FLEX LNG Ltd.

Hi, everybody, and welcome to Flex LNG's fourth quarter 2024 result presentation, where we will also go through the numbers for the full year. My name is Øystein Karle Kleve. I'm the CEO of Flex LNG Management. And as usual, I'm joined by our CFO, Knut Roholt, who will walk you through the numbers a bit later in the presentation. As usual, we will go through the financials. We will cover the market. And after the presentation, we will do our Q&A session. As usual, we have a gift for the best question this time. It's for investors who don't want to get cold feet. We have the FlexLNG warm feet. So while... Our cargo is cold, minus 162 centigrade, or 260 minus Fahrenheit. Our investor can have warm feet because we have a lot of backlog, which can weather us through this difficult market in the LNG market the last couple of months. Before we begin, I'm just going to highlight... Disclaimer, we will be utilizing some non-GAAP measures like TC and adjusted debit and adjusted net income. Those numbers are reconciled in our earnings report also available today. And of course, there are limits to how much detail we can cover in the presentation. So let's begin with the highlights. Revenues came in at 89.5 million, in line with the guidance of close to 90 million. For those who have read the earnings report, you will actually see our revenues was 90.9 million. This is due to EU ETS, the emission trading system, coming into force in 2024, and we had an income on EU ETS increase. carbon emissions on 1.4 million in our charters. This is for the account of our charters. So we receive 1.4 million from our charters in compensation for EU ETS and then we also surrender those to the EU and we have a corresponding cost of 1.4 million in our voyage expenses. So net freight income 89.5 million as mentioned in line with the guidance. Net income was driven by a sharp increase in interest rate in the Q4 after the election of Donald Trump. So we had a derivative income of 20.1 million. 5.1 of the derivatives was realized during the quarter as a positive carry, resulting in adjusted net income of 30.8 million, where we only include the realized gains and losses, not the unrealized gain and losses. That means our earnings per share came in at a healthy 84 cents or 57 cents on the adjusted basis. Recent events we were reporting back in November, we informed you then about the extension of two of our ships, Flex Resolute, Flex Courageous. At the beginning of 2024, these ships were extended from 2025 to 2027, where the Charter has the option to extend those ships to 2029. And in November, we announced that the Charter has amended the charter where they have a new firm period for 2029 to 2032 with options all the way to 2039 so we are pretty sure the ships are at least gone for to 2032 possibly a bit longer Following our Q3 presentation in November, we also announced end of November a new 15-year time charter for Flex Constellation. So the startup of this charter is in Q1 or Q2 2026, given where the rates are today, it's more probable that startup will be Q1 as this is in our option. 15 years takes the ship to 2041, so we're adding a lot of backlog through these recent new charters at a very good time, I would say, given how the market has experienced the last couple of months. We've also done some refinancing, as we mentioned in our presentation in November. adding more attractive debt, 430 million, releasing 97 million in cash, while extending our debt maturities and lowering the interest costs. We also provide a guiding today for 2025, so despite the slump in freight rates, we are very well covered with our backlog, so we do expect that the revenues will come in line with the number for 2024. The time charter equivalent earnings, it's Expected to be somewhere in the mid 70s, giving revenues of 340 to 360 million. You should note that we have four ships where we are planning to do the special five-year survey in 2025, while we only took two ships out of operations last year. Ebitda, we also expect this number to be fairly in line with last year, 250 to 270 million. So it's pretty good and steady sailing from Flex LNG. So once again, we are declaring then our dividend of 75 cents per share, taking the dividend for 2024 to $3, implying a running yield of about 12%. And this we can do given the fact that we have a fortress balance sheet and backlog, 437 million of cash. And I will touch upon minimum 62 years of backlog, which is about five years each ship. Just a kind of