FLEX LNG Ltd.

Ladies and gentlemen, thank you for standing by and welcome to the Plex LNG Q1 2020 Earnings Presentation and Investor Day Conference Call. At this time, all participants are in a listen-only mode. After this speaker presentation, there will be a question and answer session. And to ask a question during the Q&A session, you will need to press star and 1. I must advise you that this conference is being recorded today, Thursday, 28th of May, 2020. I'd now like to hand the conference over to the first speaker today, Øystein Kalliklev. Thank you. Please go ahead.

Thank you, Maria. Welcome to the 2020 first quarter result presentation for FlexLNG. My name is Øystein Kalliklev, and I'm the CEO of FlexLNG Management. Together with our CFO, Arl Gurvin, I will guide you through today's presentation. A replay of the webcast will also be available at flexlng.com. Flex LNG is a shipping company focused on the growing market for seaborne transportation of liquefied natural gas, LNG, and we are listed both at Oslo and New York Stock Exchange under the ticker FLNG. So, first a disclaimer with regards to, among other, forward-looking statements and completeness of details. The full disclosure is available in the presentation, and we recommend that the presentation is read together with the interim financial reports and our annual report, which are all available at our website. So, let's summarize the highlights today. First of all, I am pleased to say that we delivered Time Charter Equivalent, or TCE, earnings for our ships at approximately $68,000 per day, which is in line with our guidance of close to $70,000 per day. Given the seasonal softening of the market in First quarter and the outbreak of the novel coronavirus, we are satisfied with the trading results for the quarter. TCE of $68,000 per day translates into revenues and adjusted EBITDA of $38.2 and $27.8 million for the quarter. During the first quarter, interest rate levels around the world plummeted due to the adverse economic consequences of the COVID-19 pandemic. This resulted in us booking a non-cash, unrealized mark-to-market loss of approximately $22 million for our portfolio of interest rate swaps. Our portfolio of swaps at the end of the quarter consisted of $485 million hedged for around five years at about 1.5% fixed interest rate. We have so far hedged the interest rate risk for about 50% of our bank loans, So keep in mind that lower interest rates means that our financial expenses will be lower going forward as the other half of the loans have floating interest rates, which is today close to zero. Hence, adjusted for non-cash unrealized items or adjusted net income was 9.3 million for the quarter. This represents clean earnings of about 17 cents compared to 41 cents in adjusted profit per share in the fourth quarter of 2019, when we made $94,000 per day in TCE. Market conditions have so far in 2020 been challenging. We have seen the warmest winter on record in the northern hemisphere, where most gas is consumed, and this, coupled with the coronavirus outbreak, have depressed the price of natural gas worldwide. The pandemic has also adversely affected our ability to carry out crew changes. This means a lot of seafarers have stayed on ships away from their families for a prolonged period of time. So we would like to extend a special thank you to our crew, which have done a fantastic job making sure that our ships have been able to trade without any interruptions and serious incidents during this difficult period. Given the fallout from the COVID-19 pandemic, we are expecting lower trading results in the second quarter. We have so far booked about 97% of our second quarter and expect a TCE of close to $50,000, which is in line with our current cash break-even levels. Given the uncertainty with regards to COVID-19 and the low gas prices with resulting shut-ins of cargoes, we expect that the market in third quarter also will be challenging. Given the high inventory levels in Europe and the contango in gas prices, we think it's probable that the freight market will firm up again once we are approaching autumn. Consequently, the board has decided to suspend the dividend and instead focus on preserving cash. Suspending the dividend has not been an easy decision to make, but given our lackluster stock price, we think it's advisable to keep a substantial cash position to ensure that investors and financiers have full confidence in our ability to perform also in tough market conditions like this. In that regard, we are therefore very pleased to announce that we have agreed a new bank loan of $125 million for FlexVolunteer, as well as a sale-ease-backed transaction of $156.4 million for FlexAmber. Hence, in total 281 million of new financings in place. We have previously said that we would fast track the financing of the last two new buildings, given the level of uncertainty, and now we have delivered on this. With these financing, the 281 million of new loans and the 629 million ECA financing signed in February, we have thus secured about 910 million of financing, which represents on average 130 million of financing for each of these seven new buildings. 910 million also matches very well with the 937 million of remaining capex for the seven new buildings to be delivered over the next 12 months. This leaves us with a net unfunded capex of only 27 million compared to a cash balance of 121 million at quarter end. With this financing, we are very confident that we have a very robust capital structure. We have attractive long-term financing in place for all 13 ships and not a single loan maturity prior to July 2024. Long-term financings are also coupled with the newest, most efficient fleet of ships, which, given the substantial equity invested in the company, have an industry low cash break even, which will be reduced to around $45,000 per day once all ships are delivered. As mentioned in the highlights, COVID-19 has also affected our business and operations. In such a difficult time, we are pleased to say that we have a very capable organization that have been able to run our ships with 100% uptime and no delays despite these challenges. In order to mitigate the situation, we have minimized ship visits. Only critical external ship visits have been allowed, and this relates to piloting, vetting, and service or repairs if needed. We have also been able to utilize video conference tools for remote ship visits. This includes the first ever remote change of management conducted by Classification Society, ABS, for the Flexco Rages on March 27th. Five of our ships are now under the in-house ship management company, and we are planning for the transfer of the last ship, but this has been slightly delayed due to the situation. Onshore, we have established a COVID task force, which meets every morning. This group consists of key personnel who are in constant dialogue with our ships to assess the situation and assist if needed. We have closely monitored our crew for any symptoms, and we are glad to say we have not had any of our crew or onshore personnel testing positive for COVID-19. However, minimizing visits to ships also means that crew rotation has been practically impossible for some time now. This has resulted in prolonged stays for our crew away from their families, and we have therefore been working in close cooperation with relevant bodies to find practical ways of allowing such crew rotations. We are pleased that we are now finally seeing gradual improvements in relation to crew changes and we have so far been able to do limited crew rotation on one of our ships and are planning now for the other ships. We also have new buildings for delivery in the second half of the year with sea trials and mobilization and officers for these ships have gone through quarantine in South Korea at arrival before conducting such trials. There have also been reported delays of ships in dry dock due to the coronavirus, but as our fleet consists of brand new ships, we do not have any dry dockings planned prior to 2023 and are thus not affected by these issues. Okay, then Harald will give us an update on the recent financings as well as the financial numbers before I will be back with some info on the market.

