Q3 2024 Excelerate Energy Inc Earnings Call
The presentation has finished please press star followed by one on your telephone keypad.
Speaker Change: And I'll hand, it over to your host Craig <unk>, Vice President Investor Relations. Please go ahead.
Craig: Welcome to accelerate Energy's third quarter 2024 earnings call.
Speaker Change: Participating on the call today are Steven <unk>, Chief Executive Officer.
Speaker Change: And Dana Armstrong Chief Financial Officer.
Speaker Change: Also joining the call today are Oliver Simpson, Chief commercial officer, and David Weiner, Chief operating officer.
Our third quarter 2024 earnings results press release and presentation.
Were released yesterday afternoon, and can be found on our website at IR dot accelerate energy Dot com.
I would like to remind everyone that we will be making forward looking statements on this call that involve a number of risks and uncertainties.
Speaker Change: Our actual results may differ materially from those expressed in these forward looking statements and we make no obligation to update or revise them.
Speaker Change: Today's remarks will also refer to certain non-GAAP financial measures we.
Speaker Change: We have provided a reconciliation to the most directly comparable GAAP financial measures at the back of the presentation.
Speaker Change: With that it is my pleasure to pass the call over to Steven Cobos.
Steven Cobos: Thank you Craig.
Steven Cobos: And to all of you on the call good morning.
Steven Cobos: I know that many of you are familiar with the accelerated value proposition.
Steven Cobos: For those of you who are new to our store fleet.
I wanted to start today's call by simply states being who we are as a company.
It accelerated energy, we are committed to being the global leader in Fsrus and downstream LNG infrastructure.
Steven Cobos: Our aim is to leverage our rifles experience and help customers across the globe unlock access to abundant LNG supplier.
Steven Cobos: Q3 was a fantastic quarter for us.
Steven Cobos: I am proud that we delivered another strong quarter of solid financial and operational performance.
Steven Cobos: This resulted in adjusted EBITDA of $92 million.
Our ability to deliver consistent results and generate strong cash flow is driven by the high quality of our core <unk> business.
Steven Cobos: This business is underpinned by a contract portfolio that has about $4 billion in future revenue with a weighted remaining term of seven years.
Steven Cobos: This is a real foundation.
Steven Cobos: Our fsrus and.
Steven Cobos: And terminals business gives us ample flexibility to invest in growth over the near mid and long term.
Steven Cobos: It's also why we are confident in our decision to more than double our quarterly dividend to six cents per share.
Steven Cobos: Dana is going to speak more to the dividend increase during her remarks.
Steven Cobos: I want to take this opportunity to thank each and every member of the global accelerate team.
Steven Cobos: They worked hard to ensure the energy needs of our customers are met every day.
Steven Cobos: Quite frankly.
Steven Cobos: That's why we obsess about operational excellence.
Steven Cobos: We had a stellar quarter operationally with sprint viability in excess of 99, 8% and zero recordable safety incidents.
These are impressive.
Steven Cobos: <unk>, considering our pool of over 700, seafarers, who served on our vessels.
Steven Cobos: During the quarter the crew of the Fsrus excellence achieved a new milestone.
Steven Cobos: Safely perform through 250, a ship to ship LNG cargo transfer at our LNG terminal in Bangladesh.
Steven Cobos: More than 50 of those transfers occurred this year.
Amazing accomplishment for the team.
On this morning's call you were going to hear three themes.
Accelerate energy, it's driving near and mid term value creation.
We are generating sustainable earnings.
Steven Cobos: And we are executing a disciplined capital allocation plan.
Steven Cobos: Now, let's talk more about our strategy, which is our north star.
Over the last few quarters, we are focused on the steps we are taking to optimize our core regasification business.
Steven Cobos: And the strategic catalysts, we are attaching to maximize value for our shareholders.
Steven Cobos: Today.
I wanted to spend some time discussing our strategy for growing our fleet.
Steven Cobos: And how we are leveraging our LNG supply portfolio to support our growth projects.
you are going to hear three themes.
And enhance our infrastructure returns.
Accelerated energy is driving near and mid-term value creation.
I've said, it before and I'll say it again, our Fsrus terminals business is the cornerstone of our company.
We are generating sustainable earnings.
and we are executing a disciplined capital allocation plan.
Steven Cobos: Growing our fleet responsibly as opportunities present themselves as an important part of our plan to increase our presence in both new and existing markets around the world.
Now let's talk more about our strategy, which is our North Star.
Over the last few quarters, we have focused on the steps we are taking to optimize our core regasification business.
Steven Cobos: We've talked previously about <unk> 37.
Steven Cobos: This is our Newbuild fsrus that is being constructed by Hyundai heavy industries in South Korea.
and the strategic catalysts we are advancing to maximize value for our shareholders.
Today, I want to spend some time discussing our strategy for growing our fleet and how we are leveraging our LNG supply portfolio to support our growth projects and enhance our infrastructure returns.
Steven Cobos: Both $34 seven it's going to be best in class and capable of delivering 1 billion cubic feet per day of natural gas.
Steven Cobos: This makes it well suited for deployment in markets with the need for high Center.
Steven Cobos: In October I am pleased to report that we reached the steel cutting milestone for the Fsrus.
I've said it before and I'll say it again, our FSRU and Terminals business is the cornerstone of our company.
Steven Cobos: The next milestone <unk> will occur in March and 25.
Growing our fleet responsibly as opportunities present themselves is an important part of our plan to increase our presence in the new and existing markets around the world.
Steven Cobos: For $34 seven remains on track for expected delivery from June 26.
When you look at our fleet.
We've talked previously about Hull 3407. This is our new build FSRU that is being constructed by Hyundai Heavy Industries in South Korea.
Steven Cobos: Obvious that wed likely build fsrus.
Steven Cobos: At the same time.
Steven Cobos: We also recognize that the projects in our pipeline have a wide range of needs.
Well, 3407 is going to be best in class and capable of delivering 1 billion cubic feet per day of natural gas.
Steven Cobos: Several of these projects require a smaller standout vessel, making them ideal for fsrus conversions.
This makes it well-suited for deployment in markets with a need for high send-out.
Steven Cobos: Our team is currently evaluating LNG carrier candidates and it's analyzing cost efficient conversion options for integrated terminal projects.
