Thank you for standing by, ladies and gentlemen welcome to the Navigator Holdings conference call on the third quarter 2019 financial results. We have with us Mr. David Butters, Executive Chairman; Mr. Harry Deans, Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer and Mr. Oeyvind Lindeman, Chief Commercial Officer. [Operator Instructions] I must advise you that this conference is being recorded today. And now I'll pass the floor over to one of your speakers, Mr. Butters. Please go ahead, sir.

Thank you, Summer. And, good morning everyone. And welcome to Navigator's third quarter earnings conference call. Now, before we actually begin our formal remarks, let me take a moment or two to do some housekeeping items. And to that end, I would just point out that as we conduct today's conference call, we will be making various forward-looking statements. These statements include but not limited to future expectations, plans and prospects from both the financial and operational perspective. These forward-looking statements are based on management's assumptions, forecasts, and expectations as of today's date and as such subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecasts. Additional information about those factors and assumptions are included in our annual and quarterly report filed with the Securities and Exchange Commission. Now in today's conference we will follow our usual format, which includes comments from Niall Nolan, our Chief Financial Officer, and Oeyvind Lindeman, our Chief Commercial Officer, but importantly, it will also provide for the first time an opportunity for Harry Deans our Chief Financial Officer[ph] on his first impressions on his new role and how he views the road forward for Navigator. Now I share the enthusiasm the whole Navigator team both here in London and Poland in welcoming Harry, and fully and firmly believe his background, his experience, his moral compass will be a huge factor in fulfilling Navigator’s promise. Let me now hand the call over to Niall, who will cover financial events during the last quarter.

Thank you, David, and good morning all. The third quarter results were much improved from those of the second quarter, albeit at a loss of $2.9 million, which is a $1 million non-cash foreign exchange movement against $7.7 million loss incurred last quarter. Revenue for the third quarter was $75.6 million, $2 million up on the $73.6 million generated during the last quarter with $5.2 million down from revenue generated during the comparable third quarter of 2018. Revenue for the nine months ended September 30, was $225.3 million, not dissimilar from the $231.8 million generated during the nine months of last year. It was modest – a modest improvement in charter rates seen during this quarter relative to both the last quarter and the third quarter of last year. The average charter rates for this quarter were $21,446 per day, or $652,300 per month compared to rates of $19,940 per day last quarter, and $20,987 per day for the third quarter of 2018. Similarly, charter rates improved slightly over the comparative nine months periods at $21,063 during the nine months of this year against $20,083 last year. Utilization, however, has continued to be a challenge at 84.6% during this third quarter, compared to 85.2% for last quarter and 87.5% for the third quarter of last year, nine months utilization rates for this year and last were 84.8% and 89.8% respectively. During the third quarter, time charters increased to 67% of all vessel operating days, while 33% of operating days were spent undertaking spot or voyage charters. As expected. 77% of time charter days were engaged in transporting LPG, but spot charter days were split 69% for transporting petrochemicals and 31% for LPG. During the nine months of 2019 we have undertaken six dry dockings taking an aggregate of 181 days,…

Thank you, Niall and good morning to everybody. We're pretty excited to see customers continue to engage with ethylene export terminal. These customers take a long-term view based on the competitiveness of the U.S. natural gas liquids fundamentals. They take into account the industry is confident in competitively priced NGLs and ethylene, providing cheap energy and cheap feedstock, which in turn puts American produced ethylene at the lowest range on the international cost curve comparisons. This unique cost advantage is predicted to remain for a very, very long time, which enables these customers to adopt this long-term view, which is very healthy. The Handysize Ethylene Shipping segment is yet to see the full impact of the U.S. ethylene exports, as the industry is waiting for the terminal to become operational, which will happen next month. The impact will come in stages, Phase 1 will be at a reduced nameplate capacity until the completion of the 60,000 cubic meters storage tank is commissioned a year from now. At this point the Phase 2 with capacity of above 1 million tons per annum will have a major impact. What we do now, however, is this. The incremental ethylene export, Phase 1 or Phase 2 should have positive impact on the freight environment due to the limited availability of ethylene handy ships on the water at that point in time. This is simple supply demand dynamics, which will kick in once the volumes are flowing. We can spend the whole day talking about our excitement in the various ethylene and petrochemical opportunities, but let's not forget about the petrochemical’s bigger brother propane and butane. We predict LPG to play a larger role to our employment compared to the last three years and be more akin to the heights of 2015, 2016 period. The…

