Navigator Holdings Ltd (NVGS) 2018 Q3 法說會逐字稿

Thank you for standing by ladies and gentlemen, and welcome to the Navigator Holdings Conference Call on the Third Quarter 2018 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 of the company. (Operator Instructions) I must advise you that the conference is being recorded today.

And I now pass the floor to your first speaker, Mr. Butters. Please go ahead, sir.

Thank you, Colan, and good morning, everyone, and welcome to Navigator's third quarter earnings call. We will begin our call with a commentary from our Chief Financial Officer Niall Nolan, who will cover the financial highlights of the past 3 months. This will be followed by Oeyvind Lindeman's review of the commercial and marketing environment encountered during the period, some of his observations on the near-term outlook. I will finish our formal remarks with some commentary on Navigator's role in business opportunities being developed as a result of the emergence of the midstream sector's dominance and near total control of hydrocarbon logistics in the United States. So let's start with Niall. Niall?

Thank you, David, and good morning all. We made some positive progress during the third quarter with charter rates trending upwards across the fleet. Revenue for the third quarter was $80.8 million, $10.6 million higher than the $70.2 million generated during the third quarter of 2017 and $7.6 million greater than the $73.2 million generated last quarter, Q2 of '18.

Net revenue, revenue after deducting pass-through voyage expenses, was $63.6 million for the quarter, $5.6 million higher than the $58 million generated during the third quarter of 2017. This $5.6 million increase comprised of $1.6 million generated by having an extra vessel in the fleet during this quarter relative to the same quarter last year, a further $2.2 million generated as a result of an increase in charter rates, which rose to $20,987 per day or $638,450 per month compared to $20,226 per day for the third quarter of 2017 as well as $1.8 million extra being generated as a consequence of utilization increasing from 85% a year ago to 87.5% during this third quarter.

During this quarter, time charters accounted for 63% of all vessel operating days with LPG time charters making up the majority of those days and 37% of operating days being spent undertaking spot or voyage charters and contracts of affreightment, 82% of those days occupied in the transportation of petrochemical gases and 18% of all spot charter days transporting LPG.

Our fleet now consists of 38 vessels on the water and no newbuildings on order. We have the largest global fleet of 14 ethylene or ethane-capable vessels, 17 refrigerated vessels, semi-refrigerated vessels and 7 fully refrigerated LPG carriers. 2 vessels underwent their scheduled drydocking during the third quarter, accounting for an aggregate of 32 days off hire and costing a total of $2.2 million. We are scheduled to drydock a final vessel before the end of the year, which is estimated to cost approximately $1.1 million.

For next year 2019, we are scheduled to drydock 10 vessels at a provisional cost of approximately $15.9 million, which includes the cost of installing ballast water treatment systems on 8 of those vessels as they are mandatory on all vessels built or drydocked after January 1, 2019.

Vessel operating expenses increased by 7% to $26.9 million for the 3 months ended September 30 compared to $25.1 million for the same period of last year, principally as a result of the increased number of vessels in our fleet. The daily rate for vessel operating expenses for the quarter was $7,687, an increase of 3.2% from the daily rate of $7,448 incurred in Q3 of 2017. Average operating -- sorry, average daily operating expense for the first 9 months of 2018 was $7,675, a 1% increase compared to the same period of 2017.

General and administrative and corporate expenses increased to $4.9 million for the quarter from $4.6 million for the comparative period of 2017, principally as a result of foreign exchange movements as well as costs associated with facilitating in-house technical management for 10 of our vessels.

Interest costs for the quarter were $11 million for the third quarter, an increase of 17% or $1.6 million compared to the third quarter of 2017, solely as a result of increases in 3 months U.S. LIBOR.

Net income, therefore, was $600,000 for the quarter ended September 30, 2018, and earnings per share of $0.01. This compares to a net loss of $3.2 million last quarter and a loss of $1.1 million during the third quarter of 2017. EBITDA increased to $30.4 million this quarter, $3.3 million greater than the EBITDA of $27.1 million reported in the third quarter of 2017.

Looking at the balance sheet. Our cash balance at September 30 was $50.5 million with a further $20 million available for drawdown on one of our revolving credit facilities. Since the quarter-end, we received an additional approximate $72 million from bonds issued for $600 million -- NOK 600 million. These additional funds will be utilized for paying our ethylene terminal capital commitments over the course of the next 8 to 12 months.

