Excelerate Energy - Q2 2024

Executive Summary

• Q2 delivered solid profitability with Net Income of $33.3M and Adjusted EBITDA of $89.0M; management raised FY24 Adjusted EBITDA guidance to $320–$340M (from $315–$335M) on operational strength and cost normalization post-Q1 drydock.
• Revenue mix is pivoting toward stable, fixed-fee FSRU and terminal services ($151.0M) while gas sales ($32.3M) continue to normalize following Brazil’s shift to a long-term charter; EPS was $0.26 vs $0.24 in Q1 and $0.23 in Q2’23.
• Strategic progress accelerated: term sheet to co-develop the Northern Vietnam LNG Terminal (NVLT) and advanced discussions for an integrated FSRU-led solution in South Central Alaska; order placed for modular re-liquefaction kits to enhance vessel efficiency and economics.
• Capital allocation remains balanced: $609M cash, full $349.9M revolver availability, continued $0.025 quarterly dividend, and opportunistic buybacks ($11M in Q2) support growth optionality and shareholder returns.

What Went Well and What Went Wrong

• What Went Well

  • Sequential profitability inflected: Adjusted EBITDA rose to $89.0M (from $75.4M in Q1) as Q1 drydock costs rolled off; EPS improved to $0.26 (from $0.24).
  • Guidance raised on execution strength: FY24 Adjusted EBITDA to $320–$340M; CFO reiterated sufficient liquidity to fund fleet and growth (newbuild Hull 3407 milestone in Q4).
  • Strategic milestones: NVLT term sheet in Vietnam and advanced Alaska discussions underscore the integrated LNG portfolio strategy; CEO: “we are doing what we said we would do”.

• What Went Wrong

  • Revenue declined YoY ($183.3M vs $432.4M) as gas sales in Brazil decreased with the FSRU Sequoia’s transition to a time charter; mix shift pressured top line but improved visibility.
  • Project execution questions: analysts probed Alaska’s extreme tidal conditions and capex; management sees “suitable technical solutions,” yet acknowledged the challenge and declined to provide cost figures.
  • Bangladesh political transition could slow Payra near-term; management emphasized safety, continuity of operations, and long-term market fundamentals despite caretaker government dynamics.

Transcript

Operator (participant)

Good morning, all, and thank you for joining us for the Excelerate Energy second quarter 2024 earnings conference call. My name is Carly, and I'll be the call coordinator for today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad, and to remove yourself from that line of questioning, it's star followed by two. I'll now hand over to Craig Hicks, VP of Investor Relations, to continue.

Craig Hicks (VP of Investor Relations)

Good morning, everyone. Welcome to Excelerate Energy's second quarter 2024 earnings call. Participating on the call today are Steven Kobos, Chief Executive Officer, and Dana Armstrong, Chief Financial Officer. Also joining the call today are Oliver Simpson, Chief Commercial Officer, and David Liner, Chief Operating Officer. Our second quarter 2024 earnings results, press release, and presentation were released yesterday afternoon and can be found on our website at ir.excelerateenergy.com. I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Our actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update or revise them. Today's remarks will also refer to certain non-GAAP financial measures. We provide a reconciliation to the most directly comparable GAAP financial measures at the back of the presentation.

With that, it is my pleasure to pass the call over to Steven Kobos.

Steven Kobos (CEO)

Thank you, Craig, and to all of you on the call, good morning. Today, I will share with you a story of strength: strong financial results, strong operational performance, and strong execution of our strategy. On the financial side, we delivered $89 million of Adjusted EBITDA in the second quarter. Our robust FSRU and terminals contract portfolio and our ability to meet our customer commitments create the foundation for a compelling financial performance. In operations, I wanna take a moment and salute Excelerate's global team. They focus every day on providing critical services to our customers and operating at the highest levels of safety. I'm extremely proud of this team. When it comes to execution, we are doing what we said we would do. The Excelerate team continues to make great progress towards our plan to grow our company and maximize value for our shareholders.

Now, I'll provide a recap of our business strategy and an overview of the progress we are making. Then I'll turn the call over to Dana for more on our financial results. Let me recap our strategy. We are operating and optimizing our core regasification business. We are executing our comprehensive growth roadmap, and we are focused on three key areas for value creation. First, acquiring ownership interest in LNG regasification terminals. Second, establishing a diversified LNG portfolio. Third, investing in downstream natural gas infrastructure. We are advancing our plans to expand our fleet. Our newbuild FSRU, Hull 3407, remains on schedule for delivery in June 2026. Engineering and fabrication work on 3407 are underway, and the next major milestone in construction, steel cutting, is set for October.

