Excelerate Energy, Inc. Q2 FY2024 Earnings Call

Good morning, everyone, and thank you for being with us for the Excelerate Energy Second Quarter 2024 Earnings Conference Call. My name is Charlie, and I will be the coordinator for today's call. I will now turn it over to Craig Hicks, VP of Investor Relations, to proceed.

Good morning, everyone. Welcome to Excelerate Energy's Second Quarter 2024 Earnings Call. Participating on the call today are Steven Kobos, Chief Executive Officer; and Dana Armstrong, Chief Financial Officer. Also joining the call today are Oliver Simpson, Chief Commercial Officer; and David Liner, Chief Operating Officer. Our second quarter 2024 earnings results press release and presentation were released yesterday afternoon and can be found on our website at ir.excelerateenergy.com. I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Our actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update or revise them. Today's remarks will also refer to certain non-GAAP financial measures. We provide a reconciliation to the most directly comparable GAAP financial measures at the back of the presentation. With that, it is my pleasure to pass the call over to Steven Kobos.

Thank you, Craig, and to all of you on the call, good morning. Today, I will share with you a story of strength, strong financial results, strong operational performance, and strong execution of our strategy. On the financial side, we delivered $89 million of adjusted EBITDA in the second quarter. Our robust FSRU and terminals contract portfolio and our ability to meet our customer commitments create the foundation for a compelling financial performance. In operations, I want to take a moment and salute Excelerate's global team. They focus every day on providing critical services to our customers and operating at the highest levels of safety. I'm extremely proud of this team. And when it comes to execution, we are doing what we said we would do. The Excelerate team continues to make great progress towards our plan to grow our company and maximize value for our shareholders. Now, I'll provide a recap of our business strategy and an overview of the progress we are making. Then I'll turn the call over to Dana for more on our financial results. Let me recap our strategy. We are operating and optimizing our core regasification business. We are executing our comprehensive growth roadmap, and we are focused on three key areas for value creation. First, acquiring ownership interests in LNG regasification terminals; second, establishing a diversified LNG portfolio; third, investing in downstream natural gas infrastructure. We are advancing our plans to expand our fleet. Our newbuild FSRU called 3407 remains on schedule for delivery in June 2026. Engineering and fabrication work on 347 are underway and the next major milestone in construction, steel cutting, is set for October. We are confident that we will place whole 3407 with one of the projects in our pipeline. Several of these projects would be an ideal fit for 3407. As an operator of one of the largest FSRU fleets in the world, we remain bullish on the asset class. Part of our strategy for investing in our fleet is to meet our customers' needs for efficiency, reliability, and sustainability. We've got a great example of this with our plan to integrate modular reliquefaction kits onboard our vessels. These will improve the overall efficiency of our operations. I'm pleased to report we have placed an order for a reliquefaction kit and are prioritizing it for integration into our fleet. The purpose of the reliquefaction kit is to recover excess boil-off gas by reliquefying and storing LNG in the cargo tanks. It also helps prevent the loss of LNG cargo volume. This means that the energy value of our cargo can be productively used by our customer and not wasted. This technology will enhance the value of the services we provide our customers. It will create opportunities for increased revenue generation, and it's going to support the development of the regas projects in our pipeline. You'll remember that last quarter, we shared with you a prioritized list of growth opportunities. These projects span the downstream LNG value chain and range from terminal ownership to fully integrated solutions. Today, we want to share two tangible proof points of our progress. The first one is a strategic investment we are making to enter the Vietnamese energy market. In June, Excelerate signed a term sheet with ITECO Joint Stock Company, a Vietnamese-based private development company, with whom we're going to develop a greenfield LNG import terminal in Haiphong, Vietnam. The Northern Vietnam LNG terminal for NVLT is anticipated to be the first LNG terminal in the region. Vietnam is expected to have one of the fastest-growing economies in Southeast Asia. And Hanoi, the capital city, is located in the North, and this offers an enticing entry point into the country for Excelerate due to its rapid industrial growth. As domestic production declines, these industrial complexes in the north provide a foundational base of customers with a ready need for LNG, which will play a pivotal role in their energy mix. The planned LNG import terminal will have a total import capacity of 1.2 million tonnes per annum constructed in 2 phases. Phase 1 of NVLT will have a capacity of 0.7 million tonnes per annum, and we expect operations to commence in 2027. The second quick point of our value creation strategy is an integrated solution that is going to allow for the delivery of natural gas supply into South Central Alaska. For over 50 years, the South Central region of Alaska has relied on Cook Inlet natural gas for most local heating systems and electricity generation. But with domestic gas reserves in the Cook Inlet area declining, the region will need to import LNG to meet its anticipated local natural gas needs from 2028 onwards. Excelerate is in advanced discussions with local utilities in South Central Alaska for the development of an integrated LNG terminal in the lower Cook Inlet region. Excelerate, with MDFSRE-based terminal, will source LNG supply and sell gas to local utilities and other offtakers. The start of commercial operations is targeted for 2028. We talked often with many of you on this call about our efforts in LNG markets all over the world. I can assure you that as an American company, it feels great to bring the critical services we provide to customers here in the United States. Let me sum this up. Once again, when it comes to our strategy, we're doing what we said we would do. We look forward to sharing even more information about the NVLT project, the Cook Inlet project, and other projects in our pipeline with you in the future. Before I turn the call over to Dana, I want to address the current situation in Bangladesh. As many of you have seen, on Monday the Prime Minister resigned, and a caretaker government is currently being formed. During this time, the safety of our team members is and remains our top priority. All of our people are safe. The continuity of our operations is of utmost importance for the country, and as a long-term partner of Bangladesh, we continue to operate as usual. As an American company that provides essential energy services to the people of Bangladesh, we are confident we will continue to play a vital role in helping to meet the energy needs of the country. With that, I'll now hand the call over to Dana for a deep dive into our numbers for the quarter.

