New Fortress Energy Inc. (Nasdaq: NFE) (“NFE” or the “Company”)
today reported its financial results for the second quarter of
2023.
Summary Highlights
- Adjusted EBITDA(1) of $246 million in the second quarter of
2023 and $686 million in the first half of 2023
- Net income of $120 million in the second quarter of 2023 and
$272 million in the first half of 2023
- Adjusted EPS(2) of $0.58 on a fully diluted basis in the second
quarter of 2023 and $1.48 in the first half of 2023
- Achieved several milestones since the first quarter of 2023
- Genera PR, an independently managed subsidiary of NFE, assumed
management of PREPA's thermal power plants in Puerto Rico under a
10-year contract(3);
- installed(4) 350 MW of gas fired power in Puerto Rico under
U.S. Government FEMA authorization, with 150 MW of power online(4)
in Palo Seco in June 2023, and another 200 MW of power in San Juan
coming online(4) in the third quarter of 2023(6);
- installed(4) our first rig for FLNG 1 at Altamira, and
targeting COD(4) in the third quarter of 2023(6);
- completed(4) our 135 MW La Paz power plant, and targeting
COD(4) in the third quarter of 2023(6);
- completed(4) our 3 Mtpa Barcarena terminal, and targeting
COD(4) by year end 2023(6);
- Expecting an increase in earnings and decrease in capex in the
second half of 2023 through 2024 as we place $3.2 billion of
invested capital projects online(4) over the next 90 days(6)
- Capital expenditures(7) for 2024 to decline to $250 million to
reflect completion of a number of our projects
- Illustrative Adjusted EBITDA Guidance(8) for 2023 revised to
$1.6 billion to reflect lower expected cargo earnings and timing of
infrastructure projects coming online(4), while 2024 guidance(8)
reiterated at $2.4 billion
- Composition of earnings expected to transition as more than 85%
of 2024 Illustrative Adjusted EBITDA Guidance(8) will be generated
from core infrastructure and only 15% from cargo sales, with 84%
from investment grade counterparts
- Corporate strategy focuses on operations, cash generation, and
deleveraging
"We are at an exciting period in the Company's history as we
near the end of our large-scale buildout with more than $3.2
billion of high-quality, contracted projects entering service(4)
over the next 90 days(6). We expect a significant increase in free
cash flow as these projects enter service and capital expenditures
decline. Our focus is on significantly growing cash flows from our
portfolio, operational execution, deleveraging, and low cost, high
return organic growth opportunities," said Wes Edens, Chairman and
CEO of New Fortress Energy.
Puerto Rico
- Completed(4) and installed 150 MW of power at our Palo Seco
location in June 2023, and near completion(9) for 200 MW of power
at our San Juan terminal with expected COD(4) in the third quarter
of 2023(6)
- In July, Genera PR LLC, an independently managed subsidiary of
NFE, completed all mobilization activities and is now managing
PREPA's thermal power generation system(3) of 4,693 MW
Fast LNG
- Mechanically completed(10) each of our modules and three rigs
on FLNG 1, with our Pioneer III rig successfully installed offshore
in August
- Expecting to complete and install the remaining two FLNG rigs
in August(6) and introduce First Gas(11) and achieve COD(4) in
September(6)
- FLNG 2 and 3 are already under construction(9) and all
long-lead items have been procured, with expected COD(4) in the
first quarter of 2025(6)
- In May, we signed a non-binding Letter of Intent(12) with CFE
to explore installing FLNG 2 and 3 at an underutilized existing
onshore terminal in Altamira
- Financing strategy anticipates no additional NFE equity
financings
Terminals
- Completed(4) our Barcarena terminal with First Gas(11) to Norsk
Hydro on schedule for end of year 2023(6) upon the arrival of our
FSRU, which is currently being converted from an LNG carrier
- Undergoing reliability testing at our La Paz power plant and
expect COD(4) in the third quarter of 2023(6)
- Remain on schedule for our Santa Catarina terminal and expect
COD(4) in the first quarter of 2024(6)
- Construction(9) of our 605 MW power plant at Barcarena is more
than 20% completed(4) pursuant to a fixed-price, date-certain EPC
contract with Mitsubishi and Toyo Setal; Operations(4) are expected
to commence in the third quarter of 2025(6) pursuant to 25-year
PPAs with Brazilian distribution companies
Commercial
- Finalizing an agreement(13) to sell our 135 MW La Paz power
plant to CFE for approximately $180 million, with transaction close
expected in the first quarter of 2024(6)
- In March, we were awarded a 400 MW nameplate capacity
contract(14) with a 10-year duration from the Single Electricity
Market Operator (SEMO), Ireland's electric grid operator
- Expecting to finalize our permitting and construction contract
for a 600 MW combined-cycle natural gas power plant before year-end
2023(6), with operations expected to commence(4) in 2026(6)
Hydrogen
- Construction(9) on our first hydrogen plant, with an initial
capacity of 100 MW or approximately 46 tons per day, is progressing
on schedule(6), with first production(4) expected in the fourth
quarter of 2024(6) and COD(4) in the first quarter of 2025(6)
- We have several other U.S. green hydrogen projects in various
stages of Development(9) with a focus on sites with strategic
logistics, low-cost power, and strong regional hydrogen demand
Financing
- In June and July, we closed $200 million of asset level debt
for the installment of power generation at our Puerto Rico complex
at an interest rate of SOFR + 3.00%
- In August, we received credit approval for $575 million of
asset level debt for the construction of our Barcarena power plant
at a blended interest rate of 9.2%
- In August, we closed a $400 million term loan with Morgan
Stanley at an interest rate of SOFR + 3.50%
Dividend
- Common dividend(15) of $0.10 per share expected to be
maintained for each quarter through end of year 2024
Earnings Composition
- Composition of earnings expected to transition as more than 85%
of 2024 Adjusted EBITDA Guidance(8) will be generated from core
infrastructure and only 15% from cargo sales
- Approximately 84% of 2024 Adjusted EBITDA Guidance(8) expected
to be generated from investment grade counterparts
On August 7, 2023, NFE’s Board of Directors approved a dividend
of $0.10 per share, with a record date of September 13, 2023 and a
payment date of September 27, 2023.
