Navigator Holdings Ltd. (NVGS) Q3 2017 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference Call on the Third Quarter 2017 Financial Results. We have with us Mr. David Butters, Chairman, President and Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; and Mr. Oeyvind Lindeman, Chief Commercial Officer. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. I now pass the floor to one of your speakers, Mr. Butters. Please go ahead, sir.

Thank you, Tracy, and good morning, everyone and welcome to Navigator’s third quarter earnings conference call. I will open the call with a few comments and be followed by Niall Nolan who will provide commentary on our financial performance during the period. Oeyvind Lindeman, as customary, will take us through some insights into the current market and environment and near-term freighting prospects. But first, let me comment briefly on the recent press coverage surrounding Navigator’s business with Sibur, the major Russian petrochemical company with whom we have four ice class vessels operating on long-term charters. Our contact with Sibur goes back perhaps to 2009 and our relationship has consistently been on a professional and managerial level. We have found them to be an especially excellent group for a counter-party with some of the most capable and technically competent people in the business. We regard our professional relationship with them with respect and admiration and sense they have the same professional respect for us. Sibur was not a sanctioned company when we began our commercial relationship with them nor are they today. They have an open and welcomed access to western financial markets as seen by their recent successful offering of $500 million of Eurobonds completed just a month ago with an international syndicate of book managers, including JP Morgan and Goldman Sachs. I will say no more about this and respectfully ask that you refrain from any questions on this subject during the Q&A period. Now to our earnings release; during our second quarter earnings call I commented on the softness in the LPG segment and emphasized that I did not expect near-term relief. Our reported loss of $1 million in the third quarter is a tangible reflection of that pessimism. Lower utilization and charter rates are the obvious culprits behind the loss. But underlying these headlines is the simple fact there is just too many handy sized vessels to accommodate the current volume of LPG being moved. Furthermore, the overhang of excess capacity in the larger fully refrigerated VLGCs and the mid-sized vessels continues to cannibalize our semi-refrigerated sector depressing rates even further. Our ability and flexibility to move into the longer haul petrochemical gas segment as opposed to the more commodity driven LPG sector did give us some degree of support. Now, at the risk of repeating what I stressed in our second quarter call, we see no material relief from the poor trading conditions in the immediate future but do expect support from a number of initiatives that are currently underway namely number one, after about a month’s delay due to Hurricane Harvey Enterprise Product Partners expects to begin full production of their propylene business from their Texas PDH complex later this month. Propylene exports are sort of a sweet spot for handysize semi-refrigerated vessels. Much of the propylene is expected to move globally and result in some absorption of the excess tonnage. Number two, we are still awaiting the completion of Mariner East Two pipeline. As a reminder the ME2 pipeline is being built to transport 275,000 barrels a day of LPG from the Marcellus and Utica Basins in Western Pennsylvania and Eastern Ohio to Marcus Hook on the Delaware River. The project’s completion has been delayed for over two years and now is expected to be operational by second quarter of 2018 according to Energy Transfer Partners, the pipeline’s operator. When fully operational we expect noticeable pickup in handysize cargos moving out of Marcus Hook. The East Coast is a strategic and cost advantage location for LPG cargos moving to Europe and handysize vessels are a perfect fit for the smaller ports and berths that populate the coast of Europe. This is not to say that the VLG sees the mid-sized vessels will not transport the bulk of the volumes coming out of Marcus Hook. Now, we believe that these two initiatives, i.e. propylene from the Gulf Coast and LPG from the East Coast, alone should be a contributing factor in a rebalancing of the handy sector. Now, in the longer-term our prosperity will be closely tied to the growth in the global petrochemical industry. This is what our vessels were built for. Over the past half dozen years or so a global expansion has taken place with the construction of new petrochemical manufacturing plants, especially in countries with access to cheap hydrocarbons. Perhaps there’s no better example of this than what we have seen going on right here in the United States. Major oil and petrochemical companies have expanded or plan to expand nearly $150 billion in new facilities, $150 billion. This is big and driven by cheap and abundant hydrocarbons and by a growing world demand for petrochemicals. One of the most focused areas of this petrochemical expansion is, as you would expect, on ethylene crackers. In this subsector alone ethylene manufacturing capacity is expected to grow by nearly 50%. This discussion naturally brings us into the status report of our proposed joint venture with Enterprise Product Partners. This project envisions the construction of a world class ethylene export terminal at Morgan’s Point on the Houston Ship Channel. The terminal and related storage will be capable of moving approximately one million tons per year of ethylene. Construction time will be approximately two years. Together with Enterprise we have made good progress in negotiating with potential long-term take-or-pay tenants and our confidence remains high that we can take the next steps to fully approve this project. Upon completion this export terminal will be an important link in extending and solidifying Navigator’s logistical reach and dominance in the petrochemical gas transport business. Now, I’d like to pass the call on to Niall who will run through the quarter’s report.

