UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-41352

 

Excelerate Energy, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware	87-2878691
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2445 Technology Forest Blvd., Level 6 The Woodlands, TX	77381
(Address of principal executive offices)	(Zip Code)

 

Registrant’s telephone number, including area code: (832) 813-7100

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share		EE		New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☐
				Emerging growth company		☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2023, there were 26,261,166 shares of Excelerate Energy, Inc.'s Class A Common Stock, $0.001 par value per share, and 82,021,389 shares of Excelerate Energy, Inc.’s Class B Common Stock, par value $0.001 per share, outstanding.

 

 

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TABLE OF CONTENTS

 

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signatures	48

 

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about Excelerate Energy, Inc. (“Excelerate” and together with its subsidiaries, “we,” “us,” “our” or the “Company”) and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact including, without limitation, statements regarding our future results of operations or financial condition, business strategy and plans, expansion plans and strategy, economic conditions, both generally and in particular in the regions in which we operate or plan to operate, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “consider,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions.

 

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under “Risk Factors” in Excelerate’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), this Form 10-Q and our other filings with the Securities and Exchange Commission (the “SEC”), including, but not limited to, the following:

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Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. For example, the current global economic uncertainty and geopolitical climate, including international wars, may give rise to risks that are currently unknown or amplify the risks associated with many of the foregoing events or factors. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

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PART I – FINANCIAL INFORMATION

Excelerate Energy, Inc.

Consolidated Balance Sheets
As of September 30, 2023 and December 31, 2022

	September 30, 2023				December 31, 2022
	(Unaudited)
ASSETS	(In thousands)
Current assets
Cash and cash equivalents	$	602,870			$	516,659
Current portion of restricted cash		3,579				2,614
Accounts receivable, net		44,761				82,289
Inventories		18,203				173,603
Current portion of net investments in sales-type leases		14,672				13,344
Other current assets		32,636				35,026
Total current assets		716,721				823,535
Restricted cash		19,733				18,698
Property and equipment, net		1,663,582				1,455,683
Operating lease right-of-use assets		8,706				78,611
Net investments in sales-type leases		387,555				399,564
Investment in equity method investee		20,471				24,522
Deferred tax assets, net		42,804				39,867
Other assets		44,463				26,342
Total assets	$	2,904,035			$	2,866,822
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	10,827			$	96,824
Accrued liabilities and other liabilities		62,794				66,888
Current portion of deferred revenue		24,433				144,807
Current portion of long-term debt		40,705				20,913
Current portion of long-term debt – related party		8,170				7,661
Current portion of operating lease liabilities		3,911				33,612
Current portion of finance lease liabilities		21,741				20,804
Total current liabilities		172,581				391,509
Long-term debt, net		400,153				193,396
Long-term debt, net – related party		174,042				180,772
Operating lease liabilities		5,434				48,373
Finance lease liabilities		195,034				210,354
TRA liability		72,951				72,951
Asset retirement obligations		41,246				39,823
Other long-term liabilities		39,482				32,947
Total liabilities	$	1,100,923			$	1,170,125
Commitments and contingencies (Note 20)
Class A Common Stock ($0.001 par value, 300,000,000 shares authorized, 26,281,790 shares issued as of September 30, 2023 and 26,254,167 shares issued as of December 31, 2022)		26				26
Class B Common Stock ($0.001 par value, 150,000,000 shares authorized and 82,021,389 shares issued and outstanding as of September 30, 2023 and December 31, 2022)		82				82
Additional paid-in capital		465,303				464,721
Retained earnings		36,715				12,009
Accumulated other comprehensive income		2,088				515
Treasury stock (20,624 shares as of September 30, 2023 and no shares as of December 31, 2022)		(472	)			—
Non-controlling interest		1,299,370				1,219,344
Total equity		1,803,112				1,696,697
Total liabilities and equity	$	2,904,035			$	2,866,822

The accompanying notes are an integral part of these consolidated financial statements.

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Excelerate Energy, Inc.

Consolidated Statements of Income (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022

 

	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
	(In thousands, except share and per share amounts)
Revenues
FSRU and terminal services	$	133,177			$	115,346			$	377,216			$	323,010
Gas sales		142,294				687,915				541,683				1,694,853
Total revenues		275,471				803,261				918,899				2,017,863
Operating expenses
Cost of revenue and vessel operating expenses (exclusive of items below)		49,190				50,258				156,646				158,994
Direct cost of gas sales		106,109				658,320				438,987				1,606,695
Depreciation and amortization		33,161				24,648				89,126				72,687
Selling, general and administrative expenses		19,513				18,778				63,393				44,476
Restructuring, transition and transaction expenses		—				1,345				—				6,680
Total operating expenses		207,973				753,349				748,152				1,889,532
Operating income		67,498				49,912				170,747				128,331
Other income (expense)
Interest expense		(13,926	)			(9,454	)			(39,360	)			(24,308	)
Interest expense – related party		(3,592	)			(4,235	)			(10,777	)			(21,901	)
Earnings (loss) from equity method investment		(550	)			625				258				2,135
Early extinguishment of lease liability on vessel acquisition		—				—				—				(21,834	)
Other income (expense), net		5,263				657				11,435				(4,545	)
Income before income taxes		54,693				37,505				132,303				57,878
Provision for income taxes		(8,188	)			(233	)			(25,503	)			(11,752	)
Net income		46,505				37,272				106,800				46,126
Less net income attributable to non-controlling interest		32,613				28,571				80,096				26,924
Less net loss attributable to non-controlling interest – ENE Onshore		—				(127	)			—				(545	)
Less pre-IPO net income attributable to EELP		—				—				—				12,950
Net income attributable to shareholders	$	13,892			$	8,828			$	26,704			$	6,797
Net income per common share – basic	$	0.53			$	0.34			$	1.02			$	0.26
Net income per common share – diluted	$	0.40			$	0.34			$	0.91			$	0.26
Weighted average shares outstanding – basic		26,254,243				26,254,167				26,254,193				26,254,167
Weighted average shares outstanding – diluted		108,295,819				26,260,861				108,303,411				26,260,173

 

The accompanying notes are an integral part of these consolidated financial statements.

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Excelerate Energy, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022

 

	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
	(In thousands)
Net income	$	46,505			$	37,272			$	106,800			$	46,126
Other comprehensive income (loss)
Cumulative translation adjustment		62				—				(43	)			—
Change in unrealized gains on cash flow hedges		2,723				2,354				6,131				6,648
Share of other comprehensive income (loss) of equity method investee		649				(976	)			416				2,231
Other comprehensive loss attributable to non-controlling interest		(2,603	)			(1,044	)			(4,931	)			(2,386	)
Pre-IPO other comprehensive income attributable to EELP		—				—				—				(5,458	)
Comprehensive income		47,336				37,606				108,373				47,161
Less comprehensive income attributable to non-controlling interest		32,613				28,571				80,096				26,924
Less comprehensive loss attributable to non-controlling interest – ENE Onshore		—				(127	)			—				(545	)
Less pre-IPO net income attributable to EELP		—				—				—				12,950
Comprehensive income attributable to shareholders	$	14,723			$	9,162			$	28,277			$	7,832

 

The accompanying notes are an integral part of these consolidated financial statements.

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Excelerate Energy, Inc.

