FLEX LNG Ltd.

Ladies and gentlemen, thank you for standing by and welcome to the Flex LNG fourth quarter 2020 earnings presentation. At this time, all participants are in listen-only mode. After the speaker presentation, there will be the question and answer session. To ask a question during the session, you will need to press star and one on your telephone keypad. I must advise you that this conference is being recorded today on the 17th of February, 2021. I would now like to hand the conference over to your speaker today, Oystein Kaleklev. Please go ahead.

Thank you and welcome to today's FlexLNG webcast where we are presenting the fourth quarter 2020 and full year 2020 results. My name is Øystein Karl-Eklev and I'm the CEO of FlexLNG Management. I will be joined today by our CFO, Harald Gurvin, who will go through the numbers as well as providing a financial update. Our presentation today is a bit longer than usual as we are reporting not only fourth quarter but also the 2020 numbers. We thought it would be appropriate to touch on some topics in greater detail. Today's presentation will be the last with Harald as he will step down from his position. Harald joined Flex LNG as CFO on January 1st, 2019, and have done a fantastic job for us, securing attractive long-term financing for all our ships and successfully listing the company on New York Stock Exchange. Harald joined from our related company, SFL, where he's been since 2006, serving as the CFO in the period from 2012 until he joined Flex. We have recently recruited senior banker Knut Håll to take over the CFO role during second quarter. Knut is a veteran shipping banker with experience from both Swedbank and ABN AMRO, and he will be in the fortunate position to inherit a super strong balance sheet and a fully financed company from Harald. In any case, Harald will stay on in advisory capacity to ensure a smooth transition. Please also note that a replay of the webcast will be available at flexlng.com. at a later point. So then we head to the disclaimer. Before we start, I will just make you aware of our disclaimer with regards to, among others, forward-looking statement, non-gap measures, and completeness of details. And the full disclaimer is available in the presentation. And we recommend that the presentation is read together with the earnings report. So let's kick off with slide number three, the highlights. 2020 has been a story about going from overhang to scarcity, about new lows and new highs. In the spring, JKM gas prices hit a new historical low of $1.8 per million BTU. At this time, TTF, the Dutch gas hub for Northern Europe, fell below $1 for the first time. However, in January this year, LNG cargoes in Asia were being sold close to $40 per million BTU, a staggering 20 times increase. We have also seen similar movements in freight rates with the Baltic LNG, which is a freight assessment, which take into account full round-trip economics, i.e. ballast condition, and this index fell below $20,000 per day during the summer, but then reached an all-time high of above $300,000 per day in January for the route between U.S. Gulf Coast to Europe. Hence, we have been through a classic gloom and boom story, which the annals of commodity and shipping industry is filled with. During the fourth quarter, we successfully took delivery of Flex Amber in October. Given the strong sentiment in the freight market during the final months of 2020, we also made preparations for early deliveries of flex freedom and flex volunteers so we could act quickly on market opportunities. With all the travel restrictions, this is something we had to plan well in advance as it takes a lot of time to mobilize a ship today given the visa procedures, travel limitations, as well as a two-week quarantine of the crew at arrival. As the freight market became increasingly tighter, we are pleased that we were able to secure attractive spot charters for both Flex Freedom and Flex Volunteer, and these ships were delivered on 1st of January and 20th of January, respectively. These ships were then delivered straight to our charters from the ARP. So, following these three deliveries, our fleet has now gone to 12 ships on the water. Our last new building, Flex Vigilant, is scheduled for delivery in second quarter, and once she is delivered, we have completed our new building program with all ships on time and budget. In terms of financial, I am pleased that we in fourth quarter deliver time charter equivalent earnings for the fleet of $74,000 per day in line with our guidance in the last quarterly presentation of an average TCE of $70,000 to $75,000 per day. This is below the $94,000 and $95,000 per day we made in Q4 the last two years, but reflects the fact that the market didn't really firm up before end of October. However, we have had a significantly stronger market into Q1 this year than the previous years, which our guidance illustrates. Despite a very difficult market during the spring and summer, our trading results for the year were fairly stable, with quarterly trading results of $67,000 in first quarter, $47,000 per day on average during both second and third quarter, which marked the nadir of the COVID-19 crisis, and then earnings finally bounced back to $74,000 per day in fourth quarter. So on average, our fleet delivered a TCE per year of $60,000 per day, which is well above our cash break-even levels, and a result we are reasonably satisfied with, given the challenging market. With improved trading results, our income also rebounded, with net income and adjusted net income of $25.8 and $24.2 million, respectively. As mentioned, we have one more shift for delivery. We have secured attractive long-term financing for our entire fleet, including this last new building. Additionally, we have a rock-solid cash position of 129 million cash at hand at year-end, plus a new 20 million revolving credit facility, which we recently agreed. As we communicated during our third quarter results presentation in mid-November, Two-thirds of first quarter were then already booked due to a strong demand for shipping at year-end. We are therefore guiding Q1 revenues of $80 to $90 million, which is significantly higher than the $67 million of revenues in Q4. This reason for the expected revenue increase is the delivery of two ships during January, but we are also expecting higher average TCE for the first quarter. It is very rare that you see stronger trading results in Q1 than Q4, so we are off to a good start of the year, and the market outlook is much sounder than last year, given the drawdowns of gas inventories, which will spur restocking demand. Given our recent strong trading results, or very sound financial position, and healthy bookings for Q1, the board has decided to hike the dividend from 10 cents per share to 30 cents per share for the fourth quarter, which provides an effective yield of about 13% on an annualized basis. Given the improved outlook and positive share price development recently, the board has also decided to increase the cap under the share buyback program we initiated in November from $10 to $12. $12 is still only 80% of the book value of the stock. And our book consists entirely of new modern LNG carriers, fully financed. So we think it is in the interest of our shareholders that we utilize some of our financial resources to invest in buybacks, as our ships are still much cheaper than new buildings at Yard. which comes without financing and which cannot be delivered before 2023, while all ships on the water are generating cash flow today. So, slide four provides an overview of our fleet composition. To repeat, we are expecting revenues of 80 to 90 million for first quarter, which is strong numbers. We still have open positions, as currently about 13% of available days remain open, And we also have three vessels under variable hire where we do not know the realized earnings before the end of the quarter. Therefore, the range in our estimate. As of today, we have four ships on fixed hire TCs. This is FlexRanger, which have been trading for NL and its subsidiary, Endesa, for about 20 months. We have recently been notified that the charter has selected to utilize its three months early re-delivery option. Hence, She will be re-delivered to us by end of February. We have, however, fixed Flex Rainbow on a 12-month fixed hire charter with a large trading house, a charter that commenced end of January. In July and September last year, we took delivery of Flex Aurora and Flex Resolute, and both these two ships were fixed on fixed hire time charter with a major utility. Today, we also have in total three ships currently operating under variable hire TCs, Flex Enterprise, we recently extended by another year under its variable hire contract, where the charter is a super major. This will be the third year under this variable hire contract for Flex Enterprise, and she is just booked until March next year. Flex Artemis was delivered in August and immediately commenced the long-term variable time charter with Gunvor. Lastly, we took delivery of Flex Amber in October, and she commenced a variable hire time charter with a supermeasure once arriving in Lordport end of October. With our spot market on fire during the end of 2020 as well as early 2021, we have benefited from having substantial spot exposure with additions of the two new buildings, Flex Freedom and Flex Volunteer, which we have employed in the spot market. Our last new building will be Flex Vigilant and is scheduled for delivery in May. So if we look at slide five, just how we illustrate how we have allocated our earnings in 2020. We generated an adjusted earnings per share of 17 cents in the first quarter with an average trading result of $67,000 per day. In Q2 and Q3, we achieved a trading result of $47,000 in both quarters due to a challenging market following the COVID-19 pandemic. But still, we managed to generate one cent of adjusted earnings in these two difficult quarters. As market recovered in Q4, we generated 45 cents in adjusted earnings, which sums up to 63 cents per share for the year. So how did we spend these earnings? As we had four ships for delivery in the second half of 2020, we spent about 20 million related to remaining capex for these new buildings, which equates to 40 cents per share. We paid out a dividend of 10 cents in Q4 in March and another 10 cents for Q3, which was payable in