In October, I'm pleased to report that we reached the steel-cutting milestone for the FSRU. The next milestone, Teal Lane, will occur in March of 2025.
Steven Cobos: We are an LNG carrier acquisition in 2025.
Steven Cobos: In the near term, we're going to need an LNG carrier to support future deliveries of LNG volumes in our portfolio.
Both 3407 remains on track for expected delivery in June 26.
Steven Cobos: So to help you understand how this all fits together, let's dive into our molecule strategy.
When you look at our fleet, it's obvious that we like to build FSRUs.
Steven Cobos: Accelerates LNG supply strategy complements our core Regasification business.
At the same time,
We also recognize that the projects in our pipeline have a wide range of needs.
Steven Cobos: And it enhances returns on our existing infrastructure investments.
Several of these projects would require a smaller send-out vessel, making them ideal for FSRU conversions.
We utilized our global presence and market knowledge to develop LNG demand.
Steven Cobos: And provide tailored LNG to <unk> solutions to our customers.
Our team is currently evaluating LNG carrier candidates and is analyzing cost-efficient conversion options for integrated terminal projects.
Steven Cobos: Additionally, we are establishing a diversified client portfolio to support our LNG sale and purchase agreements.
We are eyeing an LNG carrier acquisition in 2025.
Steven Cobos: We now have several tangible proof points of this strategy at work.
In the near term, we're going to need an LNG carrier to support future deliveries of LNG volumes in our portfolio.
Steven Cobos: As you know through our market position in Bangladesh, We signed a 15 year deal to sell LNG to Petro bandwidth beginning in 2026.
So to help you understand how this all fits together, let's dive into our molecule strategy.
Accelerate's LNG supply strategy complements our core regasification business and it enhances returns on our existing infrastructure investments.
Steven Cobos: We increased the capacity of one of our Fsrus in Bangladesh to accomplish this.
We subsequently sourced up to 1 million tons per annum of supply for the deal from Qatari energy.
We utilize our global presence and market knowledge to develop LNG demand and provide tailored LNG delivery solutions to our customers.
Steven Cobos: The deal is expected to generate approximately $15 million to $18 million of EBITDA annually.
Steven Cobos: And our portfolio, we also have venture global F&B volumes.
Additionally, we are establishing a diversified supply portfolio to support our L&G sale and purchase agreements.
Steven Cobos: Under the agreement to accelerate will purchase point 7 million tonnes per annum of LNG for venture global for 20 years, starting in 2027.
We now have several tangible proof points of the strategy at work.
As you know, through our market position in Bangladesh, we signed a 15-year deal to sell LNG to Petro-Bangladesh beginning in 2026.
Steven Cobos: This equates to roughly 10 cargos per year.
Steven Cobos: These volumes will help support the commercial opportunities in our pipeline.
Steven Cobos: Our LNG marketing team is pursuing additional deals to further optimize parts quad portfolio.
We increased the capacity of one of our FSRUs in Bangladesh to accomplish this.
We subsequently sourced up to one million tons per annum of supply for the deal from Qatar Energy.
Steven Cobos: As an example in Q3 dollars 24 accelerated softened midterm agreements for LNG purchases and sales.
The deal is expected to generate approximately $15-18 million of EBITDA annually.
One of the Atlantic Basin regions in which we do business.
Steven Cobos: Over the terms of these agreements, we will purchase and sell in total approximately six 5 million tonnes of LNG.
and our portfolio. We also have Finisher Global FOB volumes.
Under the agreement, Xcelrig will purchase 0.7 million tons per annum of LNG for Venture Global for 20 years, starting in 2027.
Steven Cobos: The pricing will be based on a major European natural gas index.
Steven Cobos: And under these agreements are first purchase will be made during the fourth quarter of 'twenty four.
This equates to roughly 10 cargoes per year.
Steven Cobos: This is a great deal for accelerate because it furthers our efforts to expand our portfolio.
These volumes will help support the commercial opportunities in our pipeline.
Steven Cobos: It also helps to Derisk the investment we plan to make next year and the LNG carrier that would essentially service our first fsrus conversion.
Our L&G marketing team is pursuing additional deals to further optimize our supply portfolio.
Steven Cobos: Like other deals we have spoken about on our calls.
As an example, in Q3-24, Accelerate signed midterm agreements for LNG purchases and sales in one of the Atlantic Basin regions in which we do business.
Steven Cobos: Once again, we are buying and selling on the same index can derisking mark for churn we.
Steven Cobos: We are being consistent.
Over the terms of these agreements, we will purchase and sell a total approximately 0.65 million tons of LNG.
Steven Cobos: Last quarter we.
Steven Cobos: <unk> discussed our order for our first re liquefaction kit for our fleet.
Steven Cobos: I am pleased that interest from our customers is there as we expected and we are currently in commercial discussions to install two <unk> units in our fleet.
The pricing will be based on a major European natural gas index.
And under these agreements, our first purchase will be made during the fourth quarter of twenty-four.
It's a great deal for Accelerate because it furthers our efforts to expand our portfolio. It also helps to de-risk the investment we plan to make next year in the LNG carrier that would eventually serve as our first FSRU conversion.
Steven Cobos: Last quarter, we also shared with you our interest in entering the Vietnamese energy market.
Vietnam is one of the fastest growing economies in southeast Asia.
Steven Cobos: It is a very attractive emerging market for foreign investment.
Steven Cobos: Economic growth is driving a rapid increase in demand for energy.
Like other deals we've spoken about on our calls, once again, we are buying and selling on the same index and derisking margin. We are being consistent.
LNG will play a pivotal role in the decades to come.
Steven Cobos: This is especially true as Vietnam transitions from carbon intensive fuels and introduces intermittent renewables.
Last quarter, we discussed our order for our first re-liquefaction kit for our fleet.
I'm pleased that interest from our customers is there as we expected, and we are currently in commercial discussions to install two Relic units in our fleet.
Speaker Change: As a U S LNG company with a global presence, we are pursuing opportunities to develop and invest in the LNG infrastructure in Vietnam.
Speaker Change: In September accelerated signed a strategic partnership agreement with Petro Vietnam Technical Services Corporation or PTSD.
Last quarter we also shared with you our interest in entering the Vietnamese energy market.
Vietnam is one of the fastest-growing economies in Southeast Asia.
