Navigator Holdings Ltd. Preliminary Third Quarter 2020 Results
* Navigator Holdings Ltd. (the “Company”, “we”, “our” and “us”) (NYSE: NVGS) reported operating revenue of $81.4 million for the three months ended September 30, 2020, compared to $75.6 million for the three months ended September 30, 2019.
* Net income was $1.5 million or an earnings per share of $0.03 for the three months ended September 30, 2020 compared to a net loss of $2.9 million or a loss per share of $0.05 for the three months ended September 30, 2019.
* Adjusted EBITDA(1) was $31.9 million for the for the three months ended September 30, 2020, comprising $27.5 million from the operations of the vessels and $4.4 million from our 50/50 joint venture (the “Export Terminal Joint Venture”) relating to the ethylene export marine terminal at Morgan’s Point, Texas (the “Marine Export Terminal”). This compared to $29.5 million for the three months ended September 30, 2019.
* Fleet utilization decreased to 78.8% for the three months ended September 30, 2020 compared to 6% for the three months ended September 30, 2019.
* On August 4, 2020, we amended our Terminal Facility to provide for a total availability of $69.0 million and to enable the immediate drawdown of $34.0 million for general corporate purposes.
* On September 10, 2020, issued new senior unsecured $100 million 5-year bonds at a fixed coupon of 8.00% per annum to refinance the 2017 Bonds that were scheduled to mature in February 2021.
* On September 17, 2020, entered into a new $210 million revolving credit facility to refinance one of its secured credit facilities which enabled the Company to borrow an additional approximate $30 million for general corporate purposes.
* Following the execution of the above facilities, our cash and undrawn amounts available from our loan facilities has increased significantly during the quarter, to approximately $120.0 million at September 30, 2020, with no further loan maturities until April 2022.
* We have achieved a record of 714 days without a Lost-Time-Incident (LTI) across our in-house technical managed fleet of 17 vessels.
The Company’s financial information for the quarter ended September 30, 2020 included in this press release is preliminary and is subject to change in connection with the completion of the Company’s quarter-end close procedures and further financial review. Actual results may differ from these estimates as a result of the completion of the Company’s quarter-end closing procedures, review adjustments and other developments that may arise between now and the time such financial information for the quarter ended September 30, 2020 is finalized.
Ethylene Marine Export Terminal
The ethylene Marine Export Terminal continues to be operational although throughput has been affected by hurricane Laura, which disrupted power supply to nearby ethylene crackers, reducing the availability of ethylene to export. The 30,000 ton storage tank, which will increase the terminal’s throughput capacity, is currently being commissioned and is on schedule to be operational in December. Thereafter the committed offtake agreements, which have minimum terms of five years, are expected to result in approximately 940,000 tons of annual throughput.
The Company contributed $7.5 million to the Export Terminal Joint Venture during the third quarter of 2020 with a draw down on the Company’s Terminal Facility. In addition, since September 30, 2020 the Company has contributed a further $2.0 million to the Export Terminal Joint Venture, also drawn from the Terminal Facility. To date the Company has contributed $142.5 million of our expected share of the approximate $146.5 million towards the capital cost of the Marine Export Terminal.
Notwithstanding the disruptions to the global economy due to the COVID19 pandemic, the commercial environment coming into the third quarter of 2020 was relatively stable. With the Asian markets emerging from governmental lockdowns sooner than those in the West and less susceptible to further pandemic waves, arbitrage opportunities opened and remained into the summer months. The initial demand for ethylene exports from our Marine Export Terminal continued apace into July and the first half of August, including a world record for the largest ethylene cargo ever loaded – 20,000mt on Navigator Eclipse (37,500cbm / MEGC), that was delivered to China.
However, in mid-August, with predictions of hurricane Laura making landfall in Louisiana, ethylene producers initiated precautionary procedures by shutting down various crackers. Hurricane Laura’s impact was considerable and long-standing in the Lake Charles area of Louisiana where approximately one quarter of U.S. ethylene production is located. Although minimal physical damage resulted from the hurricane, the local power grid was severely impacted and multiple producers had to wait for the local utility companies to re-establish electricity supply before re-starting their ethylene crackers. This reduction in U.S. domestic ethylene production lead to U.S. ethylene prices rising sharply due to reduced supply, much of which was consumed domestically with only limited volumes available for exports. Expected increased ethylene export volumes for September and October following the severe hurricane season and the impact on the Lake Charles area by hurricane Laura did not materialize, reducing throughput at the terminal as well as our expected earnings days for the ethylene fleet. Our utilization for the spot fleet reduced in September and October as a direct consequence. The ethylene vessels that were ballasting into the U.S. Gulf during this period were forced to compete with semi-refrigerated and fully-refrigerated non-ethylene petrochemical cargoes and LPG, where available.
Electricity is now restored in the Lake Charles area and the ethylene crackers have re-commenced production. U.S. domestic ethylene prices are softening and the market dynamics are returning to what we experienced during the summer months; low U.S. ethylene price creating arbitrage with the rest of the world, thus providing employment for the ethylene fleet. We expect our utilization level to rise as a result of the widening of the ethylene arbitrage for November and December.
As well as lifting the world record ethylene cargo on Navigator Eclipse, our midsize ethylene/ethane carriers had a positive quarter in the ethane market. We extended an existing time charter to a large European chemical player for a further year and concluded a new three year time charter with a large Chinese chemical producer.
Very Large Gas Carriers had a solid quarter, regaining much of the losses of the previous three months, The Baltic spot index rose by 85% during the third quarter of 2020, but in contrast the handy-size vessel twelve month charter assessment declined slightly from $620,000 pcm to $605,000 pcm reemphasizing a stable profile due to the vessels’ flexibility in trading in LPG, petrochemicals and ammonia markets.
The impact of COVID-19 continues to affect global economic conditions that effect our business, financial condition and the results of our operations. The ultimate longevity of the COVID-19 pandemic is uncertain and its future effects depend on the spread of the outbreak and the reactions of various national governments to the virus. Therefore, an estimate of the likely impact cannot be made with certainty at this time.
Crew changes remain a challenge, similar to most shipowners, although an increasing number of crew changes have successfully occurred during the quarter, with 49 crew members now with overdue leave of an average of 34 days. Drydocking vessels too has been difficult with some yards closing on short notice. However, drydockings have occurred at various dockyards around the world and the Company has completed five drydocks during the third quarter, with a further three being scheduled for later in 2020.