Consolidated Statements of Changes in Equity (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022

 

																																						Non-
	Issued																									Related			Accumulated									controlling
	Class A								Class B														Additional			party			other						Non-			interest –
	Common Stock								Common Stock								Equity			Retained			paid-in			note			comprehensive			Treasury			controlling			ENE			Total
(In thousands, except shares)	Shares				Amount				Shares				Amount				interest			earnings			capital			receivable			income (loss)			stock			interest			Onshore			equity
Balance at January 1, 2023		26,254,167			$	26				82,021,389			$	82			$	—		$	12,009		$	464,721		$	—		$	515		$	—		$	1,219,344		$	—		$	1,696,697
Net income		—				—				—				—				—			6,844			—			—			—			—			23,895			—			30,739
Other comprehensive loss		—				—				—				—				—			—			—			—			(307	)		—			(958	)		—			(1,265	)
Long-term incentive compensation		—				—				—				—				—			—			86			—			—			—			271			—			357
Class A dividends – $0.025 per share		—				—				—				—				—			(663	)		—			—			—			—			—			—			(663	)
EELP distributions to Class B interests		—				—				—				—				—			—			—			—			—			—			(2,051	)		—			(2,051	)
Minority owner contribution – Albania Power Project		—				—				—				—				—			—			—			—			—			—			337			—			337
Balance at March 31, 2023		26,254,167			$	26				82,021,389			$	82			$	—		$	18,190		$	464,807		$	—		$	208		$	—		$	1,240,838		$	—		$	1,724,151
Net income		—				—				—				—				—			5,968			—			—			—			—			23,588			—			29,556
Other comprehensive income		—				—				—				—				—			—			—			—			1,049			—			3,286			—			4,335
Long-term incentive compensation		—				—				—				—				—			—			260			—			—			—			814			—			1,074
Class A dividends – $0.025 per share		—				—				—				—				—			(669	)		—			—			—			—			—			—			(669	)
EELP distributions to Class B interests		—				—				—				—				—			—			—			—			—			—			(2,051	)		—			(2,051	)
Minority owner contribution – Albania Power Project		—				—				—				—				—			—			—			—			—			—			320			—			320
Distributions		—				—				—				—				—			—			—			—			—			—			(2,000	)		—			(2,000	)
Balance at June 30, 2023		26,254,167			$	26				82,021,389			$	82			$	—		$	23,489		$	465,067		$	—		$	1,257		$	—		$	1,264,795		$	—		$	1,754,716
Net income		—				—				—				—				—			13,892			—			—			—			—			32,613			—			46,505
Other comprehensive income		—				—				—				—				—			—			—			—			831			—			2,603			—			3,434
Long-term incentive compensation		—				—				—				—				—			—			274			—			—			—			855			—			1,129
Class A dividends – $0.025 per share		—				—				—				—				—			(666	)		—			—			—			—			—			—			(666	)
EELP distributions to Class B interests		—				—				—				—				—			—			—			—			—			—			(2,051	)		—			(2,051	)
Minority owner contribution – Albania Power Project		—				—				—				—				—			—			—			—			—			—			555			—			555
Restricted stock units vested		29,875				—				—				—				—			—			—			—			—			(472	)		—			—			(472	)
Shares withheld for taxes		(2,252	)			—				—				—				—			—			(38	)		—			—			—			—			—			(38	)
Balance at September 30, 2023		26,281,790			$	26				82,021,389			$	82			$	—		$	36,715		$	465,303		$	—		$	2,088		$	(472	)	$	1,299,370		$	—		$	1,803,112

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Excelerate Energy, Inc.

Consolidated Statements of Changes in Equity (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022

 

																																						Non-
	Issued																									Related			Accumulated									controlling
	Class A								Class B														Additional			party			other						Non-			interest –
	Common Stock								Common Stock								Equity			Retained			paid-in			note			comprehensive			Treasury			controlling			ENE			Total
(In thousands, except shares)	Shares				Amount				Shares				Amount				interest			earnings			capital			receivable			income (loss)			stock			interest			Onshore			equity
Balance at January 1, 2022		—			$	—				—			$	—			$	1,135,769		$	—		$	—		$	(6,759	)	$	(9,178	)	$	—		$	14,376		$	(130,282	)	$	1,003,926
Net income (loss)		—				—				—				—				13,897			—			—			—			—			—			(816	)		(237	)		12,844
Related party note receivable		—				—				—				—				—			—			—			6,600			—			—			—			—			6,600
Other comprehensive income		—				—				—				—				—			—			—			—			5,458			—			—			—			5,458
Balance at March 31, 2022		—			$	—				—			$	—			$	1,149,666		$	—		$	—		$	(159	)	$	(3,720	)	$	—		$	13,560		$	(130,519	)	$	1,028,828
Net loss prior to IPO		—				—				—				—				(947	)		—			—			—			—			—			—			—			(947	)
Pre-IPO capital contribution		—				—				—				—				—			—			1,574			—			—			—			—			—			1,574
Effect of the reorganization transactions		—				—				82,021,389				82				(1,148,719	)		—			—			—			2,820			—			1,145,817			—			—
Issuance of common stock – IPO		18,400,000				18				—				—				—			—			408,272			—			—			—			—			—			408,290
Vessel acquisition		7,854,167				8				—				—				—			—			188,492			—			—			—			—			—			188,500
Tax receivable agreement		—				—				—				—				—			—			(14,939	)		—			—			—			—			—			(14,939	)
Long-term incentive compensation		—				—				—				—				—			—			66			—			—			—			204			—			270
Other comprehensive income		—				—				—				—				—			—			—			—			701			—			1,342			—			2,043
Net loss subsequent to IPO		—				—				—				—				—			(2,031	)		—			—			—			—			(831	)		(181	)		(3,043	)
Balance at June 30, 2022		26,254,167			$	26				82,021,389			$	82			$	—		$	(2,031	)	$	583,465		$	(159	)	$	(199	)	$	—		$	1,160,092		$	(130,700	)	$	1,610,576
Net income (loss)		—				—				—				—				—			8,828			—			—			—			—			28,571			(127	)		37,272
Other comprehensive income		—				—				—				—				—			—			—			—			334			—			1,044			—			1,378
Related party note receivable		—				—				—				—				—			—			—			159			—			—			—			—			159
Long-term incentive compensation		—				—				—				—				—			—			80			—			—			—			248			—			328
Class A dividends - $0.025 per share		—				—				—				—				—			(656	)		—			—			—			—			—			—			(656	)
EELP distributions to Class B interests		—				—				—				—				—			—			—			—			—			—			(2,051	)		—			(2,051	)
Establishment of Albania Power Project		—				—				—				—				—			—			—			—			—			—			2,765			—			2,765
Balance at September 30, 2022		26,254,167			$	26				82,021,389			$	82			$	—		$	6,141		$	583,545		$	—		$	135		$	—		$	1,190,669		$	(130,827	)	$	1,649,771

 

The accompanying notes are an integral part of these consolidated financial statements.

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Excelerate Energy, Inc.

Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2023 and 2022

 

	Nine months ended September 30,
	2023				2022
Cash flows from operating activities	(In thousands)
Net income	$	106,800			$	46,126
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		89,126				72,687
Amortization of operating lease right-of-use assets		12,006				23,376
ARO accretion expense		1,323				1,114
Amortization of debt issuance costs		4,875				1,826
Deferred income taxes		(5,102	)			(10,584	)
Share of net earnings in equity method investee		(258	)			(2,135	)
Distributions from equity method investee		4,725				4,950
Long-term incentive compensation expense		2,560				598
Early extinguishment of lease liability on vessel acquisition		—				21,834
Non-cash restructuring expense		—				1,574
(Gain)/loss on non-cash items		1,370				158
Changes in operating assets and liabilities:
Accounts receivable		31,531				(56,155	)
Inventories		154,398				(139,849	)
Other current assets and other assets		(10,609	)			(5,003	)
Accounts payable and accrued liabilities		(81,507	)			25,096
Derivative liabilities		—				3,649
Current portion of deferred revenue		(120,374	)			4,626
Net investments in sales-type leases		10,681				8,935
Operating lease assets and liabilities		(12,335	)			(22,286	)
Other long-term liabilities		6,064				3,687
Net cash provided by (used in) operating activities	$	195,274			$	(15,776	)
Cash flows from investing activities
Purchases of property and equipment		(304,426	)			(63,874	)
Sales of property and equipment		4,101				—
Net cash used in investing activities	$	(300,325	)		$	(63,874	)
Cash flows from financing activities
Proceeds from issuance of common stock, net		—				412,183
Proceeds from long-term debt – related party		—				652,800
Repayments of long-term debt – related party		(6,221	)			(651,393	)
Repayments of long-term debt		(15,805	)			(14,326	)
Proceeds from revolving credit facility		—				140,000
Repayments of revolving credit facility		—				(140,000	)
Proceeds from Term Loan Facility		250,000				—
Repayments of Term Loan Facility		(4,687	)			—
Payment of debt issuance costs		(7,307	)			(5,951	)
Collections of related party note receivables		—				6,600
Settlement of finance lease liability – related party		—				(25,000	)
Principal payments under finance lease liabilities		(15,661	)			(16,326	)
Principal payments under finance lease liabilities – related party		—				(2,912	)
Dividends paid		(1,969	)			(656	)
Distributions		(8,153	)			(2,051	)
Minority owner contribution – Albania Power Project		3,108				2,765
Net cash provided by financing activities	$	193,305			$	355,733
Effect of exchange rate on cash, cash equivalents, and restricted cash		(43	)			—
Net increase in cash, cash equivalents and restricted cash		88,211				276,083
Cash, cash equivalents and restricted cash
Beginning of period	$	537,971			$	90,964
End of period	$	626,182			$	367,047

The accompanying notes are an integral part of these consolidated financial statements.

