Navigator Holdings Ltd (NVGS) 2014 Q4 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings conference call on the fourth-quarter 2014 financial results. We have with us Mr. David Butters, Chairman, President and Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; Mr. Oeyvind Lindeman, Chief Commercial Officer; Mr. Tommy Hjalmas, Chief Operation Officer; Mr. Paul Flaherty, Director of Fleet and Technical Operations.

(Operator Instructions)

I must advise you this conference is being recorded today. And I now pass the floor to your speakers today. Mr. Butters, please go ahead, sir.

Thank you, Julie, and good morning, everyone, and welcome to Navigator's year-end Earnings Conference Call. Over the past half year or so, we have witnessed some of the negative impact of Saudi Arabia's redirecting of its energy strategy to keep the oil prices low and to maintain its market share. Companies engaged in providing drilling services, production enhancement, and oil-field equipment have seen their revenues plummet, the capital expenditures curtailed and, many cases, dividends cut or eliminated.

But if a certain amount of gloom has set in among the US energy producers and investors, one place it hasn't reached is Navigator Gas. Navigator has managed through this difficult time, achieving record revenues, record earnings and record cash flow and, more importantly, we see this trend continuing through 2015. Our immunity to the Saudi contagion is best exemplified by our fourth-quarter earnings per share of $0.44, twice what we achieved a year ago.

Niall Nolan, our Chief Financial Officer, will shortly cover the details of the quarterly performance as well as the full year. And Oeyvind Lindeman will follow that with an update of the commercial activity and the market update.

Now our success is in part the result of the continued growth in the supply of global, and I stress the word global supply, of LPG and the resulting demand for seaborne transportation which has not been materially dampened by lower crude pricing. Moreover, Navigator continues to be the shipping company of choice for a wide range of charterers, not least because we have a dominant position in modern technologically advanced vessels for the LPG and petrochemical gas markets.

Our success is also the result of the unique partnership forged among our customers, employees, and other stakeholders. Throughout the year, we've worked hard to understand our customers' capabilities and needs and we believe this effort brought a closer alignment between our Company and our customer base.

Our fleet is a strong. It is modern and is reflective of both customer needs and industry trends. By April of this year when the fifth handysized ethylene capable new build is delivered, Navigator will own 10 handysize vessels capable of carrying both ethylene and ethane, as well as a full range of LPG products, putting Navigator in an unchallenged position in a segment that is expected to experience exceptional growth over the next decade.

Our preeminent position in the handysized ethylene -- ethane market will be reinforced upon delivery of our four, 35,000 cubic meter ethane vessels currently being built with delivery expected from mid-2016 and extending into early 2017. While our business is strong and is expected to remain strong, the perception remains that somehow the fate of Navigator, and indeed all LPG-related companies, remains inexorably tied to the price of oil.

While I will not speak to the market for very large gas carriers, except to note that it is a very different business from ours. Ours is a semi-refrigerated and a very different and distinguished business, but I will argue that the crude price levels have only a marginal impact on the demand for Navigator vessels.

It is a basic premise that lower crude prices generally result in stronger demand for oil and its derivatives such as LPG. And indeed we are seeing that growth. Furthermore our business is truly an International trading business with no country or company the source of more than 12% of our revenues.

We also carry a diverse group of products. In addition to our core LPG market, we carry ammonia and a variety of petrochemical gas products. We believe our geographical diversity and ability to carry a wide range of refrigerated and ambient products is our strength.

Now I'm not saying that crude pricing and product differentials don't have some degree of marginal short-term impact on our business. Obviously, price volatility and diminished spreads will influence a trader's behavior in any one moment in time and consequently a cargo may get deferred for a day or two, and sometimes a bit longer, but eventually it does get sold and it will be transported. I believe the fourth-quarter results reflect product elasticity and not charter-rate elasticity, as we are confident that our results will progressively show that our business is reasonably immune to crude gas differential.

Now, last week we concluded the fixture that I believe pretty well reflects what we have been saying about our unique diverse mix of business, as well as the related indifference to crude gas differentials. We fixed the full cargo of ethylene from Targa's Houston terminal to the Far East for a major customer.

This was not done on a VLECs, nor was it done on a midsize ethylene carrier where the economics of scale can play a roll. It wasn't done on them because there are none. It was done on one of our new 22,000 cubic meter ethylene carriers.

