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Excelerate Energy (EE): A Steadfast Player in the Dynamic LNG Market
Published on November 17, 2024 | Ticker: EE

Excelerate Energy, Inc. (EE) is a prominent player in the liquefied natural gas (LNG) industry, providing integrated services along the LNG value chain. The company has carved out a niche for itself as a leading provider of flexible LNG solutions, catering to diverse markets across the globe.

Business Overview

Founded in 2003, Excelerate Energy has consistently demonstrated its ability to navigate the complex and ever-evolving LNG landscape. The company's flagship offering, its fleet of purpose-built floating storage and regasification units (FSRUs), has been a cornerstone of its success. Excelerate currently operates a fleet of ten FSRU vessels, which have the capacity to safely deliver more than 7.1 billion cubic feet of natural gas through 16 LNG regasification terminals worldwide.

Excelerate Energy, Inc. was formed as a holding company to own a controlling equity interest in Excelerate Energy Limited Partnership (EELP), a Delaware limited partnership. As of September 30, 2024, George B. Kaiser, together with his affiliates, owned approximately 76.90% of the ownership interests in EELP, with the remaining 23.10% held by Excelerate. The company started operations in 2005 with the deployment of its first FSRU in Teesside, United Kingdom. Over the years, Excelerate has expanded its global footprint, establishing operations in countries such as Argentina, Bangladesh, Brazil, Finland, Germany, Pakistan, and the United Arab Emirates.

A significant milestone in Excelerate's history was the completion of the Moheshkhali LNG terminal in Bangladesh in 2017. This project, which utilized two of Excelerate's FSRU vessels, was the first LNG import terminal in Bangladesh and has since grown to account for a significant portion of the country's natural gas supply. The company's ability to navigate challenges, such as the COVID-19 pandemic in 2020, demonstrates its resilience and adaptability in the face of global market disruptions.

Excelerate operates in two main business segments: FSRU and Terminal Services, and Gas Sales. The FSRU and Terminal Services segment generates revenue from its fleet of FSRUs and terminal assets through long-term time charter and terminal use contracts. These contracts function similarly to take-or-pay arrangements, where Excelerate is paid a fixed fee for the availability of its assets and personnel, regardless of whether the customer fully utilizes the services. For the three months ended September 30, 2024, this segment generated $150.14 million in revenues, representing approximately 78% of total revenues.

The Gas Sales segment involves procuring and selling natural gas and LNG through Excelerate's flexible LNG terminals. For the three months ended September 30, 2024, this segment generated $43.28 million in revenues, accounting for approximately 22% of total revenues.

Excelerate has completed more than 2,900 ship-to-ship transfers of LNG with over 50 LNG operators since it began operations. The company's focus on changing the way the world accesses cleaner and more reliable energy by delivering regasified natural gas has positioned it as a key player in the global LNG market.

Financials

Excelerate's financial performance has been solid, with the company reporting net income of $30.41 million and total revenue of $1.16 billion in the fiscal year 2023. The company's adjusted EBITDA, a key metric for the industry, stood at $356.07 million in the same period. Excelerate's strong balance sheet, with a debt-to-equity ratio of 0.39 as of December 31, 2023, provides it with the financial flexibility to pursue growth opportunities.

For the most recent quarter ended September 30, 2024, Excelerate reported revenue of $193.42 million and net income of $45.55 million. The company's operating cash flow for this quarter was $194.66 million, with free cash flow of $144.99 million. The increase in revenue and net income was primarily due to higher margins across several regasification projects, lower vessel operating costs, and lower business development spend.

Liquidity

One of the hallmarks of Excelerate's business model is its focus on long-term, take-or-pay contracts with its customers. These contracts, which make up a significant portion of the company's revenue, provide a stable and predictable cash flow stream. As of September 30, 2024, Excelerate's contract portfolio had a weighted average remaining term of seven years, representing approximately $4 billion in future revenue.

The company's liquidity position remains strong, with cash and cash equivalents of $608.45 million as of September 30, 2024. Excelerate also has access to $349.90 million under its EE Revolver credit line. The company's current ratio and quick ratio both stand at 3.44, indicating a robust short-term liquidity position.

Strategic Growth Initiatives

Excelerate's strategic approach to growth has been multifaceted. The company has not only focused on expanding its FSRU fleet but has also diversified its offerings to include LNG supply and trading. In 2023, Excelerate signed a 15-year deal to sell LNG to Petrobangla, the state-owned energy company of Bangladesh, beginning in 2026. This agreement is expected to generate approximately $15 million to $18 million of annual EBITDA.

Furthermore, Excelerate has been proactive in exploring new markets and opportunities. The company recently signed a strategic partnership agreement with PetroVietnam Technical Services Corporation (PTSC) to study FSRU-based LNG solutions for the Vietnamese market, which is experiencing a rapid increase in energy demand. Additionally, Excelerate is evaluating an FSRU-based integrated terminal solution to address the impending natural gas supply shortage in the South Central region of Alaska.

Operational Excellence

Excelerate's focus on operational excellence has been a key driver of its success. The company has maintained a stellar safety record, with 0 recordable safety incidents during the third quarter of 2024. This commitment to safety and reliability has helped Excelerate cement its reputation as a trusted partner in the LNG industry.

The company operates globally, with regional offices in 11 countries and an operational presence in Argentina, Bangladesh, Brazil, Finland, Germany, Pakistan, the United Arab Emirates, and the United States. Excelerate is the largest provider of regasified LNG capacity in Argentina, Bangladesh, Finland, and the UAE, and one of the largest providers in Brazil and Pakistan. It also operates the largest FSRU in Brazil.

Market Outlook

The LNG market is poised for continued growth, driven by the global demand for cleaner energy sources and the need to diversify energy supplies. Excelerate is well-positioned to capitalize on these trends, with its fleet of state-of-the-art FSRUs and its diverse portfolio of LNG supply and trading activities.

Looking ahead, Excelerate's management team has provided guidance for the full year 2024, raising and narrowing the company's expected adjusted EBITDA range to $335 million to $345 million. This guidance reflects the confidence the company has in its ability to deliver consistent and reliable performance. The increase in the guidance range was primarily driven by higher margins across several regasification projects, lower vessel operating costs, and lower-than-anticipated business development spend.

For the full year 2024, Excelerate now expects maintenance capital expenditure (CapEx) to range between $40 million and $50 million, down from the previous guidance. Committed growth capital for 2024 is still expected to range between $70 million and $80 million, including a $50 million milestone payment for the new build FSRU.

Conclusion

Despite the challenges posed by the COVID-19 pandemic and geopolitical tensions, Excelerate has demonstrated its resilience and adaptability. The company's strong market position, financial discipline, and focus on operational excellence have positioned it well for continued success in the dynamic LNG industry. With its diverse business segments, global operational presence, and strong liquidity position, Excelerate Energy is well-equipped to navigate the evolving energy landscape and capitalize on growth opportunities in the LNG market.

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