We are confident that we will place Hull 3407 with one of the projects in our pipeline. Several of these projects would be an ideal fit for 3407. As an operator of one of the largest FSRU fleets in the world, we remain bullish on the asset class. Part of our strategy in investing in our fleet is to meet our customers' needs for efficiency, reliability, and sustainability. We've got a great example of this with our plan to integrate modular reliquefaction kits on board our vessels. These will improve the overall efficiency of our operations. I'm pleased to report we have placed an order for a reliquefaction kit and are prioritizing it for integration into our fleet. Now, the purpose of the reliquefaction kit is to recover excess boil-off gas by reliquefying and storing LNG in the cargo tanks.

It also helps prevent the loss of LNG cargo volume. This means that the energy value of our cargo can be productively used by our customer and not wasted. This technology will enhance the value of the services we provide our customers. It will create opportunities for increased revenue generation, and it's going to support the development of the regas projects in our pipeline. You'll remember that last quarter, we shared with you a prioritized list of growth opportunities. These projects span the downstream LNG value chain and range from terminal ownership to fully integrated solutions.... Today, we want to share two tangible proof points of our progress. The first one is a strategic investment we are making to enter the Vietnamese energy market.

In June, Excelerate signed a term sheet with the Ivis, a Vietnamese-based private development company, with whom we're going to develop a greenfield LNG import terminal in Haiphong, Vietnam. The Northern Vietnam LNG Terminal, or NVLT, is anticipated to be the first LNG terminal in the region. Vietnam, as you know, is expected to have one of the fastest-growing economies in Southeast Asia. Hanoi, the capital city, is located in the north, and this offers an enticing entry point into the country for Excelerate due to its rapid industrial growth. As domestic production declines, these industrial complexes in the north provide a foundational base of customers with a ready need for LNG, which will play a pivotal role in their energy mix. The plant, LNG import terminal, will have a total import capacity of 1.2 million tons per annum, constructed in two phases.

Phase one of NVLT will have a capacity of 0.7 million tons per annum, and we expect operations to commence in 2027. The second proof point of our value creation strategy is an integrated solution that is going to allow for the delivery of natural gas supply into South Central Alaska. For over 50 years, the South Central region of Alaska has relied on Cook Inlet natural gas for most local heating systems and electricity generation. But with domestic gas reserves in the Cook Inlet area declining, the region will need to import LNG to meet its anticipated local natural gas needs from 2028 onwards. Excelerate is in advanced discussions with local utilities in South Central Alaska for the development of an integrated LNG terminal in the Lower Cook Inlet region.

Excelerate would own the FSRU-based terminal, source LNG supply as required, and sell gas to local utilities and other offtakers. The start of commercial operations is targeted for 2028. We talk often with many of you on this call about our efforts in LNG markets all over the world. I can assure you that as an American company, it feels great to bring the critical services we provide to customers here in the United States. Let me sum this up. Once again, when it comes to our strategy, we are doing what we said we would do. We look forward to sharing even more information about the NVLT project, the Cook Inlet project, and other projects in our pipeline with you in the future. Before I turn the call over to Dana, I want to address the current situation in Bangladesh.

As many of you have seen, on Monday, the Prime Minister resigned, and a caretaker government is currently being formed. During this time, the safety of our team members is and remains our top priority. All of our people are safe. The continuity of our operations is of utmost importance for the country, and as a long-term partner of Bangladesh, we continue to operate as usual. As an American company that provides essential energy services to the people of Bangladesh, we are confident we will continue to play a vital role in helping to meet the energy needs of the country. With that, I'll now hand the call over to Dana for a deep dive into our numbers for the quarter.

Dana Armstrong (CFO)

Thank you, Steven, and good morning, everyone. As Steven said, we are pleased with our second quarter financial results. Adjusted EBITDA for the second quarter was $89 million, up $14 million, or up about 18% versus last quarter. The sequential increase in adjusted EBITDA was driven by the impact of the FSRU Summit dry dock, which occurred and was expensed in the first quarter of 2024. As a reminder, because the FSRU Summit is under a build, own, operate, transfer, or BOOT structure, the majority of the dry dock costs were expensed last quarter through the income statement instead of being recorded as maintenance CapEx to the balance sheet. We continue to invest in our fleet to ensure that we consistently operate at the highest levels of reliability. Doing so is central to maintaining a best-in-class fleet of vessels.

Our maintenance CapEx spend for the quarter was $21 million, and year to date, through the second quarter, we spent roughly $32 million on maintenance CapEx. As of the end of the second quarter, our total debt, including finance leases, was $734 million. We had $609 million of cash and cash equivalents on hand... and roughly all of the $350 million of capacity under our revolver was available for borrowings as of quarter end. With the free cash flows generated by our core regasification business, our stellar balance sheet, and the liquidity provided by our revolving credit facility, we remain confident that we have more than sufficient capacity to fund our near-term growth and strategic objectives.