This voyage, which will take around two and half months on a round-trip basis, reflects the charterer's belief that ethylene from the US can be bought and transported halfway around the world and be at a profitable trade for the buyer. The reason the trade works is simply the price flexibility of the product; in this case, ethylene. We are hopeful that more of these profitable voyages develop over the coming years as America builds out its ethylene manufacturing capabilities.

Finally, a word about large-scale US ethane US exports. Since our last conference call, we have seen no further contracts entered into with producers or terminal operators, but at the same time, we know that interest remains strong and, to our knowledge, no Company that was previously discussing export projects has terminated discussions or lost interest. It is understood that and understandable that importers are grasping to understand the long-term implications of the Saudi move and the impact it will have on their overall business.

We believe that further ethane and ethylene exports will develop over time, and we are in a prepared mode to act, should we be fortunate enough to be included in any of these projects.

Now with that, I'd like to hand the conference call over to Niall to run through the fourth-quarter numbers for you.

Thank you, David and good morning. The 2014 fourth-quarter results and those for the full year of ended December 31, 2014, were undoubtedly a record for Navigator Gas with full-year revenue up 27% at $305 million and net income of 106% at $84 million. The Company has clearly demonstrated significant growth over the past year and one which we expect to continue with our existing new- build program in place and the marked lack of any significant volatility in our charge rates, despite the turmoil in the oil markets.

Operating revenue for the fourth quarter was up 16.5% at $78.4 million compared to the fourth quarter of 2013. This $11.1 million increase derived $5.2 million as a result of the increased fleet size compared to the fourth quarter of 2013; $7.2 million from an improvement in our utilization rate to 94.8% for the quarter; and $3 million from increased charter rates which rose from $830,500 per month or $27,300 per day in the fourth quarter of 2013 to an average of $912,000 per month or $30,646 per day for the most recent quarter.

Set against this was a reduction in revenue of $4.3 million as a result of undertaking the less higher generating spot businesses and more time-charter business relative to the fourth quarter of last year. For the year as a whole, operating revenue rose by $66.5 million to $305 million, an increase of 27%, as I just mentioned. The majority of this increase, $49 million, relates to increased fleet size following a full-year's trading of the 2013-acquired AP Moller handysize fleet, as well as our own three additional new builds delivered during 2014.

In addition, operating revenue increased by $14 million as a result of increases in charter rates over the past year referred to a moment ago and approximately $12 million as a consequence of increased vessel utilization to 97.3% for the full year, just above our ten-year average utilization rate of 97.26%. We ended the year with a total of 26 vessels in the water as at December 31, 2014, following to deliver of Navigator Oberon on December 5, our third new build delivered during 2014, and the return of Maple 3, our chartered in vessel which occurred in late December.

Our new build order book stood at 12 vessels at December 31, although Navigator Triton, an ethylene carrier, has since been delivered on January 9, 2015, taking our current order book to 11 vessels. As well as taking delivery of an expected three new buildings during 2015, we will undertake eight dry dockings during the forthcoming year, the first which is undergoing dry docking as we speak. Cost of dry dockings are principally capitalized and amortized over the period until the next dry docking in either two and a half years' time or five years' time, but we do not earn revenue for approximately 20 to 30 days per vessel while each vessel is either in or sailing to or from the dockyard.

Voyage expense decreased in both the fourth quarter and the full year of 2014 by approximately $4.3 million, as we earned more time-charter revenue as a percentage of total operating revenue during those periods relative to the equivalent periods in 2013. As I explained previously, our voyage expenses such as bumpers, port costs and canal tows, are a pass-through cost on spot charters, and therefore movements in these costs can essentially be disregarded as they are an evolution of the charter mix between spot and time charter.

Vessel operating expenses, however, are a real cost to us as they include cost for crewing and maintaining the vessels. These costs reduced by 3.5% for the fourth quarter relative to the fourth-quarter of 2013 as costs were carefully controlled. For the full year ended December 31, 2014, vessel operating expenses increased by 25% to $70 million, solely due to the increase in fleet size.