December. In total, 20 cents per share. We also started to buy back our share at the end of the year and bought 203,000 shares back in 2020 at a cost of about $1.7 million, so 3 cents per share. Hence, this sums neatly up to 63 cents, which is also adjusted for 2020. Slide number six, COVID update. Operating our ships through 2020 have been made much more difficult due to COVID-19. A lot of countries have put up a lot of travel restrictions and impediments for crew changes and repatriation of seafarers have become more difficult. Shipping is a global business and it functions as the lifeline of the economy with its integrated supply chains and just-in-time management. They say that no man is an island and good things come to those who wait, but this has not been true for seafarers in 2020, who we think deserve the proper recognition for their valuable contribution making the world go round. We have recently seen some improvements and public awareness have been increased, raised with initiatives like the Neptune Declaration on seafarer well-being and crew change, which we together with our affiliated companies Frontline, Golden Ocean, SFL and Advance, as well as about 300 maritime companies signed up for recently. However, crew rotation and fire inspections are still difficult to carry out, and we once again urge the global community to get its act together on this issue. As explained in the Q3 presentation, we acted quick to put in new routines and safeguards to ensure the safety of crew and cargo while being able to keep our propellers running. We have closely collaborated with our charters to coordinate crew changes, even though this from time to time have resulted in a higher level of deviation as we have had to take some detours to get crew off and on our ship. Since May, when most of the lockdowns took effect, we have still managed to carry out an impressive 67 crew changes. This means we have been able to keep the number of overdue seafarers to a minimum, but it's not possible to get the number to zero right now. When we reported in November, 93% of our crew was on time, i.e. they were not overdue on their contracts. We have since then managed to increase this to 96%, which puts us in world-class category based on the numbers we are seeing in the industry. At the same time, we have been able to reduce overdue time for those seafarers which are working overtime. We now have no crew being more than 30 days overdue. Furthermore, of the 4% of our crew which is overdue, half is less than 14 days, while the remaining 2% is overdue by less than 30 days. Our new building team have also faced logistical challenges when planning for the deliveries and mobilization of our new building, and there's been many of those recently, with six ships being delivered during the six-month period stretching from July to January. Despite the obstacles, our ships have been fluid, mobilized, and delivered according to budget and plan. Half of our new buildings have been pushed forward compared to contractual schedule, while three ships have been slightly delayed. For Flex Aurora and Flex Amber, this was done to fit them into employment contracts, while we delayed Flex Freedom by a month to have her 2021 vintage. So once again, I would like to extend a special thank to our seafarers and new building team for their fantastic efforts. So slide number seven, which is a business slider. And before handing over to Harald for a financial review, I just want to highlight the rapid transformation of the business landscape, which has occurred since we took delivery of our first new buildings, Flex & Never and Flex Enterprise, in January 2018. So I picked a selection of some of the cover pages of economists during this period to illustrate this point. Let's start off with trade. After President Trump and Xi, their initial flirtation failed, trade talks fell apart and the brinkmanship started with escalating tariffs. This included a 25% import tariff on US LNG into China and resulted in US LNG being priced out of China. If you were going to start a trade war in LNG, you couldn't really pick any worse country to fight it. US is the upstart in LNG with boundless of projects in need of securing markets and financing, while China is by far the fastest growing market. On paper, this makes them a perfect fit. US have what China needs, An increased trade would also balance the trade balance between the two superpowers. So this has, at least so far, really been a missed opportunity, and we do hope to see improvements here beyond the phase one trade agreement. Connected to the trade war is a general slowdown in globalization. This is evident from both trade and cross-border investments. In the past, trade typically grew about twice as fast as GDP, as the world became increasingly more integrated during the Pax Americana period. This has not been the case lately. To some extent, this is due to affluent consumers are more inclined to buy services like healthcare, hospitality, travel and education instead of traded goods. But we have also seen a breakdown in global cooperation on trade, as particularly the West have shown trade fatigue and fighting for increased globalization have become political suicide. Hence, the World Trade Organization, VTO, have not been able to conclude a global trade agreement since the Uruguay round was completed back in 1994. The Doha round has been stuck for more than 20 years with no end in sight. Trade agreements have just lately become more regional in scope rather than multilateral. Today, we do see that developing countries are the ones pushing for trade liberalization, while rich countries have retreated. Luckily for shipping, developing countries now represent a higher share of global GDP and are generally more inclined to consume goods like energy. While we have seen deglobalization in trade, we have, however, seen globalization of the COVID-19 pandemic, and this at a staggering pace. The virus, which most experts thought would be a minor flu outbreak in China, went viral on a global scale, and the rest is history. However, the remedies to the virus have been achieved through global cooperation, and the manufacturing and distribution of the vaccine would not be feasible without global supply chains. With the COVID-19 outbreak, a lot of folks were expecting that environmental concerns would be overshadowed by COVID-19 and that the public purse would prioritize employment rather than the environment. But this has not been the case. The political will to reduce carbon emissions have been remarkably strong, despite the biggest economic contraction since the Great Depression. And the U.S. is now also joining the global community under the Paris Agreement. Just from a pure economic rationale, it makes sense to push ahead with the energy transition. With a lot of fiscal stimulus, it makes sense to spend these public funds on energy for the future, which is low-carbon gas coupled with renewables, to avoid locking in emissions by opting for coal. So coal will be facing tougher times ahead, as also illustrated by one of the covers. It's not only the public sector who have become more conscious about sustainability. This is also a big investor trend. People who are making their money available for corporations want to see their capital contributing to the good of the society. Fifteen years ago, Economist, which is a rather progressive magazine, ran a cover with the title, The Good Company, A Skeptical Look at Corporate Social Responsibility. Today, she is our... The CSR acronym has been replaced by ESG, Environmental, Social and Governance. And this is rapidly becoming a license to operate. This was made very clear by the recent letter authored by Larry Fink, the head of BlackRock, which is the world's largest asset manager with a staggering $8.7 trillion under management. In the letter from Mr. Fink, he promised a big shakeout in how they manage their assets and companies Companies which are not taking ESG issues seriously risk being excluded. And this will also apply to passive index funds and exchange-traded funds, which have now become the most popular investment choice. So we in Flex think our activity is very well aligned with the public. Our ships transport our cargo, which primarily replace coal, with 50% reduced CO2 emissions. At the same time, this fuel cleans up the local air quality. A recent study from Harvard put the worldwide premature deaths from poor air quality due to particulate matter from fossil fuels to 10.2 million, where deaths in China and India represent a staggering toll of 3.9 and 2.5 million per annum. Well, you might say that LNG is still a fossil fuel, which is true. But LNG, or natural gas, is the cleanest burning hydrocarbon, reducing the harmful particulate matter pollution compared to coal by nearly 100%. At the same time, our new ships have a CO2 footprint, of less than half of the older steam turbines. We have also adopted sustainability accounting standards, and we will report our third annual ESG report in April, where we will publish a lot of non-financial figures related to emission, as well as social and governance issues. And lastly, as mentioned, the medicine against COVID-19 is not only newly developed messenger RNA vaccines, but all Keynesian fiscal and monetary stimulus on an unprecedented scale. We are living in the age of the greatest ever fiscal and monetary experiment. Will easy money and huge budget deficit at a time when baby boomers are retiring, will that lead to higher inflation? Are we seeing the last melt-up in the debt super cycle, which has now endured since Paul Walker and fellow central bankers managed to rein in inflation about 40 years ago? Will this debt supercycle be replaced by a new commodity supercycle? These are questions on the top of the mind for most investors these days. In any case, we are not afraid of inflation and certainly not a commodity supercycle. Our balance sheet consists of real physical assets being 13 ultra-modern LNG carriers which transport LNG, which is rapidly becoming a commodity dealing from oil. In times of inflation, commodity stocks tend to outperform the general market, and shipping is part of the commodity value change. If our customers are selling their cargoes at higher prices, there is generally more money on the table to pay freight. So, with that economic and political backdrop, I think we are ready for the financial hour.

