FLEX LNG Ltd. (NYSE:FLNG) Q4 2023 Earnings Conference Call February 7, 2024 9:00 AM ET Company Participants Øystein Kalleklev - Chief Executive Officer Knut Traaholt - Chief Financial Officer Conference Call Participants Øystein Kalleklev Hi, everybody and welcome to Flex LNG's Fourth Quarter and Full Year 2023 Presentation. I'm Øystein Kalleklev, CEO of Flex LNG management and I will be joined later today by our CFO, Knut Traaholt, who will run you to the numbers. As usual, we will conclude with a Q&A sess ...

[Interim Financial Information](index=1&type=section&id=Interim%20Financial%20Information) This section presents the company's unaudited interim financial results, operational performance, market insights, and detailed financial disclosures for the periods ended December 31, 2023 [Financial and Operational Highlights](index=2&type=section&id=Financial%20and%20Operational%20Highlights) For the fourth quarter of 2023, Flex LNG reported a net income of **$19.4 million**, with basic earnings per share of **$0.36**, Adjusted EBITDA stood at **$76.2 million**, and the company declared a quarterly dividend of **$0.75 per share**, while operationally, the charterer for Flex Resolute extended its contract, and the option for Flex Constellation was not utilized Q4 2023 Key Financial Metrics | Metric | Q4 2023 | Q3 2023 | | :--- | :--- | :--- | | Net Income | $19.4 million | $45.1 million | | Basic EPS | $0.36 | $0.84 | | Adjusted EBITDA | $76.2 million | $74.7 million | | Adjusted Net Income | $37.8 million | $36.1 million | | Adjusted Basic EPS | $0.70 | $0.67 | | Vessel Operating Revenues | $97.2 million | $94.6 million | | Average TCE Rate | $81,114/day | $79,207/day | - The Board of Directors declared a cash dividend of **$0.75 per share** for Q4 2023, payable around March 5, 2024[82](index=82&type=chunk) - In January 2024, the charterer of Flex Resolute extended the firm period by an additional **two years** to Q1 2027[88](index=88&type=chunk) - The charterer of Flex Constellation did not utilize its extension option; the vessel will be redelivered and marketed for new contracts after its scheduled dry-docking[87](index=87&type=chunk) [CEO Commentary](index=3&type=section&id=CEO%20Commentary) The CEO highlighted that the company successfully met its 2023 guidance for revenues, TCE rate, and Adjusted EBITDA, delivering revenues of **$371 million**, and despite anticipating a more challenging freight market in the next two years, the company is well-positioned with **94% charter coverage** for 2024 and a strong balance sheet, declaring a quarterly dividend of **$0.75 per share**, totaling **$3.125 per share** for 2023 - Delivered on all 2023 guidance: revenues of **$371 million** (vs. ~$370M guided), full-year TCE rate of **$79,500/day** (vs. ~$80,000 guided), and Adjusted EBITDA of **$290 million** (vs. $290-295M guided)[91](index=91&type=chunk)[92](index=92&type=chunk) - The company is well-positioned for a potentially challenging market with **94% charter coverage** for 2024 and a minimum firm charter backlog of **50 years**[93](index=93&type=chunk) - The Board declared a quarterly dividend of **$0.75 per share**, with total dividends for 2023 amounting to **$3.125 per share**, providing an approximate **11% annual yield**[94](index=94&type=chunk) [Business Update and Fleet Overview](index=4&type=section&id=Business%20Update%20and%20Fleet%20Overview) The company's firm contract coverage is **94%** for the remainder of 2024, with an aggregate firm contract backlog of **50 years**, potentially increasing to **71 years** with options, while technical uptime was **100%** in Q4 2023, and the fleet consists of **13 modern LNG carriers**, holding **$410.5 million** in cash and **$1,812.1 million** in long-term debt as of year-end 2023 - Firm contract coverage for the remainder of 2024 is **94%**, and the aggregate firm contract backlog is **50 years**, with the potential to increase to **71 years** if all charterer options are exercised[97](index=97&type=chunk) - Recent charter updates include the non-extension of Flex Constellation's charter, making it available in Q2 2024, and a **two-year extension** for Flex Resolute, securing its contract until Q1 2027[95](index=95&type=chunk)[96](index=96&type=chunk) Financial Position as of Dec 31, 2023 | Item | Amount (millions) | | :--- | :--- | | Cash, cash equivalents and restricted cash | $410.5 | | Total long-term debt | $1,812.1 | - The company has interest rate swap agreements with an aggregate net notional principal of **$720.0 million**, swapping floating rates to a weighted average fixed rate of **1.35%**[101](index=101&type=chunk) [Financial Results Analysis](index=5&type=section&id=Financial%20Results%20Analysis) This section provides a detailed comparison of financial performance, where for Q4 2023 versus Q3 2023, revenues increased to **$97.2 million**, but a loss on derivatives led to a lower net income of **$19.4 million**, and for the full year 2023 versus 2022, revenues grew to **$371.0 million** from **$347.9 million**, driven by higher charter rates, but higher interest expenses and lower gains on derivatives resulted in a decreased net income of **$120.0 million** for 2023 compared to **$188.0 million** in 2022 [Q4 2023 vs Q3 2023 Performance](index=5&type=section&id=Q4%202023%20vs%20Q3%202023%20Performance) In Q4 2023, vessel operating revenues rose to **$97.2 million** from **$94.6 million** in Q3, driven by higher spot market rates, but a significant loss on derivatives of **$11.6 million** (compared to a **$15.6 million** gain in Q3) due to falling forward interest rates caused net income to decrease to **$19.4 million** from **$45.1 million**, while Adjusted EBITDA increased slightly to **$76.2 million** Q4 2023 vs Q3 2023 Financial Comparison | Metric (in millions) | Q4 2023 | Q3 2023 | | :--- | :--- | :--- | | Vessel Operating Revenues | $97.2 | $94.6 | | Vessel Operating Expenses | $18.4 | $16.9 | | (Loss)/Gain on Derivatives | $(11.6) | $15.6 | | Net Income | $19.4 | $45.1 | | Adjusted EBITDA | $76.2 | $74.7 | [FY 2023 vs FY 2022 Performance](index=7&type=section&id=FY%202023%20vs%20FY%202022%20Performance) For the full year 2023, vessel operating revenues increased to **$371.0 million** from **$347.9 million** in 2022, due to improved long-term contracts and a stronger spot market, and despite higher revenues, net income fell to **$120.0 million** from **$188.0 million**, primarily due to a significant increase in interest expense (**$108.7 million** vs. **$76.6 million**) and a smaller gain on derivatives (**$18.3 million** vs. **$79.7 million**), with Adjusted EBITDA for 2023 at **$289.6 million**, up from **$272.3 million** in 2022 Full Year 2023 vs 2022 Financial Comparison | Metric (in millions) | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Vessel Operating Revenues | $371.0 | $347.9 | | Interest Expense | $108.7 | $76.6 | | Gain on Derivatives | $18.3 | $79.7 | | Net Income | $120.0 | $188.0 | | Adjusted EBITDA | $289.6 | $272.3 | - The Time Charter Equivalent (TCE) rate for FY 2023 increased to **$79,461 per day** from **$72,806 per day** in FY 2022[122](index=122&type=chunk) [Cash Flow and Balance Sheet](index=9&type=section&id=Cash%20Flow%20and%20Balance%20Sheet) As of December 31, 2023, the company's cash position was strong at **$410.5 million**, with net cash from operating activities in Q4 at **$54.3 million**, and total long-term debt increased to **$1,812.1 million** from **$1,714.7 million** at year-end 2022 due to refinancing activities, while total equity decreased to **$847.7 million** from **$907.1 million**, mainly because dividend payments of **$181.2 million** exceeded the net income of **$120.0 million** for the year - Net cash provided by operating activities was **$54.3 million** in Q4 2023, up from **$46.2 million** in Q3 2023[131](index=131&type=chunk) - Net cash used in financing activities was **$73.5 million** in Q4 2023, primarily due to dividend payments of **$47.0 million** and debt repayments[133](index=133&type=chunk)[167](index=167&type=chunk) - Total equity decreased from **$907.1 million** at YE 2022 to **$847.7 million** at YE 2023, as dividends paid (**$181.2M**) outpaced net income (**$120.0M**)[138](index=138&type=chunk) [LNG Market Update](index=11&type=section&id=LNG%20Market%20Update) The LNG market saw spot charter rates decline in Q4 2023 from their Q3 peak due to mild winter conditions, while global LNG trade volume grew **3%** to a record **412MT** in 2023, with the US leading exports, and China regaining its status as the world's largest LNG importer, with the market anticipating a tighter balance from 2026 onwards, and in 2024, approximately **14MTPA** of new export volume is expected, while **69 newbuild vessels** are scheduled for delivery, creating near-term supply pressure - LNG spot freight rates peaked in Q3 2023 and declined in Q4 due to mild weather, though they remained at elevated levels, averaging around **$93,000-$97,000/day** for 2023[140](index=140&type=chunk) - Global LNG trade volume reached a record high of **412MT** in 2023, a **3% increase**, with the US as the leading exporter, and China becoming the largest importer again[143](index=143&type=chunk)[144](index=144&type=chunk) - The