Navigator Holdings Ltd.
Preliminary Results for the Three Months Ended March 31, 2019
* Navigator Holdings Ltd. (the “Company”, “we”, “us” and “our”) reported operating revenue of $76.1 million for the three months ended March 31, 2019, a decrease from $77.8 million for the three months ended March 31, 2018.
* Net loss was $3.3 million (resulting in a loss per share of $0.06) for the three months ended March 31, 2019, a decrease from a net income of $0.7 million for the three months ended March 31, 2018.
* Adjusted EBITDA1 was $27.1 million for the three months ended March 31, 2019, a decrease from $30.5 million for the three months ended March 31, 2018.
* During the three months ended March 31, 2019 the Company successfully re-financed four of its ethylene capable vessels from the 2015 Secured Term Loan Facility for an aggregate amount of $107.0 million. The repayment of the loan on the four vessels was $75.6 million, leaving net proceeds of $31.4 million for fees and for general corporate purposes.
* During the first quarter, the Company successfully executed a credit agreement for a maximum principle amount of $75.0 million to be solely used for the payment of construction costs relating to the ethylene export marine terminal at Morgan’s Point, Texas (the “Marine Export Terminal”), resulting in the Company’s portion of the capital cost of construction of the Marine Export Terminal being fully financed
* Entered into a comprehensive, multi-year contract of affreightment utilizing up to four ethylene vessels until December 2025.
* An additional long term throughput agreement signed for the Marine Export Terminal.
The first quarter of 2019 enjoyed a positive start as the strong finish to 2018 carried over into January, with strong returns on both LPG and petrochemical fixtures. However, the initial fortitude of 2019 failed to gather further momentum due to a number of far-reaching incidents, including disruptions relating to sanctions imposed in Venezuela as mentioned below.
In January 2019, the Government of the United States imposed sanctions on Venezuela’s state-owned oil company, Petróleos de Venezuela S.A., or “PDVSA”, giving ship owners until the end of February 2019 to cease trading with all related entities. At the end of 2018, PDVSA had six handy-size vessels on time charter, two of which were our vessels. By the end the first quarter of 2019, PDVSA had only one handy-size vessel on time charter. The five vessels that left Venezuela softened the shipping market in the short term, but most have since found alternative employment. The outcome of the political and economic uncertainty in Venezuela is unknown. The country’s extreme situation can only be burdened further without the LPG cabotage trade these vessels performed, which supplied fuel for cooking and heating.
These circumstances led to the Company concluding alternate short-term time charters in the U.S. Gulf – Caribbean market with various major commodity traders in the first quarter of 2019. Elsewhere, the North Sea and Baltic LPG markets have remained consistent and a good employer of handy-size vessels.
The larger fully refrigerated liquefied gas carrier market also suffered during the first quarter of 2019, with the very large gas carrier (“VLGC”) market struggling with earnings per vessel below $200,000 per calendar month (“pcm”) at times as the number of available vessels greatly outweighed the number of cargoes and demand for product. The Mariner East network on the East Coast of the US again suffered with several pipeline issues that led to unreliable exports of both LPG and ethane. This long shipping market at times also led to VLGC owners opportunistically taking cargoes from the midsize gas carrier (“MGC”) and handy-size market. Nonetheless, by the end of the first quarter of 2019 the VLGC market had turned full circle with earnings approaching $1.0 million pcm as more cargo availability and demand swung the market balance towards the ship owners. This trend, at least in the short term, should have a positive effect on both the MGC and handy-size market.
The strong performance of the ethylene sector slowed dramatically following a serious fire at Versalis’ steam cracker at Priolo, Italy in early January 2019. The halt in output meant that the traders that hold all the equity in Priolo were left with no employment for their considerable time charter fleets. These traders thus absorbed all spot tons to keep their vessels moving from January well into March, which would normally have been shipped by the wider spot fleet. This impacted both ethylene utilization and earnings. Priolo has since come back online, with the market settling back into its previous balance. Exports from Targa Terminal in the U.S. remained steady and are already booked at full capacity for the second quarter, with all cargoes to be loaded on our vessels.
The long-haul butadiene arbitrage from Europe to Asia was closed for most of the first quarter of 2019, with the Far East over-supplied locally. There have been regular movements on butadiene, butene-1 and crude C4 from Europe to the US, however. This, accompanied by the long-awaited U.S. Propylene export trade finally coming to life, has created new opportunities for triangulation in the Atlantic basin across the petrochemical streams. This is expected to continue for the remainder of 2019.
We have also seen increased exports from the Middle East – Saudi Arabia and Abu Dhabi in particular – on both propylene and ethylene, following years of unreliable production.
Petrochemical sector voyages achieved charter rates of up to approximately $24,000 per day during the first quarter of 2019, whereas rates for standard LPG transportation remained at approximately $14,500 per day. Moreover, we concluded charters with five new charterers during the first quarter of 2019. This shows the continued adaptability of our fleet to accommodate difficult market situations and develop new opportunities.