Q2 2024 Stabilis Solutions Inc Earnings Call
[music].
Greetings and welcome to the stability solutions second quarter earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please press star zero on your phone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Andy to Halle.
<unk> financial officer, and stability solutions you may begin.
Good morning, and welcome to <unk> solutions second quarter 2024 results Conference call I'm, Andy through Holland, Senior Vice President and CFO, Steve Ellis and joining me today is our president and CEO Westy Ballard.
We issued a press release after the market closed yesterday detailing our second quarter operational and financial results. This release.
Operator: This release is publicly available in the Investor Relations section of our corporate website at Stabilis-Solutions.com
Andrew Puhala: The lease is publicly available in the investor relations section of our corporate website at Stabilis-Solutions.com. Before we begin, I'd like to remind everyone that today's conference call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company's expectations and beliefs as of today, August 8, 2024. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
It's publicly available in the Investor Relations section of our corporate website, that's dibella stash solutions dotcom.
Andrew Puhala: The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. In addition, please note that we may refer to certain non-GAAP financial information during today's call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. This call is being recorded and will be available for replay. With that, I'll hand the call over to Westy Ballard for his remarks.
Speaker Change: Before we begin I'd like to remind everyone that today's conference call will contain forward looking statements within the meaning of the private Securities Reform Act of 1995 and other securities laws.
Operator: These forward looking statements are based on the company's expectations and beliefs as of today August eight 2024.
Operator: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
Operator: The company undertakes no obligation to provide updates or revisions to the forward looking statements made in today's call.
Operator: Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results investors are cautioned not to place undue reliance on any forward looking statements.
Speaker Change: Further please note that we may refer to certain non-GAAP financial information during todays call you can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release.
Operator: Today's call is being recorded and will be available for replay.
Operator: With that I'll hand, the call over to Westy Ballard for his remarks.
Operator: Yes.
Westervelt Ballard: Thank you, Andy, and good morning to everyone joining us on the call. We delivered a strong second quarter performance thanks to the continuous hard work of our entire team, enabling us to transition our company into one of North America's largest providers of liquefied natural gas fueling, production, storage, and last mile delivery solutions for many of the world's most recognized high performance brands. Our team has worked hard to optimize our existing operations to focus on longer-term customer relationships that support higher asset utilization, more predictable cash flows, improved liquidity, and a healthier leverage profile.
Operator: Thank you Andy and good morning to everyone joining us on the call.
Speaker Change: We delivered a strong second quarter performance, thanks to the continuous hard work of our entire team.
Operator: Italy us to transition our company and one of North America's largest providers of liquefied natural gas fueling production storage and last mile delivery solutions for many of the world's most recognized high performance brands.
Operator: Our team has worked hard to optimize our existing operations to focus on longer term customer relationships.
Operator: To support higher asset utilization more predictable cash flows improved liquidity and a healthier leverage profile.
Westervelt Ballard: During the quarter, our revenue increased by over 44 percent year over year, supported by a 60 percent improvement in utilization at our flagship plant in Texas when compared to the second quarter of last year. We generated over $5 million in operating cash flow in the second quarter and ended the period with nearly $16 million in cash and availability under our credit agreements and a net cash positive balance sheet.
Operator: During the quarter, our revenue increased by over 44% year over year supported by a 60% improvement in utilization at our flagship plant in Texas, when compared to the second quarter of last year.
Operator: We generated over $5 million in operating cash flow in the second quarter and ended the period with nearly $16 million in cash.
Operator: Cash and availability.
Operator: Under our credit agreements.
Operator: Net cash positive balance sheet.
Westervelt Ballard: Our strengthening liquidity position provides considerable flexibility to fund our operations and has enabled us to reinvest in our infrastructure to meet rapidly growing demand in our key end markets. Strategically, we remain highly focused on continuing to leverage our proven business model to further the development and delivery of a portfolio of growth opportunities across our marine, commercial, and industrial business platforms. Within our marine market, we continue to deliver outstanding performance on our LNG fueling contract with Carnival Corporation, the first of its type in Galveston, which began late in the fourth quarter of 2023 and contributed to the improved plant utilization rate at our George West liquefaction facility.
Operator: Our strengthening liquidity position provides considerable flexibility to fund our operations and has enabled us to reinvest in our infrastructure to meet rapidly growing demand in our key end markets.
Operator: Strategically we remain highly focused on continuing to leverage our proven business model to further the development and delivery of a portfolio of growth opportunities across our marine commercial and industrial business platforms.
Operator: Within our marine market, we continued to deliver outstanding performance on our LNG fueling contract with Carnival Corporation. The first of its type in Galveston, which began late in the fourth quarter of 2023 and contributed to the improvement plant utilization rate at our George West liquefaction facility.
Operator: Our unique supply chain is the only one in the market.
Westervelt Ballard: Our unique supply chain is the only one in the market capable of delivering LNG volumes at scale to large vessels along the Gulf Coast, and not only is it the continuation of our considerable record of bunkering operations across the U.S.
Speaker Change: Capable of delivering LNG volumes at scale to large vessels, along the Gulf coast and not only is it a continuation of our considerable resume a bunkering operations across the U S.
