Excelerate Energy, Inc. (EE) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us. My name is Theresa Chen, and I'm the Midstream and Refining Analyst here at Barclays. It is my pleasure to introduce our next company, Excelerate Energy. Joining me from Excelerate is CEO, Steven Kobos. Welcome, Steven.

Thanks, Theresa. It's good to be here and look forward to our webcast discussion.

Absolutely. It's always good to have you at our conference, and we are at a point of the cycle and the broader macro backdrop where your infrastructure assets are more critical than ever. Maybe starting with the macro side of things and your view on the broader LNG and regasification backdrop. Looking beyond the recent geopolitical volatility in the Middle East, how do you view near- and long-term demand for LNG import infrastructure? How do you see Excelerate's regasification portfolio positioned to benefit from those trends?

Sure. Well, just right off the bat, I would say what I always say, we are bullish on the asset class. The asset class is tight. I mean, speaking of these floating regasification import terminals, a little over 50 in the world. We own or control of 12 of them. Amazing tightness in the market for those now. We look for that to be persistent into the 2030s. But there's been so much investment, so much capital deployed on liquefaction, and there are a lot of people at this conference who do a remarkably good job at that. That liquefaction, it costs maybe 10x per million tonnes for liquefaction than what it costs per million tonnes of regasification. The reason we are bullish over the intermediate and long-term is there's all the supply that's coming online, 50% increase through the end of the decade. FID is more than 200 million tonnes. This wave or the supply shock, whatever you want to call it, it's great. It's going to lead to affordability, but it doesn't do anything unless there's a home for it. We are the ones who create the homes for this coming wave through our investment in the downstream part of the LNG value chain, and there is a significant -- and will be a significant need for that. So we're excited to be part of it.

Finding home for all those incremental molecules does precipitate an incredible amount of investment need. Outlining this investment need and the path forward. You have provided some building blocks to continued growth in earnings across your asset base in the low double-digit range for dividend growth through 2028, underlined by earnings growth clearly. What are the primary drivers that give you confidence in this outlook?

The confidence just comes from sequencing. We do have a lot of stair steps, a lot of milestones that have driven this. Obviously, '26, we've had a full year of our Jamaica platform online. We've had a half year. We've put the Acadia, our new building, into Jordan. That's about $20 million of incremental uplift from that. We've just announced the last quarter the contracting for Express at 35% uplifts over its last charter into Colombia will be off of Cartagena, very excited about that. We've got the Iraq project start-up in Q2. I have promised Prime Minister Al-Zaidi, he gets a Q2 startup, and we are standing behind that and executing on that. Then we also have announced last quarter, Theresa, the acquisition of the Methane Patricia Camila and that conversion, it's a fantastic asset. We think it's going to be best-in-class FSRU, but that will come online early 2028. That kind of sequence cadence, this growth is what has given us the confidence, the visibility, did increase the dividend 13%. We've announced multiyear, as you say, commitments on our dividend growth. That's still below 1% yield. But we've got a lot of growth, and we've got leverage. That yield is still below 1%, more to do. Our leverage is still 1.9 very low, but that balance sheet gives us the ability to fund that growth and have that visibility. It's very exciting.

That's very clear. And turning back to Iraq, which remains the site of an important component of growth within your story. Your promise to the Iraqi Prime Minister, gas is going to flow second quarter 2027. Can you tell us about what underwrites this confidence in achieving that in-service date? And where do you see the most important execution milestones from here?

Sure. It's kind of an alpha and omega started with this company in 2000, 2008, opening up Kuwait's LNG. It's strange, 20 years have gone by, and we're just a few miles north of there now. We have paused a little bit in the spring for a couple of reasons. One, I wanted to see the new government in Iraq formed. I want to see that Prime Minister Al-Zaidi's government have the same commitment as their prior government before the elections in Iraq. That's why I was there in Baghdad in June and met with him in Washington in July. It's critical. It's clear that it's critical. Baghdad has not had reliable electricity since 2003. It gets very hot. Our COO was there 2 weeks ago in Baghdad. It's is 117 degrees. It's too damn hot. We're going to do something about that. I was obviously pleased not just that the project enjoys the support of the Iraqi government, but obviously, Prime Minister Al-Zaidi got a warm reception in the White House, and strong USG support, too. Those were things I wanted to see. We've been in Iraq since the project was announced. We've been -- we've removed like 150 million tonnes of material from the site, old crawler, barely crawler cranes, all kinds of things. We have been in our positioning material overland from Oman to Dubai and by barge to Iraq. That's all ongoing. We have just good visibility about bringing it online. But I'll just diverge and repeat what I said on the earnings call, like people forget what's going on intra-basin. Kuwait that receives about 6 million tonnes of LNG per annum. They're only down 10%, 15% year-on-year since '25. They've had over 45 shipments come in. Those have all been intra-basin deliveries, Kuwait, Das Island, et cetera. We expect for Iraq to enjoy that same intra-basin advantage and look forward to bringing that online.

