Good day and welcome to the New Fortress Energy Fourth Quarter 2022 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrick Hughes of Investor Relations. Please go ahead, sir.

Thank you, Jess, and good morning everyone. Thanks for joining today’s conference call during which we will discuss our fourth quarter and full year 2022 results as well as recent highlights and the very promising outlook for our business. As Jess said, the call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. In fact, at that same location on our website, you will find a press release and the corresponding presentation we are going to step through today. As we proceed through the discussion with Wes and the team, we will be referring to that presentation. In the presentation, you will see a series of important disclosures related to forward-looking statements and non-GAAP financial measures. We encourage participants to review these important disclosures in addition to the description of risk factors contained within our SEC filings. Now, let’s get underway with the call. This is Patrick Hughes. I look after Investor Relations here at New Fortress. Joining me today are Wes Edens, our Chairman and Chief Executive Officer; Chris Guinta, our Chief Financial Officer; and Andrew Dete and other members of our senior leadership team. Wes, over to you.

Great. Thanks. Welcome, everyone. And format, as usual, we are going to flip through the presentation that we posted. So, let’s just start at the beginning, so Page 3. 2022 was a very, very good year for the company, very volatile markets overall in the world, and we have delivered very solid results, nearly 2x the EBITDA and free cash flow 2021. Probably more importantly, the forecast that we have for the upcoming year is roughly 2x the results of 2021 – ‘22. So, very, very good financial results and not only the absolute number is good, but the quality of earnings continues to improve. More and more of our earnings comes from our downstream activities. Those are the long-term dated cash flows that actually are easy to predict and easy to model for all of you and does for us, so very, very good start to the year. Next page, notable highlights. There is a handful that really stand out. Top of the list for us is we signed a contract in the quarter for the power generation assets of PREPA. So PREPA is the utility in Puerto Rico that services the whole island. An effort was made by them several years ago to privatize the two main parts of their business being, number one, the transmission and distribution, which they did about 1.5 years ago; number two was the management of the kind of baseload power units, 3,600 megawatts of power in total, 10 units that we actually competed for and were successful for and took over. The contract is a 10-year contract, base fee of just over $20 million. We profit share basically with cost savings of the island up to a cap of $100 million. So there is a substantial amount of upside to the extent…

Thank you, Wes. Good morning, everyone. I will step through two slides on the LNG markets and then give an update on NFE commercially. We do want to spend a moment on the markets here just because we are seeing a moment in time and current price levels that we will talk about that we think are really supportive of the NFE business case. So starting on Page 8, there are really two key messages here. The first is a recap of the price environment for LNG in 2022 on the left side and then second is what we are seeing in terms of LNG prices settling with some amount of stability, just below the $20 area, significantly higher than the stable price levels we saw in the time period kind of pre the invasion of Ukraine. So on the left side is the graph of the TTF gas price, which I think as most of you know, has been the leading indicator for global LNG prices in the last year; graphed against the U.S. domestic gas price, Henry Hub and then the gas to oil parity, which Wes mentioned, which basically converts the Brent oil price to adjust for energy content relative to gas. As you can see on the graph, prices actually started to rise well before the invasion in February 2022 on increasing tightness in the market. We were watching this closely at the time as we are seeing kind of opportunities around the globe. And then that was extremely exacerbated with the conflict. The balance of the year was then an experience of a relatively illiquid TTF price kind of bouncing up and down, doing the work of bouncing a supply short market where you had to draw LNG into Europe, but then even kind of…

Great. Thanks. Good morning. Let me direct you to Slide #14, and we will walk through an update of our FLNG 1 construction and development. The next two slides include some recent pictures showing the current state of the modules and the rigs. And as you can see, things are progressing well. On Slide 14, you can see the support frame has been installed along with critical equipment from our suppliers at Chart and Baker Hughes. The support premium has put in place in advance of the module to ensure the stability of the deck of the jackup rigs. On Slide 15, you can see the liquefaction module on the left side and a close up of the second gas treatment module on the right. All of this will be lifted and installed over the next 3 weeks or so, and then we will have complete module to rig integration and begin land-based testing and commissioning. All of this is to note that we are approximately 80% complete on our construction activities and over 86% complete when you include engineering and procurement. Turning to Slide #16. And frankly, the headline here says it all. We’re less than 100 days away from our first FLNG setting sale to its home in Altamira, Mexico. With construction nearing completion, we’re focused on installation, commissioning and operational readiness. Regarding our installation, the pipelay barge is on location today and loading pipe. Late this week, it will begin the short pipelay work to connect the [indiscernible] pipeline and our FLNG location, and that’s expected to take around 3 weeks. We will then perform the hot tap and connect subsea pipe to our risers, which will ensure that all subsea activity will be completed prior to the FLNG arriving in the field. For commissioning, we’ve hired…

Yes, Jess, I think we’re ready for Q&A. If you can tee up the queue, please.