Thank you, Øystein. As mentioned, we are pleased to announce that we have agreed two new financings totaling 281 million post-quart rent and have just arranged financing for all seven new buildings under construction. The first facility is a 125 million term loan and revolving credit facility for the financing of FlexVolunteer, which is scheduled for delivery in the first The five-year facility has a repayment profile of 20 years, in line with our other bank facilities, and will be split into a 100 million term loan and a 25 million revolving facility. We have already entered into interest rate swaps for the full amount on the facility, giving an attractive all-in pricing, including margin, of 3.3% per annum. The second financing is a 156 million 10-year sale and leaseback transaction with an Asian-based leasing house for the new building Flexible Amber, which is scheduled for delivery in the third quarter 2020. The transaction will be priced at LIBOR plus a margin of 3.2% per annum and has an 18-year repayment profile. We will have annual repurchase options commencing on the first anniversary and there is a purchase obligation at the end of the 10-year lease period of 69.5 million. Flex Amber is included under the 629 million ECA facility entered into in February this year, and we intend to utilize the swap option under this facility to replace Flex Amber with the sister vessel, Flex Vigilant, which is the final of our new building scheduled for delivery in the second quarter of 2021. Both financing remains subject to final documentation and customary closing conditions and are expected to be drawn upon delivery of the relevant vessels from the shipyard. We have been active on the financing side the last two years, arranging a total of 1.7 billion of attractive financing for our fleet of 13 latest generation LNG carriers. At the same time, we have diversified our funding base with a mix of bank financing, lease financing and ETA financing, and have also expanded our relationship with some of the leading international financing providers. Having access to several sources of funding is important in the current market and demonstrates our ability to raise finance at attractive terms in an environment where many struggle to raise finance at all. Upon execution of the two latest financings, we will have less than 30 million in net remaining capex against a cash position of 121 million a quarter. The 629 million ECA facility for five of the new buildings also includes an accordion option of up to 10 million per vessel subject long-term employment acceptable to the banks. Following these transactions, we will have a very comfortable debt maturity profile, with the first maturity due in July 2024. The staggered debt maturity profile also mitigates any refinancing risk. Moving on to the income statement, revenues for the quarter came in at 38.2 million, down from 52 million in the previous quarter. The reduction was due to a softer market in line with the seasonal patterns. Adjusted EBITDA for the quarter was 27.8 million, down from 41.6 million in the previous quarter. The result for the first quarter includes a non-cash, unrealized loss on interest rate swaps of approximately 22 million. At quarter end, we had interest rate swaps totaling 485 million at an average interest rate of approximately 1.5%, and a non-cash market-to-market loss was a result of the sharp fall in long-term interest rates during the quarter. All our interest rate swaps relate to financing agreements, and we are not required to post any cash collateral under the agreements when the mark-to-market is negative. We also recorded a non-cash foreign exchange loss on cash deposits held in the Norwegian kronor of 2.3 million in the quarter, due to a substantial weakening of the Norwegian kronor against the US dollar in the quarter. Net loss for the quarter was 14.9 million, Adjusted for the above non-cash items, adjusted net income was 9.3 million, or 17 cents per share. Then moving on to our balance sheet as per March 31st. We had a solid liquidity position of 121 million per quarter end. Our assets consisted of six vessels on the water, with an aggregate book value of approximately 1.1 billion per quarter end. In addition, we have booked vessel purchase repayments of 349 million relating to the seven new buildings under construction, which represents the advance payments on these. Total desktop quarter end was 771 million, of which approximately 36 million is due over the next 12 months and thus classified as current liabilities. Total equity aspect quarter end was 819 million, giving a strong equity ratio of 50%. Looking at our cash flow for the quarter, the operational cash flow was 14 million for the first quarter. The operational cash flow for the quarter was negatively impacted by working capital adjustment, mainly due to less prepaid hire following the softer market in the first quarter compared to the fourth quarter. Scheduled loan installments were 8.3 million. And in addition, we had upfront financing costs of 6.5 million in connection with the 629 million ECA facility signed in February. The dividend for the quarter of 5.4 million, or 10 cents per share, was paid end of March. Adjusted for the negative foreign exchange effect on cash deposits held in Norwegian crowner of 2.2 million, the cash at the end of the quarter thus came in at 120.8 million. And with that, I hand the word back to Øystein, who will give an update on the market. Thanks.