Thank you, Steven, and good morning, everyone. As Steven said, we are pleased with our second quarter financial results. Adjusted EBITDA for the second quarter was $89 million, up $14 million or up about 18% versus last quarter. The sequential increase in adjusted EBITDA was driven by the impact of the FSRU Summit dry dock, which occurred and was expensed in the first quarter of 2024. As a reminder, because the FSRU Summit is under a build, own, operate transfer or BOOT structure, the majority of the dry dock costs were expensed last quarter through the income statement instead of being recorded as maintenance CapEx to the balance sheet. We continue to invest in our fleet to ensure that we consistently operate at the highest levels of reliability, which is essential to maintaining a best-in-class fleet and vessels. Our maintenance CapEx spend for the quarter was $21 million, and year-to-date through the second quarter, we spent roughly $32 million on maintenance CapEx. As of the end of the second quarter, our total debt, including finance leases, was $1,734 million. We had $609 million of cash and cash equivalents on hand and roughly all of the $350 million of capacity under our revolver was available for borrowings as of quarter-end. With the free cash flow generated by our core regasification business, our stellar balance sheet, and the liquidity provided by our revolving credit facility, we remain confident that we have more than sufficient capacity to fund our near-term growth and strategic objectives. As an update on our share repurchase program, during the second quarter, Excelerate purchased 674,000 shares or $11 million of our Class A common stock at a weighted average price of $16.27 per share. Through the second quarter, we've utilized 40% of the $50 million share repurchase program that was authorized in early 2024. We will continue to take an opportunistic approach to the share repurchase program throughout the remainder of the previously authorized 2-year tenure, which runs through February 2026. Now let's turn to an update on our financial guidance for 2024. We are raising our previously communicated adjusted EBITDA guidance for 2024. For the full year, we are now expecting adjusted EBITDA to range between $320 million and $340 million. For the full year, we continue to expect maintenance CapEx to range between $50 million and $60 million and committed growth capital to range between $70 million and $80 million. The majority of our committed growth capital range is related to capital spend on our newbuild FSRU, 3407, including a 15% milestone payment due to the shipyard in the fourth quarter of this year. As a reminder, committed growth capital is defined as capital allocated and committed to specific investments for previously approved capital projects. For the projects that we talked about today, plus the average in our pipeline, once we've signed definitive agreements, we'll layer in the incremental estimated capital spend into our committed growth capital estimates at that time. With that, we'll open up the call for Q&A.

First question comes from Chris Robertson of Deutsche Bank. Chris, your line is now open.