Thank you, David, and good morning. Revenue for the three months ended September 30th, 2017 at $70.2 million was similar to the comparable quarter last year. that said, $10.4 million additional revenue was generated as a result of having five new vessels joining the fleet over the past year but this was offset by an $8.2 million reduction as a result of the fall in charter rates, which averaged $20,226 per day or $615,000 per month for the three months to September versus $22,975 per day or $698,000 for the three months to September 30th, 2016. Revenue was also reduced by $2.1 million as a result of a slight reduction in utilization which decreased to an overall rate of 85% for the third quarter compared to 88.1% for the third quarter of 2016. And voyage expenses, which are offset by additional revenue as they are a pass through cost, had the effect of marginally increasing revenue by $400,000. Although it is still early in the fourth quarter, the past number of weeks have shown some small recovery in both charter rates and utilization, which does not include any of the potential beneficial effects of the additional propylene on Marcus Hook volumes that David has just referred to. We hope this improving trend we have seen recently will continue. During this third quarter we had an average of 36.8 vessels, five more than the third quarter of 2016. Towards the beginning of the quarter on July 20th we took delivery of Navigator Jorf, a 38,000 cubic meter fully refrigerated gas carrier, which sailed to the Mediterranean where she commenced a long-term time charter on August 22nd with OCP, a Moroccan based global integrated phosphate producer. Since the quarter end, in fact yesterday, Navigator Prominence, the final vessel in our new building program, was delivered giving us a total of 38 vessels in our fleet, 14 of which are ethylene or ethane capable. Although there were no dry dockings originally scheduled for 2017, Navigator Mars undertook a dry docking during the third quarter instead of Q1 of 2018 prior to commencing a three-year time charter with Braskem. The vessel was renamed Navigator Orion during the dry dock at the request of Braskem to coincide with the name of their ethane importation project. This was a 17.5 year dry docking and the cost slightly under $500,000. The charter began on October the 6th transporting ethane from the U.S. to Brazil. Six vessels have now -- are now scheduled to dry dock for special surveys during 2018 at an anticipated aggregate cost of approximately $8 million. Voyage expenses for the third quarter were $12.2 million compared to $11.8 million for the third quarter of 2016, an increase of 400,000. These voyage costs are recovered by increased revenue, as mentioned above. During this third quarter 63% of operating days related to time charters and 37% spot charters. For those vessels on time charters 84% transported LPG, 5% transported petrochemicals and 11% ammonia. For voyage charters, however, petrochemicals accounted for 89% of spot operating days and LPG 11%. Vessel operating expenses increased by 13.5% to 25.1 million for the three months to September compared to 22.1 million for the comparative period of 2006 as a result of the increased number of vessels in our fleet. However, the daily rate for vessel operating expenses reduced to an average of 7,448 per day during the quarter or $7,594 for the nine months compared to 7,601 or 8,091 per day and for the third quarter or for the nine months of 2016 respectively. General and admin and corporate expenses increased to 4.6 million for the quarter from 3.5 million for the comparative period of 2016, as a result of higher office lease costs as well as additional cost incurred in facilitating in-house technical management. We now provide in-house technical management for seven vessels with a further eight expected to be taken into in-house technical management over the course of the next 12 months. Interest costs for the quarter were 9.4 million, an increase of 1.5 million compared to the third quarter of 2016, primarily as a result of a 1 million increase associated with the reduction of interest capitalized on installments made on our vessels under construction as well as interest on the additional bank debt associated with the five new build vessel deliveries since September 2016 with both increases partially offset by an 875,000 quarterly saving following the refinancing of our unsecured Norwegian bond earlier this year. Resultant EBITDA for the three months ended September 30, 2017 was $27.1 million taking EBITDA to $91.2 million for the first nine months of 2007, and that’s resulted in a net loss of $1.1 million or $0.02 loss per share as reported for the quarter. Turning to the balance sheet, cash and cash equivalents and short-term investments, the latter being cash deposited with one of our lending banks, stood at $60.1 million at September 30. In addition, we have $51.9 million available for general corporate purposes across two RCFs and we had $51.2 million available towards the delivery installment of Navigator Prominence, which as I mentioned occurred yesterday. In July we successfully refinanced a previous term loan by entering into a new 160.8 million secured term loan and revolving credit facility for a term of six years and a cost of LIBOR plus 2.3%. Following that refinancing our next debt maturity, either bank loan or bond, is now not until mid 2020. Total outstanding debt stood at 836.8 million at September 30, which includes the $100 million of Norwegian bonds. As I referred to moments ago, this debt figure increased in the number of days by $51.2 million as we drew down funds to partially finance the delivery installment of Navigator Prominence. Vessels under construction at September 30th had reduced to $28.6 million representing previous installments made on the Navigator Prominence and following her delivery yesterday vessels under construction have reduced to zero signifying the end of our current new building program. And with that, I’ll hand you over to Oeyvind.