Thank you, Oeyvind and good morning to everyone on the call. I was very fortunate to be asked to join the Board of Navigator Gas as a Non-Executive Director in late November, 2018. Over the course of the following six months, I got to know the directors, the management and the employees of the company extremely well. That was of your like an extended interview for both myself and the company. And I can tell you I really liked what I saw. As rare as someone's background knowledge and experience fit so perfectly with the Board of Directors, the Management Team on the company's vision and values, everything just seemed to click into place for me. I was therefore delighted and honored to accept the position of President and Chief Executive Officer of the company in late August this year. Navigator Gas is a young, vibrant entrepreneurial company with an impressive track record of growth and partnership, in no time at all, that has grown from 5 to 38 vessels with a market share in the Handy segment of more than 30%. As perhaps no coincidence in my 26 year career in agriculture and petrochemicals, working over the years for BP Chemicals, INEOS and Agrium, that I have produced and managed at one time or another all the liquefied gases that we transport. In these first few months, I've been very impressed by the commitment, expertise and the caliber of our people at all levels in the company. Our deep functional expertise of liquefaction and olefins gas combined with the superb fleet and terminal infrastructure instills customer confidence. Our partners trust us to deliver the precious cargoes safely, reliably and securely to the final destination, and the most economical and environmentally friendly manner. It's been a very exciting time for me to join Navigator. In my short time here, I have witnessed the fantastic progress we have made with enterprise product partners as we build, commission and eminently start-up on ethylene liquefaction terminal and joint venture, with a superb infrastructure and fantastic location at Morgan’s Point on the Houston ShipChannel. I look forward to also seeing the fruits of that investment in terms of cash, betting our bottom line in 2020 So far Navigator Gas has exceeded my expectations. That is uniquely positioned through its recent investment in terminal infrastructure to provide much needed optionality, versatility and the cost effective route to market for our petrochemical and midstream partners. That investment will enable our customers to fully load their offsets, optimize the cracker complex variable costs and monetize U.S. shale advantage through access to secure export markets. I look forward to building on David's superb legacy and all his great work as we grew and develop the company and I am confident for the next 19 years will be just as dynamic and just as fruitful as the past. I am so excited to be part of it.

Thank you, Harry. And now I think we can pass some of them back to our conference and open it up for a question-and-answer

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Jon Chappell from Evercore.

Hey guys, this is Sean Morgan. I'm actually on for Jon Chappell this morning.

Good. Hi.

Hi, Sean.

So I guess my first question is on the sale and leaseback of Navigator Aurora. It looks like you guys are doing $69.75 million of the proceeds upfront, then there is a 10% sale price deferral. When do you expect that to be paid out?

Sean, this is a seller's credit. So in fact it won't be paid out. The sale is effectively a financing, or is a financing in substance. A sale and leaseback is just a mechanism of obtaining a high loan to value for finance of the vessels. So I mean – it will not feature as a sale in the accounts because substance or U.S. GAAP will determine just to be put in as a financing. And that's where the options kick back in, in the various stages.

Yes. And that's how we've been treating most of these sale leasebacks across the other sectors, tankers and bunkers. And so usually people have been kind of treating these things as there is a bit of an ARB in the cost of capital improvement for this sale leasebacks as opposed to more traditional financing. And I think you guys refinanced the 2015 facility, which has a margin of 2.1%, so should we – as we kind of model this, should we think about a margin that's kind of inside that on a floating basis or would it be a fixed basis around like 4%, or would that be kind of a floating type…

It's – no, it's LIBOR plus. So it's the same format as the banking but because of the 90% LTV, then it's 4.3%.

Okay. 4.3%, great. And then you mentioned in your press release that the strong market had started to spur a little bit of orders, in medium carriers and I guess to a lesser degree, for the handysize. And then you also mentioned in your 6-K that you might be placing newbuild orders. So I guess the following question from sort of those two statements in the documents last night is, should we be thinking that Navigator has been getting a lot of strong time charter interest to sort of cover any newbuilds, or is that still any newbuilds kind of still further out in the CapEx horizon for Navigator?