LNG carrier fleet is growing, with **69 newbuilds** scheduled for delivery in 2024, compared to ~**14MTPA** of new export volumes expected to be added, suggesting potential near-term market softness[145](index=145&type=chunk)[147](index=147&type=chunk) - The Biden administration's halt on new LNG project approvals could risk delays for future Final Investment Decisions (FIDs), particularly for US-based projects[146](index=146&type=chunk) [Financial Statements](index=17&type=section&id=Financial%20Statements) This section contains the unaudited condensed consolidated financial statements for the periods ended December 31, 2023, including the Statements of Comprehensive Income, Balance Sheets, Statements of Cash Flows, and Statement of Changes in Equity [Condensed Consolidated Statements of Comprehensive Income](index=17&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Presents the company's revenues, expenses, and net income for the three months and year ended December 31, 2023, compared to the same periods in 2022 [Condensed Consolidated Balance Sheets](index=18&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and equity as of December 31, 2023, compared to September 30, 2023, and December 31, 2022 [Condensed Consolidated Interim Statements of Cash Flows](index=19&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Cash%20Flows) Outlines the cash flows from operating, investing, and financing activities for the three months and year ended December 31, 2023, and 2022 [Condensed Consolidated Interim Statement of Changes in Equity](index=21&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Changes%20in%20Equity) Shows the changes in the company's equity components, including share capital, treasury shares, and accumulated deficit, for the years ended December 31, 2023, and 2022 [Notes to the Interim Consolidated Accounts](index=23&type=section&id=Notes%20to%20the%20Interim%20Consolidated%20Accounts) This section provides detailed explanations and supplementary information for the line items presented in the consolidated financial statements, covering accounting policies, earnings per share, debt, financial instruments, related party transactions, and other key financial details [Note 3: Earnings per share](index=23&type=section&id=Note%203%3A%20Earnings%20per%20share) This note details the calculation of basic and diluted earnings per share (EPS), where for the year ended December 31, 2023, basic EPS was **$2.24** and diluted EPS was **$2.22**, and dividends paid per share for the full year totaled **$3.38** Earnings and Dividends Per Share | Per Share Data | Q4 2023 | Q3 2023 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.36 | $0.84 | $2.24 | $3.53 | | Diluted EPS | $0.36 | $0.84 | $2.22 | $3.51 | | Dividends Paid | $(0.88) | $(0.75) | $(3.38) | $(3.50) | [Note 7: Vessels and equipment, net](index=25&type=section&id=Note%207%3A%20Vessels%20and%20equipment%2C%20net) The net book value of vessels and equipment decreased from **$2,269.9 million** at the start of 2023 to **$2,217.3 million** at year-end, reflecting a depreciation charge of **$73.4 million**, partially offset by **$20.7 million** in additions for drydocks, with four vessels completing their first scheduled drydocks during 2023 Movement in Vessels and Equipment, Net (in thousands) | Description | Amount | | :--- | :--- | | Net Book Value at Jan 1, 2023 | $2,269,946 | | Additions (Drydocks) | $20,714 | | Depreciation Charge | $(73,359) | | Disposals | $0 | | **Net Book Value at Dec 31, 2023** | **$2,217,301** | - Flex Enterprise, Flex Endeavour, Flex Ranger, and Flex Rainbow all completed their first scheduled drydocks in 2023[11](index=11&type=chunk)[12](index=12&type=chunk) [Note 9: Long-term debt](index=27&type=section&id=Note%209%3A%20Long-term%20debt) As of December 31, 2023, the company's total long-term debt obligations amounted to **$1,812.1 million**, an increase from **$1,714.7 million** at the end of 2022, with the debt spread across various term loans and sale and leaseback facilities Long-Term Debt Summary (in millions) | Date | Total Long-Term Debt | | :--- | :--- | | Dec 31, 2023 | $1,812.1 | | Dec 31, 2022 | $1,714.7 | [Note 10: Financial Instruments](index=27&type=section&id=Note%2010%3A%20Financial%20Instruments) To manage interest rate risk, the company utilizes interest rate swap agreements, and as of December 31, 2023, these agreements covered an aggregate notional principal of **$720.0 million**, with the company recording a total gain on derivatives of **$18.3 million** for the full year 2023, comprising a **$25.0 million** realized gain and a **$6.7 million** unrealized loss - The company has interest rate swap agreements on an aggregate notional principal of **$720.0 million** as of December 31, 2023, to swap floating interest rates to fixed rates[15](index=15&type=chunk) Gain/(Loss) on Derivatives (in thousands) | Period | Change in Fair Value | Realized Gain/(Loss) | Total Gain/(Loss) | | :--- | :--- | :--- | :--- | | **Q4 2023** | $(18,673) | $7,051 | $(11,622) | | **FY 2023** | $(6,686) | $24,967 | $18,281 | [Note 16: Subsequent Events](index=33&type=section&id=Note%2016%3A%20Subsequent%20Events) Following the end of the fourth quarter, the charterer of Flex Constellation did not exercise its extension option, with the vessel expected to be redelivered in Q1/Q2 2024, and conversely, the charterer of Flex Resolute exercised a **two-year extension option**, extending the firm charter period to Q1 2027, while the Board declared a Q4 2023 dividend of **$0.75 per share** in February 2024 - In January 2024, the charterer of Flex Constellation did not utilize its extension option, and the vessel is expected to be redelivered in Q1 or early Q2 2024[43](index=43&type=chunk) - In January 2024, the charterer of Flex Resolute exercised its first extension option, extending the firm charter period by **two years** to Q1 2027[44](index=44&type=chunk) - On February 6, 2024, the Board of Directors declared a cash dividend of **$0.75 per share** for Q4 2023[45](index=45&type=chunk) [Non-GAAP Financial Measures Reconciliations](index=34&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliations) This section provides reconciliations of non-GAAP financial measures to their most directly comparable U.S. GAAP counterparts, including detailed tables for EBITDA and Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, Time Charter Equivalent (TCE) Income and Rate, and Operating Expenses (Opex) per day, which are used by management and analysts to assess performance [Reconciliation to EBITDA and Adjusted EBITDA](index=34&type=section&id=Reconciliation%20to%20EBITDA%20and%20Adjusted%20EBITDA) This reconciliation bridges Net Income to EBITDA and Adjusted EBITDA, where for the full year 2023, Net Income of **$120.0 million** reconciled to an EBITDA of **$306.1 million** and an Adjusted EBITDA of **$289.6 million** EBITDA and Adjusted EBITDA Reconciliation (FY 2023, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $120,039 | | Interest expense, net & other | $112,739 | | Depreciation | $73,363 | | **EBITDA** | **$306,141** | | Adjustments (Derivatives, etc.) | $(16,498) | | **Adjusted EBITDA** | **$289,643** | [Reconciliation to Adjusted Net Income and Adjusted EPS](index=35&type=section&id=Reconciliation%20to%20Adjusted%20Net%20Income%20and%20Adjusted%20EPS) This table adjusts Net Income for non-recurring or non-operational items like extinguishment costs of debt and changes in derivative values, where for the full year 2023, Net Income of **$120.0 million** was adjusted to an Adjusted Net Income of **$137.3 million**, resulting in an Adjusted Basic EPS of **$2.56** Adjusted Net Income Reconciliation (FY 2023, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $120,039 | | Extinguishment costs of long-term debt | $10,238 | | Change in assets/liabilities of derivative instruments | $6,686 | | Foreign exchange (gain)/loss | $350 | | **Adjusted net income** | **$137,313** | [Reconciliation to Time Charter Equivalent (TCE)](index=36&type=section&id=Reconciliation%20to%20Time%20Charter%20Equivalent%20(TCE)) This section defines and calculates Time Charter Equivalent (TCE) income and rate, a standard shipping industry metric, where for the full year 2023, vessel operating revenues of **$371.0 million** translated to a TCE income of **$369.3 million**, yielding an average TCE rate of **$79,461 per day** TCE Rate Calculation (FY 2023) | Metric | Value | | :--- | :--- | | Vessel operating revenues | $371,022 thousand | | Voyage expenses | $(1,678) thousand | | **Time charter equivalent income** | **$369,344 thousand** | | Fleet onhire days | 4,648 | | **Time charter equivalent rate** | **$79,461 / day** |

1 FLEX LNG Third Quarter 2023 Result Presentation FORWARD-LOOKING STATEMENTS THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION ARE BASED UPON VARIOUS ASSUMPTIONS, MANY OF WHICH ARE BASED, IN TURN, UPON FURTHER ASSUMPTIONS, INCLUDING WITHOUT LIMITATION, MANAGEMENT'S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA CONTAINED IN THE COMPANY'S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. ALTHOUGH FLEX LNG BELIEVES THAT THESE ASSUMPTIONS WERE REASONABLE WHEN MADE, BECAUSE THESE ASSUMPTIONS ARE INHERENT ...