[Operator Instructions] Our first question comes from Cameron Lochridge with Bank of America. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions. And congrats on the quarter.

Thanks.

I wanted to maybe start off on the FLNG volume expectations going out through ‘25. It looks like, if I’m looking at the chart correctly, there may have been a shift in expectations around when your FLNG volumes are expected to come on. I was just wondering if you can confirm that. And if so, provide any color on what you guys are planning around turning on incremental FLNG volumes? And then on a related note, any update on the permitting progress, particularly in Mexico? Anything you can offer there would be helpful.

Great. Let me take the first one, I’ll have Cam, who runs our permitting stuff for General Counsel, give you a second. The supply-demand numbers that Andrew walked through and that I referenced at this point, assume one FLNG unit. So 70 TBtus is the volume, 1.4 million tons, probably net expected of 65 with weather days and other operational down days during the year. So that’s what’s in the numbers in front of you. We have a number of other units that are in various stages of development right now. And basically, what we have done as a matter of discipline is simply to look at incremental supply being matched with incremental demand. We have lots of options on both additional units in Mexico, the unit that we are right now forecasting to put off the coast of Louisiana and other situations around the world. So there is lots of opportunity on that side. But it is intended to be, and it is, a disciplined process of not just simply adding supply but we don’t have demand. That said, the reference I made to the modular units that we are looking to buy and the increase in our downstream capacity with terminals and Brazil and Nicaragua and elsewhere gives us a lot of opportunities, we think, to really, really incrementally add to our demand part of the equation. And if we did that, we would add to supply, and that’s, of course, where the growth comes. And so we’re not trying to forecast growth that we can’t see the other side of right now. So these numbers that are reflected in front of you we, think are very much achievable with what is on the table in front of us right now. There could be some upside to those. But certainly in outer years, we think that there is a lot of upside to those and the FLNG will be a big, big part of that. So with that, Cam?

Sure. Thanks, Wes. This is Cameron. I received that permitting process in Mexico. I think the update on the permits in Mexico is a very positive one. We have an excellent team fully engaged there. We have a great engagement with the Mexican permitting authorities and we continue to remain on schedule for all of the permitting milestones that we need to hit to match the time line that Chris mentioned earlier. So a very positive update there.

That’s great. Thanks. Thank you, both for that. I much appreciate it. If I could just quick follow-up on that. Wes, you mentioned a very measured approach to deploying new supply via FLNG. I just – I want to dig in there a little bit. Is that to imply that before you bring on additional FLNG volumes, you’ll want to have contracted offtake agreements in hand? Or in other words, we not to expect these FLNG volumes to be purely merchant volumes but rather have dedicated offtake agreements prior to them coming online?

Yes, it’s the latter. It’s really a – there is not a hard and fast rule about it, but we want to have clean line of sight to half of the volume is being deployed before we actually turn the unit on. That said, these units take a while to build. We are nearly done with number one and we have number two and three well under development. So we’ve got stuff that is on the back burner, basically moving ahead. The volumes at this point would be 2024 volume. So still volumes that would be in a market, which prospectively could be quite a tight one. And so merchant volumes could be very valuable to us at that point in time. But we don’t want to interject a lot of market volatility into the earnings. We’re on a path to high quality, repeatable, predictable earnings – we think that, that’s the path that we want to be on with this path our shareholders want us to be on. And then we can add to that incrementally of course, that’s a material amount of growth. I mean, if you just take 65 or 70 TBtus, take our margin, which today is close to $10, obviously, any incremental asset you bring online is very valuable. Even at $5, these things are actually very valuable. So there is – without any merchant volumes whatsoever, there is a lot of growth potential from one incremental unit. We think we will have a portfolio, a suite of these over time, for sure. But the right way to get from here today, we think is an emerging way.

Sure. No, much appreciated. And then if I could just squeeze one more in. Do you guys plan on disclosing what price you may have hedged that out over the past several months for some of your open cargoes?

We don’t. We don’t report that. I mean, obviously, we made a number of hedges and the market was higher. That’s obviously a good thing. In hindsight, we should have hedged everything, but there is challenges in terms of doing that. So we did the best that we could. And we think it’s actually quite constructive, but no, we don’t disclose that. You’ll see that show up in the results, though, so...