summary of the 2024 results. TCE 74.9. So this is the time charter equivalent earnings. So it's like the average rate you have obtained on your ship, 74.9. We were guiding about $75,000. Revenue, $355 million. We were guiding $353 to $355, a very narrow range. And then adjusted EBITDA smack in the middle of the range, 271 to 274, we're delivering 273. And I think for the first time here, we do see Q4 numbers below Q3, given the slumping rates from end of September into Q4 and into 2025 for that matter. Just to touch upon our contract coverage, we have Flexed Constellation, which was pictured on the front slide. She's on a 312 days time charter. We expect to get her re-delivered end of February, early March. She will then have a 12-month gap. where we will have to trade her in the spot market, which will be a bit challenging and reflected in the guidance. But once she come into Q1 2026, she will commence a 15-year charter to 2041, where the charter also have the option to extend that ship to 2043. We also have some ships with other ships with long duration charters, Flex Rainbow all the way to 2033. As I mentioned, Resolute and Courageous, we extended in November all the way to 2032, where the charter can extend those ships to 2039. And then we have two ships with Chenier, which we extended all the way back in November 2022, where those ships have been extended to 2030. and 2031. We have two ships coming up in 2029, so leaving us with Flex Freedom fixed until Q1 2027, which we think is a good window where the market will be much tighter than it is today. And then Flex Voluntär and Aurora also with Chenier fixed until Q1 2026, where they have the option to take those ships to 2028. Flex Ranger, again, I think it's a good window of re-delivery. This ship is for 10 years to 2027. And then we have one ship on index. She's getting close to her firm period. She was fixed from delivery of yard on a variable time charter for five years with Gunvor. That is maturing in Q3 when we are planning to do the five-year special survey for this ship. And then we will see whether the charter utilize their options. They can extend the ship by five single one years. Those options are also an index, which makes it probably a bit more possible that they utilize the extension options since they are not fixed rate higher. So altogether, 62 years of minimum firm backlog, which then might grow to 96 years if the charters utilize all their extension options. Guiding for 2025, I already touched upon it. It's going to be deja vu all over again. We expect numbers to be very much in line with the numbers we delivered in 2024. And with stable business, stable outlook, we are also having stable dividends. Paying now 75 cents again, $41 million in total dividend. So the last 14 quarters, we paid this ordinary dividend of 75 cents per share. We also topped up from time to time with some special dividends. And altogether, this number is now 610 million of dividends the last three and a half years, which I think gives our investors a stable and good income being invested in Flex. Giving over to Knut, just a reminder of our kind of decision factors for putting the appropriate dividend level. We had 57 cents of adjusted earnings per share. We are paying slightly higher dividend given the fact we have, as Knut will tell you more about, we are flushed with cash. So we think that we can pay out slightly higher than the earnings per share. The decision factors mostly have green lights, except for the market outlook, where short-term outlook is poor. Medium-term is slightly below average, I would say. And then when we are looking at the market from 2027 onwards, where we get most of our ships open, it's still compelling with growth. with long-term charter rates in the mid-80s, which is above the level we are delivering today. So it means that we should be able then to recharter those ships at better rates in the future. So with that, I think I hand it over to Knut before just reminding you about one number you will not find in this report. And it's actually the most impressive number. It's our lost time injury frequency. So this is our main safety KPI, where zero is the theoretical minimum, given the fact that you have had no incidents and the number we delivered in 2024 was zero. So no lost time injuries frequency for 2024, which I think is impressive and shows that we are delivering superb service to our customers. So with that, Knut, I hand it over to you and I come back with the market update.