As an update on our share repurchase program, during the second quarter, Excelerate purchased 674,000 shares, or $11 million of our Class A common stock at a weighted average price of $16.27 per share. Through the second quarter, we've utilized 40% of the $15 million share repurchase program that was authorized in early 2024. We will continue to take an opportunistic approach to the share repurchase program throughout the remainder of the previously authorized 2-year tenor, which runs through February 2026. Now, let's turn to an update on our financial guidance for 2024. We are raising our previously communicated Adjusted EBITDA guidance for 2024. For the full year, we are now expecting Adjusted EBITDA to range between $320 million and $340 million.

For the full year, we continue to expect maintenance CapEx to range between $50 million and $60 million, and committed growth capital to range between $70 million and $80 million. The majority of our committed growth capital range is related to capital spend on our new build FSRU, Hull 3407, including a 15% milestone payment due to the shipyard in the fourth quarter of this year. As a reminder, committed growth capital is defined as capital allocated and committed to specific investments for previously approved capital projects. For the projects that we talked about today, plus the others in our pipeline, once we sign definitive agreements, we'll layer in the incremental estimated capital spend into our committed growth capital estimates at that time. With that, we'll open up the call for Q&A.

Operator (participant)

Thank you. If you'd like to ask a question, please press Star followed by one on your telephone keypad now, and if you'd like to remove yourself from that queue, please press Star followed by two. Our first question comes from Chris Robertson of Deutsche Bank. Chris, your line is now open.

Speaker 6

Thank you, operator, and good morning, Steven and Dana. Thanks for taking the time to answer my questions today.

Dana Armstrong (CFO)

Morning.

Speaker 6

This is related to the Alaska proposal. I know one of the concerns that the utilities up there have had is the kind of extreme tidal ranges that happen in the Cook Inlet and the operating environment there as it relates to an FSRU. In these discussions, have you guys discussed that particular problem and kind of proposed a technical solution that would, you know, assuage their fear around that issue?

Steven Kobos (CEO)

You know, I'll lead off there, Chris, and then hand it over. Also, joining Dana and me in the room today are Oliver Simpson, our Chief Commercial Officer, and David Liner, our Chief Operating Officer. So I'll take a crack and then hand it off to David. But now, we're well aware of conditions in Cook Inlet. And let's face it, we have embraced tough conditions all over the world. Most of our fleet was designed for the North Atlantic. We deal with cyclones in the Bay of Bengal. We have been in all kinds of extreme weather. We're well aware of the tidal conditions of Cook Inlet, and we believe that there are suitable technical solutions for that to provide the sort of reliability that is essential to any of these projects.

Energy needs to be reliable, but David's team ultimately will be involved with that. So, Dave, do you wanna add some insight?

David Liner (COO)

Yeah, it's certainly an issue that's on our radar screen, and it's gonna be a challenge for the project, no doubt. There are existing facilities in the area that are similar to what's proposed for this project. So, you know, we feel fairly confident we're gonna be able to develop a technical solution. As Steven says, we do this all over the world in similar challenging environments. This one's just a little bit different. But again, you know, a technical problem, we have the engineering capabilities. We have a really strong engineering team that can develop a solution that's appropriate for the conditions that are there at the site. So yeah, we're fully aware of it and confident we can work through it.

Speaker 6

Okay. Yeah, I appreciate the, the confident tone there. I guess turning to other parts of that project, would this be part of a, I guess, conversion of the existing Kenai LNG export facility, or is this imagined as a new location?

Steven Kobos (CEO)

You know, I'll, I'll hand this to Oliver Simpson for a little more color, but the answer to that one is pretty crystal, I think.

Oliver Simpson (Chief Commercial Officer)

Yeah, thanks, thanks, Steven. Thanks, Chris. I think we're, you know, we're focused on delivering a solution to the customers in the region. I mean, I think you just heard from David. You know, we have some ideas on the technical solutions. We'll continue to work with our partners there. And, you know, there's a number of options to the technical solution. I mean, I think for us, ultimately, it's a project that has great fundamentals. There is a—you know, we see the demand for-

... for gas in the Cook Inlet region, and that's what we're focused on. We'll work on the best technical solution over the course of the project.

Speaker 6

Okay, great. I guess last question related to this, the utilities group up there had put out a study with a kind of a cost estimate around $700 million for an FSRU solution. Is that a fair starting point for some type of CapEx assumption, or do you guys have any guidance as it relates to what you think the project might cost?

Steven Kobos (CEO)

I don't think we're gonna—I mean, we're not in a position to make a comment on the cost, but typically, we come in well below that. As you guys know, from looking at our other facilities.

Speaker 6

Yes. All right, great. I'll, I'll turn it over. Thank you.

Steven Kobos (CEO)

Thanks, Chris.

Operator (participant)

Thank you very much. Our next question comes from Teresa Chen of Barclays. Teresa, your line is now open.

