Oct 21, 2021
Operator
Good morning, and welcome to the Chart Industries Inc. 2021 Third Quarter Results Conference Call.
All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session.
The Company’s release and supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting Chart’s website at www.chartindustries.com.
A telephone replay of today’s broadcast will be available following the conclusion of the call until Thursday, October 28, 2021. The replay information is contained in the Company’s press release.
Before we begin, the Company would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the Company’s earnings release and latest filings with the SEC.
The Company undertakes no obligation to update publicly or revise any forward-looking statements. I would now like to turn the conference call over to Jill Evanko, Chart Industries’ CEO.
Jill Evanko
Thanks, Gigi. Good morning, everyone.
And thanks for joining us today for our third quarter 2021 earnings call and update to 2022 outlook. With me today is Joe Brinkman, a Chart Industrial gas veteran, and now our CFO, who will take you through the quarterly results later in the call.
Today’s discussion is twofold and similar to what you’ve heard and certain from other companies. First, the near-term macro challenges that we faced in the third quarter, their impacts on our quarter and what actions we have and continue to take in order to manage through it and come out with a structurally higher margin profile, amidst, what we expect to be record setting years ahead.
And second, the continued strong broad-based order activity we’re seeing for which all indicators suggest underlying demand for our products will continue. So starting on Slide 4 of the supplemental deck that was released today.
Our third quarter 2021 orders of $350 million demonstrated continued demand across the business. And we’re significantly above our expectations coming into the quarter, which were around $300 million-ish, considering that we did not expect nor did we get any large liquefaction orders within the third quarter.
This quarter’s order level was 33% above the third quarter of 2020 and brings our year-to-date order levels 53% higher than the first nine months of 2020. Additionally, Specialty Products orders grew over 100% this quarter versus the third quarter of 2020, and over 150% for the year-to-date timeframes.
Cryo Tank Solutions has also shown impressive growth in these periods, growing 35% for the quarter and 53% for the nine months. Third quarter orders contributed to our fourth consecutive record backlog quarter, with backlog now over $1.1 billion.
Stepping up our confidence in our 2022 outlook, as well as now seeing a trend to quarterly consistency at this higher level of order activity. Pointing to the left hand side of Slide 4, which demonstrates what we believe is our expected new normal quarterly order levels.
What in pre-COVID and pre-clean energy times or 2016 through 2019 was an average of $238 million of orders a quarter is now consistently above $300 million a quarter. A few additional items to note around our order activity in the quarter.
We booked 60 orders in the third quarter that were greater than $1 million each and 152 of those this year. The third quarter was our second one in a row with 60 orders greater than $1 million.
We also had 20 first of a kind and orders with 65 new customers. Year-to-date through the third quarter 2021, all of our Specialty Products categories orders have exceeded their respective full year 2020 order levels.
So said differently in our first nine months of this year, those Specialty Products orders, all those categories are above the full 12 months of 2020. Q3 beverage orders were up 68% over Q3 of 2020, which is quick book and ship business and quoted with current material cost levels.
So a section of this business that has not experienced the margin erosion from escalating material costs. We are beginning to see somewhat of a recovery, albeit later than we had anticipated in our traditional oil and gas markets, inclusive of upstream and natural gas compression, evidenced by air cooled heat exchangers, having the two highest months of orders in the year of 2020 – 2021, excuse me, in August and September.
And the third quarter of 2021 being the highest order quarter of the year for air cooled heat exchangers. Another example of our products being agnostic to the molecule.
So we’re positioned to benefit as oil recovers while the energy transition continues. So now let’s turn to the details on the cost burdens and what actions have been taken to offset the expected continued drag from the entire than anticipated costs on Slide 5 and 6.
While we expect the third quarter of 2021 was the bottom in terms of the negative margin impact from these cost challenges as some of them have been completely mitigated while others persist and will gradually improve with offsetting actions taken. We expect subsequent quarters’ margin improves.
Yet, we also are tempering our next quarter outlook, both for sales timing shifts, as well as for the cost pressures. We previously indicated that we anticipated that in the third quarter 2021.
We would need to monitor whether material costs and availability were improving or getting worse and then respond quickly. Things did get worse in the quarter and despite the strong order and backlog growth, supply chain, labor and logistics issues weighed on our results.
We responded quickly with surcharges, additional price increases and operational cost reductions. Yet, none of our in-quarter actions were immediately impactful to margins within the quarter itself.
We are currently projecting the timing of backlog and pricing surcharges as well as normalized labor and operational efficiencies resulting thereof to result in a stair-step return to typical margins with step one of the staircase starting in Q4 and continuing through to Q2 2022, which is incorporated into our 2022 outlook. Let’s step back and get into the challenges and what we’ve done about them.
Slide 5, row one shows how material costs continued to rapidly increase in the third quarter of 2021, increasing another 12% in stainless steel, 18% in aluminum and 24% in carbon steel from June 30 to September 30. We implemented a broad price increase on July 1.
And giving a timing of our backlog and the in-quarter cost increases, we did not see much offset in Q3. Additionally, we added a surcharge to all new orders starting in the middle of the third quarter 2021 and have already issued another price increase in October 2021.
Our project based work allows for current material pricing in bid validity, so all of those quotations have also been updated as well. The second row shows the supply chain disruptions, whether port congestion, availability of drivers, trucks, containers, and materials.
Obviously, none of this is Chart specific and our teams did work to minimize the sales timing shifts due to supply chain disruption. This furthered though the grab of safety stock, where we could in turn impacting near-term free cash flow.
Speaking of availability of drivers and trucks, the third row shows an often less discussed, but highly disruptive unanticipated challenge that we faced from August 11th until October 7. Force majeure was issued to industrial gas customers, including us from our industrial gas supplier on nitrogen and argon allocations due to their need to respond to the resurgence of COVID-19 oxygen needs, in particular in the United States.
While we were in the privileged position to use one of our own cryogenic trucks from our leasing fleet and hire a certified driver through our distribution network to deliver gas to keep our production running. This disruption certainly added cost and inefficiencies to our operations.
On a positive note, this force majeure has been lifted as of October 7th and allocations are currently back to normal. Moving to Slide 6, row four, we face the issues of availability and cost of labor, including COVID-19 labor impacts.
We believe we have taken enough actions to not have the fourth quarter impacted by the labor challenges with the exceptions of the direct labor hourly wage increase, which is not temporary. And put in place in the third quarter in response to our need to retain and hire a significant number of production team members.
We hired 372 people in the quarter and over 98% are still with us. While we will continue to incur the wage increases, we also in the quarter utilized sign-on incentives, which negatively impacted expenses, but are not embedded into the base pay.
The second labor challenge, which has dramatically improved in October to-date was the resurgence of COVID-19 through our U.S. manufacturing facilities.
From August 1 to September 30, we had an average of 3.7% of our production workforce at key facilities in the United States out with COVID by week. Month-to-date in October, we have had very few direct labor in these shops out.
This created additional operational inefficiencies, changes to schedules and additional shifts with our direct labor covering different areas of the shop. We had two of our production facilities briefly disrupted by Hurricane Ida during the quarter with lost work time.
These were temporary impacts had no ongoing or permanent damage or impact. And finally, we anticipated and have planned for ongoing Chinese energy enforcement at our locations in China.
We have numerous mitigation strategies in place as needed, but at this time, our China operations will have weekly power supply of either five normal, two restricted or four normal, three restricted, which if the current situation remains throughout the quarter will allow us to hit our Q4 midpoint, China forecast borrowing no further restrictions. We’ve been continually responding to the material cost changes as well as the other cost changes through price increases in surcharge.
You can see on Slide 7, the increases to material costs on the top half of the slide since the beginning of the year increases of 33%, 40% and 65% in stainless aluminum and carbon steel, respectively are three main raw material categories. The first 20 days in October, we have seen stabilization in carbon and stainless steel, yet aluminum continues to increase in cost and decrease in availability given the situation with magnesium.
