up our Q&A. Thank you again for dialing in. If you have any other additional questions or follow-ups, feel free to reach out to myself, randygiveans@navigatorgas.com or anyone on the team. I want to say thank you to Niall. It has been such a pleasure working with you. Thank you again, everyone, and we will talk soon.

Thank you.

Goodbye.