During the quarter, we contributed $15 million from available cash resources towards our share of the capital cost of the terminal of approximately $155 million. And since the quarter-end, we have contributed a further $11 million, taking our total contributions to date to $36 million. The joint venture investment will be equity accounted and is shown separately on the balance sheet under noncurrent assets.

At September 30, total bank debt stood at $721.1 million along with the addition of $100 million from our original issue of Norwegian bonds. I referred to the new bonds moments ago. These were NOK 600 million denominated bonds, approximately $72 million, which will mature in 5 years on November 2, 2023. They are secured on 4 of our 2000-built ethylene-capable vessels and attract interest at NIBOR plus 6%.

We continue to negotiate the bank project finance facility for the remaining capital requirement for the ethylene terminal despite those funds not being expected to be required until the second half of next year. This proposed $60 million to $70 million project finance facility is expected to be a 5- to 7-year facility and attract interest at sub-3% plus LIBOR. We expect to have that facility in place before we report our next quarter's earnings.

Thank you, and I will now pass you over to Oeyvind.

Thank you, Niall, and good morning. The overall gas carrier market went through a small transition during the third quarter of 2018. The general feeling across the various gas segments are positive to what the future holds. We believe that the anticipation of various infrastructure projects and associated incremental volume needing to be transported around the world is starting to feature in people's minds. Each day we are getting closer to commissioning of new projects and debottlenecking of existing infrastructure.

The various stakeholders, including us, shipowners, are keeping close watch on shipping dynamics and attempting to forecast supply-demand balance. The Very Large Gas Carrier segment, as an example, is quoting 12-month time charter levels at the end of the quarter at $725,000 a month or $24,000 a day, which is an increase of 30% compared to the beginning of the quarter.

The same trend is seen in the Medium Size Gas Carrier segment. Increasing demand for LPG and ammonia transportation during the quarter resulted in a 10% uptick on quarter time charter rates to $450,000 a month or $15,000 a day at the end of the quarter. Today, short-term charters in this segment are up 20% on this.

The LPG pull from the larger segments have yet to trickle down to the handysize segment. We experienced a steady-state during the quarter with LPG time charters quoted in the region of $450,000 a month or $15,000 per day.

The petrochemical deep-sea trades lever continued to provide a premium with average rates at a high $600,000 a month or about $22,000 a day. Our charter profile mix remains to be about 40% petrochemicals, 50% LPG and the remaining 10% in ammonia.

We had a slight uptick in time charter committed days for the full year to around about 55%, mainly driven by new demand for LPG in Caribbean, South America and Africa.

We've been working hard together with our customers to find a balance between flexible contracts and fixed longer-term charters, and we are proud to have 1/3 of our fleet committed on period contracts for next year at robust average day rates of about $25,000 per day, keeping in mind the traditional short-term nature of the handysize freight contracts.

Now one of the infrastructure projects the industry has been waiting for is coming of the Mariner East 2 pipeline system connecting the Northeast NGL production with access to the markets to export docks. Borealis, the charter for Navigator Aurora intending to transport ethane from the U.S. to their ethylene cracker in Sweden, has received their loading window in Marcus Hook in a little more than 2 weeks' time. This is one of the near-term milestones that should have a positive impact for the gas carrier market as a whole.

On the face of it, it is a simple infrastructure project, enabling the entire value chain, the function from wellhead to gas processing, to fractionation, to exports. Looking more closely, it forms part of an emerging trend in the U.S. Projects like this enable the midstream companies to capitalize on the large footprint across the North America continent by moving up the value chain and potentially becoming the petrochemical producers of the future.

Now David will add some more color on this structural change. David?

Well, thank you, Oeyvind, and thank you, Niall. During our last conference call, I outlined 4 milestones, I believe, we would touch on the road to 2020, a year in which we believe our business could begin to produce record results. And now as Oeyvind just mentioned, we believe we may have reached the first milestone that is the opening of Mariner East 2 pipeline. If all goes well, we will be loading our inaugural ethane cargo in just 2 weeks' time and begin regular voyages to the Borealis, Sweden cracker.