[Executive Summary & Highlights](index=2&type=section&id=Executive%20Summary%20%26%20Highlights) [Q3 2023 Financial Highlights](index=2&type=section&id=Q3%202023%20Financial%20Highlights) Flex LNG Ltd. reported strong financial results for Q3 2023, with significant increases in vessel operating revenues, net income, and Time Charter Equivalent (TCE) rates compared to Q2 2023. The company also declared a substantial dividend, including a special dividend Q3 2023 vs Q2 2023 Key Financial Highlights | Metric | Q3 2023 ($M) | Q2 2023 ($M) | Change (%) | | :--------------------------- | :----------- | :----------- | :--------- | | Vessel Operating Revenues | 94.6 | 86.7 | 9.1% | | Net Income | 45.1 | 39.0 | 15.6% | | Basic Earnings Per Share | 0.84 | 0.73 | 15.1% | | Average TCE Rate (per day) | 79,207 | 77,218 | 2.6% | | Adjusted Net Income | 36.1 | 28.2 | 27.9% | | Adjusted EBITDA | 74.7 | 66.2 | 12.8% | | Adjusted Basic EPS | 0.67 | 0.53 | 26.4% | - The Company declared a dividend for **Q3 2023** of **$0.875 per share**, comprising a quarterly dividend of **$0.75** and a special dividend of **$0.125 per share**[23](index=23&type=chunk) [CEO Commentary & Outlook](index=3&type=section&id=CEO%20Commentary%20%26%20Outlook) The CEO highlighted strong freight income and healthy earnings, attributing revenue growth to full fleet operation post-drydocking and a stronger spot market. The company is on track to meet its annual revenue and Adjusted EBITDA guidance, with a positive long-term outlook for shipping market tightness from 2026 onwards - All **13 LNG carriers** were in full operation during **Q3** after completing the drydock program in **Q2**, leading to a **$7.9 million** increase in quarterly revenues to **$94.6 million**[34](index=34&type=chunk) - The company expects further revenue increase in **Q4** to **$97-99 million**, and is **on track to deliver annual revenue guidance of $370 million, Adjusted EBITDA of $290-295 million, and an average TCE guidance of $80,000 per day**[35](index=35&type=chunk) - The **LNG** product market is **expected to remain tight for the next two years** due to muted export growth, with **incrementally tighter shipping market conditions anticipated from 2026 onwards** as newbuilding deliveries peak at the end of **2025**[26](index=26&type=chunk) - The company recorded **$15.7 million** in gains on interest rate swaps in **Q3 2023**, consisting of **$6.7 million** realized and **$9 million** unrealized gains, bringing total gains since **early 2021** to **$128 million**[25](index=25&type=chunk) [Business Update & Fleet Overview](index=4&type=section&id=Business%20Update%20%26%20Fleet%20Overview) [Fleet Operations & Contract Coverage](index=4&type=section&id=Fleet%20Operations%20%26%20Contract%20Coverage) Flex LNG maintained high technical uptime across its fleet and has strong contract coverage for the remainder of 2023 and 2024, with a portion of its fleet exposed to the spot market through a market-linked contract and charterer options - **Technical uptime**, excluding drydocks, was **99.4%** for **Q3 2023** and for the nine months ended **September 30, 2023**[38](index=38&type=chunk) - The fleet has **100% contract coverage** for the remaining days in **2023** and **95% contract coverage (12.3 vessel years out of 13)** for **2024**[37](index=37&type=chunk) - The aggregate firm contract backlog for the fleet is **51 years**, potentially increasing to **77 years** with charterer options[37](index=37&type=chunk) - The company has **7.7%** and **12.7% exposure to the spot market** for the remainder of **2023** and **2024**, respectively, primarily due to the **Flex Artemis's** market-linked contract and options for **Flex Constellation**[38](index=38&type=chunk) [Fleet Details](index=4&type=section&id=Fleet%20Details) The company's fleet consists of 13 modern LNG carriers, built between 2018 and 2021, featuring advanced propulsion systems (MEGI, X-DF) and varying re-liquefaction capabilities, with charter expiration dates extending up to Q3 2030, and potential extensions to Q2 2033 Flex LNG Fleet Overview (as of November 8, 2023) | Vessel Name | Year Built | Shipyard | Cargo Capacity (cbm) | Propulsion | Boil off rate | Charter expiration | Expiration with Charterer options | | :----------------- | :--------- | :------- | :------------------- | :--------- | :------------ | :----------------- | :-------------------------------- | | Flex Endeavour | 2018 | DSME | 173,400 | MEGI+PRS | 0.075% | Q3 2030 | Q1 2033 | | Flex Enterprise | 2018 | DSME | 173,400 | MEGI+PRS | 0.075% | Q2 2029 | NA | | Flex Ranger | 2018 | SHI | 174,000 | MEGI | 0.085% | Q1 2027 | NA | | Flex Rainbow | 2018 | SHI | 174,000 | MEGI | 0.085% | Q1 2033 | NA | | Flex Constellation | 2019 | DSME | 173,400 | MEGI+PRS | 0.075% | Q2 2024 | Q2 2027 | | Flex Courageous | 2019 | DSME | 173,400 | MEGI+PRS | 0.075% | Q1 2025 | Q1 2029 | | Flex Aurora | 2020 | HSHI | 174,000 | X-DF | 0.085% | Q2 2026 | Q2 2028 | | Flex Amber | 2020 | HSHI | 174,000 | X-DF | 0.085% | Q2 2029 | NA | | Flex Artemis | 2020 | DSME | 173,400 | MEGI+FRS | 0.035% | Q3 2025 | Q3 2030 | | Flex Resolute | 2020 | DSME | 173,400 | MEGI+FRS | 0.035% | Q1 2025 | Q1 2029 | | Flex Freedom | 2021 | DSME | 173,400 | MEGI+FRS | 0.035% | Q1 2027 | Q1 2029 | | Flex Volunteer | 2021 | HSHI | 174,000 | X-DF | 0.085% | Q1 2026 | Q1 2028 | | Flex Vigilant | 2021 | HSHI | 174,000 | X-DF | 0.085% | Q2 2031 | Q2 2033 | - Propulsion systems include **MEGI** (M-type Electronically Controlled Gas Injection) and **X-DF** (Generation X Dual Fuel), with some vessels equipped with **Full (FRS)** or **Partial (PRS)** Re-liquefaction Systems[40](index=40&type=chunk) [LNG Market Update](index=11&type=section&id=LNG%20Market%20Update) [Spot & Time-Charter Rates](index=11&type=section&id=Spot%20%26%20Time-Charter%20Rates) LNG spot rates peaked in late September at $240,000/day due to Asian arbitrage and floating storage economics, then stabilized around $200,000/day. One-year time-charter rates for modern vessels decreased from $155,000-$160,000/day in early July to $120,000/day by quarter-end, with 2024 coverage assessed at $100,000/day - **Spot rates** for modern two-strokes reached a peak of **$240,000/day** in late September, a **150% increase** since the beginning of the quarter, before stabilizing at approximately **$200,000/day**[12](index=12&type=chunk) - **One-year time-charter rates** for modern two-stroke vessels dropped from **$155,000-$160,000/day** in early July to **$120,000/day** by the end of **Q3**, with current assessment for **2024** coverage at approximately **$100,000/day**[13](index=13&type=chunk) [Physical LNG Cargo Market](index=11&type=section&id=Physical%20LNG%20Cargo%20Market) The physical LNG cargo market experienced turbulence due to supply-related events, causing gas price volatility. JKM gas prices fluctuated, influenced by potential strikes in Australia, geopolitical tensions in the Middle East, and maintenance on Norwegian gas fields - **JKM** gas price fell to **$9.6 per MMbtu** in July but hovered around **$16/MMbtu** in **Asia** and **$14/Mmbtu** in **Europe** for December pricing[14](index=14&type=chunk) - Supply uncertainties from potential **Australian LNG** facility strikes, **Middle East** geopolitical tensions, and **Balticconnector** damage contributed to spot **LNG** price surges in **Asia-Pacific**[14](index=14&type=chunk) - Extended maintenance on **Norwegian gas fields** and concerns about colder **European** winter weather also influenced gas prices[15](index=15&type=chunk) [Vessel Orders & Global Trade Volumes](index=11&type=section&id=Vessel%20Orders%20%26%20Global%20Trade%20Volumes) LNG carrier orders slowed in Q3 2023, with only eight vessels ordered, the lowest since Q1 2021, due to high interest rates and newbuild prices. Global LNG trade volumes increased by 3% year-over-year, driven by robust Chinese imports and continued European buying, while US LNG exports also rose - **Eight LNG carriers** were ordered in **Q3 2023**, the lowest quarterly number since **Q1 2021**, with no speculative ordering[16](index=16&type=chunk) - Nine newbuilds were delivered in **Q3**, bringing the year-to-date total to **20**, with **15-16** more expected by year-end[16](index=16&type=chunk) - Newbuilding prices stabilized around **$265 million** for modern Korean-built ships with **2027/2028** delivery[64](index=64&type=chunk) - Global **LNG** trade volumes reached **~340mt** by end of October **2023**, a **3% increase** from October **2022**[65](index=65&type=chunk) - **Chinese LNG** imports increased by **~12%** year-to-date **2023**, while **US LNG** exports rose by **6mt**, mainly due to the restart of **Freeport**[65](index=65&type=chunk)[66](index=66&type=chunk) - **Qatar Energy** secured contracts for **11mmtpa** of capacity in recent weeks, including agreements with **TotalEnergies**, **Shell**, **Eni**, and **Sinopec**, all under **27-year contracts**[66](index=66&type=chunk) [Financial Performance - Quarterly (Q3 2023 vs Q2 2023)](index=5&type=section&id=Financial%20Performance%20-%20Quarterly%20%28Q3%202023%20vs%20Q2%202023%29) [Income Statement Overview](index=5&type=section&id=Income%20Statement%20Overview) Flex LNG reported increased vessel operating revenues in Q3 2023, primarily due to fewer drydocking days and higher spot market rates. Net income and earnings per share also saw significant improvements quarter-over-quarter Q3 2023 vs Q2 2023 Income Statement Highlights | Metric | Q3 2023 ($M) | Q2 2023 ($M) | Change ($M) | Change (%) | | :--------------------------- | :----------- | :----------- | :---------- | :--------- | | Vessel Operating Revenues | 94.6 | 86.7 | 7.9 | 9.1% | | Voyage Expenses | 0.4 | 0.8 | (0.4) | -50.0% | | Vessel Operating Expenses | 16.9 | 17.3 | (0.4) | -2.3% | | Administrative Expenses | 2.3 | 2.2 | 0.1 | 4.5% | | Depreciation | 18.7 | 18.3 | 0.4 | 2.2% | | Operating Income | 56.2 | 48.2 | 8.0 | 16.6% | | Interest Income | 0.9 | 1.3 | (0.4) | -30.8% | | Interest Expense | 27.5 | 27.2 | 0.3 | 1.1% | | Gain on Derivatives | 15.6 | 17.1 | (1.5) | -8.8% | | Foreign Exchange Gain/(Loss) | 0.1 | (0.1) | 0.2 | -200.0% | | Other Financial Items Expense| 0.2 | 0.3 | (0.1) | -33.3% | | Net Income | 45.1 | 39.0 | 6.1 | 15.6% | - The **increase in vessel operating revenues was primarily due to fewer offhire days from scheduled drydockings in Q3 2023 compared to Q2 2023, and an increase in spot market rates affecting the Flex Artemis's variable rate contract**[44](index=44&type=chunk) [Key Financial