Despite the overall increase this overall increase in vessel operating expenses, the average daily rate per vessel reduced for the full year from a daily rate of $8,115 over the 12 months of 2013 to $8,068 during the 12 months ended December 31, 2014. General and administrative costs and other corporate expenses rose by approximately 30% to $9.6 million for the 12 months to December 31, 2013, to $12.6 million for the 12 months of 2014. This was as a consequence of additional costs attributed to an increased number of employees associated with the fleet expansion and also as a result of increased costs associated with being a publicly listed Company.

Interest costs reduced by $0.8 million from $8.2 million for the fourth-quarter of 2013 to $7.4 million for the three months ended December 31, 2014, as overall borrowings decreased despite drawing down $90 million associated with the delivery of the three 2014 new buildings. We previously reported prepaying $120 million in July 2014 against one of our bank loan facilities from surplus cash as a result of the 2013 IPO. And since then we have redrawn half of that $60 million for installment payments on some of our new buildings, leaving a further $60 million available for future drawdowns.

Overall interest for the full year ended December 31, 2014, rose 5.4% to $30.3 million as the level of borrowings throughout the year were greater than those for the compared period in 2013. Net income rose by a significant 123% and 106% for the fourth quarter and 12-month period to December 31, 2014, respectively relative to the equivalent periods in 2013.

Earnings per share rose to $0.44 for the fourth quarter based on weighted average number of 55.6 million shares in issue, compared to $0.22 for the fourth quarter of 2013, based on a lower 49.8 million shares in issue at that time. This results in an earnings-per-share of $1.53 for the full 12 months of 2014 compared to $0.89 for the 12 months of 2013. EBITDA for the three months to December 31, 2014, rose 47% to $44.1 million, compared to $30 million during the fourth quarter of 2013 and also increased by 50.6% for the full year to $161.3 million from $107.1 million for the full year of 2013.

Now looking at the balance sheet, cash at December 31 stood at $62.5 million, down from $194.7 million that we held at the end of 2013. This follows the $60 million net prepayment on the bank loan mentioned a moment ago and the total of $220 million paid to the shipyards for a combination of the three vessel deliveries against which we drew $90 million from the secured bank loan and further installments on the other vessels currently under construction.

During 2015, we expect to pay $194 million to the shipyards, $48 million of which has already been paid, principally on the delivery of Navigator Triton which was delivered, as I mentioned, on January 9. At December 31, 2014, we had total commitment to the shipyards of $561 million, which we expect to finance from existing cash resources and additional debt financed.

As previously announced, we entered into a $278 million facility on January 27, 2015, effectively upsizing a previous $120 million facility. This facility has and will in the future fund the cost of the five 2014-2015 ethylene carriers and the four subsequent semi-refrigerated new build deliveries.

The terms of this loan are more favorable than its $120 million predecessor with the term of the loan increased up to seven years from each vessel delivery, the loan to value funding of 70% of the construction costs and interest at a reduced blended rate of 2.5% above US LIBOR. However, there is a requirement to write off $1.8 million of deferred financing costs on the original $120 million loan in the first quarter of 2015 in accordance with US GAAP, despite this loan being an enlargement of the previous loan.

Net debt at December 31, 2014, was $480.3 million, equating to a debt-to-capitalization rate of a modest 35%. Our average cost of debt is 4.7% on our outstanding debt at December 31, 2014, and this includes the 9% payable on the $125 million bond.

In summary, so it was a record 2014 results, and although the first quarter of 2015 will be impacted by seasonal market softening, which Oeyvind will comment on in a moment, we believe the quarter one 2015 outcome will be just slightly shy of this record fourth-quarter 2014 result, excluding the aforementioned affect of the $1.8 million write-off in deferred financing costs which will equate to about $0.03 and earnings-per-share of about $0.03.

And with that, I thank you for your attention and I'll turn the call over to Oeyvind Lindeman.

Thank you, Niall, and good morning all. I'll try to be brief. We carried 6.25 million tons of LPG, ammonia petrochemical gases during 2014. That was up from 4 million tons during the previous year. These liquid gases were transported over 550 voyages. We called 1,288 ports across the globe and performed 378 ship-to- ship loading and unloading operations.

At year-end, our fleet consisted of 26 vessels, 20 of these at the time were traded under time charters, and the remaining six traded in the spot market. The average coverage, then, for 2014 stood at 67%, slightly above our historical level of about 60/40 split.