We will move to our next question from Marc Solecitto with Barclays. Your line is open. Please go ahead.

Hi. Good morning. Maybe just to start on your ‘23 guidance, I just wanted to clarify what the embedded assumption is as far as spot prices. And then if we compare the disclosures on Slides 11 and 12, I think that implies roughly 36 TBtus of cargo sales. Just wanted to confirm if you’ve already locked all those volumes in or hedged those?

Yes, we do have – I mean, this is Chris. There is about 10 cargoes or so that have exposure and that’s really FLNG. So everything that’s expected from our existing supply contracts, that’s already been sold or has been allocated to downstream customer volumes that are expected to happen over the course of the remainder of the year. So fair point, Mark, that, that is the kind of the open exposure...

But some of those cargoes are hedged up.

That’s right.

And as we said, that’s not – we don’t disclose exactly what the hedging positions are. The exposure we’ve got at this point, our view with TTF going down to kind of mid to high teens, it’s pretty modest at this point. We think that on balance, the amount of market exposure we’ve got net of the hedges and then the absolute price of gas today is actually pretty modest. I mean, if you look at the slide that Andrew went through, you can see only this year, but out years. We are looking at 15% or 20% of our total volumes being open, and that assumes no incremental downstream activity, which, of course, that’s not our goal. It’s still at the end of February. We think there is lots of downstream in front of us, so...

Got it. That’s helpful. And maybe just – apologies if I missed it, but as far as the 30 TBtu from FLNG, are you using the current strip in your guide?

We are. Yes.

Got it. Thanks for that. And then maybe just to follow-up on the previous question. Can you talk about the expected CapEx cadence at this point? And then it relates to your dividend, just how you are thinking about the 40% targeted payout over the next couple of years with pullback in spot prices. I guess it’s partly dependent on the CapEx side as well.

Hey Mark, yes, so two kind of categories of CapEx, one being FLNG, one big terminals. So, there is very little remaining terminal CapEx. So, between the two terminals in Brazil and then the maintenance stuff at the terminal, that’s pretty minimal, I would say less than $50 million. On CapEx for FLNG 1, we will pay the remaining balance. And I think we have it in the K, but just to step through it, it’s around $250 million left to spend. And we will spend that. Majority of that is going to be in Q2. So, I think in Q1, you will have – sorry, and I am thinking from today forward. So, from 12/31 that you will see in the K, it’s probably closer to $400 million that we will spend. And that will all go out, I would say, $100 million in Q1, $200 million in Q2 and $100 million in Q3. That’s probably the way to think about it. And then for FLNG 2, or others, as Wes has said, we would be probably very thoughtful about how we continue to move that forward. We have taken careful precision through our legal team in executing excellent contracts that allow us maximum flexibility with our customers. So, we are able to kind of pace out the construction CapEx to match the business needs. Procurement and engineering has largely all been completed.

Got it. Appreciate the time.

Our next question comes from Sam Burwell with Jefferies. Your line is open. Please go ahead.

Hey guys. I wanted to maybe unpack the Fast LNG CapEx just a little bit. Last week, Chart reported and they disclosed that you guys had made orders for the cold boxes on FLNGs 4 and 5. So, curious how much of the equipment have you guys procured so far for all the units. And then maybe of the $750 million of guided CapEx per unit, what percentage of that is sort of equipment versus labor and other?

Yes. So, Wes has been very deliberate, and we announced this on our earnings – the Investor Day, excuse me, that we purchased the long lead equipment so that we have maximum flexibility that when he wants to move forward on the pace of the construction side, we have the ability to do so. So, partners at Baker Hughes, GE – excuse me, on Chart and others are on the ready with equipment so that when we want to continue to move forward on the construction, we can do so. As far as breaking it up, rule of thumb, 30% is probably procurement and engineering and 70% is construction and make-ready. Obviously, the make-ready you don’t do until you have a location and an expected online date.

Okay. Got it. Very helpful. And just I guess sticking with CapEx, like 2023, that still is expected to be $2 billion. I mean how much of that should be earmarked for the Barcarena power plant? I think you said that’s under construction. Is that more of a 2024 spend? How should we think about sort of non-FLNG CapEx this year and next?

Yes. So, non-FLNG CapEx is pretty minimal. So, there are terminals, as I mentioned and any maintenance CapEx is less than $50 million. You have got a little bit of FSRU conversion, $20-ish million or so. The Barcarena power plant, if Andrew can talk to specifics about it, but we also have the Barcarena alone that we have and it’s disclosed in the financial statements. So, we expect that to fully fund the development and construction of that power plant over the course of the next 24 months or so, maybe 18 months.