With that said, and before I get into the necessary pricing and surcharges we have put in place and the rationale for the differences between the approaches, let me address our comfort level on safety stock. As we’re aware since the beginning of the year, we have been adding safety stock where it makes sense, temporarily driving inventory balances higher than typical and thus impacting free cash flow.
Yet, this strategic decision has allowed us to not have had any material missed deliveries for our customers. For example, we’ve locked in certain one and two year contracts securing the first half of 2022 with cost savings compared to current levels, based on the timing of when we secured the inputs.
Regarding pricing, we did not anticipate material cost to increase as they did respectively from the end of Q2 to the end of Q3. When we saw this, we implemented a surcharge effective mid-quarter, in addition to the pricing changes implemented July 1 and the requoting of all material for open bids on projects with bid validity timing.
Even with these changes that was not enough to keep up with the rapidly accelerating costs. Therefore, we have implemented another price increase into effect for all new orders, which will be both temporary and permanent, depending on the product.
We’ve worked with and continue to work with our industrial gas customers that are under long-term agreements to assist us with utilizing the material cost pricing mechanism in those agreements more frequently, considering these inflationary times persist where a quarterly lag and the adjustment mechanism just isn’t effective in hyperinflationary times. And to our customers who have been fantastic to work with on this and support our longstanding relationships.
This mechanism will return to their regular schedule, whether quarterly or semi-annually as macro conditions temper. And big thank you to each of them that have been working with us to ensure we are able to deliver their product as desired, but do so without negative harm to our business.
And a second thank you to those who are working with pre-price increased backlog to appropriately support additional material path through costs for certain existing orders in our backlog. You will note that we have structured these increases in two different manners that’s on purpose.
The first is that some of our pricing will remain at higher levels after the cost situation tempers and returns to normal, which would be a typical action on our part periodically to adjust pricing. The second is around surcharges, which are temporary, albeit indefinitely temporary at this time.
So we will have certain price stickiness while being fair to our customers as they’re working to be fair us. I’m now going to hand it over to Joe to take you through our structural cost actions and the third quarter results before I talk about our 2022 outlook.
Joe Brinkman
Thanks Jill. Slide 8 shows certain organic structural costs and capacity actions.
What you see on the slide captures two goals. The first to operationally reduce costs and the second to ensure we have the appropriate capacity in the appropriate locations to meet our customers’ lead time demands.
On the left hand side of the page, you can see a subset of our cost reduction actions taken or underway in the third quarter. This is certainly not a comprehensive list.
We have consolidated our Tulsa air cooler production to our Beasley, Texas manufacturing location, creating a flexible manufacturing facility in our Tulsa location, which is in various stages of starting up depending on the product line. Adding the flexible lines in Tulsa gives us access to skilled talent and allows us to move bottleneck production from other locations.
For example, our move of vacuum insulated pipe and sub-assemblies from New Prague, Minnesota is complete and the associated benefits are anticipated to begin in the fourth quarter of 2021. The same Beasley location is set to house our Houston repair and services business, which over the course of the next few months will consolidate from our stand-alone Houston repair site.
You can see some of the other efficiency moves underway on the slide, both in the U.S. and in Europe.
Lastly, we continue to refine our SG&A structure with specific position eliminations taken in the quarter. On to Slide 9, third quarter 2021 sales of $328.3 million, increased over 20% over the third quarter of 2020 and organically 13.4%.
As a reminder, the third quarter of 2020 included approximately $25.6 million of Venture Global Calcasieu Pass sales and the second quarter 2021 had approximately $5 million. While the third quarter of 2021 had no associated big LNG revenue, excluding sales from the big LNG project in the respective periods, organic revenue increased 25.2% in the third quarter of 2021 when compared to the third quarter of 2020 and 13.6% year-to-date 2021 when compared to year-to-date 2020.
Third quarter 2021 sales included records and sequential quarterly growth in Specialty Products and Cryo Tank Solutions. CTS sales increased 14.7% sequentially from the second quarter of 2021 and 10% versus the same time last year.
While Specialty Products increased 9.5% sequentially from the second quarter of 2021 and 108.8% from the third quarter of 2020. Repair, Service & Leasing and Specialty Products comprised 49.7% of our total net sales.
The second quarter in a row at approximately 50% and compared to 34.1% for the full year of 2020. Our third quarter 2021 gross margin was negatively impacted by the cost yield described, reported gross margin as a percent of sales of 22.8% included one-time costs associated with facility startup costs, integration, restructuring and facility consolidation.
When adjusted for the one-time costs, adjusted gross margin as a percent of sales was 26.5%, reflecting the cost burden we experienced within the quarter from the rapidly increasing freight, supply chain and material costs. Adjusted gross margin as a percent of sales is flat to the third quarter of 2020, when excluding big LNG and a sequential decline from the second quarter of 2021.
The challenges were less impactful to the adjusted gross margin as a percent of sales for Specialty Products and Repair, Service & Leasing. Specialty Products adjusted gross margin as a percent of sales was just over 37%, consistent with the second quarter 2021 and indicative of the profile of that business.
The Specialty Products business is predominantly either project based pricing with near-term cost validity or product with faster book to ship timeframes, capturing more current costs in our ongoing pricing. Repair, Service & Leasing adjusted gross margin as a percent of sales of 28.7% included restructuring charges related to our decision to consolidate the Houston, Texas repair facility.
RSL adjusted gross margin was a sequential increase of 510 basis points in the second quarter of 2021, which had a low margin shipment from China backlog included in it. The most challenged gross margin and adjusted gross margin was in Heat Transfer Systems, given the heavy material content in the segment, lost production time and higher margin project based revenue recognition timing.
Sequential second quarter 2021 to third quarter SG&A increases are driven by the additions of L.A. Turbine and AdEdge.
Jill will talk about the next few quarters’ timing of cost offsets and larger project margin impacts in a moment. Slide 10 shows our third quarter and year-to-date adjusted non-diluted earnings per share of $0.55 and $2.09 respectively, including any activity on our mark-to-market of our investments, which was a net positive impact in the third quarter, as well as year-to-date.
Adjustments to earnings per share related to specific one-time costs for restructuring, severance costs, startup facilities and production lines, and other non-repeating items. We have not included add-backs from negative production or efficiency impacts from the challenges you hear about today, given that our guide anticipates certain continuance of them, as well as the timing around our expected offsets resulting from the structural actions you heard about.
In an effort to be more time sensitive, to prepare remarks and Q&A, we have included segment specific details, and first of a kind and new customer information in the appendix. Additionally, we frequently get the question of timing of the 10-Q filing.
We plan to file it later today.
Jill Evanko
Slide 10 does not mean that we’ll be giving quarterly guidance going forward, but rather we wanted to provide more specificity about the coming quarter. By way of background on how we thought about the fourth quarter, our team has built in some additional contingency in the sales and earnings outlook for the fourth quarter, compared to how we would normally guide assuming that the supply chain shipping and freight challenges might not improve.
On Slide 10, you can see the walk from our prior approximated internal sales forecast to the low end of our prior outlook range for the third and fourth quarters and that’s shown on row one. And the larger moving pieces in rows two through nine, which are not wholly comprehensive, but consolidate the largest movements, including timing of Heat Transfer System projects and backlog and notices to proceed.
These updates result in our updated low end of the sales range for the fourth quarter of 2021 of $370 million, the range is $370 million to $390 million for the fourth quarter. As mentioned, this is entirely due to projected revenue timing shifting to 2022, none of which is lost revenue.
Our new guidance results in expected 11% to 13% sales growth for the full year 2021 compared to 2020. Slide 11 shows our current 2021 outlook, which takes into account the macro challenges presented earlier, as well as the actions taken to date and the timing with which they offset those challenges given current information.
