Navigator Holdings Ltd. Q2 FY2025 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference Call for the Second Quarter 2025 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 here 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, August 13, 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 SEC. With that, I now pass the floor to our CEO, Mads Peter Zacho. Please go ahead, Mads.

Thank you. Good morning, and good afternoon, and thanks a lot for joining this Navigator Gas Earnings Call for Q2 2025. As I start, I'll just review the key data on our Q2 2025 performance and then go over the outlook for the rest of the year. After that, as usual, Gary and Oeyvind and Randy will discuss our results in more detail. The geopolitical backdrop for our Q2 result was certainly unusual and very difficult. Ahead of and during the quarter, we experienced a number of significant challenges, including the announcement of U.S. port tariffs, unprecedented high import tariffs on commodities that we transport, ethane export licenses, which were effective export bans, and new military conflicts flaring up, including the bombing of Iran's nuclear facilities. Several of the conflicts receded during and after Q2, but the effect on our customers and our business during Q2 brought a lot of uncertainty, disruption, and hence, lower trade volumes. The quarter also brought new opportunities such as ambient temperature LPG exports out of Iraq to Asia and the opportunity to buy back our own shares at a high discount to our estimated NAV. So this was a quarter of shipping at its worst and at its best. Please turn to Slide #4. With that background and moving to our results. In Q2, we generated revenues of $130 million, down 12% compared to the same period last year. This reduction is the direct result of customers halting new business and for a time, even in some cases, canceling committed fixtures with us, for which we still got paid. However, notwithstanding the backdrop, we generated EBITDA of $72 million and adjusted EBITDA, which excludes a $12 million book gain from selling Navigator Venus of $60 million, and that showed really the resilience of our business. Earnings per share was $0.31. The gain on the sale of Navigator Venus gives credence to the estimated net asset value. We did a lot of work optimizing our capital structure during the second quarter. The balance sheet is very strong with a cash position of $287 million at quarter end. It was supported by the $300 million refinancing, which was signed and drawn down as planned and at the lowest margin ever for Navigator. The return of capital continued in Q2 with both the $0.05 fixed dividend and a share buyback up to, in combination, 25% of net income. We also progressed the additional $50 million share repurchase program, completing $30 million in Q2 and the remainder in July. So done and dusted, 3.4 million shares bought back at an attractive price. Randy will elaborate on this one in a few minutes. Commercially, we achieved average TCE rates of $28,216 per day during Q2. This is lower than the approximately $30,000 achieved in previous quarters. We achieved utilization of 84%, also lower than prior quarters. Our ethylene spot fleet was impacted the most, whereas the semi-ref fleet fared better. Throughout throughput at our joint venture Ethylene Export Terminal rebounded to 268,000 tons for the quarter, which was more than 3x Q1, but still below full capacity. We are pleased to announce the two 51,500 cubic meter dual-fuel ammonia vessel orders and the associated 5-year time charter contracts. The combination of attractive yard prices, the grant from the Norwegian authorities, and expected attractive financing makes this transaction accretive to shareholders and strengthens Navigator's position in the ammonia supply chain. It's also an important step in our gradual fleet renewal and goes hand-in-hand with our sale of older vessels like Navigator Venus. We expect to be able to report more sales of older tonnage and associated book gains as the year progresses. Looking forward, we also expect that most of the headwinds that we saw in Q2 are gone. Global trade in commodities we transport have restored during July and into August. So today, we see utilization and rates returning to normal levels. We expect LPG exports from Iraq to Asia to continue, and we expect ethylene exports from the U.S. to Europe and ethane exports from the U.S. to Asia to continue. The latter will be further supported by the opening of Enterprise's new Beaumont terminal that will free up more ethane export capacity. This means more business for our ethylene and ethane vessels. Of course, trade discussions between the U.S. and its trading partners continue and much can still change. But with our diversified customer base, trading capability and strong balance sheet, we remain resilient even if geopolitics take an unexpected turn. So now over to you, Gary, and talk a little bit more about the details on our financial results, please.