Speaker Change: They are a subsidiary of Petro Vietnam, the state owned energy company.
It is a very attractive emerging market for foreign investment.
Through that partnership we are studying Fsrus based LNG solutions.
This economic growth is driving a rapid increase in demand for energy.
Speaker Change: To supplement the declining domestic gas supply and expand the use of natural gas throughout the country.
L&G will play a pivotal role in the decades to come.
Speaker Change: We remain confidential negotiations with our Counterparties on the project.
This is especially true as Vietnam transitions from carbon-intensive fuels and introduces intermittent renewables.
Speaker Change: Last quarter, we also discussed the need for an <unk> based important solution in the lower Cook Inlet region of Alaska.
As a U.S. LNG company with a global presence, we are pursuing opportunities to develop and invest in LNG infrastructure in Vietnam.
Speaker Change: The south Central region of Alaska has historically relied on cooking with natural gas.
In September, Xcelerate signed a strategic partnership agreement with Petro-Vietnam Technical Services Corporation, or PTSC.
Local heating systems.
Speaker Change: Tricil lead generation and fueling the local economy.
Speaker Change: However, cooking with domestic natural gas supply is expected to be fully depleted by 2035.
They are a subsidiary of Petro-Vietnam, the state-owned energy company.
Speaker Change: This means that the region will need to import LNG, even sooner starting as early as 2028.
Through that partnership, we are studying FSRU-based LNG solutions to supplement the declining domestic gas supply and expand the use of natural gas throughout the country.
Speaker Change: Fsrus based integrated terminal is the best solution to meeting the state's near term needs and helping Alaskans bridge to their energy future.
We remain in confidential negotiations with our counterparties on the project.
Speaker Change: We continue to work with local utilities and state officials and we're conducting technical survey that will inform the integrated LNG terminal design and engineering.
Last quarter, we also discussed the need for an FSRE-based import solution in the lower Cook Inlet region of Alaska.
Before I turn the call over to Dana I'd like to address our business in Bangladesh.
The south-central region of Alaska has historically relied on Cook Inlet natural gas for most local heating systems, electricity generation, and fueling the local economy.
Speaker Change: On our last earnings call, we talked about the ongoing transition of the government.
Speaker Change: Since then I've had an opportunity to visit the country.
However, Cook Inlet domestic natural gas supply is expected to be fully depleted by 2035.
Speaker Change: And meet with the leader of the Bangladesh Government Nobel Laureate, Chief adviser Muhammad Yunus and several cabinet level advisors.
This means that the region will need to import LNG even sooner, starting as early as 2028.
Speaker Change: Bottom line, our existing contracts in SBA with Petro bank loans are secured.
An FSRU-based integrated terminal is the best solution to meeting the state's near-term needs and helping Alaskans bridge to their energy future.
Speaker Change: From our discussions we also note that there is some appetite for even more foreign investment in the country.
We continue to work with local utilities and state officials, and we are conducting technical surveys that will inform the integrated LNG terminal design and engineering.
We respect the government's deliberate approach to ensuring all energy infrastructure and supply agreements meet the current and future needs of the country.
Speaker Change: The reality is the fundamentals that support many of these prospective projects remain the same.
Before I turn the call over to Dana, I'd like to address our business in Bangladesh.
On our last earnings call, we talked about the ongoing transition in the government.
Speaker Change: <unk> needs more natural gas.
Speaker Change: We look forward to supporting the government in the development of future energy projects when they are ready to advance those initiatives.
Since then, I've had an opportunity to visit the country and meet with the leader of the Bangladesh government, Nobel Laureate Chief Advisor Mohammad Yunus and several cabinet-level advisors.
Speaker Change: Today accelerates to Fsrus deliver approximately 34% of Bangladesh is natural gas supply.
Bottom line, our existing contracts in SBA with PetroBangla are secure.
Speaker Change: We are a long term committed partner to Bangladesh, and we are well positioned to support the book Bangladesh for many years to come.
From our discussions, we also know that there's an appetite for even more foreign investment in the country.
With that I will now turn the call over to Dana.
We respect the government's deliberate approach to ensuring all energy infrastructure and supply agreements meet the current and future needs of the country.
Dana Armstrong: Thanks, Steven and good morning, everyone as Steven said, we had a great third quarter and are pleased with our financial results.
The reality is that the fundamentals that support many of these prospective projects remain the same.
Dana Armstrong: Adjusted EBITDA for the third quarter with $19 million up 3 million or up about 4% versus last quarter, primarily driven by lower operating costs across several re gas projects and higher gas sales margin.
Bangladesh needs more natural gas.
We look forward to supporting the government in the development of future energy projects when they are ready to advance those initiatives.
Dana Armstrong: Our maintenance Capex spend this quarter with core <unk>.
Dana Armstrong: Year to date through the third quarter.
Today, XLR8's two FSRUs deliver approximately 34 percent of Bangladesh's natural gas supply.
Dana Armstrong: Roughly $35 million on maintenance Capex.
Most of our year to date maintenance capex with the upgrades for Excelsior bathroom in advance of the Germany re gas project, along with various ethylene equipment purchases to support the full fleet.
We are a long-term committed partner to Bangladesh, and we are well positioned to support the people of Bangladesh for many years to come. With that, I will now turn the call over to Dana.
In relation to Nexgen maintenance capex in the second half of 2025.
Dana: Thanks, Steven, and good morning, everyone. As Steven said, we had a great third quarter and are pleased with our financial results.
Dana Armstrong: Of our Fsrus will go into dry dock.
Dana Armstrong: Unlike the Drydocks, we incur recently in Bangladesh the cost for both of our 2025 drydocks will be capitalized to the balance sheet.
Dana: Suggested evidence for the third quarter was $92 million, up $3 million, or up about 4%, versus last quarter, primarily driven by lower operating costs across several re-gas projects and higher gas sales margins.
Dana Armstrong: From an income statement perspective, we will incur and off hire impact for the time that the vessels earned drydock.
Speaker Change: Would you expect it to be between 40 to 50 days per bathroom increases of transit time.
Dana: Our maintenance CapEx spend this quarter was $4 million. Near the date for the third quarter, we spent roughly $35 million on maintenance CapEx.
Speaker Change: We'll share further information on the 2025, Drydocks and other financial assumptions for 2025, when we release our financial guidance next February.