Speaker 6

Morning. Thank you for taking my questions. On the Northern Vietnam onshore terminal project, can you just put a little bit more color on the genesis of this project? How long you've been in discussions related to this? What got it across the finishing line? Any potential economics to think about and other potential projects like this in emerging markets that you're assessing right now?

Steven Kobos (CEO)

I'm gonna hand this to Oliver, Teresa. It's good to hear from you, by the way. I'm gonna hand it to Oliver. I think what I want to say, though, in general, you know, we're giving you guys a peek at different types of projects, you know, using different types of assets. We've told everybody we love FSRUs, but we're not wed to them if that's not the right solution for a particular project. In terms of Vietnam in general, man, we've been looking at Vietnam forever, you know? And over time, I think, I don't know, there have been... When you look at all the gas to power to the south and everything else, I think at one time or another, there have probably been more than 50 projects proposed. But we've been patient.

We've been a little counterintuitive into what we think will cross the post first in time in terms of demand and the like. But Oliver, you're closer to Vietnam. Why don't you take a run at it?

Oliver Simpson (Chief Commercial Officer)

Yeah, thanks. And thanks, Teresa. Yeah, I think, look, as Steven said, we've been looking at Vietnam for a while. There's been a number of projects, and, you know, stepping back, the prospect for LNG in Vietnam, we're extremely bullish on. I think when we saw this project, you know, the fundamentals, as Steven said in his remarks, the fundamentals in our case would be the first LNG terminal up there. This is based on industrial demand, on demand that's there today. It's not the LNG to power projects, which, you know, we believe in, but we think have a slightly longer timeline, potentially. So, you know, we looked at a number of projects, but we felt that this one had the right attributes for us.

And importantly, you know, to your broad questions, we think of projects like this as an integrated project where Excelerate brings its international expertise. We can bring our LNG supply portfolio and deliver gas and LNG solutions to these customers. That's what we're doing here in Vietnam. That's what we said we were gonna do, but that's also what we're looking to do in other projects around the world. So I think this is a good poster child of the type of projects that we're looking at.

Speaker 6

Thank you both for that nuanced answer. Maybe turning to capital allocation, just with the visible growth ahead of you while still executing the share purchase plan, what is your updated view at this point, on balancing growth endeavors, returning cash to shareholders, while still optimizing liquidity of the stock and maintaining a healthy balance sheet?

Dana Armstrong (CFO)

Hey, Teresa, this is Dana. So I'll just reiterate what we said before. Obviously, growth is our priority. We have several projects. We've talked about these projects in the last quarter call. We've just highlighted a couple of other projects in, in more specifics. We'll continue to maintain our best-in-class fleet, so CapEx on growth projects and CapEx for our existing fleet, as well as, you know, the new additions. Obviously, we have Hull 3407 coming out in 2026. That's our priority, and we will continue to maintain our dividend. We will look at potentially increasing that dividend when the time is right. You know, right now, our focus is on growth. As for the share repurchase, we're very pleased with where we are there. We've executed $20 million of the $50 million.

That program runs until February 2026, and we'll continue to use it opportunistically when it makes sense for us based on the share price and other factors.

Speaker 6

Thank you very much.

Dana Armstrong (CFO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Wade Suki of Capital One. Wade, your line is now open.

Speaker 6

Good morning, and thank you for taking my questions. Would you mind giving us a sense? I think you sort of answered it already, but what kind of vessel requirements might be required for maybe Alaska or some of the maybe projects that are further up in the queue, to whatever extent you feel comfortable in discussing that?

Steven Kobos (CEO)

... Yeah, thanks, Wade. You know, from our chart we shared last time, we shared some ref FSRU projects. Some are new building type projects, some are gonna have lower sendout, will likely be a conversion. And kind of TBD on the specific here, but we do recognize that not all of these projects require enormous sendouts, so we'll tailor the vessel for those circumstances. But we do intend to grow our fleet. That is part of this pipeline, and we will grow it in the right way. And, I guess I can tell you, Wade, we continue to evaluate, excuse me, different ways to grow that fleet. I mean, it's a bit of an obsession right now.

Speaker 6

Understand. Thank you. Just industry-wide, do you know how many FSRUs are under construction today? I guess if you ordered one today, when do you think delivery might be?

Steven Kobos (CEO)

You know, Wade, there are two new buildings, I guess, under construction. Actually, ours is in fabrication and has steel cutting in October. In October, if you ask me, there'll be one that's had steel cutting. So maybe that's how I answer that. In terms of, when you can get one, Wade, I know that, but I don't want to tell the world. So, it's, it's a while. It's a while, but, but we're happy with how we can grow this fleet.

Speaker 6

Awesome. Thank you. Appreciate that. One last one, if I could. I'd love to just hear, just from a commercial sense, what the tenor is like, maybe more recently with the customers, and maybe how that's changed here in the last few months, given all that's going on in the world.