Thank you, Mads, and welcome, everyone. During this quarter, as Mads highlighted, we encountered several geopolitical events that impacted our markets, which we could not have anticipated at the start of the year, or even at the beginning of the second quarter. However, I am pleased to share that despite the unpredictability we faced, we have achieved a solid set of results, not as high as we hoped, but by concentrating on our strengths, we have made significant progress in various areas throughout the quarter. We are optimistic about a strong second half of the year. Our second quarter 2025 financials reveal a healthy outcome due to the quality, diversity, and flexibility of our fleet and business, which helped us sustain charter rates and utilization at profitable levels, bolstered by our operational efficiency and cost management. In terms of TCE, we recorded $28,216 per day, leading to a net operating revenue of $129.6 million and an EBITDA of $71.9 million for the quarter. The decrease in TCE this quarter was mainly due to the performance of our ethylene vessels, influenced by the trade licensing and tariff-related issues that Mads previously mentioned, and which Oeyvind will also address. On the other hand, while our fully refrigerated handysize fleet did not perform well, we only had six vessels in that category. In contrast, our semi-refrigerated and mid-sized vessels maintained normal performance throughout. Overall, while the quarter was impacted by certain global challenges that we believe are not long-term, we are already noticing a recovery in our performance for the third quarter. We sold one of our oldest vessels, the Navigator Venus, for net proceeds of $17.5 million, resulting in a strong book gain of $12.6 million during the quarter. Excluding this from EBITDA as the main variance, we arrive at an adjusted EBITDA of $60.1 million. Thus, the vessel sale this quarter compensated for the sequential drop in earnings, keeping EBITDA for this quarter at $71.9 million, in line with our first quarter 2025 results. Utilization for the second quarter was at 84.2%, down 9.2% from the same quarter in 2024. Voyage expenses dropped by $1.9 million compared to the same quarter last year, mainly due to lower utilization this year as those costs are passed through to our customers, reflecting the decrease in operating revenue. Our vessel operating expenses rose to $47.4 million compared to the second quarter of 2024, primarily driven by our fleet growth following the acquisition of three secondhand vessels in the first quarter of this year, as shown in the table on the bottom right, as well as the timing of maintenance costs accrued for the three months ended June 30, 2025, compared to the same period in 2024. We anticipate finishing the year close to our budget for OpEx costs after adjusting for the additional vessels. Depreciation has also seen a slight increase compared to previous quarters due to our expanded fleet. Unrealized movements on non-designated derivative instruments led to a loss of $1.4 million in the second quarter, concerning fair valuation changes in our long-term interest rate swaps, affecting net income but without impacting our cash or liquidity. Our income tax reflects current and primarily deferred taxes stemming from our investments and shares of profits in our ethylene export terminal at Morgan's Point. Randy will provide additional details about terminal throughput volumes in the second quarter, which increased to 268,000 tons from 85,000 tons in the prior quarter, resulting in a profit of $4.8 million this quarter. Overall, for the second quarter of 2025, net income attributable to stockholders was $21.5 million, translating to basic earnings per share of $0.31. Our balance sheet remains strong, with a cash, cash equivalents, and restricted cash balance of $287.4 million as of June 30, 2025. Including available but undrawn liquidity, this amounts to $316 million on the same date. This is notwithstanding the $26.4 million in scheduled loan repayments, $6.8 million related to our return of capital policy from the first quarter of 2025, and an additional $29.6 million in share buybacks under a new $50 million repurchase plan. Our liquidity in the quarter was enhanced by a $40 million bond tap issue settled in early April, the Navigator Venus sale completed in May, and the debt refinancing that provided $142 million in net liquidity in mid-June 2025. Including our available but undrawn revolving facilities, we had $314 million of cash at the close on August 11, 2025. On Slide 8, we summarize key capital events over the quarter, where, with a supportive banking group and a strong underlying business, we have been able to return capital to shareholders, extend our debt maturity, improve liquidity, and reduce our finance costs. We completed our latest share repurchase program on July 30, 2025, buying back $50 million of our common stock. We continue to disburse capital under our 25% return policy of net income. We sold the Navigator Venus for net proceeds of $17.5 million, leading to a book gain of $12.6 million. In May, we secured a new senior secured term loan and revolving credit facility of up to $300 million, used to pay off the company’s existing secured loan facilities of $143 million and $15 million, and remains available for general corporate purposes. The facility spans six years, maturing in 2031, with interest on a quarterly basis at SOFR plus 170 basis points, secured by eight of the company's vessels. Following the successful issuance of $100 million in new senior unsecured bonds in October 2024, we capitalized on favorable market conditions by successfully issuing a further $40 million tap of these bonds on March 28, 2025, also at 7.25%. The borrowing cap under these bonds stands at $200 million, allowing for an additional $60 million Principal to be issued in the future. Presently, we face only two minor debt maturities in the next 24 months, with total balloon payments of $54 million due in 2026. The right side of this slide details our primary debt movements from the last quarter, demonstrating our ongoing progress in lowering our cost of debt, thanks to our business strength and our banking partners' confidence in Navigator. Our next priority is securing financing for our six newbuild vessels, a process we are actively pursuing, aiming for completion within the next six months. On Slide 9, our leverage against earnings is healthy, with net debt to adjusted EBITDA at 2.7x for the last 12 months through June 30, 2025. During the quarter, we returned $36.4 million to shareholders through cash dividends and share buybacks, which rose to $56.8 million by the end of July 2025 after completing our new $50 million share repurchase program. We have also made significant loan repayments of $26.4 million this quarter, and our loan-to-value ratio stands at 34%. Taking into account our terminal at Morgan's Point, this ratio drops below 30%. We have shown consistent debt repayments, with around $124 million in scheduled annual debt amortization expected over the next three years, managing our financial risk while still able to raise additional capital for growth. On Slide 10, we present our estimated all-in cash breakeven for 2025, currently at $20,270 per day, significantly below our average TCE revenue of $28,216 per day for the slightly softer second quarter, creating a difference of nearly $8,000 per day. This all-in breakeven is materially unchanged from our previous estimate in May 2025, encompassing forecasted scheduled debt repayments and dry dock commitments. The updated OpEx guidance for 2025 spans from $8,050 per day for smaller vessels to $11,100 for larger, more complex ethylene vessels. This guidance remains consistent with our last quarterly call in May 2025. Additionally, revised figures for vessel OpEx, general and admin costs, depreciation, and net interest expense are provided below, showing a slight decrease in total year guidance due to one less vessel for the remainder of 2025. Net interest expense is also slightly lower than previous guidance from May 2025. Slide 11 displays historic quarterly adjusted EBITDA, with the second quarter figures reflecting that, while not a record due to political factors impacting our ethylene and ethane vessels, the results remain very positive. The right side of the slide presents our historic adjusted EBITDA for 2024 and the last 12 months, along with sensitivity analysis indicating an increase in adjusted EBITDA of approximately $90 million for each $1,000 rise in average time charter equivalent rates per day. Our vessels' dry dock schedule, projected costs, and timeframes have been moved to the appendix due to the data intensity of that information. On this subject, we continue investing in energy and fuel-saving initiatives, which are compelling investments for both financial and environmental reasons, typically showing short payback periods. With that overview, I will turn it over to Oeyvind, who will provide more insights into the current commercial environment.

