Navigator Holdings Ltd. Q4 FY2024 Earnings Call

Welcome to the Navigator Holdings Conference call for the Fourth Quarter 2024 Financial results. On today’s call we have Mads Peter Zacho, Chief Executive Officer; Gary Chapman, Chief Financial Officer; Oeyvind Lindeman, Chief Commercial Officer and myself, Randy Giveans, Executive Vice President of Investor Relations and Business Development in North America. I must advise you that this conference call is being recorded today. 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, March 12th, 2025, and are as such subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecast. Additional information about these factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission. With that, I will now pass the floor to Mads Peter Zacho, the company’s CEO. Please go ahead, Mads.

Good morning and good afternoon, and thank you very much for joining this Navigator Gas Earnings Call for Q4 2024. As a start, I'll review the key data on our Q4 2024 performance and then I'll go over the outlook for the rest of the year. After that, Gary, Oeyvind and Randy will discuss the results in more detail. In the fourth quarter, we generated more revenues up 2% compared to the same period the previous year. This was driven by slightly higher utilization. Adjusted EBITDA for Q4 came in just over $73 million above both the $72 million in the same period the previous year, as well as the $68 million of Q3. The balance sheet is strong with a robust cash position even after we repaid our final December installment of $50 million on the terminal expansion project. And we repaid on our debt facilities and paid further installments on the MGC new buildings. The return of capital continued in Q4 with both the $0.05 fixed dividend and a share buyback up to in combination 25% of net income. During Q4, we issued $100 million of new unsecured bonds at 7.25%. This was the tightest spread for any dollar-denominated shipping bond issued in the Nordic market since 2008. Commercially, we held TCE rates high and we secured average Q4 TCE rates of $28,341, which is approximately equal to the rates of the same period the previous year. We achieved utilization above 92%, in line with our guidance and higher than both Q3 and the same period the previous year. We are overall pleased with our ability to maintain robust TC rates and utilization in a market that was temporarily hit by softer ethylene transport demand. Throughput at our joint venture Ethylene export terminal was 159,000 tons for the quarter, higher than Q3 but lower than Q4 of 2023 and below capacity. This was caused by US cracker turnarounds, which reduced domestic supply, causing higher domestic prices and a narrow arbitrage. The expansion of the terminal was completed on time, on budget in December. In November, we exercised our options for an additional two 48,500 cubic meter mid-size ethylene carriers with expected delivery in November 2027 and January 2028. We also signed the time charter agreement for the first MGC vessel to be delivered. In December 2024, we agreed to acquire three handysize ethylene carriers for a total of $83.9 million. Two of the secondhand vessels were delivered in February, with the final delivery coming in the next few days. While geopolitical tension reduces our ability to do longer-term forecasting right now, we maintain confidence about the outlook for our business and for the near term. We expect vessel utilization to continue to be high in Q1, close to what we saw in Q4, and we expect to continue to see robust TCE rates. Also this time around, the ability of our vessels to transport different cargo grades proves valuable. Petrochemicals such as ethane, ethylene, propylene and butadiene now make up a total of 46% of earnings days. That's higher than what we've seen previously. The vessel supply picture remains attractive with a handysize order book of about 10% of the vessels on water. In addition, now 22% of the global handysize vessels on the water are more than 20 years of age. With that summary, I'll just hand it over to you, Gary, and you can give a little bit more detail about our financial results. Please go ahead.

