New Fortress Energy Inc.

Good day and welcome to the New Fortress Energy third quarter 2022 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Patrick Hughes, Managing Director, Investor Relations. Please go ahead.

Thank you, Jake, and good morning, everyone. Welcome to New Fortress Energy's third quarter 2022 earnings conference call. As Jake said, this call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. At the same location, you will also find our Q3 2022 investor presentation, to which we will refer during today's call. The presentation contains 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. Now let's turn to today's call. This is Patrick Hughes. I look after investor relations here at New Fortress Energy. Joining me today are Wes Edens, our Chairman and Chief Executive Officer, Chris Junta, our Chief Financial Officer, Andrew Deedy, Managing Director, responsible for commercial activities, as well as several other members of our team. With that, I'll turn the call over to Wes.

Great. Thanks, Patrick. And thanks, everyone, for calling in this morning. So as usual, I'm going to refer to the investor deck that we posted here this morning. So if you could pull it up and follow along, that'd be great. So let's start on page number four. Q3 was another great quarter for the company. Very, very solid quarter financially, $291 million In EBITDA, that puts us well on track for our $1.1 billion goal for the year. It's up significantly from the Q3 a year ago, about $170 million, and just in general on a financial basis was actually quite a productive quarter. In addition, we made significant progress on our two major aspects of our business, the supply side and the demand side. The supply side, of course, I'm talking about the FLNG business. Chris will talk about that in some detail. We hosted a large group of investors, equity analysts, other participants last week down in Corpus Christi to share with them not only the details of what we are actually doing down there, but also to introduce them to the very talented team of people that we've got that's executing for us, and we feel great about that. On the demand side, there's a lot to talk about. Andrew will spend a lot of time on that. And it's really a question of the two aspects of demand. In the short term, the dislocation in the world is significant. And we all know about that. We'll talk about that specifically. Long term, our mission to provide power to the places in the world that need it most is very much the mission of the company. And the problems and the dislocations in the world that we've seen in Europe in particular have only exacerbated the needs that people have. So we'll talk a lot about that as well. So both sides, that's great. Other significant financial aspect of the quarter is we have increased our guidance of our illustrative goals for next year from $1.5 billion next year to $2.5 billion. So significant upward adjustment based on what we see in the world right now, and Andrew will talk about that here in just a moment. So look at page number five. This is a new page, new format for us on presenting kind of the supply and demand side, and I find it particularly helpful. On the top, you can see the summary of the supply side. So the volumes, TBTUs, 74 TBTUs in 2021, 88 in 2022, 161 as FLNG volumes kick in, in particular in the second half of 2023. Lots and lots of different adjustments in this business. 50 TBTUs equals about 1 million tons of gas, so about a million and a half tons last year, closing in on 2 million tons this year, and then 161, so we're actually making a big upward adjustment next year. But then follow over to the right, you can see what our expectations are for the rest of our FLNG volumes in 2024 and 2025, and you can see a fairly profound shift to the right in terms of the volume. take those volumes and now look at the second line down, which is the margin that we have realized on our positions. So simply put, if you took the volumes times the margins, that equals adjusted EBITDA. So it couldn't be a clearer and more transparent way of looking at the business. You can see in 2021, we realized margins of $8.14 for TBTU. Our forecasted EBITDA $2.5 billion in EBITDA results in a 1553. So you see margin improvement each of these years. That should match your intuition of what's happening in the world, right? So as the world has gotten dislocated, the opportunities to realize higher margins are there. But then what we're obviously very focused on is not the short term, but the long term. And so you look on the right-hand side, what we have done is normalized those margins for what we believe is achievable largely through the sale of power and gas to our customers around the world. And again, Andrew will spend a lot of time talking about this. But at $10, $12.50, and $15, you end up with illustrative EBITDAs in those years, ranging from $3.3 billion on the low, low side in 2024 to $6.96 billion on the high side and the other side. Now, this all assumes that the amount of supply that we have in our inventory equals what we've already effectively committed to. Obviously, we think that there are significant growth opportunities across the world and across our portfolio, but this is a very discreet way of looking at it, and I hope that you find it helpful. So for that, let's look at page number six. With the good news on the operational side, we are a significant generator of free cash flow. Cash on hand today, $1.4 billion. Targeted operating cash flows over the next three years, approximately $10 billion. So simply backing out the CapEx that we required to finish our FLNG and other initiatives we've got across the company, we expect to generate five plus billion dollars in liquidity over the next three years. So a significant amount of liquidity. And the question is, then what do you do with that? The three obvious choices are in the box down below. So number one, you can obviously make additional investments. Number two, you can return capital to shareholders, either by deleveraging the company and then issue dividends or deleveraging the company and buying back stock or some combination of all those things. We have yet to conclude specifically the path that we are going to take, and we have a significant amount of liquidity now. We talked about what the board yesterday is doing a lot of analysis over the next 30 days or so, and our target is on or around December 15th to come out and make a clear statement to shareholders about what our intentions are both in the short term and the long term with respect to to our dividend policy in particular and what we intend to do with this capital. So it's a serious exercise, as we say, when we look at balance sheet and capital structure. It's the old proverbial measure twice, cut once situation when you're talking about significant amounts of capital, but it puts us in a great position to return capital potentially to shareholders, do things to grow our business, and those are the things we're going to take into account. So more on that to come here in a month or so. Page seven is my last page before I'll turn it over to the rest of the team. If a picture is worth 1,000 words, this might be worth 10,000 words. So this is actually a chart that you could print out and carry around with you because it talks a lot about what the situation is in the world today. When you look outside the yellow box to the left, you see, for the most part, the three major indices of natural gas. Henry Hub in this country, TTF in Europe, JKM in Asia, moved relatively in a synchronized fashion for many years. What's notable is that when you start to get the dislocation here, you'll see the timeframe for that actually occurring is July of 21. So a full nine months before actually the Russian invasion, you start to get a significant change in the balance or imbalance in the world, and that caused prices to spike. The question, of course, when I look at this chart is, what do I expect to happen when you continue this out to the right and things are normalized? And what is the new normal and what is the level that we would expect for gas to eventually settle out at once this crisis is settled in one shape or form or the other? My own perspective of it is I think the new normal may be at a marginally higher rate, perhaps a markedly higher rate. And maybe the era of cheap energy, in particular in Europe, is one of the past. and that when things normalize, if indeed they do normalize, you'll end up in a higher place overall. But that obviously has a big impact on margins in the business, margins for us, and it is something to really keep your eye on. But there are a number of factors that are not included in this chart that I think could have a significant impact. Most notably is that in Asia there has been a pronounced step down in LNG importation, in China in particular, The zero COVID policy there has obviously impacted them economically. They have actually scaled back dramatically on that. That's something that we watch carefully. It's something we think could actually change markedly. But really, you know, the other thing I would mention about this chart is that this talks very much about the developed world. So this is about the United States, about Europe, about Asia. And of course, there are many, many billions of people that are outside the developed world that desperately need energy. And we'll talk about that here in just a second. But I think that even regardless of what's going to happen in Europe, you have a massive demand and a need for power in these different markets. And so this is something to keep your eye on, but an interesting chart nonetheless. Let me turn it over to Chris. Chris?