Andrew Puhala: But it also represents the evolution of the LNG supply chain to the waterfront for both our company and the industry. Thanks to our successful track record of developing and operating greenfield liquefaction plants and the key components of the liquefaction train that we purchased in 2023, we feel that we can rapidly build and commission the first phase of our expansion once we make the final investment decision to proceed over the next few months. It will be another important milestone in our company's history.
Westervelt Ballard: But it also represents the evolution of the LNG supply chain to the waterfront for both our company and the industry. We are delighted to have an established relationship with a world-class cruise operator like Carnival and view Galveston and the surrounding region as an exciting area for continued marine bunkering expansion on the waterfront. To that end, over the last year, we have been actively developing plans to build the first dedicated waterfront LLG bunkering facility along the U.S. Gulf Coast.
Operator: But it also represents the evolution of the LNG supply chain to the waterfront for both our company and the industry.
Speaker Change: We are delighted to have an established relationship with a world class cruise operator, like Carnival and view Galveston and the surrounding region is an exciting area for continued marine bunkering expansion on the waterfront.
Andrew Puhala: To that end over the last year, we have been actively developing plans to build the first dedicated waterfront LNG Bunkering facility, along the U S Gulf Coast.
Andrew Puhala: Thanks to our successful track record of developing and operating Greenfield liquefaction plants are.
Westervelt Ballard: Thanks to our successful track record of developing and operating greenfield liquefaction plants, our team of experienced industry experts, and the key components of the liquefaction train that we purchased in 2023, we feel that we can rapidly build and commission the first phase of our expansion once we make the final investment decision to proceed over the next few months. Expansion into this market is a natural extension of our existing Texas LNG fueling operations, which afford us considerable strategic and operational advantages, and will be another important milestone in our company's history as the only small-scale bunkering provider capable of executing multiple modes of delivery to our customers.
Andrew Puhala: Our team of experienced industry experts and the key components of the liquefaction train that we purchased in 2023, we feel that we can rapidly build and commission. The first phase of our expansion once we make the final investment decision to proceed over the next few months.
Andrew Puhala: Expansion in this market is a natural extension of our existing Texas, LNG fueling operations, which afford us considerable strategic and operational advantages.
Andrew Puhala: And it will be another important milestone in our company's history.
Speaker Change: As the only small scale bunkering provider capable of executing multiple modes of delivery to our customers. We are well positioned to capitalize on the growing demand for LNG fuel from maritime industry beyond the Gulf Coast, and we continue to actively evaluate opportunities to expand our operations to strategic ports across.
Westervelt Ballard: We are well positioned to capitalize on the growing demand for LNG fuel from the maritime industry beyond the Gulf Coast, and we continue to actively evaluate opportunities to expand our operations to strategic ports across the entire United States. In our commercial industrial markets, we have a strong core business serving about eight different sectors across the U.S. and Mexico.
Andrew Puhala: The entire United States.
Speaker Change: With our commercial and industrial markets, we have a strong core business, serving about eight different sectors across the U S and Mexico.
Westervelt Ballard: Going forward, we see a tremendous opportunity to further expand our business in emergency power delivery as well as enter the primary and backup power generation for the data center sector. During the quarter, we announced a 14-month contract extension of an LNG supply agreement for primary power generation, and we continue to further expand our operations with the expectation to deliver more than 235,000 megawatts of energy in 2024 to peak load, intermittent, distributed, and emergency relief power customers across multiple industries.
Andrew Puhala: Going forward, we see a tremendous opportunity to further expand our business and emergency power delivery.
Andrew Puhala: As well as enter the primary and backup power generation for the data center sector.
Speaker Change: During the quarter, we announced a 14 month contract extension of an LNG supply agreement for primary power generation and we continue to further expand our operations with the expectation to deliver more than to deliver more than 235000 megawatts of energy in 2024 to peak load intermittent distributed.
Speaker Change: An emergency relief power customers across multiple industries.
Speaker Change: Moving forward the data center sector as expected experienced meaningful demand growth with recent.
Andrew Puhala: Moving forward, the data center sector is expected to experience meaningful demand growth, with recent projections estimating that electricity load demand could increase by as much as 10% in certain markets. This growth comes as the U.S. accelerates commercial rocket launch activity and will be a source of continued growth over the next 12 to 24 months, including marine, power generation, and aerospace, and our comfort in assuming merchant risk to ensure infrastructure development meets the growing needs of next-generation low-carbon fuels like LNG. Thank you, and with that, I'll turn it over to Andy.
Westervelt Ballard: Moving forward, the data center sector is expected to experience meaningful demand growth, with recent projections estimating that electricity load demand could increase by as much as 10% in certain markets. As a provider of fuel for decentralized on-demand power, Stabilis is uniquely positioned to meet this demand through our integrated system-based solutions, and we expect to further invest in our operational capabilities and infrastructure to support the considerable demand growth ahead.
Andy: <unk> estimating that electricity load demand could increase by as much as 10% in certain markets.
Andy: As it provider fuel for decentralized on demand power stability is uniquely positioned to meet this demand through our integrated system based solutions and we expect to further invest in our operational capabilities and infrastructure to support the considerable demand growth ahead.