Thank you, Mads, and welcome everyone. The fourth quarter of 2024 financial results reflect another strong performance, as Mads highlighted, continuing our trend from recent quarters thanks to our flexible fleet, favorable charter rates, and effective cost management. Moving to Slide 6, adjusted EBITDA for the fourth quarter reached $73.4 million, driven by ongoing strong charter rates and stable utilization. This is expected to result in a record annual unadjusted EBITDA for Navigator of nearly $293 million despite a slight decrease in time charter equivalent rates compared to the same period last year. Our total operating revenue for the quarter was $144 million with a utilization rate of 92.2%, averaging $28,341 per day for time charter equivalent rates. Vessel operating expenses came in at $46 million for the quarter, slightly lower than the previous year but up from earlier quarters, which is typical as we finalize various accruals at year-end. Depreciation remained consistent with prior quarters, while general and administrative costs were $9.4 million, also in line with the previous quarter but higher than usual due to some non-recurring legal expenses. We experienced a minor loss of $0.3 million on non-designated derivative instruments in the fourth quarter related to our long-term interest rate swaps, affecting net income but not our cash or liquidity. Net interest expense decreased compared to the previous year thanks to lower borrowing rates, although we recorded a non-cash unrealized foreign exchange loss of $2.8 million. Our tax line consisted mainly of current and deferred taxes stemming from our investment in the Ethylene Export Terminal at Morgan's Point. Overall, for the fourth quarter, including our joint venture results, Navigator Holdings had a net income attributable to stockholders of $21.6 million, translating to a basic earnings per share of $0.31, with adjusted net income at $27 million or $0.39 per share. Ethylene terminal throughput volumes in Q4 2024 were 159,183 tonnes, contributing $5.6 million from our joint venture. Randy will provide further details on the terminal shortly. On Slide 7, our balance sheet remains robust with cash and cash equivalents totaling $139.8 million at December 31, 2024, despite significant outflows for loan repayments, share buybacks, and payments towards our terminal expansion and new vessels. We utilized our undrawn bank facilities for a major $50 million payment towards our terminal expansion as planned. Looking ahead, we expect further positive cash flow from operations in the first quarter of 2025. On Slide 8, our recent financing transactions have extended our debt maturities, improved liquidity, and reduced interest expenses. In Q4 2024, we fully drew down $147.6 million from our new secured term loan and revolving credit facility to refinance our previous loan and repurchase the Navigator Aurora. We're pleased that the margin of 190 basis points includes a 5 basis points sustainability-linked adjustment, underscoring our commitment to reducing our fleet's environmental impact. On October 17, 2024, we issued $100 million in new senior unsecured bonds in the Nordic bond market, maturing in October 2029 with a fixed coupon of 7.25%. The proceeds were primarily used to call and cancel our older bond that had an 8% coupon, with the transaction settling on November 1, 2024. In February 2025, we secured a new senior term loan of $74.6 million for the purchase of three secondhand ethylene-capable vessels, two of which we successfully acquired in late February, with the third expected to be delivered on March 17. We have a debt maturity due in less than a year, involving the refinancing of a $210 million bank debt due September 2025. We are actively discussing refinancing options with supportive lenders and anticipate a positive liquidity outcome by the second quarter of 2025. On Slide 9, our leverage remains strong and is decreasing, with a net debt to adjusted EBITDA ratio of 2.4 times as of December 31, 2024, and net debt capitalization at 34%. We are making substantial debt repayments, anticipating around $120 million in average annual debt amortization over the next three years. Our Morgan's Point terminal expansion was completed on December 19, 2024, with final costs expected to be around $128 million, slightly under our earlier estimate. On Slide 10, our estimated cash breakeven for 2025 is $20,610 per day, reflecting a small decrease from our November guidance. This figure accounts for all expenses, including scheduled debt repayments and dry dock costs. The breakeven level compared to the recent charter rates, with an average TCE of $28,341 per day in Q4 2024, indicates significant room for Navigator to generate positive EBITDA throughout the shipping cycle. Our OpEx guidance for 2025 ranges from $8,050 per day for smaller vessels to over $11,000 for our larger ethylene vessels. The full-year OpEx guidance is higher than 2024 due to an increase in our vessel count and rising crew costs across the industry, alongside increased investment in energy-saving technology. Slide 11 shows our historic quarterly adjusted EBITDA, reaffirming our consistent performance despite a temporary dip in Ethylene Arbitrage. We also illustrate the potential increase in adjusted EBITDA with rising charter rates on the right side of the slide. Finally, on Slide 12, we plan for 15 vessels to undergo dry docking in 2025, completing one already. We expect 413 off-hire days and total dry docking CapEx of around $30 million, which is fully accounted for in our cash flow plans, emphasizing our strategy of incorporating energy-saving technologies during these periods. Now I will hand it over to Oeyvind for an update on our commercial outlook.