Thank you, operator, and good morning, Steven and Dana. Thanks for taking the time to answer my questions today. This is related to the Alaska proposal. I know one of the concerns that the utilities up there have had is some of the extreme tidal ranges that happened in the Cook Inlet and the operating environment there as it relates to an FSRU. In these discussions, have you guys discussed that particular problem and kind of proposed a technical solution that would sway their fear around that issue?

I'll lead off there, Chris, and then hand it over. Also joining Dana and me in the room today are Oliver Simpson, our Chief Commercial Officer; and David Liner, our Chief Operating Officer. So I'll take a crack and then hand it off to David. But we're well aware of conditions in Cook Inlet. And let's face it, we have embraced tough conditions all over the world. Most of our fleet was designed for the North Atlantic. We deal with cyclones in the Bay of Bengal. We have been in all kinds of extreme weather. We're well aware of the tidal conditions of Cook Inlet. And we believe that there are suitable technical solutions for that to provide the reliability that is essential to any of these projects. Energy needs to be reliable. But David's team ultimately will be involved with that, so Dave, do you want to add some insight?

Yeah. It's certainly an issue that's on our radar screen, and it's going to be a challenge for the project, no doubt. There are existing facilities in the area that are similar to what's proposed for this project. So we feel fairly confident we're going to be able to develop a technical solution. As Steven says, we do this all over the world in similar challenging environments. This one is just a little bit different. But it's a technical problem. The engineering capabilities would provide a really strong engineering team that can develop a solution that's appropriate for the conditions that are there at the site. So yeah, we're fully aware of it and confident we can work through it.

Okay. Yeah, I appreciate the confidence there. I guess turning to other parts of that project, would this be part of a, I guess, conversion of the existing Kenai LNG export facility? Or is this imagined as a new location?

I'll hand this to Oliver Simpson for a little more color, but the answer to that one is pretty crystal clear, I think.

Thanks, Steven. Thanks, Chris. I think we're focused on delivering a solution to the customers in the region. I mean, I think you just heard from David, we have some ideas on the technical solutions. We'll continue to work with our partners there, and there's a number of options for the technical solution. I mean, I think for us, ultimately, it's a product that has fundamentals. We see the demand for gas in the Cook Inlet region, and that's what we're focused on. We'll work on the best technical solution over the course of the budget.

Okay, great. I guess last question related to this: the utilities group up there put out a study with a cost estimate around $700 million for an FSRU solution. Is that a fair starting point for some type of CapEx assumption? Or do you guys have any guidance as it relates to what you think the project might cost?

I don't think we're in a position to comment on the cost, but typically, we come in well below that. As you know, we've been looking at our other facilities. Thanks, Chris.

Thank you very much. Our next question comes from Theresa Chen of Barclays. Theresa, your line is now open.

Good morning. Thank you for taking my question. On the Northern Vietnam onshore terminal project, can you just give us a little bit more color on the genesis of this project, how long you've been in discussion related to this, what got it across the finishing line, and potential economics to think about and other potential projects like this in emerging markets that you're assessing right now?

I'm going to pass this over to Oliver. It's great to hear from you, by the way. Overall, we want to give you insight into various types of projects utilizing different assets. We have mentioned our preference for FSRUs, but we're open to other solutions if they are more suitable for specific projects. Regarding Vietnam, we have been exploring opportunities there for a long time. Historically, there have been more than 50 proposed projects focused on gas to power in the southern region. We have taken a patient approach and have somewhat unconventional views on which projects will actually succeed first based on demand dynamics. Oliver, you're more familiar with Vietnam; why don't you elaborate?

Yeah. Thanks. And thanks, Theresa. Yeah, I think, look, as Steven said, we've been looking at Vietnam for a while; there have been a number of projects. And stepping back, the prospect for LNG in Vietnam, we're extremely bullish on. I think when we saw this project, the fundamentals, as Steven said in his remarks, the fundamentals and markets would be the first LNG terminal up there. This is based on industrial demand and demand that's there today. It's not the LNG to power projects, which we believe in, but we think have a slightly longer timeline potentially. So we look at the number of projects, but we felt that this one had the right attributes for us. And importantly, to your broad questions, think of projects like this as integrated projects where Excelerate brings its international expertise. We can bring our LNG supply portfolio and deliver gas and LNG solutions to these customers. That's what we're doing here in Vietnam. That's what we said we're going to do, but that's also what we're looking to do in other projects around the world. So I think this is a good poster child for the types of projects that we're looking at.