Westervelt Ballard: Beyond the power of generation vertical, demand for high-purity LNG as rocket propellant has continued to grow. This, this demand, this growth comes as the US accelerates its commercial rocket launch activity. During the quarter, we continued to expand our customer base, strengthening our position as the preferred provider of LNG for commercial space use with the addition of a new customer in the sector. Aerospace revenues are expected to increase approximately 75% over 20-23 levels and will represent approximately 10% of our annual sales for 2024 and will be a source of continued growth over the next 12 to 24 months.
Andy: Beyond the power generation vertical demand for high purity LNG is rocket propellant has continued to grow.
Andy: This this demand this growth comes as you accelerate U S accelerates commercial rocket launch activity.
Andy: During the quarter, we continue to expand our customer base strengthening our position as the preferred provider of LNG for commercial space shoes with the addition of new customer in this sector.
Andy: Aerospace revenues are expected to increase approximately 75% over 2023 levels and will represent approximately 10% of our annual sales for 2024.
Andy: And it will be a source of continued growth over the next 12 to 24 months.
Andy: Looking ahead, we see demand catalysts materializing across multiple end markets and we continue to evaluate opportunities to deploy capital and enhance our ability to meet the increasing demand for our product offerings across all of our platforms, including marine and power generation and aerospace.
Westervelt Ballard: Looking ahead, we see demand catalysts materializing across multiple end-markets, and we continue to evaluate opportunities to deploy capital and enhance our ability to meet the increasing demand for our product offerings across all of our business units, including marine, power generation, and aerospace. During the quarter, we commenced a phased expansion that will more than double our storage capacity at our George West Texas facility from 270,000 gallons to 630,000 gallons. The expansion will grow our robust inland LNG supply and logistics network across the Gulf Coast region and will give us added flexibility to support the continued expansion of our supply and logistics network.
Andy: During the quarter, we commenced a phased expansion that will more than double our storage capacity at our George West Texas facility.
Speaker Change: From 270000 gallons to 630000 gallons.
Andy: The expansion will grow our robust inland LNG supply and logistics logistics network across the Gulf Coast region, and will give us added flexibility to support the continued expansion of our supply and logistics network.
Andy: As we evaluate the best way to scale our platform to meet demand. We are prioritizing our capital structure that will maximize return on invested capital and yield sustainable profitable growth as we've said in the past our decision making framework for incremental capital investments in our business will balance longer term ratable all Turkey.
Westervelt Ballard: As we evaluate the best way to scale our platform to meet demand, we are prioritizing a capital structure that will maximize return on vested capital and yield sustainable, profitable growth. As we've said in the past, our decision-making framework for incremental capital investments in our business will balance longer-term, rateable off-take agreements that maximize return on investment and our comfort in assuming merchant risk to ensure infrastructure development meets the growing needs of next-generation low-carbon fuels like LNG. We look forward to keeping you updated on our plans and our continued execution in the quarters ahead. Thank you, and with that, I'll turn it over to Andy.
Andy: Our offtake agreements that maximize our return on investment.
Andy: And our comfort and assuming merchant risk to ensure infrastructure development meets the growing needs of next generation low carbon fuels like LNG.
Andy: We look forward to keeping you updated our plans and our continued execution in the quarters ahead.
Andrew Puhala: Thank you and with that I'll turn it over to Andy.
Andy: Thank you Rusty, let's move to a discussion of our second quarter performance together with an update on our balance sheet and liquidity.
Andrew Puhala: Thank you, Westy. Now, we move to a discussion of our second quarter performance together with an update on our balance sheet and liquidity. In the second quarter of 2024, our revenues grew to $18.6 million, up 44.1 percent compared to the $12.9 million reported in the second quarter of last year. The growth was driven by strong demand resulting from new long-term customer agreements and improved utilization of our South Texas liquefaction facility due to the resolution of feed gas composition issues that hindered our production in the second quarter of last year.
Andy: In the second quarter of 2024, our revenues grew to $18 6 million up 44, 1% compared to the $12 9 million reported in the second quarter of last year.
Andy: Growth was driven by strong demand, resulting from new long term customer agreements and improved utilization of our south Texas liquefaction facility due to the resolution of the gas composition issues, which hindered our production in the second quarter of last year.
Andrew Puhala: Net income for the quarter was slightly above breakeven compared to a net loss of $2.2 million in the second quarter of last year. Adjusted EBITDA for the quarter was $2.1 million, an improvement of $2.2 million from the prior year period. The adjusted EBITDA margin of 11.3% reflects improved operating leverage as a result of the higher utilization rate. Each year, the second quarter has historically been the company's slowest quarter, primarily due to seasonality associated with the end of winter peaking activity and demobilization in the Northeast.
Andy: Net income for the quarter was slightly above breakeven compared to a net loss of $2 2 million in the second quarter of last year.
Andy: Adjusted EBITDA for the quarter was $2 1 million an improvement of $2 2 million from the prior year period. The adjusted EBITDA margin of 11, 3% reflects improved operating leverage as a result of the higher utilization rates.
Andrew Puhala: Adjusted EBITDA for the quarter was $2.1 million, an improvement of $2.2 million from the prior year period. The adjusted EBITDA margin of 11.3% reflects improved operating leverage as a result of the higher utilization rate.
