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FLEX LNG .(FLNG) - 2024 Q1 - Earnings Call Transcript
FLNGFLEX LNG .(FLNG)2024-05-23 19:22
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Financial Data and Key Metrics Changes - Revenues for Q1 2024 were reported at 90.2million,aligningwithguidanceofapproximately90.2 million, aligning with guidance of approximately 90 million [15][21] - Net income was 33.2million,resultinginearningspershareof33.2 million, resulting in earnings per share of 0.62, while adjusted net income was 37.9million,leadingtoadjustedearningspershareof37.9 million, leading to adjusted earnings per share of 0.70 [16][50] - Operating expenses for the quarter were lower at 16.7million,attributedtotimingeffectsofexpenserecognition[49]BusinessLineDataandKeyMetricsChanges−Thecompanyaddedsignificantbacklogthisyear,withcontractsextendingfortwoships,FlexResoluteandFlexCourageous,foratotalofthreeyearsplusoptions[3][9]−Averagecharterratesareexpectedtobearound16.7 million, attributed to timing effects of expense recognition [49] Business Line Data and Key Metrics Changes - The company added significant backlog this year, with contracts extending for two ships, Flex Resolute and Flex Courageous, for a total of three years plus options [3][9] - Average charter rates are expected to be around 72,000 to 74,000,withrevenuesanticipatedtobecloseto74,000, with revenues anticipated to be close to 85 million for Q2 [5][20] Market Data and Key Metrics Changes - The U.S. has become the largest LNG exporter, with 29 million tons exported in the first four months of the year [29] - European LNG imports are lagging 20% behind last year due to high storage levels, while demand in Asia, particularly from emerging markets, is increasing [56][60] - Spot LNG prices in Europe are stabilizing around 11to11 to 12, with spot LNG being cheaper than contracted LNG [31][58] Company Strategy and Development Direction - The company is focused on maintaining a strong financial position to support dividend payments, with a declared dividend of 0.75pershare[6][46]−Themanagementiscautiousaboutthemarketoutlook,indicatingapreferenceforsecuringcontractsratherthanspeculativenewbuilds[101][110]−Thecompanyaimstoleverageitscashreservesforpotentialinvestmentswhilemaintainingflexibilityinitsfinancialstrategy[92][109]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutfutureearningsgrowth,anticipatingareboundinrevenuesandearningsinQ3andQ4asallshipsreturntooperation[105]−Themanagementnotedthatthecurrenthighinterestrateenvironmentisexpectedtochange,potentiallyleadingtolowerinterestcostsinthefuture[92]−ThecompanyismonitoringtheLNGmarketclosely,particularlytheimpactofgeopoliticalfactorsonsupplyanddemanddynamics[62][66]OtherImportantInformation−Thecompanyreporteda70.75 per share [6][46] - The management is cautious about the market outlook, indicating a preference for securing contracts rather than speculative newbuilds [101][110] - The company aims to leverage its cash reserves for potential investments while maintaining flexibility in its financial strategy [92][109] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future earnings growth, anticipating a rebound in revenues and earnings in Q3 and Q4 as all ships return to operation [105] - The management noted that the current high interest rate environment is expected to change, potentially leading to lower interest costs in the future [92] - The company is monitoring the LNG market closely, particularly the impact of geopolitical factors on supply and demand dynamics [62][66] Other Important Information - The company reported a 7% reduction in emissions compared to 2022, highlighting its commitment to sustainability [28] - The company has a strong cash position of 383 million and no debt maturities until 2028, providing a solid foundation for future operations [27][53] Q&A Session Summary Question: What are the decision factors for the Board regarding dividends? - The Board considers earnings, contract portfolio, and cash reserves when making decisions about dividends, indicating a sustainable dividend level based on adjusted earnings [91][106] Question: What is the impact of the closure of the Strait of Hormuz on the LNG market? - While the closure would have significant implications for LNG exports, the probability of such an event is considered low due to the economic consequences involved [62][64] Question: How does the company view the current state of the LNG market? - The company sees a shift in demand towards Asia, with emerging markets increasing their LNG imports, while Europe is pulling back due to high storage levels [56][60]