Thank you both for that nuanced answer. Maybe turning to capital allocation, just with the visible growth ahead of you, while still executing the share repurchase plan, what is your updated view at this point on balancing growth endeavors, returning cash to shareholders while still optimizing liquidity of the stock and maintaining a healthy balance sheet?

Hey, sorry. This is Dana. So I'll just reiterate what we said before. Obviously, growth is our priority. We have several projects. We've talked about these projects. In the last quarter call, we just highlighted a couple of other projects in more specifics. We'll continue to maintain our best-in-class fleet, so CapEx on growth projects and CapEx for our existing fleet as well as the new additions. Obviously, we have our 3407, coming out in 2026. That's our priority. And we will continue to maintain our dividend. We will look at potentially increasing that dividend when the time is right. Right now, our focus is on growth. As far as the share repurchase, we're very pleased with where we are there. We've executed $20 million of the $50 million program that runs until February 2026. And we'll continue to use it opportunistically when it makes sense for us based on share price and other factors.

Thank you very much.

Thank you.

Thank you. Our next question comes from Wade Suki of Capital One. Wade, your line is now open.

Hi. Good morning. Thank you for taking my questions. Could you provide us with an understanding of the kind of vessel requirements that might be needed for Alaska or some of the other upcoming projects, to whatever extent you feel comfortable discussing?

Yes, thanks, Wade. You know, from our chart we shared last time, we showed some FSRU projects. Some are new building type projects. Some are going to have lower send-out; will likely be a conversion, and it's kind of TBD on the specific here. But we do recognize that not all of these projects require enormous send-outs. So we'll tailor the vessel for those circumstances. But we do intend to grow our fleet. That is part of this pipeline, and we will grow it in the right way. And I guess I can tell you, Wade, we continue to evaluate, excuse me, different ways to grow that fleet. I mean, it's a bit of an obsession right now.

Understand. Thank you. Just industry-wide, do you know how many FSRUs are under construction today? And I guess if you ordered one today, when do you think delivery might be?

Now, Wade, there are two new buildings, I guess, under construction. Actually, ours is in fabrication and has steel cutting in October. In October, if you ask me, there'll be one that's had steel cutting. So maybe that's how I answer that. In terms of when you can get one, Wade, I know that, but I don't want to tell the world. So it's a while, it's a while, but we're happy with how we can grow this fleet.

Awesome. Thank you. Appreciate that. One last one, if I could. I'd love to just hear just from a commercial sense, what the tenor is like, maybe more recently with the customers and maybe how that's changed here in the last few months, given all that's going on in the world.

So the tenor, wait, do you mean, I mean, you're not talking to our average remaining life of contracts, right? But what's your question go to?

Really thinking about new projects. And I know following Ukraine and Russia and the gas price spike, we had a little bit of a pause. I'm just kind of curious if the sentiment or psychology to what extent that might have shifted here in the last few months, given gas prices, things like that, global energy prices, geopolitics, all those other factors depending on the customer.

Yes, I'm going to hand this to Oliver. I'm going to make a couple of just big statements that are gospel for us, and that is the world understands that LNG is a critical fuel. The Global South sees LNG as affordable, as a critical fuel. The whole world sees it as affordable, as a suitable bridging fuel. As your first question to us made clear, it remains tight within the asset class to regasify LNG beyond the terminals that are out there right now. FSRUs are a tight asset class. So I'll leave it at that. But, Oliver, you're closer to the customer.

Yes, no, no, I think that's exactly right. And I think what we've seen is the customers are, on the back of the war in Ukraine, now coming back. There's LNG, and there's a strong pipeline of LNG coming online in the coming years. So you're seeing LNG as an affordable fuel again. And we're seeing that the customers are coming to us, and they're wanting that integrated solution with the LNG and what we can provide. So I think we feel strongly we have a great product to offer our customers. We're seeing demand for it. And I think we're picking markets that have the fundamentals. So these are markets that need the LNG, need for gas for a long time. So we're selective on where we're going, but we see that long-term need.

Fantastic. Thank you so much. Appreciate you. Have a great day.

Thank you.

Thank you so much. Our next question comes from Mike Scialla of Stephens. Mike, your line is now open.