Andy: Each year, the second quarter has historically been the company's slowest quarter, primarily due to seasonality associated with the end of winter, peaking activity and demobilization in the northeast.
Andrew Puhala: With that in mind, the second quarter of 2024 was the company's first-ever second-quarter profit and the highest-ever second-quarter adjusted EBITDA, demonstrating the progress being made in the business. We generated $5 million of cash from operations in the second quarter and continued to build on our strong liquidity position, which we intend to leverage as we invest in growth going forward. As of June 30, 2024, Stabilis had total cash and equivalents of $11.5 million, together with $4.4 million of availability under our credit facility.
Andy: With that in mind, the second quarter of 2024 was the company's first ever second quarter profit and highest ever second quarter adjusted EBITDA, demonstrating the progress being made in the business.
Andy: Generated $5 million of cash from operations in the second quarter and continued to build on our strong liquidity position, which we intend to leverage as we invest in growth going forward.
Andy: As of June 32020 for stability had total cash and equivalents of 11, and a half million dollars together with $4 $4 million of availability under our credit facility.
Andrew Puhala: Total debt outstanding as of June 30, 2024, was $8.6 million, resulting in a net positive cash position. During the back half of the year, we expect to increase CapEx as the expansion of our South Texas LNG storage capacity is brought online. However, we expect to maintain our solid liquidity position through 2024. That concludes our prepared remarks. Operator, please open the line for the Q&A session. Thank you very much.
Andy: Total debt outstanding as of June 32024 was $8 $6 million, resulting in a net positive cash position.
Andy: During the back half of the year, we expect to increase Capex is the expansion of our South Texas LNG storage capacity is brought online. However, we expect to maintain our solid liquidity position through 2024.
Andy: That concludes our prepared remarks, operator, please open the line for the Q&A session.
Operator: Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation time will indicate that your line is in the queue.
Speaker Change: Thank you very much at this time, we will be conducting a question and answer this question if.
Speaker Change: If you would like to ask a question. Please press star one on your phone keypad now.
Speaker Change: A confirmation tone will indicate that your line is and Nicky you May Press star two if you would like to remove your question from the key we do ask that you limit your questions to two per person in the interest of time, if any participant.
Speaker Change: Speaker equipment that might be necessary to pick up your handset before your.
Andrew Puhala: Preston Sakes, please wait a moment poll for questions.
Speaker Change: Thank you very much. Your first question is coming from Martin Malloy of Johnson Rice.
Speaker Change: Mine is nice.
Andrew Puhala: Yes.
Martin Malloy: Good morning, and congratulations on all the progress you're making on a couple different growth platform fronts. Wanted to maybe try to get some additional details about the dedicated waterfront bunkering facility you mentioned, and be able to quickly...
Martin Malloy: Good morning and congratulations on all the progress you're making on a couple different growth platform fronts. One of them, to maybe try to get some additional details about the dedicated Waterfront Bunkering Facility you mentioned and being able to quickly construct that once FID is issued. Could you maybe talk a little bit about the cost financing for that? Is there any additional, any additional contracts that need to be announced in terms of off-take that you think are needed to get this project to the finish line?
Andy: Good morning, and congratulations on all the progress you're making on.
Speaker Change: A couple of different growth platform fronts.
Speaker Change: Wanted to maybe try to get some additional details about the dedicated waterflood Bunkering facility, you mentioned and being able to quickly.
Speaker Change: Construct at once F ideas issued could you maybe talk a little bit about the.
Speaker Change: Cost of financing for that is there an additional any additional contracts that need to be announced in terms of offtake.
Speaker Change: Do you think are needed to get this project to the finish line.
Martin Malloy: Good morning, Marty Thanks, so much.
Westervelt Ballard: Morning, Marty. Thanks so much.
Andrew Puhala: Morning, Marty. Thanks so much.
Speaker Change: I think breaking the question down in several components I'll start kind of with the end and the answer is yes, we certainly don't want to put capital to work.
Westervelt Ballard: I think, you know, breaking the question down into several components, I'll start kind of with the end. And the answer is yes. We certainly don't want to put capital to work with 100% merchant risk. We certainly believe in not only that market but a wide array of markets around the U.S. and certainly have an appetite for some merchant risk. But having an anchor, and not only that, but each market, certainly, we think makes all the sense in the world.
Andrew Puhala: I think, you know, breaking the question down into several components, I'll start kind of with the end. And the answer is yes. We certainly don't want to put capital to work with 100% merchant risk. We certainly believe in not only that market but a wide array of markets around the U.S. and certainly have an appetite for some merchant risk. But having an anchor or two, and not only that, but each market, certainly, we think makes all the sense in the world.
Speaker Change: With 100% merchant risk, we certainly believe and not only that market, but a wide array of markets around the U S and certainly have an appetite for for some merchant risk, but having an anchor too and not only that but each market's certainly we think makes.
Westervelt Ballard: And we would expect to have some commercial activity that's on the books before we truly reach an FID, but not 100%. Where that balance point is is to be determined, but we are in advanced discussions with a variety of, we think, very strong, interesting counterparts to partner with us to anchor that expansion, certainly in Galveston, but, as I mentioned, not just unique to Galveston, but also in other ports in the U.S.
