Thank you for standing by, and welcome to the Navigator Holdings Conference Call on the Fourth Quarter and Year-End 2018 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 the conference is being recorded today. And I now pass the floor to one of your speakers, Mr. Butters. Please go ahead, sir.

Well, thank you, Rose. And good morning, everyone, on this April Fools' Day. I don't think this conference call is any joke, but - and we haven't one prepared. But I do want to apologize for the delay in reporting our fourth quarter 2018 earnings. But we have been waiting to finalize the financing of our portion of the Enterprise-Navigator ethylene export terminal and wanted to conclude all of the financing prior to our call. We have done that. And Niall Nolan will shortly give you the details of the financing on his formal remarks. But now that the financial - financing of that terminal is complete, I think it will relieve some of the overhang that we perceived to be there and the belief that on the part of some investors that we would need to do an equity raise. That is behind us and we're excited about the completion of the financing and the term fee. Now following my comments - introductory comments, I will hand phone over to Niall who will cover the financials and then Oeyvind Lindeman will cover the past and current trends in the trading environment. Later, I'll come back and do brief comments on the market conditions and where we're going from there. So Niall, would you want to pickup on the finance?

Sure. Thank you, David. And good morning, everyone. The headline revenue for the fourth quarter 2018 was $78.2 million, 2% ahead of the revenue of $76.7 million generated during the fourth quarter of 2017. Revenue for the 12 months of '18 was $310 million, 3.8% higher than the $298.6 million generated during the 12 months of 2017. Net revenue, that is revenue after deducting pass-through voyage costs, was $62.8 million for the fourth quarter, a small increase from the $61.9 million generated during the fourth quarter of '17, but a slight reduction from the $63.6 million generated for the previous quarter, the third quarter of 2018. We generated an extra $1 million during the fourth quarter compared to the fourth quarter of '17 as a result of a slight increase in charter rates, which rose to $20,920 per day or $636,300 per month for the fourth quarter compared to $20,586 per day or $621,160 per month for the same period in 2017. However, net revenue reduced by $600,000 as a result of a small drop in utilization to 86.3% during the quarter from 87.2% for the fourth quarter in 2017. Our fleet of 38 vessels has remained unchanged with 14 being the complex ethane and ethylene capable vessels, 17 semi-refrigerated vessels, and 7 vessels that are fully refrigerated. We have approximately 30% of our operating days for the remainder of 2019 currently committed at an average rate of $25,975 per day. We've undertaken a total of 6 dry dockings during 2018, costing an aggregate $5.8 million, the last of which underwent drydocking during the final quarter of 2018. There are 10 vessels scheduled to enter drydock during 2019, expected to cost an aggregate of $14.4 million, and this includes the now mandatory fitting of ballast water treatment systems since January…

Thank you, Niall. And good morning, all. The handysize rate environment rolled pretty much from the third quarter '18 into the fourth quarter of '18, with independent broker assessment for the semi-refrigerated 12-month time charter market starting at $440,000 per month at the beginning of the quarter and ending with a modest 7% increase to $470,000 per month in December. The slight increase in sentiment leading up to the winter months is pretty common in LPG transportation as the various retail customers manage their inventory levels in anticipation for colder weather. For this reason, Navigator experienced increased activity in regional areas, such as Europe and to North Africa in LPG. We hardly lifted any LPG from the U.S. during the quarter as domestic LPG pricing due to high local demand made it tricky for the various off-take as defined export opportunities for handysize vessels. The Mariner East pipeline system also experienced its own challenges, which put a cap on export volumes. However, as an aside, we have seen slowed handysize LPG cargoes from Marcus Hook, which is good to see and should bode well for future utilization from this particular location. Our earnings days from carrying LPG remained at about 50% for the quarter with a slight increase in time charter employment as oppose to voyage charter opportunities. Petrochemical trades also remain at about 40% of our earnings days with a slight uptick in deep-sea demand leading up to December, principally to cover Chinese inventory management prior the Chinese Lunar Year, New Year. The petrochemical voyages on average can often take more than 2 months to complete and, therefore, logistical planning leading up to this event every year is essential. The U.S.-China tariffs on petrochemicals, whilst it's not generally helpful to trade, have not reduced handysize activity as a whole,…

