Navigator Holdings Ltd (NVGS) 2015 Q1 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings Conference Call on the First Quarter 2015 Financial Results. We have with us Mr. David Butters, Chairman, President and Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; and Mr. Oeyvind Lindeman, Chief Commercial Officer.

At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you this conference is being recorded today.

And I'll now pass the floor to one of your speakers, Mr. Butters. Please go ahead sir.

Thank you, and let me welcome everyone to Navigator's first quarter 2015 earnings conference call. We are pleased with the Navigator's performance over the past months, which exceeded our own expectations laid out in our internal budget created five months or so ago.

Adjusting for the write-off of deferred financing costs, earnings per share of $0.43 represented 39% improvement over same period in 2014. In a moment, our Chief Financial Officer, Niall Nolan will take us through the details of quarterly numbers and will be followed by our Chief Commercial Officer, Oeyvind Lindeman.

Oeyvind who is joining us today from (inaudible) will review the markets pertaining during the first quarter and what we might expect as we move forward during the remaining part of the year. It seems only yesterday when we reviewed our year-end 2014 results, so there will be very little new to add to that conversation.

Remembering that Navigator is a long-term play on the structural, not cyclical changes taking place in global hydrocarbon space as the world gradually moves into greater use of cleaner fuels such as natural gas and natural gas liquids, one should not expect dramatic changes to our business quarterly basis. Change will come gradually as infrastructure is developed to facilitate the logistical shifts needed to accommodate the change.

The emergence of America as an important global source of natural gas liquids is one important example of the structural change taking place. Another example would be the developments in the Middle East process their pure hydrocarbons and export higher valued petrochemical gases at the expense of crude exports. But these changes take time to implement, but they are indeed being implemented witnessed by the infrastructure build-out in the Gulf of Mexico to accommodate the growing US LPG production.

Enterprise Products Partners in (inaudible), the early movers on LPG exports are still expanding and are now being joined by the likes of Sunoco and Lone Star with their Nederland, Texas export terminal and the recently -- that they recently opened and the anticipated opening this summer of Occidental Petroleum's Ingleside, Texas facility. These terminals will add substantial capacity for American producers to move their liquids to international markets. While the addition of these terminals may provide competition to the early movers, they do not provide -- they do provide, uses the opportunity to capture better commodity pricing and of course, shippers including Navigator the opportunity to transfer a much greater amount of product.

On the US East Coast, Sunoco Logistics just finished its Mariner East 1 pipeline and commenced shipping propane from Marcellus in Western Pennsylvania to Marcus Hook on the Delaware River. This is already having a noticeable pick-up in demand for our handysize ships after a rather dull first quarter for East Coast exports as the winter frigid conditions in the Mid-Atlantic region created unusually strong local demand for available LPG product. The completion of the pipeline and return to milder weather has changed all of that. While the Mariner East 1 pipeline capacity is only 70,000 barrels a day, completion of Mariner East 2 by the end of next year will increase the capacity to move LPG Marcus Hook by an additional 275,000 barrels.

Now, also on the East Coast, MarkWest recently commenced operations out of a leased facility in Chesapeake, Virginia for the export of butane. We will be loading our first cargo out of this terminal in a few weeks. Chesapeake facility is not expected to have an especially large impact on butane exports, but it is a nice complement to the Marcus Hook propane business.

Now, my point in categorizing and cataloging these export project is to emphasize that when dealing with the development of a new industry, all this structural change within an industry, it's necessary trying to build out the required infrastructure. Major shifts do not take place instantly but evolve over time to create a sustainable business model to accommodate that change.

In the US, we have completed or about to complete the infrastructure required to move the country from being an importer of LPG to being the world's largest exporter of LPG. At Navigator, we've been focused on these changes taking place, not only in the US, but on a global basis as well. We anticipated this shift long before it began and built and continued to build a highly sophisticated vessels that will become a meaningful participant of structural shift. We continue to train and educate the highest caliber seafarers and operators in order to manage our assets in a safe and responsible manner. We believe we are best-in-class and are determined to stay that way.

And Niall, if you now could take us through in some detail of the quarterly numbers as we have published them.

Thanks, David, and good morning. The results for the three months ended March 31, 2015 were solid quarter's performance as David mentioned and in line with the expectations I outlined at the end of our recent Q4 earnings call.