Thank you very much. Looking at the income statement on slide 8, revenues for the quarter came in at 67.4 million, up from 33.1 million in the previous quarter. The increase is due to improved markets, with time charge accrued and rate for the quarter of approximately 74,000 per day, up from 47,000 in the previous quarter, and also the increase in the fleet following delivery of three vessels in the third quarter and Flex Amber in October, which also impacted vessel operating. Adjusted EBITDA for the quarter was 50.2 million, up from 21.9 million in the previous quarter. Interest expenses were up due to a full quarter of interest on the debt related to the three vessels delivered during the third quarter, and execution of the 156.4 million flex amber sale and leaseback upon delivery of the vessel in October. Net income for the quarter was 25.8 million, or 48 cents per share, up from 3.8 million, or 7 cents per share in the previous quarter, with adjusted net income of 24.2 or 45 cents per share up from 1.2 million or 2 cents per share in the previous quarter. Looking at the full year 2020, we reported net income of 8.1 million or 15 cents per share. As I mentioned, we took delivery of our first vessel three years ago in January 2018, and this is our third year in a row delivering black numbers. Adjusted net income for the year was 34 million, or 63 cents per share. Then moving on to our balance sheet as per December 31st on slide nine. We had a solid liquidity position of 129 million at year end, an increase of 53.1 million during the quarter, which we will get back to on the next slide. During the year, we took delivery of a total of four vessels, of which one was delivered in the fourth quarter. increasing the operating fleet to 10 vessels at year-end, with an aggregate book value of 1.86 million. In addition, we have booked vessel purchase repayments of 290 million, relating to the three new buildings still to be delivered at year-end. The first of the new buildings, Flex Freedom, was delivered on 1 January, and the increase in vessel purchase repayments is due to pre-positioning of funds in end-December, in connection with the deliveries, offset by the delivery of FlexAmber in October. Total interest-bearing debt stood at 1.4 billion at the year-end. During the fourth quarter, we executed the 156.4 million sale and leaseback transaction for FlexAmber. In addition, 125.8 million was drawn under the 629 million ECA facility in December, in connection with the delivery of FlexFreedom on 1st January. Total equity as per quarter end and year end was 835 million, giving a strong equity ratio of 36%. Looking at our cash flow for the fourth quarter on slide 10, we had a positive net cash flow of 63.1 million. Cash flow from operations was 51.6 million, which includes positive working capital adjustment of 14.4 million, mainly due to an increase in prepaid hire due to the strong markets. Scheduled loan installments were $9.4 million, and in addition we had a financing cost of $5 million, relating to upfront fees, guaranteed premiums, and commitment fees on our long-term debt, which we will get back to on the next slide. Net new building CapEx made a positive contribution of $23.2 million in the quarter, relating to the new building Flex Amber. As mentioned, we executed a $156.4 million sale and leaseback transaction upon delivery, compared to total capex, including change order and pre-liver expenses, of $133.2 million. In November, we announced a share buyback program of up to 4.1 million shares. During the quarter, we repurchased a total of 203,000 shares for $1.7 million, or $8.20 per share on average. In addition, the Tencent dividend for the third quarter of $5.4 million was paid in December. Looking at our cash flow for the full year on slide 11, we started and ended the year at 129 million in cash. Cash flow from operations was 89.3 million during the year, while scheduled loan installments were 36.3 million. During the year, we arranged more than 900 million in new attractive financing, securing funding for all seven new buildings still under construction at the beginning of 2020. The associated financing cost totalled 17.5 million, of which 9.9 million were upfront fees to the financiers. In addition, we paid a guaranteed premium to Kexim, totalling 3.2 million, under the 629 million ECA facility, where part of the loan is guaranteed by Kexim. This is in effect prepayment of interest expense, as the guaranteed tranche under the facility has a significant lower margin due to the guarantee. Commitment fees prior to drawdown totaled 3.8 million, while we incurred legal expenses of 600,000. Net new building updates for the four new buildings delivered during the year was 21.8 million. And as mentioned, we purchased here totaling 1.7 million in the fourth quarter, while total dividends paid during the year was 10.8 million. or $0.20 per share, representing $0.10 for each of the fourth quarter 2019 and third quarter 2020. We have over the last year secured a total of $1.7 billion of attractive financing for the 13 vessels in Enfried. At the same time, we have diversified our funding base with a mix of bank financing, lease financing, and ECA financing. Post-quarter end, we also agreed a 20 million increase on the 100 million facility for the financing of FlexRanger. The 20 million increase will be non-advertising and available on a revolving basis. We have a very comfortable debt maturity profile with the first maturity due in July 2024. Our diversified sources of funding also give a staggered debt maturity profile mitigating any refinancing risk. We have not only diversified our financing sources but also our pool of lenders, which now include 15 different financial institutions, demonstrating our ability to raise attractive funding in a challenging capital market. Flex LNG is a clean setup, with a fleet consisting entirely of later generation LNG carriers, with attractive financing attached. This also gives a very comfortable cash per key level for the fleet, which is estimated at around $45,000 per day on average per vessel, once fully delivered in the second quarter. If we look at the breakdown, both G&A and marine operating expenses are competitive at around $1,500 and $13,000 per day, respectively. The remaining two-thirds is financing costs, where interest expense is estimated at $13,300 per day. Around 62% of our debt is either fixed rate or hedge with interest rate swaps, giving predictability on interest expense. The remaining 17,500 per day is repayment of debt. All our loans are amortizing with an average repayment profile of less than 20 years to zero, compared to the depreciation profile of our vessels of 35 years, which means we are paying down our debt more rapidly than the assets depreciate. The competitive cash break-even level and all vessels on the water generating income from the second quarter means we are very well positioned to generate substantial cash flows going forward, as illustrated on the graph on the right. And with that, I hand the word back to Øystein, who will give an update on the market.