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Excelerate Energy, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

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Excelerate Energy, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

 

 

 

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Excelerate Energy, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

 

 

 

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Excelerate Energy, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included in this Form 10-Q and included in the 2022 Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the 2022 Annual Report, this Form 10-Q and our other filings with the SEC. Please also see the section titled “Forward-Looking Statements.”

Overview

Excelerate is changing the way the world accesses cleaner and more reliable energy by delivering regasified natural gas, benefiting hundreds of millions of people around the world. From our founding, we have focused on providing flexible LNG solutions to markets in diverse environments across the globe, providing a lesser emitting form of energy to markets that often rely on coal as their primary energy source. At Excelerate, we believe that access to energy sources such as LNG is critical to assisting markets in their decarbonization efforts, while at the same time promoting economic growth and improving quality of life.

We have grown our business significantly since our first FSRU charter in 2003, and today, we are a profitable energy company with a geographically diversified business model. Our business spans the globe, with regional offices in 11 countries and operations in Argentina, Bangladesh, Brazil, Finland, Pakistan, the United Arab Emirates (the “UAE”) and the United States. We are the largest provider of regasified LNG in Argentina and Bangladesh and one of the largest providers of regasified LNG in Brazil and Pakistan, and we operate the largest FSRU in Brazil. We also lease an LNG terminal in Bahia, Brazil (the “Bahia Terminal”) from Petróleo Brasileiro S.A. (“Petrobras”), which expires in December 2023 and will transition to a TCP in January 2024. Utilizing the Bahia Terminal, we have been importing LNG and selling natural gas to the Brazilian market since December 2021. In December 2022, we began importing and selling natural gas and LNG into Europe via the Inkoo Terminal in Finland. We intend to continue to market natural gas and LNG, which offers a cleaner energy source from which power can be generated consistently. The high value our customers place on our services has resulted in a reliable source of revenues to us, while our global reach helps balance seasonal demand fluctuation among the geographies in which we operate. For the three months ended September 30, 2023, we generated revenues of $275.5 million, net income of $46.5 million and Adjusted EBITDA of $106.9 million. For the three months ended September 30, 2022, we generated revenues of $803.3 million, net income of $37.3 million and Adjusted EBITDA of $77.9 million. For more information regarding our non-GAAP measure Adjusted EBITDA and a reconciliation to net income, the most comparable U.S. Generally Accepted Accounting Principles (“GAAP”) measure, see “How We Evaluate Our Operations.”

Our business focuses on the integration of the natural gas-to-power LNG value chain, and as part of this value chain, we operate regasification terminals in global economies that utilize our FSRU fleet. Our business is substantially supported by time charter contracts, which are effectively long-term, take-or-pay arrangements and provide consistent revenue and cash flow from our high-quality customer base. As of September 30, 2023, we operate a fleet of ten purpose-built FSRUs, have completed more than 2,600 ship-to-ship transfers of LNG with over 50 LNG operators since we began operations and have safely delivered more than 6,500 billion cubic feet of natural gas through 16 LNG regasification terminals. For the three months ended September 30, 2023 and 2022, we generated revenues of $133.2 million and $115.3 million, respectively, from our FSRU and terminal services businesses, representing approximately 48% and 14% of our total revenues for each of those periods.

We also procure LNG from major producers and sell natural gas through our flexible LNG terminals. For the three months ended September 30, 2023 and 2022 we generated revenues of $142.3 million and $687.9 million, respectively, from LNG and natural gas sales, representing approximately 52% and 86% of our total revenues for each of those periods. We believe that the commercial momentum that we have established in recent years and the increasing need for access to LNG around the world, have resulted in a portfolio of new growth opportunities for us to pursue. In addition to our FSRU and terminal services businesses and natural gas sales, we plan to expand our business to provide customers with an array of products. We are evaluating and pursuing early-stage projects with opportunities in Europe, Asia Pacific, Latin America, and the Middle East.

Recent Trends and Outlook

Natural gas prices remained steady in the third quarter of 2023 relative to the second quarter of 2023. Dutch Title Transfer Facility (“TTF”) prices averaged $10.75/MMBtu, a slight decrease from $10.96/MMBtu in the second quarter of 2023, and a significant decrease from the third quarter of 2022’s average of $60.15/MMBtu. Steady LNG spot prices have benefitted LNG consumers, allowing emerging buyers in South and Southeast Asia to continue their spot cargo purchase programs. From January through September 2023, Bangladesh LNG cargos awarded were 69% higher than cargos purchased by the country on the spot market in all of 2022. In the nine months ended September 30, 2023, Excelerate has sold four LNG cargos into Bangladesh.

Mild weather in Europe in the third quarter of 2023 reduced European summer-cooling demand and resulted in the continued build-up of European LNG storage. European Union (“EU”) natural gas storage levels ended the third quarter of 2023 at approximately 95% full, exceeding the EU’s mandated November 1, 2023 target of 90%.

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Market pricing of LNG through the end of the 2023-2024 winter season is expected to be largely dependent on the magnitude of colder weather in large LNG consumer regions. According to S&P Global, European residential-commercial natural gas demand is expected to increase just 4% in the 2023-2024 winter over the prior winter. This would still result in demand at 14% below historical winter season average levels. On the supply side, recent disruptions and outages may impact the global markets. Potential supply disruptions from the now resolved Australian strikes at two LNG facilities, the outage on Finland’s Balticconnector pipeline, and the Israel-Hamas war each have the potential to impact natural gas markets adversely. Lower demand has kept natural gas prices from experiencing acute price volatility and prevented market distortions amidst recent events that could disrupt natural gas supply. A colder-than-normal northern hemisphere winter coupled with risks to supply could lead to price volatility and increase the potential for higher LNG prices. These dynamics could determine how customers in the regions in which Excelerate operates will be able to participate in the spot market throughout the remainder of 2023.

LNG supply activity has continued to make significant moves forward through the third quarter of 2023. Since the beginning of the year, 56 million tonnes per annum (“MTPA”) of incremental LNG volumes from the Gulf of Mexico have reached final investment decisions (“FID”). This increases the volume from export projects that have reached FID since 2022 to 76 MTPA. These export projects are expected to begin coming online at the end of 2024. The increase in supply is expected to create new opportunities for Excelerate to connect LNG to downstream customers, including those in South and Southeast Asia.

Recent Business Updates:

 

Components of Our Results of Operations

Revenue

We generate revenue through the provision of regasification services using our fleet of FSRUs and LNG terminal assets, as well as physical sales of LNG and natural gas, that are made primarily in connection with our regasification and terminal projects. We provide regasification services through time charters and operation service contracts primarily related to our long-term charter contracts. Most of our time charter revenues are from long-term contracts that function similarly to take-or-pay arrangements in that we are paid if our assets and teams are available and ready to provide services to our customers regardless of whether our customers utilize the services. A portion of our revenue attributable to our charters for the use of our vessels is accounted for as lease revenue, and the revenues attributable to the services provided under those charters are accounted for as non-lease revenue.

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We generally charge fixed fees for the use of and services provided with our vessels and terminal capacity plus additional amounts for certain variable costs.

Expenses

The principal expenses involved in conducting our business are operating costs, direct cost of gas sales, general and administrative expenses, and depreciation and amortization. A large portion of the fixed and variable costs we incur in our business are in the operation of our fleet of FSRUs and terminals that provide regasification and gas supply to our customers. We manage the level of our fixed costs based on several factors, including industry conditions and expected demand for our services and generally pass-through certain variable costs.

We incur significant equipment costs in connection with the operation of our business, including capital equipment recorded as property and equipment, net on our balance sheets and related depreciation and amortization on our income statement. In addition, we incur repair and maintenance and leasing costs related to our property and equipment utilized both in our FSRU and terminal services and gas sales. Property and equipment and other assets include costs incurred for our fleet of FSRUs and terminal assets, including capitalized costs related to drydocking activities. Generally, we are required to drydock each of our vessels every five years, but vessels older than 15 years of age require a shorter duration drydocking or in-situ bottom survey every two and a half years.

Cost of revenue and vessel operating expenses

Cost of revenue and vessel operating expenses include the following major cost categories: vessel operating costs; personnel costs; repair and maintenance; and leasing costs. These operating costs are incurred for both our FSRU and terminal services revenues and gas sales revenues.