Andrew Puhala: And we would expect to have some commercial activity that's on the books before we truly reach an FID, but not 100%. Where that balance point is is to be determined, but we are in advanced discussions with a variety of, we think, very strong, interesting counterparts to partner with us to anchor that expansion, certainly in Galveston, but, as I mentioned, not just unique to Galveston, but also in other ports in the U.S.
Andrew Puhala: All the sense in the world and we would expect to have.
Andrew Puhala: Some some commercial activity.
Andrew Puhala: That that's on the books before we truly reach an F I D.
Andrew Puhala: But not 100% where that balance point is as is.
Andrew Puhala: To be determined.
Andrew Puhala: But we are we are in advanced discussions with a with a variety of we think very strong.
Andrew Puhala: Interesting counterparts to partner with us to anchor that expansion certainly in Galveston, but as I mentioned, not just unique to Galveston, but also in.
Andrew Puhala: In other ports in the U S.
Speaker Change: Okay, and then I just.
Westervelt Ballard: Okay. And then I just wanted to delve a little bit more into the commercial industrial area and backup power generation and, you know, data centers or factories that are being reshored to the U.S. Could you maybe talk a little bit about how you see Stabilis playing a role in that market and the timing of maybe any contracts there?
Speaker Change: Just wanted to delve a little bit more into the commercial industrial area in backup power generation.
Speaker Change: And I guess data centers or factories that are being restored to the U S. Could you maybe talk a little bit about how you see the bill is playing a role in that market timing of maybe any contracts there.
Westervelt Ballard: Yeah, so we are unbelievably excited about this aspect of our platform. Certainly, we love the marine business, but also this emergency power, primary power, as well as primary and backup power for data centers, is a real, really materially large opportunity for us. So I think the way that we can play this is certainly on the primary power gen. We're so primary base load for data centers and areas where it's going to take a long time, if at all ever, for them to get connected to the grid.
Andrew Puhala: Yes. So we are unbelievably excited about this aspect of our platform certainly certainly love the marine business, but also this this emergency power primary power.
Speaker Change: As well as primary and backup power for data centers is a real really materially large opportunity for us and so I think the way that we can play. This is is certainly on the primary power Gen were doing that now we've been doing that for several years.
Andrew Puhala: But also primary base load.
Speaker Change: For for data centers in areas, where it's going to take a long time, if at all ever for them to get connected to grid. We think we can we can build infrastructure to become a private primary power generation source for them, but also we think we can be backup redundant power and displacement of diesel as well as some of the challenges.
Andrew Puhala: Around intermittency in solar and wind.
Speaker Change: And so we think natural gas is the clear clear leader to be primary as well as redundant power for for emergency as well as data centers, we announced a 14 month contract extension in the emergency response as a power primary power generation source, we are in a multi.
Andrew Puhala: Multiple discussions with data center developers hyperscale as well as cloud computing firms.
Speaker Change: Where the decisions are going out sometimes we made for build out of 30 40, 5100, Meg 500 Meg.
Andrew Puhala: Data center locations, and we think that we can be a real player in the primary load as well as backup load in some of these facilities as well, it's it's exciting and I think what's really exciting is this is not something that's.
Andrew Puhala: That we haven't done in the past, it's a natural extension of what we've been doing.
Andrew Puhala: Since our company's inception in 2013 2014, and so it's just another sector that we're leveraging our capabilities into.
Speaker Change: Utilizing liquefied natural gas wells I think there are areas for us to galvanized not just LNG, but some are LNG and other sources to bring to bear for a comprehensive primary and backup power solutions for for this data Center universe.
Speaker Change: Great. Thank you I'll turn it back.
Martin Malloy: Great. Thank you. I'll turn it back.
Operator: Thanks, Marty. Thank you very much. Your next question is coming from Barry Hames of Sage Asset Management. Barry, your line is live.
Speaker Change: Thanks Marty.
Andrew Puhala: Thank you very much. Your next question is coming from Barry Haimes.
Speaker Change: <unk> asset management, sorry, your line is live.
Andrew Puhala: Yes.
Barry Haimes: Thanks so much and congratulations on the good quarter. Just following up on the backup and permanent repair discussion, for Data Centers, why LNG versus natural gas? I mean, would this be data centers that don't have access to pipeline gas? So that's one question, and then my second question is, could you talk about when the new George West capacity is scheduled to come online? Thanks so much.
Speaker Change: Thanks, so much and congrats on the good quarter.
Andrew Puhala:
Westervelt Ballard: Yep, sure. Thanks so much.
Operator: Just following up on the backup and permanent repair discussion.
Speaker Change: Just just following up on on the backup.
Speaker Change: And primary parent discussion.
Speaker Change: For data centers.
Speaker Change: Why LNG versus natural gas I mean would this be.
Speaker Change: Data centers that don't have access to pipeline gas. So that's one question and then my second question is could you.
Speaker Change: You talk about when the new George West capacity is scheduled to come online. Thanks, so much.
Speaker Change: Yeah sure. Thanks, so much.
