Highlights
- Navigator Holdings Ltd. (the “Company”, “we”, “our” and “us”) (NYSE: NVGS) reported operating revenue of $119.8 million for the three months ended March 31, 2022, compared to $85.7 million for the three months ended March 31, 2021.
- Net income was $0 million for the three months ended March 31, 2022, compared to $2.8 million for the three months ended March 31, 2021.
- Earnings per share was $0.35 for the three months ended March 31, 2022, compared to $0.05 for the three months ended March 31, 2021. Earnings per share, adjusted to exclude unrealized gain on non-designated derivative instruments of $15.2 million and the foreign currency exchange loss on the senior secured bonds of $0.8 million was $0.16 for the three months ended March 31, 2022, compared to $0.04 for the three months ended March 31, 2021.
- Adjusted EBITDA(1) was a record $7 million for the three months ended March 31, 2022, compared to $31.0 million for the three months ended March 31, 2021.
- Fleet utilization was 89.5% for the three months ended March 31, 2022, compared to 88.2% for the three months ended March 31, 2021.
- The ethylene export marine terminal at Morgan’s Point, Texas on the Houston Ship Channel (the “Marine Export Terminal”) had throughput volumes of approximately 267,110 tons for the three months ended March 31, 2022, compared to 90,376 tons for the three months ended March 31, 2021.
- On January 14, 2022, the Company sold Navigator Neptune, a 2000 built 22,000 cbm ethylene carrier for $21.0 million.
- On March 7, 2022, the Company sold the Happy Bird, a 1999 built 8,600 cbm LPG carrier for $6.1 million.
- Debt reduced by $22.9 million during the three months ended March 31, 2022, with cash, cash equivalents and restricted cash standing at $168.1 million as of March 31, 2022.
The Company’s financial information for the quarter ended March 31, 2022, included in this press release is preliminary and unaudited 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 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 March 31, 2022, is finalized.
Effect of Russian Invasion of Ukraine
We currently have four charterparties with a Russian counterparty that were entered into in 2012 and 2017, two of which expire in June 2022 and two that expire in December 2023. These charterparties cannot be terminated without the consent of both parties, unless the counterparty was to become a sanctioned entity or our dealings with that counterparty were to be otherwise prohibited by sanctions, which would render the charters void. The charter parties that expire in June 2022, will not be extended and both vessels have instead been chartered for a twelve month period with a leading Nordic producer of petrochemicals.
At the beginning of the Russian invasion of Ukraine, we had employed an aggregate of approximately 120 Russian and Ukrainian officers on board our vessels, many of whom were on the same vessels. We have thus far only experienced solidarity onboard and have had no issues in operating these vessels. The total number of combined Russian and Ukrainian officers has reduced to below 100 on our vessels. We continue to monitor this situation closely, and there may be restrictions, logistical challenges or an inability to employ both nationalities in the near future.
Marine Export Terminal
Ethylene throughput for the first quarter of 2022 at the Marine Export Terminal totaled 267,110 metric tons. Throughput to international markets in each of January and March 2022 exceeded 100,000 metric tons, affirming the capability of the terminal to export above the nameplate capacity of one million metric tons per year. February 2022 experienced less volume due to reduced ethylene demand leading up to the Lunar New Year and the Winter Olympics being held in China. April and May 2022 volumes remain strong at around 100,000 metric tons, reflecting demand from producers and end users for competitively priced U.S. ethylene monomers.
Shipping Trends
The handysize semi-refrigerated and fully-refrigerated 12 month time charter rate assessment increased by $5,000 per calendar month (“pcm”) and $15,000 pcm, respectively, during the first quarter of 2022, to $685,000 pcm and $635,000 pcm, respectively, with the most recent weekly shipbroker reports showing a further increase to $705,000 pcm and $650,000 pcm, respectively. The handysize ethylene 12 month time charter assessment has increased from $875,000 pcm at the beginning of 2022 to a current level of $900,000 pcm.
The rise in shipping rates can generally be ascribed to three principal underlying factors. First, the Ukrainian conflict is disrupting traditional supply sources, challenging the historical sourcing of product supply from the closest geographical location. European customers are increasingly looking further afield when sourcing products, which results in longer seaborne voyages for the gas shipping industry. This is true for all the products we transport, across LPGs, petrochemicals and ammonia. Secondly, U.S. natural gas liquid (“NGL”) production and exports are on the rise. According to EIA, U.S. propane production for April 2022 is 7% above the level for April 2021 and is likely to be the highest level on record since the commencement of shale gas production. Seaborne export volumes of propane during April 2022 were up 14% compared to April 2021. Increased production and exports are also seen across other NGLs and derivative products. U.S. ethylene exports reached a record high of 137,000 metric tons during April 2022 bringing incremental demand for seaborne transport. Thirdly, there is less substitution effect across the gas carrier segments. Increased U.S. exports of LPG are providing incremental shipping demand, which is positive for larger gas carriers, which in turn reduces competition from other size categories within the LPG shipping segment. This dynamic also applies to the handysize segment. When ethylene capable vessels are employed in ethylene or ethane trades, and when fully-refrigerated vessels are employed in ammonia trades, there are less vessels competing for LPG and the more straightforward petrochemicals, which in turn is positive for the semi-refrigerated sub-segment of the handysize vessels. One recent example was a charter extension for four semi-refrigerated vessels currently employed carrying LPG from the west coast of North America, which achieved a charter rate increase of approximately twenty percent over the charter rate agreed a year ago.