Operating revenues increased by 6.3% relative to the fourth quarter of last year, despite some seasonal market softening in the area of parts this year as we've mentioned previously. Our net income rose by over 30% compared to the same period last year, despite writing off the $1.8 million of deferred financing costs, which I will comment on further in a moment.

Operating revenue for the first quarter was $74.2 million, up $4.4 million compared to $69.8 million generated just first quarter of 2014. This revenue increase comprised of $6.1 million as a result of the increased fleet size, which grew with an average of 26.9 vessels in the first quarter of this year compared to 24 vessels traded in the first quarter of last year. Secondly, revenue increased by $1.2 million from an improvement in charter rates, which rose from a time charter equivalent of just under $888,000 per month or $29,180 per day in the three months ended March 31, 2015 from an average of $871,000 per month or $28,650 per day for the comparable three months period of 2014. Thirdly, we achieved a small uplift from a slight increase in our utilization rates, which nudged up to 97% for this quarter compared to 96.9% for the first quarter of 2014.

And again this revenue was impacted by a reduction of $3 million from an effective pass-through costs on voyage charter revenue from the significant reduction in global bunker fuel costs.

One of our existing vessels entered drydock during the first quarter of 2015 for her 15th year of docking. She will be the first of eight dockings to be undertaken this year. While costs of dockings are capitalized and amortized over the period to next drydocking, we of course don't earn any revenue for about 20 to 30 days when the vessel is in each dock or is sailing into or away from the dockyard.

With respect to costs, voyage expenses decreased by approximately $3 million notwithstanding the number and average duration of voyages for each charter has been consistent with the first quarter of 2014. But as I mentioned earlier, this reduction is as a consequence of significant decline in bunker fuel costs. Bunker costs have fallen from about $700 per ton to around $300 per ton.

Chartered in costs were zero for this quarter compared to $2.1 million for the first quarter of 2014 following the return of the Maple 3 in December 2014 and therefore, all operating vessels are now fully owned.

Vessel operating expenses being crew costs, repairs and maintenance, insurance etcetera increased by 4.1% to $18 million for the three months to March 31, 2015 solely as a result of the additional vessels in our fleet. Daily average operating expenses across the fleet actually declined 8% from $8,333 per day for the first three months of 2014 to $7,605 per day for the three months ended March 31, 2015.

Interest costs for the three months ended March 31, 2015 were $7.9 million, the same as that for compared period of 2014. However, this marks a number of compensatory differences, mainly an increase of $900,000 relating to interest on new bank order associated with the recent new buildings, offset by $600,000 savings as a result of the July 2014 $120 million bank loan prepayment and a reduction of $300,000 of interest as a result of quarterly debt amortization on our existing facilities.

During three months ended March 31, we financed one of our secured term loan facilities by enlarging it to part finance nine vessels. As part of that transaction and in accordance with US GAAP, we were obliged to write off $1.8 million of deferred financing costs associated with the earlier loan.

Net income for the three months ended March 31, 2015 of $22 million, a rise of 30.5% from the $16.9 million achieved in the first three months of 2014. Earnings per share after the deferred financing costs rose to $0.40 for the quarter, compared to $0.31 for the first quarter of 2014. And EBITDA rose 25% to $44.7 million compared to $35.9 million for the three months ended March 2014.

Turning to the balance sheet, cash stood at $50.5 million at March 31 following further payments totaling $51 million to Jiangnan Shipyard during the quarter, representing installment payments on two new build vessels and the 80% delivery installment on Navigator Triton, which was delivered on January 9, 2015. For the remainder of 2015, we are scheduled to pay about $146 million to the shipyards, which will be financed by permitted bank loans and increasing cash resources.

I've just mentioned, we entered into a $278 million facility on [January 27, 2015] upsizing the previous $120 million bank loan to assist with financing total of nine vessels, the five ethylene carriers, which are now delivered following the delivery of Navigator Oberon on April 27, 2015 and four semi-refrigerated vessels that are scheduled to be delivered between June 2015 through to March 2016. The new loan is for an increased duration of up to seven years from each vessel's delivery. Loan to value funding has increased to 70% of the construction costs and interests have reduced to a blended rate of 2.7% above US LIBOR.

