Andrew Peller Ltd

TSX:ADW.A

Welcome to the Navigator Holdings' conference call for the fourth quarter 2024 financial results. On today's call, we have Mads Peter Zacho, Chief Executive Officer; Gary Chapman, Chief Financial Officer; Oeyvind Lindeman, Chief Commercial Officer; and myself, Randall Giveans, Executive Vice President of Investor Relations and Business Development in North America.

I must advise you that this conference is being recorded today. As we conduct today's presentation, we'll be making various forward-looking statements. These statements include, but are not limited to, the future expectations, plans, and prospects from both a financial and operational perspective, and are based on management's assumptions, forecasts, and expectations as of today's date, March 12, 2025, and are as such, subject to material risks and uncertainties.

Actual results may differ significantly from our forward-looking information and financial forecast. Additional information about these factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission.

With that, I will now pass the floor to Mads Peter Zacho, the company's CEO. Please go ahead, Mads.

Good morning, and good afternoon, and thank you very much for joining this Navigator Gas' earnings call for Q4 2024. As a start, I'll review the key data on our Q4 '24 performance, and then I'll go over the outlook for the rest of the year. After that, Gary, Oeyvind, and Randy will discuss the results in more detail.

In the fourth quarter, we generated more revenues, up 2% compared to same period previous year. This was driven by slightly higher utilization. Adjusted EBITDA for Q4 came in just over $73 million, above both of the $72 million in the same period previous year as well as the $68 million of Q3. The balance sheet is strong with a robust cash position even after we repaid our final December -- we paid our final December installment of $50 million on the Terminal Expansion Project, and we repaid on our debt facilities and paid further installments on the MGC newbuildings.

The return of capital continued in Q4 with both the $0.05 fixed dividend and a share buyback up to, in combination, 25% of net income. During Q4, we issued $100 million of new unsecured bonds at 7.25%. This was the tightest spread for any dollar-denominated shipping bond issued in the Nordic market since 2008.

Commercially, we held TCE rates high, and we secured average Q4 TCE rates of $28,341, which is approximately equal to the rates of the same period previous year. We achieved utilization above 92%, in line with our guidance and higher than both Q3 and same period previous year. We're overall pleased with our ability to maintain robust TCE rates and utilization in a market that was temporarily hit by softer ethylene transport demand.

Throughput at our joint venture ethylene export terminal was 159,000 tons for the quarter, higher than Q3 but lower than Q4 of 2023 and below capacity. This was caused by U.S. cracker turnarounds, which reduced domestic supply, causing higher domestic prices and a narrow arbitrage. The expansion of the terminal was completed on time, on-budget in December. In November, we exercised our options for an additional two 48,500 cubic meter midsized ethylene carriers with expected delivery in November 2027 and January 2028. We also signed a time charter agreement for the first MGC vessel to be delivered.

In December '24, we agreed to acquire 3 handysize ethylene carriers for a total of $83.9 million. Two of the secondhand vessels were delivered in February with the final delivery coming in the next few days. While geopolitical tension reduces our ability to do longer-term forecasting right now, we maintain confident about the outlook for our business and for the near term. We expect vessel utilization to continue to be high in Q1, close to what we saw in Q4, and we expect to continue to see robust TCE rates.

Also this time around, the ability of our vessels to transport different cargo crates proved valuable. Petrochemicals such as ethane, ethylene, propylene, and butadiene now make up a total of 46% of earnings days. That's higher than what we've seen previously. The vessel supply picture remains attractive with a handysize order book of about 10% of the vessels on water. In addition, now, 22% of the global handysize vessels on the water are more than 20 years of age.

With that summary, I'll just hand it over to you, Gary, and you can give a little bit more details about our financial results. Please go ahead.

Thank you very much, Mads, and welcome to everybody. Our fourth quarter 2024 financials show another strong result, as Mads was mentioning, maintaining our trend over many recent quarters now, not least as a result of our flexible fleet, as Mads was alluding to, good charter rates and our operational efficiency and control over costs.

Jumping on to Slide 6. Following another good operating quarter, adjusted EBITDA was $73.4 million in the fourth quarter of 2024 due to those continuing robust charter rates and strong stable utilization. And that's probably going to lead us to record an annual unadjusted EBITDA for Navigator of $292 million -- $293 million despite very slightly lower time charter equivalent rates in this fourth quarter of 2024 compared to fourth quarter of 2023.

Then putting some more numbers on that, our total operating revenue for the quarter was $144 million, with a robust utilization of 92.2% and continuing healthy time charter equivalent rates, as Mads mentioned, that were on average $28,341 per day in the fourth quarter.

In the fourth quarter of 2024, vessel operating expenses were slightly down at $46 million compared to the fourth quarter of 2023, but slightly up compared to the average of the first 3 quarters of 2024, which is typical at the end of the financial year as a number of accruals are booked.