So let's start on slide 11 by doing a quick recap and review of the spot market for LNG shipping in line with the seasonal pattern as mentioned. The market has been softening in the first quarter as we are coming out of the peak winter season. As we mentioned in our Investor Day presentation back in February, we have this winter experience yet again a very mild weather with the highest ever winter temperature measured in the northern hemisphere, which have affected gas demand adversely this winter as most gas is consumed in the northern hemisphere. In January, we had positive news surrounding the signing of the Phase 1 trade agreement between U.S. and China, and U.S. LNG shipments to China have resumed. However, the headlines quickly shifted to the coronavirus outbreak in Wuhan, with the associated prompt shutdowns in China during February. The February shutdowns in China resulted in poor sentiment in both the freight and product markets, with JKM hitting a low of $2.7 in February. However, markets turned more positive in March, when China started to resume normal import levels again, and JKM bounced back 30% to $3.50 by mid-March. For the freight market, this means that we went from one-way economics in February to full round-trip economics in March, meaning the ship owners get paid both the laden and the ballast leg, giving TCE in line with headline TCE rates. But as we all know from experience today, the coronavirus went viral. and became a global pandemic, resulting in shutdowns of all major economies. This has resulted in unprecedented low gas prices again, with European prices down to a buck, while JKM has crashed back to $2, which is a historically low spread towards the Henry Hub Index in the U.S., and thus this has created a flux of cargo cancellation recently, with suddenly relets emerging in the freight market. The lack of demand and arbitrage means that the sentiment in the freight market has been very weak in April and May, with headline rates for modern two-stroke tonnage of around $40,000 per day, with typical one-way economics. This means that the ballast leg is for the owner's account, and thus the owners are currently only able to capture 50-60% of the headline rates. All the uncertainty in the market has also meant that charters have tended to prefer fixing single voyages rather than longer periods. Hence, while we do see a very high level of fixtures, this is mostly due to more single voyages rather than multi-voyage or period fixtures. It is maybe not too surprising that charters, which are also mostly working from home, are focusing on the next cargo rather than securing shipping for the longer term these days. Additionally, owners have been facing stiff competition from portfolio players and traders, as they have been increasingly active in the markets with relets. We do, however, now see that more charters are looking for multi-month time charters for winter coverage, and most charters prefer fixed price instead of index, given the low charter rates, so there are some positive signs from this behavior. Next slide, we look at the importers. We will look at the trade flows. They totally changed in 2019 compared to 2018. In 2018, it was all about Asia increasing its import by 30 million tons, driven by rapid Chinese growth. In 2019, the main demand in Asia was muted due to a mild winter, but also by nuclear startups in the largest and third largest import countries, Japan and South Korea. Due to economic slowdown following trade disputes with US, Chinese demand was also on the soft side in 2019, growing only about 7 to 8 million tons. So in 2019, Europe came to the rescue, increasing its import by 33 million tons, or close to 70% growth, for what is essentially a fairly mature market. However, Europe has a lot of LNG infrastructure, which have been underutilized, as well as substantial storage capacity. This, coupled with record low gas prices and higher carbon prices, have made cheap LNG very competitive in Europe, with eight of the ten largest import gainers in 2019 being European. The trend has continued this year, with most of the import gainers being European. UK is continuing its path to phasing out coal. UK just went recently a month without utilizing coal, which have not occurred since the Industrial Revolution. Portugal, which was also one of the key growth areas of LNG in 2019, also went through April without burning any coal. So this shift can happen quickly. As recently in 2012, coal provided 40% of UK's power gen. In 2019, it was only 2%, with the country running in total 83 days without coal. Soon, coal's market share in the UK will be zero. The outliers here are South Korea, which has favored burning gas instead of coal, with a massive closure of close to half of their coal plants. When bearing in mind that COVID-19 is primarily a respiratory illness, it makes a lot of sense to switch off coal and clean up the air these days, particularly when it's free to do so, as I will illustrate later. Despite the shutdowns in India and China, these countries are also actually growing their LNG imports in 2020, as LNG is gradually growing its market share despite the recent turmoil. So let's consider the largest market by far, Asia. Here we find the largest import markets, Japan, China, South Korea, and India, and a lot of growth markets in Southeast Asia. As mentioned, despite COVID-19 with associated lockdowns, China, South Korea, and India have posted growth this year. Chinese growth was actually lagging 2019 levels prior to the COVID-19 lockdowns due to lower economic growth, but we have seen strong growth from March onwards. U.S. imports have also resumed, and we expect U.S. exports to China of about Half a million ton in May, which is close to 10% market share and the highest import level of US LNG since January 2018, prior to the trade conflict really escalating. While we saw slowdown in