Thank you, Gary, and good morning, everyone. Let's discuss the rate environment. Despite market uncertainties and geopolitical challenges, the handysize market performed relatively well during the second quarter. The handysize ethylene 12-month time charter rate remained stable at approximately $36,000 per day or $1.1 million monthly. Semi-refrigerated rates decreased slightly to about $30,000 per day, while fully refrigerated rates experienced the most significant decline, ending at $25,000 per day. We currently have 6 out of our 58 vessels in this segment, with 3 on time charter, so the overall effect on us was minimal. It’s important to note two things: First, these rates are significantly above our all-in-fleet breakeven of $20,270 per day. Second, our three vessel categories provide excellent diversification, covering petrochemicals, LPG, and ammonia, which helps mitigate market fluctuations. Historically, external factors impact the three markets in different ways, as was evident in the second quarter. Our earnings days mix is always highlighted in our presentations, with LPG particularly standing out this quarter. The slowdown of the U.S. ethane export license decreased demand for our ethane-capable vessels, but other segments of our fleet saw increased demand from other regions, particularly for LPG exports from Iraq. We added three additional vessels to that trade during the quarter, leading to our fleet's LPG earnings days reaching a two-year high, nearly matching that of petrochemicals. This demonstrates the versatility of our fleet: when one market declines, another can thrive. Additionally, in July, our utilization hit 90%, indicating a return to a more normal state. This combination of diversification and normalization positions our earnings favorably. The top left graph displays our fleet utilization highs and lows over the past five years. You can see the dip during the second quarter, represented by the green dotted line, but it rebounded by 5 points in July. We believe that any utilization over 90% indicates a healthy market, and we are currently operating in this range. The other graphs highlight the benefits of diversification, with increasing LPG employment in our semi-refrigerated segment and rising utilization across all three vessel categories. U.S. ethane and ethylene exports significantly contribute to our petrochemical vessel demand, so it’s important to address the recent ethane export license restrictions and their short-term impacts. The U.S. offers a substantial cost advantage in ethylene production from ethane, comparable only to the Middle East, while European and Asian producers face much higher costs. Consequently, importing U.S. ethane or ethylene can greatly enhance their cost efficiency and support their operations. China remains the largest purchaser of U.S. ethane. During the implementation of export license requirements in May and June, trade with China halted but quickly rebounded in July, reaching record levels. Spot requirements for handysize ethane vessels reappeared in the market soon after, and during that same month, the new Beaumont ethane export terminal commenced operations, which increased demand for ships like ours. Notably, one of our vessels transported the first cargo from this terminal. As mentioned earlier, European producers are navigating a difficult situation regarding the ethylene cost curve, leading many to shut down uncompetitive plants. The first graph illustrates a decline in European ethylene production capacity. The positive outcome for us is that European producers are increasingly turning to the U.S. to compensate for reduced ethylene production through imports. In July, European imports accounted for 75% of their seaborne demand from the U.S., a record high, and this trend is expected to continue. Rather than producing at high costs, they find it more economical to import from a competitive producer like the U.S. Italy serves as an example; after ceasing their own production, U.S. imports of ethylene surged. Despite a rise in U.S. ethylene prices since April, delivered prices in Europe have followed suit. The theoretical transatlantic ethylene arbitrage stands at roughly $210 per ton for freight, sufficient to sustain this trade. Recently, nearly all U.S. ethylene exports have been directed to Europe, reinforcing the supply-demand dynamic between the two regions. The vessel supply remains well-balanced, with only 12% of the handysize segment currently on order—9% if we exclude 4 CO2 carriers—and 22% of the fleet is over 20 years old. In summary, while the second quarter faced some challenges, July has shown a positive return to stability, with higher utilization and rates remaining well above breakeven. Alongside our daily freight trading, we have been pursuing several exciting developments, which Randy will discuss next. Over to you, Randy.