Thank you, Gary. And good morning to everyone. Let's take a look at the current rate environment, which you'll find on Page 14. There are two key trends to highlight on this page. First, in the fully refrigerated markets, we're seeing downward pressure on rates. You can see this in the chart, very large gas carriers in black, medium gas carriers in grey, and hand-sized gas carriers, lighter blue, although we only have six of these and only two on spot. The main reason? There's an oversupply coming from the VLGC segment, putting pressure on rates for fully refrigerated ships. This part of the market is really waiting for a lift from the US terminal expansions that are currently being constructed, which we'll discuss in a few slides. That boost in demand should start to take effect later this year. Secondly, semi-refrigerated handysize vessels, where we have most of our vessels, are holding up much, much better. That's the dark blue line in the chart. Unlike the fully refrigerated segment, this part of the market remains stable at historically healthy rate levels. Why? Because these vessels can balance between LPG, ammonia and easy petrochemicals, which are keeping demand steady. One additional key takeaway here, since the handysize ethylene rate benchmark was introduced three years ago, shown in green, this vessel class has now become the highest earner among all the vessel classes. And that is something. That's directly linked to US ethylene and ethene exports, as well as the physical restrictions for other vessel types to carry them. And this is, of course, good news for us. Our petrochemical capability is proving to be a strong advantage in the current market. Beyond ethane and ethylene, propylene and butadiene are also helping to support rates. Petrochemical cargos are making up a bigger share of our total fleet earnings days compared to previous years. So if you look at Page 15, you'll see that petrochemicals now represent 46% of our total earnings days. So that's the two top bars compared to LPG at 36% and ammonia holding steady at 18%. This growing share of petrochemicals is a key reason why we've been able to maintain strong fleet utilization during the last few months. Now turning to the outlook and what to look out for. The first thing to keep an eye on is US natural gas liquids production and US midstream takeaway capacity. So there are no surprises here. If you look on Page 16, the EIA data shows NGL production continues to climb. More NGL production means more ethane supply and it means more LPG supply. However, American terminal takeaway capacity is already close to max levels. To keep up with growing output, midstream companies, such as enterprise product partners and others, need to build more gas processing plants, more pipelines, more fractionators, and more export terminal capacity and that is exactly what is happening. Over the next four years, US export capacity is expected to increase by at least two-thirds or an additional 40 million tons of annual throughput compared to today's levels. That's a big deal. It signals strong growth through the rest of the decade, benefiting all segments of gas shipping. For Navigator, the biggest advantage comes from competitively priced ethane and ethylene. So take a look at the bottom left graph on page 17. The gray line tracks US ethylene prices, and these are quoted by Argus. A couple of months ago, prices spiked to about $750 per ton due to production turnarounds and maintenance. At that time with European and Asian delivered prices around $900 per ton, there wasn't much export activity. Arbitrage was effectively closed for ethylene from the US. Now, US ethylene prices are gradually correcting, driven down by cheaper ethane and increasing production. Yesterday, US ethylene was quoted at $580 per tonne, nearly $200 difference since the peak a few months ago. Meanwhile, international prices remain stable, which should lead to more exports in the second quarter and beyond because the arbitrage is widening. In the meantime, our vessels are being switched to grades to carry ethane, which has been a major factor in maintaining our high utilization. You can see in the right-hand graph that our fleet utilization started the year slightly ahead of where we're at this time in 2024. On page 18, it shows the current fleet and upcoming vessel supply across all segments. The handysize segment, in particular, has very little new tonnage coming in over the next three years, let alone the next 12 months, which is a positive factor for us. Clear visibility of the supply picture over the near and medium term is very helpful when thinking about supply and demand balance going forward. So the bottom line, despite market uncertainties and geopolitical risks, our core segments of ethylene-capable and semi-refrigerated vessels are performing better compared to other gas carrier segments. And while ethylene exports haven't been as strong recently, we successfully pivoted to carry more ethane while we wait for the arbitrage to return. With that, I'll hand things over to Randy to walk through the latest developments.