We anticipate that gross margin as a percent of sales increases in the fourth quarter 2021 in each segment except Cryo Tank Solutions, for which the third quarter as a reflective of the fourth quarter’s margin and backlog and lags due to the price timing. RSL and specialty products segment gross margin as a percent of sales increases are expected to be driven by the product mix and backlog and pricing increased timing, while we anticipate a slight increase in HTS margins as the result of larger project, higher margin specific sales.
Associated full year 2021 non-diluted adjusted EPS is expected to be in the range of approximately $2.75 to $3.10 on approximately 35.5 million weighted average shares outstanding. And this assumes a 19.5% effective tax rate, which is an increase from our prior estimate of 18%.
We expect the third quarter 2021 was bottom in terms of the negative margin impact in subsequent quarters are sequentially improved in particular as a result of the specific projects with margin visibility that will have material revenue recognized, the pricing and surcharges beginning to show in margins and generally higher volumes to assist in labor absorption. Yet as mentioned already, we need some contingency given the uncertain environment.
Moving to Slide 13, our full year 2022 outlook. Generally, we have good visibility to specific projects and anticipated continuance of the broad-based demand we have seen this year.
Record backlog supporting 2022 and price increase impacts. We are increasing our expected 2022 full year sales outlook to the range of $1.7 billion to $1.85 billion.
This revised guidance does not include any additional or new big LNG projects, although we are very bullish and we expect three of the U.S. Gulf Coast big LNG projects that already have approval to move to final investment decision in 2022.
Two of which we currently anticipate will hit our order book in the first half of the year. In a moment, I’ll share these potential dollar amounts for each of the big LNG projects and why our conviction has increased.
But to quickly walk you through the 2022 sales build up Slide 13. Row one shows our current backlog for scheduled 2022 shipments.
There’s some backlog that goes out to 2023 that has the potential to be shipped in 2022, but that’s not included here. Rows two and three show typical book and ships that would be expected to ship in 2022, given these assumed levels.
Rows four through six are specific small scale LNG projects that we had expected to be booked already, but due to timing shifts are now expected in the coming six months and the associated anticipated 2022 revenue impacts. And row seven provides a view of 2022 potential revenue based on booking additional liquefaction projects early in the year.
And lastly, row eight is the anticipated impact from the full year of the AdEdge and L.A. Turbine acquisitions.
Associated non-diluted adjusted EPS is expected to be in the range of $5.25 to $6.50 on approximately 35.5 million weighted shares outstanding. And this assumes a 19% effective tax rate.
And again, does not include any big LNG. With our current backlog visibility, we expect more linear typical sales by quarter in the year compared to this year where we had a distinct second half sequential increase.
Included in this thinking is that we anticipate the first half of 2022 includes a continued drag from the challenges we are currently experiencing along with the incremental offsets from the positive impact actions already taken to date. Now let’s step back and talk about the continued broad-based demand.
So the tale of two cities is being the second portion of what’s happening in the business. This continued broad-based demand supports our conviction, both of our strategy, as well as our future outlook.
We are differentiated by our molecule agnostic processes and equipment and we believe the energy transition will be a hybrid of solutions. All of which we will benefit from as well as benefiting from any recovery or rebound in traditional oil and gas.
So we’ve captured the three big tailwind buckets of what we believe will drive behavior the next decade on Slide 15 with the overarching trend being the public and private sector working toward more sustainable options. The International Energy Agency and their roadmap to net zero indicates that today’s climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050.
Another way to think of this is that if we don’t start now, even if you did everything in full force later this decade, it would be impossible for the world to catch up to accomplish these targets. Additionally, 90 countries have announced zero targets that 8% of global GDP, 82% of the world’s GDP now falls under CO2 regulation and 32 countries have government hydrogen strategies.
If you compared this to one year ago, the increases in these numbers is substantial and shows the evolution of the global mindset towards sustainability. There is increasing pragmatism also toward how we get there, while ensuring energy, resiliency and consistency as renewables grow and scale and infrastructure.
Natural gas is a key part of that. The third row on Slide 16 is important.
This goes to the immediate needs of energy without interruption and disruption, as well as bringing power in some case for the first time to populations and locations such as South Africa and India. The combination of the need for consistent energy and the desire for cleaner and greener answers will both benefit us.
So moving on to Slide 16 around our inorganic activity that we’ve done over the last 12 months and how it’s positioned us well with our full menu of clean process technologies and associated equipment. I won’t spend much time on this slide except to say that our portfolio across the nexus of clean, clean power, clean water, clean food and clean industrials is well established without the need for further inorganic activity.
Our customers can choose from our broad set of processes and equipment again, all which is molecule agnostic and technology agnostic. So they can choose a full solution or pick a component from our offering.
As a result of the inorganic additions over the past year completed at what we view as very reasonable valuations, we are now well positioned for this transition. Having the full solution set is beginning to contribute to, and expected to continue to grow our higher margin specialty products businesses.
Additionally, our inorganic businesses are on track with their integration activity and we expect less deal related and integration related costs in 2022. The acquisitions we have done over the past year are shown on Slide 17.
They’re substantially contributing to our backlog and will begin to flow through the P&L in a meaningful manner in 2022. The four acquisitions completed between October of 2020 and June of 2021 have a total purchase price of $105 million for all four, and have pulled in over $175 million of orders since their respective deal closed dates.
Additionally on the bottom left portion of this slide, you can see some of the other synergies from these combinations. And I point out in particular, the combination of BlueInGreen, AdEdge and Chart into ChartWater has gained a lot of early traction in what I believe to be – as I said, previously, our most underappreciated portion of specialty for growth in the years ahead, which is water treatment.
For example, AdEdge posted its best month of orders of 2021 in September, which was our first month of ownership. And treatment-as-a-service for water treatment and industrial applications grew by 62% since we acquired BlueInGreen last November.
Slide 18 shows our hydrogen activity, which continues to surpass our expectations as to the consistency of the strength of the order book, even without any liquefier orders in the quarter. We’ve booked approximately $200 million of hydrogen related orders this year so far in nine months.
We posted record hydrogen sales, gross profit and operating profit in third quarter, which in combination with our release of our commercially ready liquid onboard vehicle tank, and this introduction of our PSI – 1000 bar PSI hydrogen pump gives us confidence and potentially allows us to increase our near-term addressable market for hydrogen in the coming months/quarters. And this is a small but important piece of information because it shows the level of traction compared to where we were just 12 months ago.
One another bullets on the slide is delivering now, because we are a unique way to play hydrogen profitably now as well as not being wholly-dependent as hydrogen is the only winner in the energy transition. This is further supported by our current quotations on approximately $1 billion of potential hydrogen processing equipment work to over 325 customers and potential customers with over $500 million of that pipeline expected to have decision points between now and the end of the third quarter of 2022.
The pipeline includes trailer quotations for over 115 units for customers around the world, including Europe, North America, Korea and Australia. Approximately 30 fueling stations and dozens of liquefaction opportunities, including six that we anticipate may be awarded within the next six months.
We also booked in $9.7 million liquid hydrogen storage tank order in China in the third quarter of 2021. And we started the fourth quarter off with a 30 tonne per day hydrogen liquefaction engineering order in the U.S.
as well as an order for confidential project in Korea. These examples show that our geographic disbursement of hydrogen order activity has become much broader over the past few months, which is not just a positive for our business going forward.
It’s also a positive indicator for the global acceptance of hydrogen. Regarding hydrogen trailers, we’ve booked over 60 of them in the past 12 months and we shipped seven in the month of September.
An example of our capacity expansion toward exiting this year at a run rate of 52 trailers a year and we continue to work toward doubling that capacity in 2022. More and more of our customers are honing in on liquid hydrogen as the answer for heavy duty transportation ranging from trucks to trains to planes.
