FLEX LNG .(US:FLNG)2023-11-08 21:00Financial Data and Key Metrics Changes - Revenues for the quarter reached $94.6 million, at the high end of guidance of $90 million to $95 million, resulting in a net income of $45.1 million and earnings per share of $0.84 [15][20][64] - Adjusted net income, excluding unrealized gains, was $36.1 million, translating to adjusted earnings per share of $0.67 [21][64] - The company expects Q4 revenues to be between $97 million and $99 million, maintaining guidance for total annual revenues of $370 million and adjusted EBITDA of $290 million to $295 million [7][66] Business Line Data and Key Metrics Changes - All 13 LNG carriers were back in operation, contributing to revenue growth, particularly from Flex Artemis, which operates on a variable hire linked to spot market rates [6][20] - Operating expenses decreased slightly to approximately $17 million, or $13,100 per day, with full-year guidance set at $14,500 per day [13] Market Data and Key Metrics Changes - The overall LNG market is balanced with high inventories in Europe ahead of winter, and gas prices have normalized from previous highs [2][7] - U.S. LNG exports have increased significantly, contributing to a year-to-date growth of 3% in LNG exports, with the U.S. becoming the largest exporter [32][34] - European gas demand has remained flat year-to-date, but there was an uptick in October, indicating a potential increase in demand due to reduced Russian pipeline gas [34][46] Company Strategy and Development Direction - The company plans to focus on securing longer-term contracts for its ships as they become available, particularly as the market is expected to tighten from 2026 onwards [63][66] - The company is open to consolidation opportunities in the LNG shipping sector, while also exploring newbuilding options [95][97] Management's Comments on Operating Environment and Future Outlook - Management noted that the LNG market is experiencing muted export growth, with expectations for a new wave of LNG export growth starting in 2024, but significant growth is not anticipated until 2025 or 2026 [55][56] - The company highlighted the potential for increased scrapping of older, inefficient steamships due to new decarbonization regulations, which could tighten the market in the coming years [60][61] Other Important Information - A special dividend of $0.125 was declared in addition to the regular dividend of $0.75, resulting in a total dividend yield of approximately 11% over the last 12 months [3][66] - The company maintains a strong financial position with cash reserves of $429 million and a clean balance sheet [22][23] Q&A Session Summary Question: What is driving the divergence between time charter rates and spot rates? - Management explained that spot rates are influenced by immediate market conditions and seasonal demand, while time charter rates reflect longer-term expectations and are affected by the outlook for LNG prices [68][70] Question: Can you update us on the status of the Panama Canal? - Management discussed the restrictions on daily transits due to drought conditions, which have increased costs for using the canal, impacting shipping routes for LNG carriers [78][85] Question: How liquid is the time charter market across different durations? - Management noted that the term market has become less liquid recently, with fewer long-term fixtures being completed as spot rates have declined [76][77] Question: How does the market view the future of steamships and newbuilds? - Management indicated that the market is cautious about the future of steamships, with expectations that many will not be scrapped immediately, but rather replaced by newbuilds as they come off charter [90][92] Question: What is the company's approach to M&A opportunities in the shipping sector? - Management expressed interest in consolidation opportunities but emphasized the importance of finding the right assets at the right price [95][98]