Thank you all for the good financial review, and again, I have to say you've done a great job, and you're leaving the company with our envious financial position. As mentioned in the introduction, the COVID-19 pandemic wreaked havoc with the energy market when shutdowns and lockdowns took effect. Oil prices collapsed on with West Texas Intermediate Oil falling as low as minus $37 per day, which is still hard to fathom. Natural gas prices and LNG was also affected, with record low gas prices during the summer. We did, however, avoid negative prices, but European gas for some time traded below $1 per million BTU, which equates to oil at around $6 per barrel. well below the low of around $23 for Brent oil, which is not landlocked like the West Texas Intermediate crude. Asian spot LNG price also hit a all-time low of $1.8, while Henry a bit a 21-year low in June at $1.40. As previously mentioned, this resulted in a flurry of constellation of flexible US LNG cargoes. But notwithstanding this, LNG exports managed to grow by about 1% in 2020, which makes it an outlier in the energy space. This is well below the 7% growth we expected, but still much better than other energy sources. The closest substitution to LNG, pipeline gas, fell by about 3%, as LNG is rapidly grabbing market share from pipeline gas. By 2025, we do expect that more gas will cross borders as LNG on ships than through pipeline, as LNG on ships is a more flexible mode of transportation, given the shippers more options where to monetize the gas. Oil output fell by about 8%, driven by OPEC plus Russia's cut of 9.7 million barrels, as well as less shale output in the US. Coal, which is facing existential threat, was down close by 7% in 2020, while nuclear power was down by 4.5%. The only other energy source that grew was renewables. There are different ways to measure renewables, whether it's installed capacity or electricity or power output. According to IEA, electricity output grew by 6.6% in 2020. Hence, as we have talked about before, there are two sources of energy that will keep on growing, and this is renewables and natural gas. Renewables are intermittent, while gas is flexible and can be turned on and off quickly, so they fit well together, as we have pointed out in the past. Okay, slide 15, let's do a quick recap and review of the spot freight market. The graph to the left-hand side represents the headline rates for large modern LNG carriers with two-stroke propulsion. Keep in mind what I've said before, that headline rates do not fully take into account ballast bonus conditions, so actual spot rates can significantly differ from headline rates both on the upside and downside depending on the firmness of the market. Despite COVID, 2020 has for the most part followed the usual seasonal pattern, but with much weaker rates during the spring and summer compared to previous years due to lost freight demand caused by the wave of cancellations. However, as we said in our second quarter presentation in August, we were starting to see improvements with cargo cancellations tailing off with July and August marking the peak cancellation months. The comeback of U.S. LNG was, however, somewhat delayed by the most active hurricane season on record, which disrupted LNG exports out of U.S. Gulf Coast plants during August, September and October. But these supply outages did, however, spark a rally in the product market, which I will cover shortly. During the August presentation, we also assessed the probability of a third consecutive warm winter to be low, as La Nina alerts were then already being sent out. As we pointed out, last time we saw a cold winter in 2017-2018, the spot market held up well in Q1. We therefore kept substantial spot exposure during the winter, either by trading in the spot market, or fixing our ships on variable higher time charter, which are linked to the general freight market. As we have now seen, the thesis of a cold winter played out well for us. First, Northeast Asia was hit by extremely cold weather in December and January, with Beijing experiencing the coldest weather in five decades, while Japan experienced record snowfall in several regions, which together with nuclear shutdowns resulted in the power market going haywire at the start of the year. Northern Europe have however been unusual cold in January and February, driving up gas demand and inventories down. Recently we have seen the Arctic weather also hitting Middle America, with Texas averaging similar temperatures as Alaska, resulting in all-time high power demand and causing rolling blackouts in one of the most energy-rich places on the planet. While the market was on fire at the end of the year and into January with record high freight rates, rates have now normalized and the coal spell in Asia has subdued. The cold weather has, however, continued in Northern Europe with firm gas demand and a big drop in gas inventory. Consequently, the spread in gas prices between Asian and European markets have narrowed, which is also evident from the next slides when we are talking about product prices. Less arbitrage and gas prices returning to more fundamental values have thus pushed more Atlantic cargoes to Europe instead of the longer route to Asia. During December and January, a lot of ships had to take the long route via Suez or Cape of Good Hope, and this can add up to 50% to the sailing distance. Shorter sailing distances have thus freed up more ships, and this, coupled with less arbitrage, have cooled down the freight market. As you can see from the graph on the right-hand side, vessel availability was very low at the end of the year, going into 2021. This was particularly the case in the Atlantic, or the dark blue color here. So the ships coming open now are mostly based in Asia, where demand was strong at the beginning of the year, while we are now seeing more of the Atlantic cargo staying in this basin, which means some ships will need to reposition. Trade rates have thus returned to seasonal normal levels, But we are able to monetize a strong market by fixing both our new buildings on attractive charters, as mentioned, while also getting a boost on our variable hire contracts during January. Next slide, please. Illustrated development of the spot market, with spot LNG volumes going to 37% of volumes in 2020, there is also more demand for spot freight. And with high availability of ships and low rates in the summer, it was easy for charters to opt for spot fixtures, particularly given the high level of uncertainty. that a lot of folks were working from home probably also affected decision-making. However, we do expect the spot market to mature, so it's positive to see spot or short-term fixtures growing by about 50%, which makes this market more liquid. So gas prices. So gas prices started to recover over the summer and into a cold winter. The average AKM front-month contract for February – was about $18, but it hit a high of $32.5 before rolling over on January 15 to March contract. And this was due to buyers in Asia being short on volumes, given the cold spell. This is a remarkable turnaround. However, such prices are not sustainable in the long term, given the oil price. At one time, LNG prices were trading