Depreciation is broadly in line with previous quarters in the year, and our general and admin costs of $9.4 million in the fourth quarter is in line with the third quarter of 2024, but both of those were slightly elevated compared to our run rate as we recorded some nonrecurring costs, mainly legal costs related to projects.

Our unrealized movements on non-designated derivative instruments resulted in a small loss in the fourth quarter of $0.3 million, this being related to movements in the fair market value of our long-term interest rate swaps, which affects our net income, but which had no impact on our cash or liquidity.

We also report a lower net interest expense in the fourth quarter of 2024 compared to the fourth quarter of 2023 due to lower SOFR rates. And we also have a non-cash unrealized loss on foreign exchange in this fourth quarter of $2.8 million. Our income tax line reflects current tax and mainly deferred taxes, primarily derived from our investment and share of profits in our ethylene export terminal at Morgan's Point.

And overall, for the fourth quarter, including our share of results from our joint venture, net income attributable to stockholders of Navigator Holdings was $21.6 million with a basic earnings per share of $0.31 and adjusted net income, which excludes unrealized gains/losses on derivatives, foreign exchange, write-off of deferred financing costs and any gain or loss on the repayment of bonds of $27 million or $0.39 per share. Ethylene terminal throughput volumes in Q4 '24 were 159,183 tons, as Mads mentioned, resulting in a contribution of $5.6 million from our ethylene terminal joint venture. And as usual, Randy will give a little bit more detail on the terminal shortly.

On Slide 7, our balance sheet remains very strong with a cash and cash equivalents balance of $139.8 million at December 31, 2024, despite paying out $35 million for scheduled loan repayments, over $1 million in share buybacks in respect of the third quarter 2024, $57 million in the quarter in payments towards our ethylene terminal expansion, and a further $21 million towards our four MGC newbuild vessels.

In December 2024 and as planned, we utilized our undrawn bank facilities to cover our share of the final major payment towards our Terminal Expansion Project of $50 million. Based on our outlook today, we anticipate further positive cash generation from our operations in the first quarter of 2025 and beyond.

On Slide 8, our recently closed financing transactions have helped us to extend our debt maturities, improve our already strong liquidity, reduce our interest expense and helped us fund accretive fleet expansion.

In the fourth quarter of 2024, we fully drew down on our new $147.6 million 6-year secured term loan revolving credit facility, which was used to refinance our existing March 2019 secured loan facility that would have matured in March 2025 and to repurchase, in October, the Navigator Aurora pursuant to our existing October 2019 sale and leaseback arrangement.

We're also very pleased to repeat that the margin of 190 basis points includes a sustainability-linked adjustment of 5 basis points, reflecting our continued commitment to concentrating our efforts on the environmental impact of our fleet.

Then on October 17, 2024, the company successfully issued $100 million of new senior unsecured bonds in the Nordic bond market. These new 2024 bonds will mature in October 2029 and bear a fixed coupon of 7.25% per annum. And we used the proceeds primarily to call and cancel our previous 2020 bond that paid a coupon of 8%, and this core transaction settled on November 1, 2024.

Then into the new year, on February 7, 2025, we entered into a new senior secured term loan facility of $74.6 million to finance the majority of the purchase price of three secondhand ethylene-capable vessels.

We completed the acquisition of two of the three vessels, the Navigator Hyperion and the Navigator Titan on February 19 and February 24, respectively, with the third vessel that will be renamed the Navigator Vesta currently due to be delivered to us on March 17.

We then have one debt maturity during less than 12 months, which will be the refinancing of our $210 million bank debt facility, due to mature in September 2025 and with a balloon then due of $136 million.

Refinancing discussions for this are well underway with a supportive lender group, and we expect this refinancing will result in a positive liquidity event for the company and be completed in the second quarter of 2025.

On Slide 9, our leverage remains in a strong position and is still reducing with net debt to adjusted EBITDA at 2.4x for the 12 months to December 31, 2024, and our net debt to capitalization was 34% at the end of the year.

We're continuing to make substantial debt repayments with around $120 million of average annual scheduled debt amortization payments expected across the coming 3 years, 2025 to 2027. And within our refinancing work streams, we continue to look for further ways to reduce our average cost of debt.

Our Morgan's Point terminal expansion, which increases the export capacity of the ethylene export terminal, was completed and put into service on December 19, 2024, and we expect the final cost will come in at approximately $128 million, just below our previous expectation of $130 million.

On Slide 10, our estimated cash breakeven for 2025 is $20,610 per day, which shows a slight decrease per day compared to the final guidance we provided back in November 2024 in relation to 2024. This figure is all-in and includes forecast scheduled debt repayments and our dry dock schedule.