Thank you, Oeyvind. Following up on several announcements we made in recent months, we want to provide some additional details on updated developments regarding some of those announcements. So turning to Slide 20, we're pleased to announce our return of capital for the fourth quarter of 2024. But before we get to that, I want to highlight that during the fourth quarter, we repurchased more than 69,000 common shares of NVGS in the open market, totaling $1.1 million for an average price of $15.88 per share. Now looking ahead, in line with our recently announced return of capital policy and the illustrative table below, we're returning 25% of net income or $5.4 million to shareholders during this first quarter. The Board has declared a cash dividend of $0.05 per share, payable on April 3rd to all shareholders of record as of March 24th, equating to a quarterly cash dividend payment of $3.5 million. Additionally, with our shares trading well below our estimated NAV of greater than $27 per share, we'll use the variable portion of the return of capital policy for share buybacks. As such, we expect to repurchase $1.9 million of NVGS common shares between now and quarter end in the next 2.5 weeks, such that the dividend and share repurchases together equal 25% of net income or $5.4 million for the quarter. As seen over the past few years, returning capital to shareholders will remain a primary focus for us going forward. Now turning to our recently completed ethylene export terminal expansion on Slide 21. Following up on our previous announcement regarding the expansion of the Ethylene Export Terminal. The project was completed on time and on budget in mid-December and has been officially put into service. The Flex Train triples the ethylene refrigeration capacity at Morgan's Point from 125 tons per hour to 375 tons per hour, increasing the annual throughput capacity to 1.55 million tons per year or 130,000 tons per month. That said, due to the US cracker turnarounds and the resulting reduction in domestic supply, the ethylene arbitrage remains relatively tight. But we continue to sell spot cargoes and we expect the throughput capacity to increase in the coming months, especially as the domestic ethylene forward curve is forecasting a wider arbitrage going forward, as we've been alluded to. And in terms of CapEx, we paid $124 million through December 31st and have completed the final payment of $4 million in January for a total CapEx of $128 million, of which we might get a small rebate following some of the final tuning. As for contracting the expansion volumes, the second and larger new multi-year offtake contract has been signed, and we continue to expect that additional off-take capacity will be contracted sometime in the coming months. Now, turning to Slide 22. Following the terminal expansion and the expected increase in ethylene volumes in the coming quarters and years, we recently agreed to acquire 3 second-hand German-billed, handy-sized ethylene carriers for a total purchase price of $83.9 million. Two of the vessels were delivered in February and the third vessel is expected to be delivered next week. To note, Navigator Hyperion's first cargo as a part of our fleet was loading ethane at Morgan's Point and is currently en route to Asia as you can see in the map to the right. The vast majority of the capex has been financed through new debt totaling $74.6 million. So the acquisition is only requiring $10 million or so in total of our cash. Now finishing on slide 23, the secondhand vessels that we recently acquired will support the terminal expansion in the near term, but we also want to support the terminal expansion in the longer term. So in November, we exercised our options for two new 48,500 cubic meter capacity liquefied ethylene gas carriers at a price of $102.9 million each. The vessels are scheduled to be delivered in late 2027 and early 2028. To note, these new building vessels will be the largest in our fleet, have dual fuel engines that can burn ethane, and will be made retrofit ready for using ammonia as a fuel. They'll also be able to transit through the old Panama locks, as well as the new Panama Canal locks. Most importantly, these ethylene carriers will support the terminal expansion as customers who are looking at signing off-take contracts are also looking at securing their shipping needs. As such, we have signed a time charter agreement for the first vessel to be delivered and discussions are ongoing with multiple customers interested in chartering the other vessels. So we expect to fix additional vessels on time charters prior to delivery in 2027 and early 2028. Now, lastly, in terms of vessel financing, we have already paid the initial 10% deposit, totaling $42 million in September and in December, and we expect to complete financing arrangements sometime next year. So with all of that, I will now turn it back over to Mads for some closing remarks.

Thanks a lot, Randy. So then in summary, we delivered another solid quarter with strong operating cash flows, and we have in front of us a Q1 that has come off to a good start. We stay on our toes and we refinance well ahead of maturities at lower margins and better terms. We continue to pay quarterly cash dividends and buy back shares. We have in the past sought out opportunities for additional share buybacks and will continue to look for opportunities to increase capital distributions to our shareholders. Despite the current geopolitical tension, we remain confident about the demand fundamentals of our business. Continued growth in US natural gas liquid production and the significant build out in US export terminal capacity over the next four years will support exports and thereby also transport demand. Near term volumes through the export ethylene terminal are expected to gradually recover with a widening ethylene arbitrage. The vessel supply picture remains attractive with a small handy size order book and an aging global fleet. Thanks a lot for listening. And now I'll just hand it back to you, Randy, so you can coordinate the Q&A.

Thank you, Mads. The operator will now open the lines for some questions and answers. Please proceed with your questions.

All right. Is it me? Can you hear me, Randy? All right, thank you. Well, you know, just another day in paradise. I have a couple of questions. So the first, well, the first is maybe around the chartering. I know there's probably about a dozen or so of your ships that are coming currently on contract that come off over the next six months or so. Just curious if you can give a little color, as to sort of where the contract market is relative to where those assets are currently contracted. Is that something that you'd anticipate there possibly being an uplift as new contracts are signed?