at about $200 per barrel of oil equivalent. So LNG prices have now normalized. As oil prices have been on a bull run, LNG linked to oil price at the slope of 13%, which equates to about 25% discount oil, have therefore strengthened and is now back above spot LNG prices. The takeaway from this slide is, however, that future prices for gas in Europe and Asia are now well above U.S. prices, which reduce the risk of cancellation significantly, and where cargo economics are at a level where charters can pay substantially higher freight over the summer than what was the case last year. This notwithstanding the recent cold spell in U.S. with associated high gas prices, which is expected to subside. Slide 18, inventories. So during the summer, a lot of folks were monitoring the European inventories levels closely as European customers were buying a lot of cheap gas for storage given the vast storage and import capacity in Europe. With 100 billion cubic meters storage capacity, this equates to about 70 million tons of LNG. Europe can effectively buy all of the U.S. LNG capacity and put it on storage. In reality, LNG will be competing with pipeline gas for such reinjection. By the summer, European buyers became exhausted as we were approaching tank tops. However, with the pull from Asia during the winter, and the cold winter in particularly northern Europe, the flow of cargoes to Europe has slowed down considerably, and this has resulted in a high level of inventory drawdowns, with European gas inventories going from tank tops to NOAA level well below the previous two seasons, and also below the five-year average. Hence, this will be supportive of the market as European buyers will be required to restock in order to make sure they have sufficient gas on storage once we are approaching winter again. We therefore think we will see a contango curve in the market again during the early autumn, which might very well incentivize floating storage, which our ships are ideally equipped for. So, the weather. Slide number 19. I'm not going to spend too much time on this, as most viewers probably read newspapers, but we have highlighted repeatedly during our presentations that weather plays a huge role in the LNG market, and while the winter has been mild the two previous seasons, it's back with a vengeance this season, first in Asia, then Europe, and now in the US. This only illustrates the fact that it's not possible to just electrify everything. We need flexible gas as part of the future energy system, as the gas system can transport ample energy on short notice to consumers, particularly under peak conditions. In Germany, where renewables have a high share, there has been a lot of talk about dunkelflaute angst. Dunkelflaute is a word where we combine dunkelheit, meaning darkness, which is not good for solar energy, with the word windflaute, which means little wind. I think recent experience have demonstrated that Dunkelfraude combined with coal spells evidence the need for flexible gas, and it's therefore not surprising that energy majors like Shell, BP, and Total are building their future business strategy around low carbon and clean gas together with renewables. So U.S. exports, slide 20. While OPEC and Russia balance the oil market through FIATs, The LNG industry sorted out the needed rebalancing through the market, as there was no sign that the big producers like Qatar and Australia were willing to cut capacity. And this was neither to be expected, since both countries have off-take agreements underpinning their production, and both countries have very low cash costs of producing the LNG. Hence, it was up to the US to rebalance the market, and this was done by off-takers utilising their contractual right to cancel cargoes, usually two months in advance. With these cancellations, which counted about 190 in total, about 13 to 14 million tons were removed from the markets. Some supply disruption in places like Australia, Norway, Malaysia, Trinidad and Tobago took care of the rest of the rebalancing, and this actually led to a shortage of LNG at the end of the year, as mentioned, demand picked up. However, with thermal demand, U.S. production is up again at full capacity, and EIA expects the production this year to be around 8.5 billion cubic feet per day, which equates to around 66 million tons. or around 88% utilization. So the number conscious think that there will be much less cargo cancellation this year. U.S. is, however, rapidly ramping up capacity and is destined to take over the throne as the largest exporter, at least for a short while prior to the Qatari expansion. So let's review the development in imports and exports with an overview of the 10th largest exporters and importers in 2020 compared to their levels in 2019. So the 10 biggest exporters here I think represent around 87% of all the exports and the imports, so the 10 biggest imports I think is around 81% of the world's imports. So while Europe absorbed nearly all the 35 million tons of LNG coming on stream in 2019 and also soaked up a lot of volumes in the first half of 2020, Asia started to pull cargoes in the second half of the year. This was particularly driven by increased import by China, which grew its import by more than 6 million tons and thereby coming close to Japan. We do expect China to surpass Japan in import volumes by end of 2021, possibly 2022. depending on economic growth and the scheduled restart of nuclear plants in Japan. India and Taiwan also grew steadily in 2020, while Turkey was the main growth market in Europe. On the export side, Qatar and Australia were neck-on-neck in 2020, with slightly higher export numbers in Qatar than Australia, according to Kepler. We expected Australia to surpass Qatar, but they fell short due to outages of Gorgon and Prelude. The U.S. recorded the highest growth with about 11 million tons, but this also fell short of expectation due to the cancels mentioned. So slide 22 illustrates some of the points I've already made. After a wave of cancellation during the spring and summer months, the market picked up with what can visually be illustrated as a V-recovery in the import share of Asian buyers, with export cargoes destined for Asia going from a low of 58% in May to 77% in January 2021. So higher imports to Asia mean that Atlantic cargoes will have to be transported further, and this underpins really in both product prices as well as freight rates, as I will illustrate on the next slide. So with the pull from Asia, Panama became congested due to its limited capacity. Going through Panama is the shortest route to Asian markets for U.S. cargoes. Increased output from U.S. combined with pull from Asia means a lot of ships have to take the longer route through Suez and Cape of Good Hope. This can add 50% travel distance to our already long journey of typically around 10,000 nautical miles versus the average sailing distance for the cargoes of around 4,000 nautical miles. There were also a lot of ships waiting in queue. But with waiting time of up to 14 days, this adds ton time, similar to the longer sailing distances. So this also drove shipping demands. And Panama congestion is not a fluke. This will happen again as U.S. will continue increasing