Most of our year-to-date maintenance CapEx spend was for upgrades for our Excelsior vessel in advance of the Germany Regas project, along with various vessel equipment purchases to support the full fleet.
Speaker Change: Yeah.
Speaker Change: At the end of the third quarter, our total debt, including finance leases were $716 million, and we had $608 million of cash and cash equivalents on heme.
In relation to next year's maintenance CapEx in the second half of 2025, two of our FSRUs will go into dry dock.
Speaker Change: Roughly all of the $315 million in revolver capacity was available for borrowing as of quarter end.
Unlike the dry docks we incur recently in Bangladesh, the cost for both of our 2025 dry docks will be capitalized to the balance sheet.
Speaker Change: With our robust free cash flow generated by quarter, we gas business.
Speaker Change: Our stellar balance sheet.
From an incontainment perspective, we'll incur an off-hire impact for the time that the vessels are in dry dock.
Speaker Change: The liquidity provided by every bomber.
Speaker Change: We have more than sufficient capacity to fund our near term growth opportunities.
Speaker Change: Next I'd like to provide a recap of our capital allocation strategy.
Speaker Change: Accelerated capital allocation strategy is focused on investing in growth.
Dana: We'll share further information on the 2025 DRIDOX and other financial assumptions for 2025 when we release our financial guidance next February.
Speaker Change: Maintaining our best in class fleet.
Speaker Change: Returning capital through quarterly dividends and our share repurchases.
Speaker Change: We are committed to enhancing shareholder returns in the near term, while we continue to advance on our strategic growth catalyst.
Dana: At the end of the third quarter, our total debt, including finance leases, was $716 million, and we had $608 million of cash and cash equivalents on hand.
Speaker Change: As a reminder, we announced a 10 year <unk>.
Roughly all of the $350 million of revolver capacity was available for borings as of quarter end.
Speaker Change: $50 million share repurchase program earlier this year.
Speaker Change: During the third quarter, we purchased roughly 364000 shares.
With our robust free cash flow generated by our core regas business, our stellar balance sheet, and the liquidity provided by our revolver, we have more than sufficient capacity to fund our near-term growth opportunities.
Or just over $7 million and our class a common stock at a weighted average price of $20 61 per share.
Year to date through the third quarter, we have utilized roughly $28 million and $15 million that was previously authorized.
Dana: Next, I'd like to provide a recap of our capital allocation strategy.
Speaker Change: Additionally, last week.
Dana: Accelerate's capital allocation strategy is focused on investing in growth, maintaining our best-in-class fleet, and returning capital through quarterly dividends and our share repurchases.
Speaker Change: Our board of directors approved a quarterly cash dividend equal to six cents per share of class a common stock.
Speaker Change: Representing an increase of three and a half cents per quarter or Q4 times the previous level.
Dana: We are committed to enhancing shareholder returns in the near term while we continue to advance on our strategic growth catalyst.
Speaker Change: The dividend is payable on December 5th 2024.
Speaker Change: To class a common stockholders of record as of the close of business on November 22024.
As a reminder, we announced a two-year, $50 million share repurchase program earlier this year.
Speaker Change: This dividend increase is aligned with our capital allocation strategy and reflect the strength of our balance sheet. The stability of our core <unk> business and the confidence we have in our cash generation.
Dana: During the third quarter, we purchased roughly 364,000 shares for just over $7 million of our Class A common stock at a weighted average price of $20.61 per share.
Speaker Change: Next let's turn to an update on our financial guidance for 2024.
Dana: Year-to-date through the third quarter, we've utilized roughly $28 million of the $50 million that was previously authorized.
Speaker Change: Based on our performance to date, we are raising and narrowing our previously communicated adjusted EBIT guidance for 2024.
Dana: Additionally, last week, our Board of Directors approved a quarterly cash dividend equal to six cents per share of Class A Common Sop, representing an increase of three and a half cents per quarter, or 2.4 times the previous level.
Speaker Change: The full year, we are now expecting adjusted EBITDA to range between $335 million and $345 million.
Speaker Change: The increase in the guidance range was primarily driven by higher margins across several re gas projects.
Dana: The dividend is payable on December 5, 2024 to Class A common stockholders of record as of the close of business on November 20, 2024.
Our vessel operating cost and lower than anticipated business development spending.
Speaker Change: For the full year, we now expect maintenance capex to range between 40 and $50 million committed.
This dividend increase is aligned with our capital allocation strategy and reflects the strength of our balance sheet, the stability of our core regas business, and the confidence we have in our cash generation.
Speaker Change: Committed growth capital is still expected to range between 70 and $80 million.
Speaker Change: This range is increases of $15 million milestone payments and any amount that we paid in October.
Speaker Change: As a reminder, committed growth capital is defined as capital allocated and committed to a specific investment for previously approved capital projects.
Dana: Next, let's turn to an update on our financial guidance for 2024.
Dana: Based on our performance today, we are raising and narrowing our previously communicated adjusted EBITDA guidance for 2024.
So to recap we had another great quarter with our base business continuing to deliver consistent earnings results and predictable positive cash flows.
Dana: For the full year, we are now expecting adjusted EVA debt to range between $335 million and $345 million.
Speaker Change: Extremely well positioned financially to invest in strategic growth opportunities.
Speaker Change: Still maintaining the financial flexibility to return capital to shareholders.
Speaker Change: With that we'll open up the call for Q&A.
Speaker Change: Thanks Keith.
Dana: For the full year, we now expect maintenance capex to range between $40 million and $50 million.
Speaker Change: A reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Dana: committed growth capital is still expected to range between 70 and 80 million.
Our first question for today comes from Chris Robertson of Deutsche Bank.
Dana: This range is inclusive of the $50 million milestone payment for the new build that we paid in October.
Speaker Change: Your line is now open.
Please go ahead.
Speaker Change: Thank you operator, and good morning, Stephen and Dana and Thank you for taking my question just wanted to clarify on the new supply agreement that was just signed here.
Dana: As a reminder, committed growth capital is defined as capital allocated and committed to specific investments for previously approved capital projects.
Speaker Change: Do you guys have I guess have you secured supply for that agreement and is there an agreed upon kind of spread or margin that we should be thinking about there.