The breakeven level relative to today's charter rates, recalling our average TCE for the fourth quarter of 2024 was $28,341 per day, provides substantial headroom for Navigator to generate positive EBITDA throughout the shipping cycle.

On the right is our OpEx guidance now for 2025 across our different vessel size segments, ranging from $8,050 per day for our smaller vessels up to just over $11,000 per day for our larger, more complex ethylene vessels. And following below is guidance for this year and for the first quarter of 2025 across vessel OpEx, general and admin, depreciation and cash interest expense.

The full year guidance for vessel OpEx for 2025 towards the bottom is higher than the total for 2024 as we have three extra vessels in 2025 for the majority of the year. Costs relating to our crew are rising, not just for Navigator but across the shipping industry. And we've increased our spend on energy saving technology compared to 2024.

Slide 11 outlines our historic quarterly adjusted EBITDA, showing this fourth quarter solid figure and demonstrating yet another very positive and consistent result. As we've reported for many quarters now despite a slightly prolonged dip in the ethylene arbitrage, which Oeyvind will cover shortly.

On the right side, as we have done before, we show our historic adjusted EBITDA bar for 2023, last 12 months and an annualized adjusted EBITDA based on the fourth quarter's results. In addition, the EBITDA bars then to the right of those provide some sensitivity and illustrate an increase in adjusted EBITDA of approximately $19 million for each $1,000 incremental increase in average time charter equivalent rates per day. This is slightly higher than we were showing in the previous quarter, which was an increase of approximately $18 million.

Then finally, on Slide 12, we have 15 vessels scheduled for drydocking during 2025, of which the first one has already successfully completed on March 7, and in total, for the 15 vessels, we are expecting 413 off-hire days and total drydocking CapEx of approximately $30 million, all of which is scheduled, fully costed and included in our cash flow plans.

As we've set out before, some further detail on the expected timing and cost of these dry docks is then shown below, and we continue to take our dry docks as opportunities to install these energy-saving technologies on our vessels, and this will continue in 2025, as I mentioned before, at a planned total cost of around $5.6 million. Many of these technologies have a very short payback period, helping us to improve our environmental impact, improve operating efficiency and also gather better data to make further future improvements.

So with that, I will hand you over to Oeyvind to take us through our commercial update and outlook. Oeyvind?

Thank you, Gary, and good morning to everyone. Let's take a look at the current rate environment, which you find on Page 14. There are two key trends to highlight on this page.

First, in the fully-refrigerated markets, we're seeing a downward pressure on rates. You can see this in the chart, very large gas carriers in black, medium gas carriers in gray, and handysize gas carriers lighter blue, although we only have six of these and only two on spot. The main reason, there's an oversupply coming from the VLGC segment, putting pressure on rates for fully-refrigerated ships.

This part of the market is really waiting for a lift from the U.S. terminal expansions that are currently being constructed, which we'll discuss in a few slides. That boost in demand should start to take effect later this year.

Secondly, semi-refrigerated handysize vessels where we have most of our assets are holding up much, much better. That's the dark blue line in the chart. Unlike fully-refrigerated segment, this part of the market remains stable at historically healthy rate levels. Why? Because these vessels can balance between LPG, ammonia, and easy petrochemicals, which are keeping demand steady.

One additional key takeaway here, since the handysize ethylene rate benchmark was introduced 3 years ago, shown in green, this vessel class has now become the highest earner among all the vessel classes. And that is something. That's directly linked to U.S. ethylene and ethane exports as well as the physical restrictions of other vessel types to Canada. And this is, of course, good news for us. Our petrochemical capability is proving to be a strong advantage in the current market.

Beyond ethane and ethylene, propylene and butadiene are also helping to support rates. Petrochemical cargoes are making up a bigger share of our total fleet earning days compared to previous years. So if you look at Page 15, you'll see that petrochemicals now represent 46% of our total earnings days. So that's the 2 top [ blue ] bars compared to LPG at 36% and ammonia holding steady at 18%. This growing share of petrochemicals is a key reason why we've been able to maintain strong fleet utilization during the last few months.

Now turning to the outlook and what to look out for. The first thing to keep an eye on is U.S. natural gas liquids production and U.S. midstream takeaway capacity. So there are no surprises here. If you look on Page 16, the EIA data shows NGL production continues to climb. More NGL production means more ethane supply, and it means more LPG supply. However, American terminal takeaway capacity is already close to max levels.

To keep up with growing output, midstream companies such as Enterprise Product Partners and others need to build more gas processing plants, more pipelines, more fractionators, and more export terminal capacity, and that is exactly what is happening.

Over the next 4 years, U.S. export capacity is expected to increase by at least 2/3 or an additional 40 million tons of annual throughput compared to today's levels. That's a big deal. It signals strong growth through the rest of the decade, benefiting all segments of gas shipping.