Thanks. Good morning, everybody. Just trying to characterize the two projects that you announced here. You said last quarter that 10 of the 12 were kind of in that $50 million to $400 million range, somewhere two, I guess, Piran, one of them was longer term and above that range. Is it fair to characterize these two as kind of towards the higher end of that range and longer term? Just trying to get a sense of how they fit into the pipeline.

Yes, I believe they are certainly within that range. Each project has its unique fundamentals. However, we are very optimistic about the demand for LNG in Vietnam. The project there is integrated, supplying gas to downstream customers, and we anticipate being involved for many years. Alaska has a similar situation, with different fundamentals, but there is also a demand for LNG in that area. We are taking an integrated approach to these projects, which gives us a positive outlook.

Okay, thanks. And I guess looking at the remaining projects in the pipeline, what would cause you to, I guess, unveil those? Is it getting a term sheet like you have in Vietnam or something else that would be required before you could talk about them?

Yeah, Mike, this is Steven. We want to be as transparent with you guys as possible, short of inviting you guys to travel around the world and sit at conference room tables with us or walk around the site. So we want to be as transparent as we can. But we think it's important, as we said last time, we'll come to you guys when we've got tangible proof points. We want as much transparency as we can. We want to show you as much consistency as possible. These just happen to be unfolding. It's all a horserace, and these horses happen to be ahead at this point in time. And we wanted to also convey that we thought they were good in showing the whole range of opportunities that we're looking at geographically. We had hinted last time that we were looking at the Americas. That might have been too thin a breadcrumb, so we wanted to make clear that we are looking all over the globe, and that includes the USA when it's appropriate. So we just thought they were interesting proof points, and we were advancing them coming into the quarter in a way that felt like it was comfortable to talk about it. And we'll continue to do that.

Sounds good. Thank you.

Thank you very much. Our next question comes from Bobby Brooks of Northland Capital Markets. Bobby, your line is now open.

Hey, good morning, guys. Thank you for taking my question. I just want to start off with the reliquefaction technology that you guys are integrating into your current FSRUs. I was really – it's a really interesting way to uplift revenue generation on your current footprint. So what I was curious to hear about is, first, how quickly can that technology be added to your current FSRU footprint? And then secondly, once that is added, how quickly can you see a financial benefit? Is that something where you need to go back to the customer and renegotiate the contract? Or is that something that is already baked into those new contracts? And maybe if you can just give a sense of how incremental the financial benefit would be, that would be appreciated.

Hey, Bobby, good to hear from you. Listen, I'll take the last point. In general, yes, we're going to have some communication with the customer. It's a great benefit, but we're not in the business of giving things away for free. So it's a nice piece of kit. We think the customers, it will pay for itself for a customer, many customers easy within a year. So we think they'll value it, and we think they're going to fly off the shelf. David can talk about timing on it. We're excited, man. This is going to lower emissions in our fleet. Of course, we're excited about it.

Yes. Just to build on that, in terms of timeline, the lead time for this equipment is about 18 months. And we want to buy this equipment or we have bought this equipment now so that it will be ready and available to deploy as soon as our customers decide they want to employ it. And as Steven said, we know that there's strong demand for it. By buying it now, that enables us to save our customers from having to make a decision two years in advance that they want this technology. So we're cutting the implementation time down from a couple of years down to a series of months to be able to deploy this from the time a customer says, yes, we're ready to go. So yes, roughly 18 months from now, as early as 2026, we could be able to deploy the technology to an existing vessel or something coming into the fleet as well.

Got it. Have you already purchased these items? Did you buy enough for all 10 lead FSRUs, since you don't plan to do that in 2026, or did you only buy them for half, or can you clarify that?

We have completed our engineering and design work to ensure that the technology is compatible with different types of vessels in our fleet. We have already placed our initial orders and expect to continue this as we gain more customer interest. Currently, we are not aware of any other FSRU equipped with one of these kits globally. Our team is committed to maintaining a best-in-class fleet, and over time, we plan to implement this technology across more vessels. However, there are a few vessels in our fleet that may not benefit from this technology as much as others, primarily due to how our customers use their vessels. In the long term, I anticipate that we could apply this technology to about six or seven vessels in our fleet.