Direct cost of gas sales

Direct cost of gas sales includes the cost of LNG and other fuel and direct costs incurred in selling natural gas and LNG, which are significant variable operating costs. These costs fluctuate in proportion to the amount of our natural gas and LNG sales as well as LNG prices.

Depreciation and amortization expenses

Depreciation expense is recognized on a straight-line basis over the estimated useful lives of our property and equipment assets, less an estimated residual value. Certain recurring repairs and maintenance expenditures required by regulators are amortized over the required maintenance period.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) consist primarily of compensation and other employee-related costs for personnel engaged in executive management, sales, finance, legal, tax and human resources. SG&A also consists of expenses associated with office facilities, information technology, external professional services, business development, legal costs and other administrative expenses.

Restructuring, transition and transaction expenses

We incurred restructuring, transition and transaction expenses related to consulting, legal, and audit costs incurred as part of and in preparation for our initial public offering (the “IPO”).

Other income, net

Other income, net, primarily contains interest income, gains or losses from the effect of foreign exchange rates and gains and losses on asset sales.

Interest expense and Interest expense – related party

Our interest expense is primarily associated with our finance leases liabilities and loan agreements with external banks and related parties.

Earnings from equity-method investment

Earnings from equity-method investment relate to our 45% ownership interest in the Nakilat joint venture, which we acquired in 2018.

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Provision for income taxes

Excelerate is a corporation for U.S. federal and state income tax purposes. Excelerate’s accounting predecessor, EELP, is treated as a pass-through entity for U.S. federal income tax purposes and, as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, our historical results of operations prior to the IPO do not include any provision for U.S. federal income tax for EELP. In addition, EELP has international operations that are subject to foreign income tax and U.S. corporate subsidiaries subject to U.S. federal tax. These taxes are also included in our provision for income taxes.

Net income (loss) attributable to non-controlling interest

Net income (loss) attributable to non-controlling interests includes earnings allocable to our shares of Class B Common Stock as well as earnings allocable to the third-party equity ownership interests in our subsidiary, Excelerate Energy Bangladesh, LLC.

Net income (loss) attributable to non-controlling interest – ENE Onshore

Net income (loss) attributable to non-controlling interest – ENE Onshore includes the earnings allocable to the equity ownership interests in Excelerate New England Onshore, LLC (“ENE Onshore”). On October 17, 2022, EE Holdings, the indirect sole member of ENE Onshore, and EELP, the sole member of Excelerate New England Lateral, LLC (“ENE Lateral”), entered into a merger agreement, pursuant to which ENE Onshore was merged with and into ENE Lateral (the “ENE Onshore Merger”), effective October 31, 2022. ENE Lateral was the surviving entity and ENE Onshore ceased to exist as a separate entity. Prior to the ENE Onshore Merger, Excelerate consolidated ENE Onshore as a variable interest entity as Excelerate was determined to be the primary beneficiary of ENE Onshore. As a result of the ENE Onshore Merger, Excelerate ceased to have a non-controlling interest related to ENE Onshore.

Factors Affecting the Comparability of Our Results of Operations

As a result of a number of factors, our historical results of operations may not be comparable from period to period or going forward. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Impact of the Reorganization

Following the completion of the IPO in April 2022, we are a corporation for U.S. federal and state income tax purposes. EELP is treated as a pass-through entity for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, our historical results of operations prior to the IPO do not include provision for U.S. federal income tax for EELP. The reorganization undertaken in connection with the IPO, as described under “Organizational Structure—The Reorganization” in the Prospectus (the “Reorganization”), was accounted for as a reorganization of entities under common control. As a result, our consolidated financial statements recognized the assets and liabilities received in the Reorganization at their historical carrying amounts, as reflected in the historical consolidated financial statements of EELP. In addition, in connection with the Reorganization and the IPO, we entered into the Tax Receivable Agreement (the “TRA”) with Excelerate Energy Holdings, LLC (“EE Holdings”) and the George Kaiser Family Foundation (the “Foundation”) (or their affiliates) (together, the “TRA Beneficiaries”) pursuant to which we will be required to pay the TRA Beneficiaries 85% of the net cash savings, if any, that we are deemed to realize as a result of our utilization of certain tax benefits described under “Certain Relationships and Related Person Transactions—Related Person Transactions—Transactions in Connection with our Reorganization and Initial Public Offering—Tax Receivable Agreement” in our Proxy Statement on DEF 14A filed on April 17, 2023 (the “Proxy Statement”).

Also included in the Reorganization is our acquisition of all of the issued and outstanding membership interests in Excelsior, LLC and FSRU Vessel (Excellence), LLC (f/k/a Excellence, LLC) (collectively, the “Foundation Vessels”). The acquisition of Excelsior, LLC was accounted for as an acquisition of property and equipment at the completion of the Reorganization. The Foundation Vessels had historically been accounted for as finance leases in our historical financial statements. In 2018, EELP entered into an agreement with a customer to lease the Excellence vessel with the vessel transferring ownership to the customer at the conclusion of the agreement for no additional consideration. Historically, EELP, as a lessor, has accounted for the Excellence vessel contract with our customer as a sales-type lease in the consolidated balance sheet in accordance with Accounting Standards Codification 842, Leases. The Excellence vessel continues to be accounted for as a sales-type lease and thus did not result in an adjustment to property and equipment.

Public Company Costs

We have incurred and expect to continue to incur incremental, non-recurring costs related to our transition to a publicly traded corporation, including the costs of the IPO and the costs associated with the initial implementation of our Sarbanes-Oxley Section 404 internal control reviews and testing. We also expect to incur additional significant and recurring expenses as a publicly traded corporation, including costs associated with compliance under the Exchange Act, annual and quarterly reports to common stockholders, registrar and transfer agent fees, national stock exchange fees, audit fees, incremental director and officer liability insurance costs and director and officer compensation.

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How We Evaluate Our Operations

We operate in a single reportable segment. However, we use a variety of qualitative, operational and financial metrics to assess our performance and valuation. Among other measures, management considers each of the following in assessing our business:

Adjusted Gross Margin;

Adjusted EBITDA; and

Capital Expenditures.

Adjusted Gross Margin

We use Adjusted Gross Margin, a non-GAAP financial measure, which we define as revenues less direct cost of sales and operating expenses, excluding depreciation and amortization, to measure our operational financial performance. Management believes Adjusted Gross Margin is useful because it provides insight on profitability and true operating performance excluding the implications of the historical cost basis of our assets. Our computation of Adjusted Gross Margin may not be comparable to other similarly titled measures of other companies, and you are cautioned not to place undue reliance on this information.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. We define Adjusted EBITDA as net income before interest expense, income taxes, depreciation and amortization, accretion, non-cash long-term incentive compensation expense and items such as charges and non-recurring expenses that management does not consider as part of assessing ongoing operating performance. In the first quarter of 2023, we revised the definition of Adjusted EBITDA to adjust for the impact of non-cash accretion expense, which results in a metric that is consistent with how management will review performance going forward. Management believes accretion expense does not directly reflect our ongoing operating performance.

We adjust net income for the items listed above to arrive at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. This measure has limitations as certain excluded items are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. For the foregoing reasons, Adjusted EBITDA has significant limitations that affect its use as an indicator of our profitability and valuation, and you are cautioned not to place undue reliance on this information.

Capital Expenditures

We incur capital expenditures as part of our regular business operations. Capital expenditures are costs incurred to expand our business operations, increase efficiency of business operations, extend the life of an existing asset, improve an asset’s capabilities, increase future service of an asset, repair existing assets in order to maintain their service capability, and provide upkeep required for regulatory compliance. Costs related to prospective projects are capitalized once it is determined to be probable that the related assets will be constructed.