We've had significant interest from banks from financing the larger 35,000 cubic meter vessels and we will start evaluating financing arrangements for those and the remaining 2017 deliveries over the coming months. So total net at March 31, 2015 stood at $558 million, equating to modest 40% of debt-to-equity. Our average cost of debt, including the 9% payable on the $125 million Norwegian bond was 4.7% at March 31, 2015.

So in all, a solid start to 2015, despite some seasonal market softening in the first two months of this year.

And with that, I'll hand you over to Oeyvind for some marketing comments.

Thank you, Niall. And just to add to echo some of David's point, we are very excited about the continued build-out of US NGL infrastructure, allowing the increasing production in US LPG surplus to reach international market. They are re-coming. An example, up to -- middle of 2012, neither Navigator or anyone else had exported a single molecule of gas from Sunoco's Marcus Hook terminal near Philadelphia, but since the second half 2012 until -- including first quarter this year, we have listed or done, completed 40 load operations at these terminal, moving a total of 6 million barrels of propane.

Now we see similar developments for butane. A surge of butane is coming to the market, which we will benefit from, and as David mentioned, we recently concluded our first shipment of butane 150,000 barrel cargo from Chesapeake, Virginia and we expect more to come. And this vessel is one of the first to load from this terminal. So I'm sure we'll take pictures and familiarize ourselves with that terminal.

We see -- we expect, as David mentioned, more LPG coming to the East Coast with the commissioning of the Mariner East 1 pipeline connecting the Marcellus and Utica with the East Coast and export markets.

In parallel, Enterprise is well underway with their expansion program on the US Gulf Coast. And as David said, Lone Star and Sunoco's Nederland terminal is operational and we expect to be able to load from there pretty soon. And Occidental's Ingleside terminal in Texas is also expected to be commissioned and operational July of this year. We are in discussions with several customers to load from this site.

But that is the US and every -- while mostly the guys on the call today are very familiar with the US, but Navigator is involved in global trades. We do take advantage of developments elsewhere in the world. As an example, there is increasing LPG production in Russia, far distant Siberia pumping out LPG. This is railed to the Baltic Sea to a terminal called Ust-Luga terminal. And during first quarter, we have seen a surge of incremental volume at this terminal, which we have loaded on our ships and delivered to European customers, mainly blue-chip customers using the product for feedstock for petrochemical production.

We continue to be part of the changes within the petrochemical markets and our vessels, as David mentioned, we do (inaudible) ethylene from the Middle East to Europe and Far East. And as we talked about in the last earnings call, we completed the first ever ethylene load from the US Gulf to Far East. And this trade has continued, increasing the ton mile demand for our handysize gas carrier segment. At Navigator, we'll continue to benefit from these changes, both in the US and in the global market, both changes dynamics for LPG and petrochemical gas transportation.

We are very encouraged these developments we talked about for the remainder of the year. And if you talk about Marcus Hook in particular, and the temperatures during January, February didn't allow for LPG exports, but going into the second quarter and definitely this summer, we see big incremental demand for handysize ships, Navigator gas ships loading particularly from this terminal going to European customers.

Thank you.

Thank you, Oeyvind. Operator, I think we can open the call now to question-and-answer period.

Thank you very much. (Operator Instructions) Charles Rupinski, Global Hunter.

Just curious, if I can ask you a question about what we've seen with the bunker price moving up basically and the oil price as well. How this would affect sort of the charter environment for your vessels?

I don't think it's had much of affect either way, Charles. Oeyvind, could you comment or Niall do you have any specific numbers for --?

During the first quarter, we had about 65% coverage meaning time charters. And of course, then the bunker saving or loss on the time charter is for the customer. We don't see that impact. Now on the spot voyages, obviously, the bunkers is on our accounts and with the narrowing of the arbitrage as US and Europe and LPG, the decreasing bunker price obviously assisted allowing (inaudible). But everybody is buying bunkers, everybody is exposed to the bunker market, so I don't -- we are all in the same boat when it comes to bunker price and freight rates are adjusted accordingly.

(Operator Instructions) Omar Nokta, Clarkson Capital.

Just on Oeyvind's comments about the ethylene loaded out of US, in the past couple of weeks, we've seen a real divergence in the price of propylene and ethylene here in the US finally getting into significant discount prices in Asia and in Europe. Where do you think based on what you're seeing that US is going to start really shifting or not only shifting but going from this purely propane exporter and potentially butane to really start including propylene and ethylene in a bigger way?