its output. Asia will continue to grow its LNG demand while the capacity in Panama is finite. So FID is on slide 24. So it's been a while since we have included a slide on new LNG export projects. Last time we included a slide with this was in connection with our Q1 presentation in May where we put up a list of all the projects covered by a box where we just wrote delayed for all the projects except for Qatar, which we said would most likely go ahead regardless of the developments in the energy and financial markets given the cheap feed gas and the deep pockets of the Qataris. Despite this, one project was sanctioned at the end of the year, and this was maybe not too surprisingly Costa Azul, which is located northwest in Mexico, close to the U.S. border. This project had already secured offtake for most of its volumes, is able to source gas from the shale place, while also offering a location not dependent on the Panama Canal, which certainly would be an advantage this season. The highly anticipated expansion by Qatar Petroleum from 77 million tons to 110 million tons have also recently been given the formal green light. There is a couple of things worth mentioning about this project. The project has a break-even cost of around $4 per million BTU, and this is equivalent to oil at around $25 per barrel, and highly competitive. It also includes the world's largest carbon capture plant, and up to 4,000 MW of solar power in order to electrify the plant and thus reduce emissions in the liquefaction process, a system to reduce carbon emissions in the well-to-tank process, have now become crucial in order to entice buyers. NOx emissions are also reduced by 40% through application of enhanced dry-low NOx technology, The project will conserve 10.7 million cubic meters of water per year by recovering a whopping 75% of the plant's water. And lastly, Qatar Petroleum already have the options to expand the plant by two more trains, bringing the capacity from 110 million tons to 126 million tons, and they are signaling that this will happen. With the big expansion in Qatar, will there then be room for more projects? We do expect a small wood fiber plant on the west coast of Canada to be sanctioned this year. Total recently signed an agreement with the government of Papua New Guinea for the Papua LNG project and signaled their intention to build this 5 million ton project. While the Exxon-led PNG LNG project in the same country is facing a more uncertain outcome. Exxon is also leading a big project in Mozambique called Rovuma LNG. It's now been reported that Exxon is in talk with Total, which sanctioned the Mozambique LNG project in 2019, about teaming up on the gas extraction as they share some of the same resource base. We therefore expect a decision about going ahead with this project will be delayed to 2022, as there have also been recently some security concerns in Mozambique. Woodside, which operates the Pluto field, has recently secured offtake for 2 million tonnes, So it wouldn't be too surprising if this project is also given the green light. And then finally, it's U.S. We would expect to see some more projects going ahead, given the vast shale resources available close to Gulf of Mexico. And we have put up some of the hot contenders here in the box to the right-hand side of the slide. ESG. I already touched a bit on this, but as mentioned in the past, ESG is not something we just report because it's expected of us. ESG is an integrated part of our strategy. Our strategy is to move LNG to market so it can replace coal, and this is the quickest and cheapest way of not only reducing global warming, but also imperative in order to solve the air pollution problems which are running rampant, particularly in Asia. Furthermore, we have ships which are much more efficient than older generation of ships. So first we have a cargo reducing emissions substantially and then we have ships which are doing this much more environmental friendly. Our ships are also being fueled by the cargo we transport, LNG, which is also the most environmentally friendly fuel available. So we implemented ESG reporting in line with sustainable accounting standard board guidelines for maritime transportation with our first report published in 2018. Our third annual report will be published in April And we will continue to broaden the scope under what we are providing of non-financial measures so that investors can assess how we are running our business, not only in terms of the environmental issues, but also in relation to social and governance issues. So GHG emissions or decarbonization of shipping, which is becoming a big thing. As I mentioned earlier, decarbonization is taking center stage in the industry. IMO's Marine Environmental Protection Committee, MEPC, held its 75th session in November 2020, where they discussed and approved the first draft amendment to Marple Annex 6. The aim is to implement short-term measures for greenhouse gas emission reduction based on mandatory goal-based technical and operational measures to reduce carbon intensity of international shipping, with a view to adopt at MEPC 76 scheduled for mid-June 2021. So this is probably the biggest regulatory change in shipping since the introduction of double hull tankers, and it's much bigger than IMO 2020. If adopted then, as we believe will happen, these amendments would enter into force on 1st of January 2023. The amendments representing short-term measures for GHG emissions utilize a two-part approach to address both technical and operational aspects of limiting greenhouse emissions. The two most important changes are implementation of energy efficiency requirements for all existing ships and not only new ships. This is what we call EEXI, and this will take effect from 2023. It's a bit similar to fuel efficiency standards for cars, only that it will also include all existing ships as well as the new ships. The measuring stick here will be carbon emissions per ton mile. The second part is implementation of annual operational carbon intensity indicator. In practice, this means each ship will get a report card each year, which is like an energy marking you find on everything from dishwashers, refrigerators, or even houses. The report card goes from A to E, and if you get a D three years in a row, or a E, then you need to take proactive action immediately. There is a lot of uncertainty about how this will play out. We can read in the newspaper that somewhere around 50 to 80% of the ships today are not complying with these rules. And this depends whether you are reading shipping watch or trade winds. But what is clear, however, is that LNG is a bit more complicated than most shipping segments. Keep in mind LNG ships have historically been extremely inefficient. as the thermos keeping the LNG cold have until recently not been very efficient. This means boil-off gas, and until about 10 years ago, most ships used steam turbines to burn this boil-off to create propulsion. But as I pointed out earlier, steam propulsion is not very efficient. Additionally, these ships have much less cargo capacity than the newer ships, affecting the ratio of carbon emissions to ton-miles. These ships, therefore, score poorly on carbon