Westervelt Ballard: So data centers are fairly agnostic. They certainly all consistently want to burn the cleanest, most abundant, safe, secure fuel that they can, and certainly that speaks loudly for natural gas. Whether it's natural gas or LNG, they're interchangeable. But to answer your question, oftentimes these data centers are not going to have access to pipeline gas. And if they do, it will be for years. And my argument is that they will.
Speaker Change: So data centers.
Speaker Change: Certainly are fairly agnostic they they certainly all consistently want to burn the cleanest.
Speaker Change: Most abundant safe secure fuel that they can and certainly that speaks loudly for natural gas, whether it's natural gas or LNG.
Speaker Change: They're interchangeable but to answer your question is oftentimes. These data centers are not going to have access to pipeline gas and if they do it will be for years in some instances they will so.
Westervelt Ballard: So if there are areas, which we think there are numerous, where the data centers don't have access to natural gas, we can run multiple hub-and-spoke operations where we can build the infrastructure and then spread those out at scale to clusters of data centers around the U.S. There'll be other instances where we can be thoughtful in assisting their efforts in getting into the pipeline infrastructure, but that's not as simple. There are certain markets where there's an abundance of pipeline infrastructure, certainly along the Gulf Coast and some up in the Marcellus Northeast, but there are a lot of areas where they just don't have access to the grid.
Speaker Change: So if there are areas, which we think there are numerous where they the data centers don't have access to natural gas, we can run multiple a hub and spoke operations, where we can build the infrastructure.
Speaker Change: And then and then spoke those out at scale to clusters of data centers around the U S. There'll be other instances, where we can be thoughtful on assisting their efforts and getting into the pipeline.
Speaker Change: Infrastructure, but that's that's not as simple there are certain markets, where there is an abundance of pipeline infrastructure certainly in along the Gulf coast and some up in the Marcellus.
Speaker Change: North east, but but there are a lot of areas, where they just don't have access to grid. They don't have access to natural gas pipelines.
Westervelt Ballard: They don't have access to natural gas pipelines, and this is a real problem. This is large, and it's growing, and we think we can not only help with the pipeline aspect but also areas of LNG where they don't have access to pipelines. I think that was the first question. The other question was about George West Facility. We've already started installing half of that capacity, and I'm proud to say that on Sunday it was up and running.
Operator: And this is real this is large and is growing and we think we cannot only help with the pipeline aspect, but also areas of LNG, where they don't have access to pipelines.
Speaker Change: I think that was the first question the other question.
Speaker Change: Was around Georgia, George West facility, we've already started.
Operator: Installing <unk>.
Operator: Half of that capacity and I'm proud to say Sunday. It was it was up and running and for the second half of that capacity expansion storage, we expect to to bring that online either later on this year or the beginning of next year, but half of that is already up and running as of the weekend.
Westervelt Ballard: And for the second half of that capacity expansion storage, we expect to bring that online either later this year or the beginning of next year. But half of that's already up and running as of this weekend.
Operator: Okay.
Barry Haimes: So that will, in effect, add to your capacity even in the current quarter, then?
Operator: So that all in effect.
Speaker Change: Add to your capacity even in the current quarter then.
Westervelt Ballard: That's correct, storage and capacity, not production storage.
Speaker Change: Thats correct storage capacity not production storage storage, Okay got it okay. Thanks, so much.
Barry Haimes: production storage. Storage, okay, got it. Okay, thanks so much. Yep.
Operator: Yep.
Operator: Thank you very much. Just a reminder, if anyone has any remaining questions, you may press star 1 now to join the queue. Thank you.
Operator: Thank you very much just a reminder, if anyone has any remaining questions. You May press star one now to join Nikki Keith.
Operator: Yeah.
Speaker Change: Just seeing if you have any one else jump into the queue.
Operator: Okay.
Operator: Okay.
Operator: Another question coming in from Martin Malloy from Johnson Rice.
Speaker Change: Your line is nice.
Speaker Change: Alright I'm back.
Operator: Yes.
Operator: Okay.
Martin Malloy: We haven't, um, there haven't been any questions about aerospace, and yet, you know, there's a war article in the Wall Street Journal just about the frequency of, um, the flights of rockets being sent up. Can you maybe talk about the opportunities that you're seeing there? Is there... What kind of contracts do you think are available out there that you might pursue? Timing, etc. Yeah, so...
Speaker Change: We haven't.
Speaker Change: There haven't been any questions about aerospace and yet.
Speaker Change: Yeah Theres a war article in the Wall Street Journal, just about the frequency of.
Speaker Change: Of of flights.
Speaker Change: Of rockets being sent up.
Speaker Change: Can you maybe talk about the opportunities that youre seeing there is there.
Operator: Yes.
Speaker Change: What kind of contracts do you think are available out there that you might pursue.
Speaker Change: Timing et cetera.
Westervelt Ballard: Yep, so we think the opportunity is very exciting, as you can probably tell not only in my narrative but around some of the disclosures that we've had. There's certain aspects of our aerospace relationships that are highly confidential and just really aren't appropriate for us to comment on, but I'll say this: we are aware of the dynamics and play, understand and have read those articles that you've read in the journal and other financial magazines and newspapers, and we feel that we are the market leader, and we think we can continue to be the market leader.