Indian imports in April, they are expected to bounce back to 2019 levels in May. Japan is the weak market as they have experienced prolonged lockdown and not follow the policies of South Korea where coal have been replaced to a great extent by LNG imports to reduce fine dust pollution. So let's head back to the growth market Europe. Despite high inventory levels coming out of the winter due to unseasonable warm winter, European buyers have continued to buy LNG hand over fist in 2020. The main reason is low LNG prices stimulate demand for gas injection for storage and we do expect that European inventory levels will approach tank tops in July-August. Furthermore, the 20% reduced capacity of French nukes will stimulate additional gas demand in France and as you can see from the graph, French imports have been very healthy. Keep in mind that onshore storage capacity for gas is very limited and way below the storage capacity for oil. Furthermore, the vast majority of storage capacity is located in the US and Europe and not in the big import nations in Asia. This means Europe is the natural swing importer and the glut of LNG has resulted in record low gas and electricity prices in Europe. Once the inventory in Europe is full, we do expect a natural way to store gas will be on ships, and coupled with the contangling gas prices, we expect another round of massive floating storage once we are approaching autumn. This should, in our view, be supportive of the freight market, particularly for large modern ships with low boiler freight, which our fleet consists entirely of. So, I've already touched upon the product market and the low prices resulting from the LNG glut. As you can see from this chart, Asian LNG prices and European gas prices have been plummeting from close to $10 and $8 respectively at the beginning of the year to record low levels now, with JKM at around $2, which is similar to Henry Hub, and the Dutch European gas hub price TTF even trading below $1. This is totally unprecedented that global gas prices converge to such extent and to such low levels. We have also seen an oil price crash with West Texas Intermediate Crude even trading below zero level. Most LNG sold and bought are still traded under long-term oil index link, usually linked to Brent or the Japanese crude cocktail. About 70% of the LNG volumes are tied to such oil-linked contracts. Usually, LNG is priced at a slight discount to oil. Energy equivalent price is 17% of a barrel of oil for a million BTU of LNG. Hence, we typically see this index or slope at about 12 to 14%, i.e. a discount to the 17%. For some contracts, there is a fixed price element. In the graph here, the fixed price is $0.8 per million BTU. For most oil-priced there is a certain measurement period, usually the average price of three months. Then there is a three-month lag before the FOB price is set. FOB price is the price at the loading location, typically a liquefaction train. A cargo to Asia typically can take up to a month to transport, so this is what we call a 3-3-1 structure. three months measurement period, three months delay in pricing, and then one month for delivery, and thus the death price, i.e. the price at destination. The 3-3-1 formula is very tightly correlated to the custom-cleared LNG import price for oil-linked LNG contracts. Hence, we do expect that the oil price crash will start to feed into contract LNG prices once we are approaching autumn. Japan and South Korea, which is the largest and third largest import nations, have historically been very well covered with contracted LNG, typically also LNG which have had destination limitations. Hence, these countries have typically not responded much to lower gas price, as they have already committed to large purchases of LNG under such contracts. With the low contract prices now, We do, however, expect to see coal-to-gas switching in these nations and possibly more spot cargo procurement. As you can also see from the graph, market participants do not expect the rock-bottom prices for gas to endure, and forward prices are therefore higher, something which we call contango, and this is generally supportive of freight market due to floating storage. However, the long-term prices are now very low compared to historical prices, And this, we also think, will stimulate demand. As mentioned on the previous slide, LNG is a clean fuel at dirt cheap price. It's now actually cheaper than coal when measured against higher quality Newcastle coal, both on a regular energy quantity measure, but even more so on an efficiency measurement. Most gas plants are much more efficient than a coal plant, in transforming the energy content of the feedstock to usable energy. A gas plant typically has a thermal efficiency of 50 to 55 percent, while coal plants have an efficiency of only 35 to 40 percent. Hence, in the graph we show this as Aussie coal and coal adjusted efficiency, which creates the economically switching range. However, natural gas is much cleaner than coal. On a CO2 basis, it's about half but even more so for health detrimental emissions like particular matters of fine dust, socks and knocks. In Europe, where there is a well-organized market for carbon emissions, the switching band is thus wider, as carbon permits in Europe have now rebounded following the plummeting prices for such emission permits following the COVID-19 outbreak. Hence, it may be not a big surprise that Europe has been gobbling up so much gas lately. Yeah. Let's review maybe the least interesting slide in the pack today. FIDs or sanctioning of new projects. With the COVID-19 pandemic, the crash in energy prices and energy companies cutting their budgets, we are seeing delays in sanctioning of new projects across the board. Last year, we experienced a record amount of projects being sanctioned. And these projects are expected to come on stream from end of 