Yes. The power plant is being built under a fixed price lump sum turnkey EPC agreement with Mitsubishi between now and July 2025. So, actually on a kind of a per quarter basis, it’s a pretty modest amount of CapEx, obviously, mostly done through the loan we have.

Yes. So then, I think $2 billion is probably a little high from kind of what we were expecting when we announced last quarter. That included probably moving forward at a quicker pace with additional FLNG units that we will now be very thoughtful on how we move forward there to match the online of supply with our demand.

We will take our next question from Sean Morgan with Evercore. Your line is open. Please go ahead.

Hey guys. I think Slide 11 is pretty helpful. We get a lot of questions sort of regarding open exposure. And I am wondering a little bit, the FLNG, it looks like the fully contracted, some of that would have to be contacted by the math for the 120 loan of kind of third-party gas. So, have you – firstly, is there any difficulty of procuring gas kind of upstream? You have to sign contracts on midstream pipelines and then contracts with E&Ps to basically procure that 63% that you have on Slide 11? And then also on the other side, you don’t have any firm offtake contracts yet, right? Just now, you are just sort of maybe saying that instead of being 100% merchant, you would probably look to sign some of that either shortly before you start producing gas or kind of in the near-term after it starts operating.

Yes. The first question, the gas that we are going to take on FLNG 1 is Texas gas, right. It comes from Aguadulce, comes in a pipeline, a TC pipeline, which 100% of the capacity is contracted with CFE. And they, in turn, are subcontracting to us. So, the sticky bit there would be the capacity on that pipeline, but that’s the agreement that we have with CFE. The gas out of Texas is obviously very plentiful. There is an oversupply. Prices have come down, obviously. So, there is massive flexibility in terms of buying Henry Hub-indexed gas at that location for us. So, that’s not a challenge whatsoever. Andrew?

Hey Sean. Yes, I think the way to think about it is, yes, we are not looking to necessarily sign like fixed offtake at the unit like you might think about some other business models, right. We have a bunch of fixed offtake through our terminals. I think it’s 66 contracts now with an average life of 15 years. And on Page 12, showing kind of some of that, right. So, if you think about the Barcarena or the Nicaragua contracts, like that’s how we think about our charter demand through FLNG.

To Andrew’s point, the numbers that are shown on Page 11 are aggregates of the entire portfolio. So, it’s not that we are taking an individual supply contract, be it FLNG or Cheniere or Shell or anybody else and allocating to a specific location typically. It’s really just done in the context of the overall balance of the supply that we have and – balance of demand that we have and the net numbers at the bottom, so.

Okay. That’s really helpful. So, the CFE effectively has the upstream relationships already set up. So, there is no need to do anything there because you are just kind of relying on their gas. And then I guess another question we get a lot it also sort of relates to CFE and of course, there are two pipelines Valley Crossing in Texas. What is the on the water gas price relative to say, Henry Hub? Is it – can we think of like an extra dollar per MMBtu of transit costs and CFE sort of margin built in there? How do you sort of quantify that?

No, that’s a very good guess. That’s plus or minus exactly what we think it is.

Okay. Alright. Thanks Wes and that’s it for me. Appreciate the time.

You bet.

Our next question comes from Greg Lewis with BTIG. Your line is open. Please go ahead.

Hey. Thank you for taking my question and good morning everybody. I was hoping to talk a little bit about the updated EBITDA guidance and kind of maybe some of the puts and some of the takes. You mentioned the volumes, kind of curious if you have adjusted your spread assumptions around the EBITDA guidance. And then as we think about that $2 billion number, just looking at consensus, it is still a little bit above where the Street is. So, really just kind of trying to understand how we should be thinking about it and maybe where some of that delta might be?

Yes. Greg, so to answer the question, I mean we had $2.5 billion we talked about at the last earnings call, $2 billion now of that. The difference is really just FLNG timing and the downstream execution, as Wes has talked about on this call. We feel really good about it, too. It is above where a lot of the estimates are today. There is very little volatility in that $2 billion. We feel really comfortable about that. Certainly, the $2.5 billion included a little bit more volumes under the FLNG scenario and it had a little bit of a higher strip. But as Andrew has said, we have termed out more and more of that gas since we announced the call in November of 2022. So, very little at risk, and we feel great about the $2 billion for 2023 calendar year.