Thank you, Niall, and good morning, everyone. The proportion of total revenue against product types have remained relatively stable throughout the year. The third quarter had LPG at 45% of revenue, 50% in petrochemical ands and 5% in ammonia. Similarly, the earnings days spit across the fleet had few changes during the last period with 57% earning days in LPG, 36% in petrochemicals and 7% in ammonia. Whilst 89% of our spot activity for the three months were firmly placed in the petrochemical arena, as Niall just mentioned, our involvement in LPG has increased a few percentage points quarter-on-quarter. The slight increase in LPG demand has been against shorter-term time charters as opposed to voyage charters reflecting our customers need for flexibility in terms of discharge optionality that is inherently embedded in a time charter contract. The competitive freight environment for handysize LPG vessels are opening new markets. We have entered into a flexible time charter contract to trade along the coast of Chile, a first for Navigator. This is a good example that reinforces the versatility of a handy size ship and their ability to enable new incremental trades for the segment. As Niall mentioned, another incremental trade has just started. The Braskem ethane project commenced early October, the first vessel has now loaded at Morgan’s Point Terminal in the Houston Ship Channel and is waiting to discharge in [Indiscernible] to Brazil. The second vessel is scheduled to follow later in November. Enterprise, as David mentioned, stated last week that their PDH plant in Texas should be running at capacity at the end of the month. It could be meaningful to our segment that there is a desire to use handy size vessels for these propylene export volumes. Rising crude markets should encourage petrochemical arbitrages between regions subject to their feedstock cracker slate. Regions like the U.S. is heavily using gas as feedstock. Ethane and propane is more competitively priced compared to oil based products. Asian petrochemical plants on the other hand are predominantly using naphtha as their cracker slate. The wider the delta the argument goes that you have more long haul trades as a result. Back in 2014 and 2015 we focused -- we used to export considerable amount of LPG from the U.S. to receivers in the Atlantic Basin. However, as we have mentioned over the last year or so, our re-involvement in this trade has declined primarily because of we have shifted some of our focus, strategic focus, to petrochemical opportunities and the changes we see emerging in this particular market. We are in a good position to capture and monetize these trends as we now have a fully delivered fleet of 38 ships. The majority of these have petrochemical features including ethylene capability. Our logistics platform therefore is attractive to our customers who require our know how and flexibility, whether this flexibility comes in different contract types, COA versus time charter versus voyage charter or ship sizes, our mid sizes or our handysizes or ship capabilities where it’s ethylene or semi-refrigerated. Therefore, in the near term we see the beginning of green choosing the market sentiment and to our utilization rate. Additional incremental trades, whether that is in LPG such as our recent transaction in Chile or in petrochemicals such as the new potential supply flow from US, should encourage demand for handysize ships and hopefully reinforce the current cautious optimism in our current market. Thank you.