Financial
Highlights
Three Months Ended
(in millions)
March 31, 2023
June 30, 2023
Revenues
$
579.1
$
561.3
Net income
$
151.6
$
120.1
Diluted EPS
$
0.71
$
0.58
Adjusted net income(16)
$
187.6
$
119.2
Adjusted EPS(2)
$
0.90
$
0.58
Terminals and Infrastructure Segment
Operating Margin(5)
$
402.1
$
239.4
Ships Segment Operating Margin(5)
$
78.7
$
54.4
Total Segment Operating Margin(5)
$
480.8
$
293.8
Adjusted EBITDA(1)
$
439.7
$
246.5
Please refer to our Q2 2023 Investor
Presentation (the “Presentation”) for further information about the
following terms:
1)
“Adjusted EBITDA,” see definition and
reconciliation of this non-GAAP measure in the exhibits to this
press release.
2)
“Adjusted EPS” is not a measurement of
financial performance under GAAP and should not be considered in
isolation or as an alternative to any measure of performance or
liquidity derived in accordance with GAAP. We calculate Adjusted
EPS as adjusted net income divided by the weighted average shares
outstanding on a fully diluted basis for the period indicated. We
believe this non-GAAP measure, as we have defined it, offers a
useful supplemental view of the overall evaluation of the Company
in a manner that is consistent with metrics used for management’s
evaluation of the Company’s overall performance. Adjusted EPS does
not have a standardized meaning, and different companies may use
different definitions. Therefore, this term may not be necessarily
comparable to similarly titled measures reported by other
companies.
3)
Refers to the selection of Genera PR LLC
(“Genera”), an independently managed subsidiary of NFE, by the
Puerto Rico Public-Private Partnerships Authority (“P3A”), in
accordance with the requirement established by Act 120-2018 (Puerto
Rico Electric System Transformation Act), for a ten-year operation
and maintenance agreement with the Puerto Rico Electric Power
Authority (“PREPA”) for the operation, maintenance, decommissioning
and modernization of PREPA-owned thermal power generation system of
4,693 MW after a mobilization period, as approved by the government
of Puerto Rico, the Fiscal Oversight Management Board and Puerto
Rico’s Electricity Bureau.
4)
“Online”, “Operational”, "Operating",
"Completion", "Completed", “COD” or “commercial operation date”,
“Deployment” or similar statuses (either capitalized or lower case)
with respect to a particular project means we expect gas to be made
available in the near future, gas has been made available to the
relevant project, or that the relevant project is in full
commercial operations. Where gas is going to be made available or
has been made available but full commercial operations have not yet
begun, full commercial operations will occur later than, and may
occur substantially later than, our reported Operational,
Completion or Deployment date, and we may not generate any revenue
until full commercial operations have begun. We cannot assure you
if or when such projects will reach full commercial operation. Our
ability to export liquefied natural gas depends on our ability to
obtain export and other permits from governmental and regulatory
agencies. No assurance can be given that we will receive required
permits, approvals and authorizations from governmental and
regulatory agencies in connection with the exportation of liquefied
natural gas on a timely basis or at all or that, once received, we
will be able to maintain in full force and effect, renew or replace
such permits, approvals and authorizations.
5)
“Total Segment Operating Margin” is the
total of our Terminals and Infrastructure Segment Operating Margin
and Ships Segment Operating Margin. "Terminals and Infrastructure
Segment Operating Margin" included our effective share of revenue,
expenses and operating margin attributable to our 50% ownership of
Centrais Elétricas de Sergipe Participações S.A. (“CELSEPAR”) prior
to the Sergipe Sale. "Ships Segment Operating Margin" included our
effective share of revenue, expenses and operating margin
attributable to our ownership of 50% of the common units of Hilli
LLC prior to the completion of the Hilli Exchange. Hilli LLC owns
Golar Hilli Corporation (“Hilli Corp”), the disponent owner of the
Hilli.