Metrics](index=6&type=section&id=Key%20Financial%20Metrics) Key financial metrics for Q3 2023 showed improvements across the board, with basic EPS, Adjusted EBITDA, and Adjusted EPS all increasing compared to the previous quarter, reflecting stronger operational performance Q3 2023 vs Q2 2023 Key Financial Metrics | Metric | Q3 2023 | Q2 2023 | Change | Change (%) | | :--------------------------- | :----------- | :----------- | :----------- | :--------- | | Basic Earnings Per Share | $0.84 | $0.73 | $0.11 | 15.1% |\n| Adjusted EBITDA | $74.7 million| $66.2 million| $8.5 million | 12.8% |\n| Adjusted Net Income | $36.1 million| $28.2 million| $7.9 million | 27.9% |\n| Adjusted Earnings Per Share | $0.67 | $0.53 | $0.14 | 26.4% |\n| Time Charter Equivalent Rate | $79,207/day | $77,218/day | $1,989/day | 2.6% | - The **gain on derivatives was $15.6 million in Q3 2023, including a net unrealized gain of $9.0 million, compared to $17.1 million in Q2 2023, which included a net unrealized gain of $10.9 million**. This was influenced by increasing short and long-term interest rates[18](index=18&type=chunk) [Financial Performance - Year-to-Date (9M 2023 vs 9M 2022)](index=7&type=section&id=Financial%20Performance%20-%20Year-to-Date%20%289M%202023%20vs%209M%202022%29) [Income Statement Overview](index=7&type=section&id=Income%20Statement%20Overview) For the nine months ended September 30, 2023, Flex LNG reported increased vessel operating revenues and improved TCE rates compared to the same period in 2022, driven by fixed-rate contracts and a stronger spot market. However, net income decreased due to lower gains on derivatives and higher interest expenses 9M 2023 vs 9M 2022 Income Statement Highlights | Metric | 9M 2023 ($M) | 9M 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :----------- | :----------- | :---------- | :--------- | | Vessel Operating Revenues | 273.8 | 250.0 | 23.8 | 9.5% | | Voyage Expenses | 1.5 | 2.3 | (0.8) | -34.8% | | Vessel Operating Expenses | 49.9 | 47.2 | 2.7 | 5.7% | | Administrative Expenses | 8.4 | 6.9 | 1.5 | 21.7% | | Depreciation | 54.6 | 54.0 | 0.6 | 1.1% | | Operating Income | 159.4 | 139.6 | 19.8 | 14.2% | | Interest Income | 3.9 | 0.9 | 3.0 | 333.3% | | Interest Expense | 81.1 | 52.1 | 29.0 | 55.7% | | Extinguishment Costs of Long-Term Debt | 10.2 | 14.4 | (4.2) | -29.2% | | Gain on Derivatives | 29.9 | 74.8 | (44.9) | -60.0% | | Foreign Exchange Loss | 0.6 | 1.9 | (1.3) | -68.4% | | Other Financial Items Expense | 0.6 | 0.4 | 0.2 | 50.0% | | Net Income | 100.6 | 146.6 | (46.0) | -31.4% | - Vessel operating revenues increased due to a higher proportion of the fleet on improved longer-term fixed-rate contracts and a stronger spot market, partially offset by scheduled drydockings[53](index=53&type=chunk) - Interest income increased significantly due to higher floating interest rates on cash and cash equivalents[4](index=4&type=chunk) - Interest expenses rose primarily due to the increase in floating interest rates[5](index=5&type=chunk) [Key Financial Metrics](index=8&type=section&id=Key%20Financial%20Metrics) Year-to-date, basic earnings per share decreased, but Adjusted EBITDA and Adjusted net income showed growth, indicating improved operational performance when excluding non-recurring and non-cash items 9M 2023 vs 9M 2022 Key Financial Metrics | Metric | 9M 2023 | 9M 2022 | Change | Change (%) | | :--------------------------- | :----------- | :----------- | :----------- | :--------- | | Basic Earnings Per Share | $1.87 | $2.76 | ($0.89) | -32.2% |\n| Adjusted EBITDA | $213.4 million| $193.3 million| $20.1 million| 10.4% |\n| Adjusted Net Income | $99.5 million| $96.2 million| $3.3 million | 3.4% |\n| Adjusted Earnings Per Share | $1.85 | $1.81 | $0.04 | 2.2% |\n| Time Charter Equivalent Rate | $78,888/day | $69,809/day | $9,079/day | 13.0% | - The gain on derivatives decreased significantly from **$74.8 million** in **9M 2022** to **$29.9 million** in **9M 2023**, primarily due to a lower net unrealized gain (**$12.0 million** in **9M 2023** vs **$76.1 million** in **9M 2022**)[6](index=6&type=chunk) [Financial Position & Cash Flow](index=9&type=section&id=Financial%20Position%20%26%20Cash%20Flow) [Balance Sheet Summary](index=9&type=section&id=Balance%20Sheet%20Summary) As of September 30, 2023, total equity decreased compared to December 31, 2022, mainly due to dividend payments offsetting net income. Total long-term debt increased, influenced by new drawdowns and prepayments Balance Sheet Highlights (as of September 30, 2023) | Metric | Sep 30, 2023 ($M) | Dec 31, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Total Equity | 874.9 | 907.1 | (32.2) | -3.5% | | Net Book Value of Vessels & Equipment | 2,235.9 | 2,269.9 | (34.0) | -1.5% | | Total Long-Term Debt | 1,838.0 | 1,714.7 | 123.3 | 7.2% | | Current Portion of Long-Term Debt | 103.6 | 95.5 | 8.1 | 8.5% | | Cash, Cash Equivalents & Restricted Cash | 429.5 | 332.4 | 97.1 | 29.2% | - The **decrease in total equity was primarily due to $134.2 million in dividends paid, partially offset by $100.6 million in net income and $1.4 million from share-based compensation**[10](index=10&type=chunk) - The net book value of vessels and equipment decreased due to **$54.6 million** in depreciation, partially offset by **$20.5 million** in drydocking additions[28](index=28&type=chunk) [Long-Term Debt & Financing Activities](index=9&type=section&id=Long-Term%20Debt%20%26%20Financing%20Activities) The company's long-term debt increased due to significant drawdowns from various facilities and sale and leaseback agreements, while also undertaking substantial prepayments and regular debt repayments - **Material factors increasing long-term debt included drawdowns of $290.0 million, $180.0 million, and $330.0 million from various facilities and sale and leaseback agreements**[29](index=29&type=chunk) - **Material factors decreasing long-term debt included regular repayments of $84.4 million and prepayments of $136.9 million (Flex Amber Sale and Leaseback) and $458.5 million (Flex Freedom, Flex Vigilant, Flex Artemis, Flex Aurora tranches)**[31](index=31&type=chunk) - As of **September 30, 2023**, the company had interest rate swap agreements with an aggregate net notional principal of **$720.0 million**, with a weighted average fixed interest rate of **1.35%** and a weighted average duration of **3.6 years**[42](index=42&type=chunk) [Cash Flow Activities](index=9&type=section&id=Cash%20Flow%20Activities) Net cash provided by operating activities increased in Q3 2023 compared to Q2 2023, driven by higher net income after non-cash adjustments and a drydocking credit. Net cash used in financing activities remained stable, primarily for debt repayments and dividend payments Q3 2023 vs Q2 2023 Cash Flow Highlights | Metric | Q3 2023 ($M) | Q2 2023 ($M) | Change ($M) | | :----------------------------------- | :----------- | :----------- | :---------- | | Net Cash Provided by Operating Activities | 46.2 | 40.9 | 5.3 | | Net Cash Used in Investing Activities | 0.0 | 0.0 | 0.0 | | Net Cash Used in Financing Activities | 66.7 | 66.3 | 0.4 | | Regular Repayments of Long-Term Debt | 26.4 | 25.9 | 0.5 | | Dividend Payments | 40.3 | 40.3 | 0.0 | - Net cash provided by operating activities in **Q3 2023** included net income, after adjusting for non-cash items, of **$55.6 million**, compared to **$47.6 million** in **Q2 2023**[60](index=60&type=chunk) - The company had a drydocking credit of **$0.1 million** in **Q3 2023**, a significant improvement from an expenditure of **$16.1 million** in **Q2 2023**[60](index=60&type=chunk) [Financial Statements](index=17&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Comprehensive Income](index=17&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The condensed consolidated statements of comprehensive income present the company's financial performance for the three and nine months ended September 30, 2023, and comparative periods, showing net income and total comprehensive income Condensed Consolidated Statements of Comprehensive Income (Selected Data) | Metric ($ thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | 45,101 | 39,016 | 46,587 | 100,648 | 146,608 | | Total Other Comprehensive Income/(Loss) | — | — | — | — | — | | Total Comprehensive Income | 45,101 | 39,016 | 46,587 | 100,648 | 146,608 | [Condensed Consolidated Balance Sheets](index=18&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of the company's assets, liabilities, and equity as of September 30, 2023, and comparative periods, showing changes in cash, debt, and total equity Condensed Consolidated Balance Sheets (Selected Data) | Metric ($ thousands) | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :------------------- | :----------- | :----------- | :----------- | | Cash and Cash Equivalents | 429,415 | 449,830 | 332,329 | | Total Current Assets | 463,987 | 482,500 | 354,048 | | Vessels and Equipment, Net | 2,235,873 | 2,254,727 | 2,269,946 | | Total Assets | 2,769,056 | 2,795,903 | 2,679,512 | | Current Portion of Long-Term Debt | 103,638 | 103,461 | 95,507 | | Total Current Liabilities | 159,797 | 165,722 | 153,198 | | Long-Term Debt | 1,734,341 | 1,760,455 | 1,619,224 | | Total Liabilities | 1,894,138 | 1,926,177 | 1,772,422 | | Total Equity | 874,918 | 869,726 | 907,090 | [Condensed Consolidated Interim Statements of Cash Flows](index=19&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Cash%20Flows) The condensed consolidated interim statements of cash flows detail the cash generated from or used in operating, investing, and financing activities for the three and nine months ended September 30, 2023, and comparative periods Condensed Consolidated Interim Statements of Cash Flows (Selected Data) | Metric ($ thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | 46,158 | 40,871 | 71,933 | 120,774 | 166,528 | | Net Cash Used in Investing Activities | — | (2) | (1) | (2) | (5) | | Net Cash (Used in)/Provided by Financing Activities | (66,673) | (66,305) | (83,494) | (23,069) | (95,610) | | Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash | (20,420) | (25,549) | (12,537) | 97,100 | 69,998 | | Cash, Cash Equivalents and Restricted Cash at End of Period | 429,501 | 449,921 | 271,168 | 429,501 | 271,168 | [Condensed Consolidated Interim Statement of Changes in Equity](index=21&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Changes%20in%20Equity) The condensed consolidated interim statement of changes in equity illustrates the movements in share capital, treasury shares, additional paid-in capital, and accumulated deficit for the nine months ended September 30, 2023, and 2022, reflecting the impact of net income, dividends, and share-based payments Condensed Consolidated Interim Statement of Changes in Equity (Selected Data) | Metric ($ thousands) | At January 1, 2023 | Share-based payments | Net income | Dividends paid | Distributed treasury shares | At September 30, 2023 | | :------------------- | :----------------- | :------------------- | :--------- | :------------- | :-------------------------- | :-------------------- | | Share Capital | 5,452 | — | — | — | — | 5,452 | | Treasury Shares | (8,082) | — | — | — | 522 | (7,560) | | Additional Paid in Capital | 1,203,407 | 1,386 | — | — | (522) | 1,204,271 | | Accumulated Deficit | (293,687) | — | 100,648 | (134,206) | — | (327,245) | | Total Equity | 907,090 | 1,386 | 100,648 | (134,206) | — | 874,918 | [Notes to the Interim Consolidated Accounts](index=22&type=section&id=Notes%20to%20the%20Interim%20Consolidated%20Accounts) [General Information & Accounting Principles](index=22&type=section&id=General%20Information%20%26%20Accounting%20Principles) Flex LNG Ltd. is a Bermuda-registered company focused on LNG transportation, listed on NYSE and OSE. The interim financial statements are unaudited, prepared under U.S. GAAP, and consistent with prior annual statements. No material impact from recent accounting pronouncements is expected - **Flex LNG Ltd.