Thank you and Tracy, you might open the call now to some question and answers.

Thank you. [Operator Instructions] Your first question comes from Douglas Mavrinac of Jefferies. Please ask your question.

Great, thank you, operator. Good morning, good afternoon, guys. My follow-up questions to your commentary, I guess the first couple are going to center on a comment, Oeyvind, that you just mentioned about green shoots because, as David said, clearly the market is challenged, near terms likely remaining challenging as well, but there are things on the intermediate term horizon i.e., green shoots. So when we’re looking at the market from that perspective, in David’s comments he mentioned the ME2 pipeline coming on line in 2018, Enterprise propylene exports starting to increase or soon to be ramping up so when we look at the LPG market from say 2013 through 2016 capacity increases played a large role in LPG shipping demand so given the current environment with economic growth getting better and everything else when we think about what demand growth could do going forward and trying to quantify it is capacity growth going to play an important role as it did in the past or do we also need some arbs [ph] to open up as well to take advantage of that increase in capacity growth?

Well, clearly for the -- for any trade there needs to be an arbitrage between regions and we talked about oil price versus gas cracking slates and arbitrage for petrochemical so clearly the wider the arb or wider the price differential between oil and gas then I think is a good thing for the deep sea trade, particularly for petrochemicals which is great for our business. But you’re right, the large order book across all segments are declining which is a good thing and the focus now is really on the supply side and incremental trades and because the freight market is as it has been the last six, nine months, new incremental trades have popped up, such as the one in Chile, so that more of the them which will soak up capacity, the better it is for the entire segment. So yes it’s a little bit shift from the capacity of ships or the supply of ships to okay where are the trades going to come from? What’s the volume? What’s the price arbitrage so you’re right, Doug. That’s the shift.

Got you, got you, and, Oeyvind, following up on some of those points that you just mentioned, so what we’re looking at is we’re seeing economic growth getting better globally obviously so you would think end user demand for LPG would be improving and at the same time we’re finally seeing US propylene inventory starting to rise and one would think that as inventories rise prices would probably not continue to strengthen. You could probably see that arb reopening. Is that kind of how we should be thinking about things in terms of the arb? And then secondly, when you look at the strengthening in crude prices in naphtha and some of the oil byproducts, have we seen an increase in the demand for U.S. ethane as a replacement so looking at those two arbs, one, U.S. pricing versus global pricing on LPG and then two, have we seen the strengthening in crude create an increase in demand for ethane as well?

I think the ethane story, it’s not a quick fix so but you’re right with crude above 50 people are starting to consider ethane as feedstock or for power more seriously so but those are more long-term projects which are ongoing. On the propylene side the arb doesn’t work today but the new production is not -- hasn’t engaged in the U.S. yet and the argument is that the inventory is up, new production locally, crude goes up in the as naphtha is up, then you should see propylene moving. That’s the idea anyways.