Speaker Change: Yeah. So we think the opportunity is very exciting as you can probably tell not only in my narrative, but around some of the disclosure that we've had there are certain aspects of our aerospace relationships that are highly confidential and just really aren't appropriate for us to comment on.
Speaker Change: But I'll say this we we are aware of the dynamics in play understand and have read those articles that you read in the journal and other kind of.
Operator: Financial.
Speaker Change: Magazines and newspapers and we feel that we are the market leader and we think we can continue to be the market leader.
Speaker Change: Most of the roads in aerospace go through a very small handful of private.
Speaker Change: Contractors now, but we think there are meaningful ways for us to to grow this business not only as a fuel supplier, but potential partner.
Speaker Change: Some of them want to be more vertically integrated in their supply chain. So I think there is theres a very Australia approach that we can take to this in a wide variety of outcomes.
Speaker Change: And I think that there are a lot more.
Speaker Change: Launches at scale that are in the works and certainly our kind of real time discussions would substantiate that.
Operator: Great.
Martin Malloy: Great. And then maybe just one follow-up question, just on the Marine side, can you maybe talk a little bit about the competitive environment? Who would you compete against in terms of these Marine bunkering contracts? Are there large international players, or is it... I guess if you could just give us some more color about that.
Speaker Change: And then maybe just one follow up question just on the Marine side could you maybe talk a little bit about the competitive environment.
Operator: Yes.
Speaker Change: Who would you compete against in terms of.
Speaker Change: These marine Bunkering contracts are there large international players or is it.
Speaker Change: I guess, if you could just give us some more color about that.
Westervelt Ballard: Yes, the market's very different in every geography, and so it's really more dependent upon where you enter the market and where you think opportunities are. Certainly, if you want to be a U.S. provider, and you've got U.S. gas that's delivering in U.S. locations, you've got some Jones Act last mile requirements that certainly need to be considered. If you are importing gas from external sources into certain U.S. ports, that's not as relevant. It's really kind of a small universe of providers, and everybody has their own kind of unique capabilities, some of which that we would compete with really don't have the full supply chain and last mile delivery capabilities. They just want to build the liquefaction plant and have people provide for their own logistics.
Speaker Change: Yes. So the market is the market is very different in every geography, and so it's really more more dependent upon where you enter the market and where you think opportunities certainly if you want to be.
Operator: <unk>.
Speaker Change: A U S provider.
Speaker Change: And you've got U S gas, that's delivering and U S locations you have got some Jones Act last mile.
Speaker Change: Requirements that certainly need to be considered.
Speaker Change: If you are importing gas.
Speaker Change: From external sources into certain U S ports, that's not as relevant.
Speaker Change: It's really kind of a small universe of providers and everybody has their own kind of unique.
Speaker Change: The capabilities some of which that we would compete with really don't have the full supply chain and last mile delivery capabilities. They just want to build liquefaction and have people provide for their own logistics. We have a couple of other I don't know competitors, but others that are that are in this market that would do last mile.
Westervelt Ballard: We have a couple other, I don't know, competitors, but others that are in this market that would do last mile delivery, know liquefaction like we do, and frankly, would buy from us. Are they competitors? I don't know. I guess to some extent, but if they're buying from us and then doing the last mile to certain industries. Okay, that's fine with us as well. But it's hard to put your hands around just one competitor.
Speaker Change: Delivery no liquefaction like we do and frankly would buy from us.
Speaker Change: Are they competitors I don't know I guess to some extent, but if they are buying from us and then doing last mile to certain industries.
Andrew Puhala: Okay, that's fine with us as well. So it's hard to put your hands around just one competitor. I'll say this, we're one of the largest, if not the largest, turnkey supplier for certainly inland liquefied natural gas distribution, but I'd say rapidly becoming one of the largest providers on the waterfront in certain markets. Certainly, we expect to continue to enhance that position as well.
Speaker Change: Okay, that's fine with us as well and so so it's hard to put your hands around just one competitor I'll say this.
Westervelt Ballard: I'll say this, we're one of the largest, if not the largest, turnkey supplier for certainly inland liquefied natural gas distribution, but I'd say rapidly becoming one of the largest providers on the waterfront in certain markets. Certainly, we expect to continue to enhance that position as well.
Andrew Puhala: We're one of the largest if not the largest turnkey supplier for.
Andrew Puhala: Sure certainly inland liquefied natural gas distribution, but I would say.
Andrew Puhala: Rapidly, becoming one of the largest providers.
Andrew Puhala: On the waterfront in certain markets.
Andrew Puhala: Certainly.
Andrew Puhala: We expect to continue to enhance that that position as well.
Martin Malloy: Great, thank you. That was very helpful.
Speaker Change: Alright. Thank you does very helpful.
Westervelt Ballard: Great, Marty. Thank you.
Marty: Great Marty Thank you.
Operator: Thank you very much. Your next question is coming from Barry Haimes of Sage Asset Management. Barry, your line is life.
Speaker Change: Thank you very much. Your next question is coming from Barry Haimes of Sage asset management, sorry. Your line is now.
Barry Haimes: Thanks. All right, back to just one or two others. Just following up on the space, is that... Does that product carry premium pricing and margins, or is it similar to your other end markets?
Speaker Change: Thanks, Hi back for just one or two others just following up on the space is that.