For Navigator, the biggest advantage comes from competitively priced ethane and ethylene. So take a look at the bottom left graph on Page 17. The gray line tracks U.S. ethylene prices, and these are quoted by Argus.

A couple of months ago, prices spiked about $750 per ton due to production turnarounds and maintenance. At that time, with European and Asian delivered prices around $900 per ton, there wasn't much export activity. Arbitrage was effectively closed for ethylene from the U.S. Now U.S. ethylene prices are gradually correcting, driven down by cheaper ethane and increasing production.

Yesterday, U.S. ethylene was quoted at $580 per ton, nearly $200 difference since the peak a few months ago. Meanwhile, international prices remain stable, which should lead to more exports in the second quarter and beyond because the arbitrage is widening.

In the meantime, our vessels are being switching grades to carry ethane, which has been a major factor in maintaining our high utilization. You can see in the right-hand graph that our fleet utilization started the year very slightly ahead of where we're at at this time in 2024.

On Page 18, it shows the current fleet and upcoming vessel supply across all segments. The handysize segment, in particular, has very little new tonnage coming in over the next 3 years, let alone the next 12 months, which is a positive factor for us. Clear visibility of the supply picture over the near and medium term is very helpful when thinking about supply and demand balance going forward.

So the bottom line, despite market uncertainties and geopolitical risks, our core segments of ethylene capable and semi-refrigerated vessels are performing better compared to other gas carrier segments. And while ethylene exports haven't been as strong recently, we successfully pivoted to carry more ethane while we wait for the arbitrage to return.

With that, I'll hand things over to Randy to walk through the latest developments. Randy?

Thank you, Oeyvind. Following up on several announcements we made in recent months, we want to provide some additional details on updated developments regarding some of those announcements.

So turning to Slide 20. We're pleased to announce our return of capital for the fourth quarter of 2024. But before we get to that, I want to highlight that during the fourth quarter, we repurchased more than 69,000 common shares of NVGS in the open market, totaling $1.1 million for an average price of $15.88 per share.

Now looking ahead, in line with our recently announced return of capital policy and the illustrative table below, we're returning 25% of net income or $5.4 million to shareholders during this first quarter. The Board has declared a cash dividend of $0.05 per share payable on April 3 to all shareholders of record as of March 24, equating to a quarterly cash dividend payment of $3.5 million.

Additionally, with our shares trading well below our estimated NAV of greater than $27 per share, we'll use the variable portion of the return of capital policy for share buybacks. As such, we expect to repurchase $1.9 million of NVGS common shares between now and quarter end in the next 2.5 weeks, such that the dividend and share repurchases together equal 25% of net income or $5.4 million for the quarter. As seen over the past few years, returning capital to shareholders will remain a primary focus for us going forward.

Now turning to our recently completed ethylene export terminal expansion, on Slide 21. Following up on our previous announcement regarding the expansion of the ethylene export terminal, the project was completed on time and on budget in mid-December, and has been officially put into service.

The flex train triples the ethylene refrigeration capacity at Morgan's Point from 125 tons per hour to 375 tons per hour, increasing the annual throughput capacity to 1.55 million tons per year or 130,000 tons per month.

That said, due to the U.S. cracker turnarounds and the resulting reduction in domestic supply, the ethylene arbitrage remains relatively tight, but we continue to sell spot cargoes, and we expect the throughput capacity to increase in the coming months, especially as the domestic ethylene forward curve is forecasting a wider arbitrage going forward, as Oeyvind alluded to.

And in terms of CapEx, we paid $124 million through December 31 and have completed the final payment of $4 million in January for a total CapEx of $128 million, of which we might get a small rebate following some of the final tuning.

As for contracting the expansion volumes, the second and larger new multi-year offtake contract has been signed, and we continue to expect that additional offtake capacity will be contracted sometime in the coming months.

Now turning to Slide 22. Following the terminal expansion and the expected increase in ethylene volumes in the coming quarters and years, we recently agreed to acquire three secondhand German-built handysize ethylene carriers for a total purchase price of $83.9 million. Two of the vessels were delivered in February and the third vessel is expected to be delivered next week.

To note, Navigator Hyperion's first cargo, as a part of our fleet, was loading ethane at Morgan's Point, and is currently en route to Asia, as you can see in the map to the right. The vast majority of the CapEx has been financed through new debt totaling $74.6 million. So the acquisition is only requiring $10 million or so in total of our cash.

Now finishing on Slide 23. The secondhand vessels that we recently acquired will support the terminal expansion in the near term, but we also want to support the terminal expansion in the longer term. So in November, we exercised our options for two new 48,500 cubic meter capacity liquefied ethylene gas carriers at a price of $102.9 million each. The vessels are scheduled to be delivered in late 2027 and early 2028.

