Business Wire | Aug 3, 2020 06:00AM EDT

New Fortress Energy Announces Second Quarter 2020 Results

Aug. 03, 2020

NEW YORK--(BUSINESS WIRE)--Aug. 03, 2020--New Fortress Energy LLC (NASDAQ: NFE) ("NFE" or the "Company") today reported its financial results for the second quarter ending June 30, 2020.

Business Highlights

* Operating Margin* of $15.2 million, increasing $17.4 million since the first quarter * Record volumes were achieved in the second quarter Average daily volumes sold in Q2 2020 were approximately 978,000 gallons per day which is a 223,000 increase from Q1 2020 Gallons per day volumes are expected to be between 1,700,000 and 2,000,000 on average for the remainder of 2020 * Completed termination of 8 remaining 2020 cargos in exchange for a payment of $105 million; also executed mitigation sale of one cargo Allows us to take advantage of historically low prices of LNG on the open market Cancellation resulted in one-time charge of $105 million and was primary driver of $166.5 million net loss in the second quarter * Simplifying our corporate structure Converted all Class B shares to Class A shares to enhance our liquidity, improve our credit profile and lower our cost of capital Converting our public entity from an LLC to a C Corporation effective August 7, 2020, will make NFE shares eligible to be included in benchmark stock indices currently utilized by more than $8 trillion of fund industry assets * New business pipeline is very robust We continue to focus on 10 key markets which have Committed(1) and In Discussion Volumes(2) of over 21 million GPD(3) Our goal is that each new terminal in our target markets produce between $100mm to $200mm in Illustrative Annualized Operating Margin Goal(4) * Progressing Financing and Capital Plan We received a B+/B1 corporate family rating from Moodys and S&P which we plan to use as basis for refinancing with targeted savings of $25mm per year Once we have completed our refinancing, our goal is to begin returning capital to shareholders by considering a quarterly dividend, subject to approval by our Board of Directors * COVID-19 during Q2 2020 did not materially impact financial results While the coronavirus has affected our customers and electricity demand in the markets we serve, power and gas remain an essential good Customer receivables remain current and the business has ample liquidity to support operational demands and growth initiatives

*Operating Margin is a non-GAAP financial measure. For definitions andreconciliations of non-GAAP results please refer to the exhibit to this pressrelease.

Financial Overview

For the three months ended,

March 31, June 30,

(in millions, except Average Volumes) 2020 2020

Revenues $74.5 $94.6

Net Loss ($60.1) ($166.5)

Operating Margin* ($2.2) $15.2

Average Volumes (k GPD) 755 978



* Revenue increased by $20.1 million from Q1 2020 driven by an increase in volumes due to a full quarter of operation of CHP Plant and revenue recognized from gas supplied as part of commissioning PREPA's Power Plant in Puerto Rico, partially offset by lower revenue due to maintenance at the Old Harbour Power Plant * The net loss increased $106.4 million from Q1 2020 primarily driven by contract cancellation charge for the termination of 2020 cargos * Positive Operating Margin was primarily due to a full quarter of operation of CHP Plant and additional revenue in Puerto Rico * SG&A was approximately $20mm when excluding non-cash share-based compensation expense, non-capitalizable development related expenses and expenses associated with simplifying our corporate structure

