Excelerate Energy(US:EE)2023-11-08 16:00PART I. FINANCIAL INFORMATION Financial Statements The company's financial statements show a significant increase in net income for the nine months ended September 30, 2023, driven by FSRU and terminal services revenue growth, alongside improved cash flow from operations and a stronger equity position Consolidated Balance Sheets As of September 30, 2023, total assets slightly increased to $2.90 billion, driven by property and equipment, while total liabilities decreased to $1.10 billion, strengthening total equity to $1.80 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $602,870 | $516,659 | | Inventories | $18,203 | $173,603 | | Property and equipment, net | $1,663,582 | $1,455,683 | | Total Assets | $2,904,035 | $2,866,822 | | Liabilities & Equity | | | | Accounts payable | $10,827 | $96,824 | | Current portion of deferred revenue | $24,433 | $144,807 | | Long-term debt, net | $400,153 | $193,396 | | Total Liabilities | $1,100,923 | $1,170,125 | | Total Equity | $1,803,112 | $1,696,697 | Consolidated Statements of Income Net income significantly increased for both Q3 and the nine months ended September 30, 2023, despite a sharp decline in total revenues primarily due to lower gas sales, offset by growth in FSRU and terminal services Income Statement Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $275,471 | $803,261 | $918,899 | $2,017,863 | | - FSRU and terminal services | $133,177 | $115,346 | $377,216 | $323,010 | | - Gas sales | $142,294 | $687,915 | $541,683 | $1,694,853 | | Operating Income | $67,498 | $49,912 | $170,747 | $128,331 | | Net Income | $46,505 | $37,272 | $106,800 | $46,126 | | Net Income Attributable to Shareholders | $13,892 | $8,828 | $26,704 | $6,797 | | Diluted EPS | $0.40 | $0.34 | $0.91 | $0.26 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, operating cash flow turned positive to $195.3 million, while investing activities significantly increased cash usage to $300.3 million, primarily due to asset purchases Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $195,274 | $(15,776) | | Net cash used in investing activities | $(300,325) | $(63,874) | | Net cash provided by financing activities | $193,305 | $355,733 | | Net increase in cash, cash equivalents and restricted cash | $88,211 | $276,083 | Notes to Consolidated Financial Statements Key notes detail the FSRU Sequoia acquisition funded by new debt, significant revenue from FSRU and terminal services in Brazil and Bangladesh, and subsequent long-term charter and LNG sales agreements - In March 2023, the company exercised its option to purchase the FSRU Sequoia for $265 million, closing the purchase in April 2023 using proceeds from the new Term Loan Facility and cash on hand47 - In March 2023, the company entered into an amended credit agreement that included a new $250 million Term Loan Facility, which was used for the Sequoia purchase58 - For the nine months ended Sep 30, 2023, Brazil (43%) and Bangladesh (28%) were the largest sources of revenue95 - Subsequent to the quarter, Excelerate executed a 10-year time charter party (TCP) agreement with Petrobras for the FSRU Sequoia, commencing January 1, 2024135 - In November 2023, Excelerate signed a 15-year LNG Sales and Purchase Agreement (SPA) with Petrobangla of Bangladesh to supply 0.85 to 1.0 MTPA of LNG, starting in 2026136 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q3 2023 performance to higher charter rates and gas sales margins, offsetting reduced gas sales volumes, while strategic moves like the FSRU Sequoia purchase and new long-term agreements bolster strong liquidity Recent Trends and Outlook Natural gas prices significantly decreased in Q3 2023, enabling increased spot purchases in emerging markets, while high European storage levels and anticipated LNG export capacity growth from late 2024 shape the market outlook - Dutch Title Transfer Facility (TTF) prices averaged $10.75/MMBtu in Q3 2023, a significant decrease from $60.15/MMBtu in Q3 2022141 - European Union (EU) natural gas storage levels ended Q3 2023 at approximately 95% full, exceeding the mandated target142143 - Since the beginning of 2023, 56 MTPA of incremental LNG volumes from the Gulf of Mexico have reached final investment decisions, with these projects expected to come online starting at the end of 2024144 How We Evaluate Our Operations The company evaluates performance using non-GAAP measures, with Adjusted Gross Margin increasing to $120.2 million and Adjusted EBITDA rising to $106.9 million in Q3 2023, reflecting strong year-over-year growth Non-GAAP Financial Metrics (in thousands) | Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Adjusted Gross Margin | $120,172 | $94,683 | $323,266 | $252,174 | | Adjusted EBITDA | $106,947 | $77,891 | $275,449 | $207,000 | Consolidated Results of Operations Analysis Net income for Q3 2023 increased by $9.2 million due to higher charter rates and gas sales margins, despite a significant decline in gas sales revenue and increased SG&A expenses - Q3 2023 net income increased by $9.2 million YoY, primarily due to higher charter rates in Finland, Argentina, Brazil, and Germany, and higher direct margin on gas sales173 - FSRU and terminal services revenues increased by $17.9 million in Q3 2023, driven by new service in Finland and Argentina and higher rates in Brazil181 - Gas sales revenues decreased by $545.6 million in Q3 2023 due to a reduction of natural gas sales volumes in Brazil183 - SG&A expenses for the nine months ended Sep 30, 2023, increased by $18.9 million YoY, mainly due to incremental public company costs and new business development192 Liquidity and Capital Resources The company maintains strong liquidity with $602.9 million in cash and available credit, supported by a new $250 million term loan for the FSRU Sequoia purchase, while managing future commitments for a newbuild FSRU and LNG supply - As of September 30, 2023, the company had $602.9 million in unrestricted cash and cash equivalents208 - Cash flow from operating activities for the nine months ended Sep 30, 2023, was $195.3 million, a $211.1 million positive swing from the same period in 2022213214 - In March 2023, the company secured a new $250 million term loan facility, which was used to fund the $265 million purchase of the FSRU Sequoia in April 2023218219 - Future payment commitments for a newbuild FSRU are approximately $50.0 million in 2024 and $250.0 million in 2025-2026226 Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, commodity prices, and foreign currency through derivative instruments, with interest rate swaps valued at $8.0 million as of September 30, 2023, showing an $8.7 million sensitivity to a 100 basis point rate change - The company uses long-term interest rate swaps to hedge a portion of its exposure to interest rate changes on its external bank loans232 - A hypothetical 100 basis point change in the LIBOR and SOFR forward curves would change the fair value of existing interest rate swaps by $8.7 million233 - The company is exposed to commodity price risk through LNG purchases but did not hold any commodity derivative instruments as of September 30, 2023234 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with previously identified material weaknesses in internal control over financial reporting fully remediated by June 30, 2023, through enhanced personnel and controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023237 - Previously identified material weaknesses related to the control environment, period-end financial reporting, and income tax provision controls have been fully remediated as of June 30, 2023238241 - Remediation actions included hiring new accounting leadership, establishing an internal audit function, and designing and implementing new controls241 PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, which are not expected to materially adversely affect its business, financial condition, or results of operations - The company does not expect currently pending legal proceedings to have a material adverse effect on its business or financials244 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have occurred to the risk factors disclosed in the 2022 Annual Report245 Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - Not applicable246 Other Information No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during the third quarter of 2023 - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during Q3 2023249