So to recap, we had another great quarter with our base business continuing to deliver consistent earnings results and predictable positive cash flows.
Speaker Change: Just in terms of how to frame medium term agreement in terms of is that three years five years seven years, and what what could that mean in terms of expected EBITDA generation.
Dana: We are extremely well positioned financially to invest in strategic growth opportunities while still maintaining the financial flexibility to return capital to shareholders.
With that, we'll open up the call for Q&A.
Steven Cobos: Thanks, Chris This is Steven.
Steven Cobos: I'm going to turn that over to Oliver Simpson, our chief commercial officer.
Speaker Change: Thank you. As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad.
Oliver Simpson: Just say that we're excited about this one of the things that I like about this is once again as I mentioned, you're going to see us buying and selling our LNG and the same index.
Speaker Change: Our first question for today comes from Chris Robertson of Deutsche Bank. Your line is now open. Please go ahead.
Chris Robertson: Thank you, Operator. Good morning, Steven and Dana, and thank you for taking my question. I just wanted to clarify on the new supply agreement that was just signed here.
Oliver Simpson: Using our market knowledge market access in places that are familiar to us but.
Speaker Change: I'd like to turn to Oliver and seeing how much we're at Liberty to elaborate.
Do you guys have, I guess, have you secured supply?
Speaker Change: for that agreement, and is there an agreed-upon kind of spread or margin that we should be thinking about there just in terms of how to frame a medium-term agreement in terms of is that three years, five years, seven years, and what could that mean in terms of expected EBITDA generation?
Oliver Simpson: Thanks Steven.
Speaker Change: Thanks, Chris.
Speaker Change: I think I agree with.
Speaker Change: We're excited about this transaction.
Speaker Change: It's a great add to our base business.
Speaker Change: I think it's fair to say, it's a locked in locked in margin.
Thank you.
Speaker Change: On the precious and so in terms of the length of the deal I think we said midterm.
Thanks, Chris. This is Steven.
Speaker Change: I'm going to turn that over to Oliver Simpson, our Chief Commercial Officer. I would just say that we're excited about this. One of the things that I like about this is, once again, as I mentioned, you're going to see us buying and selling LNG in the same index.
Speaker Change: Kind of where we have to leave it added think about it as multiyear I would say.
Hmm.
Speaker Change: But building on building on what Stephen said and I think it's it's a great example of our ability to leverage.
Speaker Change: On our base business and global footprint and.
Oliver Simpson: and, you know, using market knowledge, market access in places that are familiar to us. But I'd like to turn to Oliver and seeing how much we're at liberty to elaborate.
Speaker Change: Delivered deliver LNG to onto our customers.
Speaker Change: Additionally, it was selected.
Speaker Change: And that's really the point that it also allows us on the shipping side to acquire to acquire an LNG carrier, which is something that we're quite excited about.
Thanks, Steven. Thanks, Chris.
Yeah, I think echoing with Hicks.
Speaker Change: That's the carrier that we can use towards.
Dana: I mean we're excited about this transaction. It's a great add to our base business.
Speaker Change: Our pipeline and our growth opportunities.
Speaker Change:
Speaker Change: It's great to see the synergies between our base business growing.
Dana: I think it's fair to say it's a locked-in margin on the purchase and sale.
Building on that and then leading into a comprehensive pipeline.
Speaker Change: In terms of the length of the deal, I think we said midterm I think that's kind of where we have to leave it at and think about it as multi-year, I would say But building on building on what Steven said, I think it's
Speaker Change: I guess.
Follow up question since you brought up the carrier.
Speaker Change: Do you envision that carrier kind of being needed steady state too I guess service that contract or will there be seasonal opportunities for it to trade spot.
Speaker Change: It's a great example of our ability to leverage on our base business and global footprint and deliver LNG to our customers. I think additionally I'd also like to
Speaker Change: Or I guess, how consistent will it be for use in your own portfolio versus any I guess sub chartering opportunities.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: I think I think trustee we've shown in the past we've had the ability to.
Speaker Change: It also allows us, on the shipping side, to acquire an energy carrier, which is something that we're quite excited about, that's a carrier that we can use towards our shipments.
Speaker Change: To buy and sell some spot cargos servicing some of the market similar in again.
Speaker Change: On the point of service, leading on our base business and leveraging that data.
Speaker Change: our pipeline and our growth of opportunities. So it's great to see the synergies between our base business, growing on that, and then leaning into our project pipeline.
Speaker Change: This kind of yeah.
Speaker Change: If we go down the route of perhaps being an LNG carrier for this we can use it for this but we will certainly look to optimize around the commercial business spot charters and other deals as it makes sense.
Speaker Change: Got it that makes sense. Thank you I'll turn it over.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Jeremy Tonet from Jpmorgan.
Speaker Change: I guess service that contract or will there be seasonal opportunities for it to trade spot? Or I guess how consistent will it be for use in your own portfolio versus any I guess sub-chartering opportunities?
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Hey, this is Noah cats on for Jeremy. Thanks for the question first I wanted to touch on what Youre seeing with other growth opportunities outside of Fsrus are you still focused on investing additional assets in vessels and infrastructure for onshore regasification efforts with potential smaller players maybe for <unk>.
Speaker Change: I think I think for us the we've shown in the past we've had the ability to
Speaker Change: to buy and sell some spot cargos, servicing some of the markets that we're in, again on the point of leading on our base business and leveraging that.
Speaker Change: Our near term earnings uplift.
Speaker Change: So I think this carrier, if we go down the route of purchasing an energy carrier for this, we can use it for this, but we'll certainly look to optimise around our commercial business, spot charters and other deals as it makes sense.
Speaker Change: Noah This is Stephen again.
Speaker Change: Yeah I think.
I hope we've made clear we certainly that was one of the reasons we brought.
One of the Vietnam opportunities to wide, we wanted to say that we want to make sure the market understands customers understand that while we think we're the leader in Fsrus.
Speaker Change: Got it. That makes sense. Thank you. I'll turn it over.
Speaker Change: Thank you. Our next question comes from Jeremy Turnett from JP Morgan. Your line is now open, please go ahead.
Certainly do.
Do more than saying I know, we're the leader in Fsrus, but.