6)
Lead times and expected development times
used in this Presentation indicate our internal evaluations of a
project’s expected timeline. They refer to us completing certain
stages of projects within a timeframe and within a spectrum of
budget parameters that, when taken as a whole, are substantially
consistent with our business model. These timeframes include
assumptions regarding items that are outside our control, including
permitting, weather, supply of equipment and materials, and other
potential sources of delay. To the extent that projects have not
yet started or are currently under development, we can make no
assurance that such projects are on track within the timeline
parameters we establish. Additionally, the construction of
facilities is inherently subject to the risks of cost overruns and
delays. If we are unable to construct, commission, complete and
operate any of our facilities as expected, or, when and if
constructed, any of them do not accomplish our goals, estimates
regarding timelines, budget and savings could be materially and
adversely affected.
7)
Represents management’s expectations
regarding the funding of the committed expenditures reflected and
the estimated expenditures for the development of our projects. The
estimated expenditures, including those related to project costs,
are based on specified assumptions that may not be based on a
measure of performance under GAAP and should not be relied upon for
any reason. These values are not based on the Company’s historical
operating results, which are limited and do not purport to be an
actual representation of our future economics. Actual results could
differ materially from management’s assumptions, and there can be
no assurance that actual performance will reflect our
expectations.
8)
"Illustrative Adjusted EBITDA Guidance”
means our forward-looking goal for Adjusted EBITDA for the relevant
period and is based on the "Illustrative Total Segment Operating
Margin Guidance" less illustrative Core SGA assumed to be at $130mm
for all periods 2024 onward including the pro rata share of Core
SG&A from unconsolidated entities. For the purpose of this
presentation, we have assumed an average Total Segment Operating
Margin between $9.57 and $13.64 per MMBtu for all downstream
terminal economics, because we assume that (i) we purchase
delivered gas at a weighted average of $6.68 in 2023, (ii) our
volumes increase over time, and (iii) we will have costs related to
shipping, logistics and regasification similar to our current
operations because the liquefaction facility and related
infrastructure and supply chain to deliver LNG from Pennsylvania or
Fast LNG (“FLNG”) does not exist, and those costs will be
distributed over the larger volumes. For Hygo + Suape assets we
assume an average delivered cost of gas of $15.31 in 2023 based on
industry averages in the region. We assume all Brazil terminals and
power plants are Operational and earning revenue through fuel sales
and capacity charges or other fixed fees. For Vessels chartered to
third parties, this measure reflects the revenue from those
charters, capacity and tolling arrangements, and other fixed fees,
less the cost to operate and maintain each ship, in each case based
on contracted amounts for ship charters, capacity and tolling fees,
and industry standard costs for operation and maintenance. We
assume an average Total Segment Operating Margin of up to $162k per
day per vessel. For Fast LNG, this measure reflects the difference
between the delivered cost of open LNG and the delivered cost of
open market LNG less Fast LNG production cost. These costs do not
include expenses and income that are required by GAAP to be
recorded on our financial statements, including the return of or
return on capital expenditures for the relevant project, and
selling, general and administrative costs. Our current cost of
natural gas per MMBtu is higher than the cost we would need to
achieve Illustrative Total Segment Operating Margin Guidance, and
the primary drivers for reducing these costs are the reduced costs
of purchasing gas and the increased sales volumes, which result in
lower fixed costs being spread over a larger number of MMBtus sold.
References to volumes, percentages of such volumes and the
Illustrative Total Segment Operating Margin Guidance related to
such volumes (i) are not based on the Company’s historical
operating results, which are limited, and (ii) do not purport to be
an actual representation of our future economics. Actual
circumstances could differ materially from the assumptions, and
actual performance and results could differ materially from, and
there can be no assurance that they will reflect, our corporate
guidance.
9)
“Under Construction”, “Development,” “In
Development” or similar statuses means that we have taken steps and
invested money to develop a facility, including execution of
agreements for the development of the project (subject, in certain
cases, to satisfaction of conditions precedent), procuring land
rights and entitlements, negotiating or signing construction
contracts, and undertaking active engineering, procurement and
construction work. Our development projects are in various phases
of progress, and there can be no assurance that we will continue
progress on each development as we expect or that each development
will be Completed or enter full commercial operations. There can be
no assurance that we will be able to enter into the contracts
required for the development of these facilities on commercially
favorable terms or at all. If we are unable to enter into favorable
contracts or to obtain the necessary regulatory and land use
approvals on favorable terms, we may not be able to construct these
assets as expected, or at all. Additionally, the construction of
facilities is inherently subject to the risks of cost overruns and
delays.
10)
“Mechanical Completion” or similar
statuses with respect to a particular project means we have
completed construction and certain subsystems are ready to be
handed over to the commissioning team. There may be several
mechanical completion milestones defined for the various subsystems
of a project. Therefore, no assurance can be given that we will be
able to complete a project and begin operations even if a project
has reached mechanical completion.
11)
Refers to the date on which (or, for
future dates, management's current estimate of the date on which)
natural gas is first made available for a project, including a
facility in development. Full commercial operation of such project
will occur later than, and may occur substantially later than, the
date of first gas. We cannot assure you if or when such projects
will reach the date of delivery of first gas, or full commercial
operations.