Thank you. So let's start off since it's Q4 with a bit of a review of the full year and in particular the operational days. As you may recall, in 2023 we had four dry dockings and this year we have had two. 33 days of dry docking, which is actually seven days below our budget. and net of the off-fire days for dry docking. We are delivering 99.7% technical uptime, which is a very strong performance. On the TC, as you see here, stable TC, 75,300 for the fourth quarter and close to 75 for the full year. This shows also the stable revenue streams that we have. On OPEX, we are for the year and also for Q4 delivering slightly below our budgets and guiding, which is a strong testament to our cross-discipline. For 2025, we are seeing that a number of our ships are coming close to their schedule and maintenance on running hours, in particular for the auxiliary engine and main engines. So in combination with higher crew cost, and that is crew cost for crew changes, in particular crew changes in Asia, we are now guiding an OPEX per day of 15,500 for the year. If we look at the revenues, as I mentioned, we have revenues of 90.9 million, of which 1.4 is related to EU ETS. And as a reminder, we are subject to EU ETS when our ships are in Europe and having port calls to Europe. This is a cost for the ship owner but under our time charter agreements we can reimburse and get that reclaimed from our charters. Revenues received there from the charters will be booked as operating revenues while we correspondingly will book the same amount as voyage expenses. EBTA, we are delivering smack on guidance. And one of our important numbers is the adjusted net income, where we adjust for non-cash items. And for the fourth quarter, we are adjusting 15 million for unrealized gains on the interest derivative portfolio and half a million loss on FX portion we have. And as we presented also on the Q4 presentation, we concluded some refinancing in Q3 that refinanced three ship, leaving the Flex Endeavour unencumbered. So therefore, you will also see a lower debt balance and also cash balance on the Q3 numbers. The long-term lease for Flex Endeavour was concluded on the 3rd of October and then releasing the full amount of 160 million. So during the quarter, we had 52 million on cash flow from operations, then the scheduled debt amortizations, and then close to 41 million we paid out in dividends. That leaves us with a very strong cash balance of $437 million. This is a reminder of how we keep our balance sheet. It's fairly clean. It's chips and cash. And then we have debt on the other side and the book equity. And as we show here, our book values are more or less reflecting all-time low values, but we still maintain a fairly decent book equity ratio of 30% given our backlog. And most importantly, our debt funding portfolio, a very attractive mix of both the bank debt and leases, where we also include RCFs to manage our cash position. During the quarter, we converted a term loan, a bullet term loan with one of our banks to an RCF, and thereby increasing our RCF capacity to about 414 million. That we use in between quarters for cash management and reduce interest rate cost. And the net of the RCF, we see here our net debt balance. And what... On our interest rate exposure, the 530 million in the dark blue is basically our net debt exposed to the floating rate market. Remaining here is fixed rate debt and hedge debt, which I will cover in the next slide. Also, on the debt maturity profile, our first debt maturity is in December 2028. That's related to Flex Resolute. And given that we announced a contract extension for her on the Q3 presentation, that is a very manageable residual to refinance. We see here a gun fishing sticker. You see three hooks. We did announce contracts for three ships in the last quarter, even though we have a very attractive debt funding portfolio. We will consider refinancing of these three ships, in particular given the long duration of those contracts. We have been managing our interest rate risk very actively. Last quarter, we did some amendments and added more duration to secure coverage during these high interest rate environments. So we have extended duration, which has also yielded very well, which is shown in both realized and unrealized gains during the fourth quarter. This is a mix of traditional interest rate swaps and also fixed rate leases and fixed rate portions of our leases, which is primarily in our Japanese operating leases. So in conclusion, and also we get a lot of questions about dividend sustainability. This slide can be read in conjunction with the decision factors for our dividend. We have stable cash flow. We have a very healthy balance sheet with 437 million in cash. We have barely known CapEx liabilities and first debt maturity in 2028. So that is what is there to support both our commercial and financial flexibility and dividend story. So with that, I hand it back to you, Einstein.

Okay, thank you, Knut. Let's dig into the market a bit. Yeah, 2024 was a year with record low growth in export volumes. We put in a recent history. On our Kepler platform, we couldn't find any year with less growth than 2024. But I can't rule out that this could have happened sometimes in the 70s or 80s. So I just put in recent history. Actually, growth in the market was lower than 2020 when you had this wave of US cargo cancellation. In 2020, the export market actually grew 1%. It's only 0.2% this year. It's a combination of factors. It's been some delays. on liquefaction plants. And then, of course, there's been the sanction on the expansion of Russian capacity, particularly the Arctic LNG-2, which I will come back to later. But despite the sanction on Russian LNG plants, Russia managed to grow their exports 4%. Last year, Europe was one of the big takers of Russian LNG. U.S. only 1% growth in 2024. Nigeria have resolved some of their issues with