Thank you, Oeyvind. In light of several announcements we've made recently, we would like to share additional details and updates on our developments. Starting with our return of capital for the second quarter of 2025, we repurchased over 234,000 common shares of NVGS, totaling $3.3 million at an average price of $14.12 per share. For the third quarter, in line with our return of capital policy, we are returning 25% of net income, amounting to $5.4 million to shareholders. The Board has declared a cash dividend of $0.05 per share, payable on September 17 to all shareholders of record as of August 28, equating to a total cash distribution of $3.3 million. Furthermore, since our shares are trading significantly below our estimated NAV of $28 per share, we plan to utilize the variable portion of our return of capital policy for share buybacks, expecting to repurchase an additional $2.1 million of NVGS shares before the quarter ends. Continuing with share buybacks, we announced a $50 million share buyback program during the first quarter call in May, which was effectively implemented, having repurchased 3.4 million shares at an average price of $14.68 per share. Historically, we had about 56 million shares outstanding until the merger with Ultragas in 2021, where we issued 21 million shares for vessels at an implied value of $16.82 per share. Since then, we have repurchased over half of those shares, or 11.8 million shares, for a total of $166 million at an average price of $14.15 per share. We have several compelling reasons for repurchasing shares; acquiring them at a discount boosts NAV per share, reduces share count, increases EPS, supports share price, and diversifies cash uses. Our commitment to returning capital to shareholders will remain a primary focus moving forward. Regarding our ethylene export terminal, after a low throughput first quarter, volumes during the second quarter surged to 268,000 tons as U.S. Gulf ethylene crackers ramped production, which allowed us to operate the flex train in May and June. Although U.S. ethylene prices have recently increased, European prices have also risen, and we anticipate strong third-quarter volumes. Overall, U.S. ethylene prices are expected to remain favorable in the upcoming quarters. With the expanding arbitrage opportunities, we've executed multiple spot cargoes and are in discussions with new customers for future contracting, indicating that additional offtake capacity should be contracted soon. We are excited to announce our recent inclusion in the Russell 2000 and Russell 3000 indices, which broadens our shareholder base and boosts trading liquidity. When the Russell Indexes made their additions public on May 23, it was significant as invested funds began positioning their portfolios. After the reconstitution day on June 27, we observed substantial trading activity with 4.5 million shares of NVGS trade on that day. Our share price and trading liquidity have risen since May, with averages close to 400,000 shares traded per day, amounting to nearly $6 million daily, which draws attention from larger investors. On fleet renewal, we've been selling older vessels and replacing them with modern ones. In May, we sold our oldest vessel, Navigator Venus, for $17.5 million, achieving a profit of $12.6 million. We plan to sell another unencumbered vessel this quarter, leading to a considerable book gain and cash inflow. Our average fleet now stands at 12.2 years of age with an average size of 20,816 cubic meters. We recently announced a joint venture to build two new ammonia-fueled carriers, with significant government grants reducing net construction costs. These vessels will be the largest in our fleet, equipped with dual fuel engines for clean ammonia and operated on long-term charters with reputable industry players. We are targeting financing arrangements in the next six months. Finally, I invite you to our upcoming Analyst Investor Day in Houston on November 11, where we will provide tours and presentations about our operations and market strategies. We look forward to seeing you there. Now, I'll hand it over to Mads for his closing remarks.

