11/29/2021 | Press release | Distributed by Public on 11/29/2021 16:44
Highlights
The Company's financial information for the quarter ended September 30, 2021, included in this press release is preliminary and is subject to change in connection with the completion of the Company's quarter-end close procedures and further financial review. Actual results may differ from these estimates as a result of the completion of the Company's quarter-end closing procedures, review adjustments and other developments that may arise between now and the time such financial information for the quarter ended September 30, 2021 is finalised.
Ultragas Transaction
During the third quarter 2021, on August 4, 2021, the Company entered into the previously announced transaction with Naviera Ultranav Limitada ("Ultranav") to combine the Ultragas ApS ("Ultragas") fleet and business activities with Navigator, by acquiring two entities, Othello Shipping Company S.A. with its 18 wholly owned vessel owning entities; and Ultragas ApS, (the vessels' operator) with its subsidiary (Ultraship, an in-house technical manager), and associated entities UltraShip Crewing and Unigas Intl B.V. (the pool in which 11 of the 18 vessels operate). The acquired fleet of 18 vessels, which has a provisional book value of approximately $377.0 million, comprises:
On September 28, 2021, the Company agreed to sell one of the older acquired vessels, the Happy Bride, a 1999 built 6,400 cbm LPG carrier to a third-party for $4.75 million. The sale completed on October 12, 2021.
The acquisition price for the entities acquired comprised of approximately 21.2 million new shares of the Company's common stock issued to Ultranav as well as the Company assuming the acquired entities approximate $175.2 million of net debt.
The debt consists of five bank loans, secured on a total of 13 of the 18 vessels acquired, the other five vessels are unencumbered. The bank loans, which in aggregate have half yearly repayments of approximately $13.6 million, mature from June 2026 and attract interest at U.S. Libor plus a margin of between 1.9% and 2.65%. In each case U.S. Libor has been fixed through an interest rate swap of approximately 2.0%. The financial covenants on these five bank loans were modified on acquisition to be consistent with those of Navigator.
Market Trends
The 12 month timecharter assessment for handysize semi-refrigerated gas carriers was quoted at $625,000 per calendar month ("pcm") at the beginning of the third quarter 2021 and reduced 6% to $590,000 pcm for September which is the lowest level throughout 2021. However, the market has firmed over the past two months and the time charter assessment has increased 9% to $645,000 pcm. A broker's assessment of ethylene capable handysize vessels was $750,000 pcm at the end of the third quarter and has increased to $790,000 pcm since that time. The larger, medium sized gas carriers ("MGC's") and very large gas carriers ("VLGC's") are showing moderate to strong earnings being quoted at $680,000 pcm and $970,000 pcm respectively. This reduces interest in handysize LPG cargoes from the larger vessels as they focus on their traditional segment-specific trade-routes.
Similarly, when the ethylene capable handysize vessels are carrying ethane or ethylene cargoes, they do not seek employment from the LPG or other petrochemical cargoes that the semi-refrigerated handysize vessels are employed in. We therefore see a correlation in our utilization rates relative to U.S. export activity of ethane and ethylene. The U.S. petrochemical industry was building ethylene inventory levels during the third quarter, 2021 in anticipation of the hurricane season, which led to a reduction in physical exports of ethylene from the U.S. Gulf and forced some of the ethylene capable handysize vessels to seek employment opportunities in the traditional semi-refrigerated market. This cause-effect negatively impacted our utilization rates which reduced slightly from 85% in the second quarter 2021 to 84% in the third quarter. Since October however, U.S. ethylene exports have gone from strength to strength showing record volumes for November, which in turn has had a positive impact on our vessel utilization. In addition to increased volumes to transport, trade-routes have changed from previously being the majority to shorter European destinations to now a majority to Far Eastern destinations, which doubles the ton-mile demand for each ton exported. At the beginning of 2021, we had two fully-refrigerated handysize vessels employed in ammonia trades, today we have five and we expect ammonia to become a larger part of our employment portfolio going forward. This will also have a positive effect in tightening the handysize segment, as switching handysize vessels from LPG to ammonia reduces the availability of vessels trading in LPG.
Our four MGCs with ethane and ethylene capability are contracted on multi-year ethane time charters. This means they are employed in the premium trades that they were built for, thus avoiding competing with our handysize vessels in the LPG and petrochemical markets. There is continued interest in additional spot ethane opportunities from the various petrochemical consumers and we see our Luna Pool increasingly playing an important part in adding value to this particular supply chain.
Terminal
Ethane remains competitive as a feedstock for the production of ethylene. This key fundamental underpins the continuation of U.S. produced ethylene to international markets. The arbitrage, being the price difference between U.S. product and international ethane prices, have been uncharacteristically volatile during 2021, including the third quarter. U.S. ethylene exports are likely to achieve record high export levels in November, and we expect the Marine Export Terminal to maintain nameplate capacity going forward.