2022 to 2025. For 2020, the only project we expect to be sanctioned is the expansion by the Qataris. Their nameplate capacity is currently 77 million tons, second only to Australia. And with cheap feed gas and deep pockets, they have announced that they take a longer view and are targeting sanctioning now. when cost of expansion is lower than what it would be in a buoyant market for oil services. Their intended expansion is between 33 to 49 million tons, bringing their nameplate capacity to between 110 and 126 million tons, and thus putting them back on the top once production starts from 2025 onwards. When looking a bit forward, we do expect new volumes to taper off after a massive increase in production capacity in the last couple of years. Given the fact we have in this period experienced a US-China trade war, two record warm winters and now a global pandemic, it might not be too surprising that the market is drowning in cheap gas, although the absolute price level has surprised everyone, including the forward market. From next year to 2023, New volumes will be fairly low before we resume with large new volumes coming to the market in 2024 onwards. This means that product prices should probably stabilize on higher and more sustainable levels, which we would expect resulting in more demand pull from Asia instead of Europe, which has been acting as the sink. Higher LNG prices and ton miles should thus be supportive of the shipping demand in a period where there will be more ships than gas molecules coming to the market. As we have explained before, there has been a large technological and efficiency leap in LNG shipping technology the last 10 or 15 years, so we would expect that in this period a big chunk of the older steam vessels will be leaving the market. Steam vessels today still represent more than 40% of the fleet, and our modern ships are typically close to 50% more fuel efficient than these ships, and have a 30% larger parcel size, with associated reduction in carbon footprint, which is high on the agenda for most energy companies. As I've touched upon already, In the presentation, LNG is a fast track for reduction of pollutants, not only CO2, which is the major cause of global warming, but also to a greater extent, fine dust or particular matter, which can cause serious respiratory problems, as well as NOx and SOx. The virus behind COVID-19 is formally named SARS-CoV-19. This means Severe Acute Respiratory Syndrome, or in short, SARS. COVID-19 is a novel coronavirus and shares a lot of similarities with the SARS virus from 2003. However, SARS-CoV-19 is much more potent in terms of transmission, as infected people can go for an extended period of time before experiencing any symptoms, and for most, without any symptoms at all, while still being able to transmit the virus to others. While it is argued that COVID-19 is a multi-system virus, it is for most a foremost attack the upper respiratory system, and people with respiratory problems are thus at greater risk. With the shutdowns of economies, we have seen a remarkable improvement in local air quality, particularly nitrogen dioxide. Several studies point out strong correlation between air quality and death tolls from the virus, but some argue that more dense populated areas where there are more pollutants are also at higher risk. In any case, Reducing local air pollutants brings serious health benefits, particularly at this point of time, with gas prices now being below coal switching to gas. It's a free health policy, and we do hope that more countries can take guidance from South Korea and UK, which is substituting coal for natural gas on that scale. So, this concludes today's presentation, and to summarize, we... delivered fairly good trading results despite challenging markets with TCE of approximately 68,000 per day, in line with the guidance, which is well above our cash break even levels of around 50,000. For Q2, we expect TCE to be closer to 50, which is still in line with cash break even levels. Once we take delivery of the seven remaining new buildings, which are generally financed with lower leverage and lower interest rates, we do expect cash break-even levels to fall to closer to $45,000 per day, which gives us industry-low cash break-even levels, despite having the newest, most modern fleet with earnings premiums, as well as we have evidence today and in the past. We are also pleased to announce two new financing options. This secures us attractive long-term financing of $281 million, which brings the available financing for the seven remaining new buildings to $910 million, which matches very well with the remaining capital of $937 million, particularly given our substantial cash position of $121 million. And this is cash that is freely available and not restricted cash in any ways. We have a brand new fleet of the most modern large ships with efficient two-stroke propulsion, which is typically the ships that charters would prefer for longer-term contracts when they are entering the market for longer-term tonnage. With first-class in-house management company, we are well positioned to benefit from re-delivery of older ships under contracts once term activity pick up again after charters recently being more preoccupied with next voyage, as illustrated earlier in the presentation. And lastly, while we are now experiencing market turmoil with the COVID pandemic, the long-term fundamental outlook for the industry remains very attractive. Hence, we are confident that we can deliver attractive shareholder value for the patient investor given the current implied valuation together with a super strong capitalization and liquidity position. In times like these, these attributes enable us to navigate safely in harsh weather. So that's it for me. I would like to thank everybody for participating, and I will put the line back to Maria for any questions.