Typically the US domestic LPG demand increases during the winter months due to heating with the consequence of reduced seaborne exports of natural gas liquids from, in particularly, the US East Coast. This effect was eroded last January and February due to the combined influence of the polar vortex and low LPG inventories, which resulted in an extraordinary situation whereby we imported European LPG to the US East Coast, maintaining a healthy transatlantic trade during the winter months. Despite the cold spell experienced in many parts of the US during this winter, the high level of domestic LPG inventories being a direct consequence of the ever-increasing shale gas production, mitigated the need for imports.

In parallel, the usually active MGM hub, export hub, in (inaudible) Philadelphia reduced the volume available to International customers, which has softened the transatlantic trade market somewhat. That said, the US producers and exporters, in correlation with rising spring temperatures, are now very much back in the market offering volumes available for export and for us to transport.

Last week Clarkson's issued -- every week they issue a 12-month time charter assessment for our segment and last week that stood at, for a 12-month handysize semi-refrigerated shipment, at $32,800 a day and the fully ref'd (inaudible) at $27,900 a day, and that was last week. Thank you.

Good. We can open the conference call now, open to questions.

Thank you.

(Operator Instructions)

Ben Nolan, Stifel.

I have several questions and I'll try to keep them brief. But my first question relates to some of the vessels and, Oeyvind, you mentioned it, that are currently on contract. But going over the list, it looks like that 11 of them come off contract between March and May.

I was wondering if you could maybe give me a little bit of context about should there be any rollover in terms of the time charter rates at maybe higher levels or approximately the same as where it was? Any color that you can add to that?

Oeyvind, you can do that one.

Typically, as you know, Ben, the market we are in, the segment we are in, is typically 12-months time charters, plus or minus. And, therefore, throughout the year, typically these charters are rolled over to another 12-month time charter. So invariably, wherever you are starting the year, these ships regularly will be extended.

However, the vessels you did mention, we've extended a few of them already, being only middle of March, some were options, some were new. But as a guidance, at least for the options that were declared, that is in line with the Clarkson assessment that I mentioned.

Doug Mavrinac, Jefferies.

First off, congratulations on a great quarter. Despite all the uncertainty out there, I think on the part of some people in the marketplace, a record quarter in that type of environment is quite an accomplishment.

My first question pertains to the quarter itself. There are two things that jumped out at me. And obviously, Oeyvind, you mentioned the springtime and how we all know things get seasonally soft, but during the fourth quarter oil was in decline, yet the charter rate environment was very strong. So before the winter started to disrupt things, Oeyvind or team, what one or two things out there did you see being the primary driver behind demand in the face of a declining oil environment that caused these rates to be so strong that you guys reported?

Oeyvind, why don't you reflect on that one?

I think, Doug, it's an excellent question. We always ask ourselves that question too, but it boils down to the fundamentals of LPG being a supply-driven product.

Right.

The shale gas production in the US is not stopping anytime soon. It's been increasing ever since it started with more volume that needs to be exported. Yes, you have big storages in the US, in particular in Mount Bellevue, but still is an International market for that. So I think fourth quarter, the real driver, as called through last year, really US exports.

I mean, the existing terminal operators in the US in [cargoes] Sunoco Enterprise, they were chockablock -- they were first selling out all the available dock space to the range of different vessel sizes, including ours. And I think that was the main -- if we're going to mention something, that was the main point for fourth quarter.

Perfect. That's very helpful. And then as we extrapolate that concept into 2015, the supply- driven market that the US represents, can you guys talk about how your ships may be advantaged versus, say, some of your peers or versus some of the bigger VLGCs given what you know about the specifics about Marcus Hook or Occidental or what have you? Your ships may be more desirable, given some of the specifics behind the export requirements for the projects that are planned to come online in 2015.

Oeyvind, if you mention the Occidental and the expansion in Marcus Hook, I think that would be helpful to be responsive to Doug's question.

Yes. The Occidental terminal opening up in Ingleside, Texas, which is a big ex-Naval base, they have huge dock space, they are gearing up for export of ambient, i.e., warm propane and butane, straight off the pipe there which navigated ships and the refrigerated vessels are the largest ships that can load this kind of product because of temperatures.

So we will definitely benefit very much from that specific terminal. The timeframe for that, last time we met with Occi, they were talking about June this year.