Furthermore, Energy Transfer has told us that the completion of the second part of the pipeline expansion into the Marcus Hook, Mariner East 2X is now expected to be operational in the third quarter of next year. This will bring pipeline capacity to move liquids, including ethane from the Marcellus and Utica region of Western Pennsylvania and Eastern Ohio into the Delaware River to approximately $600,000 a day and potentially more. The opening of Mariner East 2 will benefit the very large gas carriers, and to a lesser extent, midsize and handysize vessels.

The other milestones are also on track. We expect propylene cargoes out of the Texas Gulf Coast to ramp up in the early 2019, and our joint venture with Enterprise remains on target to begin exports in about 1 year from now. Recent discussions with the Pembina Pipeline Group has given support to our belief that the fourth milestone, the opening of Pembina's export terminal on the West Coast of British Columbia will be online by the summer of 2020.

So while our current business environment remains somewhat sluggish, the key elements of the major improvement are in place, but this will take time, perhaps 12 to 18 months to be fully implemented. And there is no way we can speed this process up.

But now I would like to step back for a moment and ask the question to ourselves as to what is our raison d'être? Why do we exist? What are we positioning Navigator for? To answer this, you will have to walk back with me almost 3 decades to the introduction of the first publicly traded master limited partnership, Buckeye pipeline. Buckeye was spun off from Penn Central to capture a higher valuation than a C Corp, or a sale to a third party could achieve. The Buckeye MLP was a great success and fostered a number of other MLPs. Major oil and pipeline companies as well as petrochemical companies use these vehicles as a means and a method to unload cash generating but slow or no-growth assets.

During the 1980s and '90s, most of the liquid gathering and intrastate transport of liquids was done by regional independent companies. But as the MLPs grew in size and developed access to low-cost capital, they acquired most of the independent operators and built their own network of fractionators, gathering lines, storage and interstate pipelines.

Today, these sons and daughters of the major oil and petrochemical companies are dominant players in the midstream sector, rivaling, in some cases, the size and scope of their parents. The midstream sector has become so dominant that they essentially own and control all of the domestic logistics of the U.S. oil and petrochemical industry.

While it is unusual for the midstream company to actually own the product they are handling, it's virtually impossible for producers to move their product to customers without engaging a midstream company. Now 2 important trends have recently emerged over the last 6 to 8 years. The first one came about with the abundance of low-cost hydrocarbons created by shale drilling and with the domestic markets relatively saturated. Midstream companies began building and operating LPG export terminals to tap the international markets eager to get cheap natural gas liquids and now crude oil.

More recently, we have seen another major development. Companies such as Enterprise are backing into becoming primary producers of petrochemical gases. In the case of Enterprise, a primary producer of propylene. Enterprise did put into operation its first PDH plant earlier this year with the objective of selling into the international markets. Enterprise has openly talked about the possibility of adding a second PDH plant in the near future.

Other midstream companies becoming major primary petrochemical producers targeting the export markets is not out of the question and quite logical as they control the movement of the raw material. We will see just how this development takes shape, but it will be a number of years before it has a meaningful and material impact. But I believe it is inevitable as long as the U.S. has an abundant supply of low-cost hydrocarbons and there is a growing global demand for semifinished petrochemical gases.

As these trends develop, Navigator's role will become more important and essential for a smooth midstream transition from the logistical provider to a producer and exporter. We can and do provide the technical know-how on land in the United States and on land internationally. And of course, we do have the largest petrochemical gas fleet and a highly capable team of operators.

Because of our long history of petrochemical gas transport, we also can provide an invaluable amount of market intelligence about potential buyers, customers and ports. These capabilities were attributes that attracted Enterprise to offer us a partnership in the construction and operation of the first purpose-built ethylene export terminal. We will continue to explore other opportunities where we can become partners in the midstream evolution.

As we look at the historical development of the midstream sector and witness their need to accommodate growing international demand and flattening domestic needs, we are -- we see a niche opportunity for Navigator. There is not enough U.S.-based export infrastructure, nor international infrastructure currently in place to accommodate the potential demand. And I believe this answers the fundamental question of why Navigator exists and what Navigator aspires to be. And that is, the dominant player in the niche petrochemical gas export market with full integration with primary producers as well as end users.