To note, these newbuilding vessels will be the largest in our fleet, have dual fuel engines that can burn ethane, and will be made retrofit ready for using ammonia as a fuel. They'll also be able to transit through the old Panama locks as well as the new Panama Canal locks.

Most importantly, these ethylene carriers will support the terminal expansion as customers who are looking at signing offtake contracts are also looking at securing their shipping needs. As such, we have signed a time charter agreement for the first vessel to be delivered, and discussions are ongoing with multiple customers interested in chartering the other vessels. So we expect to fix additional vessels on time charters prior to the delivery in 2027 and early '28.

Now lastly, in terms of vessel financing, we have already paid the initial 10% deposit totaling $42 million in September and in December, and we expect to complete financing arrangements sometime next year.

So with all that, I will now turn it back over to Mads for some closing remarks.

Thanks a lot, Randy. So then in summary, we delivered another solid quarter with strong operating cash flows, and we have in front of us Q1 that has come off to a good start.

We stay on our toes, and we refinanced well ahead of maturities at lower margins and better terms. We continue to pay quarterly cash dividends and buy back shares. We have, in the past, sought out opportunities for additional share buybacks, and we'll continue to look for opportunities to increase capital distributions to our shareholders.

Despite the current geopolitical tension, we remain confident about the demand fundamentals of our business. Continued growth in U.S. natural gas liquids production and the significant build-out in U.S. export terminal capacity over the next 4 years will support exports and thereby also transport demand.

Near-term volumes through the export ethylene terminal are expected to gradually recover with a widening ethylene arbitrage. The vessel supply picture remains attractive with a small handysize order book and an aging global fleet.

Thanks a lot for listening. And now I'll just hand it back to you, Randy, so you can coordinate the Q&A.

[Operator Instructions]

Is it mute? Can you hear me, Randy?

I see you, Ben Nolan from Stifel.

I have a couple of questions. So the first -- well, the first is maybe around the chartering. I know there's probably about a dozen or so of your ships that are coming currently on contract to come off over the next 6 months or so. Just curious if you could give a little color as to sort of where the contract market is relative to where those assets are currently contracted. Is that something that you anticipate there possibly being an uplift as you -- as new contracts are signed?

So Ben, I think the slide in the PowerPoint gives a very good indication of where the semi-refrigerated market is and also the fully-refrigerated market is, which is quite small for us. And it's only two ships that are trading in the spot market there. But I believe that the ethylene ethane market for handysize will strengthen alongside the arbitrage. So the arbitrage, as I mentioned, for U.S. produced ethylene to the world has widened by almost $200 over the last 2 months. So it is continuing to slide. And with that, I think that the demand for handysize ethylene ships will increase and therefore, push that market in a more tight position.

I guess, I'm asking more about, as you -- some of the existing time charter contracts roll off, are they at levels that are sort of below current market levels or like the existing contracts, are they -- how do they compare to where we are?

So good for us that we don't -- our core is not fully-refrigerated shipping. So you can see on that -- the correlation on that time charter rate graph that all the fully-refrigerated segments are sliding, but not our core semi-ref and ethylene. So I think that's pretty good. And the rates that we are discussing are around those levels that you see. So yes, I think we're pretty comfortable.

So higher is, I guess, the answer, than where they had been.

[ At ] the moment but ethylene, we're not going to give away ethylene ships on cheap rates because we believe that once the arbitrage is back on, I think that market will tighten too. So we shall see on next quarter if we probably have the same question.

By then, you'll have recontracted a few of them, so we'll know. But -- okay. And well, I guess I have two more quickly, just to get an understanding of the contribution from the expansion. Should we expect -- given that the arbitrage on ethylene is still -- for the first quarter hasn't been open very much, should we expect the contribution from the joint venture to be similar to what it was in the fourth quarter? Is that a fair assumption?

So for the fourth quarter, we also got some deficiencies a lot from 3Q, right? So the 1Q volumes will be a little lower than the 4Q volumes. We will get some deficiencies from the fourth quarter that roll into the first quarter, probably not as much. So the results during the first quarter of 2025 will be softer than the fourth quarter of 2024 from the terminal.

And then lastly for me, Oeyvind or Mads, there's a lot going on geopolitically around the world. Just curious if you can maybe frame in how to think about what the impact on your business would be if -- as the Red Sea to the extent that it remains open and also if there is a piece that comes around in Ukraine? How do we think about -- what does that do to -- what, in theory, would that do to the underlying dynamics of the market?

Maybe I can just kick us off, Oeyvind, and then you can chime in and add to it. I think when it comes to the Red Sea, we hope that there will be a piece of course that will continue, but it's not going to affect our business very much. We don't do a lot of transits through the Red Sea, and it doesn't impact the overall capacity utilization of our segment very much.

