Excelerate Energy, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; comparison is to the corresponding 2022 periods. Excelerate provides LNG and natural-gas sales, FSRU vessel charters, regasification and terminal services across multiple countries.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $432.4 million | $622.9 million | $643.4 million | $1,214.6 million |
| Operating income | $53.7 million | $39.3 million | $103.2 million | $78.4 million |
| Net income (loss), consolidated | $29.6 million | $(4.0) million | $60.3 million | $8.9 million |
| Net income (loss) attributable to shareholders | $6.0 million | $(2.0) million | $12.8 million | $(2.0) million |
| Adjusted EBITDA (non-GAAP) | $88.6 million | $66.5 million | $168.5 million | $129.1 million |
| Operating cash flow | Not separately provided by quarter | $24.5 million | $(9.5) million |
- Q2 gross margin was $75.2 million, versus $54.9 million; Adjusted Gross Margin, a non-GAAP measure, was $106.0 million, versus $79.2 million. Six-month amounts were $147.1 million and $203.1 million, respectively, versus $109.5 million and $157.5 million.
- Q2 gas-sales revenue declined $205.9 million year over year, while FSRU and terminal-services revenue rose $15.4 million. For the first half, gas-sales revenue fell $607.5 million and services revenue increased $36.4 million.
- Higher charter rates, improved vessel utilization and gas-sales margins supported earnings. Consolidated net income includes $23.6 million attributable to non-controlling interests in Q2; shareholder-attributable income was $6.0 million.
- Six-month investing cash outflow was $288.7 million, including $292.8 million of property and equipment purchases. Financing provided $210.5 million. Cash, cash equivalents and restricted cash decreased $53.9 million to $484.1 million; unrestricted cash was $462.0 million.
Liquidity, debt and capital commitments
- At June 30, 2023, external long-term debt, net of issuance costs, was $449.8 million; related-party debt was $184.3 million. Finance lease liabilities totaled $221.7 million. The new $250 million term loan funded part of the $265 million Sequoia vessel purchase.
- The amended senior secured facilities mature in March 2027. The revolver had $80.9 million of letters of credit outstanding and $269.1 million of available borrowing capacity. The company reported compliance with debt covenants.
- Management believes cash, operating cash flows and available borrowing capacity will be sufficient for operations, planned capital expenditures, debt service, taxes and expected dividends for the next 12 months.
- Capital commitments include an approximately $330 million FSRU newbuild expected for delivery in 2026, with approximately $50 million expected due in 2024 and $250 million in 2025–2026. A 20-year LNG purchase agreement for 0.7 million tonnes annually is estimated at approximately $250 million per year using June 2023 futures prices; commencement depends on the facility becoming operational and is not expected within the next 12 months.
Material changes, outlook and risks
- Revenue declined chiefly because natural-gas sales volumes in Brazil were lower than in the prior-year period; first-half 2022 also included higher sales at New England. Lower LNG prices during Q2 allowed some emerging buyers to return to the market. Management described winter demand and weather, LNG prices, and new supply as important market variables; it did not provide quantified company earnings guidance.
- Q2 SG&A increased $8.5 million, reflecting public-company costs, European contract expenses and business development. Six-month interest expense increased $10.6 million, primarily due to the term loan, issuance-cost amortization and higher reference rates.
- The Bahia Terminal lease and associated Brazilian LNG and natural-gas activity expire in December 2023. Results remain exposed to customer contract performance and termination rights, LNG and gas prices and volumes, vessel and project operations, financing costs, and foreign exchange. One customer represented 49% of first-half revenue and another 19%.
- The company reported no material change to previously disclosed risk factors and does not expect pending ordinary-course legal matters to have a material adverse effect. It stated that previously identified material weaknesses in internal controls had been remediated as of June 30, 2023.
- The board declared a $0.025-per-share Class A dividend for Q2, payable September 7, 2023. The filing also reports that a customer’s tax holiday runs through 2033, when the related contract and revenue are scheduled to end.
Important facts for investors to verify
- How much of the decline in gas-sales revenue reflects lower sales volumes, and how sustainable are the reported gas-sales margins?
- What commercial arrangements, if any, will replace Brazilian activity when the Bahia Terminal agreement expires in December 2023?
- Can operating cash generation support the newbuild payments, other capital needs, debt service and distributions without materially reducing liquidity or increasing borrowing?
- How will the Venture Global LNG purchase commitment, estimated at approximately $250 million annually at the cited prices, affect margins and working capital once it starts?
- How do non-controlling interests and the company’s dual-class ownership structure affect the portion of consolidated earnings attributable to Class A shareholders?