Let me first, answer part of it and then I'll ask Oeyvind answer a piece of it. I recently met with the folks at (inaudible) Logistics and focusing on the fuller and more advanced element of their facility in Marcus Hook, which is a large facility capable of handling not only pure exports but also large enough to create an infrastructure for a petrochemical business. They're discussing Mariner East 3 and -- believe that and they are focused on Mariner East 3 as well as some of the surplus in the Mariner East 2 is really to upgrade to a product at the site, so that they can produce propylene and now they have petrochemical assets, so that they can capture some of that added value in the US and create manufacturing jobs.

And that's just great for us, because in addition to being able and capable of carrying fuel great propane, our vessels are the largest vessels for petrochemical gases i.e. propylene and butane. This however -- and I'm sure that will happen on the Gulf Coast, creating the PDH and so butadiene or whatever have you. We're certainly seeing the ethylene being exported now, because of shortages just in Europe. But all of this I think is even further down the road, because it takes quite a while to build these plants, but an important thing is that if that happens, we're sitting with the largest capable petrochemical vessels right now. So that would be a beautiful piece of an incremental business for us. But tell us, Oeyvind, what you're seeing now as far as kind of arbitrage and what kind of trade within that petrochemical gas component there might be?

Well, just to talk about ethylene. It is important to remind ourselves that the only ethylene terminal in the US is (inaudible) and the load rate there is 40 tons an hour, which is about 4,000 -- 400 barrels an hour, which is very limited. So, loading one of our big ships, the largest ethylene ships on the water takes whole day. But the economics still allows for customers to do that and take it all the way to China or Far East.

Now the infrastructure would develop in the US from the big (inaudible) ethylene cracker, the new one come on stream in [2017-2018], you would think that there would be excess capacity on the ethylene and you would think that new ethylene terminals would be available to export these products as well. Will the same thing happen with propylene, probably. Why shouldn't US fuel more PDH brands and export propylene products. And we come in there and load the propylene. So, yes, I think there is big opportunity for US to take a larger chunk of E2, E3 markets in the petrochemical gas.

It definitely seems that this is based on a pricing that it may start to instigate some investments. Just one question on that regarding charters load ethylene export facility. Are there similar sort of restrictions on the ability to move propane as well, or is it also a very small amount?

There are several terminals that have propane capacity, essentially because they have propane storage. So there is a few terminals that can be propane safe but today we haven't seen any big propane movements will come probably but the propane generally moves to Mexico to Colombia, in the region, nothing to US. But we haven't seen it in the past and it all depends on arbitrage and arbitrage in petrochemical gases changes every day. So you might have a situation whereby a cargo of propylene going one way and a week later, it should be asked to turn around and discharge where it came from.

And then just sort of summarizing that point, when we think about the global trade of ethylene and propylene, can you give us sort of a sense of at least from your business or for maybe just a market perspective, what percentage of those two cargos originates in the Asian markets versus the West?

I think the petrochemical market as a whole transported at least above 10 million tons, half of that is ethane and ethylene and the rest -- the biggest part then is butane and propylene. In Asia, there is big business for propylene gas transportation but within their smaller ships. Smaller ships are not involved taking the advantage of the arbitrage between continents. But the exact proportions of coastal Far East propylene trade and West, I don't have right now.

One thing is likely to happen now on speculation that should the sanctions in the UN and negotiations to resolve issues with Iran, Iran has a very major petrochemical complex, historically been very active. Recently, it's been rather quiet for exports and so on, but they are major producers of all sorts of petrochemical gases and should that open up, I think that will be a terrific beneficiary for the transport -- international transport of petrochemical gases. But of course that we're dealing that with some speculation, but probably likely.

Michael Webber, Wells Fargo.

This is Donald Burns stepping in for Mike. Are you guys seeing some incremental mix shift demand for LPG given the stronger recovery of oil and vis-a-vis naphtha pricing as a petrochemical feedstock and also given some of the I think the pretty seriously understated geopolitical risks we're seeing in Middle Eastern oil markets?

