New Fortress Energy Inc.

Good day and thank you for standing by. Welcome to the NFB first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 in your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Brett McGill, Managing Director and Head of Investor Relations. Please go ahead.

Thanks, Jamara. Good morning, everyone, and welcome to New Fortress Energy's first quarter 2022 earnings call. This call is being recorded and will be available by replay until May 12th. This morning, we'll be referencing our Q1 2022 investor presentation, which is posted on our website and will remain available after today's call. The presentation includes a series of important disclosures related to forward-looking statements. and non-GAAP financial measures. We encourage participants to review these important disclosures in addition to the description of risk factors contained within our SEC filings. Joining me here today are Wes Edens, CEO and Chairman of the Board, and Chris Junta, Chief Financial Officer. Also joining today's call are other members of our team, including Andrew Deedy, Ken Nicholson, and Patrick Hughes. So with that, I'll hand the call over to Wes.

Great. Thanks, Brett, and thanks, everyone, for calling in. As usual, we will be referring to the earnings deck, which we've posted on the website. So if you could just flip through and follow, that would be terrific. So with that, let's start at page four. So first, the financial results. Q1 was another very good quarter for the company. We've moved kind of solidly out of the development phase of our life into the production part of our life, at least from an earnings standpoint. And you look at the progression of earnings on Q1. On the page, you can see that very, very clearly. So adjusted EBITDA 2019, negative $115 million. First positive year of EBITDA 2020, $33 million. Last year, $605 million, with the bulk of that coming in the fourth quarter. And the first quarter this year, $258 million. So very much on track to produce what we have guided towards, which is approximately a billion dollars in adjusted EBITDA this year. Our guidance at the moment is $1.5 billion in 2023, with substantial upside both that year and beyond, depending on the timing and delivery of our FLNG, which we'll talk about. But the core underlying business, our business, which is basically selling gas or selling power to customers around the world is a very, very strong one. Obviously, there has been massive changes and disruptions in the energy market that have implications in both the short and long term that we'll talk about, but the bottom line is that the financial results are very, very promising on the first quarter of the year. Page number five, what we have laid out here is basically converted the volumes that we have delivered to our customers through our business into the blue boxes, which are TBTUs. So those are a very simple metric that describes the volumes that we have had. Twelve TBTUs delivered in 2019, 36 in 2020, 61 in 2021, 80 in 2022 is our forecast. The six on the top of it represents the six TBTUs. That's about two cargoes that are uncommitted at this point. So that's the marginal long position that we reflect in terms of the volumes. And then things start to change dramatically as you move into 2023 and beyond. The yellow portion of the graph basically represents the TBTUs that we expect to produce from our FLNGs. So second half of next year, 39 TBTUs, so 24 that are uncommitted in total. So we have a significant long position, which is a good position to be in at this point. And then as these start to roll in, you can see that the numbers become dramatically larger, 268 in 2024, 520 in 2025. The goal, obviously, over time will be to convert the yellow lines to the blue lines, right? So essentially what we will do is take our market volumes and convert them into customer volumes as they become part of our portfolio, given market conditions. The yellow parts of these chart represents some of the most scarce things in the world, which is LNG volumes that are not committed, that are being produced in 2023, 2024, 2025. Given that the shortage of energy broadly in the world, and specifically LNG with the developments in Europe and elsewhere, these are very, very significant developments for us. Page number six. Just a little bit of recap. So prior to the war in the Ukraine, the world was already very short energy, in my view. We spent a considerable amount of time over the last couple of years traveling around the world in the different markets that we do business with. My conclusion last fall was that the world was structurally short gas as you're getting developing countries that needed more energy as well as the developed countries. Obviously, then on February 24th, that changed dramatically when Russia invaded Ukraine. Just to give a little bit of context to it, so total production in the world roughly is about 400 million tons of LNG. Europe today gets about 40% of its natural gas from Russia. It's about 150 BCM of gas that converts into about 100 million tons of gas. So in the most simple way of thinking about this, you had 400 million tons of production in the world and one of the biggest customers in the world all of a sudden instantly got short 100 million tons. Now, the gas has not stopped flowing in Russia today, but what is crystal clear is that given the choice, over time, the Europeans will choose to get their energy from elsewhere, and the energy security issues become more pressing than the cost of the energy. Simply put, the 100 million tons of incremental demand does not exist. You can't manufacture it. So of the 400 million tons that is created in the world right now, the vast, vast majority of that is already spoken for. The way that LNG is produced around the world, generally speaking, is