If we were to go back say three years ago before the collapse in price of oil we saw a lot of discussion, lot of activity around ethane exports out of the U.S. There we were very busy working on a number of proposals and projects and inquiries. When that price collapsed it created a lot of uncertainty as to what the future pricing of relative hydrocarbons was going to be. The result of all that confusion and uncertainty was a tabling, I’ll call it tabling of ethane projects. I think today two things are happening. Number one, one has gotten an adjustment. One has now recognized where the price of oil is and so that is kind of over combined with a strengthening in the price of oil so the game is not over for ethane and that I am confident about. There is plenty of it here in the United States. It is going to move and it will move. And one other element that I think is worth observing, if you will, about arbitrage pricing and capacity etcetera, the pricing and arbitrage for propane coming out of the Gulf Coast is very sensitive and it’s sensitive because the producers have an opportunity in the Gulf Coast to dump their propane into anything in Mount Belleview and the Salt Domes because it is there. Storage is cheap and they can await any price changes. That won’t be the case when Mariner East 2 opens up because there really is no serious storage in the East Coast. The Salt Domes don’t exist the way they do in the Gulf Coast so I think price sensitivity for arbitrage, for propane coming out of the East Coast is going to be a lot less sensitive than in the Gulf but we will see. That’s my judgment and it’s not -- we’ll see where that comes but it seems logical that that would happen.

And third one for me and final question before turning it over, David, in your commentary you mentioned on the terms of the Enterprise ethylene project feeling confident about some of the next steps, I don’t know how at liberty you are to talk about what some of those next steps could be but in terms of just trying to get an idea as far as kind of some of the near-term milestones or hurdles that have to still be overcome, is that something that you can share on the call in terms of what’s left in terms of reaching agreement on that particular project?

We’re pretty confident that we have almost everything completed. Now, it is a lot more complex that you would realize. I think between ourselves and Enterprise together between us we must have five or six partnership agreements from operations, transportation, construction. I think those are pretty well done now. I would say we’re confident that those are completed and as soon as we are comfortable and finalize a few things on take-or-pays we’ll do that. But let’s just put it I am very comfortable where we are. I am surprised we are as advanced as we are and we will see how that develops in the near term.

Thank you. Your next question comes from the line of Jon Chappell with Evercore. Please ask your question.

Thank you. Morning, good afternoon. David, you spoke about in the -- actually didn’t speak about it but in the press release you mention eight ships coming up off of contract and you were in discussions now for charter or COAs on those. As that kind of lines up with your let’s call it two time period view of challenges over the next six months or so and then a potential uplift to some of these new projects finally come on line second quarter or mid next year, how do you think about the duration of these contracts you’re trying to sign them away over a long period of time or do you want to just get them employed for the next quarter or two and hope that when those shorter-term contracts expire you’re in a much tighter market environment?

Mr. Lindeman will answer that.

Yes, Jon, so that is a good question and funnily enough since we announced -- two of those eight ships are now being extended so that remains six then and we’re still negotiating those, and embarking to negotiate those contract of freightments but those two ships being extended on time charter at the relatively okay rate, it gives us optimism for what’s to come so clearly there is appetite there for handysize and for Navigator of course extending existing time charter parties will bring some comfort to our coverage and so forth so yes, good question at the right time. So two have been extended.

Were those extended for a year? Is that the typical time charter extension period?

A year, one is one year and another one is slightly shorter but to potentially a year, yes.

Okay and then also while I have you, Oeyvind, it’s not the most transparent market, the semi-refrigerated handysize, so we only have a couple of sources that we use to kind of get a trend on the rate environment. I did notice last week for the first time in 18 months that there is an uptick in the market average that one of these sources reported. First of all, can you confirm that was indeed the case and obviously it’s off of a very low base but as far as like setting a tone that the trend of declines have stopped, do you kind of feel like we’ve hit the bottom? And it may not be significant upside in the near term but the bottoms in?

Yes you’re correct observation, Jon, so you’re right. One of those investments had an uptick which if some of the green shoots we’re referring to, the Middle East doing their trade is very strong which caused some of the uptick here but in looking at our utilization rate as Niall mentioned, then certainly there might be some -- well, there are some green shoots there and with some other things we discussed that will underpin and hopefully stabilize this and we can look forward.