And then in Marcus Hook, in particular being close to Europe, European ports, may -- some of them or many of them cannot take a VLGCs, a large ship or they might, even on storage for demand for a larger volume. We go there regularly from the US. Also the US Gulf and US East Coast to Europe and to Mediterranean West Coast African ports, but the Mariner East 1 pipeline is coming.

We expect -- or Sunoco is mentioning the second quarter of this year which will ramp up volume for Marcus Hook in particular. And in the meantime, [Mark West], the other producers and exporters on the US East Coast, have also communicated to us that the volumes are definitely on the rise now; that during the springtime they need to get -- hard to say, but they need to get rid of this product because they have it and they need an out.

Ben Nolan.

Actually, my question I was going to ask is sort of related to what you were talking about on Marcus Hook there. I was looking at some of the things that Sunoco had put out and they're talking about the possibility of a new polypropylene or, sorry, a propylene export facility there, which obviously I would assume would have to go on a gas carrier like yours.

Are you guys seeing -- I know that, David, you had mentioned fixing a cargo of ethylene from the Gulf Coast to Asia. Are you guys seeing much momentum in terms of the pet chem side on longer haul voyages, which obviously lends itself to a larger ship?

Sure. I'll let Oeyvind talk about the Mideast, and what we're doing on ethylene in a second, but pet chem is a future for a lot of our activities. It's not understood. They're complicated vessels that have to carry this product, sometimes you carry different grades and different products in each of our tanks. Some of it will be refrigerated and some ambient. So it's a complicated business to trade.

But if you listen to Sunoco logistics and what they want to accomplish in their Marcus Hook facility, which is a large facility that is just now awakening, if you will, because up to this point, the product coming in to them has been essentially being trucked in from the Marcellus, trucked in or rail car'd in. And they're opening the first of the pipe with Mariner East 1.

In their expansion of over 270,000 barrels a day that will begin in the second half of late 2016, they anticipate a lot of pure grade product to be exported. But their game plan is to use that facility to upgrade, to make propylene for example and other upgraded products; part to create jobs and business activity in that part of the country and to encourage the regulators and so on to be kind to them and they're getting their permits. But it's a good economic strategy for the Philadelphia area, but it's a brilliant thing for us because our vessels are the largest of the petroleum gas vessels.

We are the VLTCs, if you will, of the petrochemical gas markets. Evidenced by the fact that we can be economic by carrying propylene -- sorry, ethylene from the US Gulf all the way to the Far East. We also have another interesting product cargo being loaded next week or the week after in South America that is even more complicated because we have ethylene in one cargo and propylene in the other cargo, so that will make a full cargo and it's going just as far. I didn't mention that, but that again shows flexibility in the developing petrochemical gas market.

We talked about the ethylene. We are going to have an awful lot of excess ethylene coming out of the United States and a lot of that will be upgraded to pellets and shipped in bulk form.

I believe that the facilities and terminals in the Gulf Coast that have ready access to the ethylene manufacturers will be looking to export a lot of their liquids -- not till 2017, so it's not near term, but it's a market that we are going to build into and we are building our vessels into that market. And hopefully the vessels come at the same time as these facilities open up.

So it's a complicated mix. I have, again, to stress the difference between the VLGC market, which is going to have really one function, and that is to haul propane, refrigerated, fully refrigerated propane from the Gulf Coast of Mexico -- Gulf Coast in the United States to the Far East or from the Persian Gulf to the Far East. And they return empty.

It's a shovel business; it's a one product business. It's a fully refrigerated business. And that's just not what we are. We are a much more complicated, technically complicated, and the marketing and chartering is far more detailed than what these other companies are doing. And I'm very optimistic that the petrochemical gas market, as you rightly point out, Ben, is developing both in the Mideast and certainly in the United States on the Gulf Coast and it will be in the East Coast as well.

But, Oeyvind, why don't you mention what's happening in the Mideast as far as the ethylene business that we're picking up now?

On petrochemicals, we've seen a size creep, larger is better because of economies of scale which falls into our domain. Now, on the Middle East ethylene exports, we are the ones doing most of the ethylene molecules from [re wise] the Middle East to Europe. So at the minute we have three ships going back and forth as a floating pipeline servicing that trade delivering ethylene to the European markets.

