Flex LNG Q3-2026 Video Webcast - FLEX LNG LTD

Explicit Guidance:

• Full Year 2024: Guidance remains unchanged from prior quarter: Revenues of $345–370 million; TCE of $73,000–$78,000 per day; Adjusted EBITDA of $255–280 million.
• 2024 Outlook Adjustment: Based on strong Q3 and one month remaining, full-year results are expected to land at the "mid to lower end" of the above guidance range due to current spot market conditions.
• OPEX: Full-year OPEX per day updated to $16,200 (previously $16,000), driven by higher costs related to travel and crew changes due to Middle East conflicts.
• Dividends: No forward dividend guidance provided; quarterly decisions are made by the Board. Current quarter dividend of $0.75/share declared (21st consecutive), payable December 10, 2024.

Business-Segment Outlook:

• Spot Market Exposure: Flex Volunteer expected to trade in the spot market into Q1 2025; Flex Artemis remains available for spot or new contracts.
• Fleet Availability: Flex Ranger expected to return to service in Q1 2025; currently marketing both Flex Volunteer and Flex Ranger for spot and new contract terms.
• Backlog: 48 years of minimum firm backlog (potential growth to 75 years if all options exercised).
• Vessel Utilization: Flex Freedom charter includes an extension option due later in Q3.
• Liquidity: Expect to free up ~$34 million in liquidity from new Jolco financing for Flex Enterprise, expected to close in Q4.

Market and Competitive Outlook:

• Spot Market Dynamics: Anticipates "choppy" market conditions over the next 12–18 months. Expect seasonal tightening and a gentle rise in spot rates in winter 2024, though historical seasonal peaks have not yet fully materialized.
• Supply Side (Newbuilds): Order book remains robust (~290 vessels, ~35% of existing fleet); 77 new contracts signed in 2024. Most newbuilds tied to long-term contracts (Qatar/others), mitigating immediate spot market dilution.
• Demand Drivers (2025+): Significant US export capacity ramp-up expected in H2 2025 (Port Arthur, Rio Grande, Venture Global CP2), adding ton-mile requirements.
• Regulatory/Trade Shifts: Anticipates potential surge in shipping demand in 2025 due to:
  • EU ban on Russian gas imports effective January 1, 2025, forcing demand for alternative US supply.
  • Normalization of Qatari exports via the Strait of Hormuz, which would likely remove Qatari-owned vessels from the spot market and increase scrap activity for older steamers/tri-fuels.
• Tonal Mile Effect: Increased US supply (Atlantic Basin) moving to Asia expected to generate positive ton-mile effects.

Macro / Industry Outlook:

• Geopolitics: Maintains "orange" risk level regarding elevated geopolitical risks and uncertainty in the Middle East (duration of conflicts, Qatari supply normalization).
• Weather Patterns: Anticipates potential impact from "Super Nino" (El Niño/La Niña cycle) in 2027, expecting mild/hot weather followed by cold snaps, increasing heating/cooling seasonality and demand.
• Regulatory/Transit Constraints: Panama Canal transit restrictions expected to persist due to El Niño heat, affecting shipping logistics.
• Interest Rates/FX: Expect to maintain a net hedge ratio of 70–75% into mid-2025. Average fixed interest rate on debt portfolio is 2.46% (notional $775M).
• Construction Costs: Newbuilding prices remain high (~$245M/ship), supporting value of modern existing tonnage.

Strategic Initiatives:

• Financing/Refinancing:
  • Signed new sale-and-leaseback for Flex Enterprise at attractive terms (SOFR + 25 bps) to address 2029 maturity.
  • Amended financing for Flex Artemis and Flex Amber: reduced margins (250 bps to 140 bps), extended repayment profiles, and reduced quarterly payments ($4.3M to $3.5M).
  • Continues to optimize funding to reduce cost of debt.
• Capacity Expansion: Monitoring new US capacity projects (Golden Pass, Port Arthur, Rio Grande, Venture Global CP2) entering market in 2025–2028.
• M&A/Restructuring: No active M&A guidance; focus remains on optimizing existing balance sheet and debt maturities.

Risks and Headwinds to Outlook:

• Market Softness: Persistent soft spot market and heavy schedule of new building deliveries expected to impact 2025 supply dynamics.
• Geopolitical Risks: Uncertainty regarding the duration of Middle East conflicts and timing of Strait of Hormuz reopening.
• Weather Volatility: Potential for adverse weather events impacting trading patterns and demand.
• Backlog Visibility: Downgraded to "orange" due to two vessels in spot market and potential increased spot exposure in 2025.
• Supply/Demand Imbalance: Need to balance incoming newbuild capacity against potential demand shocks from US exports and European sanctions.

Management Tone on the Future:

• Confidence Level: Moderate caution for the near term (12–18 months), describing the period as "choppy" with low expectations for immediate shipping volumes.
• Long-Term View: Maintains "full confidence" in the long-term structural demand story, supported by the third wave of US L&D export capacity.
• Hedging: Active management of RCF facilities and interest rate derivatives continues to provide financial stability despite spot volatility.

Miscellaneous:

• Dividend Policy: Board maintains "orange" level for market outlook, balancing this against strong revenue visibility, backlog, and financial position. No specific guidance on future dividend levels provided beyond quarterly assessment.
• Capex: No capex or dry dockings expected for the next 12–18 months; next major dry docking scheduled for 2028.
• Debt Maturity: Next significant debt maturity in 2029; board will evaluate refinancing opportunities if attractive terms arise before then.