Thank you very much, Randy. And let's move to Page 28. So it's time to summarize an eventful second quarter, where waves of port fees and import tariffs and export licenses tested our resilience and negatively impacted our profitability. But we did not sit on our hands during Q2 because Q2 was also a quarter of opportunities where we took advantage of strong financial markets and optimized our balance sheet. We lowered the cost of debt and used excess cash for buying back 5% of outstanding shares at attractive prices. And we looked through the fog and we took another step in positioning Navigator as a leader within not only the ethylene/ethane supply chain, but also the clean ammonia supply chain. Q3 has come off to a robust start, and we now see a normalization of our operating environment. By any further geopolitical surprises, we expect to be back on the previous trajectory. This will be driven by the continued growth of U.S. natural gas liquids production and the significant build-out in U.S. export infrastructure over the next 4 years. We expect this will support exports of natural gas liquids and thereby also transport demand for the products that we carry. And as in previous quarters, the vessel supply picture remains attractive with a small handysize order book and an aging global fleet. So thanks a lot for listening, and I'll hand it back to you, Randy, now for the Q&A.

Thank you, Mads. Operator, we will now open the lines for some questions and answers. The first questioner may proceed.

This is Omar Nokta from Jefferies. As usual, great presentation. I have a couple of follow-up questions. From a broader perspective, the second quarter was quite volatile due to the geopolitical situation having a significant impact. From your comments, it seems that the third quarter and the second half of the year should improve considerably. Could you share your thoughts on whether the third quarter will return to the performance seen before the second quarter, or do you anticipate a more gradual improvement in the third quarter, with a return to normalcy occurring in the fourth quarter?

Yes. And I can't help thinking back to when we had this discussion back in the middle of Q2 talking about the Q1 result. At that time, we were looking at port fees that had disappeared for our segment. We also saw the trade war between China and U.S. kind of receding. But then came the export licenses, which were really a surprise. And even though at the time, we argued they were coming, they would be a bargaining chip. They did lead to some disruption and some reduced utilization for our fleet in Q2. So when we talked a quarter ago, I thought that maybe we communicated that we were seeing a gradual improvement, but then came this knock. That's different now because now the effects have gone away. And as Oeyvind was talking about, we see the utilization back up at just above 90% for July, and we can also confirm that the rates have reacted similarly. So we would say that Q3 as a whole is back to the levels that we saw before Liberation Day, and we see a normalization of the business in Q3, then we'll deal with Q4 once it comes. But so far, that looks good, too.

It's great to hear. I wanted to inquire about the terminal contracts. You mentioned that two contracts were recently signed for the expanded section of the terminal, and it seems there could be more in progress over the next few months. Can you provide an update on what percentage of the expansion is currently under contract? Additionally, out of the total capacity of 1.55, how much is contracted?

Yes. Thanks, Omar. We don't want to go into too many of those details because we're still having those commercial conversations. So we won't go into the quantum of the new contracts. But it's certainly a large portion. We have 4 existing offtake customers. We have multiple term sheets out to many new customers, especially here in the last few months when we've been doing a lot of these spot cargoes, they have been to new customers, right? So that's why we do expect additional longer-term offtake contracts to be signed here in the coming months. Duration still to be determined. Some want just a couple of years, some want multiple years, whereas in terms of size, it ranges as well. So there's still a lot of variables to be determined, but we should have more updates on this in the November call.