The opportunity for reliquefaction is significant moving forward, especially with new growth opportunities and projects. You have approximately $960 million available, and your quarterly free cash flow ranges from $50 million to $60 million. Additionally, your expertise in importing LNG positions you well to take advantage of the best opportunities ahead. I would like to understand what concerns you may have going forward. Do you perceive the $960 million as a limit in terms of how much you're willing to invest in growth or is it influenced by other factors? It seems like the potential for your company is immense.

First of all, Bobby, I'd like for you to write a copy for Craig. I think that's true. I do feel, in all seriousness, that there is an enormous total addressable market out there. It is enormous. We don't need all of it, and we don't want all of it. We are somewhat picky. We believe there are many markets with the strong fundamentals we're seeking. As you have seen from our evidence today, we are carefully exploring the globe for the right market and the right opportunity to advance our business model, not just pursuing projects that don't make sense for us. I believe that over time, we are incredibly well-positioned with the resources we have to leverage. The total addressable market is large enough for us to capitalize on it while still being selective.

Got it. Just one last point for clarification. Based on your discussion about the PMLP and the LNG import terminal in North Vietnam, will you be selling gas to the industrial factories in that market, or will it be sold to utilities? I would like to understand who your customers for the gas will be.

Yes, I’ll take that one, Bobby. We don’t want to go into too much detail about the commercials, but essentially the concept is an integrated terminal where we will supply LNG to that terminal, and the terminal company we are partnering with will sell gas and LNG to local customers and industries. Over time, we will determine exactly how far downstream we are, but we do see a demand for the product from the terminal. I'll leave it at that.

Got it. Yes. There is a strong demand, not from utilities, but likely more from industrial players. Thank you very much, and congratulations on another successful quarter.

Thanks.

Our next question comes from Praneeth Satish from Wells Fargo. Your line is now open.

Great. Thanks. Good morning. On Piran, do the political changes in the region and potential prime ministerial candidates? Does that have any bearing on support for this project? And then just broadly, where does Piran stack now versus some of the other opportunities you're looking at here with Vietnam, Alaska and all those other projects in the backlog?

Thanks, Praneeth. I'll address that. The situation with Piran and the market has not changed regarding the necessity for natural gas in Bangladesh. The supply-demand dynamics, decline trends, and historical onshore production fundamentals remain intact. The need for gas continues to exist. However, we are still adjusting to the recent government change, and the caretaker government's team is not yet fully established. Hence, any dealings with a state energy company like Petrobangla will require direction from the government to move forward. We will maintain some of the ongoing efforts, including our Metocean projects, as we assess current needs. Progress will vary over time, which is why we have a well-developed project pipeline. It’s important to note that this is just one project out of twelve in our pipeline. We are committed to providing more insights and details to enhance your understanding of our daily operations. There may be some delays due to the absence of a fully formed government, but the underlying fundamentals persist. I see significant potential for an American energy firm to deliver increasing energy resources for the people of Bangladesh, and I am optimistic about our long-term prospects.

Okay. Now that makes sense. And then I guess, maybe how are you weighing at this point, organic investments versus M&A? Clearly, you've got a robust pipeline here of organic growth opportunities. So how are you kind of thinking about the balance between the two? And do you think there's more of a bias now on organic investments over M&A? Just curious for your thoughts.

Praneeth, I don't want to downplay it, but we appreciate the deals we will secure. We focus on fundamentals, and the method of delivery is not our concern. We understand our role in the energy transition. We recognize that LNG is cost-effective and requires placement. Most major players are currently concentrated on liquefaction and enhancing their supply chains. We are the ones creating market opportunities and figuring out how to transport that LNG to its necessary destinations. That is the demand. The specific tools used to include us in that value chain are not a priority for us.

Got it. Thank you.

Our next question comes from Zack Van Everen of TPH. Zack, your line is now open.

Hey. Good morning, guys. Thanks for taking my question. Just going back to Alaska. I note you guys are in advanced discussions. I guess what's the timeline in your guys' sight where you put kind of paper there? What are you looking at as far as getting over that hurdle for that project?

Yes. I'll pass that to Oliver, Zack, because I'm impatient. I always want yesterday, but I'll let the folks actually facing the customer to speak to that.