** is a limited liability company, registered in **Bermuda**, focused on seaborne transportation of liquefied natural gas (**LNG**), with ordinary shares listed on **NYSE** and **OSE**[89](index=89&type=chunk) - The unaudited interim condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and are consistent with the accounting policies from the annual financial statements for the year ended **December 31, 2022**[90](index=90&type=chunk)[91](index=91&type=chunk) - Recently issued accounting pronouncements are not expected to materially impact the Company[92](index=92&type=chunk) [Earnings Per Share](index=22&type=section&id=Earnings%20Per%20Share) Basic and diluted earnings per share are calculated by dividing net income by the weighted average number of ordinary shares outstanding, with adjustments for dilutive potential ordinary shares. Dividends paid per share are also reported - Basic **EPS** is calculated by dividing net income by the weighted average number of ordinary shares outstanding[93](index=93&type=chunk) - Diluted **EPS** includes the weighted average number of ordinary shares that would be outstanding if all dilutive potential ordinary shares were issued[94](index=94&type=chunk) Earnings Per Share Data | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | 45,101 | 39,016 | 46,587 | 100,648 | 146,608 | | Weighted Average Number of Ordinary Shares | 53,689,275 | 53,682,140 | 53,171,086 | 53,684,544 | 53,148,397 | | Basic EPS | 0.84 | 0.73 | 0.88 | 1.87 | 2.76 | | Diluted EPS | 0.84 | 0.72 | 0.87 | 1.87 | 2.74 | | Dividends Paid Per Share | (0.75) | (0.75) | (1.25) | (2.50) | (2.75) | [Cash, Cash Equivalents and Restricted Cash](index=23&type=section&id=Cash%20%2C%20Cash%20Equivalents%20and%20Restricted%20Cash) The company's cash, cash equivalents, and restricted cash balances are detailed, with restricted cash specifically allocated for Norwegian tax authorities related to employee social security Cash, Cash Equivalents and Restricted Cash ($ thousands) | Metric | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | :----------- | | Cash and Cash Equivalents | 429,415 | 449,830 | 332,329 | | Restricted Cash | 86 | 91 | 72 | | Total | 429,501 | 449,921 | 332,401 | - Restricted cash is held for Norwegian tax authorities for employee social security[98](index=98&type=chunk) [Other Current Assets and Liabilities](index=24&type=section&id=Other%20Current%20Assets%20and%20Liabilities) Details of other current assets include trade accounts receivable, accrued income, prepaid expenses, and other receivables. Other current liabilities comprise accrued expenses, deferred charter revenue, and provisions Other Current Assets ($ thousands) | Metric | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | :----------- | | Trade Accounts Receivable, Net | 5,410 | 5,409 | 4,859 | | Accrued Income | 9,508 | 7,058 | 2,152 | | Prepaid Expenses | 8,377 | 7,881 | 5,940 | | Other Receivables | 5,378 | 5,669 | 3,376 | | Total | 28,673 | 26,017 | 16,327 | Other Current Liabilities ($ thousands) | Metric | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | :----------- | | Accrued Expenses | 17,090 | 22,118 | 20,686 | | Deferred Charter Revenue | 31,630 | 31,771 | 32,963 | | Other Current Liabilities | 964 | 1,328 | 1,673 | | Provisions | 896 | 727 | 247 | | Total | 50,580 | 55,944 | 55,569 | [Vessels and Equipment, Net](index=24&type=section&id=Vessels%20and%20Equipment%2C%20Net) Movements in vessels and equipment, net, for the nine months ended September 30, 2023, reflect additions from drydocking and depreciation. Several vessels completed their first scheduled drydocks during the period Movements in Vessels and Equipment, Net (9M 2023, $ thousands) | Metric | Vessels and Equipment | Drydocks | Total | | :--------------------------- | :-------------------- | :------- | :-------- | | Cost at January 1, 2023 | 2,467,470 | 32,500 | 2,499,970 | | Additions | — | 20,530 | 20,530 | | Disposals | — | (10,000) | (10,000) | | Cost at September 30, 2023 | 2,467,470 | 43,030 | 2,510,500 | | Accumulated Depreciation at January 1, 2023 | (209,647) | (20,377) | (230,024) | | Charge | (49,157) | (5,446) | (54,603) | | Disposals | — | 10,000 | 10,000 | | Accumulated Depreciation at September 30, 2023 | (258,804) | (15,823) | (274,627) | | Net Book Value at January 1, 2023 | 2,257,823 | 12,123 | 2,269,946 | | Net Book Value at September 30, 2023 | 2,208,666 | 27,207 | 2,235,873 | - **Flex Enterprise**, **Flex Endeavour**, **Flex Ranger**, and **Flex Rainbow** completed their first scheduled drydocks in **Singapore** and **Denmark** during **March, April, and June 2023**[103](index=103&type=chunk)[104](index=104&type=chunk) [Capital Commitments & Long-Term Debt](index=25&type=section&id=Capital%20Commitments%20%26%20Long-Term%20Debt) The company's capital commitments are primarily related to long-term debt obligations, including sale and leaseback arrangements. Total long-term debt increased to $1,838.0 million as of September 30, 2023, with a detailed breakdown by facility Capital Commitments (Long-Term Debt Obligations, $ thousands) | Period | Sale & Leaseback | Period Repayment | Balloon Repayment | Total | | :---------- | :--------------- | :--------------- | :---------------- | :-------- | | 1 year | 51,603 | 54,361 | — | 105,964 | | 2 years | 52,275 | 54,361 | — | 106,636 | | 3 years | 52,998 | 54,361 | — | 107,359 | | 4 years | 53,751 | 54,361 | — | 108,112 | | 5 years | 54,562 | 46,671 | 250,000 | 351,233 | | Thereafter | 667,880 | 12,973 | 392,786 | 1,073,639 | | Total | 933,069 | 277,088 | 642,786 | 1,852,943 | Long-Term Debt Obligations (as of Sep 30, 2023, $ thousands) | Facility Name | Type | Current Portion | Non-current | Total | | :---------------------------- | :--------------- | :-------------- | :---------- | :---------- | | Flex Resolute $150 Million Facility | Term | 7,647 | 135,083 | 142,731 | | Flex Enterprise $150 Million Facility | Term | 9,549 | 129,111 | 138,660 | | $375 Million Facility | Term and revolving | 21,740 | 330,043 | 351,783 | | $290 Million Facility | Term and revolving | 14,215 | 267,143 | 281,358 | | $320 Million Sale and Leaseback | Sale and leaseback | 18,412 | 271,030 | 289,442 | | $330 Million Sale and Leaseback | Sale and leaseback | 16,715 | 297,659 | 314,374 | | Flex Rainbow Sale and Leaseback | Sale and leaseback | 8,411 | 165,109 | 173,520 | | Flex Volunteer Sale and Leaseback | Sale and leaseback | 6,948 | 139,164 | 146,112 | | Total | | 103,638 | 1,734,342 | 1,837,979 | [Financial Instruments & Fair Value](index=26&type=section&id=Financial%20Instruments%20%26%20Fair%20Value) The company utilizes interest rate swap agreements to manage interest rate risk, with an aggregate notional principal of $720.0 million. Derivative instruments are measured at fair value, classified under Level 2 inputs, and movements in their fair value and realized gains/losses are detailed - As of **September 30, 2023**, the company had interest rate swap agreements with an aggregate notional principal of **$720.0 million** (up from **$691.0 million** at **Dec 31, 2022**) to reduce interest rate fluctuation risk[108](index=108&type=chunk) - In **Q3 2023**, the reference rate for some interest rate swap agreements transitioned from **LIBOR** to **SOFR** plus a **Credit Adjustment Spread (CAS)** of **0.26161%**[111](index=111&type=chunk)[115](index=115&type=chunk) Gain/(Loss) on Derivatives ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Change in Fair Value of Derivative Instruments | 8,955 | 10,909 | 27,346 | 11,987 | 76,110 | | Realized Gain/(Loss) on Derivative Instruments | 6,684 | 6,201 | 1,103 | 17,916 | (1,303) | | Gain/(Loss) on Derivatives | 15,639 | 17,110 | 28,449 | 29,903 | 74,807 | - **Fair value measurements** for derivative instruments and debt are classified as **Level 2**, using discounted expected cash flows and observable market-based inputs[119](index=119&type=chunk)[121](index=121&type=chunk)[123](index=123&type=chunk)[126](index=126&type=chunk) [Related Party Transactions](index=30&type=section&id=Related%20Party%20Transactions) The company engages in various transactions with related parties, including administration and technical management services, office facilities, and chartering services, as well as administrative support income Summary of Receivables Due From Related Parties ($ thousands) | Related Party | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | :----------- | | Seatankers Management Norway AS | — | 15 | 16 | | Frontline Management (Bermuda) Limited | 634 | 942 | — | | Sloane Square Capital Holdings Ltd | 19 | 19 | 9 | | Paratus Management (UK) Limited | 2 | 2 | — | | Total | 655 | 978 | 60 | Summary of Payables Due To Related Parties ($ thousands) | Related Party | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | :----------- | | Flex LNG Fleet Management AS | (358) | (715) | (293) | | Total | (358) | (755) | (328) | Summary of Transactions with Related Parties (9M 2023 vs 9M 2022, $ thousands) | Transaction Type | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | | Administration Services Fees | (669) | (642) | | Technical Management Fees | (2,622) | (2,585) | | Office