Speaker Change: Hey, this is Noah Katz on for Jeremy. Thanks for the question. First, I wanted to touch on what you're seeing with other growth opportunities outside of FSRUs. Are you still focused on investing additional assets in vessels and infrastructure for onshore re-gasification efforts with potential smaller players, maybe for more near-term earnings uplifts? Thanks.
Speaker Change: We want to be agnostic. If there are other means of getting LNG to people, who need LNG. We will evaluate those we will we want to be advancing those we don't want to rely on one asset class to solve what is the.
Speaker Change: Pressing global needs and that is getting access to affordable with LNG.
Speaker Change: We've tried to make that point, we are looking at things for that reason.
Hi Noah, this is Steven again, and
Speaker Change: And I hope that we will continue to progress in that effort.
Yeah, I think...
Speaker Change: I hope we've made that clear, and certainly that was one of the reasons we brought one of the Vietnam opportunities to light. We want to say that we want to make sure the market understands, customers understand that while we think we're the leader in FSR use, I certainly...
Speaker Change: It sounds good thanks for that and then as a follow up I see you maintain the growth capex guidance for the full year, but slightly lowered the maintenance Capex guidance, you might've Saturday, but.
Speaker Change: I guess, just what went into the guidance decrease for the full year and then if I can ask about what can you tell us about your initial thoughts into 2025 based on the trends you've seen thus far in the fourth quarter. Thanks.
Speaker Change: do more than think. I know we're the leader in FSRUs, but
Speaker Change: We want to be agnostic. If there are other means of getting LNG to people who need LNG, we will evaluate those.
Hi, This is Dana so in regards to your first question on maintenance Capex. It's just that we haven't spent quite as much on maintenance capex most of that spend year to date is for vessel upgrades, especially equipment.
Speaker Change: We want to be advancing those. We don't want to rely on one asset class to solve what is a pressing global need, and that is getting access to affordable LNG.
Speaker Change: So, we've tried to make that point, we are looking at things for that reason, and I hope that we will continue to progress in that effort.
Speaker Change: And we report Capex right now on a cash basis, so there's a little bit of Lumpiness in how we spend that cash in.
Speaker Change: Payments the timing of the payments. So we're just slightly short of where we thought we'd be that will likely trail into 2025. So your question on 2025 and I assume that's in regards to maintenance Capex, we're still running through those numbers and that we will have to as I said on the call. We will have two dry docks next year. So those obviously will be dumped into our maintenance capex.
Speaker Change: Sounds good, thanks for that. And then as a follow-up, I see you maintain the growth CapEx guidance for the full year, but slightly lowered the maintenance CapEx guidance. You might have said already, but I guess just what went into the guidance decrease for the full year? And then if I can ask about what can you tell us about your initial thoughts into 2025 based on the trends you've seen thus far in the fourth quarter? Thanks.
Speaker Change: Next year.
And we will share more information on 2025 in February.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Michael CLO of Stephens.
Speaker Change: Hi, Noah. This is Dana. So, in regards to your first question on maintenance CapEx, it's just that, you know, we haven't spent quite as much on maintenance CapEx.
Please go ahead.
Speaker Change: Yes. Thank you good morning, everybody, maybe just to follow up on the last question.
Speaker Change: Most of that spend year-to-date is for vessel upgrades, vessel equipment. We report CAPEX right now on a cash basis, so there's a little bit of lumpiness in how we spend that cash and, you know, the payments, the timing of the payments.
Speaker Change: Dino I realize you haven't.
Speaker Change: Put the numbers out there yet, but can you say with those two dry docks and some of the capex billing.
Speaker Change: So we're just slightly short of where we thought we'd be. That'll likely trail into 2025.
Speaker Change: Maintenance Capex spilling into next.
Next year relative to 'twenty forward, what do you think that 25 would be up.
Speaker Change: So, your question on 2025, I assume it's in regards to maintenance CAF eggs. We're still running through those numbers, but we will have, as we said on the call, we will have two dry docks next year, so those obviously will be built into our maintenance CAF eggs next year.
Speaker Change: Capex versus 24.
Speaker Change: Hi, Mike Yeah, we expect it to be up this year, we did have a drydock, but that as you probably are aware that dry dock with not capitalize that does not include in our maintenance capex because that was where some of that's all that kind of structure for next year in the second half of the year. We do expect our maintenance Capex will go up because of the two capitalized drydocks and.
and we'll share more information on 2025 in February.
Okay, thank you.
Speaker Change: Thank you. Our next question comes from Michael Siala of Stevens. If your lines are open please go ahead.
Speaker Change: We're not sharing which vessels those arent and the specific timing right now because we're still working through those details with our counterparties that we should have more to share in February.
Michael Siala: Yeah, thank you. Good morning, everybody. Maybe just to follow up on the last question.
Very good and.
Speaker Change: Dana, I realize you haven't put the numbers out there yet, but can you say with those two dry docks and some of the
Speaker Change: We've obviously got some good visibility on growth in 2026 with.
Speaker Change: The new Fsrus.
Speaker Change: CapEx spilling, maintenance CapEx spilling into next year relative to 24, would we think that 25 would be up, maintenance CapEx versus 24?
Speaker Change: And you've given us a look at some of the longer term projects with Alaska in Vietnam anything between here and there.
Speaker Change: Between here in mid 'twenty, six I guess that you can point to that will serve as growth drivers.
Speaker Change: Hi Mike, yeah we expect it to be up. This year we did have a dry dock but that as you probably are aware that dry dock was not capitalized, it was not included in our maintenance CapEx because that was for
Steven Cobos: So Steven.
Oliver Simpson: Turns this one over to Oliver I would say we are.
Oliver Simpson: We're certainly looking at things that could have an impact so obviously going to be binary if those make or don't make but you should be aware that we are just looking at 2026.
Speaker Change: summit vessel that's on a boot structure. So next year, in the second half of the year, we do expect our maintenance capex will go up because of the two capitalized dry docks. And we're not sharing which vessels those are and the specific timing right now because we're still working through those details with our counterparties, but we should have more to share in February.
Oliver Simpson: And beyond in terms of opportunity so but.
However, once you see if you can give mark any more color.
Yeah. Thanks, Thanks, Mike.
Pretty good.
Speaker Change: We've obviously got some good visibility on growth in 2026 with the new FSRU, and you've given us a look at some of the longer-term projects with Alaska and Vietnam. Anything between here and there?