When it comes to the war in Ukraine, it's pretty much a similar picture. I would be very surprised if we saw a full restoration of the flows that we saw before the war in the near term. We did see some pickup in ammonia transportation as effect of the war, but we think that that's going to stay active for quite a period.

When it comes to trade friction, that's probably a little bit more of a potential impact. So far, we haven't seen any of the products that we carry that have been subject to tariffs. It's mainly been on coal, on oil, and on natural gas between China and the U.S. So far, the commodities we're transporting have not been affected.

But obviously, if it turns out that large tariff is put on by China on to, let's say, some of the cargoes we transport, that would be negative for the arbitrage, negative for the U.S. product competitiveness, and that would have a negative effect on our rates. But we haven't seen that. And yes, we haven't seen any indication that they will show up. Oeyvind?

Yes, I concur, I think, not only for the handysize, but for the entire gas carrier segment, not that much traffic through the Red Sea or there. So less of an impact for us compared to containers and other industries.

Next up, we have Spiro Dounis from Citi.

Maybe just start with Morgan's Point, if we could. You've been operating the facility for a few months now. So maybe just aside from the narrow arb, it sounds like it's improving. Just curious how the facility has been ramping, if you're capable today of running sort of near max utilization rates.

And Randy, you also mentioned an offtake agreement in the books now. Maybe just remind us, is your strategy to contract all that offtake out? Do you plan on keeping some spot? And maybe just how to think about some of the gating items to getting a few more of those over the line.

Sure. Yes. Starting on the operations, fully operational, right? The unit, the Enterprise, Navigator, both of us, for the terminal, have switched from builders' insurance to operators' insurance. So clearly, the insurers are also comfortable that it is fully operational and up and running. Clearly, not fully utilized, but we have fed ethylene and chilled it from the flex train and put it into the storage tank. So operationally, it is there. If the arb blew out next week, we could do the 130,000 tons in April, right? So that is not any issues.

In terms of the offtake contracts, yes, we did sign a second one. So we are building up to hopefully 90% offtake. Now depending on rates and terms, we're not opposed to going to the full 1.55 million tons. But if we can get to 1.35 million, 1.4 million, 90% utilization and offtake, that gives us a 10% buffer for some maintenance or some production disruptions, whether it be weather-related or what have you, but also some spot cargoes. Because, again, looking back at 2022 and 2023, we did nameplate capacity, right, at 1 million tons, 987,000 tons for the full year. So we had to say no to a lot of spot cargo opportunities, and frankly, no to a lot of potential new customers.

So going forward, we do want to have a little bit of that spot optionality to say yes to new customers, building out the customer base, and also the spot rates are usually always higher than the term rates, right? So to answer that question, yes, we'd like to get it to 90%-ish of the nameplate capacity of 1.55 million.

Lastly, in terms of hurdles, you mentioned, yes, right now, it had been vessel availability, right, that's tight, and it still is. But also, frankly, it's really the arb, right? And if you're a trader and you see a tight ethylene arb currently, it's hard for them to look forward 2, 3 years.

Now end users are certainly more longer looking in terms of their focus. But we're going to have a portfolio of both traders as well as end users, and we think those contracts will be signed in the coming months and quarters.

Second question, switching gears a bit, maybe just going to vessel sales. It sounds like you're still trying to sell three more of those and you're in conversations now. Just curious if you can get a little more detail on the status of those conversations, how far along those are? Is there a scenario where all three go to a single buyer? And then lastly, just how to think about the use of that cash?

Yes, I can kick us off here. We are looking at different options. We are looking -- there are some interested buyers that are just looking on a vessel-by-vessel case. So we have a number of potential buyers that have been and are inspecting our vessels, and we have those negotiations at different stages. There could also be a situation where one buyer takes off two or three, and we'll, of course, welcome that.

So it's ongoing. We've had some near deals that then didn't come through, and we have new that are coming up. So it's quite, I wouldn't say fluid, but it's a market that is developing over time. And yes, we will continue our efforts to sell them. We think they have the right age now to exit our fleet, and we also see that the vessel values are quite robust, and we have low book values on those ships. So we think it would be a win-win if we were to sell the ships right now. So it's an effort that is ongoing and will continue.

Next up, we've got Omar Nokta from Jefferies.

Just a couple of questions on my end. Maybe just first, just on the corporate redomicile that you mentioned in the press release, looking to potentially evaluate going from the Marshall Islands to England and Wales. Can you give us maybe just some context of what's the thought there? And then also any tax implications as a result?

I can kick us off and then Gary, you can supplement. The idea is that we would want to move the domicile, the flagging, and also the tonnage taxation to where we do our business. Most of our customers and also our offices and operations, they are in the U.S. and in Europe. They are certainly not in the Marshall Islands. So we think it will be more natural for us to domicile our business to or our ownership to where we are doing our business.