Speaker Change: Does that product carry premium pricing and margins or is it similar to your other end markets.
Westervelt Ballard: Well, without getting too much into, you know, each contract, I will say that that molecular requirement in terms of purity is much higher than that of other end markets that we serve, and so the requirement for that is a little bit different, and so... I'll let you kind of read between the lines there.
Andrew Puhala: Well without getting full into.
Andrew Puhala: Each contract I will say that that that that molecular requirement in terms of purity is much higher.
Andrew Puhala: Than that of other end markets that we serve and so therefore the requirements of that is a little bit different.
Andrew Puhala: And so.
Andrew Puhala: Okay.
Andrew Puhala: I'll let you kind of read between the lines there that they require a higher specification and higher purity and higher MNBTU energy density than that of some of the other end markets that we serve.
Andrew Puhala: I'll, let you kind of read between the lines there.
Andrew Puhala: That they require a higher specification and higher purity.
Speaker Change: Hi, I'm going to be to you.
Andrew Puhala: Energy density than that of some of the other end markets that we serve.
Speaker Change: Got it fair enough and sort of back on George West.
Speaker Change: You mentioned the storage capacity, but I think you guys were also considering.
Speaker Change: Incremental production capacity is that right and if so where does that stand.
Andrew Puhala: We are always always considering a wide variety of expansionary opportunities George West certainly is one of them. The reason we wanted to put that storage. There is because is because it gives you some redundancy flexibility and optionality for us to not only continue to enhance and bolster our supply chain as well as our contract.
Andrew Puhala: With carnival on the water, but it also allows us to have redundancy and capability for other kind of inland other sectors that are coming into Texas. If we see a larger tidal wave of demand in that South Texas market, we will move quickly to to double and even triple potentially that the production capacity George West.
Andrew Puhala: <unk>.
Andrew Puhala: So as those green shoots present themselves look for us to do that but right now we thought it was a more prudent decision to more than double our storage because it just gives us flexibility and optionality around a wide variety of sector development on the water and off.
Speaker Change: Right. So as I recall, you had ordered some long lead time equipment in terms of production. So you haven't yet decided whether you're going to put that we've already not only orders, but we acquired it it's already it's already in our possession and the likely location for that is really on the waterfront in Galveston I reserve the right to change my mind.
Andrew Puhala: If other sectors, whether it's aerospace or data centers.
Speaker Change: Move at a more rapid pace, which theyre moving quickly.
Andrew Puhala: But we think the prudent location for that is to be the first really the first mover in the first dedicated LNG bunkering port in Galveston and that surrounding air so the likely spot for that that train and.
Speaker Change: And Thats what were talking about <unk> over the next couple of months is on the waterfront for LNG Bunkering.
Speaker Change: Got it thanks, so much I appreciate it yeah you bet.
Andrew Puhala: Okay. Thank you very much we appear to have reached the end of our question and answer session I will now hand back over to Weston for closing remarks.
Speaker Change: As I mentioned, everyone and thank you to all for joining us on the call and we look forward to seeing you on the road in the in the near future.
Speaker Change: Thank you very much. This does conclude today's conference you may now disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Operator: Thank you very much. Just a reminder if anyone has any remaining questions, you may press star one now to join the key. Thank you. See if you have anyone else jump into the queue. Okay, we have another question coming in from Marty Malloy, who's from Johnson Rice. Martin, your line of life.
Operator: You may press star 2 if you would like to remove your question from the queue. We do ask that you limit your questions to two per person in the interest of time. If any participants are using speaker equipment, it might be necessary to pick up your handset before you press the star keys. Please wait a moment or three polls for questions. Thank you very much. Your first question is coming from Martin Malloy of Johnson Rice. Martin, your line is live.
Westervelt Ballard: Most of the roads in aerospace go through a very small handful of private contractors now, but we think there are many ways for us to grow this business not only as a fuel supplier but as a potential partner if some of them want to be more vertically integrated in their supply chain. So I think there's a very entrepreneurial approach that we can take to this with a wide variety of outcomes. And I think that there are a lot more launches at scale that are in the works, and certainly, the kind of real-time discussions would substantiate that.
Westervelt Ballard: We think we can build infrastructure to become a primary power generation source for them, but also we think we can be backup redundant power and displacement of Dezell, as well as some of the challenges around intermittency and solar and wind. And so we think natural gas is the clear, clear leader to be primary as well as redundant power for emergencies as well as data centers. We announced a 14 month contract extension in the emergency response as a primary power generation source.
Westervelt Ballard: We are in multiple discussions with data center developers, hyperscale as well as cloud computing firms where the decisions are going to sometimes be made for building out of 30, 40, 50, 100 meg, and 500 meg data center locations. And we think that we can be a real player in the primary load as well as backup load in some of these facilities as well. It's exciting, and I think it's really exciting that this is not something that we haven't done in the past.
Westervelt Ballard: It's a natural extension of what we've been doing since our company's inception in 2013-14. And so it's just another sector that we're leveraging our capabilities into utilizing liquefied natural gas. We all think there are areas for us to galvanize not just LNG but RNG and other sources to bring to bear for a comprehensive primary and backup power solutions for this data center universe.