Steven Kobos (CEO)

So the tenor, Wade, do you mean, I mean, you're not talking to our average remaining life of contracts, right? What, what's your question get to?

Speaker 6

Yeah, really thinking about new projects. Yeah, I know, you know, following Ukraine and Russia and the gas price spike, we had a little bit of a pause. I'm just kind of curious if the sentiment or psychology to what extent that might have shifted here in the last few months, given gas prices, things like that, like global LNG prices, geopolitical, all those other factors-

Steven Kobos (CEO)

Oh, yeah, I mean-

Speaker 6

On the customer.

Steven Kobos (CEO)

Well, I'm gonna hand this to Oliver. I'm gonna make a couple of just big statements that are gospel for us, and that is, the world understands that LNG is a critical fuel. The Global South sees LNG as affordable, as a critical fuel. The whole world sees it as affordable, as a suitable bridging fuel. And as your first question to us made clear, there remains a tight within the asset class to regasify LNG beyond the terminals that are out there right now. FSRUs are a tight asset class. So, I'll, I'll leave it at that, but, Oliver, you, you're closer to the customer.

Oliver Simpson (Chief Commercial Officer)

Yeah, no, no, I think that's exactly right. And I think, you know, what we've seen is, you know, the customers are on the back of the war in Ukraine. The customers are now coming back. There's LNG, you know, there's a strong pipeline of LNG coming online in, you know, in the coming years. So you're seeing LNG as an affordable fuel again. And we're seeing that, you know, the customers are coming to us, and, you know, they're wanting that integrated solution with the LNG and what we can provide. So I think, you know, we feel strongly we have a great product to offer our customers. We're seeing demand for it.

I think, you know, we're picking markets that have the fundamentals, so these are markets that need the LNG, need the gas for a long time. So, you know, we're selective on where we're going, but we see that long-term need.

Speaker 6

Fantastic. Thank you so much. Appreciate it. Y'all have a great day.

Oliver Simpson (Chief Commercial Officer)

Thank you.

Operator (participant)

Thank you so much. Our next question comes from Mike Scialla of Stephens. Mike, your line is now open.

Speaker 6

Thanks. Good morning, everybody. Just trying to characterize the two projects that you announced here. You said last quarter that 10 of the 12 were kind of in that $50 million-$400 million range. Some were too, I guess, Payra being one of them, was longer term and above that range. Is it fair to characterize these two as kind of toward the higher end of that range and longer term? Just trying to get a sense of how they fit into the pipeline.

Oliver Simpson (Chief Commercial Officer)

Yeah, I'll take that one. Thanks, Mike. Yeah, I think that they're suddenly in that range. I think, you know, obviously, you know, each project has its own fundamentals, but as we said in the case of Vietnam, you know, we're extremely bullish on the need for LNG in that country. And the project is, it's an integrated project, so, you know, providing gas to customers downstream. So that is,

... you know, we expect to be there for many years. I think Alaska, it's similar to different fundamentals, but also there's a need for LNG in the region. And again, we're looking at this, you know, from an integrated point of view, so it's view on this.

Speaker 6

Okay. Thanks. I guess looking at the remaining projects in the pipeline, what would cause you to, I guess, unveil those? Is it getting a term sheet like you have in Vietnam or something else that would be required before you could talk about them?

Steven Kobos (CEO)

Yeah, Mike, this is Steven. You know, we wanted—we want to be as transparent with you guys as possible, you know, short of inviting you guys to travel around the world and sit at conference room tables with us or, you know, walk around the site. So we want to be as transparent as we can, but we think it's important, as we said last time, we'll come to you guys when we've got tangible proof points. We want as much transparency as we can. We want to show you as much consistency as possible. These just happen to be unfolding. You know, it's all a horse race, and these horses happen to be ahead, at this point in time, and we wanted to—we also thought they were good in showing the whole range of opportunities that we're looking at geographically.

You know, we had hinted last time that we were looking at the Americas. That might have been too faint of a breadcrumb, so we wanted to make clear that, you know, we are looking all over the globe, and that includes US of A, when it's appropriate. So we just thought they were interesting proof points, and we were advancing them coming into the quarter in a way that felt like it was comfortable to talk about them. And we'll try to continue that.

Speaker 6

Sounds good. Thank you.

Operator (participant)

Thank you very much. As a reminder, if you'd like to ask a question, please press Star followed by one on your telephone keypad. And to take yourself out of that question queue, it is Star followed by two. Our next question comes from Bobby Brooks of Northland Capital Markets. Bobby, your line is now open.

Speaker 6

Hey, good morning, guys. Thank you for taking my question. I just want to start off with the reliquefaction technology that you guys are integrating to your current FSRUs. I was really interested. It's a really interesting way to uplift revenue generation on your current footprint. So what I was curious to hear about is, first, how quickly can that technology be added to your current FSRU footprint? And then secondly, once that is added, how quickly can you see a financial benefit? Is that something where you need to go back to the customer and renegotiate the contract, or is that something that's already baked into those new contracts? And maybe if you could just give a sense of, you know, how incremental this financial benefit would be, that'd be appreciated.