Ben, I think the slide in the PowerPoint gives a very good indication of where the semi-refrigerated market is and also the fully-refrigerated market, which is quite small for us. And it's only two ships that are trading in the spot market there. But I believe that the ethylene market for handysize will strengthen alongside the arbitrage. So the arbitrage, as I mentioned, for US produced ethylene to the world has widened by almost $200 in the last two months. So it is continuing to slide. And with that, I think that the demand for handysize ethylene ships will increase and therefore push that market into a tighter position.

Yeah, which I follow. I guess I'm asking you more about as some of the existing time charter contracts roll-off, are they at levels that are sort of below current market levels or like the existing contracts? How do they compare to where we are?

So good for us that our core is not fully refrigerated shipping. So you can see on that the correlation on that time charter or rate graph is that all the fully refrigerated segments are sliding, but not our core semi-ref and ethylene. So, you know, I think that's pretty good. And the rates that we are discussing are around those levels that you see. So yeah, I think we're pretty comfortable.

So higher is, I guess, the answer than where they had been.

I'm pretty strong at the moment, but the ethylene, we're not going to give away ethylene ships at cheap rates, because we believe that, you know, once the arbitrage is back on, I think that market will tighten too. So we shall see on next quarter, and you probably have the same question.

Yeah, well, by then you'll have recontracted a few of them, so we'll know. But, okay, so, and well, I guess two more quickly, just to get an understanding of the contribution from the expansion, should we expect, given the arbitrage on Ethylene is still, for the first quarter hasn't been open very much, should we expect the contribution from the joint venture to be similar to what it was in the fourth quarter. Is that a fair assumption?

So for the fourth quarter, we also got some deficiency payments a lot from 3Q, right? So the 1Q volumes will be a little lower than the 4Q volumes. We will get some deficiencies from the fourth quarter that roll into the first quarter, probably not as much. So the results during the first quarter of 2025 will be softer than the fourth quarter of 2024 from the terminal.

Got it. Okay. And then lastly for me, Oeyvind or Mads, with all the geopolitical events happening around the world, I am curious about how we should consider the potential impact on your business, particularly if the Red Sea stays open and if there is a resolution in Ukraine. How should we think about the potential effects on the underlying dynamics of your market?

Maybe I can just kick us off, Oeyvind, and then you can chime in and add to it. I think when it comes to the Red Sea, we hope that there will be a peace accord that will continue, but it's not going to affect our business very much. We don't do a lot of transits through the Red Sea and it doesn't impact the overall capacity utilization of our segment very much. When it comes to the war in Ukraine, it is pretty much a similar picture. I would be very surprised if we saw a full restoration of the flows that we saw before the war in the near term. We did see some pick up in ammonia transportation, as a result of the war, but we think that that's going to stay active for quite a period. When it comes to trade friction, that's probably a little bit more of a potential impact. So far, we haven't seen any of the products that we carry that have been subject to tariffs. It has mainly been on coal, on oil, and on natural gas between China and the U.S. so far; the commodities we're transporting have not been affected. But obviously, if it turns out that a large tariff is put on by China onto, let's say, some of the cargoes we transport, that would be negative for the arbitrage, negative for US product competitiveness, and that would have a negative effect on our rates. But we haven't seen that, and we haven't seen any indication that they will show up.

Yeah, I concur. I think not only for the handysize, but for the entire gas carry segment, not that much traffic through the Red Sea or over there. So less of an impact for us compared to containers and other industries.

Got it. I appreciate the free information there on TERRA slings. That's it from me. Thank you.

Thank you, Ben.

Thank you. Next up, we have Spiro Dounis from Citi. Spiro, your line's open.

Hey, good morning team. Thanks for the question. Nice pronunciation there, Randy, appreciate it. Maybe just start with Morgan's Point if we could. You've been operating the facility for a few months now. So maybe just aside from the narrow arb, which sounds like it's improving, security side of the facility has been ramping if you're capable today of running sort of near max utilization rates. And Randy, you also mentioned an offtake agreement in the books now, maybe just remind us, is your strategy to contract all that offtake out? Do you plan on keeping some spot and maybe just how to think about some of the gating items to getting a few more of those over the line?