Hi, Sean. It's Oeyvind. Let me answer at least the first question regarding orders. So the handysize and particularly the Medium Size Gas Carrier segment, so the order book was extremely low at about 2%. So with the high earnings of the Very Large Gas Carriers picking up than the Medium Size today being assessed at $740,000, and the confidence in LPG production, particularly in the U.S. for export markets, as you know, what Enterprise Phillips 66, Targa, they are all thinking and doing or have announced expansions for LPG export. So the confidence is very much on the LPG side, and with the low to next to nothing order book, it's to be expected that some new building orders have been placed. But most of that has been in a medium-sized market and those ships are particularly coined for LPG and ammonia, not so much petrochemical. So that's – we haven't seen much, but you'd expect to see some orders than some of them have come. And that's really the explanation, more LPG, stronger market, it’s natural.

Buildings? Let me just clarify. Right now we have no intention of placing any orders for new buildings. I think I've made that clear in the past. So maybe reading was a little bit aggressive in what we're going to do, but our intention is clearly not to go out and speculate the order any new vessels.

Okay. Great. And then you said that 75% of the volumes are now contracted through the new export terminal, are you starting to get a clearer idea of what the shipping requirements might be for Navigator's fleet with regards to that new terminal?

Yes. So when the – sort of Phase I kicks in. So there's the commissioning cargo in December to make sure everything is fine and then the flow starts coming then January onwards. But talk about Phase I, so we know, as I mentioned in the notes that there's about – there's very limited handysize available ethylene ships on the water for next year. So out of the 30 odd ships, maybe 17 are available and they're all trading with different trades today. So those ships then have to take up the new volume that is coming from the terminal. So again, going back to extremely basic supply-demand theory, you think that the ethylene shipping market for handysize should go up because suddenly you have new volume coming from the U.S. And take-or-pay contracts and the main, the key destinations are chiefly Asia, some to Europe, and you run the ton-mile module, and you get to healthy numbers on the existing limited ships. So we expect the ethylene freights to rise once this thing is coming.

Great. Okay, thanks guys. I’m going to turn it over. Appreciate it.

Thanks, Sean.

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

Howdy gentlemen, it's Randy Giveans with Jefferies. How was it going?

Hi, Randy.

Randy, hi.

Great. Dr. Deans welcome to the call.

Thank you. Thanks, Randy.

All right. So on the last call, management mentioned utilization in the third quarter should be in line with the second quarter, which it was, and you did some explanation of kind of the weakness thus far. That said, how's utilization been kind of the past six weeks looking at the fourth quarter and do you expect utilization to be 87%, 88%, 89% in 2020?

Hi Randy, it’s Oeyvind. So for 2020, that’s a different question. For next – this quarter – fourth quarter, so I mentioned in the initial remarks that utilization is creeping upwards. We're not talking massive jumps, but the reason for that is chiefly LPG. So I mentioned that in the last six months, our proportion of LPG earnings base gone from 43% to 46% to 63%. And that is making the utilization go up a couple of notches. So whether we can maintain that, or that continues for the next six weeks until New Year, time will tell, but it's taking a little bit rosier than the 94% that Niall was mentioning in the second and third quarter. But we're not promising big jumps.

Okay. That’s fair. Slow and steady wins the race. But with that, are you confident that this would be kind of the last quarterly earnings loss for at least the next year or so?

Come on, Randy. Look, on that, we always talked about the road to 2020 how fundamentally things would change once we entered into the next year. And I think that's clearly coming about and it's within striking distance now. And in the terminal, a month from now, we'll be loading its first cargo. It's going to be an active one. We've got a number of different factors in 2020, there are number of different terminals opening up. So we're comfortable in that way, we're in this transition period, this fourth quarter and we're hopeful that the direction we've seen into the third quarter can be maintained and that by 2020 we will be rolling. I think that's what I'm trying to say in the past and I'm still holding to it. I think the excitement around obtaining these large cargo – the large contracts that bring us up to 75% was a major event for us, we're extremely excited about that. I can't tell you how happy we are and I don't think that's the end of the contracts, commitments for that terminal. So yes, I think everything is in place. The timing of any kind of breakout is of course dubious to be terribly precise, but we're moving clearly in that direction. And 2020 we will be a definitive turn in that direction, Randy.