So with that -- those commentaries, I'd like to turn the call back to Colan who will open up the call for a Q&A period.

(Operator Instructions) Your first question today is from the line of Jon Chappell from Evercore.

David, very interesting commentary there for the last 5, 10 minutes. So just I know that this is going to evolve over time, but bigger picture question, as we think about how you're going to deploy capital over the next couple of years, should we think about more of the terminal asset joint ventures and more of the, I guess, transition into a bit more of the midstream or do you still think that there is a fleet growth opportunity within the traditional business?

I hate to say it, Jon, but I think it's all of those. First understand that with the milestones that we look at and the road to 2020, there is really nothing we have to do. Everything that will evolve into a successful 2020 is in place and being built by other parties. Now that said, we're not going to sit because it is really a dramatically changing market, it's structurally changing. And I'd like -- and we've been asked to look at really extending our logistical reach. We have a lot of the capabilities that others don't have. And if you look at the midstream companies, you will find something very interesting. The midstream companies are perhaps the most parochial companies that you'll ever run into. And there is a very simple reason they're provincial. I mean, they have no real experience, expertise, knowledge or have had any interest in the international markets and that is because as MLPs, their focus was in the United States because of the tax reasons.

Suddenly, they are emerging with all this capability and control of the liquids and products. They have the infrastructure in the United States and the United States is tapering off in its growth demands. And the markets that are external are strong. So they want to bridge it. We have more international experience than all of these guys, and I think we can begin with infrastructure in the United States, as we have done with Enterprise, extend that into the transportation needs and assist where necessary and find the opportunities where we can continue to bring infrastructure expertise on the international markets to facilitate the export into those areas. So I think all of this will develop within time. This is after 2020, Jon. But it's there, and it's likely to be able to be done without a lot of risk capital, i.e., that will be done with good contracts, secured by good rates with high-quality companies. So it's hard to define, Jon, but I think it's all of those things.

It's helpful, and it was a big picture. I know it's probably a 3- to 5- to 7- to 10-year plan. So understood. More immediate and to your point about risk capital in long-term contracts, I think you have done a very good job laying out exactly the capital expenditure plan surrounding the terminal. But as we look to get a bit more clarity on 2020 financials, any information you can give on cash flow or returns or how we should think about modeling the financial impact once the terminal is up and running?

Sure. And with that, I think this is a good question for Niall, please.

So Jon, we've mentioned before that the return on the terminal at EBITDA is around the sort of mid-teen level. So based on our $155 million, that should we expect to generate those sort of cash numbers.

Okay. And does that start as of -- I know you said the terminal is going to really start in '19, but realistically, probably the real financial impact starts first quarter 2020?

Indeed. Yes.

And Jon, just to clarify something. We will begin that operation by delivering the product from the chiller directly onto the ships. It will be a slower process of loading until storage is completed. Now there is a shortage of -- the storage is probably the most complicated and time-consuming element of that terminal. There is a lot of hand welding to be done and so on. And that probably won't be completed until 6 months after the opening of the initial phase of the terminal. So for the first 6 months of operation, the loading will be somewhat restricted until the storage. So it may take us 4 days to load the vessel directly from the chiller. But once the storage is erected and operational, then it's a 1-day process. So it would ramp up after 6 months. So it begins, let's say, 1 year from now, but 6 months later, it kicks into high gear.

Okay. So just to be clear then, that mid-teens annual return on the $155 million capital, maybe start with that kind of mid-2020, but for the first half of 2020, maybe 1/2 or even 1/4 of that EBITDA run rate given the 4 days versus the 1-day loading period, is that right?

It will be -- go ahead, Niall.

No. I mean, what David was mentioning is the speed at which the product loads. It doesn't affect the output or the capability of the terminal. So the terminal can still without the tank has a capacity of 1 million tons. It just means it's more efficient from a vessel perspective once the tank is there. It can load 1,000 tons an hour rather than 115 tons or 115-ish tons per hour without the tank. (multiple speakers) So it should kick in from the beginning of 2020.

Your next question today comes from the line of Donald McLee from Berenberg.

I wanted to dig in a bit into the financing. Could you discuss the decision that's happened NOK bond market to finance the terminal over the near term? It sounds like it was a bit of a proactive move with the additional financing expected sometime next quarter. I was just curious if you can provide some color on the rationale between the NOK bond market today versus a potentially more attractive financing package the next quarter? And then along with that, maybe how the level of contracted capacity on the terminal might have factored in there.