Well, the business has been strong generally. We did not notice some material weakness as a result of collapse in the price of crude months ago nor are we seeing that dramatic change going up. I think it's been steady, it's been growing and it's very supportive. It's been arbitrage on just about all of the fuel grade LPGs and petrochemical gases. There is not much more we can deal with. We're running at 97% utilization. We can improve on that, but not a great deal. Oeyvind, can you put any more color than that on the question that our friend just asked?

General trend, at least for Europe -- European petrochemical producers is move away from naphtha to lighter feedstock (inaudible), that's the general trend, but granular impact of increase in oil prices so far, we haven't -- we don't really see the impact much, but the trend is there, lighter feedstock.

And then, I have a second question that's on current spot market as we transition into the summer. As of couple weeks ago, there is virtually no prop tonnage available in the US Gulf, I think it peaked at around three to four week waiting time for the [ODC] in early April. Can you comment on current earnings and fundamentals in the Atlantic Basin and what your expectations are as we transition into summer?

If you compare first quarter and second quarter, particularly on US East Coast, there will be night and day. First quarter as we talked about, because of the temperature -- the cold temperature, the exports were lackluster. Now with the spring on the doorstep, we see definitely a strong pickup of demand for shipping in general, including ourselves to move the NGL to markets. So the textbook should dictate the supply demand, despite some tonnage you (inaudible) but definitely a stronger second quarter for us whereby our first open position today is some time maybe [early Q2] and we are now early May. So that's an indicator of the market.

Jon Chappell, Evercore.

Couple of questions for you David on some strategic developments. I'm sure if there were any updates you would have provided them in your comments or in the press release, but just trying to get a better idea of maybe timing. So first on the four I think carriers new builds, obviously one is already contracted, any update on the timing of the three remaining vessels?

It is frustrating not to be able to come back to you all on these calls and be able to give you some tangible information. It has been about 45 days since our last call. So it really isn't a full three month period, but I would say that I'm -- I remain confident about the attractiveness of these vessels to transport ethane. Sooner or later, they will find their home on long-term basis.

I think the issue has been the suddenness in dramatic movement of the price of crude about this last four, five month period has put a pause -- temporary pause on decision making on the part of the major companies involved in the importation and use of ethane. Throughout this whole period, our opinion the economic advantage of using the US ethane in competition to any other raw material, but still very positive and you would have said, well, this would trigger a transaction. But I think the issue has been the suddenness of it and the lack of understanding of the cause of all of this volatility of the crude has given everyone a bit of pause before they make decisions. No one wants to be found silly about making a decision without having a better fix on the causes of it.

Also we needed is in my opinion was some stability in the price of crude oil, for example, in order to those decisions to get firmed up. I think we've had some stability, but now we were on the rise. So in my opinion, this will all be firmed up in a period of time (inaudible) two-month type of forecast, but conversations are continuing. It's serious and no one has backed off and said that they aren't interested. So, yes, I think it's going to continue, but I just cannot give a real clarity on when that -- it will happen, but I'm confident by the time these vessels do get delivered in the summer and fall of 2016, they'll be all fixed and have a nice happy home.

The other thing in kind of that same regard then is the VLECs, on the one hand, you talked about the uncertainty and it doesn't seem to me that anyone has really move forward with those types of vessels or almost nobody. On the other, I think when you first brought up the potential for those about a year ago, you had said in a year's time, if we haven't moved on them, we probably won't. Now it's obviously a much different environment from when you first made that statement. So, is it something where you feel you've missed the boat, and that's not something you can pursue anymore or does it go kind of hand-in-hand with what you just talked about the uncertainty in the market and decision making has maybe pushed back the open window opportunity and is it still something you are considering?

Yes, I think that what you've said is probably right. When I said that I was thinking that we would be -- if it happened within the year, we wouldn't be doing it. Fortunately, that's the time I thought there would be some stability in the price of oil and therefore, the decisions could be made in a logical and practical way with all the numbers.

The complete breakdown in crude has deferred any kind of decision on the part of it. We have not lost business to anyone else and indeed I think if you would've evaluated the situation, we're probably the leading player that have the ability to do it, but it's not happening. It's not happening because the decisions are deferred but I have heard nobody say we will not be doing this business, because we just don't think it's going to economic to us.