Yes, we announced the project with a start-up timeline of 2028, which we believe is achievable. You can estimate a rough idea of when we might enter into definitive contracts based on that timeline. There’s a process we need to navigate in the region, so I won't specify a timeline here. However, we will continue collaborating with our partners, and we are confident in our ability to advance this quickly.

The decline curve for the Cook Inlet with domestic production is a real thing moving at a real pace though, right? And that's going to drive the need for the timing for papering those approvals to everything else because there is going to be a need for this bridge, or it's going to have to happen.

Got you. No, that makes sense. I appreciate that. And then between the two projects, I know on the Cook Inlet project, you noted that some of it will have or the gas sales will have take-or-pay style applications for Vietnam and Alaska. Is the majority of these terminals planned to be take-or-pay? Or will you open up some marketing or commodity exposure with these?

We're focused on securing the right anchor customers to support these projects. We're always looking for potential growth opportunities, but we don't intend to take on commodity risks in these markets. The projects will be backed by the customers enabling us to go forward with final investment decisions, and we will explore various markets. While we will have different growth prospects, we aim to seize opportunities for growth.

Perfect. Thank you, guys, so much.

Our next question comes from Craig Shere of Tuohy Brothers. Craig, your line is now open.

Good morning. Congratulations on the good quarter. I want to dig a little deeper into the FSRU capacity question. Maybe you could speak to availability of shipyard slots, the timing differences between new builds and conversions, how you think about conversion? Because you've talked about it for maybe a couple of years or more, but up until now, you've only done new builds. And then on top of that, FSRU capacity is critical. Obviously, that's not the only thing you do, but that's critical. But what are your thoughts about the need for more long-term LNG supply beyond your venture global contract?

Craig, you've combined multiple questions into one, which is impressive. I'll address some of your inquiries and then hand it off. We’ve spent a considerable amount of time discussing Vietnam and exploring opportunities there. Our discussions around conversions have been ongoing for years, and we will proceed with those based on the projects available. We have a positive outlook on FSRUs and enjoy the process of designing tailored new buildings that meet our needs. We believe that 347 will be the leading asset in the market, and we want to pursue more like it. While conversions are significant projects with their own execution risks, some will be suitable. I can't provide a specific timeline for when we will choose a conversion candidate over a new build, but we will offer updates as soon as possible because it's important for transparency. I want to emphasize that we remain confident in our views on the total addressable market, our ability to deliver LNG to these countries, the value of this asset class, and the resilience of that infrastructure in Europe. We consistently convey these points. From this, you can certainly infer our strategy, Craig. Additionally, you had inquiries regarding the portfolio. I believe that was your fifth or sixth question, so I will pass those to David.

Thank you, Steven and Craig. The evidence we have today regarding booking the NVLT highlights the significant opportunities for us to grow our LNG portfolio. We've already had considerable success last year with our first long-term deals in this area. We now have the capability to provide solutions to our customers with LNG as we enter these markets. We plan to expand this portfolio as new projects come online. It's a matter of balancing supply growth with demand. As I mentioned earlier, a lot of LNG is becoming available, and we have established strong relationships and partnerships. Our efforts are focused on opening these markets, which will provide us with ample opportunities to expand our portfolio.

Great. Just to clarify on the timing difference between new build and conversion, as we think about backing into project-specific timelines.

Sure, I can address that. There is a notable difference in execution time, with a new build typically taking around 3 to 3.5 years, though it can be shorter. Conversion times are usually less, but they come with execution risks, as previously mentioned. It's important to manage these factors when considering a project; you need to understand the execution timeline and the capacity of the vessel you plan to use before deciding on a conversion or a new build. Generally, a new build will be a larger capacity vessel compared to a conversion, making it more suitable for smaller send-out projects. It ultimately depends on the specific project in question.

Conversion would be more suitable for a smaller sender.

Or a smaller sender, yes. I hope that helps, Craig.

Thank you. It does. Thank you.

We currently have no further questions. So I would like to hand back to Steven Kobos for closing remarks.

Listen, I really appreciate the conversation that we had today with Dana, Oliver, and David and May, and it's always a pleasure to get with you guys. The questions we got about our strategy in Vietnam, what we're doing in Alaska, and our overall value creation strategy. We will continue to be transparent with you guys. We will continue to do what we say we will do. And with that, thanks very much for your time.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.