Facilities | (65) | (34) | | Chartering Services Fees | — | (32) | | Administrative Support Income | 187 | 14 | | Total Related Party Transactions | (3,171) | (3,279) | [Share Capital, Treasury Shares & Share-Based Compensation](index=31&type=section&id=Share%20Capital%2C%20Treasury%20Shares%20%26%20Share-Based%20Compensation) The company's share capital remained stable, with no new shares issued under ATM or DRIP in 9M 2023. Treasury shares decreased due to the exercise of share options by management, impacting outstanding non-vested and vested share options - As of **September 30, 2023**, the company had an issued share capital of **$5.5 million**, divided into **54,520,325 ordinary shares**[134](index=134&type=chunk) - **No new shares were issued** under the at-the-market (**ATM**) offering or dividend reinvestment plan (**DRIP**) during the nine months ended **September 30, 2023**[135](index=135&type=chunk) - The company held **784,007 treasury shares** at a cost of **$7.6 million** as of **September 30, 2023**, a decrease from **838,185 shares** at **December 31, 2022**[136](index=136&type=chunk) - In **September 2023**, **75,250 share options** were exercised by management, settled by transferring **54,178 treasury shares**[137](index=137&type=chunk) - **Outstanding non-vested share options decreased to 271,500** (from **488,750** at **Dec 31, 2022**), while **vested share options increased to 142,000** (from **nil** at **Dec 31, 2022**)[138](index=138&type=chunk)[139](index=139&type=chunk) [Subsequent Events](index=32&type=section&id=Subsequent%20Events) Subsequent to the quarter-end, the Board of Directors declared both a regular quarterly cash dividend of $0.75 per share and a special cash dividend of $0.125 per share for Q3 2023, payable in December 2023 - On **November 7, 2023**, the Board declared a cash dividend for **Q3 2023** of **$0.75 per share**, payable around **December 5, 2023**[140](index=140&type=chunk) - Additionally, a special cash dividend of **$0.125 per share** for **Q3 2023** was declared, also payable around **December 5, 2023**[141](index=141&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=33&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) [EBITDA and Adjusted EBITDA Reconciliation](index=33&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) The company provides reconciliations for EBITDA and Adjusted EBITDA, non-GAAP measures used to supplement understanding of operating performance by excluding items not directly affecting core operations, such as interest, taxes, depreciation, amortization, and certain gains/losses - **EBITDA is defined as net income/(loss) plus net interest expense, write-off of debt issuance costs, income tax expense, and depreciation and amortization**[151](index=151&type=chunk) - **Adjusted EBITDA further excludes extinguishment costs paid on long-term debt, gain/loss on derivatives, and foreign exchange gain/loss to provide a clearer view of core operational performance**[152](index=152&type=chunk) EBITDA and Adjusted EBITDA Reconciliation ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | 45,101 | 39,016 | 46,587 | 100,648 | 146,608 | | Interest Income | (945) | (1,284) | (649) | (3,918) | (945) | | Interest Expense | 27,543 | 27,203 | 21,563 | 81,069 | 52,058 | | Write-off of Unamortized Debt Issuance Costs | — | — | 1,698 | 8,805 | 3,422 | | Income Tax Expense | 33 | 5 | 27 | 74 | 54 | | Depreciation | 18,736 | 18,251 | 18,204 | 54,606 | 54,020 | | **EBITDA** | **90,468** | **83,191** | **87,430** | **241,284** | **255,217** | | Extinguishment Costs Paid on Long-Term Debt | — | — | 10,933 | 1,433 | 10,933 | | (Gain)/Loss on Derivatives | (15,639) | (17,110) | (28,449) | (29,903) | (74,807) | | Foreign Exchange (Gain)/Loss | (95) | 113 | 947 | 605 | 1,921 | | **Adjusted EBITDA** | **74,734** | **66,194** | **70,861** | **213,419** | **193,264** | [Adjusted Net Income and Adjusted EPS Reconciliation](index=34&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20EPS%20Reconciliation) Adjusted net income and adjusted EPS are non-GAAP measures used to assess financial and operating performance by excluding specific items like debt extinguishment costs, unrealized derivative gains/losses, and foreign exchange impacts, enhancing comparability across periods - **Adjusted net income represents earnings before write-off and accelerated amortization of unamortized loan fees, fees in relation to the extinguishment of long-term debt, foreign exchange gains/loss, and gain/loss on derivatives financial instruments held for trading**[147](index=147&type=chunk) - **Adjusted EPS is calculated by dividing adjusted net income by the weighted average number of shares outstanding**[147](index=147&type=chunk) Adjusted Net Income and Adjusted EPS Reconciliation ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | 45,101 | 39,016 | 46,587 | 100,648 | 146,608 | | Extinguishment Costs of Long-Term Debt | — | — | 12,631 | 10,238 | 14,355 | | Change in Assets/Liabilities of Derivative Instruments* | (8,955) | (10,909) | (17,958) | (11,987) | (66,722) | | Foreign Exchange (Gain)/Loss | (95) | 113 | 947 | 605 | 1,921 | | **Adjusted Net Income** | **36,051** | **28,220** | **42,207** | **99,504** | **96,162** | | Weighted Average Number of Ordinary Shares | 53,689,275 | 53,682,140 | 53,171,086 | 53,684,544 | 53,148,397 | | Adjusted Basic Earnings Per Share | 0.67 | 0.53 | 0.79 | 1.85 | 1.81 | - The **calculation of Adjusted Net Income was changed in Q3 2022 to deduct changes in derivative instrument assets/liabilities from net income, rather than just gain/loss on derivatives, to better reflect the company's underlying business performance given increased materiality of realized gains/losses**[155](index=155&type=chunk) [Time Charter Equivalent (TCE) Income and Rate Reconciliation](index=35&type=section&id=Time%20Charter%20Equivalent%20%28TCE%29%20Income%20and%20Rate%20Reconciliation) TCE income and TCE rate are non-GAAP measures used in the shipping industry to compare revenue performance across different charter types. TCE income is calculated as operating revenues less voyage expenses, while TCE rate is the weighted average daily TCE income - **TCE income is defined as operating revenues less voyage expenses**, used to compare revenue from voyage charters to time charters[156](index=156&type=chunk) - **TCE rate represents the weighted average daily TCE income** of the entire operating fleet, calculated by dividing **TCE** income by onhire days[160](index=160&type=chunk)[161](index=161&type=chunk) Time Charter Equivalent Income Reconciliation ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Vessel Operating Revenues | 94,584 | 86,727 | 91,260 | 273,788 | 249,988 | | Less: Voyage Expenses | (421) | (762) | (434) | (1,456) | (2,300) | | **Time Charter Equivalent Income** | **94,163** | **85,965** | **90,826** | **272,332** | **247,688** | Time Charter Equivalent Rate Reconciliation | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Time Charter Equivalent Income ($ thousands) | 94,163 | 85,965 | 90,826 | 272,332 | 247,688 | | Fleet Onhire Days | 1,189 | 1,113 | 1,196 | 3,452 | 3,548 | | **Time Charter Equivalent Rate ($/day)** | **79,207** | **77,218** | **75,941** | **78,888** | **69,809** | [Operating Expenses per Day Reconciliation](index=37&type=section&id=Operating%20Expenses%20per%20Day%20Reconciliation) Operating Expenses (Opex) per day is a non-GAAP measure used to compare the average daily operating performance of the fleet, calculated by dividing vessel operating expenses by available days - **Opex per day represents the weighted average daily vessel operating expenses** of the entire operating fleet[164](index=164&type=chunk) - **It is calculated by dividing vessel operating expenses by the available days** during a reporting period, assisting management in evaluating financial and technical performance[165](index=165&type=chunk)[166](index=166&type=chunk) Operating Expenses per Day Reconciliation ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Jun 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Vessel Operating Expenses | (16,937) | (17,293) | (17,492) | (49,936) | (47,210) | | Available Days | 1,196 | 1,183 | 1,196 | 3,549 | 3,549 | | **Opex per Day ($)** | **(14,161)** | **(14,618)** | **(14,625)** | **(14,071)** | **(13,302)** | [Corporate Information & Disclaimers](index=13&type=section&id=Corporate%20Information%20%26%20Disclaimers) [Result Presentation Details](index=13&type=section&id=Result%20Presentation%20Details) Flex LNG hosted a video webcast on November 8, 2023, to discuss its Q3 2023 financial results, with presentation materials available on its website - **Flex LNG** released its **Q3 2023** financial results on **November 8, 2023**, and hosted a video webcast at **3:00 p.m. CET (9:00 a.m. EST)**[68](index=68&type=chunk) - Presentation materials and replay details are available on **www.flexlng.com**[69](index=69&type=chunk) [Forward-Looking Statements](index=14&type=section&id=Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, emphasizing that such statements are based on assumptions and subject to significant uncertainties and contingencies, and actual results may vary materially. The company disclaims any obligation to update these statements - **Forward-looking statements are based on various assumptions and are subject to significant uncertainties and contingencies, meaning actual results may differ materially from projections**[72](index=72&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law[72](index=72&type=chunk) - **Key factors that could cause actual results to differ include general market conditions, changes in demand, operating expenses, financing availability, governmental regulations, and geopolitical events such as the Russia-Ukraine conflict and developments in the Middle East**[73](index=73&type=chunk)[75](index=75&type=chunk) [Board of Directors](index=16&type=section&id=Board%20of%20Directors) The Board of Directors of Flex LNG Ltd. is listed, with David McManus serving as Chairman - The **Board of Directors** includes **David McManus (Chairman)**, **Steen Jakobsen**, **Ola Lorentzon**, **Nikolai Grigoriev**, and **Susan Sakmar**[77](index=77&type=chunk)[78](index=78&type=chunk)

Second Quarter 2023 Result Presentation August 16, 2023 1 Flex Endeavour in dry-dock April 2023 FORWARD-LOOKING STATEMENTS MATTERS DISCUSSED IN THIS PRESENTATION MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE INFORMATION ABOUT THEIR BUSINESS. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE ...