One example is Stoke Space Technologies, who purchased our hydrogen run take in the quarter. Another example is our partnership with Hyzon Motors for 1000 mile heavy duty Class 8 truck using that recently introduced liquid hydrogen onboard tank.
Slide 19 shows third quarter carbon capture activity. And I view this quarter as a catalyst for expectations of increasing activity and commercialized CCUS activity in the near-term.
Last year, I’d had indicated that our carbon capture was by year behind hydrogen in terms of its commercial activity, which turned out to be more like 18 months behind hydrogen given various market developments. But this quarters activities, which included our partnerships with TECO 2030, ionada and FLSmidth hitting on key markets that carbon capture will be a critical part of their decarbonization efforts included marine, cement, industrial and power.
We’re also notified recently of our $5 million U.S. Department of Energy funding award for SES’s cryogenic carbon capture technology to design, build commission and operate our process at Central Plains Cement Company, which is a wholly-owned subsidiary of Eagle Materials and doing this at their cement plant in Missouri.
The project will scale our CCC system to a capacity of 30 tonnes per day, while also demonstrating that the system captures more than 95% of the CO2 from the flue gas slip stream and produces a liquid CO2 stream that is more than 95% pure. We expect the purity to actually be above 99%.
And also meaningful in the quarter was an actual booking of an engineering order for our carbon capture offering from a publicly-traded industrial manufacturing company, producing materials for the heavy construction industry, as well as one engineering order for CCUS with KAUST in the Middle East. Both of these engineering work orders are expected to move to full carbon capture and storage project orders within the coming 12 months.
And finally, our SES carbon capture technologies was recognized by researchers at MIT and Exxon as the most competitive carbon capture solution with the determination that the cost to produce cement and capture CO2 using our CCC technology is 24% higher than producing cement with no CO2 capture. While other carbon capture technologies range from a 38% increase to 134% increase in the cost of producing cement and capturing CO2 versus producing cement and not capturing CO2.
So the ultimate takeaway here in this discussion is that 2030 carbon emission reduction goals cannot be accomplished without carbon capture and storage. So stay tuned as this market continues to grow.
An important topic and we discussed this briefly on our second quarter earnings call, but I’m going to spend a little more time in the details around LNG because our bullishness on impending big LNG notices to proceed has increased again in the past few weeks. And a subset of our commercial pipeline of potential orders related to LNG project work, which you can see on Slide 20 is also increasing.
As a reminder, we think of our LNG business in three buckets, the first infrastructure, including over the road trucks, fuel stations, transport, ISO containers, LNG by rail. The second small scale and utility scale projects and the third big LNG, which we don’t include in our guidance or outlook, but we have approximately $1 billion of potential bookings on the horizon over the next year, as these projects move ahead to final investment decision.
So LNG is kind of at the nice edge in the market with tightness of the supply/demand balance shifting the trend of shorter offtake contracts to an acceleration of long-term offtake agreements in particular, we’re seeing that on the U.S. Gulf Coast export terminal projects.
We anticipate three big LNG U.S. Gulf Coast export terminal projects to proceed to FID in 2022.
And as I said earlier, with expectations for two of the three progressing to orders for us in the first half of the year. None of these projects again have been booked into backlog at this point, and none of them are included in our 2022 outlook.
We conservatively anticipate Venture Global Plaquemines Phase 1, which is 10 million tonnes per annum to move ahead to FID in the first half, and note, I said conservatively anticipate. We also anticipate that this project will include over $135 million of Chart content.
And in the third quarter VG and the Polish Oil and Gas Company finalized an agreement under which PGNiG will purchase an additional 2 million tonnes from Venture Global for 20 years. Tellurian Driftwood Project Phase 1 which is a 11 million tonnes per annum and which we anticipate will include over $350 million of Chart content.
A signed sale and purchase agreements with Shell in the third quarter, resulting in the completion of LNG sales for their first two plants and intent to proceed to construction in early 2022. And Cheniere, whose Corpus Christi Stage 3 Project which we anticipate will include over $375 million of Chart content, announced last week that ENN LNG has agreed to purchase approximately 0.9 million tonnes per annum of LNG.
And in Cheniere’s words, marks another milestone in our efforts to contract our LNG capacity on a long-term basis in anticipation of an FID of Corpus Christi Stage 3, which we expect will occur next year. The second category of LNG small scale, we have two LOIs in hand for projects not yet booked that were a primary piece around our thinking of 2022 and you saw that in the walk.
These projects are for Eagle Jacksonville in Florida, and a utility scale project in New England. The New England project is awaiting approval from the city council and the council has had it on its agenda over the past few months meeting, but they run out of time at these meetings, which is incredible in and of itself.
But we’re hopeful that’ll be approved at the council meeting this afternoon and we expect notice to precede imminently thereafter. And finally, in the infrastructure category, we continue to see growth even coming off of records for LNG vehicle tanks, ISO containers and other associated equipment.
At the end of September, we were awarded a $19 million purchase order for a series of LNG by rail tender cars, our second of this magnitude in as many year years. Third quarter 2021 LNG over the road vehicle tank orders continued very strong over $33 million.
Bringing year to date 2021 orders to approximately $105 million higher than any full year in our history and included new customer orders in Poland and India indicating wider acceptance of LNG as a fuel during the energy transition. Finally, we were awarded an engineering study for a U.S.
ship owner as part of a planned conversion to LNG fuel gas propulsion of two American vessels in the coming quarters.
Joe Brinkman
As of September 30, 2021, our net leverage ratio was 2.99. On October 18 of 2021 we closed on our refinance, which improves terms as capacity spreads maturity of our instruments and reduces costs as shown on the left side – left hand side of Slide 2022 – sorry 22.
This $1 billion sustainably linked revolver increases our borrowing capacity on the revolver from $83 million to $430 million, eliminates 50 basis point floor on U.S. dollar borrowing, saving approximately $2.3 million annually at current borrowing levels and removes the cash hoarding provision from COVID-related restrictions.
For the first time in our history, we met the criteria for and in our debt instrument a sustainability linked offering with associated further cost savings tied directly to our achievement of greenhouse gas intensity reduction target over the next five years. The offering was committed at 150% of our targeted $1 billion by 100% of our existing bank group.
To conclude, you can see on Slide 23, some of the recognition of our ESG actions, including this quarter being named the Emissions Reductions Champion Organization of the Year by Gastech, as well as being a finalist in the Gastech awards category of Organisation Championing Diversity & Inclusion. Also last month, we were named finalist in S&P Global Platts Global Energy Awards for Corporate Social Responsibility.
Both Jill and I wanted to take a moment amid the challenging macroeconomic environment to thank our team members for staying focused, executing quickly on a variety of cost offset actions and continuing to generate increasing interest and demand in our unique portfolio of sustainable solutions and molecule agnostic offerings. With that, I will turn it over to Gigi to open it up for questions.
Operator
[Operator Instructions] Our first question comes from the line of Ben Nolan from Stifel. Your line is now open.
Ben Nolan
Yes. Thanks.
Hey, Jill.
Jill Evanko
Hey, Ben.
Ben Nolan
Combine two in here quick and then turn it over. First should be a quick one on the Corpus Christi Stage 3.
Is that number bigger than it used to be in terms of your content? It seems like it is just curious if there was some extra content that was maybe sold into that.
But then the other question is a little bit more thematic in that – obviously, it was a little bit of a challenging quarter. There were some things that you didn’t expect that really nobody expected that had an impact here.
But given your [Audio Dip] 2022, just trying to get a sense of what the wiggle room is there and do you feel like there’s – if things inevitably do sort of don’t go exactly according to plan, if there’s enough room in your numbers such that it’s already accounted for.
Jill Evanko
All right. Thanks, Ben.
So let me pull off the first answer around the Corpus Christi Stage 3. The number is there than it was previously.