And just as a bit of definition, in my prepared remarks I said there was -- I didn’t expect any material uplift here in the near term. That doesn’t mean that there isn’t something, a trend for improvement for a couple of reasons. Material for me is going to be driven by those factors of the propylene and the ME2. Those have an opportunity, have a chance of really rebalancing the handy sector. We still have to have other factors working in our favor but those are material things that could have a material change in the rate structure and level of activity and that would be for mostly in the handy size. But again, we’re looking down the road and I think you kind of underestimate or what this petrochemical business, the change of structural redeployment of where petrochemicals are coming from. That is really where we’re going to make a change, where whole business focus and logistics becomes a different game.

Yes that makes sense. Thanks, David. Just one for Niall and I’ll turn it over; I noticed in the 10-Q as far as like liquidity and capital resources section you noted that you believe that the sources of funds that you have today are sufficient to meet your liquidity needs for the next year or so. I am just curious does that include any potential investments in the terminal and if not, how much do you think that could be and how would you proceed kind of financing that?

No it doesn’t include any potential investment in the terminal. It’s on the basis of the commitments already or as at September 30th and is more of an audit point. With the respect to financing of the terminal, we’ve -- it’s obviously early days on that and we’re looking at various optionalities surrounding it but Navigator has considerable resources including cash in balance sheet, the unrestricted $51.9 million that I referred to earlier that is available from the two RCFs and we currently have five debt free unsecured vessels. In addition, we’ve had conversations with banks who are willing to commit capital funding for this type of project and there’s strong interest from infrastructural funds. The issue I guess is not where is the finance going to some from but more of how we can tap the cheapest source of finance. And I think with respect to sort of quantum, the terminal I think, as David mentioned but would take two years to build from a get go. Provisionally 40% of it or about $75 million would be required in the first year of which a third of that would be payable in the first six months with two-thirds in the second six months, so it’s a quite a long lead time into it but we’re looking at alternatives.

Perfect, it’s very helpful now. Thank you. Thanks, David. Thanks, Oeyvind.

Thank you. Your next question comes from the line of Benjamin Nolan. Please ask your questions.

Yes thank you. Good morning, guys. So my -- something that was mentioned I think in the press release but you hadn’t -- didn’t address much was that there was an element of impact from the Hurricane in terms of your loadings. I was wondering if you might be able to quantify that and with respect to either revenue or utilization or anything else. I mean was it significant or marginal?

I believe it was marginal, Ben. I think the impact was mostly unfortunately on month’s delay for the propylene. We would have expected more activity right now on the propylene but I think there was just a minor for us, a little bit of delay. That’s about it. It was not what would be considered significant.

Okay.

We can’t use that excuse.

And then and sort of along those lines as you mention the propylene facility with Enterprise, how -- is there a way that you could quantify how much that might mean to the market in terms of number of ships or -- and obviously it’s a moving target depending on where it goes or whatever but if you just had to sort of roughly pencil it in, how big of a deal is that?

Yes, Ben, so you’re right. You’re absolutely right that it depends on where it goes so I think where is the appetite for the propylene and the people we talk to generally goes as follows; Europe first, then kind of East Mediterranean, then Asia so if it goes that direction then you will be needing more and more and more ships. Now I can’t tell you, quantify how many and so forth. We’ll just have to see where it goes.

Okay what’s the total capacity?

Yes I think the propylene side today they’re servicing of US is supplying quite a lot to the Caribbean but with this new PDH coming the suggestion is that you can have the handyships loading for a month and then is the question where is it going to go to? Will it have an impact? Yes. Well maybe the next call we have some clarity on that.

Okay, appreciate it, Oeyvind. That’s helpful and then lastly, just from a sort of a strategic position, obviously it’s been a tough market but that said I think you guys continue to outperform sort of where the indexes are I think in large part because of the petrochemical side and I would imagine given your scale that is better than what a lot of your smaller competitors could be able to do, meaning they’re under earning on their assets relative to what you guys are. Is that -- is there a way if that’s correct, is there a way to sort of capitalize on that differential? I mean are some of these guys maybe be willing to charter their vessels to you and potentially you guys use that to improve the market or create a pool or is there -- I guess my question is, is there a way to capitalize on the arbitrage there?