emissions, as illustrated earlier. While the solution in most other shipping segments will be to tune down the engines, or what we will call engine power limitation, resulting in slow steaming, this option is not straightforward in LNG shipping. You can stop the boil-off from the tanks if you tune down the engines, so you either have to retrofit reliquifaction or improve insulation, but this is costly and probably not worthwhile for all the inefficient ships. Additionally, these shifts are already fairly slow on boil-off speed, so doing this will further decrease the speed, making them commercially unattractive. And some owners with tonnage under contracts will maybe not be able to meet operational requirements under these charters if they are pursuing this strategy. Another hot topic is CH4 emissions, which is an LNG-specific issue and which have therefore not received much attention. CH4 is a potent greenhouse gas with about 28 times higher effects than CO2. We think it's fair to include this as well. If so, the carbon footprint of the four-stroke diesel electric ships will go up a lot, as the carbon emission, taking this into account, is similar to steam ships. Hence, we think attrition of older ships due to this new legislation will go up a lot, and this will be more the case in the event of even a carbon taxation, as this will further aggravate the problems for the less efficient ships. We are, however, well positioned to meet the required 40% reduction in carbon intensity by 2030, as all fleet consists entirely of new ships with efficient fuel-to-stroke engines and a relatively low boil-off rate, so we view these rules as an opportunity rather than a threat. So, to put the new regulation into context, we have added a fleet list on slide 27, which shows the composition of the fleet with different classes of ships, with around 200 steamships in operation. These ships are at most risk of new regulation. Another 223 ships are fueled by four-stroke diesel-electric engines and are more efficient due to size than engines, but emit a significant level of unburned methane, or CH4, as mentioned. We also here find the largest ships in the industry, the Q-Max and the Q-Flex, which are about 265,000 cubic and 216,000 cubic meters, respectively. There are 45 of these ultra-large ships. These ships are a bit of an oddity, as they do not run on LNG. These ships reliquify all the boil-off, which is energy-consuming, and they rather burn very low sulfur oil or marine diesel, as they can't burn LNG. Hence, they will also be at a disadvantage in terms of emissions. However, one of the QMAX ships have been converted to a MEGI a couple of years back. But this is a complex procedure and costly, and in retrofitting, all the ships will take them out of service for some time. We, in this category, also have 27 hybrid steamships, which are not particularly efficient, given the inherently low thermal efficiency of steam propulsion. The LNG 3.0 segment consists of Megian XDF ships as well as ice-breaking ARC-7 ships, so this is the place to be in our view. The ARC-7 ships are not particularly efficient, as they are also four-stroke diesel-electric engines, as they need to generate sufficient electricity to run their thrusters in order to break through ice. But we expect them to get an ice allowance for this particular trade. So, slide 28... So there's been a recent uptick in term contracts, so the order book today mostly consists of shifts which are committed under term contracts. We have seen some of the speculative owners opting for term contracts, and this makes sense, as putting up our in-house management takes a lot of time, as we have spent considerable time and resource going through that process, and you also need a certain scale of your business for this to be worthwhile. Trading ships spot is also much more challenging than basically outsourcing the commercial activities to the charters under a term charter. Here you also need to scale in order to get relevant info flow in order to not be put on a disadvantage, and having more ships also gives you better trading opportunities, as you can have ships in different basins chasing several opportunities at the same time. Lastly, LNG shipping is extremely capital-intensive. Getting the capital structure that we have in place is not easy. We have managed to do so based on our tax record, reputation, and the fact that 840 million of our capital structure consists of common equity, which is not easy to raise these days. Hence, some owners of speculative tonnage have also seen it will be hard to raise financing unless they secure term contracts, and have therefore opted for this. This contracting activity, however, put a lid on term rates, and we have therefore elected to remain relatively high exposed to the spot market, as we have assessed expected future spot rates to be more attractive than term rates. And we can also afford to do so. Nevertheless, we do aim to put a larger portion of our fleet under term contracts when the time is right, and we do think there will be ample opportunities in the future due to a lot of older ships coming off charters, and we expect charters to prefer the new type of ships due to the reasons described earlier. So finally, last slide before summary. Slide 29 is just an update of the graph we presented in our Q3 report, and the numbers are fairly similar. EIA expects U.S. to export 8.5 BCF per day, as mentioned, 66 million tons. This is 16 million tons higher than last year due to less cancellation, as well as some new capacity coming on stream. At this level, export will be at 88% of capacity. Prelude is back in operation after being closed 11 months last year. Compared to last draft, we have not included drought for Gorgon as two trains will be inspected and repaired in 2020 affecting capacity. We put up Egypt as a dark horse in November and this materialized with Idku back in operation and Damietta expected to return already in Q1 after being closed down for nine years. However, Egypt and Exports are price sensitive, so we expect a utilization of only 68% in line with the projections from energy aspect. Then finally, we have new production coming on stream in Malaysia with a new FLNG unit, as well as in Russia with Yamal train 4 and Portovia. Melke in Norway we expect to be closed until Q4, tagging down exports to around 27 million tons for 2020 watt. There is, however, some uncertainty here, but also some upside if product prices are firm. Then U.S. can produce another about $6 million. So that's it. We are then at the summary. I'm not going to spend too much time summarizing it. As mentioned, we delivered easy numbers in line with the guidance. We expect to make higher revenues in Q1 compared to Q4 based on our firm market. The board has decided to increase the dividend from $0.10 to $0.30 for Q4, which gives us an effective yield of 13%. We have 12 ships on the water and last ship for delivery in Q2. The market is looking better. We will have restocking demand. And then, as we mentioned also in the past, we are fully financed. We have a rock-solid cash position. And that's it for me, folks. So then I think we can open up for questions, and I would like to thank you all for listening in.