The tables below reconcile the financial measures discussed above to the most directly comparable financial measure calculated and presented in accordance with GAAP:

	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
	(In thousands)
FSRU and terminal services revenues	$	133,177			$	115,346			$	377,216			$	323,010
Gas sales revenues		142,294				687,915				541,683				1,694,853
Cost of revenue and vessel operating expenses		(49,190	)			(50,258	)			(156,646	)			(158,994	)
Direct cost of gas sales		(106,109	)			(658,320	)			(438,987	)			(1,606,695	)
Depreciation and amortization expense		(33,161	)			(24,648	)			(89,126	)			(72,687	)
Gross Margin	$	87,011			$	70,035			$	234,140			$	179,487
Depreciation and amortization expense		33,161				24,648				89,126				72,687
Adjusted Gross Margin	$	120,172			$	94,683			$	323,266			$	252,174

 

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	Three months ended September 30,								Nine months ended September 30,
	2023				2022				2023				2022
	(In thousands)
Net income	$	46,505			$	37,272			$	106,800			$	46,126
Interest expense		17,518				13,689				50,137				46,209
Provision for income taxes		8,188				233				25,503				11,752
Depreciation and amortization expense		33,161				24,648				89,126				72,687
Accretion expense		446				376				1,323				1,114
Restructuring, transition and transaction expenses		—				1,345				—				6,680
Long-term incentive compensation expense		1,129				328				2,560				598
Early extinguishment of lease liability on vessel acquisition		—				—				—				21,834
Adjusted EBITDA	$	106,947			$	77,891			$	275,449			$	207,000

 

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Consolidated Results of Operations

Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

	Three months ended September 30,												Nine months ended September 30,
	2023				2022				Change				2023				2022				Change
	(In thousands)												(In thousands)
Revenues
FSRU and terminal services	$	133,177			$	115,346			$	17,831			$	377,216			$	323,010			$	54,206
Gas sales		142,294				687,915				(545,621	)			541,683				1,694,853				(1,153,170	)
Total revenues		275,471				803,261				(527,790	)			918,899				2,017,863				(1,098,964	)
Operating expenses
Cost of revenue and vessel operating expenses (exclusive of items below)		49,190				50,258				(1,068	)			156,646				158,994				(2,348	)
Direct cost of gas sales		106,109				658,320				(552,211	)			438,987				1,606,695				(1,167,708	)
Depreciation and amortization		33,161				24,648				8,513				89,126				72,687				16,439
Selling, general and administrative		19,513				18,778				735				63,393				44,476				18,917
Restructuring, transition and transaction		—				1,345				(1,345	)			—				6,680				(6,680	)
Total operating expenses		207,973				753,349				(545,376	)			748,152				1,889,532				(1,141,380	)
Operating income		67,498				49,912				17,586				170,747				128,331				42,416
Other income (expense)
Interest expense		(13,926	)			(9,454	)			(4,472	)			(39,360	)			(24,308	)			(15,052	)
Interest expense – related party		(3,592	)			(4,235	)			643				(10,777	)			(21,901	)			11,124
Earnings (loss) from equity method investments		(550	)			625				(1,175	)			258				2,135				(1,877	)
Early extinguishment of lease liability on vessel acquisition		—				—				—				—				(21,834	)			21,834
Other income (loss), net		5,263				657				4,606				11,435				(4,545	)			15,980
Income before income taxes		54,693				37,505				17,188				132,303				57,878				74,425
Provision for income taxes		(8,188	)			(233	)			(7,955	)			(25,503	)			(11,752	)			(13,751	)
Net income		46,505				37,272				9,233				106,800				46,126				60,674
Less net income attributable to non-controlling interests		32,613				28,571				4,042				80,096				26,924				53,172
Less net loss attributable to non-controlling interests – ENE Onshore		—				(127	)			127				—				(545	)			545
Less pre-IPO net income (loss) attributable to EELP		—				—				—				—				12,950				(12,950	)
Net income attributable to shareholders	$	13,892			$	8,828			$	5,064			$	26,704			$	6,797			$	19,907
Additional financial data:
Gross Margin	$	87,011			$	70,035			$	16,976			$	234,140			$	179,487			$	54,653
Adjusted Gross Margin		120,172				94,683				25,489				323,266				252,174				71,092
Adjusted EBITDA		106,947				77,891				29,056				275,449				207,000				68,449
Capital expenditures		11,638				21,844				(10,206	)			304,426				63,874				240,552

Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Net income

Net income was $46.5 million for the three months ended September 30, 2023, an increase of $9.2 million, as compared to $37.3 million for the three months ended September 30, 2022. Net income was higher primarily due to higher rates on charters in Finland, Argentina, Brazil, and Germany partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($13.7 million), lower operating lease expense due to the acquisition of Sequoia ($7.1 million), higher direct margin earned on gas sales in Brazil and Bangladesh during the three months ended September 30, 2023 ($36.2 million), which exceeded direct margin earned on gas sales that occurred in Brazil during the three months ended September 30, 2022 ($29.6 million), and higher interest income received on cash balances invested in money market funds ($4.4 million), partially offset by an increase in the provision for income tax ($8.0 million), as discussed below, extended commissioning time for our power barge assets in Albania ($5.1 million), an increase in interest expense ($4.5 million), primarily due to the new Term Loan Facility, and an increase in depreciation and amortization expense ($3.4 million), primarily as a result of acquiring Sequoia and Excelsior in the second quarter of 2023 and 2022, respectively.

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Net income was $106.8 million for the nine months ended September 30, 2023, an increase of $60.7 million, as compared to $46.1 million for the nine months ended September 30, 2022. Net income was higher primarily due to higher rates on charters in Finland, Germany, Brazil and Argentina and a contract extension in the UAE, partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($36.3 million), the early extinguishment of the Excellence vessel finance lease liability as part of the vessel acquisition ($21.8 million), lower operating lease expense due to the acquisition of Sequoia ($15.3 million), higher direct margin earned on gas sales in Brazil and Bangladesh and new gas sales in Finland during the nine months ended September 30, 2023 ($102.7 million), which exceeded direct margin earned on gas sales that occurred in Brazil and New England during the nine months ended September 30, 2022 ($88.2 million), higher interest income received on cash balances invested in money market funds ($13.2 million), less interest expense – related party incurred in the nine months ended September 30, 2023 due to the acquisition of the Foundation Vessels ($7.9 million), improved utilization resulting in lower idle vessel costs in 2023 ($7.7 million), lower restructuring, transition and transaction expenses after the completion of our IPO in April 2022 ($6.7 million), one of our vessels coming off of suspension in the second quarter of 2022 ($5.6 million), and a decrease in foreign currency exchange losses ($3.2 million), partially offset by an increase in general and administrative expenses ($18.9 million), as discussed below, an increase in interest expense ($15.1 million), primarily due to the new Term Loan Facility, an increase in the provision for income tax ($13.8 million), as discussed below, an increase in depreciation and amortization expense ($10.4 million), primarily as a result of acquiring Sequoia and Excelsior in the second quarter of 2023 and 2022, respectively, and extended commissioning time for our power barge assets in Albania ($6.0 million).

Gross Margin and Adjusted Gross Margin

Gross Margin was $87.0 million for the three months ended September 30, 2023, an increase of $17.0 million, as compared to $70.0 million for the three months ended September 30, 2022. Adjusted Gross Margin was $120.2 million for the three months ended September 30, 2023, an increase of $25.5 million, as compared to $94.7 million for the three months ended September 30, 2022. Gross Margin and Adjusted Gross Margin were higher primarily due to higher rates on charters in Finland, Argentina, Brazil and Germany partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($13.7 million), lower operating lease expense due to the acquisition of Sequoia ($7.1 million), and higher direct margin earned on gas sales in Brazil and Bangladesh during the three months ended September 30, 2023 ($36.2 million), which exceeded direct margin earned on gas sales that occurred in Brazil during the three months ended September 30, 2022 ($29.6 million). The increase in Gross Margin was also offset by extended commissioning time for our power barge assets in Albania ($5.1 million) and an increase in depreciation and amortization expense ($3.4 million), primarily as a result of acquiring Sequoia and Excelsior in the second quarter of 2023 and 2022, respectively.

Gross Margin was $234.1 million for the nine months ended September 30, 2023, an increase of $54.6 million, as compared to $179.5 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, Adjusted Gross Margin was $323.3 million, an increase of $71.1 million, as compared to $252.2 million for the nine months ended September 30, 2022. Gross Margin and Adjusted Gross Margin were higher primarily due to higher rates on charters in Finland, Germany, Brazil and Argentina and a contract extension in the UAE, partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($36.3 million), lower operating lease expense due to the acquisition of Sequoia ($15.3 million), higher direct margin earned on gas sales in Brazil and Bangladesh and new gas sales in Finland during the nine months ended September 30, 2023 ($102.7 million), which exceeded direct margin earned on gas sales that occurred in Brazil and New England during the nine months ended September 30, 2022 ($88.2 million), improved utilization resulting in lower idle vessel costs in 2023 ($7.7 million), and one of our vessels coming off of suspension in the second quarter of 2022 ($5.6 million). The increase in Gross Margin was also offset by an increase in depreciation and amortization expense ($10.4 million), primarily as a result of acquiring Sequoia and Excelsior in the second quarter of 2023 and 2022, respectively, and extended commissioning time for our power barge assets in Albania ($6.0 million).