And I would say also that this is the first time, which increases my confidence level, that the respective operators of the three projects that I described on big LNG all were comfortable with us putting our level of anticipated content out into the public domain. So that’s a positive.
And then directly answering your question, there’s been – always in the way that these projects work ongoing work in the background between the EPCs, the operators and Chart around structures what things are going to look like, what pieces go to get other. So there’s scope changes with respect to that which benefited us as well as simply the comment around re-quoting and re-pricing given the changes in the macro environment.
So those two were the drivers of the increasing content on that particular project. And then with respect to the 2022 question, the low end of the guide build in that wiggle room that you’re describing.
And the way that we think about this is sales being more evenly spread across the year. And you’ll still have that drag on margin in the first quarter, gets better in the second quarter.
And we have good visibility around the way those – that backlog that we have already flows out and where we get confidence that low end of the range and we’ve built a little bit of that wiggle room in that first half margin. In our thinking, again, we don’t guide quarterly.
So somebody will ask me that question. But the way that we think about that is, as we went through the details of our backlog in the first half of 2022, the most substantial portions of our backlog are in specialty products in Cryo Tank Solutions.
And in specialty, we see more resiliency around that ongoing margin level. And then also as Brinkman just commented, pieces and parts of our specialty that are quicker in terms of book and ship and have kept up with the pricing/cost left lag.
And then on the Cryo Tank Solutions in that backlog in the first half, we also have the majority of that in EMEA, which has a tighter mechanism of passing that price through. So those two things give us a good view toward the first half.
But the way I’d think about the year is much more evenly spread than 2021 has been with a step up in margin from Q4 to Q1, Q1 to Q2 and at a comfort level at the low end of that range.
Ben Nolan
Okay. I appreciate it.
Thanks Jill.
Jill Evanko
Thanks, Ben.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of John Walsh from Credit Suisse.
Your line is now open.
John Walsh
Hi. Good morning.
Jill Evanko
Hey, John.
John Walsh
Hey and a welcome to Joe as well.
Joe Brinkman
Thanks, John.
John Walsh
I guess, my – great. My first question, Jill is really, I mean, obviously the orders better than expected.
What can you call out that we – so that we can have confidence that those orders are going to translate into the profit we kind of all expect it will whether it be your 80-20 actions. I know with big LNG you had, IPSMR that made the margins higher.
Anything that you could give us to kind of that little bullet points around there would be helpful?
Jill Evanko
Yes, definitely. And I think the starting point being on the midsize projects, which are more in that $5 million to $50 million range, we’re seeing more and more of that activity happening and coming in through the order book.
And those projects we have very good visibility to the margins, tend to require more of our full solution offering, which is at higher – typically at higher margins because we’re providing the technology as well as the equipment. On the other side of the fence around the cost reduction activities and the ongoing efficiencies, we have hundreds of projects underway around that, but it’s really you could capture it in 80-20 around the activities that we’re doing on automation in certain shops as well as looking at the ability to make product in the right locations.
And so we’re well underway on that. And what I mean by that is there are certain locations that pieces and parts of our answers and our products are higher value content.
And then there’s others that we can churn through like a SKID as an example and do that in a more cost effective facility. And so we’re well down the path on doing that still room to optimize that as well ahead.
And so we have additional optimization and cost reduction operational actions that are underway that give us a little more headroom on the way we think about margin as well.
John Walsh
Great. And then I’ll ask the question, I’m curious to the answer.
But one of your, I guess customers had announced their intention to acquire competitive yours, particularly on the industrial gas side. I also believe on the cryogenic side, ACT.
Just wondering how you’re thinking about industry consolidation. There’s obviously only few players out there.
Some of these are very niche technologies, but we’d just love to get your thoughts on what that might mean going forward from a market perspective.
Jill Evanko
Definitely. And it’s interesting of late, we’ve seen a lot of interest in the industry which was anticipated and again makes me feel good about the valuations that we paid for the pieces and parts that we’ve added over the last 12 to 14 months.
With this specific ACT acquisition announcement from Plug Power, I’m going to address it in twofold first is that Plug continues to be a good partner to Chart a great customer. We do a lot with them across the value chain of providing liquefaction facilities and processes to the equipment side.
So it wasn’t a surprise to us that they would look for the ability to have given their amount of increasing need and forecasted increases to the trailer side, want to have that hydrogen trailer capability in-house. They’ve indicated to us even as of the announcement date of the acquisition, that they intend to continue to purchase equipment from us as well as liquefaction being a key part of that relationship.
We view the acquisition actually as a positive to implication to us. The reason we view it that way is on the industrial gas side of the house where we think Plug will prioritize hydrogen trailers in this particular business for themselves given their forecast.
And in turn, we have over 90% of the 115 plus trailers that we’re currently quoting on are with different customers than them. So if you think about that as well as the industrial gas regular liquid oxygen, liquid nitrogen, argon trailers, we anticipate that their ACTs IG customers are going to for alternative sources as well, and that’s a positive to our business.
So net-net we congratulate Plug on that. We’re thankful and appreciative of the ongoing relationship with them.
And we anticipate that they’ll be key part of our liquefaction business as well in the near-term.
John Walsh
Great. Appreciate the detailed responses.
I’ll pass it along.
Jill Evanko
Thanks, John.
Operator
Thank you. Our next question comes from the line of Marc Bianchi from Cowen.
Your line is now open.
Marc Bianchi
Hey, thanks. I wanted to talk about the order outlook here.
I know you’ve got the guidance there and how the orders that you expect to book flow into the revenue outlook. But we don’t see it that way when you report.
So what kind of quarterly order report number should we expect for fourth quarter and then, what would be embedded in the guidance for 2022?
Jill Evanko
Yes. So what we’ve implied here for the fourth quarter would be consistent to the third.
So I said, $350 million level and then into 2022 the range of the guide implies a $300 million to $325 million low end order activity and a kind of $375 million to $400 million per quarter at the high end. So when you think about kind of that range, the high end is going to be achieved when you have a quarter where you get a liquefaction project or a small scale terminal project something like that.
So that’s the key delta between the $325 million and the $375 million to $400 million is the more difficult to predict kind of middle size projects.
Marc Bianchi
And then just related to that, you got the $200 million of hydrogen orders so far this year, assume there’s going to be some more in fourth quarter. What does that number look like in 2022 based on – I mean, obviously, laid out the awesome opportunity there, but just if you risk adjust it.
Jill Evanko
Yes. Okay, so I’d answer it twofold in particular on the risk adjusted.
We’ve seen just astounding of hydrogen order activity that was beyond what I had anticipated in terms of its consistency throughout the year this year. We had – it kind of it was so new at the end of last year to being commercialized as an industry that it was hard to predict whether quarters were going to be consistent and they’ve been way more consistent than I had expected.
So I would very comfortably say that next year’s hydrogen order activity would be up somewhere in that 40% to 50% type of range. It could be considerably higher than that, but I’m not going to go there right now, because that really dependent on how these liquefaction plant projects progress.
The fact that we have six that we anticipate will move to decision and award in the next nine months that we’re currently quoting is a meaningful difference to kind of how it’s been earlier this year. But it’s still a new industry in terms of how it’s commercial behavior is.
So I’d be comfortable risk adjusted at that 40% up year-over-year.
Marc Bianchi
Okay. That’s great, Jill.
If I could just sneak one more in.
Jill Evanko
Sure.
Marc Bianchi
So it looks like you dropped the free cash flow guidance that we had previously for this year. And I’m curious what the thought process is with that.
And how should we think about free cash flow? I mean, we could kind of get an inference from what the EPS guidance implies.
Maybe it’s like $40 million to $50 million in the fourth quarter and $220 million to $260 million in 2022. Maybe if you could comment on that and if there’s any other stuff we should be considering.
