FLEX LNG .(FLNG) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA revenues for Q3 2024 were $90.5 million, aligning with guidance of approximately$90 million, resulting in net income of $17.4 million and adjusted net income of$28.7 million [3][19] - Adjusted earnings per share for the quarter was $0.53, with a pro forma cash position of$450 million, representing about 35% of the company's market cap [4][8][60] - For the full year, revenue guidance is set between $353 million to$355 million, with adjusted EBITDA expected to be between $271 million to$274 million [10] Business Line Data and Key Metrics Changes - The company reported 100% technical utilization of its fleet during the quarter, with operational expenses at $14,900 per day, slightly improved from the previous quarter [19][20] - The time charter equivalent (TCE) rate for the quarter was$75,400, compared to guidance of $75,000 to$77,000 [9] Market Data and Key Metrics Changes - The LNG market is experiencing 1% growth historically, with a projected increase to around 6% growth next year due to new projects coming online [28][29] - European LNG import levels are below last year due to high storage levels, currently around 93% full, which has affected sourcing [32] Company Strategy and Development Direction - The company has a significant backlog of contracts, totaling over 50 years minimum, which may grow to 82 years with option declarations, providing strong earnings visibility [8][60] - Recent contracts for Flex Resolute and Flex Courageous have been fixed for longer periods at higher rates than the prevailing market, indicating a strategic focus on securing long-term revenue [5][12] Management's Comments on Operating Environment and Future Outlook - Management noted a soft spot market affecting one ship on index, leading to expectations of revenues close to $90 million in Q4, slightly lower than Q3 [7][60] - The company remains optimistic about long-term demand despite current market softness, citing a healthy backlog and cash position [17][60] Other Important Information - The company declared its 13th consecutive ordinary dividend of$0.75 per share, despite a decrease from $3.125 to$3 in trailing 12 months dividends [8][15] - The company has completed two refinancings totaling $430 million, resulting in net proceeds of$97 million [6][22] Q&A Session Summary Question: What is the expected timeline for U.S projects to start ordering long-term contracts? - Management indicated that many U.S projects are close to export, and with 90 million tons of new volumes expected from 2028 to 2030, significant shipping requirements will arise [62] Question: What motivates the charterer to fix ships far in advance? - The motivation is not project-specific but portfolio-related, as super majors are satisfied with the service and are looking to secure ships due to new environmental regulations [63][65] Question: What is the strategy for the CONSTELLATION vessel? - The strategy involves assessing market conditions and potentially trading the ship in the spot market until the market improves, with a focus on maximizing shareholder value [67] Question: What is the outlook for the options on Aurora and Volunteer? - Management believes the market will tighten by 2027, and if options are not declared, the ships will return in 2026, which is expected to be a favorable time for term rates [69][70] Question: How does the company view the MEGI and XTF technologies? - Management highlighted that MEGI ships are more efficient and have a better environmental profile, leading to a resurgence in interest despite their higher costs [71][74] Question: What is the company's stance on dividend sustainability and share buybacks? - The company maintains a strong cash position and believes it can sustain dividends despite market fluctuations, while share buybacks are not ruled out but are approached cautiously due to ownership structure [76][81]