Sure, yeah, starting on the operations, fully operational, right? The unit, the enterprise navigator, both of us for the terminal have switched from builders insurance to operators insurance. So clearly, the insurers are also comfortable that it is fully operational and up and running. Clearly not fully utilized, but we have fed ethylene and chilled it from the Flex Train and put it into the storage tank. So operationally it is there. If the Arb blew out next week, we could do the 130,000 tons in April right so that is not any issues. In terms of the offtake contracts yes we did sign a second one, so we are building up to hopefully 90% offtake now depending on rates and in terms we're not opposed to going to the full 1.55 million tons. But if we can get to 1.35 million, 1.4 million, 90% utilization and off take, that gives us a 10% buffer for some maintenance or some production disruptions, whether it be weather-related, what have you, but also some spot cargos, because again, looking back at 2022 and 2023, we did nameplate capacity right at a million tons, 987,000 tons for the full year. So we had to say no to a lot of spot cargo opportunities and frankly no to a lot of potential new customers. So going forward, we do want to have a little bit of that spot optionality to say yes to new customers, building out the customer base and also the spot rates are usually always higher than the term rates, right? So to answer that question, yeah, we'd like to get it to 90%-ish of the nameplate capacity of 1.55 million. Lastly, in terms of hurdles, you mentioned, yeah, right now it had been vessel availability, right? That's tight and it still is, but also frankly, it's really the Arb, right? And if you're a trader and you see a tight ethylene Arb currently, you know, it's hard for them to look forward two, three years. Now end users are certainly, you know, more longer looking in terms of their focus, but we're going to have a portfolio of both traders as well as end users, and we think those contracts will be signed in the coming months and quarters.

Great. Great. So actually quite a few things open up once that Arb opens up as well. So good to hear. Second question, switching gears a bit, maybe just going to vessel sales. Sounds like you're still trying to sell three more of those and you're in conversations now. Just curious if you can get a little more detail on the status of those conversations, how far along those are, you know, is there a scenario where all three go to a single buyer? And then lastly, just how to think about the use of that cash?

Yeah, I can kick us off here. And we are looking at different options. We are looking, there are some interested buyers that are just looking on a vessel-by-vessel case. So we have a number of potential buyers that have been and are inspecting our vessels and we have those negotiations at different stages. And there could also be a situation where one buyer takes off two or three and will of course welcome that. So it's ongoing. We've had some near deals that then didn't come through and we have new that are coming up. So it's a quite, I wouldn't say fluid, but it's a market that is developing over time. And yeah, we will continue our efforts to sell them. We think they have the right age now to exit our fleet. And we also see that the vessel values are quite robust. And we have low book values on those ships. So we think it would be a win-win if we were to sell the ships right now. So it's an effort that is ongoing and will continue.

Very helpful. I'll leave it there. Thank you gentlemen.

Thank you, Spiro.

Thanks, Randy. Howdy. Howdy. Thanks guys for the update. Just a couple of questions on my end. Maybe just first, just on the corporate redomicile that you mentioned in the press release, looking to potentially or evaluate going from the Marshall Islands to England and Wales. Can you give us maybe just some context of what's the thought there and then also any tax implications as a result?

Yeah, I can kick us off and then, Gary, you can supplement. The idea is that we would want to move the domicile, the flagging, and also the tarnish taxation to where we do our business. Most of our customers and also our offices and operations, they are in the US and in Europe; they are certainly not in the Marshall Islands. So we think it will be more natural for us to domicile our business or our ownership to where we are doing our business. We don't expect that there will be any negative consequence for our tax payments. They are very efficient tonnage taxation schemes in a country like Denmark, in the UK, for instance. And we are, you could say, in the final inning of figuring out exactly how we put our fleet into those jurisdictions for tonnage taxation. So whatever tax implications there might be, they will be very, they'll be insignificant. We also expect that given those flags are very efficient and professional that there will not be any, you could say, operational restrictions or changes per se in the way that we are operating our ships. So actually, why didn't we do it before? We probably could have, but we want to have our ownership where we do our business?

Yeah, I think I could add to that. I mean, it's a complex move to take a whole business and pick it up and move it into the UK. But for the reasons, as I said, moving our structure closer to our actual business is a good thing to do. It's quite a legalistic process. It takes a lot of time. There's a lot of paperwork to do that. And obviously, from a shareholder perspective, we want to make sure that we get all of the disclosures right and that we're looking at all of the processes and things that we need to do in order to get this done with the stock exchange and obviously with our major shareholders and our entire shareholder base. So there's a lot to think about, a lot to do, and we're in the process of doing that now. And I think on the whole, it's going to be a neutral financial impact. It's not designed to give us a particular advantage. Financially, I think it's designed to bring us closer to our business and to give us a more flexible and cleaner group structure as well.