Steven Kobos (CEO)

Great. Hey, Bobby. Good to hear from you. Listen, I'll take the last point. In general, yeah, we're gonna have some communication with the customer. It's a great benefit, but we're not in the business of giving things away for free. So, it's a nice piece of kit. We think a customer- it'll pay for itself for a customer, many customers, easily within a year. So we think they'll value it, and we think they're gonna fly off the shelf. David can talk about timing on it. But we're excited, man. This is gonna lower emissions of our fleet. Of course, we're excited about it.

David Liner (COO)

Yeah, just to build on that, in terms of timeline, so the lead time for this equipment is about 18 months, and we want to buy this equipment, or we have bought this equipment now so that it will be ready and available to deploy as soon as our customers decide they want to employ it. And as Steven says, we know that there's strong demand for it. And by buying it now, that enables us to save our customers from having to make a decision 2 years in advance that they want this technology.

So we're cutting the implementation time down from, you know, a couple of years down to a series of months to be able to deploy this from the time a customer says, "Yes, we're ready to go." So, yeah, roughly 18 months from now, you know, as early as 2026, we could be able to deploy the, deploy the technology to an existing vessel or something coming into the fleet as well.

Speaker 6

Got it. And so you said that you've already bought these lead, the items. Have you bought enough for all 10 and or, you know, 11 FSRUs? Because that's what you guys would jump to in 2026, or you only bought it for half or any color on that?

Steven Kobos (CEO)

Yeah, I mean, Bobby, we've placed—we've done our engineering, we've done our design work, we've done the work to ensure that it's plug and play across the different classes of vessels within our fleet. But, you know, we've placed, we've placed our initial orders. We expect as we get further customer traction, you know, we will continue this. We're not aware of any other FSRU that has one of these kits on it out there in the world. And, you know, David's team does obsess about our fleet being best-in-class, and we're determined to keep it best-in-class. And you can look over time for us to put it across the fleet. There are... I don't want to get into the sausage making.

There are two or three vessels that are used in a way that maybe it's not as, as useful as it is for the way that most of our customers use their vessels. So, you know, it's kind of it shouldn't be surprising how people use these assets vary. But I'd say, you know, over the long run, I'd look to put it on, I don't know, six or seven of the fleet, probably.

Speaker 6

Got it. And then, so the opportunity set for Excelerate is vast going forward, just with these growth opportunities and new projects. And, you know, you guys have roughly $960 million of dry powder. Add that to, you guys are producing $50-$60 million of quarterly free cash flow, and then finally layer in your expertise and history in importing LNG. So you clearly are well-positioned to capitalize on those, on the vast, on the vast opportunities I'm trying to do. What I'm trying to get a sense of is, what, what are the constricting factors for you going forward? Do you, do you see the $960 million of that dry powder as the limit in terms of what you'd be comfortable putting towards growth or maybe something else?

It just really seems like the sky is the limit here for you guys.

Steven Kobos (CEO)

First of all, Bobby, I'd like for you to write the copy for Craig, because that's, that's true. I feel like, all seriousness, there is an enormous TAM out here. It is enormous. We don't need all of it. We don't want all of it. We're kind of picky. We do think there are a lot of markets with the great fundamentals that we're looking for, and I think what you've seen from, from our proof points today, just a reminder, you know, we are carefully looking all over the world for the right market, the right chance to advance our business model, not just chasing some project somewhere that-- whose dispatch doesn't make sense.

So I do think over time, we are incredibly well-positioned with the tools, including our dry powder, that we have to bring to bear. So I think the TAM is so big that we're going to be able to kill it while still being selective.

Speaker 6

Got it. And, so and then just maybe last one for me, just kind of a clarifying point. It seems like just reading through how you guys talked about the NVLT, the Vietnamese, the Northern Vietnam LNG import terminal that you guys just talked about. Is that—would you be selling gas to actual those, those industrial factories in the market, or would you be selling it to utilities? I just kind of wanted to get some clarity on that. Like, who would be the customers offtaking the gas?

Oliver Simpson (Chief Commercial Officer)

Yeah, I'll, I'll take that one, Bobby. I, I think, you know, we don't want to get into too much details on, on the commercials here, but, but essentially, you know, the idea, as, as I mentioned, is an integrated, integrated terminal where we, we'll be providing the, the LNG to that terminal. And the, the terminal, the terminal company that we're in, that we're a partner in, will be selling gas and/or LNG out of the terminal to local customers, local, local industries. Over time, we'll see exactly how far downstream we are, but we do see that there is, there is demand for the product from, from the terminal. And I think I'll, I'll sort of leave it at that.