12)
Refers to the non-binding letter of intent
between New Fortress Energy Inc. and CFEnergía, S.A. de C.V. in
connection with the proposed development and operation of an
onshore liquefied natural gas terminal to be located at the
existing Altamira LNG import terminal. We cannot assure you if or
when we will enter into binding definitive agreements related to
such contracts or the terms of any such contracts.
13)
Refers to the binding short-form
agreements with Comisión Federal de Electricidad (“CFE”) related to
the (i) expansion and extension of NFE’s supply of natural gas to
multiple CFE power generation facilities in Baja California Sur,
and (ii) sale of NFE’s La Paz power plant to CFE. These
transactions are subject to customary terms and conditions and
execution of final long-form binding definitive agreements. We
cannot assure you if or when we will enter into long-form
definitive agreements related to such projects or the terms of any
such agreements. Furthermore, upon execution of long-form
definitive agreements, we cannot assure you if or when conditions
to such agreements will be satisfied, or if we will obtain the
required approvals for the transactions set forth in such
agreement.
14)
Refers to the award of a 10-year contract
by the Single Electricity Market Operator (SEMO) to Shannon LNG
Limited, a subsidiary of NFE, for the delivery of 400 MW of
electricity generation capacity at the site in Kerry, Ireland by
October 1, 2026. The contract was awarded following a competitive
auction process, operated by SEMO, and regulated by the Commission
For Regulation of Utilities (CRU) and the Northern Ireland
Authority for Utility Regulation (NIAUR).
15)
The payment of dividends under the
dividend policy will be made at the discretion of the Board and
will be subject to the Board's final determination based on a
number of factors, including, but not limited to, the Company's
financial performance, its available cash resources, the terms of
its indebtedness, its cash requirements, credit rating impacts,
alternative uses of cash that the Board may conclude would
represent an opportunity to generate a greater return on investment
for the Company, and restrictions and other factors the Board deems
relevant at the time it determines to declare such dividends. The
dividend policy may be revised, suspended, or cancelled at the
discretion of the Board at any time.
16)
"Adjusted Net Income” means Net Income as
presented in the relevant Form 10-K or Form 10-Q for the relevant
financial period as adjusted by non-cash impairment charges or
losses on disposal of our assets.
Additional Information
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investors section of New Fortress Energy’s website,
www.newfortressenergy.com, and the Company’s most recent Annual
Report on Form 10-K, which is available on the Company’s website.
Nothing on our website is included or incorporated by reference
herein.
Earnings Conference Call
Management will host a conference call on Tuesday, August 8,
2023 at 8:00 A.M. Eastern Time. The conference call may be accessed
by dialing (888) 204-4368 (toll free from within the U.S.) or
+1-323-994-2093 (from outside of the U.S.) fifteen minutes prior to
the scheduled start of the call; please reference “NFE Second
Quarter 2023 Earnings Call” or conference code 9499542.
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.newfortressenergy.com
within the "Investors" tab under “Events & Presentations.”
Please allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast. A replay of the conference call will be available at the
same website location shortly after the conclusion of the live
call.
About New Fortress Energy
Inc.
New Fortress Energy Inc. (Nasdaq: NFE) is a global energy
infrastructure company founded to help address energy poverty and
accelerate the world’s transition to reliable, affordable, and
clean energy. The company owns and operates natural gas and
liquefied natural gas (LNG) infrastructure and an integrated fleet
of ships and logistics assets to rapidly deliver turnkey energy
solutions to global markets. Collectively, the company’s assets and
operations reinforce global energy security, enable economic
growth, enhance environmental stewardship and transform local
industries and communities around the world.