We don't expect that there will be any negative consequence for our tax payments. There are very efficient tonnage taxation schemes in a country like Denmark and the U.K., for instance. And we are, you could say, in the final inning of figuring out exactly how we put our fleet into those jurisdictions for tonnage taxation. So whatever tax implication there may be, they will be very -- they will be insignificant.

We also expect that given that those flags are very efficient and professional that there will not be any, you could say, operational restrictions or changes per se in the way that we're operating our ships.

So actually, why didn't we do it before? We probably could have, but we want to do -- have our ownership where we do our business.

Yes. I think I could add to that. I mean, it's a complex move to take a whole business and pick it up and move it into the U.K. But for the reasons Mads had said, moving our structure closer to our actual business is a good thing to do. It's quite a legalistic process. It takes a lot of time. There's a lot of paperwork to do that.

And obviously, from a shareholder perspective, we want to make sure that we get all of the disclosures right and that we're looking at the -- all of the processes and things that we need to do in order to get this done with the stock exchange and obviously, with our major shareholders and our entire shareholder base.

So there's a lot to think about, a lot to do, and we're in the process of doing that now. And I think on the whole, it's going to be a neutral financial impact. It's not designed to give us a particular advantage financially. I think it's designed to bring this closer to our business and to give us a more flexible and cleaner group structure as well.

And then just a follow-up separately. Randy had mentioned the newbuildings being chartered on a short-term basis on delivery. That seems to be 2-plus years ahead of delivery. So nice to get a charter. Is there any color you can give on the type of contract you entered into, whether it's rate or duration?

Omar, I think it's too early to say. What we are super excited about is that, yes, we're able to attract customers 2 years ahead for ethylene, which means that the customers we talk to believe in ethylene, believe in U.S. ethylene exports, and they come to us. So it's a beautiful match between the shipping on us and our infrastructure.

So obviously, that's definitely nice. But in terms of just any color on the rate, is it like in any sense that we can glean? You're willing to share?

Not on this call.

I figured. Okay that's good to hear. And then finally, just separately, again, maybe, Gary, just to you on the refinancing or the financing of the terminal expansion. You'll have spent $128 million or so when it's all said and done. How much of that do you think you can "recoup" via financing?

Yes. I mean the company put $150 million into the original. We put $128 million into the expansion. So it's quite a lot and none of that -- very soon by the end of 2025, there will be no debt on that. There's a small loan against the original terminal.

I think the options that we've got there, there are quite a few. It's obviously a little bit of a different asset to our fleet portfolio. So we have to think of it in a different way. The joint venture with Enterprise, we need to take that into consideration, our relationship with them in terms of how we securitize the debt if we do put debt onto the investment. But there are options we're looking at, and we wouldn't be pushing the envelope too much in terms of loan to value on that kind of investment. We don't need to. But it probably isn't hugely efficient for it to just sit there with no debt and no financing on it. So --

We're looking at a few different options, and probably later this year, we might take a look at that. And I think part of it is around the contract coverage that Randy has talked about. I think once we've got a little bit more there on the expansion, we can -- it's an easier conversation, if you like, with financiers and potential lenders in that respect.

So we're not in a rush, but we will do something. It's probably not going to be hugely -- highly levered, say, 50%, perhaps something in that kind of region. And it's something we'll look at later this calendar year. So it's not going to be imminent.

And then just a follow-up on that. Yes, I was just looking in your release, there's just under $11 million that's borrowed at the moment from the initial investment on that initial facility, and that's going to be paid off by the end of the year. But the thought on that 50%, do you think it's 50% financing of both investments, or is it 50% just on the latter?

I think it depends. I mean, we don't -- in some respects, we don't want to raise money for the sake of it. We want to be efficient with what we do. So we're looking at timing of use of funds as well because that's going to come into our bank accounts, and we're going to need to make really good use of that. So a little bit of this is around timing as well. So whether it's -- by then, the investment will be one, won't be an old and a new expansion and an original investment. It would be just one terminal investment.

So how much we end up taking, I think, we'll take a look at our cash flows. We'll look at all the exciting projects that Oeyvind keeps bringing to us to take a look at. And we'll sort of go from there. But at the moment, it's a little bit early to sort of be really firm with you about what we're going to do. But I do think we will do something. But at this stage, yes, we're still sort of working out exactly what that will be.

Next up, we have Poe Fratt from AGP.

Can you quantify where you are in the offtake right now? You said the goal is to get to 90% offtake from the terminal. Where are you right now?