Speaker 6

Got it. Yeah. So healthy, healthy amount of demand, not through utilities, but probably more those industrial players there. Thank you very much, guys, and congratulations on another, you know, fantastic quarter.

Steven Kobos (CEO)

Thanks.

Operator (participant)

Our next question comes from Praneeth Satish, from Wells Fargo. Your line is now open.

Speaker 6

Great. Thanks. Good morning. On Pyra, do the political changes in the region and potential prime ministerial candidates have any bearing on support for this project? And then just broadly, where does Pyra stack now versus some of the other opportunities you're looking at here with Vietnam, Alaska, and all those other projects in the backlog?

Steven Kobos (CEO)

Thanks, Paneesh. I'll take that one. It's Steven. I would say, what I'll tell you about Pyra, what I'll tell you about the market is nothing really changes about the need for natural gas in Bangladesh. The supply-demand balances, the decline curve, and their historic onshore production, all those fundamentals are there, so the need remains. But at this point, you know, we're less than a week into a change in government. We don't have the caretaker government's lineup filled out yet. So clearly, when you are anytime you're dealing with a counterparty who's a state energy company like PetroBangla, they're going to need a remit from a government to proceed with it. We will continue doing some of... and that'll take a little while.

We will continue with some of the efforts that we're ongoing this year, you know, some of the metocean. We've got a metocean buoy out there. We're doing all kinds of things to assess what the needs are. We're going to keep doing that because we need to, because this will, you know. But things will ebb and flow on that pipeline. Everything doesn't proceed at a uniform pace. That's why you want and why we have a robust overall pipeline. But let's not forget, Iris is one of 12. That's why we came to you all last quarter, one of 12 projects in our pipe. That's why we are trying to give you all more color, more detail, more proof points, just so you guys have better visibility into what's really going on here at our conference rooms day to day.

So yeah, I think it's obvious that there would be some slowdown 'cause we don't even have a government yet. Fundamentals are still there. I think there's a great opportunity in country for an American energy company to keep providing ever more energy for the people of Bangladesh, so I like our prospects long term.

Speaker 6

Okay, now that makes sense. And then, I guess maybe how are you weighing at this point, organic investments versus M&A? Clearly, you've got a robust pipeline here of organic growth opportunities, so how are you kind of thinking about the balance between the two? And do you think there's more of a bias now on organic investments over M&A? Just curious for your thoughts.

Steven Kobos (CEO)

Puneet, I don't wanna make light of it, but we like the deals that we'll make. You know, and we like fundamentals, and we don't really care how they get served up, you know? We know what we like to do, we know we're a critical part of the energy transition, we know LNG is affordable, we know LNG needs to find a home. We know most of the world and most of the big players are focused on re-liquefaction and building their supply portfolios. We are the ones opening markets and finding a way to take that LNG and get it where it needs to go. So we know that's what the need is. What tool you use to bring us to the table and fit into that value chain, we're going to be agnostic to.

Speaker 6

Got it. Thank you.

Operator (participant)

Our next question comes from Zach Van Everen of TPH. Zach, your line is now open.

Speaker 6

Hey, good morning, guys. Thanks for taking my question. Just going back to Alaska, you know, it notes you guys are in advanced discussions. I guess, what's the timeline in your guys' eyes where you put pen to paper there? You know, what are you looking at as far as getting over that hurdle for that project?

Steven Kobos (CEO)

Yeah, I'll pass that to Oliver, Zach, because, you know, I'm impatient. I always want yesterday, but I'll let the folks actually facing the customer speak to that.

Oliver Simpson (Chief Commercial Officer)

Yeah, I think, look, the timeline, we, you know, we announced a project with a timeline start up of 2028. We think that that's achievable for the project. So obviously, I think, you know, you can back out of there that, you know, sort of a rough idea of what sort of timeline we'd be looking to get into definitive contracts. It's obviously, there's a process we've got to go through in the region. I don't think we're gonna speak to a specific timeline here, but we'll keep working with our partners and, you know, we're confident we can move this along, you know, fairly quickly.

Steven Kobos (CEO)

Yeah. The decline curve for the Cook Inlet domestic production is a real thing, moving at it's a real pace, though, right? And that's going to drive the need on the timing for papering this, the approvals, everything else, 'cause there is going to be a need for this bridge. Or it's gonna have to happen.

Speaker 6

Gotcha. No, that makes sense. I appreciate that. And then between the two projects, I know on the Cook Inlet project, you note that some of it will have or the gas sales will have take-or-pay style obligations. For Vietnam and Alaska, is a majority of these terminals planned to be take-or-pay, or will you open up some marketing or commodity exposure with these?

Oliver Simpson (Chief Commercial Officer)

I think, you know, what we're looking at on these types of projects is to get the right level of anchor customers that support the project. We're always interested in trying to see upside opportunities, but, you know, I don't think we'll be. We're not looking to take commodity risks in these markets. So they're gonna be underpinned by the customers that allow us to take FID, and then we'll be looking different markets. We'll have different growth prospects, but we'll be looking to take those opportunities on the growth side.