Adjusted EBITDA

Our Adjusted EBITDA was $106.9 million for the three months ended September 30, 2023, an increase of $29.0 million, as compared to $77.9 million for the three months ended September 30, 2022. Adjusted EBITDA was higher primarily due to higher rates on charters in Finland, Argentina, Brazil, and Germany partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($13.7 million), lower operating lease expense due to the acquisition of Sequoia ($7.1 million), higher direct margin earned on gas sales in Brazil and Bangladesh during the three months ended September 30, 2023 ($36.2 million), which exceeded direct margin earned on gas sales that occurred in Brazil during the three months ended September 30, 2022 ($29.6 million), and higher interest income received on cash balances invested in money market funds ($4.4 million).

Adjusted EBITDA was $275.4 million for the nine months ended September 30, 2023, an increase of $68.4 million, as compared to $207.0 million for the nine months ended September 30, 2022. Adjusted EBITDA was higher primarily due to higher rates on charters in Finland, Germany, Brazil and Argentina and a contract extension in the UAE, partially offset by the end of our contract in Israel in the fourth quarter of 2022 ($36.3 million), lower operating lease expense due to the acquisition of Sequoia ($15.3 million), higher direct margin earned on gas sales in Brazil and Bangladesh and new gas sales in Finland during the nine months ended September 30, 2023 ($102.7 million), which exceeded direct margin earned on gas sales that occurred in Brazil and New England during the nine months ended September 30, 2022 ($88.2 million), higher interest income received on cash balances invested in money market funds ($13.2 million), improved utilization resulting in lower idle vessel costs in 2023 ($7.7 million), one of our vessels coming off of suspension in the second quarter of 2022 ($5.6 million), and a decrease in foreign currency exchange losses ($3.2 million), partially offset by an increase in general and administrative expenses ($18.9 million), as discussed below.

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For more information regarding our non-GAAP measures Adjusted Gross Margin and Adjusted EBITDA, and a reconciliation to their most comparable GAAP measures, see “—How We Evaluate Our Operations.”

FSRU and terminal services revenues

FSRU and terminal services revenues were $133.2 million for the three months ended September 30, 2023, an increase of $17.9 million, as compared to $115.3 million for the three months ended September 30, 2022. FSRU and terminal services revenues were higher primarily due to the Exemplar charter beginning in Finland in the fourth quarter of 2022, Excelsior providing seasonal service in Argentina before redelivery to Germany at the end of the third quarter of 2023, and higher daily rates in Brazil and Argentina, partially offset by the end of our contract with Israel in the fourth quarter of 2022.

FSRU and terminal services revenues were $377.2 million for the nine months ended September 30, 2023, an increase of $54.2 million as compared to $323.0 million for the nine months ended September 30, 2022. FSRU and terminal services revenues were higher primarily due to the Exemplar charter beginning in Finland in the fourth quarter of 2022, seasonal service by Excelsior in Argentina before redelivery to Germany at the end of the third quarter of 2023, a contract extension in the UAE, and higher daily rates in Brazil and Argentina, partially offset by the end of our contract with Israel in the fourth quarter of 2022.

Gas sales revenues

Gas sales revenues were $142.3 million for the three months ended September 30, 2023, a decrease of $545.6 million, as compared to $687.9 million for the three months ended September 30, 2022. The decrease was primarily due to a reduction of natural gas sales volumes related to our terminal operations in Brazil, partially offset by LNG sales in Bangladesh during the three months ended September 30, 2023.

Gas sales revenues were $541.7 million for the nine months ended September 30, 2023, a decrease of $1,153.2 million, as compared to $1,694.9 million for the nine months ended September 30, 2022. The decrease was primarily due to a reduction of natural gas sales volumes related to our terminal operations in Brazil and of LNG sales at our terminal in New England during the nine months ended September 30, 2022, partially offset by LNG sales in Bangladesh during the nine months ended September 30, 2023 and Finland gas sales activity which commenced in the fourth quarter of 2022.

Cost of revenue and vessel operating expenses

Cost of revenue and vessel operating expenses was $49.2 million for the three months ended September 30, 2023, a decrease of $1.1 million, as compared to $50.3 million for the three months ended September 30, 2022. The decrease in cost of revenue and vessel operating expenses was primarily due to lower operating lease expense due to the acquisition of Sequoia, partially offset by positioning costs associated with seasonal service in Argentina.

Cost of revenue and vessel operating expenses was $156.6 million for the nine months ended September 30, 2023, a decrease of $2.4 million, as compared to $159.0 million for the nine months ended September 30, 2022. The decrease in cost of revenue and vessel operating expenses was primarily due to lower operating lease expense due to the acquisition of Sequoia, and improved utilization resulting in lower idle vessel costs in 2023, partially offset by positioning costs associated with seasonal service in Argentina.

Direct cost of gas sales

Direct cost of gas sales was $106.1 million for the three months ended September 30, 2023, a decrease of $552.2 million, as compared to $658.3 million for the three months ended September 30, 2022. The decrease was primarily due to a reduction of natural gas sales volumes related to our terminal operations in Brazil, partially offset by LNG sales in Bangladesh during the three months ended September 30, 2023.

Direct cost of gas sales was $439.0 million for the nine months ended September 30, 2023, a decrease of $1,167.7 million, as compared to $1,606.7 million for the nine months ended September 30, 2022. The decrease was primarily due to a reduction of natural gas sales volumes related to our terminal operations in Brazil and of LNG sales at our terminal in New England during the nine months ended September 30, 2022, partially offset by LNG sales in Bangladesh during the nine months ended September 30, 2023 and Finland gas sales activity which commenced in the fourth quarter of 2022.

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Depreciation and amortization expenses

Depreciation and amortization expenses were $33.2 million for the three months ended September 30, 2023, an increase of $8.6 million, as compared to $24.6 million for the three months ended September 30, 2022. Depreciation and amortization increased primarily due to the acquisition of Sequoia in the second quarter of 2023, extended commissioning time for our power barge assets in Albania, and the acquisition of Excelsior in the second quarter of 2022.

Depreciation and amortization expenses were $89.1 million for the nine months ended September 30, 2023, an increase of $16.4 million, as compared to $72.7 million for the nine months ended September 30, 2022. Depreciation and amortization increased primarily due to the acquisition of Sequoia in the second quarter of 2023, extended commissioning time for our power barge assets in Albania, accelerated depreciation recognized for assets removed from service on one of our vessels in the second quarter of 2023, and the acquisition of Excelsior in the second quarter of 2022.

Selling, general and administrative expenses

Selling, general and administrative expenses were $19.5 million for the three months ended September 30, 2023, an increase of $0.7 million, as compared to $18.8 million for the three months ended September 30, 2022. The increase was primarily due to increased compensation expense.

Selling, general and administrative expenses were $63.4 million for the nine months ended September 30, 2023, an increase of $18.9 million, as compared to $44.5 million for the nine months ended September 30, 2022. The increase was primarily due to incremental costs incurred in conjunction with our transition to a publicly traded company, expenses related to new contracts in Europe, and additional business development activities.

Restructuring, transition and transaction expenses

We had no restructuring, transition and transaction expenses for three and nine months ended September 30, 2023. Restructuring, transition and transaction expenses relating to the completion of our IPO in April 2022 were $1.3 million and $6.7 million for the three and nine months ended September 30, 2022, respectively.

Interest expense

Interest expense was $13.9 million for the three months ended September 30, 2023, an increase of $4.4 million, as compared to $9.5 million for the three months ended September 30, 2022. Interest expense increased primarily due to the new Term Loan Facility.

Interest expense was $39.4 million for the nine months ended September 30, 2023, an increase of $15.1 million, as compared to $24.3 million for the nine months ended September 30, 2022. Interest expense increased primarily due to the new Term Loan Facility, accelerated amortization of deferred issuance costs related to the Amended Credit Agreement, and increases in LIBOR and SOFR rates, partially offset by lower balances remaining on our finance leases and long-term debt.

Interest expense – related party

Interest expense – related party was $3.6 million for the three months ended September 30, 2023, a decrease of $0.6 million, as compared to $4.2 million for the three months ended September 30, 2022. Interest expense decreased primarily due to the acquisition of the Foundation Vessels in the second quarter of 2022.

Interest expense – related party was $10.8 million for the nine months ended September 30, 2023, a decrease of $11.1 million, as compared to $21.9 million for the nine months ended September 30, 2022. Interest expense decreased primarily due to the acquisition of the Foundation Vessels in the second quarter of 2022.