In addition, there are expansions going on in the Middle East, particularly also in propylene. In a few months, there's 200,000 tons, 300,000 tons of propylene coming to market that needs to find a home and a home where it's not -- where is further afield, is Far East, is Europe, potentially even the US in the short term. So that also falls into the domain of our size vessels. So I think, on the petrochemical side, it's a lot of scope for an upside for Navigator, trading in that environment.

Jon Chappell, Evercore ISIS.

It's Evercore ISI. First question, which I'm surprised hasn't been asked so far, is an update on the three remaining 35,000-cubic meter ethane carriers that have not been contracted longer-term yet. Can you give any progress reports on those? And given what you talked about in the broader industry, any thoughts about maybe chartering those shorter-term right out of the yard until longer-term contracts emerge?

Those vessels aren't due to us until approximately the fourth quarter of 2016. The first vessel coming out will be dedicated to Borealis on the long-term charter. We're excited about that and they're pleased with that vessel and how it's progressing.

We are in talks with others. Obviously it's a little sensitive, but I'm trying to put it this way, that there has been seemingly no letup in interest in ethylene carriage from the United States -- ethane carriage from the United States to -- these are really designed for European-type of markets, Atlantic basin type of markets where they can fit in and be very economic.

I think things have been deferred a bit, as I tried to point out, some decisions have to take a little bit longer time as people evaluate changes. I think some things will gel a little earlier than later. By our next conference call, I hope -- this is always dangerous to say, but I would hope that we would have something more tangible to talk about.

But on specific charter. But, on the other hand, those vessels today would be operating -- if we had them in the market, they would be operating at a very profitable rate and would be making very good money, whether it be hauling fully refrigerated propane or we would be possibly handling ethylene or some other complex petrochemical gas. If the economics work for a handysize vessel to go halfway around the world carrying ethylene, they will be just terrific if they carry on a 35,000 cubic meter ethane carrier, because ethane and ethylene are the same thing.

So I'm not concerned, whatsoever, about those vessels coming to the market. I just want them sooner than later, but they take time to build.

But long and short of it, my preference, obviously, would be to put them on long-term charter, just to build that core industrial leg, built upon long-term charters, that would be very nice, even though the monetary returns might not be as attractive as offering them today in the spot market.

Omar Nokta, Clarksons.

This has been helpful and a lot of my questions have been answered. I did want to ask a little bit about the potential for a dividend. I know this is something that's been brought up in the past and you're still definitely in the growth phase, with several new buildings coming on this year and over the next couple of years, but how do you think about it where we are in the cycle and where you are in the corporate life cycle? Where are you on returning capital to shareholders?

Always a good question. I just answered that to our Board yesterday.

Look, I mentioned in my prepared remarks that the ethane trade, particularly on the larger vessels that we don't own are not even having contracted to build, that business may develop at any moment. It's been deferred. People are evaluating what is happening in the oil markets, evaluating the economics, evaluating a variety of other things.

But a lot of work has been done by the potential charterers. And they have not killed anything related to ethane exports. It's still in the process of evaluation. Some of them are closer than others. And if we were to get a call tomorrow to be part of a major project, it would require probably capital up to maybe $500 million to $600 million, $700 million of capital expenditures on our behalf to build new, very large ethane carriers.

I want to be in the position to be part of that. If we start a dividend policy today, or indeed any kind of use of capital outside of building our own steel, then I think we might jeopardize either the project, being part of it in a full way, or we would have to revisit the decision to pay dividends. I don't want to do either one of them. I want to be part of it.

So I think my attitude is we're building a strong Company. We are very robust financially. We can handle everything very easily with what we have with our capital program that's in place today. And indeed, our projection at the end of three years, we're going to be very -- contingent be very cash-rich in a very strong balance sheet.

But I want to be prepared. I think short-term decisions is a mistake. I want to be there if something develops quickly.

And that's the long and short of it, it's a simple but honest answer. I'm not dismissive of a potential major program and I want to be part of it; very much so.

Andrew Casella, Imperial Capital.

Congrats on the quarter. When we look at the downtick in commodity prices in the fourth quarter, can you frame the trendline from October through December? And then, obviously you guys have not provided guidance in the past, but how are you seeing trends and strength even with oil at around $40 in the first quarter?