It has been economic right through the downturn that's another thing I must press that even with the prices being where it was, nobody backed off and said the spread was insufficient, it always was. Just the issue of major commitment on the part is contracting to buy a long-term supply of ethane, the commitment to charter vessels for long-term, those major capital decisions have to have some basis of understanding and when they didn't understand the volatility in the price of crude and (inaudible) alternative feeds, they couldn't make the decision, that will come back and play a role in the next period of time. So it's not dead, Jonathan, not in my opinion but it's deferred.

On the CapEx for the remainder of 2015, what's the schedule for 2016 and 2017, can just remind us where you stand on financing for all three of those periods?

The recent loan that we put in was financed the remainder of all of these vessels coming out in 2015 and two of the vessels that will be delivered in the 2016. We then have to finance, which I mentioned that the banks have made some -- quite a number of banks made some overtures about financing this trip that is for ethane carriers or larger ethane carriers and then we've got the two deliveries in 2017. 15 deliveries of the 16 deliveries are all pretty much all back-end installments whereby there is 70% delivery installment. So the finances won't be required until delivery, but they are well in hand.

And then do you have that the total figures for 2016 and 2017?

2016, it's just under $350 million -- $345 million and 2017, this is $20 million, which is just the last payment on the two semi vessels.

Doug Mavrinac, Jefferies.

Oeyvind, during either one your answers, one of the questions or in your prepared comments, you described 2Q as being night and day different than what we saw in 1Q in terms of activity levels for your base LPG carrier fleet and then even though 1Q, which you guys are described dull, rates are still $29,000 a day, which were still very, very good. So my question is can you give us some sort of sense as far as what you're seeing in the market for handysize earnings in 2Q thus far? if we were at $29,000 and change per day in 1Q when things you picked up, how are you seeing that manifest itself in terms of daily spot rates for -- across the industry and even if you have some specifics for your own fleet, kind of what are we think thus far in 2Q for your handysize carriers?

As I mentioned, we're booked up in month of May, really one month ago for the second quarter, but definitely there is a change from first quarter to second quarter just the mere fact of utilization seems to be very high and tightness of or the lack of tonnage is there. And it is our job to see what we can do with the rate of course. So, we will come with the results when the time comes first of all, but so far it's looking good.

But you're seeing utilization levels up from Q1 levels, which equated to $29,000 a day.

Well, 97.1 or 97%, it's very, very difficult to beat. Even it is [97%], then I think that's pretty good.

And then my follow-up, David, in one of your answers to one of the previous questions you described the conversation is still taking place for some of your ethane carriers. My question is, now we've seen volatility in crude to the upside over the last four weeks, in those conversations, would you say that or have you seen any changes on the part of the people you're negotiating with in terms of the urgency to get something done. Now that we're seeing new crude both WTI and Brent really rallying, it's causing people to have a little bit more urgency in terms of the negotiations or are they just wanting stability whether it's volatility to the downside into the upside, or are they more interested in stability or has this kind of lit a fire under some people?

I would say -- it wouldn't be an urgency racing to capture the price right away. I think the urgency and the concern on the part of the people that we've been talking about is the urgency to be sure that they get our vessels. Remember, we're the only ones building that are not committed 35,000 cubic meter ethane carriers.

Those vessels can be delivered in late 2016. So if there is an urgency, it is one of which, if I don't get them, I may miss them and I want to be in the business and I want to transport ethane. So, it's not a matter of the price of oil, because I think everybody wants to have a stable market, so they can make such certain judgments and go to their Board of Directors with some degree of authority and confidence.

When there is volatility, it is always someone who will speculate what happens if. And so what I do notice, yes, the urgency is not on the price of the commodity, but the availability of our equipment and that's why I say confidence is there from my part.

Ben Nolan, Stifel.

Stepping away from the potential for contracts on the ethane capable vessels and maybe in conjunction with some of the discussion that you guys are having earlier with Omar about the potential for real growth in the transportation of petrochemicals, have you seen much in the way of demand for maybe more long-term contracts? I know you had those two new builds on your traditional handysize vessels that came with five year contracts, but are your customers coming to you asking to lock in equipment for substantially longer periods of time, or has that dynamic not really changed?

I think it's the latter, (inaudible) for the handysize is very much short term for outsiders [but six, twelve] months time charters, we're obviously comfortable with that because of our experience and so forth and we controlled the results of utilization, but it hasn't really changed. Unique special projects like the ones you just mentioned, then yes, but generally, a little bit.

