Excelerate Energy, a global leader in flexible LNG solutions, just reported another strong quarter, reaffirming its guidance for 2024. The company highlighted its "action-oriented growth strategy," focusing on acquiring regasification terminals, securing long-term LNG supply contracts, and investing in downstream natural gas infrastructure. While these strategies are certainly sound, one small detail buried within the Q1 2024 earnings call transcript suggests a potential game-changer that may have flown under the radar of most analysts: reliquefaction capability upgrades for their existing FSRU fleet.

During the Q&A session, CEO Steven Kobos casually mentioned "reliquefaction capacity modules" as a potential upgrade for their vessels. This seemingly innocuous statement could signal a bold move by Excelerate to further optimize its assets and potentially reshape the dynamics of the LNG market.

Reliquefaction, the process of converting natural gas back into LNG, has traditionally been a land-based operation. Installing reliquefaction modules on FSRUs would represent a significant shift, allowing Excelerate to offer an entirely new level of flexibility and value to their customers. Imagine an FSRU not just delivering natural gas to a specific location but also acting as a mini-LNG hub, able to receive excess gas, reliquefy it, and then ship it to other markets. This capability could unlock a multitude of opportunities for Excelerate, creating a powerful competitive advantage in the increasingly dynamic LNG landscape.

Why This is a Big Deal

Enhanced Flexibility and Responsiveness: With onboard reliquefaction, Excelerate's FSRUs would be able to adapt to fluctuations in gas demand and supply. If demand in one market dips, the FSRU could absorb excess gas, reliquefy it, and redirect it to a different location experiencing higher demand. This agility would make them invaluable partners for countries seeking to optimize their gas imports and manage price volatility.Unlocking New Markets and Opportunities: Currently, FSRUs are primarily used for gas imports. Onboard reliquefaction opens the door for FSRUs to be deployed in new and emerging markets, acting as floating LNG export terminals. This would be particularly attractive for countries with stranded gas reserves or those seeking to capitalize on short-term LNG supply opportunities. Imagine an FSRU stationed off the coast of Mozambique, receiving gas from onshore production facilities, reliquefying it, and then shipping it to Asian markets.Boosting Profitability and Contract Values: By offering this additional service, Excelerate could command premium day rates for its FSRUs, increasing profitability and enhancing shareholder returns. Furthermore, the added flexibility would make their vessels more attractive for long-term contracts, securing stable cash flows and potentially driving up the company's valuation.

The Numbers Tell a Story

While Excelerate hasn't provided specific financial projections for this potential upgrade, the implications are significant. Assuming they were to equip just half of their existing 10-vessel fleet with reliquefaction modules, the company could see a substantial increase in their adjusted EBITDA.

Hypothetical Scenario

If a reliquefaction upgrade allows Excelerate to increase its average day rate by just 10%, their annual EBITDA could jump by approximately $32 million. Considering their current market cap of $1.84 billion, this represents a potential value creation of almost 2%. Furthermore, the longer-term contracts that this added flexibility could attract would contribute to a higher valuation multiple, potentially driving share prices significantly higher.

EBITDA Trend Analysis

Let's look at Excelerate's reported adjusted EBITDA over the past few quarters:

The strategic implications of onboard reliquefaction are undeniable. If Excelerate successfully implements this strategy, it could position them not just as a provider of FSRUs but as the architect of floating LNG hubs, a role that could solidify their leadership in the global LNG market for years to come.

"Fun Fact: Did you know that Excelerate Energy pioneered the FSRU concept back in 2005? The company's innovative spirit is evident in its continuous pursuit of new technologies and solutions, exemplified by this potential move towards onboard reliquefaction."