Well, thank you, Niall, and thank you, Oeyvind. Fourth quarter 2018 worked out to be pretty much what we expected, and we don't anticipate much of a dramatic change for the first half of this year. While we have seen some clear and positive signs for some of the milestones on the road to the improved 2020 highlighted in our previous calls, they were not offset the sluggish activity in the LPG transport nor in the overcapacity in our handysized sector. These sluggish conditions will improve in our handysize sector, but it will take a while and not be significantly changed until later in the year when we see our ethylene export terminal become operational. As Oeyvind mentioned, on one of our milestones, we have begun to see propylene cargoes exported out of the Houston area as we have anticipated. These volumes are the result of purpose-built PDH plants that commenced operations in late 2018. We expect more export petrochemical plants to be build over the next several years. Now on the other hand, where we have been somewhat disappointed is in the slow progress of getting the energy transferred Mariner East pipeline project up to its potential. Mariner East 2 is operational at the moment, although there are - they are utilizing a work about our loop on the last 10 to 15 miles. This loop has a restricted capacity and is expected to be utilized until the company is given permission to complete construction on the last few miles. Now just as Mariner East 2 was ramping up, a sink hole near the mid-Mariner East 1 pipeline halted also from this line to Marcus Hook. ME1 is the smallest of the 3 pipelines and, as you remember, is basically used to transport ethane. The line is expected up,…

Thank you, sir. Thank you, ladies and gentlemen. We will now begin the question-and-answer session [Operator Instructions] We will now take our first question. Please go ahead. Your line is now open.

Hi. This is Sean Morgan on for Jon Chappell.

HI, Sean.

So the CapEx on the new JV terminal, I think you said there's going to be about 77.5 remaining, and should we assume that all of that will be spent in 2019? And is it pretty much straight line across that period or is it front ended or just tell us a bit more about the CapEx plans?

Your numbers Sean are correct. The timing will be - the majority - about 70% of it will be - of the remaining will be paid in 2019 with the residual in 2020. The refrigeration unit comes online later this year, but the tank does not come online until the back end of next year, 2020. And consequently, there are some smaller element of payments that will be paid in 2020 as a consequence.

Okay. Great. And just, sort of, a bigger question, and I think it's going to be accounted for as an equity line item in the income statement. But will that business have a similar profile in terms of the cyclicality to your existing shipping business or do you expect that, that will provide you an element of diversity in your overall business?

I think ultimately that business will be pretty much a contract business, Sean. We're targeting using the infamous enterprise model of locking arb down on long-term contracts and earning a nice fee off of that business, so So the ultimate goal is for that terminal to have a substantial contract cover on a long-term basis. So in a sense, it is a counter although we are striving to get as many of our vessels on the long-term contract as a tie in with the terminal. So hopefully, we're on the same plane, if you will, with a lot of long-term contracts associated both with the terminal and the extension onto the ships.

Okay, great. That makes sense and I'm going to turn it over. Thank you.

Welcome.

Thank you. We will now take our next question. Please go ahead. Your line is now open.

Yes. Thank you. This is Fotis Giannakoulis from Morgan Stanley. David, you mentioned about the fact that there's still an oversupply in the midsize carrier market. Can you please give us an estimate of how many vessels are over supplied? And explain to us how the mid-carrier market is being affected by the rising rates for VLGCs the last few weeks? And also, from the weakness that we experienced in domestic U.S. ethylene demand and the decline in prices both for ethylene and ethane?

Okay, sure. There are a number of questions there, Fotis. Well, first, I think you meant - when you said midsize, I think you meant the handysize...

Correct, correct, yes.

So, for the longest period, we believed, based upon our own judgment in a field or universe of around 110 vessels on the handysize, there probably were roughly 8 vessels too many. Now that's a judgment based upon what we see daily on the market, what utilizations were experienced, what we understand utilization of other companies are. So it is not an absolute scientific number, but it's a reasonably good number. So we have to absorb 8 handysize vessels in some way over the next 24 - 9 to 24 months in order to get back to the level we believe we can achieve and that is a level in 2015 where rates for our vessels were considerably higher than they were today. And where we were going to get that absorption of those 8 vessels were from the Mariner East 2 project when Mariner East 2 was opening and additional volumes coming from there to Europe, we're going to get it from the propylene and that is happening now. We're going to have to get it from the opening of the ethylene export terminal, where we can absorb significant amount of handysize vessels at least those capable of carrying ethylene. And lastly, we believe that ultimately in a year from now, approximately when the West Coast of British Columbia opens up the Pembina export terminal, we'll be able to absorb another 4-or-so vessels out of that putting us into perhaps a deficit in the handysize fleet. And therefore, rates being exceptionally strong and achieving levels of earnings back that we were - we saw in 2015. I think we're on target to achieve those. Eight does not seem like a great deal, but the ups and downs. Now I think we're going to get there. Everything seems to be…