Sure. Niall?

The -- look, we said in previous calls that there were quite a number of options to finance the terminal. We were just looking for the most cost-effective. And it was all really about sequencing or the thought process was about the sequencing of getting the throughput agreed with the terminal, getting the financing in place and the financial calls that would be made on the terminal itself. So we have gone out and secured this fund for the $70-odd million, which, as I mentioned, will take us into the second half of next year in terms of calls or capital contributions towards the terminal. And then we would -- we will finance the rest of it with this project finance facility.

Okay. And then could you provide an update on where the level of contracted capacity is for the terminal? Is it still in that 50% range?

Yes. It remains there for the time being. Discussions are ongoing with various off-takers for that. It's a long process, but the discussions are there and we fully expect the terminal to be up and running at 100% capacity before it commences operation.

Okay. And then just one more. Could you provide an update on where the fleet stands from a spot versus time-charter basis? And maybe how you expect that mix to shift over the coming quarters with the recent strength in rates and ME2 and the AltaGas coming online too?

Yes. The proportion between time charter and spot charters, in the textbook example in a rising market, which we believe we're in, then charters would like to go long time charters, and we, as owners, will go short. So it's not a straightforward answer to our expectation of that split going forward. We generally maintain a 50-50 from quarter to quarter. How that's going to be? I don't think it's going to change much over the next few months or few quarters. So I would think about the 50-50 mark.

Your next question is from the line of Michael Webber from Wells Fargo.

I just wanted to dig in just a bit more on the NOK financing. Just in looking through the terms, I think Donald just asked about the contracted capacity and the fact that, that bond is actually redeemable by the end of Q1 if you guys actually don't have the bank financing secured on that. Considering it -- I'm just trying to make sense of the fact that it looks like that's over -- the NOK is overcollateralized to begin with. Is your ability to secure -- in your conversations with the bank there on at least the first 50% on that facility, is that contingent in any way on securing additional term business for the project where they -- or the bank, you thought would be comfortable financing it at 50%?

Those discussions are still ongoing, Mike. But we -- the bank would be comfortable at providing some but not all of the funds at the current level.

Right. So when I see 70% -- $70 million of anticipated bank financing, you say some, but not all. Does that 70% equal then the sum of the financing you're talking about or are we talking about a portion of the $70 million they'd be comfortable lending?

At the current level, a portion of the $70 million.

A portion of the $70 million. So you need to go out -- you need to get more term business secured on the ethylene facility to get the $70 million of bank financing you guys are looking for?

Yes. And we've got no fears on that front with the current conversations that are ongoing.

Right. It's just with the time stamp on it, trying to do it by the end of first quarter of '19, which makes it a bit interesting. I guess, can you maybe talk to maybe some of the unique challenges that this presents? I think when I and I think when most people look at this and they look at in our ethylene JV with Enterprise, it's 50% covered and it looks really strong when you look at the high-level details on paper. But the -- if you need more than 50% forward contracting to get -- even to get the 50% bank financing on it, it just seems like there's a bit of a disconnect there. I was just curious can you maybe talk to what the biggest -- have there been any challenges that have surprised you or what's different about this processes than maybe you're expecting?

No. Look, we don't have any particular concerns about it. There is proportionality to the facility. But we do have existing cash from within the facilities. The bond agreement, if you've looked at the relevant paragraph, it says as long as there's financing in place from frankly wherever it comes. So there are revolving -- undrawn revolving facilities that we currently have, plus cash flow that's generated between now and the end of March of next year. So -- and some capability to draw down on this facility. So all combined, we've got no particular concerns that this is not going to be fully financeable by that time.

Okay. I can dig into it a bit more offline. The -- as it pertains to maybe other opportunities, I mean it sounds like this is a big step for you guys in kind of moving into land-based infrastructure, so I don't want to get ahead of myself. But there are some other ethane projects -- some ethane projects rather that made headlines in the first half of the year. It seems like some of the shipping opportunities there might have fallen by the wayside or have had a hard time getting -- kind of getting the orders that they wanted. Is there an opportunity for you guys to step into other ethane projects or ethane projects in the next -- call it the next year or 1.5 years? Or do you think you need to get this down and done before you look at anything kind of more strategic in termed out?