Please refer to our Q2 2020 Investor Presentation for further information about the following terms:1) "Committed Volumes" means our expected volumes to be sold to customers under (i) binding contracts, (ii) non-binding letters of intent, (iii) non-binding memorandums of understanding, (iv) binding or non-binding term sheets or (v) have been officially selected as the winning provider in a request for proposals or competitive bid process. We cannot assure you if or when we will enter into binding definitive agreements for the sales of volumes under non-binding letters of intent, non-binding memorandums of understanding, non-binding term sheets or based on our selection as the winning provider under a request for proposals or competitive bid process. Some but not all of our contracts contain minimum volume commitments, and our expected volumes to be sold to customers reflected in our "Committed Volumes" are substantially in excess of such minimum volume commitments.2) "In Discussion", "In Discussion Volumes" or similar words refer to expected volumes to be sold to customers for which (i) we are in active negotiations, (ii) there is a request for proposals or competitive bid process, or (iii) we anticipate a request for proposals or competitive bid process will soon be announced based on our discussions with the potential customer. We cannot assure you if or when we will enter into contracts for sales of additional volumes, the price at which we will be able to sell such volumes, or our costs to purchase, liquefy, deliver and sell such volumes. Some but not all of our contracts contain minimum volume commitments, and our expected sales to customers reflected in our "in discussion volumes" are substantially in excess of potential minimum volume commitments.3) Based on In Discussion Volumes as of July 31, 2020.4) "Illustrative Annualized Operating Margin Goal" means our goal for Operating Margin under certain illustrative conditions, presented on a run rate basis by multiplying the average volume we expect to sell in the last quarter of the relevant period by four."Operating Margin" means the sum of (i) Net income / (loss), (ii) Selling, general and administrative, (iii) Depreciation and amortization, (iv) Interest expense, (v) Other (income) expense, net (vi) Contract termination charges and Loss on Mitigation Sales, (vii ) Loss on extinguishment of debt, net, and (viii) Tax expense (benefit), each as reported on our financial statements. Operating Margin is mathematically equivalent to Revenue minus Cost of sales minus Operations and maintenance, each as reported in our financial statements.This goal reflects the volumes of LNG that it is our goal to sell under binding contracts multiplied by the average price per unit at which we expect to price LNG deliveries, including both fuel sales and capacity charges or other fixed fees, less the cost per unit at which we expect to purchase or produce and deliver such LNG or natural gas, including the cost to (i) purchase natural gas, liquefy it, and transport it to one of our terminals or purchase LNG in strip cargos or on the spot market, (ii) transfer the LNG into an appropriate ship and transport it to our terminals or facilities, (iii) deliver the LNG, regasify it to natural gas and deliver it to our customers or our power plants and (iv) maintain and operate our terminals, facilities and power plants. There can be no assurance that the costs of purchasing or producing LNG, transporting the LNG and maintaining and operating our terminals and facilities will result in the Illustrative Annualized Operating Margins illustrated.For the purpose of this release, we have assumed an average Operating Margin of $5.00 per MMBtu.These costs do not include expenses and income that are required by GAAP to be recorded on our financial statements, including the return of or return on capital expenditures for the relevant project, and selling, general and administrative costs. Our current cost of natural gas per MMBtu are higher than the costs we would need to achieve our Illustrative Annualized Operating Margin Goal, and the primary drivers for reducing these costs are the reduced costs of purchasing gas and the increased sales volumes, which result in lower fixed costs being spread over a larger number of MMBtus sold. References to volumes, percentages of such volumes and the Illustrative Annualized Operating Margin Goal related to such volumes (i) are not based on the Company's historical operating results, which are limited, and (ii) do not purport to be an actual representation of our future economics. We cannot assure you if or when we will enter into contracts for sales of additional LNG, the price at which we will be able to sell such LNG, or our costs to produce and sell such LNG. Actual results could differ materially from the illustration and there can be no assurance we will achieve our goal.

Additional InformationFor additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of New Fortress Energy's website, www.newfortressenergy.com, and the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, which will be available on the Company's website. Nothing on our website is included or incorporated by reference herein.

Earnings Conference Call

Management will host a conference call on Monday, August 3, 2020 at 8:00 A.M. Eastern Time. The conference call may be accessed by dialing (866) 953-0778 (from within the U.S.) or (630) 652-5853 (from outside of the U.S.) fifteen minutes prior to the scheduled start of the call; please reference "NFE Second Quarter 2020 Earnings Call."

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newfortressenergy.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A replay of the conference call will also be available after 11:00 A.M. on Monday, August 3, 2020 through 11:00 P.M. on Monday, August 10, 2020 at (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.), Passcode: 1896774.

About New Fortress Energy LLCNew Fortress Energy (NASDAQ: NFE) is a global energy infrastructure company founded to help accelerate the world's transition to clean energy. The company funds, builds and operates natural gas infrastructure and logistics to rapidly deliver fully integrated, turnkey energy solutions that enable economic growth, enhance environmental stewardship and transform local industries and communities.