Early extinguishment of lease liability on vessel acquisition

In the nine months ended September 30, 2022, we incurred a $21.8 million expense as a result of the difference between the consideration given to acquire the Excellence vessel and the historical finance lease liability.

Other income (loss), net

Other income (loss), net was $5.3 million for the three months ended September 30, 2023, a variance of $4.6 million as compared to $0.7 million for the three months ended September 30, 2022. The variance was primarily due to higher interest income received on cash balances invested in money market funds.

Other income (loss), net was $11.4 million for the nine months ended September 30, 2023, a variance of $15.9 million as compared to $(4.5) million for the nine months ended September 30, 2022. The variance was primarily due to higher interest income received on cash balances invested in money market funds and lower foreign currency exchange losses related to our operations in Brazil.

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Provision for income taxes

The provision for income taxes for the three months ended September 30, 2023 and 2022 was $8.2 million and $0.2 million, respectively. For the nine months ended September 30, 2023 and 2022, the provision for income taxes was $25.5 million and $11.8 million, respectively. The increase was primarily attributable to the year-over-year change in the amount and geographical distribution of income.

The effective tax rate for the three months ended September 30, 2023 and 2022 was 15.0% and 0.6%, respectively. For the nine months ended September 30, 2023 and 2022, the effective tax rate was 19.3% and 20.3%, respectively. The effective tax rate was impacted by the geographical distribution of income and the varying tax regimes of jurisdictions.

Excelerate is a corporation for U.S. federal and state income tax purposes. Excelerate’s accounting predecessor, EELP, is treated as a pass-through entity for U.S. federal income tax purposes and, as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, our historical results of operations prior to the IPO do not include any provision for U.S. federal income tax for EELP.

The Company has international operations that are also subject to foreign income tax and U.S. corporate subsidiaries subject to U.S. federal tax. Therefore, our effective income tax rate is dependent on many factors, including the Company’s geographical distribution of income, a rate benefit attributable to the portion of the Company’s earnings not subject to corporate level taxes, and the impact of nondeductible items and foreign exchange impacts as well as varying tax regimes of jurisdictions. In one jurisdiction, the Company’s tax rate is significantly less than the applicable statutory rate as a result of a tax holiday that was granted. This tax holiday will expire in 2033 at the same time that our contract and revenue with our customer ends.

Net income attributable to non-controlling interest

Net income attributable to non-controlling interest was $32.6 million for the three months ended September 30, 2023, an increase of $4.0 million, as compared to $28.6 million for the three months ended September 30, 2022. The increase in net income attributable to non-controlling interest was primarily due to higher net income.

Net income attributable to non-controlling interest was $80.1 million for the nine months ended September 30, 2023, an increase of $53.2 million, as compared to $26.9 million for the nine months ended September 30, 2022. The increase in net income attributable to non-controlling interest was primarily due to higher net income and the addition of non-controlling interest related to owners of our Class B Common Stock after our IPO.

Net loss attributable to non-controlling interest – ENE Onshore

Net loss attributable to non-controlling interest – ENE Onshore was $(0.1) million and $(0.5) million for the three and nine months ended September 30, 2022. In October 2022, ENE Onshore merged with and into ENE Lateral.

Liquidity and Capital Resources

Based on our cash positions, cash flows from operating activities and borrowing capacity on our debt facilities, we believe we will have sufficient liquidity for the next 12 months for ongoing operations, planned capital expenditures, other investments, debt service obligations, payment of tax distributions and our announced and expected quarterly dividends and distributions, as described in “Dividend and Distribution Policy” in the 2022 Annual Report. For more information regarding our planned dividend payments, see Note 12 – Equity. As of September 30, 2023, we had $602.9 million in unrestricted cash and cash equivalents.

Our proceeds from the IPO in April 2022 were approximately $416.2 million, after deducting underwriting discounts and commissions, but before deducting IPO-related expenses of $7.6 million. Approximately $50.0 million of the IPO net proceeds were used to fund, in part, EELP's purchase of the Foundation Vessels. The remaining proceeds are expected to be used to fund our growth strategy, working capital, and other general corporate purposes.

In December 2021, we started importing LNG and selling regasified natural gas to Petrobras through the Bahia Terminal under an agreement which expires in December 2023. We also have imported and sold natural gas and LNG into other countries in which we operate. Some of the inventory purchases which we make to fulfill these sales could potentially exceed cash on hand at certain times. We plan to fund any cash shortfalls with borrowings under the EE Revolver. For more information regarding the EE Revolver, see Note 10 – Long-term debt to the Consolidated Financial Statements. Management believes the EE Revolver will provide sufficient liquidity to execute our contractual purchase obligations. In the event sufficient funds were not available under the EE Revolver, we would seek alternative funding sources.

We have historically funded our business, including meeting our day-to-day operational requirements, repaying our indebtedness and funding capital expenditures, through debt financing, capital contributions and our operating cash flows as discussed below. We expect that our future principal uses of cash will also include additional capital expenditures to fund our growth strategy, pay income taxes and make distributions from EELP to fund income taxes, fund our obligations under the TRA, and pay cash dividends and distributions.

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Any determination to pay dividends to holders of our common stock and distributions to holders of EELP’s Class B interests will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, covenant compliance, restrictions in our existing and any future debt and other factors that our board of directors deems relevant. In the future we may enter into arrangements to grow our business or acquire or invest in complementary businesses which could decrease our cash and cash equivalents and increase our cash requirements. As a result of these and other factors, we could use our available capital resources sooner than expected and may be required to seek additional equity or debt.

Cash Flow Statement Highlights

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

	Nine months ended September 30,
	2023				2022				Change
Net cash provided by (used in):	(In thousands)
Operating activities	$	195,274			$	(15,776	)		$	211,050
Investing activities		(300,325	)			(63,874	)			(236,451	)
Financing activities		193,305				355,733				(162,428	)
Effect of exchange rate on cash, cash equivalents, and restricted cash		(43	)			—				(43	)
Net increase in cash, cash equivalents, and restricted cash	$	88,211			$	276,083			$	(187,872	)

Operating Activities

Cash flows provided by operating activities increased by $211.1 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to:

Investing Activities and Capital Expenditures

Cash flows used in investing activities were primarily comprised of capital expenditures made for the purchases of property and equipment, which increased by $236.5 million for the nine months ended September 30, 2023, as compared to the same period in 2022. The increase was primarily due to the purchase of the Sequoia vessel and vessel upgrades made ahead of beginning service at the Inkoo Terminal in Finland.

Financing Activities

Cash flows provided by financing activities decreased by $162.4 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to proceeds of $412.2 million from the IPO sale of Class A Common Stock in 2022, $13.8 million less net borrowings on our long-term debt and Term Loan, $6.6 million of repayments on the Kaiser Note Receivable during the nine months ended September 30, 2022 and a $7.4 million increase in distributions to shareholders and joint venture partners, partially offset by $250.0 million in proceeds from the Term Loan Facility in 2023 and $25.0 million in cash payments in 2022 made as part of the early extinguishment of a lease liability related to the IPO transaction.

Debt Facilities

Revolving Credit Facility and Term Loan Facility

On April 18, 2022, EELP entered into a senior secured revolving credit agreement, by and among EELP, as borrower, Excelerate, as parent, the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the lenders and issuing banks thereunder made available the EE Revolver, including a letter of credit sub-facility, to EELP.

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The EE Revolver enabled us to borrow up to $350 million over a three-year term originally set to expire in April 2025.

Also, on April 18, 2022, the Company borrowed under the EE Revolver, on the closing day of such facility, and used the proceeds to repay the KFMC Note in full. The KFMC Note was terminated in connection with such repayment.

On March 17, 2023, EELP entered into an amended and restated senior secured credit agreement (“Amended Credit Agreement”), by and among EELP, as borrower, Excelerate, as parent, the lenders party thereto, the issuing banks party thereto and Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Agreement provides for, among other things (i) a new $250 million term loan facility (the “Term Loan Facility” and, together with the EE Revolver, the “EE Facilities”), (ii) an extension of the maturity date of the EE Revolver, (iii) an increase in the maximum consolidated total leverage by 0.50x to 3.50x, provided that, if the aggregate value of all unsecured debt is equal to or greater than $250 million, maximum consolidated total leverage increases to 4.25x, and (iv) collateral vessel maintenance coverage to be not less than the greater of (a) $750 million and (b) 130% of the sum of the total credit exposure under the Amended Credit Agreement. The EE Facilities mature in March 2027. Proceeds from the EE Revolver are intended to be used for letters of credit, working capital, and other general corporate purposes.

