Strong New Fortress sales mean projects remain on track

Gas-to-power company New Fortress Energy reported a 40% jump in sales volumes in the first quarter with its Jamalco CHP plant in Jamaica coming online late last year and its “very robust” new project pipeline well on-track despite the COVID-19 pandemic’s impacts on the O&G sector. 

The firm, however, did take a hit on revenue from the 22% drop in average Henry Hub prices for the quarter, which nevertheless increased 6.7% over 4Q19 to US$74.5mn. 

The company reported a net loss of US$60.1mn for the quarter, up US$21.7mn from its loss the previous quarter, as the company continues to operate in the red amid its rapid build-up and expansion from 10 to 15 global territories, with projects now advancing in Mexico and Nicaragua.

The company achieved record sales volumes in the first quarter and for the first time exceeded 1.65Mg/d (gallons per day) or 6,246m3/d (cubic meters per day) in April 2020.

On Tuesday’s results call, CEO Wes Edens addressed the pandemic’s impact on revenue saying: “The organic numbers… are down a little bit with the COVID impact, down kind of 20% of revenue and down kind of 20% in terms of volumes on what we expected.” 

“It’s not great. It’s obviously infinitely better than the vast majority of companies out there in the world,” he said. 

With the company’s system where it is now, said Edens, “We would expect to generate, kind of 2.0-2.2Mg/d, and we think right now the average is [1.5-1.7Mg/d],” he added, noting that the 1Mg/d-mark is “the important line of departure for us, at which point the margins for our business grow dramatically.” 

The firm reported that average daily volumes sold in the first quarter were in excess of 750,000g/d per day, which is a 200,000g/d increase from 4Q19. 

The company reported that all terminals in Jamaica (Montego Bay, Old Harbour) and Puerto Rico are now fully operational, with the Jamalco facility adding 100MW to the Jamaican grid and natural gas delivery starting at San Juan units 5 and 6 in Puerto Rico in March.

While the company could not release many details, it did report that it is shortlisted for the upcoming temporary power RFP for the Puerto Rico Electric Power Authority (PREPA), expressing optimism on its prospects, as it is now in close communication with regulators. 

PROJECT UPDATES

Edens also gave an update on projects advancing in Mexico and Nicaragua, noting that capex in Mexico was moving as expected with “less than US$100mn” left to spend in that country. Capex, he said, had not really begun to roll out in Nicaragua with the projects still in very early works.

The company reported that the dredging process at its 100MW LNG Pichilingue terminal project in La Paz, Baja California Sur state, Mexico, looks likely to be wrapped up by the of the month, with the facility probably on track to go online in the third quarter.

“The guys down there are doing a very good job, so that will really catalyze the marine development of that, allow us to bring the ships into the terminals,” said Edens. “So, that’s something that I think could turn on fairly quickly.”

Turning to Nicaragua, Edens said the 300MW natural gas-fired power plant New Fortress will build near Puerto Sandino is still in the planning and design and permitting stage, adding that there have been delays due to the health crisis.

“[There is] a little bit of a delay just in terms of getting people down there and travel, because that’s restricted,” said Edens.

“That actually does make it a little more challenging on the permitting side, when you can’t get people into the country,” he said, “But this too shall pass.”

The CEO added that the company expects to announce “material MOUs” in the coming months with active discussions in a number of territories. “So, I’m actually quite optimistic about the second half of this year,” he added.

Edens is also encouraged by the prospect of reduced competition from big oil majors, saying, “You saw Exxon yesterday announce that they were cutting back their capex by US$10bn on projects.” 

“I just think that everyone is dealing with the crisis in their own way,” he said. “We’re fortunate both to have a high-margin business, one that is without a bunch of legacy issues to deal with and it serves customers' most basic needs.” 

“Power is right up there next to food, water and air in terms of what you need to survive and prosper. So, I feel like the prospects of the business, honestly, in the context of that, simply couldn’t be better.”