New Fortress Energy Inc. (NASDAQ:NFE) Q4 2022 Earnings Call Transcript

Wes Edens: 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.

Cameron Lochridge: 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?

Wes Edens: 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…

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

Marc Solecitto: 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?

Chris Guinta: 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…

Wes Edens: But some of those cargoes are hedged up.

Chris Guinta: That’s right.

Wes Edens: 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…