In April 2023, Excelerate purchased the FSRU Sequoia for $265 million using $250 million borrowed through our Term Loan Facility together with cash on hand. Concurrently with the purchase, the Company entered into interest rate swaps for the same notional amount as the Term Loan Facility. The purpose of the swaps is to hedge our exposure to fluctuations in SOFR related to borrowings on the Term Loan Facility. The interest rate swaps have maturity, payment and reset dates that align with those of the Term Loan Facility.

On September 8, 2023, EELP entered into an amendment to the Amended Credit Agreement (“First Amendment”). The First Amendment provides for, among other things (i) inclusion of commodity and foreign exchange swap termination value in the collateral vessel maintenance coverage test and (ii) an update to the ordering of payment applications in the event of default.

Borrowings under the EE Revolver bear interest at a per annum rate equal to the term SOFR reference rate for such period plus an applicable margin, which applicable margin is based on EELP's consolidated total leverage ratio as defined and calculated under the Amended Credit Agreement. The unused portion of the EE Facilities is subject to an unused commitment fee calculated at a rate per annum ranging from 0.375% to 0.50% based on EELP's consolidated total leverage ratio.

The Amended Credit Agreement contains customary representations, warranties, covenants (affirmative and negative, including maximum consolidated total leverage ratio, minimum consolidated interest coverage ratio, and collateral vessel maintenance coverage covenants), and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of amounts borrowed under the EE Facilities. As of September 30, 2023, the Company had issued $40.0 million in letters of credit under the EE Revolver. As a result of the EE Revolver’s financial ratio covenants and after taking into account the outstanding letters of credit issued under the facility, all of the $310.0 million of undrawn capacity was available for additional borrowings as of September 30, 2023.

As of September 30, 2023, the Company was in compliance with the covenants under its debt facilities.

Other Contractual Obligations

Operating Leases

We lease a terminal and offices in various locations under noncancelable operating leases. As of December 31, 2022, we had future minimum lease payments of $88.6 million. As of September 30, 2023, we had future minimum lease payments totaling $9.9 million and are committed to $2.7 million in year one, $3.9 million for years two and three, $2.0 million for years four and five and $1.3 million thereafter.

Finance Leases

Certain enforceable vessel charters and pipeline capacity agreements are classified as finance leases, and the right-of-use assets are included in property and equipment. As of December 31, 2022, we had future minimum lease payments totaling $307.3 million. As of September 30, 2023, we had future minimum lease payments totaling $282.4 million and are committed to $8.3 million in payments in year one, $66.5 million for years two and three, $66.5 million for years four and five and $141.0 million thereafter.

Newbuild Agreement Commitments

In October 2022, Excelerate signed a binding Shipbuilding Contract (the “Newbuild Agreement”) with Hyundai Heavy Industries for a new FSRU to be delivered in 2026. As part of the Newbuild Agreement, we currently expect to pay approximately $330 million, subject to adjustment. Related payments are due in five installments with the final installment due concurrently with the delivery of the vessel, which is expected in 2026. During the year ended December 31, 2022, we made the first installment payment of approximately $30.0 million. Our future payment commitments related to the Newbuild Agreement are expected to be approximately $50.0 million in 2024 and $250.0 million in 2025-2026.

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Venture Global SPA

In February 2023, we executed a 20-year LNG sales and purchase agreement with Venture Global LNG (the “Venture Global SPA”). Under the Venture Global SPA, Excelerate will purchase 0.7 MT per annum of LNG on a FOB basis from the Plaquemines LNG facility in Plaquemines Parish, Louisiana. Our purchase commitment will be based on the final settlement price of monthly Henry Hub natural gas futures contracts plus a contractual spread. Using Henry Hub natural gas futures pricing as of September 30, 2023, our average annual commitment is estimated to be approximately $255 million. The start of this commitment, however, is dependent on the LNG facility becoming operational, which is not expected in the next twelve months.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires significant judgments from management in estimating matters for financial reporting that are inherently uncertain. For additional information about our accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies” in the 2022 Annual Report and the notes to the audited financial statements included therein.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2022 Annual Report.

Recent Accounting Pronouncements

Refer to Note 2 – Summary of significant accounting policies, to the notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for information regarding recently issued accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In our normal course of business, we are exposed to certain market risks, including changes in interest rates, natural gas and LNG commodity prices and foreign currency exchange rates. In order to manage these risks, we may utilize derivative instruments. Gains or losses on those derivative instruments would typically be offset by corresponding gains or losses on the hedged item.

Interest Rate Risk

We have entered into long-term interest rate swap agreements in order to hedge a portion of our exposure to changes in interest rates associated with our external bank loans. We are exposed to changes in interest rates on our other debt facilities as well as the portion of our external bank loans that remain unhedged. We may enter into additional derivative instruments to manage our exposure to interest rates.

As of September 30, 2023, the fair value of our interest rate swaps was $8.0 million, compared to $2.3 million as of December 31, 2022. Based on our hedged notional amount as of September 30, 2023, a hypothetical 100 basis point increase or decrease in the three-month and six-month LIBOR and SOFR forward curves would change the estimated fair value of our existing interest rate swaps by $8.7 million.

Commodity Price Risk

In the course of our operations, we are exposed to commodity price risk, primarily through our purchases of or commitments to purchase LNG. To reduce our exposure, we may enter into derivative instruments to offset some or all of the associated price risk. During the three and nine months ended September 30, 2023, we utilized an immaterial amount of financial derivatives to hedge some of our commodity price risk. We did not hold any commodity derivative instruments as of September 30, 2023 or 2022.

Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar and the functional currency of each of our subsidiaries is the U.S. Dollar. Gains or losses due to transactions in foreign currencies are included in “Other income (expense), net” in our consolidated statements of income. Due to a portion of our expenses being incurred in currencies other than the U.S. dollar, our expenses may, from time to time, increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. Dollar and the Euro, Argentine Peso, Brazilian Real and the Bangladesh Taka. During the nine months ended September 30, 2023, we utilized an immaterial amount of financial derivatives to hedge some of our currency exposure. For the nine months ended September 30, 2023 and 2022, we recorded $(3.2) million and $(6.4) million, respectively, in foreign currency gains/(losses) in our consolidated statements of income. As of September 30, 2023, we held an immaterial amount of foreign currency swaps.

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Item 4. Internal Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, 2023.

Remediation of Previously Identified Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In preparation of our 2020 and 2019 financial statements to meet the requirements applicable for our 2022 IPO, we identified the following material weaknesses in our internal control over financial reporting which were previously disclosed in our Registration Statement on Form S-1 filed on January 7, 2022, each of which has been remediated as of June 30, 2023.

We did not design and maintain an effective control environment commensurate with public company financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls, accounting and tax knowledge, experience and training to appropriately analyze, record and disclose accounting matters commensurate with accounting and financial reporting requirements.

This material weakness contributed to the following additional material weaknesses:

These material weaknesses resulted in adjustments to selling, general and administrative expenses, cost of revenue and vessel operating expenses, provision for income taxes and related account balances and disclosures as of and for the years ended December 31, 2020 and 2019.

To remediate the material weaknesses, we designed and implemented new or enhanced controls and took other actions to improve our internal control over financial reporting, including:

We determined that the remediated controls described above are designed effectively and have operated for a sufficient period of time to appropriately address the material weaknesses described above. Additionally, management has concluded, through testing, that these controls are operating effectively and the material weaknesses described above were remediated as of June 30, 2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are a party to ongoing legal proceedings in the ordinary course of business. We do not believe the results of currently pending proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or liquidity.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in “Risk Factors” included in the 2022 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the three months ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(a) of Regulation S-K).

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Item 6. Exhibits.

Exhibit Number		Description
10.1		Amendment No. 1, dated August 9, 2023, to Stockholder’s Agreement, dated as of April 18, 2022, by and among Excelerate Energy, Inc., Excelerate Energy Limited Partnership and Excelerate Energy Holdings, LLC (Incorporated by Reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2023)
10.2*		First Amendment, dated September 8, 2023, to the Amended and Restated Senior Secured Credit Agreement, dated as of March 17, 2023, by and among Excelerate Energy Limited Partnership, Excelerate Energy, Inc., Wells Fargo Bank, N.A., as Administrative Agent, the other lenders party thereto and the other issuing banks party thereto
31.1**		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

** Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Excelerate Energy, Inc.
Date: November 9, 2023		By:	/s/ Dana Armstrong
			Dana Armstrong
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)

 

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