Jill Evanko
Yes. And a good point on I should have addressed that we dropped that outlook simply because of the uncertainty around the material side and availability of the material side.
So we’ve had to kind of make a grab at safety stock where it even is able to be grabbed at higher levels than I had anticipated previously. So that was made it more difficult because we view this inventory grabbing as something that’s temporary, but hard to tell what fourth quarter is.
What I can say is that the fourth quarter what you just described I think is pretty darn accurate. There’s a couple of things I’d point out there’s a $20 million inbound receivable that had been anticipated to come the end of September and move to the fourth quarter as an inbound cash payment.
So that’s something that will benefit Q4 that we didn’t call out specifically. And then there’s also just around these larger project timings, which will more primarily impact 2022 from a benefit to free cash flow because we have – we get essentially better free cash flow off of these projects, like the NFE Fast project or the Plug liquefiers or the helium liquefiers for the Russian oil and gas customer.
So the profile will improve with the more activity that we have in that kind of mid project size range. I think your number you just implied for 2022 is certainly within the bands of how we’re thinking about it.
And we intend to come back around and provide what that’ll look like in 2022 as we come out of this year. Because we think we’ll have a better ability to give you an accurate number on that.
So, sorry for the long winded answer, Marc, I just wanted to give you some detail on our thinking.
Marc Bianchi
No, it was very helpful. Thanks so much.
I’ll turn it back.
Jill Evanko
Thank you.
Operator
Thank you. Our next question comes from the line of Ian Macpherson from Piper Sandler.
Your line is now open.
Ian Macpherson
Yes. Thanks.
Good morning, Jill. I was going to ask on that free cash flow as well.
I think that’s helpful. And then revisiting the stair step margin recovery point that you made earlier, we were previously eyeing sort of low 30’s gross margin on an enterprise level for next year, certainly by the middle of next year.
And now I guess, we walk up from Q3 to a higher destination. Is that still based on the initiatives that you have underway for recapturing pricing and efficiencies?
Is low 30’s consolidated gross margins still the right destination to think about to get to your guidance for next year?
Jill Evanko
It is. Yes.
And it’s interesting. We actually – thanks Ian for the question by the way.
Good morning. We actually kind of banter about how much specificity did we want to provide around kind of how that first half, second half gross margin percent of sales works.
But you’re absolutely still landing at the same place. I don’t see a ton of drama between the first half, second half, but kind of work your way up to that.
We’re still thinking on the full year, in that low 30’s, I think 30.5% to 31%, depending on how things flow out. We were kind of thinking 27.5% to 29% coming into the year, or sorry, starting the year, I shouldn’t say coming into you, because that would imply that for the fourth quarter.
Ian Macpherson
Great. Thanks.
My other ones were answered. I’ll pass it over.
Thank you.
Jill Evanko
Thank you.
Operator
Thank you. Our next question comes from the line of Eric Stine from Craig-Hallum.
Your line is now open.
Eric Stine
Hi, Joe. Hi, Jill.
Jill Evanko
Hey, Eric.
Eric Stine
So maybe just on the acquisition outlook in your commentary and the release you talk about that in 2022, you expect less deal related costs. I mean, is that commentary more related to just the wind down of costs associated with acquisitions you’ve done or is that a bit of a way of signaling that maybe in 2022 things quiet down a little bit on the M&A front?
Jill Evanko
It’s a way of signaling that we have what we felt like we needed to get to round out our full solution portfolio in the areas of our strategy and feature growth expectations. And we had indicated, I would say maybe it was September, October of 2020.
We had indicated and we saw kind of this 12 month window where we thought that evaluations would be reasonable and through our relationships that we can bring in the pieces and parts. That’s kind of proving itself out to be true.
We’ve looked at some deals recently that would be more opportunistic and felt that given the discipline around our investment approach and philosophy that that wasn’t the right time to go after those. So we’re signaling that there’s less that we need to have.
We feel really good about where we’re positioned and our jumping off point right now to achieve what we’ve got in the coming decade. But that doesn’t mean that we wouldn’t be opportunistic if something came along and we felt like it would be a nice addition to the portfolio.
More on the near-term to your question, there’s – we have always stated that we would like to over the course of time in full owned HTEC and Earthly Labs, those are the two of our minority investments that we would – we feel like we would have a lot of synergies by bringing them ultimately in-house. I think those over the course of time, that’s still in our thinking.
It’s just at what point are the owners ready to do that? As well as the structure of a deal like that.
We also have different thinking around the utilization of GTLS equity/cash and so on. But the upshot and way shorter answer is less M&A on the horizon for us given how we feel about what we currently have to achieve our strategy.
Eric Stine
Yes. Got it.
No, that’s great color. Thanks for that and maybe just one quick one on carbon capture.
I know the commentary that it’s what 18 months behind, but that you’ve been positively surprised just by the order activity. I mean, is that – is this still something where you think – I mean, is it any chance that you start to see some results in 2022?
Or is this still more of a one of the reasons why you think this is a – you expect revenues to be at record levels in each of the next four years?
Jill Evanko
Both. So I think that we will start to see a 1Z, 2Z type of more meaningful carbon capture project into the order book in 2022.
But it’s more about that. 2023, 2024, 2025, where I think it has meaningful impact to us.
My commercial guys tell me that are working on this particular facet of specialty, there’s an enormous amount of activity happening and quoting happening. It’s kind of staggered and maybe the best way to describe it is, it’s staggered on there’s pre-feed work, then there’s engineering work and then there’s the decision point that we’re going to pull the trigger to full construction on a carbon capture project.
Most of what we’re in right now is bucket one or two. And so I think in 2022, you’ll see a few couple – a couple few of these go to bucket three in that – in the order book, but more midterm.
Eric Stine
Okay. Thanks a lot.
Jill Evanko
Thanks Eric.
Operator
Thank you. Our next question comes from the line of Rob Brown from Lake Street.
Your line is now open.
Rob Brown
Good morning, Jill. I understand the bullishness on the demand environment or the order environment.
Are you seeing as you increase prices any weakening there? Or how much room do you have on pricing?
And what’s your risk sort of view on whether pricing will impact the order rates?
Jill Evanko
We have seen less noise in response to the pricing of late than what I would’ve anticipated, meaning that it’s been kind of a broadly, we need to have this conversation and that’s been accepted. And I think that’s because we’re not individually out in left field kind of going and doing this.
This is the environment that industry is operating in right now. And that’s also – and our thinking is from a long-term relationship perspective, that’s why we’re doing some of this as price increases that we intent to keep after things temper and some of it as just truly hyperinflationary response on the surcharges.
And that seems to be pretty well accepted. But what we’re also finding is those who are saying, I can’t take your price change or your surcharge we’re saying, we don’t want your work.
And there’s still enough work coming in to sustain the order levels that you’re seeing so far this year.
Rob Brown
Okay. Okay, great.
And then are you – on the repair service and leasing business, there’s sort of a dynamic pricing environment here, cause people to, to do more in that business or does that drive that business up or is there any connection there?
Jill Evanko
Certainly that’s that is what we’re hearing is that those who are saying, I’m good on original equipment for now, I’m going to pull something back into service that I already own. That is what we’re hearing.
We yet to see it but that’s what we’re getting feedback from, in particular, customers on the tank side as well as we had been seeing that on the air cooler side, yet now we’re seeing a reversal with oil prices where they are and this kind of dipping the toe in the water toward compression and midstream/upstream, starting to recover, so more so on the tank side.
Rob Brown
Okay. Thank you.
I’ll turn it over.
Jill Evanko
Thanks, Rob.
Operator
Thank you. Our next question comes from the line of Zach Schreiber from PointState.
Your line is now open.
Zach Schreiber
My questions have been asked and answered. I’ll follow up offline.
Thank you.
Jill Evanko
Thank you.
Operator
Thank you. Our next question comes from the line of Connor Lynagh from Morgan Stanley.