Ladies and gentlemen, we'll now begin the question and answer session. As a reminder, if you wish to ask a question over the phone, please press star and 1 on your telephone keyboard. The first question comes from the line of Greg Miller from BTIJ. Please ask your question.

Yeah, hi. Thank you, and good afternoon. Harold, congratulations. We're going to miss you. Guys, I have a little bit of questions around the dividend. Obviously, we like to move higher in the dividend. We talk about it being related to Q4, but as we've guidance. Clearly that's exceptional guidance. I guess I'm just curious how we should think about dividends going forward now that we're going to have the final vessel be delivered in May. And really what I'm getting at is if Q1 is going to be a nice strong quarter, but as we move in towards you know, the April-May period, and we see seasonal weakness. Anyway, we should be thinking about, you know, how we should be thinking about kind of bracketing the dividends, just given that there is still some cyclicality, seasonality around LNG ship pricing.

Thanks, Greg. I don't know, have you got married? Because usually before, at least in 2020, you were named Greg Lewis, so...

That's a new year, I guess.

We should try new things, I guess. Okay, Greg Miller. Yeah, the dividend. So a dividend is always, you know, I think some companies, they tend to have more like, call it a structural approach to this, where they either have like a minimum dividend and then they pay out 70% above that level or something like that, or they say, We're going to pay out 70% of earnings. For us, we are thinking a bit more common sense about it. We don't want to manage the dividend too much. We want it to reflect how much money we are earning and how much money we have in surplus. So right now, with the legacy of Harald's financing, we have a very good financial position. We have more money than we need in the company. And, you know, at least the short-term outlook is good. So it's natural for us to increase the dividend. So it's more a question at what level should you put it. I think I held this presentation in September on the Pareto Conference because we get a lot of questions about the dividend. And, you know, people have been waiting for dividends because we have been in an investment mode now for about three years. And now we're kind of the investment done. We spent more than $20 million on CapEx last year, despite having the ship's finance. So how to think about the dividend? So we have $840 million of equity, and this is all common equity, so there's no fancy equity here with some preference on dividends. So in order to give people a fair return, you could say that you should have maybe let's say 12% return on your equity. That's the typical number analysts are putting in at least. So that means we should be generating $100 million every year. And then is that feasible with 45,000 of cash break-even level? We certainly think that we have to generate in the mid-60s in order to be generating $100 million of cash. And then how is our financial situation? It's very good. We have 130 million of cash on Eurovolver now, putting that up to 150. Plus, of course, the cash flow we generate in Q1. And we don't really have any maturities of debt we have to worry about, and no bonds. So we are able to, you know, and aim to pay out all our earnings over the cycle. But, of course, shipping is cyclical. So it's not like the numbers are... very stable. This, of course, depends on the business risk. We have elected to take spot exposure, so our earnings will be more volatile as a consequence of that. So then we are thinking, but if we're going to pay out $100 million, which I think is a fair, then the dividend needs to go up closer to more like $0.45. But, of course, we are dependent on the market. So we're starting here with $0.30, and which reflects around 67% of the adjusted debts because we also have a buyback program. And we think the stock is cheap. We're paying out dividends. We hope people are reinvesting the dividends. But we can't force people to spend their dividends on buybacks. So we are buying some back. But we also are mindful that we have a dominant shareholder with a big stake in the company. So It's not like we can buy all the stocks back. So we're doing a bit of both. I hope that, of course, the EPSO, the cash flow for generation in Q1 will be substantially higher. But then when we are taking that decision, we are in May, we will have a bit more view on how the summer market will be developing. Are we going into more of a contango structure? Are we seeing pull from Asia? Is the fiscal stimulus and the vaccines being rolled out? and where we see higher economic growth. The economic growth for this year is expected to be like 4%. So all these things will at least become more evident then. And then if we become more bullish on short-term outlook, I think the long-term outlook we are very bullish on. So if that becomes more evident, then we always have the room to increase the dividend. But I think this is a dividend which is, you know, very sustainably, at least in the shorter run. So we're trying to do a bit of both. We don't want to manage it too much, but we like the dividend not to be just a factor of what you're making in one quarter, because when we're making our dividend decision, we're not only looking into one quarter, but a bit further ahead, if that makes sense.

No, that's great. That's great to hear, actually. And then just obviously you mentioned the balance sheet, you're wrapping up the initial new build, well maybe that was the second phase of the new build program, where you're taking delivery of your last new build next quarter. Obviously new builds are always an opportunity, but on the slide in the back where you talk about obviously the committed vessels and the uncommitted vessels, I think there was around 30 uncommitted vessels Maybe they were ordered on spec, maybe not. Do we think there'll be a potential for some of those uncommitted vessels to kind of end up being resales over the next 12 months?

That might very well be. If you look at us, we have to compare our stock. Our stock is basically ownership stake in a in a ship, a brand new ship, and some cash. So third in ship, $130 million of cash. So if you buy a stock, you're buying a slice of those shares, and then you get $10 million of cash attached to that ship. We also get financing attached to it. And that financing, it's not very easy to replicate the process we have done raising that financing. I'm a bit more hesitant lately about committing financing unless you have long-term charters. so we think that a slice of our ships should be more worth than a ship on a yard where you don't have that financing attached and where you don't have that cash attached and where you don't have a set-top for managing the ship because building a ship management system do take time both the technical and also the commercial so for us to kind of go buying some of those on resale, they have to be more attractive than buying the stock. And right now, and lately, that has certainly not been the case.

Okay. Hey, thank you very much for your time. Great presentation.

Thanks, Greg.

Thank you. Dear participants, once again, if you wish to ask a question over the phone, please press star and one.

Yeah. I think if we have some questions from the web, we can always take a couple of those. Okay. Are you checking? Yeah. I think we were talking for like an hour here, so I guess everything is very clear and evident, hopefully. If not, we are back with presentation in May. We will have more clarity, as I mentioned to Greg, about economic development how this recovery will play out, and hopefully we're then, not hopefully, we're very confident we then will deliver fantastic results for Q1 and provide more guidance on the future. So thanks a lot again for joining, and I wish you a good day.

That does conclude our conference for today. Thank you for participating in all these connects. Have a nice day. Dear speakers, please stand by.