Oliver Simpson: Yeah, I think we see obviously 26, we will have we will have the newbuild coming on and obviously as we've mentioned we're working towards the conversion so I think the.
Oliver Simpson: The Newbuild and conversions will work towards the kind of organic pipeline of projects we have.
Speaker Change: between here and mid-26, I guess, being 0.2 that will serve as growth drivers.
Oliver Simpson: But in the near term.
Oliver Simpson: We continue to look at them.
Speaker Change: Michael, this is Steven. I'm going to turn this one over to Oliver, but I would say we are certainly looking at things that could have an impact. It's obviously going to be binary if those make or don't make, but you should be aware that we ain't just looking at 2026 and
Oliver Simpson: Inorganic opportunities for growth that we see where that.
Speaker Change: No would add near term then.
Speaker Change: I think there is a.
Speaker Change: There is a number of ongoing discussions.
Speaker Change: I think we do have a great financial position to act on something if it's the right thing comes up so.
Speaker Change: We're looking at those and we'll come back on those where we can.
and beyond in terms of opportunity set.
Speaker Change: Okay. Thank you.
Speaker Change: I'll punch and see if you can get Mike any more color.
Speaker Change: Thanks, Steven. Thanks, Mike. Yeah, I think we see, obviously, 26. We'll have the new build coming on. And obviously, as we've mentioned, we're working towards the conversion. So I think that...
Speaker Change: Thank you.
Speaker Change: I Wonder if I had to ask a question Thats star one on your telephone keypad.
Speaker Change: Our next question comes from Bobby Griffin of Northland Capital Markets. Your line is now open. Please go ahead.
Bobby Griffin: Hey, good morning, guys. Thank you for taking my question. So I just wanted to ask on the LNG carriers to access our U I was just curious how quickly could you convert that LNG carrier to ask us to tune Fsrus and could you maybe give us more detail as to what type of projects is converted.
Speaker Change: the new build and conversions will work towards the kind of organic pipeline of projects we have, but in the near term we continue to look at
Speaker Change: inorganic opportunities for growth that we see would add, you know, would add near-term value. I think those are
Bobby Griffin: Converted.
Speaker Change: There's a number of ongoing discussions, you know I think we're in a great financial position to act on something if the right thing comes up so we're looking at those and we'll come back on those when we can.
SSR you would say probably I'm guessing is probably a smaller project, where it's more of a backup insurance policy for those customers energy needs and it's probably in like.
Bobby Griffin: Environmentally it's probably in a bay that doesn't.
Bobby Griffin: It doesn't experience crazy changes like Cook inlet.
Okay, thank you.
Speaker Change: Thank you. As a reminder, if you'd like to ask a question, that's star 1 on your telephone keypad.
Okay.
Bobby Griffin: Hey, Bobby this is David miner.
Speaker Change: Our next question comes from Bobby Grooks of Northland Capital Markets. The line is now open, please go ahead.
Speaker Change: Yeah, Great question. So we're excited about the conversion prospect.
Indeed that would probably be for a smaller project one of the smaller projects that are in our pipeline.
Bobby Grooks: Hey, good morning, guys. Thank you for taking my question. So I just wanted to ask on the LNG carrier to FSRU. I'm just curious, how quickly could you convert that LNG carrier to an FSRU? And could you maybe give us more detail as to what type of projects this converted?
It's not necessarily only for those projects that would use it for an insurance policy. It could be for any reason and we expect that to be a versatile project or excuse me versatile vessel that could go into it wouldnt just be cook inlet or environmentally sensitive areas. It could really go anywhere, but it would be targeted for.
Bobby Grooks: FSRU would fit. I'm guessing it's probably a smaller project where it's more of a backup insurance policy for those customers' energy needs, and it's probably in like, you know, environmentally.
Speaker Change: Those smaller send out customers.
Speaker Change:
Speaker Change: Bye bye having.
Speaker Change: Asset available to us in 2025 debt that Oliver spoke about.
Speaker Change: It's probably in a bay that's less, you know, doesn't experience crazy changes like Cook Inlet.
We get to start on those on the engineering.
Speaker Change: Hi.
Speaker Change: Conversion project you can't do the conversion without the long lead items, you can't do the long lead items without engineering.
Speaker Change: Hey Bobby, this is David Liner. Yeah, great question. So we're excited about the conversion prospect. Indeed, that would probably be for a smaller project, one of the smaller projects that are in our pipeline.
Speaker Change: Can't do the engineering without a vessel and so by getting our hands on a vessel. We are starting the clock that youre that you spoke about the timeline to bring that vessel to market youre, starting the clock by getting your hands on that asset so.
Speaker Change: It's not necessarily only for those projects that would use it for an insurance policy, it could be for any reason.
Speaker Change: In terms of total timeline last earnings call. We spoke about a new vessel that was on the order of.
Speaker Change: And we expect that to be a versatile project, or excuse me, a versatile vessel that could go into, it wouldn't just be Cook Inlet or environmentally sensitive areas, it could really go anywhere, but it would be targeted for those smaller send-out customers.
Speaker Change: Three to three and a half years to bring that to market.
Speaker Change: The conversion is considerably less than that notionally, a year less than not but it's very dependent on the specification also the donor vessel that youre going to use for that conversion. There's a lot of things that go into driving the timeline on a conversion so.
Speaker Change: You know by having that asset available to us in 2025 that Oliver spoke about
Speaker Change: I don't feel comfortable until we have our hands on that asset and have fully flushed out the specification don't feel comfortable speaking to the exact timeline, but I hope that gives you a sense for.
We get to start on those on the engineering
Speaker Change: You know, for a conversion project, you can't do the conversion without the long lead items, you can't do the long lead items without engineering, and you can't do the engineering without a vessel.
Speaker Change: Roughly what to expect.
Yeah.
No that's terrific color. Thank you David I appreciate that so maybe.
Speaker Change: And so by getting our hands on a vessel, we're starting the clock that you spoke about, the timeline to bring that vessel to market. You're starting the clock by getting your hands on that asset.
Speaker Change: You kind of laid it out really well there that you have to get the vessels for the engineering before the long lead time items.