I'll answer that, if I could. Look, ethane is very likely to become an important export product in time. The United States has ample ethane. There are now 2 existing export facilities, a third one being built. And there is a huge demand, particularly in China for ethane as a feedstock for ethylene. The economics are good. The environmental issues are great. We could expect to see a substantial trade in that. How much, I'm not quite sure. My guess is 7 million to 9 million incremental tons over what we have today and that would require maybe 25 or 30 vessels. That is -- first of all, it would be -- it's kind of unusual for ethane to go and not ethylene to go. If you were a country and had a need for more ethylene, you may want to import ethylene as opposed to import ethane and build an ethylene cracker. It's logical to do that. The only place it is not logical to do it is in China. China, because it's a controlled economy, and they determine and very focused on where plants will be located and how many jobs it will create and they want to be built there.

So ethane, the big volumes will go to China. They will go on large volumes or large vessels, but they require permits. They require permits from the central government in China and of course, provincial permits. In our opinion, those permits will not be issued and there won't be much of a trade until there is a resolution between Beijing and Washington on the tariffs. Once those tariffs are resolved, they can sit down and develop what might be a logical trade. That is a timing issue that I'm not quite sure I can give you. It is very likely to happen. We have been engaged not only in the first publicly one for China that is the Satellite and Energy Transfer one. We felt there was some issues about that and we stepped back. But that may emerge somewhat earlier than expected. It's all about tariffs right now.

But now the rest of the world, I think with some exceptions where there is a conversion -- a part conversion of an existing ethylene cracker in the internationally, whereby they would like to use some ethane from the U.S. Most of the stuff we would see would be ethylene as the basic product being exported. So for us, we're indifferent. Ethylene or ethane, it requires the same complicated large vessels that we have. And it may require some infrastructure on the receiving end, particularly. So it's just kind of what I've been talking about as having this basket of opportunities that cannot be easily defined. And if they could be, I would be reluctant to find them because I don't want to talk about things that are not on our plate confirmed and under contract. But it's that trend that's important. And I don't know if I've answered the question or not, but...

No, you have this -- and the Satellite project is what I was actually referencing. So -- but the breakdown there, you think it's purely driven by tariffs and kind of geopolitical issues as opposed to any you mentioned kind of underlying issue for you in order to get the tonnage and (multiple speakers)

Tariffs are an important part. Then there are some people who question the ability of Satellite to fund, finance a $5 billion ethylene cracker when the market capital of their company is half that. But if you understand the importance of Belt-Road and the importance of the enthusiasm and backing by provincial governments as well as the central government in China, for projects like this, which I think the Satellite one is deemed to be a strategic asset, a strategic initiative that financing probably will be encouraged by those governmental agencies. So it probably will get done from their standpoint, but nothing can get done until they have the permits, and the permits are conditioned upon licenses from the federal government. And that's the hang-up right now, I believe.

Look -- and I think it will be the same case in a number of others and most of the -- Satellite is an independent company. Most of the other petrochemical companies in China anxious to get ethane to build new ethylene crackers are state-sponsored companies. You can imagine who they are. They're all large and have deep government involvement. Financing of those will be relatively easy because they will be under long-term contracts. But again, nothing will happen until there is a resolution, but it will happen. Remember this has the most median impact on the balance of payments of the United States and the trade deficit. It will be on the liquid. LNGs will take 6 or 8 years to get up and running and make an impact on our balance of payments, but liquids can be done very quickly. Ethane can be done in 2 to 2.5 years. So that will have a quick fix, but I'm sitting back until there is clarification on how they want to proceed in Washington and how they want to proceed in Beijing. And all our logic and everyone's logic suggests that some time sooner or later it will be resolved and then that trade will open up.

Got you. That's helpful. And actually, if you don't mind, Niall, if I could just move back to one more on the project financing just real quick. The $70 million of anticipated bank financing. As you stand right now in terms of forward cover, how much of that forward financing you think you can get? You said that it is 50%.

Well, that facility isn't in place yet, so we're still negotiating that.

Right. So if you don't -- if the project sits at 50% forward covered, how much financing do you think you can get out of that $70 million, so we can sort of backfill how much cash you have to draw down to keep the bonds in place?