Sure. All fair. Just wanted to give you the opportunity to give a little guidance but understand that. All right, well last question for me.

Randy, you know how volatile it is?

I am well aware. That said, you had a 12 month charter, major petrochemical producer for one of the ethane-capable vessels, excess of 30,000 a day. Any chartering activity or talks at least for some of the ethylene-capable handysize ships, especially for the new ethylene export project?

I think it's fair to say, Randy, that we're a month away from – about a month away from the commissioning the first and then the gates are open. So people are getting in line and more firmly discussing the opportunities today and last quarter. So we're discussing with a host of different people that are contracting or thinking of contracting with the ethylene terminal for freight. And we have the largest fleet of these ships, you need the large ships to get the efficiency and the economies of scale to the destination, the end-users in Asia or in Europe, so beside and we'll get there.

Sounds good. We will stay tuned. Thanks again.

Thank you Randy.

Thank you. There are no other questions at this time. [Operator Instructions]

Well, good…

Sir, would you like to take another few questions at this time please. So the first one comes from Nick [indiscernible].

Hi guys. Thanks for taking my question. Can you tell us who ordered these six MGCs in the last quarter? And are any of those ethylene or ethane-capable?

Yes. Hi Nick. Good to hear your voice. Those were ordered by Greek ship owners and they are fully refrigerated LPG carrier.

Yes, sure. Thanks. Thanks for that.

Summer, anything else?

Yes, we have one more question from the line of Ben Nolan, please go ahead.

Good morning, Ben.

Yes. Hi, this is Frank Galanti on for Ben Nolan from Stifel. Wanted to ask about the export terminals, that 75% capacity – sorry booked capacity. I wanted to get a sense if you had any destination to the cargoes, is it based on the customer mix that you guys have? Do you have a sense for where a majority of those cargoes are going to be going?

I think – Hi, Frank, I think the last earnings call, then the Analyst Day and so forth, we kind of modeled the destination 25:75 split, meaning 25% Europe, 75% to cross Pacific whether that is North Asia or South East Asia, so we haven't changed our opinion on that fundamentally. So it's about that.

Okay. And that's what's lining up with the current contracts?

Yes. You see the customers can take the cargo wherever they want, obviously. So it depends a little bit case-by-case at the time. So it's not set where some of these cargoes will go 100%.

Alright, that's fair. That makes sense. And then I guess further, I understand that expansion possibilities are present for the ethylene export terminal and that would probably be a first priority from a capital perspective, but are you guys on the path or down the road a little bit on any similar opportunities in the infrastructure side?

You're right about the priority. We do expect that sooner or later, this current terminal that were jointly owned with the Enterprise will be fully utilized, fully committed. Hopefully we can talk about that in the not too distant future. Once that is done, obviously it makes sense to sit down with Enterprise, sit down with the customers that have been knocking on the door about incremental volumes and make a decision about whether or not there is a need for further expansion of the existing terminal. So you're right, that would be a priority and it is especially important for us because as everyone knows, incremental capital expenditures in expanding an existing facility is always the most delicious part of a return on your capital. So we will be focusing on that as our priority, whether or not other opportunities on a global basis present themselves. We are looking at things. We are an entrepreneurial company, we are a logistically focused company and to the extent that something comes up, we will grab it. Harry, do you have any views on that?

Yes. Thanks David. Frank. I guess, when are these – let's get the tank commission first and prove out the nameplate capacity. Now the other thing that I would say, I've been hung about with engineers for 25 or 26 years, they always leave a good 10% to 15% off their sleeves. So I would be disappointed that we can squeeze more capacity out of the existing terminal. So let's sweat the asset and get it working like a clock and see how many tons we can squeeze out of it and then world is oyster, as David said, and we can look at other expansion opportunities.

Okay, great. Thanks for all the color. That's all I had. Appreciate it.

Thank you.

Thank you. There are no further questions at this other questions at this time. I'd like to hand back to the speakers.

Okay. Well, thank you all for joining us this morning. I think it was an exciting quarter for us in accomplishing some of the goals that we really set out to accomplish on our road to next year. And when we talk next time, it will be 2020, and hopefully we'll be seeing the tangible results of what we've been talking about. Thank you for joining us and good day.

That does conclude our conference. Thank you for participating.