All right. Thank you. Ladies and gentlemen, to those who wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, star 1 to those who wish to ask a question. Thank you. Your first question comes from the line of Gregory Lewis from BTIG. Please ask your question.

Yes, thank you, and good afternoon.

Good afternoon, Greg, and glad to have you coming up with the first question as we have done in the past.

You're too kind. I wanted to touch a little bit on some comments you made about the potential for LNG storage in the back half of this year. You know, we've seen and we've been hearing about the, you know, I guess some declines of some of the spot cargoes that are, you know, coming out of the U.S. And really just kind of want to understand if you can provide a little bit of color what we think is going to drive that storage just as on vessels. Clearly, there's not a lot of onshore storage, if any, in Asia. But that being said, it seems like some of the end users are turning away cargoes or delaying refusing to take them. So just kind of wondering, is there an economic arbitrage that could be driving that in the back half of the year? Or is it really that we can't really see much shut-ins at this point, and therefore it just is going to have to go somewhere? Just any kind of color around that I think would be helpful.

Yeah, thanks. I think most people have been focused on the shut-ins of cargoes in the U.S., and of course that's because it's really basically the only place where – The buyers have the optionality of shutting in and not taking delivery of cargoes. For the vast majority of LNG SPAs, it's a take or pay. Regardless of the price, you have to take the volume. The only option you might have is to reduce the volume slightly for a period, but then you have to take higher volumes later. But we actually, you know, we've seen shut-ins of volumes in Egypt. You know, Egypt was resuming exports, have now been shut down. We have seen Algeria doing the same because of the low price pitches. And, you know, this super expensive FLNG unit for Shell Preludes has been down since February because of COVID-19 issues. So if you're thinking about the U.S. cargoes, of course, we have massive cancellations in June, 20, 30 cargoes and maybe 30, 40 cargoes in July. They typically have two months notice to do this. And if they cancel, they have to pay their tolling fee regardless. So it's more about, you know, what kind of price do you have? So right now with JKM close to Henry Hub, of course, it doesn't really make sense to take the cargo. And that's why you're seeing the massive cancellations. Even if you need the cargo, it's better to cancel the cargo and buy a cargo in the market. So what we think will drive, of course, floating storage and more volumes is, of course, the price. The price needs to get up. The price is at unprecedented low levels. But if you look at the forward market, prices are rebounding, and nobody expects the prices to stay here. for a very long period of time. And we've already seen the oil price bouncing back as well. So if you look at the forward prices, once you're starting to get to September, you know, it does start not making economic sense to kind of cancel the cargoes. It's better to take the cargoes. And with kind of full inventory levels in Europe, we do expect more cargoes to go to Asia, which traditionally also tend to source more gas when you're getting closer to winter season. So, of course, that will drive more demand for shipping and probably more demand for floating storage as people can be buying, let's say, cheap September cargoes and, you know, it takes a month to travel and then maybe float a month and then they can sell that September cargo into November. So we think there will be a lot of that. You know, this has happened last year and the year before. Economics for the product prices have been different at those points of time. But, you know, we have a contango in the market and prices will go up. And that's why we think there will be floating storage. And we do see some inquiries in the market about that, where especially the traders are trying to find ships for winter coverage because prices can, you know, prices for product and prices for freight can certainly move very quickly.