Cautionary Statement Concerning
Forward-Looking Statements
This press release contains certain statements and information
that may constitute “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. All
statements contained in this press release other than historical
information are forward-looking statements that involve known and
unknown risks and relate to future events, our future financial
performance or our projected business results. You can identify
these forward-looking statements by the use of forward-looking
words such as “expects,” “may,” “will,” “can,” “could,” “should,”
“predicts,” “intends,” “plans,” “estimates,” “anticipates,”
“believes,” “schedules,” “progress,” “targets,” “budgets,”
“outlook,” “trends,” “forecasts,” “projects,” “guidance,” “focus,”
“on track,” “goals,” “objectives,” “strategies,” “opportunities,”
“poised,” or the negative version of those words or other
comparable words. Forward looking statements include: illustrative
financial metrics and other similar metrics, including goals,
expected financial growth and margins, among others; ability to
maintain our expected timelines; expectations regarding our ability
to construct, complete and commission our projects on time and
within budget; our ability to increase earnings and free cash flows
and decrease capital expenditures; our ability to change our
corporate strategy and to shift to cash generation, deleveraging
and organic opportunities; the execution of definitive documents
and their related terms and conditions, including without
limitation the sales price of the La Paz power plant to CFE and the
permitting and construction contract for our Ireland project;
expectations regarding the funding of our projects and operations,
including expectations of no additional NFE equity financings; and
all the information in the exhibits to this press release. These
forward-looking statements are necessarily estimates based upon
current information and involve a number of risks, uncertainties
and other factors, many of which are outside of the Company’s
control. Actual results or events may differ materially from the
results anticipated in these forward-looking statements. Specific
factors that could cause actual results to differ from those in the
forward-looking statements include, but are not limited to: risks
related to the development, construction, completion or
commissioning schedule for the facilities; risks related to the
operation and maintenance of our facilities and assets; failure of
our third-party contractors, equipment manufacturers, suppliers and
operators to perform their obligations for the development,
construction and operation of our projects, vessels and assets; our
ability to implement our business strategy; the risk that proposed
transactions may not be completed in a timely manner or at all; the
receipt of permits, approvals and authorizations from governmental
and regulatory agencies on a timely basis or at all; new or changes
to existing governmental policies, laws, rules or regulations, or
the administration thereof; failure to maintain sufficient working
capital and to generate revenues, which could adversely affect our
ability to fund our projects; adverse regional, national, or
international economic conditions, adverse capital market
conditions and adverse political developments; and the impact of
public health crises, such as pandemics (including coronavirus
(COVID-19)) and epidemics and any related company or government
policies and actions to protect the health and safety of
individuals or government policies or actions to maintain the
functioning of national or global economies and markets. These
factors are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in
any of the Company’s forward-looking statements. Other known or
unpredictable factors could also have material adverse effects on
future results. Any forward-looking statement speaks only as of the
date on which it is made, and we undertake no duty to update or
revise any forward-looking statements, even though our situation
may change in the future or we may become aware of new or updated
information relating to such forward-looking statements. New
factors emerge from time to time, and it is not possible for the
Company to predict all such factors. When considering these
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements included in New Fortress
Energy Inc.’s annual and quarterly reports filed with the
Securities and Exchange Commission, which could cause its actual
results to differ materially from those contained in any
forward-looking statement.
Exhibits – Financial Statements
Condensed Consolidated Statements of
Operations
For the three months ended March 31,
2023 and June 30, 2023
(Unaudited, in thousands of U.S.
dollars, except share and per share amounts)
For the Three Months
Ended
March 31, 2023
June 30, 2023
Revenues
Operating revenue
$
501,688
$
494,619
Vessel charter revenue
76,524
65,840
Other revenue
919
886
Total revenues
579,131
561,345
Operating expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)
184,938
225,768
Vessel operating expenses
13,291
11,443
Operations and maintenance
26,671
33,697
Selling, general and administrative
52,138
55,803
Transaction and integration costs
494
1,554
Depreciation and amortization
34,375
42,115
Total operating expenses
311,907
370,380
Operating income
267,224
190,965
Interest expense
71,673
64,396
Other expense (income), net
25,005
(6,584
)
Income before income from equity method
investments and income taxes
170,546
133,153
Income from equity method investments
9,980
2,269
Tax provision
28,960
15,322
Net income
151,566
120,100
Net income attributable to non-controlling
interest
(1,360
)
(852
)
Net income attributable to
stockholders
$
150,206
$
119,248
Net income per share – basic
$
0.72
$
0.58
Net income per share – diluted
$
0.71
$
0.58
Weighted average number of shares
outstanding – basic
208,707,385
205,045,121
Weighted average number of shares
outstanding – diluted
209,325,619
205,711,467
Adjusted EBITDA For the three months ended June 30,
2023 (Unaudited, in thousands of U.S. dollars)
Adjusted EBITDA is not a measurement of financial performance
under GAAP and should not be considered in isolation or as an
alternative to income from operations, net income, cash flow from
operating activities or any other measure of performance or
liquidity derived in accordance with GAAP. We believe this non-GAAP
measure, as we have defined it, offers a useful supplemental view
of the overall operation of our business in evaluating the
effectiveness of our ongoing operating performance in a manner that
is consistent with metrics used for management’s evaluation of the
Company’s overall performance and to compensate employees. We
believe that Adjusted EBITDA is widely used by investors to measure
a company’s operating performance without regard to items such as
interest expense, taxes, depreciation, and amortization which vary
substantially from company to company depending on capital
structure, the method by which assets were acquired and
depreciation policies. Further, we exclude certain items from our
SG&A not otherwise indicative of ongoing operating
performance.
We calculate Adjusted EBITDA as net income, plus transaction and
integration costs, contract termination charges and loss on
mitigations sales, depreciation and amortization, asset impairment
expense, interest expense, net, other (income) expense, net, loss
on extinguishment of debt, changes in fair value of non-hedge
derivative instruments and contingent consideration, tax expense,
and adjusting for certain items from our SG&A not otherwise
indicative of ongoing operating performance, including non-cash
share-based compensation and severance expense, non-capitalizable
development expenses, cost to pursue new business opportunities and
expenses associated with changes to our corporate structure, plus
our pro rata share of Adjusted EBITDA from certain unconsolidated
entities, less the impact of equity in earnings (losses) of certain
unconsolidated entities plus certain non-capitalizable contract
acquisition costs.