Financial Data and Key Metrics Changes - Revenues for Q2 2023 were $86.7 million, slightly lower than Q1 due to drydockings and a softer spot market, but higher than $348 million recorded last year [5][9][27] - Adjusted net income for Q2 was $28.2 million, resulting in adjusted earnings per share of $0.53, while net income was $39 million or $0.73 per share [27][63] - The company reaffirmed its revenue guidance for the year at $370 million and adjusted EBITDA between $290 million to $295 million [21][40][100] Business Line Data and Key Metrics Changes - The company completed drydockings for four ships this year, impacting revenues in Q2 but expected to boost revenues in the second half of the year [5][40][99] - Time charter equivalent earnings are expected to be around $80,000, higher than last year, driven by a repriced portfolio of ships [6][21] Market Data and Key Metrics Changes - European LNG imports grew by 5 million tonnes in the first seven months of 2023, while Chinese demand rebounded with a 20% growth in Q2 [15][30] - Gas prices in Europe fell from $100 per million BTU to about $10, creating a competitive environment for LNG against oil [16][31] - The company noted potential supply crunches due to possible strikes in Australia, which could affect global LNG volumes [17][50] Company Strategy and Development Direction - The company is focused on maintaining a strong backlog, currently at 54 years of minimum contract backlog, with expectations for options to be declared due to rising term rates [22][68] - The strategy includes optimizing the balance sheet and maintaining a high hedge ratio for interest rates to mitigate risks [11][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth in Q3 and Q4, expecting revenues between $92 million to $100 million as all ships return to operation [21][99] - The management highlighted the importance of LNG in replacing Russian pipeline gas in Europe and the need for affordable prices to attract new consumers [86] Other Important Information - The company declared a dividend of $0.75 per share for Q2, bringing the total dividends over the last 12 months to $3.25, yielding about 10% [8][101] - The company has a solid cash position of $450 million with no debt maturities prior to 2028 [12][100] Q&A Session Summary Question: Was it a surprise that Cheniere declared the option on the Vigilant early? - Management stated it was not a surprise as it was planned, and they expect other options to be declared soon [66] Question: Are there inflation adjustments in fixed-rate contracts? - Management confirmed there are no inflation adjustments, but they have hedged against inflation risks through interest rate management [67] Question: What is the likelihood of options being declared? - Management indicated a high likelihood of options being extended due to rising newbuilding prices and favorable market conditions [68] Question: Will the company consider continuous maintenance during operations? - Management explained that while continuous maintenance is conducted, the concept differs from drilling rigs, and they prepare in advance to minimize dock time [69] Question: How is the Panama Canal situation affecting the company? - Management noted that low water levels and increased waiting times in the Panama Canal are creating inefficiencies, impacting shipping schedules [76][85] Question: What is the outlook for LNG commodity prices? - Management expects prices to remain tight in the short term due to high demand for the winter market and limited new LNG supply [78]

[Financial & Operational Highlights](index=2&type=section&id=Financial%20%26%20Operational%20Highlights) [Q2 2023 Key Highlights](index=2&type=section&id=Q2%202023%20Key%20Highlights) The company reported Q2 2023 revenues of $86.7 million and net income of $39.0 million, completed scheduled drydockings, and declared a $0.75 dividend per share Q2 2023 Financial Highlights vs Q1 2023 | Metric | Q2 2023 | Q1 2023 | | :--- | :--- | :--- | | Vessel Operating Revenues | $86.7 million | $92.5 million | | Net Income | $39.0 million | $16.5 million | | Basic Earnings Per Share | $0.73 | $0.31 | | Average TCE Rate | $77,218/day | $80,175/day | | Adjusted EBITDA | $66.2 million | $72.5 million | | Adjusted Net Income | $28.2 million | $35.2 million | | Adjusted Basic EPS | $0.53 | $0.66 | - Successfully completed all scheduled drydockings for vessels delivered in 2018: Flex Endeavour, Flex Enterprise, Flex Ranger, and Flex Rainbow[5](index=5&type=chunk) - In August 2023, **Cheniere exercised its first option for Flex Vigilant**, extending the firm charter period by an additional 200 days[5](index=5&type=chunk) - The company declared a **dividend of $0.75 per share** for the second quarter of 2023[5](index=5&type=chunk) [CEO Commentary](index=3&type=section&id=CEO%20Commentary) The CEO confirmed Q2 revenues of $86.7 million were in line with guidance and reaffirmed H2 growth expectations, supported by a strong balance sheet and hedging strategy - Q2 revenues were **$86.7 million**, within the guided range of $85-90 million, and higher than Q2 2022 despite three ships being off-hire for drydocking[8](index=8&type=chunk) - Revenue guidance for **Q3 ($90-95M)** and **Q4 ($90-100M)** is reiterated, with expected full-year revenues of approximately $370 million[9](index=9&type=chunk) - The company benefits from a strong balance sheet with **$450 million in cash**, no debt maturities before 2028, and a significant earnings backlog of a minimum of 54 firm years[11](index=11&type=chunk) - Interest rate hedging strategy on an aggregate of $820 million resulted in **gains of $17 million** for the quarter, with $6.2 million realized[10](index=10&type=chunk) [Business and Market Overview](index=4&type=section&id=Business%20and%20Market%20Overview) [Business Update and Fleet Overview](index=4&type=section&id=Business%20Update%20and%20Fleet%20Overview) The company has 100% contract coverage for 2023 and a firm backlog of 54 years after successfully completing all scheduled drydockings for the year - Contract coverage is **100% for 2023** and **95% for 2024**, with a firm contract backlog of 54 years, potentially extending to 80 years with charterer's options[13](index=13&type=chunk) - Four drydockings were completed in H1 2023, with the future schedule including two in 2024, four in 2025, and three in 2026[14](index=14&type=chunk) Fleet Overview as of August 16, 2023 | Vessel Name | Year Built | Propulsion | Charter Expiration (Firm) | Expiration with Options | | :--- | :--- | :--- | :--- | :--- | | Flex Endeavour | 2018 | MEGI+PRS | Q3 2030 | Q1 2033 | | Flex Enterprise | 2018 | MEGI+PRS | Q2 2029 | NA | | Flex Ranger | 2018 | MEGI | Q1 2027 | NA | | Flex Rainbow | 2018 | MEGI | Q1 2033 | NA | | Flex Constellation | 2019 | MEGI+PRS | Q2 2024 | Q2 2027 | | Flex Courageous | 2019 | MEGI+PRS | Q1 2025 | Q1 2029 | | Flex Aurora | 2020 | X-DF | Q2 2026 | Q2 2028 | | Flex Amber | 2020 | X-DF | Q2 2029 | NA | | Flex Artemis | 2020 | MEGI+FRS | Q3 2025 | Q3 2030 | | Flex Resolute | 2020 | MEGI+FRS | Q1 2025 | Q1 2029 | | Flex Freedom | 2021 | MEGI+FRS | Q1 2027 | Q1 2029 | | Flex Volunteer | 2021 | X-DF | Q1 2026 | Q1 2028 | | Flex Vigilant | 2021 | X-DF | Q2 2031 | Q2 2033 | [LNG Market Update](index=11&type=section&id=LNG%20Market%20Update) The LNG market softened in Q2 2023 with lower charter rates, though global trade volumes grew 2.5% and newbuilding activity has declined from 2022 levels - Q2 2023 saw a soft decline in gas prices and charter rates, with spot rates for modern tonnage climbing toward **$100,000/day** by the end of June[58](index=58&type=chunk) - Global LNG trade volumes reached **202.5 million metric tons in H1 2023**, a 2.5% increase from H1 2022, with Europe being a key driver of demand growth[59](index=59&type=chunk) - Newbuilding contracting activity has significantly declined in 2023, with **36 ships ordered year-to-date** versus 66 in the same period in 2022[63](index=63&type=chunk) [Financial Results](index=5&type=section&id=Financial%20Results) [Financial Performance Analysis](index=5&type=section&id=Financial%20Performance%20Analysis) Q2 2023 net income was boosted by derivative gains, while H1 2023 net income declined from the prior year due to smaller gains and higher interest expenses [Quarterly Performance (Q2 2023 vs Q1 2023)](index=5&type=section&id=Quarterly%20Performance%20(Q2%202023%20vs%20Q1%202023)) Q2 revenues decreased due to drydocking off-hire days, but net income rose sharply to $39.0 million, driven by a $17.1 million gain on derivatives Q2 2023 vs Q1 2023 Performance | Item | Q2 2023 ($M) | Q1 2023 ($M) | Change Driver | | :--- | :--- | :--- | :--- | | Vessel Operating Revenues | 86.7 | 92.5 | More off-hire days for drydocking in Q2 | | Vessel Operating Expenses | 17.3 | 15.7 | Increase in technical expenditure | | Administrative Expenses | 2.2 | 3.9 | Decrease due to performance bonuses in Q1 | | Gain/(Loss) on Derivatives | 17.1 | (2.8) | Favorable movement in long-term interest rates | | Net Income | 39.0 | 16.5 | Primarily driven by the gain on derivatives | [Half-Year Performance (H1 2023 vs H1 2022)](index=7&type=section&id=Half-Year%20Performance%20(H1%202023%20vs%20H1%202022)) H1 2023 revenues increased to $179.2 million, but net income fell to $55.5 million due to smaller derivative gains and higher interest expenses than in H1 2022 H1 2023 vs H1 2022 Performance | Item | H1 2023 ($M) | H1 2022 ($M) | Change Driver | | :--- | :--- | :--- | :--- | | Vessel Operating Revenues | 179.2 | 158.7 | Higher proportion of fleet on improved fixed-rate contracts | | Interest Expenses | 53.5 | 30.5 | Increase in floating interest rates | | Gain on Derivatives | 14.3 | 46.4 | Smaller unrealized gain in 2023 compared to 2022 | | Net Income | 55.5 | 100.0 | Lower gain on derivatives and higher interest expense | | Adjusted EBITDA | 138.7 | 122.4 | Reflects stronger core operational performance | [Financial Position (Balance Sheet)](index=5&type=section&id=Financial%20Position%20(Balance%20Sheet)) As of June 30, 2023, the company maintained a strong liquidity position with $449.9 million in cash, while total equity stood at $869.7 million Balance Sheet Summary | Item | June 30, 2023 ($M) | Dec 31, 2022 ($M) | | :--- | :--- | :--- | | Cash, Cash Equivalents & Restricted Cash | 449.9 | 332.4 | | Vessels and Equipment, net | 2,254.7 | 2,269.9 | | Total Long-term Debt | 1,863.9 | 1,714.7 | | Total Equity | 869.7 | 907.1 | - To mitigate interest rate risk, the company has interest rate swaps on an aggregate notional principal of **$820.0 million** as of June 30, 2023[19](index=19&type=chunk) [Cash Flow Analysis](index=9&type=section&id=Cash%20Flow%20Analysis) Net cash from operations was $40.9 million in Q2 2023, while financing activities used $66.3 million, primarily for debt repayment and dividends Q2 2023 vs Q1 2023 Cash Flow Summary ($M) | Activity | Q2 2023 | Q1 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 40.9 | 33.7 | | Net Cash from Investing Activities | 0.0 | 0.0 | | Net Cash from Financing Activities | (66.3) | 109.9 | - Key cash outflows in Q2 2023 included **$16.1 million for drydocking** and **$40.3 million for dividend payments**[47](index=47&type=chunk)[49](index=49&type=chunk) [Unaudited Interim Financial Statements](index=17&type=section&id=Unaudited%20Interim%20Financial%20Statements) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=17&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported Q2 2023 net income of $39.0 million on revenues of $86.7 million, driven by operating performance and a significant gain on derivatives Condensed Consolidated Statements of Operations (in thousands of $) | Metric | Q2 2023 | Q1 2023 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Vessel operating revenues | 86,727 | 92,477 | 179,204 | 158,728 | | Operating income | 48,223 | 55,010 | 103,233 | 86,811 | | Gain/(loss) on derivatives | 17,110 | (2,846) | 14,264 | 46,358 | | Net income | 39,016 | 16,531 | 55,547 | 100,021 | | Basic Earnings per share | 0.73 | 0.31 | 1.03 | 1.88 | [Condensed Consolidated Balance Sheet](index=18&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2023, the company reported total assets of $2.80 billion, total liabilities of $1.93 billion, and total equity of $869.7 million Condensed Consolidated Balance Sheet (in thousands of $) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 449,830 | 332,329 | | Vessels and equipment, net | 2,254,727 | 2,269,946 | | **Total Assets** | **2,795,903** | **2,679,512** | | Current portion of long-term debt | 103,461 | 95,507 | | Long-term debt | 1,760,455 | 1,619,224 | | **Total Liabilities** | **1,926,177** | **1,772,422** | | **Total Equity** | **869,726** | **907,090** | [Condensed Consolidated Statements of Cash Flows](index=19&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For H1 2023, the company generated $74.6 million in operating cash flow and increased its cash balance by $117.5 million after financing activities Condensed Consolidated Statements of Cash Flows - H1 2023 (in thousands of $) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 74,616 | 94,595 | | Net cash used in investing activities | (2) | (4) | | Net cash provided by/(used in) financing activities | 43,604 | (12,116) | | Net increase in cash | 117,520 | 82,535 | | Cash at end of period | 449,921 | 283,705 | [Notes to the Interim Consolidated Accounts](index=22&type=section&id=Notes%20to%20the%20Interim%20Consolidated%20Accounts) [Long-term Debt and Financial Instruments](index=26&type=section&id=Long-term%20Debt%20and%20Financial%20Instruments) The company managed its $1.86 billion long-term debt with interest rate swaps on a notional $820.0 million, resulting in a $14.3 million gain in H1 2023 - Total net long-term debt outstanding was **$1,863.9 million** as of June 30, 2023[123](index=123&type=chunk) - The company has interest rate swap agreements on an aggregate notional principal of **$820.0 million** to reduce risk from interest rate fluctuations[107](index=107&type=chunk) Gain on Derivatives - H1 2023 (in thousands of $) | Component | H1 2023 | | :--- | :--- | | Change in fair value (unrealized) | 3,032 | | Realized gain on derivatives | 11,232 | | **Total Gain on Derivatives** | **14,264** | [Subsequent Events](index=31&type=section&id=Subsequent%20Events) Post-quarter, the Board declared a $0.75 per share dividend, and Cheniere exercised a charter option for the Flex Vigilant - On August 15, 2023, the Board declared a Q2 2023 cash dividend of **$0.75 per share**, payable around September 5, 2023[154](index=154&type=chunk) - On August 14, 2023, **Cheniere declared its option to extend the charter for Flex Vigilant** by 200 days, with the charter now scheduled to expire in Q2 2031[136](index=136&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Net Income to EBITDA and Adjusted EBITDA](index=32&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDA%20and%20Adjusted%20EBITDA) For Q2 2023, Net Income of $39.0 million was reconciled to an Adjusted EBITDA of $66.2 million by excluding non-core items like derivative gains Reconciliation to Adjusted EBITDA (in thousands of $) | Metric | Q2 2023 | Q1 2023 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | 39,016 | 16,531 | 55,547 | 100,021 | | EBITDA | 83,191 | 67,625 | 150,816 | 167,787 | | **Adjusted EBITDA** | **66,194** | **72,491** | **138,685** | **122,403** | [Reconciliation of Net Income to Adjusted Net Income](index=33&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) Q2 2023 Net Income of $39.0 million was reconciled to an Adjusted Net Income of $28.2 million, resulting in an Adjusted Basic EPS of $0.53 Reconciliation to Adjusted Net Income (in thousands of $) | Metric | Q2 2023 | Q1 2023 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | 39,016 | 16,531 | 55,547 | 100,021 | | **Adjusted net income** | **28,220** | **35,233** | **63,453** | **56,361** | | Adjusted basic EPS ($) | 0.53 | 0.66 | 1.18 | 1.06 | [Reconciliation to Time Charter Equivalent (TCE) Rate](index=34&type=section&id=Reconciliation%20to%20Time%20Charter%20Equivalent%20(TCE)%20Rate) The company's TCE rate for Q2 2023 was calculated at $77,218 per day based on TCE income of $86.0 million and 1,113 on-hire days TCE Rate Calculation | Metric | Q2 2023 | Q1 2023 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Time charter equivalent income (k$) | 85,965 | 92,204 | 178,169 | 156,862 | | Fleet onhire days | 1,113 | 1,150 | 2,263 | 2,352 | | **Time charter equivalent rate ($)** | **77,218** | **80,175** | **78,720** | **66,691** |

Financial Data and Key Metrics Changes - Revenues for Q1 2023 were $92.5 million, aligning with guidance of $90 million to $93 million, with adjusted net income of $35.2 million or $0.66 per share [6][16][61] - The company reaffirmed its revenue guidance for the full year 2023 at $370 million, expecting adjusted EBITDA of around $290 million to $295 million [30][49] - The company maintained a strong cash position of $475 million, an all-time high, translating to about $9 per share in cash [29][38] Business Line Data and Key Metrics Changes - Average time charter equivalent earnings for the fleet were slightly above $80,000 per day, consistent with annual guidance [6][14] - Operational expenses (OpEx) per day were maintained at $13,400, reflecting effective cost control [14] - The company completed dry dockings for Flex Endeavour and Flex Enterprise on schedule and budget, with further dry dockings planned [7][48] Market Data and Key Metrics Changes - LNG exports grew by approximately 5% in the first four months of 2023, with North America being a significant contributor [20] - European gas prices have experienced volatility, with a peak of about $100 per million Btu, but have since declined due to reduced demand [21][22] - The company noted a shift in LNG demand dynamics, with increased imports to Europe and a gradual recovery in Chinese demand [40][43] Company Strategy and Development Direction - The company has a minimum contractual backlog of 57 years, providing strong revenue visibility [11][13] - The strategy focuses on long-term charters to mitigate market volatility, distinguishing it from other shipping companies [54][85] - The company is cautious about newbuilding investments due to high prices and prefers to secure long-term contracts for existing ships [108] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market outlook, citing strong earnings and a robust liquidity position [13][20] - The company anticipates a seasonal uptick in charter rates during Q3 and Q4, with revenues expected to increase to around $90 million to $100 million for those quarters [9][49] - Management highlighted the importance of balancing natural gas prices in the U.S. and their impact on drilling activity and LNG exports [52][66] Other Important Information - The company has successfully completed a balance sheet optimization program, refinancing all 13 ships in its fleet [29][103] - The company has increased its hedging portfolio to $820 million, enhancing financial flexibility [18][19] - The dividend payout of $0.75 per share reflects a yield of approximately 11% over the past 12 months [2][32] Q&A Session Summary Question: How does the low natural gas prices in the US impact Flex LNG? - Management indicated that while low prices could affect new drilling activity in the long term, current U.S. gas production remains strong [52] Question: What differentiates Flex from other shipping companies? - Management noted that Flex has long-term charters that provide stable revenues, unlike many commodity shipping companies that face volatility [54] Question: What is the outlook for LNG transport out of the US for 2023 and 2024? - Management expects muted export growth in 2024 but anticipates significant growth from 2025 onwards as new projects come online [72] Question: Is Europe an important market for Flex? - Management confirmed that Europe remains a key market, with increased imports to replace lost volumes from Russian gas [73] Question: What are the plans for growth and use of cash? - The primary focus is on dividends, with a disciplined approach to newbuilding investments, preferring to secure long-term contracts for existing ships [108]

Financial Performance & Dividends - Q1 2023 revenues were $92.5 million, aligning with the guidance of $90-93 million[17, 96] - The company's adjusted net income for Q1 2023 was $35.2 million, with an adjusted EPS of $0.66[17, 96] - Flex LNG is declaring an ordinary quarterly dividend of $0.75 per share for Q1[5, 96] - The dividend per share for the last twelve months is $3.75, implying a yield of approximately 11%[5, 96] Guidance & Outlook - Flex LNG reaffirms its 2023 revenue guidance of approximately $370 million, with adjusted EBITDA of about $290-295 million[6, 17] - Q2 2023 revenues are expected to be $85-90 million due to three dry-dockings and a softer spot market[17] - Quarterly revenues are projected to increase to $90-100 million in Q3/Q4 as the dry-docking program concludes[17] Balance Sheet & Operations - The company completed balance sheet optimization in Q1 2023, resulting in net proceeds of $387 million[5, 106] - The cash balance at the end of Q1 2023 was $475 million, which is approximately $9 per share[5, 86, 106] - The average TCE (Time Charter Equivalent) was $80,175 per day, consistent with the 2023 guidance of approximately $80,000 per day[17, 106]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-38904 Par-La-Ville Place Hamilton Bermuda (Address of principal executive offices) INFORMATION CONTAINED IN THIS FORM 6-K REPORT This Report on Form 6-K is hereby incorporated by reference into the Company's Registration Statement on Form F-3 (File No. 333- 268367) that was declared effective December ...