Okay, great. And then just another one for me on the finances. Clearly you guys had a successful quarter over the last few months in lining up some financings. I guess it's kind of a two-part question, but as I look at, and realizing that these are all still have customary closing conditions to go forward. But with all of the financings now lined up for the new builds, you know, just running some quick math, the remaining equity contribution for the new build fleet is the minimum, maybe $20, $30 million. Does that provide an opportunity for Flex? You know, and just given the outlook is challenging for the next couple of years. I mean, you kind of laid out oncoming capacity. Does this provide maybe another opportunity for Flex to kind of step on the throttle a little bit and grow the fleet? I mean, we're hearing that there are potentially some new build vessels that are potentially going to be for sale here in the coming quarters. Is there an opportunity for the company to kind of take advantage of maybe this pause in the cycle to kind of build out its fleet? you know, just given the success you guys have had in kind of, you know, financing Alpha Fleet?

I think, you know, for everybody who knows the kind of the great John Fredrickson system, they would know that we tend to be opportunistic. I, you know, we're very pleased to have kind of the financings in place. We announced the ECA financing, you know, third quarter presentation end of November, and then we also there had, you know, the subject of final documentation. The final documentation was ready by February, and we announced the kind of the signing of the loan agreement in February. But, you know, just as we signed that and we had the Q4 numbers in February, people were asking me immediately, what are you going to do with the 2021 ship's And we just financed five ships for 2020, and people have been so worried about the remaining capex, even though it's been very low, $252 million for those 2021 ships. So we've just been fast-tracking that financing. And you're fast-tracking financing in a period of time where the financing market is more or less shut for almost everybody. You see even the big IG companies investment-grade companies going to the bond market. People are drawing credit lines. So I think we have demonstrated a very good track record of raising attractive financing. We have banks that believe in us. Banks like to finance kind of the new and good assets, and especially with the management, which have, I think, demonstrated ability to charter these ships out at premium rates. And then, you know, we get into the question, you know, how much money should you have? Of course, I'm very comfortable now. We have 121 million of cash. None of the cash is restricted cash because we haven't any bonds, you know, that have calls on FX. We don't have any swaps calling on restricted cash, so that's free cash. And then with 910 million secured for the 937 million of remaining capex, it gives us a very good liquidity situation. And I understand some of the analysts are wondering why you keep paying the dividend when you have such a good liquidity situation. But I think if you look at our share price, it's pretty low. And we want to make people who are investing in the company, you know, just make them ultra comfortable that, you know, we will be around and we will thrive and we will have the financial resources to stay the course even if the market is a bit choppy. So it's just kind of more value for us to have that cash and who knows, you know, I think there will be people who will be in trouble who have uncommitted ships because financing a ship today uncommitted will be close to impossible. So, you know, and then of course, a lot of them put a bet on that the fact they're going to have a long term contract, but as I showed in the graph, you know, there's not really a lot of demand for long term contracts. Now, I think that will change once the COVID pandemic is kind of getting less attention. But, but this means that there will also be opportunities, we are opportunistic people, we wouldn't rule out anything. But right now, I think we're more focused on ourselves, delivering the new buildings over the next 12 months, throwing down the debt, securing more backlog and visibility. And once we have that in place, we also have a very robust capital structure to start resuming dividends.

Okay, perfect. Thank you very much for the time today.

Thanks, Craig.

All right, thank you. And the next question comes from the line of Jay Mintz-Snyder from Value Investors Edge. Please ask your question.

Hi, good afternoon, Oystein. Congratulations on a fantastic quarter.

Hey, Jay. Good to hear from you again. How's Vegas?

Well, we're recovering, doing what we can. But yeah, you know, considering the tough markets, it's good to see that you're able to get the 68,000 TCE. You know, as I'm looking at your presentation today, Comparing it to last quarter, I noticed you don't have the fleet kind of delivery chart. I know last quarter you said the fleet might actually be delivering early ahead of schedule. Is that no longer the case? Are we back kind of to the normal trajectory or maybe even some delays on that side?

I think most of the ships, you know, it's kind of we have more like option to take out ships earlier. But right now, as the market is, we don't really want to utilize the option to take ships out early. So the next ship to be delivered will be Flex Aurora, more or less on schedule. And then, of course, Flex Artemis will be delivered as scheduled in August, and she will enter a five-year or minimum five-year contract with Gunvor. So we don't really expect major changes on the schedule, and that's why we are not really including it either.

