FLEX LNG Ltd. Q3 FY2024 earnings call

• Recently fixed Flex Resolute and Flex Courageous for 2029 to 2032 with options to 2039.
• One ship to be re-delivered in March next year.
• Completed three ship refinancings totaling $430 million, resulting in net proceeds of $97 million and a pro forma cash position of $450 million.
• Declared 13th consecutive ordinary dividend of $0.75 per share.
• Q4 expected to be softer due to a soft spot market affecting one ship on index, but backlog remains over 50 years minimum (potentially growing to 82 years).
• Market analysis: LNG export volumes growth, spot market conditions, steamship redeliveries and EEXI regulations, U.S. election impact on LNG projects.

In the third quarter, revenues were $90.5 million, with adjusted EBITDA of $70 million. For the 9 months, revenues totaled $265 million and adjusted EBITDA was $204 million. The time charter equivalent (TCE) rate for Q3 was $75,400, compared to the guidance range of $75,000 to $77,000. OpEx is guided to be around $15,000 for the full year. The full-year TCE is guided to be $75,000 per day, revenues $353 million to $355 million, and adjusted EBITDA $271 million to $274 million.

• Q4 revenues expected close to $90 million, down from Q3's $90.5 million due to a soft spot market affecting one ship.
• Full-year TCE guided to $75,000 per day, revenues $353-355 million, adjusted EBITDA $271-274 million.
• Continued dividend of $0.75 per share, with an attractive yield of 13% based on a $3 trailing 12-month dividend.
• Hedging portfolio adjusted significantly in September taking advantage of falling interest rates.

• Trade policy uncertainties, particularly regarding Trump's potential trade stance which could impact LNG trade.
• Spot market conditions remaining soft, affecting revenues in Q4.
• Redelivery of 75 steamships from long-term charters in the next 24 months, leading to potential scrapping and market rebalancing challenges.
• EEXI regulations posing challenges for older steamships, potentially leading to commercial obsolescence.
• Uncertainty around the impact of U.S. election trade policy changes on LNG import/export dynamics.

Q: What is the view on the options for Aurora and Volunteer?

A: Aurora and Volunteer are fixed until Q1 '26. We will be notified in end of next year whether options will be declared. The market is expected to start tightening in '27, and if options aren't declared, the ships will be back in 2026 with the term market firming up in '26 in anticipation of a tighter market from '27 onwards.

Q: How sustainable is the dividend?

A: We have $450 million in cash, don't need cash to run the business. Financial covenants require around $70 million cash, so we have a surplus. Even if we made no money, we could sustain the $0.75 dividend for 10 quarters. Interest rates are coming down, improving cash, and long-term rates are expected to firm up, supporting future dividends.

Q: What's the view on the Panama Canal and Suez Canal impact?

A: Panama Canal operations are back to normal but LNG shippers are avoiding it due to cost and flexibility. Suez Canal is seeing some activity but not regular transits for LNG; instead, it's used to supply Jordan and Egypt. Bypassing canals adds nautical miles but doesn't significantly increase ton mileage compared to new ship deliveries.