Okay, thanks, Gary, thanks Mads on that. And then just to follow up separately, Randy had mentioned the new building being chartered on a short-term basis on delivery. You know, that seems to be, you know, two-plus years ahead of delivery. So nice to get a charter. Is there any color you can give on the type of contract you entered into, whether it's rate or duration?

Omar, I think it's too early to say what we are super excited about is that yes, we're able to attract customers two years ahead for ethylene, which means that the customers we talk to believe in ethylene, believe in US ethylene exports, and they come to us. So it's a beautiful match between the shipping arm, us, and our infrastructure.

Okay, but so obviously that's definitely nice, But in terms of just any color on the rate, is it like a, in any sense that we can glean? You're willing to share?

Not on this call.

I figured.

Profitable.

Okay, that's good to hear. And then finally, just separately again, maybe Gary, just to you on the refinancing or the financing of the terminals, the terminal expansion, you'll have spent $128 million or so once it's all said and done. How much of that do you think you can recoup quote-unquote via financing?

Yeah, I mean, the company put $150 million into the original, we put $128 million into the expansion. So it's quite a lot and none of that. Very soon by the end of 2025, there'll be no debt on that. There's a small loan against the original terminal. I think the options that we've got there are quite a few. It's obviously a little bit of a different asset to our fleet portfolio. So we have to think of it in a different way. You know, the joint venture with Enterprise, we need to take that into consideration, our relationship with them in terms of how we securitize the debt if we do put debt onto the investment but there are options we're looking at and you know we wouldn't be pushing the envelope too much in terms of loan-to-value on that kind of investment we don't need to but it probably isn't hugely efficient for it to just sit there with no debt and no financing on it. So, you know, we're looking at a few different options and probably later this year we might take a look at that. And I think part of it is around the contract coverage that Randy has talked about. I think once we've got a little bit more there on the expansion, we can it's an easier conversation, if you like, with financiers and potential lenders in that respect. So we're not in a rush, but we will do something. It's probably not going to be hugely highly levered, say 50%, perhaps something in that kind of region. And it's something we'll look at later this calendar year. So it's not going to be imminent.

Okay. And then just to follow up on that, yeah, I was just looking in your release, there's just under $11 million that's on, that's borrowed at the moment from the initial investment on that initial facility. And that's going to be paid off by the end of the year. Is the thought on that 50% financing of both investments or is it 50% just on the ladder?

I think it depends. I mean, we don't, in some respects, we don't want to raise money for the sake of it. We want to be efficient with what we do. So, we're looking at timing of use of funds as well, because that's going to come into our bank accounts, and we're going to need to make really good use of that. So a little bit of this is around timing as well. So whether it's, you know, by then the investment will be one, it won't be an old and a new expansion and an original investment, it would be just one terminal investment. So how much we end up taking, you know, I think we'll take a look at our cash flows. We'll look at all the exciting projects that we even keeps bringing to us to take a look at. And we'll sort of go from there, but at the moment it's a little bit early to sort of be really firm with you about what we're going to do, but I do think we will do something. But at this stage, yeah, we're still sort of working out exactly what that will be.

Okay, got it. Understood. Thanks, guys.

Thank you, Omar.

Good morning, good afternoon. Hopefully, you'll be able to hear me. Can you quantify where you are in the offtake right now, you said the goal is to get to 90% offtake from the terminal. Where are you right now?

Yeah, so we have not quantified and we're not yet going to, because again, commercially we still have capacity to sell. So the majority of the 1.55 is sold on off take right so you've seen that we had 94% of the million sold we announced that number a few times in the last couple of years. So that remains and then we've signed some extensions and increased capacity offtake for some of the new capacity. So greater than that, but not quite 1.4. So I'll give you a big range there.

I mean, you can, If we look them up on vessels value, there are some public sources there for an evaluation of the vessels. Once the tonnage is getting older, I think that bid-ask spread is moving a bit. It's also not super liquid market. So I think you can look them up and see what they come out at. And if that's close to, let's say, $18 million or similar, that's an assessment there. But I think at the end of the day, we don't look much at it when we are discussing it with potential buyers. It's not a liquid market.