Adjusted EBITDA is mathematically equivalent to our Total
Segment Operating Margin, as reported in the segment disclosures
within our financial statements, minus Core SG&A, including our
pro rata share of such expenses of certain unconsolidated entities.
Core SG&A is defined as total SG&A adjusted for non-cash
share-based compensation and severance expense, non-capitalizable
development expenses, cost of exploring new business opportunities
and expenses associated with changes to our corporate structure.
Core SG&A excludes certain items from our SG&A not
otherwise indicative of ongoing operating performance.
The principal limitation of this non-GAAP measure is that it
excludes significant expenses and income that are required by GAAP
to be recorded in our financial statements. Investors are
encouraged to review the related GAAP financial measures and the
reconciliation of the non-GAAP financial measure to our GAAP net
income, and not to rely on any single financial measure to evaluate
our business. Adjusted EBITDA does not have a standardized meaning,
and different companies may use different Adjusted EBITDA
definitions. Therefore, Adjusted EBITDA may not be necessarily
comparable to similarly titled measures reported by other
companies. Moreover, our definition of Adjusted EBITDA may not
necessarily be the same as those we use for purposes of
establishing covenant compliance under our financing agreements or
for other purposes. Adjusted EBITDA should not be construed as
alternatives to net income and diluted earnings per share
attributable to New Fortress Energy, which are determined in
accordance with GAAP.
The following table sets forth a reconciliation of net income to
Adjusted EBITDA for the three months ended June 30, 2022, March 31,
2023, and June 30, 2023:
(in thousands)
Three Months
Ended
June 30, 2022
Three Months
Ended
March 31, 2023
Three Months
Ended
June 30, 2023
Total Segment Operating Margin
$
327,448
$
480,817
$
293,834
Less: Core SG&A (see definition
above)
42,040
41,067
47,381
Less: Pro rata share Core SG&A from
unconsolidated entities
1,914
14
—
Adjusted EBITDA (Non-GAAP)
$
283,494
$
439,736
$
246,453
Net income
$
(178,431
)
$
151,566
$
120,100
Add: Interest expense
47,840
71,673
64,396
Add: Tax (benefit) expense
(86,539
)
28,960
15,322
Add: Depreciation and amortization
36,356
34,375
42,115
Add: Asset impairment expense
48,109
—
—
Add: SG&A items excluded from Core
SG&A
8,270
11,071
8,422
Add: Transaction and integration costs
4,866
494
1,554
Add: Other (income) expense, net
(22,102
)
25,005
(6,584
)
Add: Changes in fair value of non-hedge
derivative instruments and contingent consideration
2,247
111,140
(2,835
)
Add: Pro rata share of Adjusted EBITDA
from unconsolidated entities
49,951
15,432
—
Add: Loss (income) from equity method
investments
372,927
(9,980
)
(2,269
)
Add: Contract acquisition cost
—
—
6,232
Adjusted EBITDA
$
283,494
$
439,736
$
246,453
Segment Operating Margin (Unaudited, in thousands of
U.S. dollars)
Performance of our two segments, Terminals and Infrastructure
and Ships, is evaluated based on Segment Operating Margin. Segment
Operating Margin reconciles to Consolidated Segment Operating
Margin as reflected below, which is a non-GAAP measure. We define
Consolidated Segment Operating Margin as GAAP net income, adjusted
for selling, general and administrative expense, transaction and
integration costs, contract termination charges and loss on
mitigation sales, depreciation and amortization, asset impairment
expense, interest expense, other (income) expense, loss on
extinguishment of debt, net, (income) loss from equity method
investments and tax (benefit) expense. Consolidated Segment
Operating Margin is mathematically equivalent to Revenue minus Cost
of sales minus Operations and maintenance minus Vessel operating
expenses, each as reported in our financial statements.
Three Months Ended June 30,
2023
(in thousands of $)
Terminals and Infrastructure
(1)
Ships
Total Segment
Consolidation and
Other (1)
Consolidated
Segment Operating Margin
$
239,436
$
54,398
$
293,834
$
(3,397
)
$
290,437
Less:
Selling, general and administrative
55,803
Transaction and integration costs
1,554
Depreciation and amortization
42,115
Interest expense
64,396
Other (income) expense, net
(6,584
)
(Income) from equity method
investments
(2,269
)
Tax provision
15,322
Net income
$
120,100
(1)
The Company has excluded contract
acquisition costs that do not meet the criteria for capitalization
from the segment measure. Contract acquisition costs of $6,232 for
the three and six months ended June 30, 2023 reconcile Cost of
sales in the segment measure to Cost of sales in the condensed
consolidated statements of operations and comprehensive income
(loss). Consolidation and Other also adjusts for the exclusion of
the unrealized mark-to-market gain or loss on derivative
instruments in our segment measure.