Okay. That’s great to hear. And then my other question was when we talk about matching – your reference matching supplies and demand around some of the volumes. And clearly, the core of the business is selling – or not selling, but delivering gas to your downstream terminals. Has there been any change in how you are thinking about the medium-term outlook and the ability to deliver LNG into more of the international market, we will call it?

Maybe I can take that. I mean I think the premise of our business basically is that there is a shortage of gas and power around the world. That was true in absolute terms, long before there was Ukraine invasion. And the prices reflect, I think the dislocation exists is there is just more demand for power. There is still 1 billion-plus people without power in the world. There is – a lot of people on affordable power. And so there is no shortage of demand for what our products are. And what we have done in a fairly methodical way over the last 8-plus years is basically build out terminals and power plants in those places to access them. Obviously, today, we have in Jamaica and Puerto Rico and Mexico and Nicaragua and Brazil. There are a handful of other very significant markets we have spent a lot of time on, and we are confident that those will turn into terminals in due course as well. But there is – the medium-term or long-term basis, there is just no lack of supply. I mean I think that when you look at the business in the aggregate, I think number one, the question is, is the macro view of the world the right one, we feel very strong. The answer is yes, a resounding yes. There is a shortage of gas and power. I use the same example all the time. People in Jamaica used 10% as much electricity per capita as we do. People in Kenya use 10% as much electricity per capita as Jamaicans do. So, there is a vast need for affordable power. That actually is something we feel more strongly about every day. Number two, I think the question about the businesses are really good at…

We will take our next question from Martin Malloy with Johnson Rice. Your line is open. Please go ahead.

Good morning. I have got kind of a macro question here. With the FLNG assets coming online, would it ever make sense for NFE to potentially invest in upstream gas assets or conversely maybe an upstream gas producer taking equity interest in the FLNG assets to take advantage of the increase in optionality for those molecules?

It’s a great question. It’s something we kick around all the time. I think that it would be the ultimate in the integration from kind of cradle to grave of gas out of the ground to power and onto a system. The U.S. gas, in my opinion, is especially adjusted for the stability of the jurisdiction and the rule of law, is the cheapest gas on earth. And so simply connecting U.S. domestic gas to international markets is a fantastic idea. And that’s essentially what we are trying to do with this first one where we are basically buying gas out of Texas, maybe the pipeline gas and then taking it into there. I think the gas assets in the U.S. are very undervalued. And so I am not an expert at this. We have spent a lot of time looking at it. But I think that the quality and duration and durability of some of those products is actually very, very, very inexpensive relative to the rest of the world. And so I am a big believer in the value of those assets. And whether it’s directly or it’s in partnership or some combination of all that, I think that’s something we will explore over time. And obviously, it’s first step first is get the FLNG. So, we are connected to the system directly. And then I think those kinds of opportunities are things that we will think about.

Okay. And my second question, I just wanted to ask about the hydrogen zero project. And maybe are there any milestones we should be looking out for there?

Yes. I mean the – I left it out of the presentation because we are actually so far on the tracks of what our thoughts are with regards to that as a business. As we said before, my goal is to get a project fully committed and out of the ground and then in all likelihood, spin that off as a separate company because it deserves to have a separate identity. And I think our goal for that is to do so in the first half of this year if everything goes to plan. We have ordered the long lead items from Plug. We have personnel that are working on it every day. We have a site which is now cleared. We have the bulk of the engineering down. So, there is a whole bunch of individual milestones. But rather than kind of clutter up what I think is an otherwise very clean beginning of the year picture for the company, I thought we would just leave that on to the side. But it’s a good question to ask. And I think that I think – look, I think with the IRA and the incentives the government has provided, makes the U.S. the most attractive place on earth to build hydrogen facilities. The location of those facilities is very, very important because when you create hydrogen, it quickly turns from a chemistry problem into a transportation problem. So, you want to be located next to where people are going to use it. Our site down in Beaumont we think is ideal because we are close to customers or close to hydrogen pipelines, that’s great. But I think our goal is to actually have a pretty specific update on this in the not-too-distant future. So – and I think that the prospects for that business, given kind of the macro environment for here in the U.S. and the $3 a kilogram production credit are actually quite good. So, thanks for the question.

And that will conclude today’s question-and-answer portion of the call. I would now like to turn the conference back to Mr. Edens for any additional or closing remarks.

Jess, I will take it. It’s Patrick Hughes here. Thanks everybody for joining today. We remain available to you as always, to answer additional questions as they may arise. And we wish you a good day. Thank you.

Ladies and gentlemen, that does conclude today’s call. We thank you for your participation. You may disconnect at this time and have a great day.