Yes. So we have not quantified and we're not yet going to, because, again, commercially, we still have capacity to sell. So the majority of the 1.55 million is sold on offtake, right? So you've seen that we had 94% of the 1 million sold. We announced that number a few times in the last couple of years. So that remains and then we've signed some extensions and increased capacity offtake for some of the new capacity. So greater than that, but not quite 1.4. So I'll give you a big range there.

And then what would you peg the asset values for the older handys that are on the market right now?

I mean you can -- if we look them up on vessels value, I mean, there are some public sources there for an evaluation of the vessels. Once the tonnage is getting older, I think that bid-ask spread is moving a bit. It's also not super liquid market. So I think it's -- you can look them up and see what they come out at. And if that's close to, let's say, $80 million or similar, that's an assessment there. But I think at the end of the day, we don't look much at it when we are discussing it with potential buyers. It's not a liquid market.

And then just a couple of detailed questions for Gary. You talked about deficiency payments in the fourth quarter potentially going down. Would you care to quantify the deficiency payments that you received in the fourth quarter?

It's difficult for us to give that information out contractually, Poe. I mean, that would lead us into pricing of the various underlying contracts with our customers. So it's a little bit hard for us to do that. Plus, I think as well, it's -- the deficiency payments vary in the different contracts as well. So just giving one number in isolation, I'm not sure how useful that is.

It's certainly been obviously protected for us to have those deficiency payments, take-or-pay, and it's worked very well. But it does vary. Some are delayed by a month, some are delayed by 2 months, some delayed by a quarter. And so it kind of varies. And I think giving a number out, anyway, I'm not sure how particularly useful it is. But as I say, in any case, it's unfortunately, I think, probably a step too far for us to give that number away.

I mean, Randy, I don't know if you feel that there's any more color we can give really, it's tough.

Yes. No, yes, I think you nailed it. And on our EBITDA of $73 million, it's not a huge material number, but -- yes, we'll follow up offline.

And then could you remind me how much you -- you put 10% down on the 4 newbuilds. Can you remind me what your progress payments are for 2025 and 2026?

Well, overall, we've got 5x 10%, and it depends on the progress of the actual build. So in the contract, there are certain 10% due and those contracts say that those 10% are not due before. So it does depend slightly on the actual progress, if you like the odd. So I think we can follow up offline and give you a slightly more accurate answer. I don't have that data exactly to hand, unfortunately.

And then just one last quick one, more detailed than you probably wish, but the -- the change in the domicile, how much is that going to cost? And when should we see that hit the P&L?

Yes. I mean, lawyers, to be honest, aren't cheap. And clearly, this is a bit of a legal process. But we do a lot of the work in-house. Our legal team has been very busy with this. We're trying to minimize that cost externally where we possibly can. It's taking obviously an amount of external legal advice to make sure we're doing the right thing. But in terms of actual cost, it's sort of spread over many quarters. We've been doing this project slowly in the background for quite some time now. So I don't think you should expect to see a big hit as a result of this. I think it's already gone through, and it's not something that sort of jumps out.

Next up, we have Climent Molins from Value Investor's Edge.

Most has already been covered, but I wanted to follow up on the terminal. With the [ IP press ], I'm guessing this is a near-term priority. But as we think about the 3.2 million metric tons of, let's call it, maximum capacity, is there a clear path to reach it if the economics make sense? And secondly, what is the earliest that could happen, again, if the economics make sense?

Yes. So it's -- the flex capacity includes ethane and ethylene. Enterprise has already sold the majority of the remaining, let's call it, 1.65 million tons of ethane capacity for the flex train. Getting quickly into the weeds, the train that we converted is a total capacity of 2.2 million tons. We bought 1/4 of that capacity. That's the 550 for ethylene. That means there's 1.65 million remaining. The majority of that is already contracted for ethane liquefaction and offtake for 2025, some of it unwinds in '26, a little bit more in '27, a little bit more in '28.

As we all know, Enterprise is also about to open a new ethane export facility in Neches River over in Beaumont. So it's hard to say what the outlook is in the coming years in terms of how much will they re-contract for the ethane out of Morgan's Point versus shift over to Neches River. But the plan and discussions are to have more and more of the Morgan's Point be flexible for ethylene, right? Because Neches River cannot do ethylene, it can only do ethane. So that is the plan.

So in terms of when are we going to get to 2 million, 2.5 million, 3 million, 3.2 million tons of ethylene coming out of Morgan's Point, I don't know. It certainly won't be in the next 2 or 3 years, but potentially longer term. That said, we do expect there to be more of that flexible capacity widening in coming years.

All right. That is it. Mads, that's the end of the Q&A. Do you want to give a final goodbye?

No. I just want to say thank you very much for listening in. I hope you can see we are on a good footing, and we have been going through an exciting fourth quarter, and I think the fundamental outlook is quite good for us. So steady cruising so far. Thank you.