Three Months Ended March 31,
2023
(in thousands of $)
Terminals and
Infrastructure
Ships (1)
Total Segment
Consolidation and
Other (2)
Consolidated
Segment Operating Margin
$
402,139
$
78,678
$
480,817
$
(126,586
)
$
354,231
Less:
Selling, general and administrative
52,138
Transaction and integration costs
494
Depreciation and amortization
34,375
Interest expense
71,673
Other (income) expense, net
25,005
(Income) from equity method
investments
(9,980
)
Tax provision
28,960
Net income
$
151,566
(1)
Ships includes our effective share of
revenues, expenses and operating margin attributable to our 50%
ownership of Hilli LLC, prior to the disposition of this
investment. The earnings attributable to the investment of $5,986
for the three months ended March 31, 2023 are reported in income
from equity method investments in the condensed consolidated
statements of operations and comprehensive income.
(2)
Consolidation and Other adjusts for the
inclusion of the effective share of revenues, expenses and
operating margin attributable to 50% ownership of Hilli LLC in our
segment measure and exclusion of the unrealized mark-to-market gain
or loss on derivative instruments.
Three Months Ended June 30,
2022
(in thousands of $)
Terminals and Infrastructure
(1)
Ships (2)
Total Segment
Consolidation and
Other (3)
Consolidated
Segment Operating Margin
$
237,712
$
89,736
$
327,448
$
(54,112
)
$
273,336
Less:
Selling, general and administrative
50,310
Transaction and integration costs
4,866
Depreciation and amortization
36,356
Asset impairment expense
48,109
Interest expense
47,840
Other (income), net
(22,102
)
Loss from equity method investments
372,927
Tax (benefit) provision
(86,539
)
Net loss
(178,431
)
(1) Terminals and Infrastructure included
the Company's effective share of revenues, expenses and operating
margin attributable to 50% ownership of CELSEPAR, prior to the
disposition of this investment in the fourth quarter of 2022. The
losses attributable to the investment of $389,996 for the three
months ended June 30, 2022 are reported in (loss) income from
equity method investments in the consolidated statements of
operations and comprehensive income (loss).
(2) Ships included the Company's effective
share of revenues, expenses and operating margin attributable to
50% ownership of the Hilli Common Units, prior to the disposition
of this investment in the first quarter of 2023. The earnings
attributable to the investment of $17,069 for the three months
ended June 30, 2022 are reported in (loss) income from equity
method investments in the condensed consolidated statements of
operations and comprehensive income (loss).
(3) Consolidation and Other adjusts for
the inclusion of the effective share of revenues, expenses and
operating margin attributable to 50% ownership of CELSEPAR and
Hilli Common Units in our segment measure and exclusion of the
unrealized mark-to-market gain or loss on derivative
instruments.
Adjusted Net Income and Adjusted Earnings per Share
(Unaudited, in thousands of U.S. dollars)
The following table sets forth a reconciliation between net
income attributable to stockholders and earnings per share adjusted
for non-cash impairment charges and losses on disposals of
assets.
Three months ended March 31,
2023
Three months ended June 30,
2023
Six months ended June 30,
2023
Net income attributable to
stockholders
$
150,206
$
119,248
$
269,454
Non-cash impairment charges, net of
tax
—
—
—
Loss on disposal of investment in Hilli
LLC
37,401
—
37,401
Adjusted net income
$
187,607
$
119,248
$
306,855
Weighted-average shares outstanding -
diluted
209,325,619
205,711,467
207,534,174
Adjusted earnings per share
$
0.90
$
0.58
$
1.48
Condensed Consolidated Balance
Sheets
As of June 30, 2023 and December 31,
2022
(Unaudited, in thousands of U.S.
dollars, except share amounts)
June 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
104,342
$
675,492
Restricted cash
100,513
165,396
Receivables, net of allowances of $805 and
$884, respectively
275,292
280,313
Inventory
128,411
39,070
Prepaid expenses and other current assets,
net
105,133
226,883
Total current assets
713,691
1,387,154
Construction in progress
4,593,132
2,418,608
Property, plant and equipment, net
2,161,930
2,116,727
Equity method investments
138,569
392,306
Right-of-use assets
504,299
377,877
Intangible assets, net
74,540
85,897
Goodwill
776,760
776,760
Deferred tax assets, net
8,074
8,074
Other non-current assets, net
164,244
141,679
Total assets
$
9,135,239
$
7,705,082
Liabilities
Current liabilities
Current portion of long-term debt and
short-term borrowings
$
366,945
$
64,820
Accounts payable
602,759
80,387
Accrued liabilities
821,137
1,162,412
Current lease liabilities
133,431
48,741
Other current liabilities
143,598
52,878
Total current liabilities
2,067,870
1,409,238
Long-term debt
5,064,188
4,476,865
Non-current lease liabilities
349,331
302,121
Deferred tax liabilities, net
27,192
25,989
Other long-term liabilities
75,783
49,010
Total liabilities
7,584,364
6,263,223
Commitments and contingencies
Stockholders’ equity
Class A common stock, $0.01 par value, 750
million shares authorized, 205.0 million issued and outstanding as
of June 30, 2023; 208.8 million issued and outstanding as of
December 31, 2022
2,050
2,088
Additional paid-in capital
1,039,201
1,170,254
Retained earnings
290,564
62,080
Accumulated other comprehensive income
74,346
55,398
Total stockholders’ equity attributable
to NFE
1,406,161
1,289,820
Non-controlling interest
144,714
152,039
Total stockholders’ equity
1,550,875
1,441,859
Total liabilities and stockholders’
equity
$
9,135,239
$
7,705,082
Condensed Consolidated Statements of
Operations
For the three months ended June 30,
2023 and 2022
(Unaudited, in thousands of U.S.