Speaker Change: Would it be right for me to say and then earlier in the call you were talking about having the LNG carrier to deliver those mid term guidance am I right in my thinking about the right way that you could buy you could get that LNG carrier for the SRU conversion and while Youre doing the engineering and we'll in ordering those long lead time items it could actually be.
So in terms of total timeline
Speaker Change: Last earnings call, we spoke about a new vessel that was on the order of three to three and a half years to bring that to market.
Speaker Change: Conversion is considerably less than that, notionally a year less than that, but it's very dependent on the specification.
Speaker Change: Also, the donor vessel that you're going to use for that conversion. There's a lot of things that go into driving the timeline on a conversion, so don't feel comfortable until we have our hands on that asset and have
Speaker Change: Delivering LNG volumes to your cart infrastructure as to hear about that right.
Speaker Change: Yes, that's spot on that's the beauty of this model is we get the trade that asset while we are preparing for the conversion and so you don't have to absorb.
Speaker Change: fully fleshed out the specification, don't feel comfortable speaking to the exact timeline, but I hope that gives you a sense for roughly what to expect.
Months or even longer of downtime.
On an idled vessel, while you do all that.
Speaker Change: That engineering work.
Speaker Change: No, that's that's terrific. Oh, thank you, David. I appreciate that. And so maybe, you know, you kind of laid it out really well there that you have to get the vessel before the engineering before the long lead time items.
Speaker Change: <unk>.
Okay.
Speaker Change: Really that's really impressive.
Speaker Change: And then I don't want to take up too much time here, but.
Speaker Change: So would it be right for me to say, and then earlier in the call you're talking about having a LNG carrier to deliver those midterm values. Am I right? Am I thinking about the right way that...
Speaker Change: I guess on the new build.
Speaker Change: Am I right that discussions are already being had on where that where that new build will ultimately go if you get it delivered if you get it delivered in June of 2020 can we assume that by.
Speaker Change: You could buy, you could get that LNG carrier for the FSRU conversion, and while you're doing the engineering and ordering those LNG time items, it could actually be delivering LNG volumes to your current infrastructure. Am I thinking about that right?
Yes, or September that year that shipping generating EBITDA and then also what it'd be rates assume the EBITDA generation from the Newbuild would would likely be kind of notably above what your current fleet generates.
Speaker Change: Yep, that's spot on. That's the beauty of this model is we get to trade that asset while we're preparing for the conversion. And so you don't have to absorb, you know, months or even longer of downtime on an idle vessel while you do all that engineering work.
Speaker Change: In terms of like on a per vessel generation.
Speaker Change: Hum.
Speaker Change: It's all over here.
Sparrow
I'll take that one.
Speaker Change: I think.
[inaudible]
Speaker Change: Okay, wow, that's really, that's really impressive. And then I don't want to take up too much time here, but I guess on the new build.
We're not going to go into the specifics of any commercial discussions.
Speaker Change: I think what I, what I'd say to trying to shed some light as the surface or you could see.
Speaker Change: Am I right that discussions are already being had on where that new bill will ultimately go?
And the new build Fsrus is contracted.
Without.
Speaker Change: Without it there.
Speaker Change: It was contracted without a long term contract attached to it. So I think it's a unique asset in the fleet.
If you get it delivered...
Speaker Change: If you get it delivered in June of 2026, can we assume that by August...
I assume you look at the size of the center.
Speaker Change: or September that year, that ship is done generating EBITDA. And then also would I be right to assume the EBITDA generation from the new build would likely be kind of notably above what your current fleet generates in terms of like an odd per vessel
Speaker Change: It's a fantastic asset for project needs at the highest end up so we're very excited about bringing that asset into the fleet.
Speaker Change: And the prospects for that.
Speaker Change: So.
generation.
Speaker Change: <unk> is one of these things we will come back when we can say more on.
Oliver Simpson: Hi, it's Oliver here. I'll take that one. I mean, I think
Speaker Change: Specifics.
Speaker Change: And we're excited about having that asset came out in 2006 until the fleet.
Oliver Simpson: We're not gonna go into the specifics of any commercial discussions, but I think what I'd say to try and shed some light is, you know, this FSRU, it's the only new-build FSRU that's contracted without...
Speaker Change: Okay got it.
I'll return back into the queue. Thank you guys appreciate the time and congrats on another good quarter.
Speaker Change: Thank you.
At this time, we currently have no further questions. So I'll hand, it back to Steven <unk> for any further remarks.
Speaker Change: without a – that was contracted without a long-term contract attached to it. So, I think it's a unique asset in the fleet. I think, you know, you look at the size of the send-out, it's –
Steven Cobos: Again, I would like to thank everyone on the call for joining us today I really appreciate the conversation.
Speaker Change: It's a fantastic asset for a project that needs that highest end up.
In summary, we're doing what we said we would do.
Steven Cobos: This is an incredible company that is doing big things in markets all around the globe.
Speaker Change: So, we're very excited about bringing that asset into the fleet and the prospects for that. So, I, you know, again, it's one of these things we'll come back when we can say more on specifics, but we're excited about having that asset come out in 2026 into our fleet.
Steven Cobos: That is why we are the industry leader in Fsrus and downstream LNG infrastructure.
Steven Cobos: What you heard today is that we.
Steven Cobos: We are driving near and midterm value creation we.
We have a rock solid base business that generate sustainable earnings and we are executing a disciplined capital allocation strategy to maximize value for you our valued shareholders with that thanks very much for your time.
Speaker Change: Okay, got it. I'll return back to the queue. Thank you guys, appreciate the time and congrats on another good quarter.
Thank you.
Speaker Change: At this time we currently have no further questions, so I'll hand back to Steven Kobos for any further remarks.
Speaker Change: Thank you for joining today's call you may now disconnect your lines.
Steven Kobos: Again, I would like to thank everyone on the call for joining us today. I really appreciate the conversation.
Steven Kobos: In summary, we are doing what we said we would do.
Speaker Change: This is an incredible company that is doing big things in markets all around the globe. That is why we are the industry leader in FSR use and downstream LNG infrastructure.
Speaker Change: What you heard today is that we're driving near and midterm value creation.
Speaker Change: We have a rock-solid based business that generates sustainable earnings, and we are executing a disciplined capital allocation strategy to maximize value for you, our valued shareholders. With that, thanks very much for your time.
Speaker Change: Thank you for joining today's call. You may now disconnect your lines.