the producers line up long-term offtake to help them finance the projects that they are going to develop. So when you see 400 million, 100 400s is a big number, it's actually much worse than that in a sense that the 400 is already spoken for. So when we look at the chart on the right-hand side, expected supply additions across the world, you can see there is very, very little in 2022, 23, 24, and 25. There are a number of projects that have been declared FID or in the process of being declared FID that we expect to come on in the second half of the decade. That is not responsive to the world's energy needs in the next three or four years. literally the only thing that really is on our horizon is the fast LNG projects that we have. So we'll talk about that in some detail. Page number seven, I think it's worthy to give a little context of not just the energy crisis, but all the other derivative impacts that this has in the world. So the crisis, in my view, in energy, which is very, very manifest, is just the beginning of what the real crisis is likely to play out. Obviously, agriculture relies heavily on fertilizer. Fertilizer is created in large part through natural gas, so the impact of higher energy prices, which obviously hits the pocketbook of people in their electricity bill every month, also has profound impacts on the cost of the food that they buy. That then turns into inflation. Inflation obviously, rapid consumer price increases disproportionately affect the people that have the least amount of money. And so what really I think is about to play out is that not only are you going to get significant amounts of increase in energy costs to both developed and developing countries around the world, but then the knock-on effect of great increases in the inflation in agriculture and food prices. Food insecurity, mass hunger, there are significant implications for all this, which just only is exacerbated by the energy crisis that we have in the Ukraine. Lastly, and it's worth noting, is that the climate change goals that, of course, many countries have adopted around the world were focused on a phase-out of fossil fuels. When you have the energy crisis that we've had in Europe, what happens is that coal gets burned, and it delays basically the impact of these climate change initiatives by 10 or 20 years. So it is not only a significant crisis today, but one that, in my view, has got a long duration and is likely to play out over the next number of years. Page 8, just to put into context what actually happened in the last year and a half. So I went back to the first of last year and basically created the energy hierarchy, the complex energy from top to bottom. So diesel, Brent, TTF, which is the measurement of the price of gas that is brought into Europe, Henry Hub, which is obviously our own domestic index, and then coal. And you can see that the energy prices have moved dramatically. Diesel, $10 to $30. Brent, $51 to $110. TTF, $7 to $32. Henry Hub, $258 to $841 yesterday. Coal, $2 to $11. So pretty much across the board, there has been massive changes in energy. And while we think that there are significant adjustments ahead, again, given the duration of the events that are going to play out, we think that this is not going to change quickly. So page nine, with that overview, what does this mean for our business? In short, there are several aspects of our business which are greatly affected by this, all of them in a substantially positive way. The FSRUs, which I'll have Andrew talk about in just a moment, so FSRUs are the ships with regas capacity that are used to bring gas into markets, are in great demand with all that has happened in Europe, and they are in short supply. We are very much the market leader in terms of the owner of FSRUs The world's fleet is, depending on how you count it, 45 or 46 ships. We are nine of that, so we're about 20% of the market. We have open positions as well, so that's something that Andrew will talk about here in a second. So that is a tactical exposure, but it's a very, very positive one, and one that we think will actually result in some very positive results for us in the coming months and days. Fast LNG is really the industry-changing application. As I've said many times, the only commodity that you cannot buy is time. We green-lighted the production of our liquefiers 18 months ago. That, in hindsight, looks like a very good event. It was done at the time when LNG was $5 or $6 in the world, not $35 in the world. So we thought it made sense to provide security of supply for our customers and to do that with our own activities. That's why we started it. That's why we actually bought the equipment, started the whole industrial process, and then obviously the events of the last couple months have made that look very prescient. We have committed to this, as I said, at the beginning of last year. The process that we are engaged in is to industrialize the production of these units. Let's say it's the Henry Ford kind of initiative where we are trying to unitary design, unitary engineering, build them ourselves in a controlled environment. That is how we believe we can actually produce them not only in a high-quality way, but in a very, very fast and efficient way. And Chris will talk about that in just a second. Lastly, hydrogen. So, you know, the energy crisis will only accelerate efforts to find alternative sources of energy. We believe that renewables in general will be the beneficiary of this and the focus on this. But long-term, we think dispatchable power is the cornerstone of real change to address climate change. And of that, we think that hydrogen is one of the key components of it. So both Ken and Patrick will walk through that in just a moment. So with that, I'm going to turn to FSRU and talk to Andrew.