Your line is now open.
Connor Lynagh
Yes. Thanks.
Good morning all.
Jill Evanko
Hey Connor.
Connor Lynagh
I wanted to return to the 2022 outlook here and I think we’ve kind of approached this a couple different ways, but I appreciate this isn’t how you laid it on the slides. So just high level answers would be appreciated, but basically if I look at fourth quarter, that seems like a pretty clean base.
I don’t think you have a lot of really big discrete projects that you’ve talked about in that number. So that kind of gets you to about a $1.5 billion revenue run rate.
So basically, what I’m trying to understand is, in the guidance how much do you have in, just outright discrete projects that get you to that higher level, how much pricing are you expecting to realize, and then how much sort of volume is underlying the remainder there? Just – yes, appreciate any context you can provide on that.
Thanks.
Jill Evanko
Sure. Yes, no, totally makes sense.
I follow your question. So specific projects, there’s let’s see, we’ve got the existing ones in backlog, the four that we’ve spoken about before, which will have somewhere in the total impact of 60 to 70-ish, let’s say in 2022.
Then you’d have a few more on the small scale side, which combined add up to in total over $55 million of which the RevRec we’ve only incorporated a portion of that in there. But the specific project timing is the largest bucket of those three buckets that you’re describing.
There is an element of volume around the book and ship business that we anticipate is consistent to the order levels that we’ve seen and in the last couple of quarters and then the pricing which we’ve put in, we would prefer not to disclose specifics around the pricing in terms of what we did July, what we did mid-quarter and what we’ve done in October, but you could safely put a kind of a 10% on there.
Connor Lynagh
Okay, got it. That’s helpful context.
And then more on the cost side so obviously, you’ve had some relatively large restructuring costs and then I think you call out some other sort of what seemed to be supply chain related costs. So wondering if you could clarify what that ladder bucket is, basically what – why you’re calling it out, why you think it’s sort of non-recurring and what the outlook is for those different – those buckets of those non-recurring costs.
So there’s going to sort of mitigate as we move through the next few quarters here.
Jill Evanko
Yes. We anticipate that all of the add-back buckets mitigate as we move into 2022.
And yes, if you take deal in restructuring, it’s really my response to Eric Stine’s question around, there’s less M&A on our horizon. And we also are – every one of our acquisitions to-date is under various stages of its integration, but we’ll be coming out of that in the first half of 2022.
So we expect that’s the reason for less in 2022, around the other costs, we have the restructurings, we have startup costs around facility, green fields around the movements from Tulsa to Beasley, as well as from other locations into Tulsa. We have consolidations of product lines in Europe over to, from Italy to France, from Czech Republic to Italy.
We have other activities in India that are adding capacity, et cetera. So those are at very – again at various stages of completion, I would expect that bucket mitigates closer – mitigates/lowers, but does doesn’t go away in its entirety in 2022, but certainly mitigates by the middle of the year, because a lot of those projects have completion dates of Q4 and Q1 – Q4 2021 and Q1 2022.
And then you have specific one time around if we have severance for people if we had a specific structure of a particular sign-on to get someone to come join the company, things like that, that would be in that bucket. But we don’t expect, we don’t forecast an enormous amount of that going forward.
And other than that, those are kind of the, the broad brushes on those.
Connor Lynagh
Okay. Got it.
Thanks for the color. I’ll turn it back here.
Jill Evanko
Thank you.
Operator
Thank you. Our next question comes from the line of J.B.
Lowe from Citi. Your line is now open.
J.B. Lowe
Hey guys. Good morning.
Just a couple quick ones, the carbon capture engineering orders that you’ve got this quarter, are those on projects that you would expected to, perhaps in your previous expectations been able to actually book equipment orders this year or sometime next year or are those different projects?
Jill Evanko
No, those are a subset of the same projects and we still expect to anticipate to book equipment orders associated with those couple certainly in 2022. But there’s also few dozen other ones that are in stages that we aren’t really allowed to talk about, that we would anticipate a subset of those two move ahead probably later in the year of 2022 to order stage.
So no revenue impact in 2022 from those, but certainly order book impact.
J.B. Lowe
Okay. Is that the typical kind of cadence that you get the engineering side piece first before you get an actual equipment order?
Are we going to hear about the engineering things before the equipment orders on an ongoing basis, or should we just expect it to hear about actual bookings, sometimes the first time we hear about these projects?
Jill Evanko
Yes. You’re going to hear about the engineering orders first because in – okay, so twofold, you’ll hear about the engineering orders.
First in both larger liquefaction projects for hydrogen, as well as for carbon capture, because that’s truly a meaningful indicator in industry of a project getting to the serious point. So that’s an important decision point for the operator and that’s why those – we would typically disclose that because it gives you a better line of sight to the higher probability equipment orders.
But that’s going to be typical.
J.B. Lowe
Got you. Okay.
My other question was on, what’s going on in China right now in terms of power curtailments. How much revenue do – well, first question is, is any revenue that you’re missing from China was that also pushed into 2022?
And what’s the magnitude of that specifically from China?
Jill Evanko
Yes, it’s the minimus in terms of the push and you think about our China business, gosh, it used to be like kind of 80 million to 90 million, a year and I think this year we’re tracking to over 100 where our fourth quarter forecast there is in the, for external sales. And remember we do inter co-sales from that Chinese facility too, but external sales is kind of 30 million to 40 million in our fourth quarter forecast.
We use the midpoint of that at the kind of 35 mark. And assuming that we can keep this four days on regular power and three days disrupted power or ideally like we had last week five and two then our – the lady runs our Chinese business is just incredible.
She’s got it so under control that she can tell you if something’s going to move by the $100,000 revenue mark. So it was really about $0.5 million of timing shift from Q3 to Q4 in that business and the minimus from 2021 to 2022.
J.B. Lowe
Okay. Last question is just is on – again on the 2022 revenue bridge, you have about 40% of your expected revenue is going to be book and ship.
Is that typical for you guys? Is that higher than normal, lower than normal?
Jill Evanko
That would be pretty typical. I think what I would say is higher than normal in that is the amount of activity in the pipeline that 40% probability is being applied to.
And so if you were kind of risk adjusting that, that’s what would – I take that to the low end of the guide, the lower end of the guide.
J.B. Lowe
All right. Thanks.
Jill Evanko
Okay. Thanks J.B.
Operator
Thank you. Our next question comes on the line of Walt Liptak from Seaport.
Your line is now open.
Walt Liptak
Hi. Thanks.
Good morning, guys.
Jill Evanko
Hey, good morning, Walt.
Walt Liptak
Hi, a lot of detail. So I wanted to try and ask one from 50,000 feet, the oil and gas prices around the world have been going up and just generally, how does that impact Chart’s business now?
Is this good for your customers, bad this slow orders? Does it accelerate it?
And I’m thinking about hydrogen, carbon capture and then the traditional package gas or traditional energy customers.
Jill Evanko
Sure. Well, we could have a long conversation about this one.
So let me pluck it off. On the gas side, on the high natural gas pricing that has – we were watching that very carefully over the last couple of months to see if it had a delay impact on any of, kind of the LNG infrastructure ordering activity.
And that has not been the case. Our LNG infrastructure kind of risk that’s in our thinking is for anybody who’s doing a Class 8 commercial truck and that has ship shortages.
That would be more impactful than what we’re seeing on anybody’s response to changing their demand forecast because of nat gas prices. In terms of the oil part of the question, it’s a little more complex.
And what I say by that is, a few years ago, you’d say where oil price goes that’s going to drive activity and what used to be at $80 oil, you would see quite a bit of activity. We’re not seeing that same trend right now.
And so I’m more tempered on the way that higher oil price impacts our traditional customers ordering activity, I think a little bit of that is they’re not going to speculatively build anymore. And a little bit of that is impacted by the view toward how do I become cleaner?