Yes, absolutely, David. And thank you. Can you explain to us - I mean, this is quite strange because usually when we have such an open arb in commodity, the shipping market usually skyrockets. This hasn't happened in the gas carrier sector. Of course, VLGCs, they have tripled since the beginning of the year, but they are still at a relatively low historical levels. Can you explain to us what is the bottleneck right now? And what makes you that optimistic that later this year this market will turn to be highly profitable? Is it the lack of fractionation capacity? Is it the fact that the Chinese are abstaining from purchasing despite the very profitable export margins out of the U.S.? What is the problem right now?

And the problem very - it's simple, it's infrastructure. Okay. So let's talk - I mean, both ethane and ethylene. Let's talk ethane for a moment. In the case of ethane, you basically have only two companies with any kind of infrastructure gathering system, pipelines, terminals to move ethane out in the United States. And that's Energy Transfer and Enterprise, both companies have facilities and are building facilities. In the case of Energy Transfer, they do have the Marcus Hook ethane facility and the pipeline, Mariner East 1, which unfortunately, as I mentioned, is shut down at the moment, awaiting resolution of what caused the sinkhole, but they expect that up soon. Energy Transfer is also building a new facility in - around Nederland, Texas. That won't be up and operational until the end of 2020. And in the case of Enterprise, their facility is, of course, at - on Morgan's Point along the same site that we are putting our ethylene terminal. Now can anybody else run and build facilities? Not easy because the key to what they have, I tried to mention in our last conference call, they control the network of pipelines, the gathering systems, the fractionators, the pipelines and the terminals moving this stuff into a terminal and the ability then to put it on ships for - and transport it around the world. It is very difficult for any other company to come in and build that infrastructure from scratch. Pipeline networks, connecting fractionators around Oklahoma, Texas, Louisiana, all gathered and moved into places where there's storage, et cetera, very difficult. That will be the big challenge American ethane, who tries -- is trying to break in, they don't have access to this ethane. So you have, in the case of ethane, Fotis, a restricted…

Thank you very much David. That's extremely helpful. One last question. I hope this is a very quick answer. The economics of ethylene terminal look outstanding right now given this high arbs and no-brainer for you to make this investment both from stand-alone basis and the profitability of the shipping fleet. But I was wondering if there are any other infrastructure opportunities that you might look in the future, especially as the market started improving and ethylene terminal is complete and you started having more cash flow to spend on more growth?

That's not - the answer to that question is not quick. The answer is, this whole - listen, this whole sector of the U.S. abundance of natural gas liquids, the need for the infrastructure, the desire for international companies to grab as much as they can to - either in the process form or in the raw material form is just beginning. We're not at the end of it. We're not in the middle of it. We're at the beginning of a development of a significant business. And yes, there will be all sorts of opportunities. It won't be just in shipping. Shipping is probably the most mundane part of it all because everyone understands shipping and unfortunately shipping can get overbuild because of the attract and dip at different times. But the infrastructure piece, the ability to be part of the midstream company's development. Go back to what I talked about in our last conference call, the growing tower of the midstream companies and how they, in their next step, will need to break away from their parochial domestic clothing and get into the international markets. They just beginning - they're just beginning, Fotis. And as that happens, it is going to open wonderful, delicious opportunities for companies that are flexible, that have flexible people, flexible equipment, flexible attitude about how to develop this alongside. And with this midstream company, we have the elephant by the tail. The elephant being the midstream companies and those companies are beginning to wake up and to move, and we're going to be pulled along with them. And that is what we are ultimately going to do. It will take time. None of these things are overnight, but it is a whole different industry that will be shaped up in 5 to 6 years from now. We're going to be right in the damn middle of it.

Thank you very much, David. We are here to wish [ph] you're right.

Okay. Thank you.

Thank you. [Operator Instructions] Thank you. We will now take our next question. Please go ahead. Your line is now open.