Thank you, Randy. I appreciate that. I understand the sensitivity. I have one final question before I pass it back. This relates to the terminal's capacity of 1.55 and the potential to increase that to as high as 3. I believe Enterprise manages the adjustment of volumes switching from ethane to ethylene. As I consider our situation heading into 2026, do you know when the decision will be made regarding what portion of that capacity will be allocated to ethylene?

Yes, it's really going to be on a month-to-month basis. Now there's a few positive developments. One is the Beaumont facility, the Neches River facility is now online for Enterprise. One of our vessels took the inaugural cargo very recently here. So now that there's a new ethane export facility for Enterprise to operate out of, that frees up some capacity at Morgan's Point. Secondly, the new ethane storage tank, which you've been out to Morgan's Point, we have the ethylene storage tank in place for almost 5 years now. They are just now completing or soon to complete their ethane storage tank. So that will also give them more flexibility and some optionality around the cargo switching between ethane and ethylene. And it is an enterprise decision operationally, but really, it's a market decision, right? If the customers and the offtakers want ethylene, they can switch it to ethylene pretty much immediately, right? The damper setting, it only takes a couple of hours. So it's really going to be every week decision in terms of flexing between ethane and ethylene. But for those 2 positive developments, the new terminal in Neches River as well as the ethane storage tank will give us more optionality for more ethylene cargoes above and beyond the 1.55 million tons in coming years. Thank you, Omar. Next up looks like Climent Molins. Your hand is raised.

This is Climent Molins from Value Investor's Edge. I wanted to start by asking about the ammonia carriers you recently ordered. Does the Enova grant come with strings attached? Or are those minimal? And should we think about the grants as a kind of a one-off? Or could this be repeated in the future?

Thanks for the question. There are always conditions with grants. They are connected to the technology features of the ship and the additional enhancements we are implementing compared to a typical fossil fuel ammonia carrier. This funding is partly for the ammonia propulsion system, as well as for energy efficiency improvements on the vessel. It supports the upgrades to a standard ship. However, this doesn't mean we need to use a high percentage of ammonia in the initial years, nor does it restrict us to trading only near Norway. We have the flexibility for global trading with these ships. The grant is appealing because it does not impose limitations on our operations. The ship will fly the Norwegian flag, which is known for being efficient and professional. Overall, this grant offers us additional benefits without any significant downsides. If you're asking whether this type of grant can be repeated, the answer is yes, as the Norwegian authorities are keen to boost the volume of new green propulsion and green shipping globally. While a complete replication isn't likely, there are opportunities for innovation and further advancement. They have recently awarded another grant for bulk carriers, and more developments are anticipated.

That's very helpful. And Randy, you mentioned you continue to engage potential buyers to divest the remaining 2000-built handysizes. Once those vessels are sold, should we expect you to redeploy proceeds on more modern tonnage? Or have you already done that with the acquisition of the 3 mill ethylene carriers and the new build additions?

Oeyvind, I'll let you take this.

Yes. I mean once they are sold, the funds will go into the capital allocation program, the 3 pillars, and they will be distributed accordingly to which pillar we deem necessary at that time. So it's flexible. We'll put it to work where we deem it's needed.

If you were to ask us about the likelihood of buying more ships or selling them in the near term, we are probably more inclined to sell. We've had success with our new-building program and acquiring the three German-built vessels in the spring. We've accomplished a lot in renewing the fleet with new additions, and now we need to focus on selling a few of the older ships.

We've had one come in here, just looking at the tariffs. It seems that the tariff announcements in trade news were negative during the second quarter. However, recently there have been some positive developments around trade deals. Mads, how do you think these announcements will impact your business, specifically U.S. commodity exports going forward?

Yes, I believe these developments will provide much-needed clarity for our customer base and create a more stable trading environment, which is very encouraging. In times of volatility, it's challenging to understand the direction of the market, prompting us to take a step back and wait for things to settle. However, we now have several trade agreements between the U.S. and its major trading partners. While some details still need to be finalized, we have the overall framework established, which offers stability and enables better forecasting for us and our customers—a goal we've all been striving for. While the future may still hold uncertainties, we see this as a positive progression towards gaining clarity and confirming trade agreements. Most importantly, these agreements do not impose tariffs on U.S. exports to other countries; the focus has primarily been on tariffs from imports into the U.S., which does not significantly affect our operations. Therefore, we haven't seen a substantial impact from tariffs on the transportation services we provide.