My next question is again sort of broadly speaking, but obviously has an impact on you and it relates to the delivery of new builds. I know, David, that one of your concerns historically has been that the market would potentially become over build. Is that still sort of the top of mind for you that there is a risk of overbuilding or are you seeing any dynamics, are you seeing slippage of new buildings for your own equipment or maybe more broadly in the market, maybe a little bit less of an appetite among potentially speculative orders or is that aspect of the supply side is key keeping you up at night like it maybe it was?

I hope it doesn't keep me up but I'm always concerned about overbuilding. If you're in shipping and you're not concerned about overbuilding, you won't be in shipping for very long. It is something that has historically been a real death knell for shippers. And particularly when things go well, people want to come into the business and be part of it and build into it. Now, we talked about the question about the length of contracts and did we see anything that -- any longer ones, well, we haven't, not materially, I think there is extending out a little bit. But to the extent that they were, that would make the attractiveness of the handysize even more interesting and you would see even greater amount of newbuilds. One of the things that keeps people away, is the fact that the handysize is one that is very difficult to get long-term contracts and hence it is kind of a barrier to entry, if you will.

Now as far as the existing newbuild in some 38 vessels -- 37 vessels being built, since we know where they are, we have ten of those or at least six of those in the handysize, 38 -- 37 in the handysize. But there are some issues. There has been some discussion and some press about one Chinese yard that has had some difficulties, knowledge difficulties I guess about their ability to continue building amount of vessels that they've got on order and I believe they've got 13 of them in the handysize space that they may have to be delayed. I think -- and I don't want to speculate, I'll take the word of the yard at face value and assume that they will get delivered, but I'll also take what they've said about significant delays in delivering those vessels. And of course, to extent that they get delayed, it's a bonus to us who have vessels in the water, and our vessels still remain on time and on budget. So we're happy with that.

But I think one should be -- everyone as an investor and owner should be concerned about newbuilds. Right now, I'm comfortable with it. I am not losing sleep. And I think we can handle, but it's on our plate and what's on the plate of everyone else. And there hasn't been, as far as I know, any newbuilds in handy space audit in the last four to five months. I think subsequent to the collapse in oil, the one beneficiary that has had is to scare people about it and I think if you were to try to order new vessels today in handysize, you are looking at the second half of 2017.

And then my last question, maybe this is for Niall, you're talking with John about your CapEx program and the financing that you have in place. Could you maybe quantify for me what you feel like is your available capital if an opportunity were to arise without needing any additional equity, say, how much dry powder would you characterize you have at the moment?

At the moment, we've got sufficient equity to build or pay for the equity portion of the existing new build program. Obviously, we are generating cash on an ongoing basis. We got a number of facilities which come to maturity in 2017, as well as the Norwegian bond which we have a call option from this December and expires in December, 2017. Assuming that all of those loans and the bond were renewed, so that -- and sort of existing state if you were going forward, we would have probably about [$100 million to $150 million] per annum, but right now we wouldn't have anything significant of spare capacity, because available cash that we have will be used for the equity portion of the new builds that we have coming between now and March 2017.

That $100 million plus that you're talking about, is that on a levered basis or that is sort of your equity that you can probably contribute?

It's kind of the internally generated equity that's the equity generated from the operations.

Michael Webber, Wells Fargo.

Just a follow-up question, on one of the previous questions was talking about the just in the regional mix between trade flows in the Atlantic Basin and Asia Pacific. As US Gulf and East Coast exports continue to ramp, how are you viewing your regional fleet deployment? Is there continuing sort of ramping of focus in the Atlantic Basin or does increasing focus from the US Gulf create at times dislocation in opportunities elsewhere?

I think the bulk of the fleet is migrating to the West. We had new building deliveries on April 27. She is streaming full speed towards the US or Atlantic Basin because that's where the attractive rates are. So the migration to the Atlantic and (inaudible) definitely the second quarter.

Thank you very much. There are no further questions in the phone line. Please continue.

Oh great, thank you for helping us today with the call and thank you all for joining us. We will return once again in three months time and talk further about our developments. Thank you and good day.

Thank you very much. That does complete the conference for today. Thank you all for participating and you free now to disconnect.