Okay. To your point, there is good empirical evidence that intra-basin flows continue and remain resilient. And to your earlier comments about Iraq not having reliable supply power and how this project will help to address that. You have a minimum offtake commitment of 250 MMcf per day. How should we think about the potential for volumes to move above that level over time?

Look the reason -- one of the many reasons why I like Iraq, like the fundamentals of that project. I personally think that like Kuwait that's been importing LNG for 20 years, when you get past a deficit and they have a severe deficit, there's still a spark spread there like the Kuwaiti space. You bring in more affordable LNG for power, you export the more valuable fuel oil. There's a very definite reason why Kuwait still imports LNG 20 years later. Frankly, why I think it will make sense for Iraq always to do so regardless of how they do with their deficit. It is an integrated project. It's a minimum take. Ratably, it looks like the rest of our capacity deals because of that minimum take. That's 250 million scf. I believe their maximum is 500 TBD really how that maximum will look seasonally. I mean, certainly in summer, I expect them to take as much as they can. We'll see how that looks annually. But it's not linear, but you could expect that there could be, say, another 30% to 40% of headroom or uplift if they elected to take a maximum volume.

Fair enough. And turning to the Methane Patricia Camila. On that conversion, can you provide an update on the project's progress to date? And what are the major milestones here between now and the targeted early 2028 in-service date?

Was it clear how much I was geeking out about that ship. I mean -- I don't mean in a bad way, but our ops team had been stalking that candidate as we thought the best conversion candidate in the world. I mean 170,000 cubic meters TFDE, most importantly, it was a BG and then a Shell asset, and they knew what to build. It's got installed reliquefaction, which if we were adding it after the fact, that would be a $30 million kicker. A fantastic ship. I don't really love the orange and black color scheme, but you can't have everything that you want in life. But other than that, a fantastic ship. It's going to be best-in-class. She's not really going to have competition to speak of when she hits the water in 2028 because other people do not adopt our philosophy. I think we're going to have a best-in-class asset and kind of the TAM to choose from '28. We've bought and ordered the regasification module out of Scandinavia. That's a big, huge single lift at the shipyard. I think we talked early on before we settled on the PatCam that we were talking about $200 million all-in. I can tell you, tell everyone on the webcast, we're looking probably $230 million to $250 million all-in on the PatCam as a converted ship. But again, she's going to be best-in-class, and we look for her earnings profile to be unchanged even at that slightly higher ticket for it. So excited about that. We're doing all the things we need to do. It's a complex project. We're going to deliver it safely and on time, but we look for that to be competing in early '28.

Very good. And within this $230 million to $250 million range, can you help us think through the expected cadence of spend, including any major milestone payments? And is there any other color on the potential economics at this juncture?

Okay. That's all in with the vessel. Obviously, I think everybody knows the price tag, we think was fantastic on a ship, $79 million for what we're getting. I think we have a 10% down payment due here in a month or so, so call it $8 million. We've got the balance when we take delivery in January, so $71 million there. There's a sequence of modeling. I don't have the exact modeling, but we've ordered the regasification kit. I don't have the stage payments in front of me, Theresa. But our ever helpful IR lead, Craig Hicks, will help everyone with their model on that point. As I said, the final payments will be at sail-away in '28. We're pretty excited about it. There will be $70 million at the outset, $8 million later. But again, that $230 million number is inclusive of the $79 million. We think we're getting a lot of bang for the buck. Look forward to it. We've always said 5 to 7 build multiple lower if integrated, higher, if not, but we'll see. She's going to be well suited for an integrated project if we can. That reliq is a game changer that can impact your economics on your fuel that you're selling rather than burning the LNG by, call it, $10 million a year. It really makes a difference in what the profitability of that asset can be.

Understood. And under this more efficient engineering framework with the reliq on the vessel, as you work to commercialize the PatCam, what types of counterparties contract structures and/or geographies are generating the most interest at this juncture? If you could wave a magic wand, Steven, what would the ideal commercial outcome look like for this asset?