Non-GAAP Financial MeasureOperating Margin is not a measurement of financial performance under GAAP and should not be considered in isolation or as an alternative to income/(loss) from operations, net income/(loss), cash flow from operating activities or any other measure of performance or liquidity derived in accordance with GAAP. We believe this non-GAAP financial measure, as we have defined it, provides a supplemental measure of financial performance of our current liquefaction, regasification and power generation operations. This measure excludes items that have little or no significance on day-to-day performance of our current liquefaction, regasification and power generation operations, including our corporate SG&A, contract termination charges and loss on mitigation sales, loss on extinguishment of debt, net, and other expense.

As Operating Margin measures our financial performance based on operational factors that management can impact in the short-term and provides an assessment of controllable expenses, items associated with our capital structure and beyond the control of management in the short-term, such as depreciation and amortization, taxation, and interest expense are excluded. As a result, this supplemental metric affords management the ability to make decisions to facilitate meeting current financial goals as well as to achieve optimal financial performance of our current liquefaction, regasification and power generation operations.

The principal limitation of this non-GAAP measure is that it excludes significant expenses and income that are required by GAAP to be recorded in our financial statements. A reconciliation is provided for the non-GAAP financial measure to our GAAP net income/(loss). Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measure to our GAAP net income/(loss), and not to rely on any single financial measure to evaluate our business.

Cautionary Statement Concerning Forward-Looking StatementsCertain statements contained in this press release constitute "forward-looking statements" including our expected volumes of LNG or production of power in particular jurisdictions; our expected volumes for Committed Volumes and In Discussion Volumes; the expectation that we will continue to take advantage of low LNG prices; our expectation regarding improvements to our liquidity, credit profile and cost of capital and related expectations regarding our ability to refinance our debt; and our expectation that our shares will be eligible for inclusion in stock indices. You can identify these forward-looking statements by the use of forward-looking words such as "expects," "may," "will," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. These forward-looking statements represent the Company's expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the risk that our construction or commissioning schedules will take longer than we expect, the risk that the volumes we are able to sell are less than we expect due to decreased customer demand or our inability to supply, the risk that our expectations about the price at which we purchase LNG, the price at which we sell LNG, the cost at which we produce, ship and deliver LNG, and the margin that we receive for the LNG that we sell are not in line with our expectations, risks that our conversion from an LLC to a C Corporation will not be effective on the timeline we expect or that it will not result in our inclusion in stock indices, risks that our operating or other costs will increase and our expected funding of projects may not be possible, negatively impacting our liquidity and risks that our downstream Committed projects costs are greater than we expect so the expected funding of such projects may not be possible, negatively impacting our credit profile and cost of capital, and the risk that we may not be able to refinance our debt or that any such refinancing will not result in the savings we expect, if any. Accordingly, readers should not place undue reliance on forward-looking statements as a prediction of actual results.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in the Company's annual and quarterly reports filed with the SEC, which could cause its actual results to differ materially from those contained in any forward-looking statement.

Exhibits - Financial Statements

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three months ended March 31, 2020 and June 30, 2020

(Unaudited, in thousands of U.S. dollars, except share and per share amounts)

For the Three Months Ended

March 31, June 30, 2020 2020

Revenues

Operating revenue $ 63,502 $ 76,177

Other revenue 11,028 18,389

Total revenues 74,530 94,566



Operating expenses

Cost of sales 68,216 69,899

Operations and maintenance 8,483 9,500

Selling, general and administrative 28,370 31,846

Contract termination charges and loss on 208 123,906 mitigation sales

Depreciation and amortization 5,254 7,620

Total operating expenses 110,531 242,771

Operating loss (36,001 ) (148,205 )

Interest expense 13,890 17,198

Other expense, net 611 999

Loss on extinguishment of debt, net 9,557 -

Loss before taxes (60,059 ) (166,402 )

Tax (benefit) expense (4 ) 117

Net loss (60,055 ) (166,519 )

Net loss attributable to non-controlling 51,757 29,094 interest

Net loss attributable to stockholders $ (8,298 ) $ (137,425 )