dollars, except share and per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenues
Operating revenue
$
494,619
$
497,240
$
996,307
$
897,315
Vessel charter revenue
65,840
75,134
142,364
167,554
Other revenue
886
12,481
1,805
25,104
Total revenues
561,345
584,855
1,140,476
1,089,973
Operating expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)
225,768
272,401
410,706
480,699
Vessel operating expenses
11,443
18,628
24,734
41,592
Operations and maintenance
33,697
20,490
60,368
43,658
Selling, general and administrative
55,803
50,310
107,941
98,351
Transaction and integration costs
1,554
4,866
2,048
6,767
Depreciation and amortization
42,115
36,356
76,490
70,646
Asset impairment expense
—
48,109
—
48,109
Total operating expenses
370,380
451,160
682,287
789,822
Operating income
190,965
133,695
458,189
300,151
Interest expense
64,396
47,840
136,069
92,756
Other (income) expense, net
(6,584
)
(22,102
)
18,421
(41,827
)
Income before income from equity method
investments and income taxes
133,153
107,957
303,699
249,222
Income (loss) from equity method
investments
2,269
(372,927
)
12,249
(322,692
)
Tax provision (benefit)
15,322
(86,539
)
44,282
(136,220
)
Net income (loss)
120,100
(178,431
)
271,666
62,750
Net (income) loss attributable to
non-controlling interest
(852
)
8,666
(2,212
)
5,754
Net income (loss) attributable to
stockholders
$
119,248
$
(169,765
)
$
269,454
$
68,504
Net income (loss) per share – basic
$
0.58
$
(0.81
)
$
1.30
$
0.33
Net income (loss) per share – diluted
$
0.58
$
(0.81
)
$
1.29
$
0.33
Weighted average number of shares
outstanding – basic
205,045,121
209,669,188
206,867,828
209,797,133
Weighted average number of shares
outstanding – diluted
205,711,467
209,669,188
207,534,174
209,810,647
Condensed Consolidated Statements of
Cash Flows
For the three months ended June 30,
2023 and 2022
Unaudited, in thousands of U.S.
dollars)
Six Months Ended June
30,
2023
2022
Cash flows from operating
activities
Net income
$
271,666
$
62,750
Adjustments for:
Depreciation and amortization
76,949
71,172
(Earnings) losses of equity method
investees
(12,249
)
322,692
Drydocking expenditure
—
(12,439
)
Dividends received from equity method
investees
5,830
14,859
Change in market value of derivatives
572
(9,798
)
Deferred taxes
—
(178,109
)
Asset impairment expense
—
48,109
Earnings recognized from vessels chartered
to third parties transferred to Energos
(71,536
)
—
Loss on the disposal of equity method
investment
37,401
—
Other
12,435
6,808
Changes in operating assets and
liabilities:
Decrease (increase) in receivables
(14,532
)
(123,843
)
(Increase) in inventories
(60,710
)
(35,167
)
Decrease (increase) in other assets
63,576
(58,949
)
Decrease in right-of-use assets
40,655
35,265
Increase in accounts payable/accrued
liabilities
75,746
71,603
(Decrease) in lease liabilities
(38,885
)
(31,352
)
Increase (decrease) in other
liabilities
116,959
(12,668
)
Net cash provided by operating
activities
503,877
170,933
Cash flows from investing
activities
Capital expenditures
(1,465,642
)
(441,708
)
Sale of equity method investment
100,000
—
Other investing activities
(1,450
)
—
Net cash used in investing
activities
(1,367,092
)
(441,708
)
Cash flows from financing
activities
Proceeds from borrowings of debt
919,625
437,917
Payment of deferred financing costs
(6,659
)
(4,805
)
Repayment of debt
—
(146,030
)
Payments related to tax withholdings for
share-based compensation
(9,519
)
(13,054
)
Payment of dividends
(676,918
)
(47,374
)
Other financing activities
(3,946
)
—
Net cash provided by financing
activities
222,583
226,654
Impact of changes in foreign exchange
rates on cash and cash equivalents
1,608
(2,018
)
Net decrease in cash, cash equivalents
and restricted cash
(639,024
)
(46,139
)
Cash, cash equivalents and restricted
cash – beginning of period
855,083
264,030
Cash, cash equivalents and restricted
cash – end of period1
$
216,059
$
217,891
________________ 1 Cash and cash equivalents includes $11,204,
which has been classified as assets held for sale and included in
the Other non-current assets on the condensed consolidated balance
sheets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808127382/en/
Investor Relations: Chance
Pipitone ir@newfortressenergy.com
Media Relations: Ben Porritt
press@newfortressenergy.com (516) 268-7403
New Fortress Energy (NASDAQ:NFE)
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