Speaker 6

Perfect. Thank you guys so much.

Operator (participant)

As a reminder, if you would like to ask a question, please press Star followed by one on your telephone keypad. And to remove yourself from that line of questioning, it's Star followed by two. Our next question comes from Craig Shere of Tuohy Brothers. Craig, your line is now open.

Speaker 6

Good morning. Congratulations on the good quarter. I wanna dig a little deeper into Wade's FSRU capacity question. Maybe you could speak to availability of shipyard slots, the timing differences between new build and conversion, how you think about conversion, because you've talked about it for maybe a couple of years, or more, but up till now, you've only done new builds. And then, on top of that, FSRU capacity is critical. Obviously, that's not the only thing you do, but that's critical. But what are your thoughts about the need for more long-term LNG supply beyond your Venture Global contract?

Steven Kobos (CEO)

Craig, you put the most questions into one question than anybody I know, man. I mean, come on. I will take some of your six questions, and then I'll pass it around. I'll pass it around the table. I mean, we've talked. You don't know how long we've talked about Vietnam. We talked and looked for opportunities for a very long time. We have talked about conversions for years. We will pull the trigger on that depending upon the project. We are bullish on the asset class of FSRUs. And by the way, we love being able to geek out, design bespoke new buildings that we know what we need, okay? We think, we think 3407 is gonna be the best-in-class asset of float. We want more of those, too. Conversions are...

It's a significant project, you know, and it's got its own execution risks, just like every other major project. But the reality is, there will be some that are suitable for it. Can't tell you what the sequencing will be on when we move to access a conversion candidate versus a new building. I mean, as soon as we can give you visibility to that, we will, 'cause it's a key element of transparency. What I've tried to tell you guys is just not faltering on our view on this. Our view on the TAM, our view on being able to get LNG into these countries, our view on how valuable this asset class is, our view on how sticky that infrastructure will remain in Europe, by the way.

We're, we're pretty consistent on everything we say all around that, and from that, you can no doubt divine our intentions, Craig. But you also have some questions about the portfolio. I'm gonna... I think that was your fifth or sixth question, Craig, so I'm gonna toss five and six over.

Oliver Simpson (Chief Commercial Officer)

All right. Yeah. Thanks, thanks, Steven. Thanks, Craig. Yeah. I think, you know, I think the, the sort of the proof points we gave today, both Inlet and, and NVLT are, are, you know, great, great opportunities for us to expand the LNG portfolio. We've, we've talked about the LNG portfolio. You know, I think we had some, some great successes last year, with our inaugural sort of long-term deals there. We're now, you know, we've, we've got volumes where we're able to bring solutions to our customers now with, with the LNG when we go into these markets, and we're gonna grow that portfolio as, as the projects, as the projects come online. So it's, it's a balancing act between growing the supply as, as the demand is there.

You know, as I mentioned earlier, we see there's a lot of LNG coming online. We've got some great relationships, great partnerships out there. So I think what we're doing, opening these markets, we're gonna have plenty of opportunities to grow that portfolio.

Speaker 6

Great. Just to clarify, on the timing difference between new build and conversion as we think about backing into project-specific timelines.

David Liner (COO)

Yeah. I can certainly take that one, Craig. David Liner here. You know, there is a difference in execution time. A new build, you know, on the order of 3-3.5 years. Some can be a little bit shorter than that. Conversion times are generally less than that, but there is the execution risk that goes with a conversion, as Steven mentioned before. And that's always something that we, you know, we're always managing those two. You know, when we're looking at a prospective project, you have to understand that execution timeline and the capacity of the vessel that you want to employ before you wanna pull the trigger on a conversion or a new build.

Of course, a new build is generally gonna be a much higher capacity vessel than a conversion. They're gonna be more appropriate for a smaller send-out type project. So you know, it just depends on which project your, your-

Steven Kobos (CEO)

Conversion would be... Yeah. Conversion would be more appropriate for a smaller send-out.

David Liner (COO)

For a smaller sendout, yes. I hope that helps, Craig.

Speaker 6

Great. Thank you. That's us. Thank you.

Operator (participant)

We currently have no further questions, so I would like to hand back to Steven Kobos for closing remarks.

Steven Kobos (CEO)

Listen, I really appreciate the conversation that we had today with Dana and Oliver and David and me, and it's always a pleasure to get with you guys. The questions, questions we got about our strategy in Vietnam, what we're doing in Alaska, and our overall value creation strategy. We will continue to be transparent with you guys. We will continue to do what we say we will do. With that, thanks very much for your time.

Operator (participant)

This concludes today's call. Thank you to everyone for joining. You may now disconnect.