How do I participate more in the energy transition? So I’m tempered that the oil price drives a ton of response in that sector, but certainly we’re seeing a slight recovery in activity there.
I can go in more detail on any particular area that you’d like on that, Walt.
Walt Liptak
Okay. No, I think that’s good.
I’ll leave it at that. Thank you.
Jill Evanko
Thank you.
Operator
Thank you. Our next question comes from the line of Craig Shere from Tuohy Brothers.
Your line is now open.
Craig Shere
Good morning. Thanks for fitting me in.
Jill Evanko
Hey Craig.
Craig Shere
Just a big picture question. I mean, honestly, it’s a little concerning at this level that you’d even temporarily have to worry about, sensing talent from labor’s side given the enormous growth you have ahead of you over the next three to five years.
Imagine labor markets although your outlook certainly brightens with an infrastructure bill and FIDs from Venture Global, Cheniere, Sempra and others. But that’s only going to tighten the labor market much further.
I know that in response to part of John’s question, you alluded to increased automation. But I just wonder if – to really fulfill the promise of your Specialty Products opportunity set, are there really enough engineers and welders out there period or do you really have to, at some point increasingly pay off for talent and poach people, or can you really automate this away?
Jill Evanko
So I would target the answer, not to the engineers side. We’ve had an enormous amount of success in bringing engineers into the business, in particular, as you described driven by the variety of different applications and markets that we play in.
And the engineers in cryogenics particularly love these types of applications that are unique that we have on the process side. So that’s not been an issue for us.
And we’re also seeing a trend of engineers leaving kind of their industry longer term roles and saying, hey, I want to go into something that has the potential for this much higher growth than the GDP style year-over-year. So I target my comments more around the manufacturing and the welding side, which was where my commentary was on wage increases.
I don’t think we’re alone in the need to increase the wages to retain talent. That’s something that we’ve seen across the board on industry and actually on average, we are still average on that side of things which is something that’s important.
We also have an incredible set of talent in our welding base that teaches incoming folks that don’t have the welding background, how to weld to our specifications and criteria, whether that’s TIG/MIG type of welding. And we have beef up that program through our welding council over the course of the last nine to 12 months where the welding council actually moves people between facilities and trains them so that we have the flexibility to move them.
We saw that in the third quarter where we had less work in our New Iberia, Louisiana facility. And we had about 50 people that moved between our Minnesota facility, as well as our Teddy Trailer facility to help out where we had higher demand.
So that’s another piece of the puzzle. Automation is a part of this and that’s – but that’s always been a part of this.
It’s always been a part of our thinking. It’s always been part of our ongoing productivity strategy, but at the end of the day, there’s some real specialized product that we make that requires specialized talent.
And we also have customers on the big LNG side that are – take Venture Global, these are repetitive cold boxes and heat exchangers. And part of the value to them is they get a standard repeated product.
And so we keep the same team that work on those particular projects together. So the answer is far more nuanced than I can give you in a two minute quick summary, but those are the high points.
Craig Shere
Great. Thank you.
Operator
Thank you. Our next question comes on the line of Vebs Vaishnav from Coker Palmer.
Your line is now open.
Vebs Vaishnav
Hey, good morning. How are you doing?
Jill Evanko
Hey, good morning, Vebs. Good.
How are you?
Vebs Vaishnav
Good. So maybe if I just think about LNG and you laid out these three projects, but one of your equipment peers talked about 100, 250 MTPA over next few years.
Can you help us frame like, if we think about that kind of opportunity over next few years, how should we think about your market share or what the potential opportunity could be for you?
Jill Evanko
Yes. We think about it in terms of the specific projects that we have been, I guess, I don’t know what the right term is awarded, but not yet booked and then walk it from there around how we build up our opportunity set.
And I think what we’re seeing and how I answer the question is, yes, there’s eight to 10 global projects that have gotten to the point where we think they’re going to move ahead over the coming few years. And that is a much smaller number than what you had pre-COVID because you had a lot of projects at various different stages and trying to grab pieces and parts of that whatever your MTPA forecast is.
So that’s been a good thing for the industry, because I think it’s really honed in on those who are going to move to construction. Of those eight to 10, we would have content on about 70% of those projects, but at varying different dollar content levels, we choose to talk about these three U.S.
Gulf Coast projects. And I would actually say, I’d call it four, because I think Plaquemines Phase 2, the other 10 million tons per annum is not that far behind.
But we choose to talk about those because we have much better line of sight to the activity around them, as well as to the dollar amount of our content, our anticipated content. So that’s really why but there’s certainly additional potential Chart content beyond what we talk, what we specifically called out on those, if that’s helpful.
Vebs Vaishnav
Got it. That’s helpful.
And maybe switching topic on inflation. So if could you remind us, see if I think about a hydrogen plant, how much is your revenue opportunity and then trying to think about what kind of inflation have we seen on those kind of opportunities?
Jill Evanko
Sure. So a hydrogen liquefaction plant for us and it depends on the size.
So at the low end, it’s going to be like a 10 ton per day. We see mostly in the quoting activities of the 15 ton per day, but we’re starting to see more activity on the 30 ton per day, the larger ones, just like the engineering award.
We won with Salisbury for the U.S. utility.
So on the 15 ton per day, those can range from $25 million to $50 million of Chart content. Again, it just really depends on kind of what the location is, where is it, et cetera, but a conservative average number to use for those is going to be in the low 30s per project.
Again, these are less inflationary sensitive because we quote with very narrow bid validity on the project in whole inclusive of material. And so that gives them a little bit more resilience than our standard product that’s just ordered as a component.
The bigger projects like a 30 ton per day can be somewhere between $45 million and $65 million of content is a pretty safe assumption to use on those.
Vebs Vaishnav
Got it. I guess, where I was going with was if I think about inflation and all the clean hydrogen project cost inflation, not specifically to you, because as you said the risk is pretty low for you guys, but just trying to think about inflation, if that’s – that you have seen any impact from this kind of inflation on those project conversations?
Jill Evanko
We have not to-date seen that impact on those conversations. Not to say that it won’t happen, but we’ve actually seen an increase in the conversations timelines to what they are forecasted award dates are.
And I’m not sure if that’s a function of we’re going to do it regardless and move it ahead, or if that’s just a function of getting more validity in the hydrogen industry as a whole. But haven’t seen yet the inflationary impact on timing of those.
Vebs Vaishnav
Right. That’s very helpful.
Thanks for taking question.
Jill Evanko
Thank you, Vebs.
Operator
Thank you. Our next question comes from the line of Atidrip Modak from Goldman Sachs.
Your line is now open.
Atidrip Modak
Hey Jill.
Jill Evanko
Yes, Ati.
Atidrip Modak
I knew that you spoke to some of the supply chain disruptions earlier, but could you help us understand, could you expand on the actions taken into the supply chain disruption that you highlight on Slide 5, specifically around the optionality, around localization and the safety stock and how that helps you with the margin recovery through 4Q and 2022?
Jill Evanko
Yes. So specifically to the safety stock and I would comment that this is the current area of that is on aluminum because that’s the biggest concern on availability and where we’re able to lock those down.
We do so and we’ve done that kind of over the last six months to try to keep costs in line with the current cost environment versus seeing potentially further increases. On the localization of the suppliers that cuts down on the increased freight cost, the increased container cost, et cetera.
If you look at just in the third quarter alone, container cost, this is a macro market, not a figure – not a chart-specific figure, but container cost using the container freight index in the quarter itself increased 34%. And so we would be basically eliminating sending things overseas, eliminating the potential for delays and keeping what we’re seeing as the current cost state level versus further degradation.
Atidrip Modak
Thanks. I’ll turn it over.
Jill Evanko
Thank you.
Operator
Thank you. This concludes today’s conference call.
Thank you for participating. You may now disconnect.