Thank you, Molins. Gary, this one is for you. For the 6 newbuilding financings, should we expect similar terms as your most recent debt financings?

Yes. That's a very good question. We are hoping to at least match what we've done in the past. I think at the moment, we've got a number of different structures, and we've got quite a lot of conversations going on with all kinds of different potential capital providers. So I think given the nature of the ammonia vessels in particular, but also the Panda vessels, I think we've got 6 really attractive projects there, and we'll probably group those vessels, whether it's 6 or whether it's 4 and 2 or 2 and 4. But certainly, we will be looking to do those in the next 6 months. We've got plenty of opportunity. And I think the capital providers that we're talking to are very keen. And I think we'll get some really good terms. And certainly, we're shooting for as low as we can get in the best terms that we can get, and we'll see where that lands.

Perfect. Great. We see another hand raised here, Dalton. We still can't hear you.

Can you guys hear me okay now?

We got you now.

Dalton Willett with Sharmos Capital Partners. One question I had on the new builds that you guys are working on financing out. How do you think about the risk of like IMOs, new rules for how ships have to be fueled or carbon-related issues? How do you think about going and making those investments knowing that the goalpost could be changed in a 6-, 12-, 18-month period? How are you guys managing that risk?

Yes. I think we should consider the two different orders we placed. The four ethane ethylene vessels we've ordered aren’t really tied to the IMO regulations. They will most likely be fueled by ethane, which is very cost-effective compared to traditional fuel oil. This gives them an advantage over most other vessels in the global fleet. As for the two ammonia carriers, we have a five-year contract in place, ensuring a secured return on those ships for the first five years. What happens after that remains to be seen. The good news is that these vessels are dual fuel. Therefore, even if ammonia becomes less competitive than we anticipated, they can still operate efficiently using regular fuel oil. In that regard, they are very flexible and appealing, regardless of the direction the IMO takes.

Yes. No, that's helpful. And then on the kind of the restructuring of the balance sheet, getting yourself in a better capital position, can you kind of talk about the timing of that and why it made sense to go now versus, say, towards the end of the year? How are you guys thinking about getting your balance sheet where it is today?

Maybe I can just kick us off, and you can fill in, Gary also. When it comes to the share buybacks, I think we have been pretty consistent over the past 3 years in having share buyback programs at the right point in time during the year, adding or buying back about 5% of outstanding shares. And then on top of that, we have the regular quarterly dividends and share buybacks. That model has kind of worked well for us. So we think it's a good way to do it. It's, of course, up to the Board. If they were to decide to do something in addition or not, we'll see about that. We have good liquidity in the balance sheet right now. So it gives us a lot of flexibility to allocate between the different opportunities of investing, paying or buying back shares or other uses of our cash. But Gary, you can add.

Yes. I mean I think we've taken advantage a lot of the fact that there's a lot of liquidity out there at the moment. Navigator is in a great place. We've got a strong business, a flexible business. Our banking partners are very keen to work with us. That's allowed us to refinance and push out the maturities, lower the cost of our debt, and we're going to continue to do that. What that's also doing is it's providing plenty of liquidity for these projects that we're doing. We paid $64 million towards the cost of our new build Panda vessels already. We don't have finance for those vessels yet, but we've paid all of that out of cash so far. So it buys us some really good flexibility. We've got to be careful that we don't carry too much liquidity and too much cash, and we're constantly monitoring that. But I think at the moment, from our perspective, we've got a number of older debt facilities that we would perhaps like to refinance and refresh. And so I think there's some work to do on that alongside the newbuild vessels as well. So I think we've taken advantage of a strong market using our strong business model to be able to do what we've done. We've ended up being able to do pretty much everything that we want to do, including buying back the shares, as Mads was talking about. So I think we're trying our best to be efficient with what we do, but also lower the cost of what we do. And I think we've been able to do that so far, and we expect to be able to continue to do that.

Great. Fantastic. I appreciate it. I think that's going to be the last thing I have. Pass it back to you guys. I appreciate it.

Thank you, Dalton. So that completes our Q&A for today. Thank you again for joining us for our second quarter earnings results. We'll be reporting our third quarter earnings results in early November and hope to see many of you here in Houston on November 11 and 12. Thanks again, and have a great day.