New Fortress Energy Inc.

Good day and thank you for standing by. Welcome to the New Fortress Energy Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star and zero. I would now like to hand the conference over to your speaker today, Josh Kane with Investor Relations. Please go ahead.

Thank you. I would like to welcome you to the new Fortress Energy third quarter 2021 earnings call. Joining me here today are Wes Edens, our CEO and Chairman of the Board, Chris Genta, our Chief Financial Officer, and Andrew Deedy, Managing Director, leading our Brazil efforts. Throughout the call today, we are going to reference the earnings supplement that was posted to the new Fortress Energy website. If you've not already done so, I'd suggest that you download it now. In addition, we'll be discussing some non-GAAP financial measures during the call today. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Wes, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements, and review the risk factors contained in our quarterly report filed with the SEC. Now, I'd like to turn the call over to Wes.

Great. Thanks, Josh, and welcome, everyone. As usual, please refer to the earnings deck that we sent out to you. That's what we're going to walk through here in just the next few minutes. So with that, let's just turn to the beginning. So page four, excellent, excellent quarter. Not only do we hit the margins that we had laid out for you just a month ago, but we've increased those forecasts by roughly 50% since the beginning of the year. We did this not by being long the market by making some directional bet, but rather we did this by utilizing our portfolio of assets and terminals around the world combined with their supply to put ourselves in a great position to take advantage of the market opportunities. By the numbers, for the quarter, $210 million in margin. In July, when we gave an update as to what we thought expectations should be for the We're at $171 million. It's obviously a significant beat to that. And the fourth quarter, our estimate now is $375 million. So right on top of where we thought we were a few weeks ago, 98% of the revenues are booked for the quarter. So that's obviously something which we feel is pretty well baked at this point. That was $184 million this summer. So in total, an uplift in earnings from middle of the year to the second half of the year in estimates of $219 million. $585 million in total operating margin for the second half of the year. Annualized, obviously, well over $1 billion. Put this on a very, very good track to achieve our goals for next year and the years after. So $1.1 billion in 2022, $1.5 billion in 2023. So very, very good by the numbers. Next page. You know, the three drivers of the business are really the terminals business, the fast energy and our energy transition business, And the terminals side of the business, the focus for us now is very much on finishing our existing pipeline, adding new terminals very selectively around the world, and then really generating significant organic growth without the introduction of a lot more capital. So over time, this will reduce the CapEx spend across the portfolio on the terminal side substantially. And access to these high-volume markets like Brazil, Ireland, Sri Lanka, gives us a tremendous amount of capacity to distribute our products, be they gas or power or both, and doing so in a very, very capital-efficient way. Fast LNG, there's a lot to talk about there, and obviously with what's happening in the marketplace, there should be, and we think there is, a lot of focus on it. The decision to go FID on the first of the liquefiers back earlier in the year, in hindsight, looks like a very, very good one. We have the only uncommitted liquefier of scale that will be completed next year. So in a marketplace that is short, and I'll walk through our views of it, but likely to stay short for some time, we are the only people that can actually supply that with one and possibly with two. So the opportunity to add to that, whether it's for a customer and providing tolling revenues for us, or whether it's for our own portfolio on the merchant side, or quite possibly both, puts us in a very, very good place. Lastly, with respect to energy transition, we have had a lot of productive work done on that behalf. We are near FID on our first facility, which we believe could be as soon as the next couple of weeks. We're talking about blue hydrogen with carbon capture, which we think is definitely the path of transition fuels generally. Very viable economically at roughly $1 a kilogram, so very much the sweet spot in terms of that. Very well positioned to benefit from upcoming legislative actions, which we think will promote incentivized hydrogen production. So very, very good quarter for us across the board. A question, of course, that a lot of people have is what in the world has happened to the market? So let's look at pages 7 and 8 and 9. I'll give you our thoughts about it. The chart on the left-hand side tells a very compelling story. The systemic underinvestment in the oil and gas industry has resulted in a decrease in terms of the availability of hydrocarbons. and leaves us very vulnerable to shocks at different levels. So from 2014 to 2021, you've gone from roughly $800 billion in capital invested in the production of oil and gas to $400 billion today. The chart on the right-hand side, you can see that you've gone from 95% of the capital being allocated to conventional gas and oil exploration to roughly 50-50 today. So remarkable changes in a very, very short period of time. and ones that we are very much on board with in terms of focusing on a greener, cleaner, carbon-free future. The problem is you still need hydrocarbons today. And you look at page eight, you can see what happens. So basically, this systemic underinvestment has led us to be, as a market, very vulnerable to shocks. And, you know, lack of rainfall in Brazil – causing a decline in the hydroelectric power generation, too much rain in China that caused them to not be able to mine enough coal, lack of wind in Europe, lower Russian supply, faster economic recovery. All these things kind of happening at the same time had a profound impact on the market. This 100-year event that you're seeing in terms of the pricing of this is one that I think we could all see on an annual basis because what you've really done is lowered the amount of surplus that you have. And so any of these shocks or any combination of these shocks together leads you very vulnerable to much higher prices. If you look on page number nine, what does that mean for our markets? We believe that the demand for LNG is expected to materially outpace the supply of it. There's a significant amount of LNG production which comes on in the second half of this decade, but there's a whole host of different uses for it. I chronicle a handful of them on the right-hand side that could really greatly outpace even the supply. So coal-to-gas conversions, oil-to-gas conversions, increases in the number of electric vehicles, cryptocurrency, the actual Bitcoin production that is using a significant amount of energy, hydrogen production, ship bunkering. There's a list of literally dozens of different uses of the product, and there are only a handful of different sources of it. We think this puts us in a position where you could see market shocks on the system, as we're seeing right now, and on top of that, fundamental shocks as you have just absolute needs for energy production and a lack of capacity for it. So with that, let's talk about the terminals. Turn it over to Andrew and B. Thanks, Wes.