Sounds good and then a couple detailed questions for Gary. You talked about deficiency payments in the fourth quarter potentially going down. Would you care to quantify the deficiency payments that you received in the fourth quarter?

Hi, Poe. It's difficult for us to give that information out contractually, Poe. I mean, that would lead us into pricing of the various underlying contracts with our customers. So it's a little bit hard for us to do that. Plus, I think as well, the deficiency payments vary in the different contracts as well. So just giving one number in isolation, I'm not sure how useful that is. It's certainly been, you know, obviously protective for us to have those deficiency payments take or pay. And it's worked very well, but it does vary. You know, some are delayed by a month, some are delayed by two months, some are delayed by a quarter. And so it kind of varies. And I think giving a number out anyway, I'm not sure how particularly useful it is. But as I said, in any case, it's unfortunately, I think, probably a step too far for us to give that number away. I mean, Randy, I don't know if you feel that there's any more color we can give really. It's a tough one.

Yeah. No, yeah, I think you nailed it. And on EBITDA, $73 million; it's not a huge material number, but yeah, we'll follow up offline.

Yeah, sounds good. And then can you remind me how much you put 10% down on the four new builds. Can you remind me what your progress payments are for 2025 and 2026?

Well overall we've got 5 times 10 percents and it depends on the progress of the actual build. So in the contract there are certain 10 percents due and those contracts say that those 10% are not due before. So it does depend slightly on the actual progress, if you like, of the yard. So I think we can follow up offline and give you a slightly more accurate answer. I don't have that data exactly to hand unfortunately.

Okay. And then just one last quick one, more detailed than you probably wish, but the changing of domicile, how much is that going to cost? And when should we see that hit the P&L?

Yeah, I mean, look, lawyers, I'll be honest, aren't cheap. And clearly, this is a bit of a legal process, but we do a lot of the work in-house. Our legal team has been very busy with this. We're trying to minimize that cost externally where we possibly can. It's taking obviously an amount of external legal advice to make sure we're doing the right thing. But in terms of actual cost, it's sort of spread over many quarters. We've been doing this project slowly in the background for quite some time now. So I don't think you should expect to see a big hit as a result of this. I think it's already gone through and it's not something that jumps out.

Hi, thank you, Poe. All right. Next up, we have Climent Molins from Value Investors Edge.

Hi, good afternoon. Thank you for taking my questions. Most has already been covered, but I wanted to follow up on the terminal. With the Arb depressed, I'm guessing this is a near term priority, but as we think about the 3.2 million metric tons of, let's call it maximum capacity, is there a clear path to reach it if the economics makes sense? And secondly, what is the earliest that would happen again, if the economics make sense?

Yeah, so the flex capacity includes ethane and ethylene. Enterprise has already sold the majority of the remaining, let's call it 1.65 million tons of ethane capacity for the flex drain. Getting quickly into the weeds, the train that we converted is a total capacity of 2.2 million tons. We bought a quarter of that capacity, that's the 550, for ethylene. That means there's 1.65 million remaining. The majority of that is already contracted for ethane liquefaction and offtake for 2025. Some of it unwinds in 2026, a little bit more in 2027, a little bit more in 2028. As we all know, enterprise is also about to open a new ethane export facility in Neches River over in Beaumont. So it's hard to say what the outlook is in the coming years in terms of how much will they recontract for the ethane out of Morgan's Point versus shift over to Neches River. But the plan and discussions are to have more and more of the Morgan's Point be flexible for ethylene, right? Because the Neches River cannot do ethylene, it can only do ethane. So that is the plan. So in terms of when are we going to get to 2 million, 2.5 million, 3 million, 3.2 million tons of ethylene coming out of Morgan's Point? I don't know. It certainly won't be in the next 2 or 3 years, but potentially longer term. That said, we do expect there to be more of that flexible capacity widening in coming years.

Makes sense. Thanks for the cover. I'll turn it over.

Sounds good. Thank you, Climent. All right. That is it. Mads, that's the end of the Q&A. Do you want to give a final goodbye?

No, I just want to say thank you very much for listening in. I hope you can see we are on a good footing and we have been going through an exciting fourth quarter and I think the fundamentals outlook is quite good for us. So steady cruising so far. Thank you.

Sounds good. Thank you Climent.