I'm not quite sure I understand the question, Andrew. Could you --?

Sure. Let me ask it again. Throughout the month when you saw weakness in the commodity pricing, I mean the quarter, in the fourth quarter, from October, November, December, would you say it was directionally downward? Was it stable? I'm trying to frame incremental (multiple speakers).

The only thing I could say, John, it doesn't have a trend. What it does have is, with the volatility as dramatic as it was in the fourth quarter, when it moves down as quickly as it has, you may have a delay on the part of a buyer of a cargo of X simply because yesterday, he or she may have purchased it at $1 and it's changed dramatically, so they hold off a day or two before they commit finally to do it.

It's only a hesitation, not a delay, and there's no real trend. So it doesn't really trend with the price of oil. It's only does -- only kind of like a trader's mentality. But nothing fundamental. I can't stress that enough.

Got it. And I think this question's more for Oeyvind, but how are you seeing the rate environment develop this year? Do you think 32,000, 33,000 a day is the bogey for the semi reference or any kind of discussions you think as far as margin degradation on the part of customers trying to capture a little bit more value along the value chain?

Sure. Oeyvind?

I think if you look at every week on the Clarkson 12-month time charter assessment, they will give you a fair indication of whether the market is strong or soft. Our market, in general, is quite stable. So you can glance at that whenever you have a question about, okay, where are we?

But remember, those rates being quoted is a 12-month time charter right there and then. We have some charters that we've contracted a year ago, two years ago, so our combined rate is obviously different than that one, but that is reflective of what's happening in the market.

Michael Webber, Wells Fargo.

I wanted to just touch on that last question. David, in your remarks, you were talking to just how tight dynamics are and we've talked about this on the newer projects coming online here, and there being no real signs of any letup. Just thinking about that within the context of your current DC levels, which remain very firm, if you were to think about this conceptually in 2015 and maybe even 2016, where is a realistic peak level average TCE rate you think you can earn on your (inaudible)sized fleet? How close to peak do you think we really are from a sustainable basis?

Well, look, the economics today, I hate to say it because I hate to encourage people to build. That's all I'm going to do by saying the rates are attractive. But the rates are attractive.

I don't think we'll see much in the way of price increases, rate increases. We don't need them. There's a high rate of profitability, whether it's on our existing fleet or the new buildings and the price that we've been paying for those new buildings. It's all a very attractive return on investment and particularly return on our equity.

It is a bigger risk the price rates climb than going down. It's a risk for us because it just encourages new builds. I'm happy with where they are. I think they will stay close to where they are.

And we will show incremental profitability and revenues and cash flow, partly because of increase in the number of vessels and our fleet expansion that's programmed over the next year and a half. And we will seek strategic trades that enhance our rates to triangulation of carrying multi-cargoes of different things and more difficult trades if we get a premium price. And again, I will refer to that trade, the cargo we fixed of ethylene to the Far East, get a premium trade on that because we have specialized knowledge on how to handle it and we have the vessels to do that.

So it will be that type of rate enhancement that we'll seek or won't seek it on your conventional semi-refrigerated vessels. I think the rates there are good. They're attractive and I would not expect we would see much in the way of increases on the headline rates.

Charles Rapinski, Global Hunter.

You did a very -- I appreciate all the comments on the industry and I just had -- most of my questions have been answered, but I did have a quick modeling question. As new builds are delivered, can you give us a little color on working capital requirements, say, for the first month or so? When they come online in terms of bunkering, depending on whether you need to bunker them, positioning, things of that nature?

Niall?

We generally tend to get employment for a vessel about a month after it's delivered or date of delivery. And in that month, we will have our standard OpEx, which is, on round numbers, about $250,000 a month.

Bunkers, kind of depends where it goes. Obviously they're being delivered in China. If they go to the Middle East, it's probably, on today's bunkering prices about $300,000. If for some reason we want to take it over to east through Panama into the US, it would be a bit more, but we'd be doing that for a particular reason.

If we were lucky and got a cargo in either someplace like Taiwan or even in Korea to take to Hawaii to help us along the way, then obviously it's less, it starts performing, albeit those initial charters may not be premium earning because, from our perspective, we're just looking for a relocation charter to get us to someplace central. But generally, I suppose you're talking about $0.5 million.