Net loss per share - basic and diluted $ (0.32 ) $ (2.40 )



Weighted average number of shares outstanding - 26,029,492 57,341,215 basic and diluted



Other comprehensive loss:

Net loss $ (60,055 ) $ (166,519 )

Unrealized loss (gain) on currency translation 369 (520 )adjustment

Comprehensive loss (60,424 ) (165,999 )

Comprehensive loss attributable to 52,073 29,009 non-controlling interest

Comprehensive loss attributable to stockholders $ (8,351 ) $ (136,990 )

Non-GAAP Operating Margin(Unaudited, in thousands of U.S. dollars)We define non-GAAP operating margin as GAAP net loss, adjusted for selling, general and administrative expense, contract termination charges and loss on mitigation sales, depreciation and amortization, interest expense, other expense (income), loss on extinguishment of debt, net and tax expense (benefit).



For the three months ended,

March 31, June 30, 2020 2020

Net loss $ (60,055 ) $ (166,519 )

Add:

Contract termination charges and loss on 208 123,906 mitigation sales

Selling, general and administrative 28,370 31,846

Depreciation and amortization 5,254 7,620

Interest expense 13,890 17,198

Other expense, net 611 999

Loss on extinguishment of debt, net 9,557 -

Tax (benefit) expense (4 ) 117

Non-GAAP operating margin $ (2,169 ) $ 15,167

Condensed Consolidated Balance Sheets

As of June 30, 2020 and December 31, 2019

(Unaudited, in thousands of U.S. dollars, except share amounts)

June 30, December 31,

2020 2019

Assets

Current assets

Cash and cash equivalents $ 167,316 $ 27,098

Restricted cash 32,946 30,966

Receivables, net of allowances of $0 and $0, 65,069 49,890 respectively

Inventory 50,885 63,432

Prepaid expenses and other current assets 28,941 39,734

Total current assets 345,157 211,120



Restricted cash 23,131 34,971

Construction in progress 346,951 466,587

Property, plant and equipment, net 475,198 192,222

Right-of-use assets 106,993 -

Intangible assets, net 42,931 43,540

Finance leases, net 915 91,174

Investment in equity securities 323 2,540

Deferred tax assets, net 2,744 34

Other non-current assets 77,170 81,626

Total assets $ 1,421,513 $ 1,123,814



Liabilities

Current liabilities

Accounts payable $ 24,854 $ 11,593

Accrued liabilities 165,292 54,943

Current lease liabilities 26,835 -

Due to affiliates 6,586 10,252

Other current liabilities 26,134 25,475

Total current liabilities 249,701 102,263



Long-term debt 950,238 619,057

Non-current lease liabilities 57,166 -

Deferred tax liabilities, net 20 241

Other long-term liabilities 14,314 14,929

Total liabilities 1,271,439 736,490



Stockholders' equity

Class A shares, 169,174,104 shares issued and 168,587,346 outstanding as of June 30, 2020?

23,607,096 shares issued and outstanding as of 341,675 130,658 December 31, 2019

Treasury shares, 586,758 shares as of June 30, 2020, at cost;

0 shares at December 31, 2019, at cost (6,172 ) -

Class B shares, 0 shares issued and outstanding as of June 30, 2020;

144,342,572 shares, issued and outstanding as of - - December 31, 2019

Accumulated deficit (192,852 ) (45,823 )

Accumulated other comprehensive income (loss) 352 (30 )

Total stockholders' equity attributable to NFE 143,003 84,805

Non-controlling interest 7,071 302,519

Total stockholders' equity 150,074 387,324

Total liabilities and stockholders' equity $ 1,421,513 $ 1,123,814

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and six months ended June 30, 2020 and 2019

(Unaudited, in thousands of U.S. dollars, except share and per share amounts)



Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Revenues

Operating $ 76,177 $ 31,738 $ 139,679 $ 57,876 revenue

Other revenue 18,389 8,028 29,417 11,841

Total 94,566 39,766 169,096 69,717 revenues



Operating expenses

Cost of sales 69,899 44,043 138,115 77,392

Operations and 9,500 5,403 17,983 9,902 maintenance

Selling,general and 31,846 32,169 60,216 81,918 administrative

Contractterminationcharges and 123,906 - 124,114 - loss onmitigationsales

Depreciationand 7,620 2,110 12,874 3,801 amortization

Total operating 242,771 83,725 353,302 173,013 expenses

Operating (148,205 ) (43,959 ) (184,206 ) (103,296 ) loss

Interest 17,198 6,199 31,088 9,483 expense

Other expense 999 920 1,610 (1,655 )(income), net

Loss onextinguishment - - 9,557 - of debt, net

Loss before (166,402 ) (51,078 ) (226,461 ) (111,124 ) taxes

Tax expense 117 155 113 401

Net loss (166,519 ) (51,233 ) (226,574 ) (111,525 )

Net lossattributable to 29,094 45,047 80,851 91,782 non-controllinginterest

Net loss attributable $ (137,425 ) $ (6,186 ) $ (145,723 ) $ (19,743 ) to stockholders



Net loss pershare - basic $ (2.40 ) $ (0.28 ) $ (3.49 ) $ (1.09 )and diluted



Weightedaverage numberof shares 57,341,215 22,114,002 41,771,849 18,154,939 outstanding -basic anddiluted



Othercomprehensive loss:

Net loss $ (166,519 ) $ (51,233 ) $ (226,574 ) $ (111,525 )

Unrealized gainon currency (520 ) - (151 ) - translationadjustment

Comprehensive (165,999 ) (51,233 ) (226,423 ) (111,525 )loss

Comprehensivelossattributable to 29,009 45,047 81,082 91,782 non-controllinginterest

Comprehensiveloss $ (136,990 ) $ (6,186 ) $ (145,341 ) $ (19,743 )attributable tostockholders



Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2020 and 2019

(Unaudited, in thousands of U.S. dollars)

Six Months Ended June 30,

2020 2019

Cash flows from operating activities

Net loss $ (226,574 ) $ (111,525 )

Adjustments for:

Amortization of deferred financing costs 6,965 2,589

Depreciation and amortization 13,324 4,106

Contract termination charges and loss on 124,114 - mitigation sales

Loss on extinguishment of debt, net 9,557 -

Deferred taxes 15 379

Change in value of investment in equity 2,217 802 securities

Share-based compensation 4,430 28,008

Other 907 232

(Increase) in receivables (9,214 ) (15,211 )

(Increase) in inventories (4,794 ) (3,664 )

(Increase) in other assets (9,446 ) (6,865 )

Decrease in right-of-use assets 17,781 -

Increase in accounts payable/accrued 13,655 2,553 liabilities

(Decrease) Increase in amounts due to (3,666 ) 1,848 affiliates

(Decrease) in lease liabilities (19,873 ) -

Increase in other liabilities 279 4,680

Net cash used in operating activities (80,323 ) (92,068 )



Cash flows from investing activities

Capital expenditures (95,422 ) (232,348 )

Principal payments received on finance lease, 78 471 net

Net cash used in investing activities (95,344 ) (231,877 )



Cash flows from financing activities

Proceeds from borrowings of debt 832,144 220,000

Payment of deferred financing costs (13,600 ) (4,400 )

Repayment of debt (506,402 ) (2,500 )

Proceeds from IPO - 274,948

Payments related to tax withholdings for (6,117 ) - share-based compensation

Payment of offering costs - (6,938 )

Net cash provided by financing activities 306,025 481,110



Net increase in cash, cash equivalents and 130,358 157,165 restricted cash

Cash, cash equivalents and restricted cash - 93,035 100,853 beginning of period

Cash, cash equivalents and restricted cash - end $ 223,393 $ 258,018 of period



Supplemental disclosure of non-cash investing and financing activities:

Changes in accounts payable and accrued liabilities associated with

construction in progress and property, plant $ (3,084 ) $ (54,888 ) and equipment additions

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CONTACT: IR: Alan Andreini (212) 798-6128 aandreini@fortress.com Joshua Kane (516) 268-7455 jkane@newfortressenergy.com Media: Jake Suski (516) 268-7403 press@newfortressenergy.com