Understandable. So back to kind of the regular schedule. On the Flex Artemis with the variable time charter to Gunvor, can you talk through that a little bit? Is there some sort of floor structure and then like a profit sharing, or how does that work?

Yeah, it's a good question. You know, when we wrote the press release for that time charter, you know, we agreed on kind of the wording because if you are a trader, you know, typically you are bidding for cargoes, FOB cargoes, and the last thing you want, is for your competitors to be able to kind of calculate your freight cost, because right now freight cost is a very substantial portion of the cargo economics, and that's why we are not sharing too much details about it, because it has adverse competitive implications for our customers, which is our uppermost priority. What I can say, you know, we have had two ships on index through the last year or so. And as you can see from our TCE numbers, they are kind of supporting our premium rates. So, of course, you get 100% utilization. You get to capture the headline rates. Of course, nobody really will pay you the headline rate 100%. because then they can tap into the spot market. Of course, there are some times where the spot market doesn't have any chips available, which happened October last year. During October last year, it was impossible to get any chips because the market was sold out. But I would say, you know, it correlates very well with the headline rates. Typically, you know, there's not one fit all kind of structure. So Some contracts you could typically have without any ceiling but without any floor. Some have with floor, with profit spit. Some have with floor and ceiling. So they tend to vary. But I think they give us a good exposure to the headline rates while also protecting us on the downside both with utilization and for some of them also with the floor.

That makes sense. It sounds like we can model that as a normal sort of mega market rate with full utilization then. Okay. Looking forward to your cash demands, I'm very impressed with your refinancing for 2021. I know we talked about that last time, about getting those new bills financed. I don't see any really needs for cash really until 2024. I mean, you have a very clear debt maturity profile, large cash balance. And your shares trade at an enormous discount to NAV, right? I mean, you can debate the NAV, right, whether or not you use the lower current market values or more of a replacement value, but maybe somewhere between $12 and $15 or $16 per share, right? And your shares are like $4. So how do you look at – is there any method you can take to correct that gap? I know you want to keep a strong cash balance. Is there any sort of appetite – to a share repurchase or a tender offer or anything that could help close some of that gap?

I think I had a call with you early March after our investor day, and we did this conference call, and you were asking me a lot about the 21 new buildings. And I told you, okay, we are fast-tracking those financing, and I'm happy to say we were able to fast-track those in time for our report today. So that gives us a very comfortable cash position, as you see. Even after taking delivery of those ships and generating zero cash flow from operations, you would have $100 million of cash, which is, of course, a lot more than we need. When it comes to what to do with the cash, and of course we don't have any maturity, as you said, before 2024, I think it's more to, you know, when we have such a depressing stock price, you know, we just want to give people a comfort. You know, if you invest in us, it's not like we are going to the market to raise any money because we already have the money. And if you are, you know, in 2018, kind of the investor in our company were more, I would say, growth investors. In 2019, they were value investors, and today it's probably more deep value investors and If you are a deep value investor, the last thing you want to do is that the company has to raise money because then your kind of position is kind of diluted. So we just keep that in mind that the people investing in the company, including our majority shareholder, John Fredrickson, with a 45% stake and management as well, we want to make sure that we can thrive in this market and if opportunities arise, It could be something to look at. There are also resale opportunities, and I think there will be more resale opportunities. Tradewinds is floating a story today with some prices. I think it was said around $170 million for a resale. Of course, that's a ship without any contract, without any software, without any financing. For off-lead, we have 13 new ships. with financing attached and our software in terms of management, both technical and commercially. So our ships are much more worth than those resale. But still, the stock market is putting a discount to that. So for us, of course, the best investment we can do is buying back the stock. But on the other hand, we also want to make sure that investors are comfortable with our financial situation. And the best way to do that is to have financing secured and a lot of cash.

Yeah, definitely understand it's a challenging balance, and you beat me to my follow-up because I was going to ask about the resale. I heard there's a 2022 vessel for something like $170 million, so very interesting. As an investor, we would hope that you would look at share repurchases ahead of vessels if you're trading at a huge discount, but we trust you to make the right choices. Thanks again for the questions and an excellent quarter.

Thank you, Jay. Good to hear from you again.

All right, thank you. There are no further questions at this time. Please continue.

Okay, that's good. And I think we are adjourned. Everything is very clear. I wish you a continued good day. And we are back with our second quarter sometime in August. So I wish you a pleasant day and a good weekend tomorrow. Thank you.

Thank you. Let us conclude our conference for today. Thank you all for participating. You may all disconnect.