Jon Chappell, Evercore ISI.

I guess you all get cut off a little too quickly, I guess.

We do. That's all right. I'm going to ask two really quick ones right now and then I'll move on. But don't cut me off after I ask the first one.

First of all, I want to be clear about the chartering costs because they were up significantly quarter-over-quarter despite the fact that the only charter and ship that you had expired in mid-December. So is there a one-time charge associated with re-delivering that and should chartering costs continue to start to be zero going forward in 2015 or are you doing some short-term charter-ins?

Before I let you answer that, I just want to be clear on one thing with Oeyvind. You pointed a couple times to the Clarkson's number. I just want to know how that stands relative to 12 months ago when you were chartering rolling these ships over as well. I think that's important because, obviously if it's significantly higher, then we are not just talking about a full utilization charter rollover but we're marking this to market at a much higher level than the last contracted level. So thank you.

Okay. So the first question, Niall?

The Maple 3 was chartered right through to the end of December. So you did actually have a full month. And there is no penalties or additional costs associated with re-delivering it.

We did have a short-term chartered-in vessel, the semi, which we hadn't undertaken to do and didn't have enough available vessel capacity, so we took it on for, I think it was about slightly less than a month, for about $600,000. That's the explanation as to why the chartered-in costs were higher at the end of Q3.

And we don't expect that through the first quarter of 2000 --

No. It's re-delivered now so we're done. There should be zero costs going forward unless we decide or need to charter in something else for a short-term need.

Yes. Oeyvind, why don't you think take Jonathan's second question?

Last week Clarkson's assessed semi-ref $32,800, which is about $1 million a month. 12 months ago, I can't remember exactly what it was, but I would imagine it was around the $950,000 mark. So from a month ago, it's a notch up.

Okay. We probably have time enough for one more question.

Michael Webber.

I just wanted to follow up on the earlier question from the analyst from ISIS around ethane specifically. I know you talked about the fact that there may be people dragging their feet a little bit in terms of making decisions on delaying or anything like that. But if you could maybe lay out what the current tendering environment looks like for your midsize carriers, maybe in terms of the number of tenders and then the size of those tenders on a per-ship basis, that would help us frame it up.

Yes. The first volume, understand that we're the only ones building 35,000 cubic meter ethane carriers. End of story.

So there will be no tenders, because if someone is interested in ethane imports commencing at the end of 2016 or the very first of 2017, there's only one place for them to go and that's to Navigator. Period. End of story.

So you don't have a tender, but what tends to happen is that a potential user will approach us saying they have this project, they're working through the numbers, they're selling so and so, they've begun doing X and Y, spending money to get in preparation. They will say we are in advanced stages, talking to the ethane suppliers and they're doing that. They expect to conclude a contract for the supply in X time, and let's talk about your vessels. Let's talk about mostly on technical up to this point.

They have their rates. The rates are attractive to us. Their rates give us a handsome return on a cash-on-cash, unleveraged basis and leverage is even much more attractive. That's the rates we're quoting.

And the technical aspects are being reviewed, because these vessels are not simple. These are not straight VLGCs, fully refrigerated vessels. These are complicated vessels, so there's a lot of technical issues that have to be understood, not resolved. Sometimes they're resolved, but most of them are just understood.

So we're making that kind of progress. And we're closing in. But nothing has been concluded, Michael. But I'm confident that we'll be able to talk more specifically.

But, again, if we were to tap those vessels today, unencumbered by any charter doing anything and put them in a spot market, we'd be able to make a very good return on spot market carrying mundane products. But that's not the market we want. Not the market that I expected them to be in, in six months or so. So I'm sorry I can't be any more clear than that, but that's where we are.

That color was helpful. I know it's sensitive, so I appreciate it. Thanks for the time, guys.

Okay. Well, thank you all for joining us. It's been an interesting -- I also apologize for the late conference call. Late in terms of publishing our numbers.

But we have gone through the first time, because we are a public Company, the process of incorporating Sarbanes-Oxley, so we are a proud member of that community today. And believe me, it takes a lot of time to have all your documentation done. Process is as bad as going to get a root canal, but it's done and we are happy and bright people today. Okay? Well, thank you very much.

That does conclude our conference for today. Thank you for participating. You may all disconnect.