That would seem like a normal question. Now, the answer really is what strategic course are we headed into? And therefore, what type of equipment do we want to own and that is the key to answering that question. If the equipment works in with our goal of being the dominant player in petrochemical gasses and that is a process that will probably take a couple of years to unfold. It’s not a quick change. It takes time and we’re focusing on that with every breath of our existence because we feel that we’re really on the cusp of something fundamentally changing and we’ve spent the last number of years being in the best position of anyone to capture that. So we will only do it if it works into our goal and right now there are not many vessels that I would point to that say they’d fit and it may be larger vessels or maybe smaller ones but they will be -- so just to consolidate the market as it is, we’re focusing very carefully and what we want to be and what we see is very different and very exciting for us and that’s not much of an answer for you, Ben, but that’s what I have this morning.

Well and I guess really my -- and I can certainly appreciate that with respect to acquiring assets but I guess I was curious if there are other ways that you could go about building your scale and leveraging your platform besides buying other things?

Yes chartering in is one way; pooling is another but we have such a unique fleet with very strong capabilities in the more complicated areas of ethane, ethylene that it’s hard to see us having a pool when there would be some non-comparable assets in that pool so we’ve gone through it. It’s certainly a pool would certainly correct things more things more quickly but they will correct themselves and the point that I made about what fundamental changes in the East Coast and West and the Gulf Coast, they’re going to correct itself here. They’re in the process so I think we’re just going to be patient and focused in what we want to build and what we want to be two or three years down the road.

Thank you. Your next question comes from the line of Mike Webber of Wells Fargo. Please ask your question.

Hey, David, I wanted start off I guess with a sensitive question. I know you made a comment earlier around not touching on anything related to Wilbur and I can certainly understand that but I guess respectfully there are other equity owners on the call that would probably I guess like some degree of color and I guess maybe if I kind of stay away from anything resembling Macarthyism in terms of public comments that have been made around his sale or -- and/or liquidation it’s unclear whether it’s from personal holding or WL Ross & Co. but from your position as CEO of Navigator have you had any conversations with large strategic investors around any kind of secondary? I mean any color for existing investors around any kind of turnover in the shareholder base or anything of the like, if you wouldn’t mind?

Okay and that’s a fair question. First of all, the sale, the large shareholder ownership in Navigator is held by WL Ross & Co., okay. That’s where the stock is held and WL Ross & Co. are represented on our Board. They have insisted and confirmed their interest in staying in this story. They recognize where we are and what the promise holds for the future and what we’re doing. They are not sellers so what may have been discussed about sale I have no clue as to what those are. They certainly are not the WL Ross & Co. ownership and that’s where the shares are held so I cannot comment on the Secretary’s comments, whatever they may have made, because I just don’t know but he is not part of WL Ross & Co. and the decision of what they do is in the hands of the people on Sixth Avenue in New York City and not in Washington.

Right, okay. No that’s helpful and certainly again not asking you to speak for him. With regards to I guess your day-to-day commercial business, obviously it’s been an odd week I guess to put it lightly. Has any of the noise or just news flow from the week, has that permeated to any kind of commercial conversations or is it really isolated to kind of what we maybe see in the press?

It’s in the press. Our customers recognize who we’re doing business with. We’ve had good conversations with Sibur. Obviously they’re annoyed but no one needs to find themselves in the television. Our commercial business has not been affected by it so aside from being badgered by different telephone calls from people who are trying to create some stories, there has been no material change whatsoever on that, Mike.

Okay I appreciate you swinging at those. I’ll stop and turn it over. Thank you.

Thank you, good talking with you.

Thank you. [Operator Instructions] There are no further questions coming through on the line, sir.

That’s great, Tracy. Well, I want to thank everyone for joining us this particular conference call and there was a lot of noise surrounding today’s announcement of earnings and so on but I suspect we’ll be talking to you sooner than later. Thank you so much for joining us.

Thank you. That does conclude this conference call today. Thank you for participating. You may all disconnect.