Well, I think we could -- we can -- we're striving to be able to draw down as much as we need to cover the full payment of the terminal with other -- with the revolver that we have. That's our goal.

Right. No, I understand, but if you're sitting at 50% of that facility termed out, what are the banks telling you, how much capital is available right now?

This is what I'm saying, the facility is not agreed yet. We're still working on it. So that's a move well thought.

And your final question today is from Randy Giveans from Jefferies.

So yes, I've got 2 quick questions. So first, you mentioned in your press release Mariner East 2 pipeline expected to come operational in December. How long will it take to ramp up to that full 275,000 barrels per day? And then once fully operational, how will that affect LPG exports out of markets, specifically kind of on a handysize equivalent basis? I know most of the cargoes will be shipped on VLGCs, but just trying to see the impact on the Navigator fleet.

Yes, Randy, that's a tough question to ask Navigator. Energy Transfer would be a better source, and we've tried to get that -- the answer out of them, what is their schedule of production and throughput, how quickly can they ramp up. And I don't have a very good answer for them. All the facilities and markets over there right now, the Bors are operational, they have been operational. There is some question of whether they have a workaround from this temporary pipe that they've put in place or was in place that circumvents some troubled area in West Goshen near Philadelphia. So the important thing is for them to get it up and running. And then that would satisfy a lot of sensibilities and legalities once that is running.

We will be hauling the ethane because that's dedicated on the pipeline and we will get as much as needed. I think ours is 10,000 barrels a day essentially for the Borealis contract. Once if it is up and running at 275,000, we expect the majority of that, well over the majority, to be going to the Far East or Latin America on very large gas carriers. Some of it will go on smaller vessels, midsize and handys. We operated reasonably well out of that facility several years ago, hauling LPG to Europe because there are a lot of smaller ports and storage facilities that needed and could only accept handysize vessels. So we would hope some of the cargoes once this thing is up and operating would be on handy. But more important for us is to see the health of the midsize and very large gas carriers because we can't get rates that are historically high until there is some relief to the very large gas carriers because they impinge on the midsize guys.

I think it's terribly important that Energy Transfer talk about the ability to put Mariner East 2X, or I like to Mariner East 3, up and running 9 months from now. They can do that, I think, technically because most of the work has already been done. It's just uncovering the overburden and laying the pipe and all of the tunnels and so on, the riverbeds and bridges and highways have already been drilled. Getting up to 800,000 barrels a day just changes everything. The most important thing, I think, it changes is the pricing mechanisms that are in place with propane because there in the East Coast, there is no storage. Producers are very anxious to move their product out of there. It's been sitting there for a long period of time. There is an abundance of it. A lot of the stuff is capped. So they will price the propane to clear the market.

Now the Gulf Coast guys, they've always had Mont Belvieu to store it if they didn't like the pricing. Now I can tell you if you're a Gulf Coast producer and seeing the Northeast markets or producers being able to sell all of theirs and you're not selling yours, you're going to change the price. So I think you're going to see the potential of a lot more volume, both Gulf Coast and the East Coast moving as a result of the opening of Mariner East 2X. I think you have to wait until those volumes come before you see it. But I think that's the importance of what Energy Transfer talked about. Not so much the Mariner East 2, which is good, but the fact that they can get the third pipe up and running within 9 months.

Perfect. Okay. And then last question just on utilization, full quarter of 3Q was 87.5%. Now that we're kind of halfway through the fourth quarter, what it has it been for October?

I think you have to look at October, what is the trend, what do you think we're going to wind up in the fourth quarter, Oeyvind?

I think the trajectory of what we're seeing today November, December, we should be able to get to around 90% level, so up from third quarter. I'd be very surprised not to see an uptick for fourth quarter.

There appear to be no further questions at this time. Speaker, please continue.

Okay. Well, we're hoping that the Marcus Hook, in fact, opens the way it's scheduled. The road to 2020 is getting shorter. So we're hopeful that we will see some tangible results, maybe not this current quarter, but 2019 being a fundamentally transitional year. Thank you for joining us this morning and look forward to meeting again. Bye.

Thank you. That does conclude the conference for today. Thank you all for participating and you may now disconnect.