Hey. This is Greg on for Randy Giveans here at Jefferies.

Hi, Greg.

Hey. So last quarter, you guys had mentioned that you're hoping for about 90% utilization for 4Q and you guys came in at about 86% of this quarter. Can you just talk about the discrepancy? And why things were a little bit lower than expected? And December, I know that you'd mentioned that it was a little bit over 90% for October, November, so it was much lower in December?

Oeyvind?

Yes. Hi, Greg. Yeah, I think the average was about 87% versus what we were hoping to do, 90%. 87% isn't good enough altogether. So we will just aim to achieve higher than that. But the 3 percentage points is not a whole of a lot, however, things change. So in October, it was low. And then as I mentioned because of winter and so forth, in November, December, it increased to above 90% and then the average became 87%. But few bits and pieces that affects the business, some contracts of affreightments not being nominated as expected, time charters not being renewed as expected or vice versa. So it's not one single event. I think the most our, sort of, bread-and-butter business being LPG, I mentioned that we didn't do much out of U.S. in the fourth quarter and that has an impact. We picked up - we talked about Marcus Hook and so forth, so that has come back a little bit. But when you have no U.S. Gulf busy because lack of arbitrage, at least, for handysize in the area then that caused that I think. So it's not a single event, it's a collection of many various touch points across the business, our global business, and that's about it, Greg.

Okay. And then any idea on may be some rate guidance or utilization guidance for 1Q now that we're one day into 2Q?

No, the assessment on the broker panel, but I think, it's quoted every week. And I think you can take some cues from that. So back end of December, they were quoting or clocked since 12-month time charter were quoting 470. It's about the same level for Q3 - sorry, first quarter, if you look at those weekly quotes. So to mirror what David mentioned earlier in the call, in the near term much the same. And then while we wait some of these infrastructure projects, our road to 2020 to materialize and more of the propylene more from Marcus Hook, which both of these two points are, sort of, slowly coming together and then the ethylene terminal by the end of the year or second half of the year and then the Pembina. So we're on the journey, but Q1, if you take the broker assessments, kind of the same as what we have last year, fourth quarter.

Okay, okay. That sounds good. All right. So to switch gears here on the - talking about this JV and the terminal and getting contracts for 100% of that capacity. I know that you said earlier in the call that you wanted to reach about 100%. But what's the time line on being able to get all that kind of remaining capacity contracted?

As I tried to point out in the comments I was making, once this issue about tariffs is overhanging everyone, how to commit to long term. That's been a real bugaboo I think in making progress that was something we expected much greater and quicker progress. We have far in negotiations now and we expect even without resolution and tariffs to sign up additional capacity here very, very soon. But the question maybe do we want 100%? Or do we would like to make it - our target 100% really being 80% and using 20% for the spot market? I think that's a joint decision that Enterprise and ourselves will sit down as soon as we approach that number. But we're pretty damn confident that we will get a high level. But again, I want to stress that if we're open today, it would all be sold out because the economics are so darn good. It's just nothing else around it. It has that kind of profitability attached to it. Spread is enormous and demand is strong. So again, if we're open today, it would be 100%. We're going to get higher levels of throughput, but whether we want to push completely to 100% or stay at around 80%, I'm not - and use the 20% to the spot market and kind of trade around that, we'll see. But I think it will all fall in place over the next few months. Remember, the terminal should be up and operational sometime in the fourth quarter of this year. It won't be fully operational because the chiller will be up and operating, giving us the ability to run, say, 75% of the capacity. Once the storage is completed, then we can run at a complete 100% efficiency. That maybe sometime deep into 2020. But operationally under this year, it will be there, hopefully around November. So it's coming on us rather rapidly.

Okay. Perfect. Well, thank you for the color and I'll hop off on. Great quarter.

Okay. Rose, unless we're approaching the top of the hour and perhaps this would be a good time either to take the last question or sign off now.

So there are no further questions, please continue.

Well, thank you all. I again - once again, I apologize for the late conference call, but you can understand that I - we definitely wanted to finish off the financing, get that behind us, leave no question about whether we were going to be issuing any kind of equity. We got it done and done it successfully. And we're going to be seeing you and talking to you relatively quickly on the next call. Thanks, again. Okay, you can sign off, Rose.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now disconnect, with the speakers please standby.