feed gas problems and managed to show healthy growth both in Q4 2024 and for the full year. On the import side, it's been a year where Europe has stepped back. Europe has had the benefit of two very mild winters in a row prior to this winter, resulting in Europe coming out of the winter season last year with very high inventory levels. And they stepped back from the market, giving more room for Asian countries, particularly than China. which grew healthy last year, getting close to the record levels they had prior to the invasion of Ukraine. So I believe they ended up at 78.5 or 79 million. The record high is 80 million tons. And then India up actually 14 percent. This has changed a bit in the past with the cold winter and the big inventory draws in Europe. Europe has been making a comeback in the market. as we've shown on this graph here. Before the invasion of Ukraine by Russia, Europe imported around 80 million tons, and then during this energy crisis of 2022, they really were the buyer of first and last resort, increasing their imports all the way to 127 million tons, primarily sourcing a lot of spot U.S. LNG at that time. Imports stayed stable in 2023, but then given the two-mile winter, they came out of last winter season with high inventory. So imports in 2024 slumped to 103 million tons. But this is changing now with a colder winter, less renewable output, especially in Germany. We see that. The inventories in Europe are well below the last couple of years and we do expect Europe to come out of the winter with low inventories with a big need for restocking during the summer months. And this is also reflected in the price of LNG. So we have this graph here showing the three main indices for natural gas prices. It's the Henry Hub in the US, which is the main benchmark price for natural gas, hovering around $3 to $4, one of the cheapest gas sources you can have. Then JKM, meaning Japan-Korea market. So this is more like the spot LNG price in Asia, although most of the Asian players, the big nations like Japan, China, Korea, they have a lot of LNG they buy on long-term contracts linked to oil price. So this is the spot price. And then you have the more like deregulated European market, where the main benchmark for Northwest Europe is TTF, Title Transfer Facility, which is a virtual pricing hub in the Netherlands. So generally what we have seen now is that prices have been picking up and picking up to a level where... LNG becomes expensive for 15 million dollars per million BTU, meaning oil price at above 80 dollars, resulting in more of the Asian nations turning to more affordable energy like coal. So we see here that the pull from Europe is pushing up prices where the a kind of killing of the arbitrage, meaning it's more profitable to send the US cargoes to Europe rather than Asia, despite actually shipping being now more or less for free. So this change in trading pattern in the latter part of 24 and into 25 have resulted in a big slump in the freight market, which I will also cover later. Looking at... Looking at Asia, had a good start of the year, pulling a lot of cargoes, up at record high levels. And then we see a bit lower growth from Asia at the end of the year as Europe came for full force into the market. Stable market in the kind of mature markets being JKT, meaning Japan, Korea, Taiwan. Taiwan did grow their imports quite a lot, but Japan and Korea are fairly stable. China, as I mentioned, growing fairly steady, and the same goes with South Central Asia. Then turning back to Russia and the sanctions, there are a couple of big LNG export plans in Russia. Two of them are not sanctioned. This is Sakhalin primarily exporting to Japan, Korea, China, and then Yamal, which generally can export cargoes to Russia. to Asia via the Northern Sea Route with specialized LNG tankers. But when the ice is thick, they like to export those cargoes into Europe and Europe has been a willing buyer. As you can see on the graph on the left hand side here, Europe record high import of Russian LNG last year. Some of the newer projects, as I mentioned, been sanctioned, particularly then Arctic LNG 2. It's a big plant. The first train is up and running, but they have not been successful in placing those cargoes in the market. And the second train is also ready for commissioning. So we'll see how this develops, whether there will be a grand bargain with EU, Trump, Russia, Ukraine, and whether this part of the deal will be a lifting of the sanction on Russian gas and LNG, then some of these cargoes might come back into the market. At least seems to be some signals from part of the EU that they are willing to make certain concession in order to leave this war behind us. Then looking at the export market, there is a lot of volume coming to the market, a lot of volume which were already sanctioned or given the green light prior to Biden putting in the moratorium on new export licenses January 2024. And of course, as we expected and mentioned when we had our Q3 presentation in November, we did expect that President Trump would remove these limitations very quickly, which he did. So there is a lot of new projects in the U.S. ready to be FID. We see on the right-hand side here, We have picked out some of the key contenders to get FID either this year or next year, being Lake Charles, Delphine LNG, Sabine Pass Expansion, Woodside Louisiana, CP2, and possibly as well Alaska LNG. There's a lot of trade disputes going on. We saw overnight here China coming in, putting a tariff on US LNG, similar to what they did back in 2018-19. when we had a period of time with 13 months without China sourcing any LNG from US. So the Chinese have made contracts with a lot of these US expansion projects. And in case this tariff stays in place, we would expect them to resell those cargoes, possibly to European buyers, and rather source more LNG from Qatar, Australia, Russia, West Africa. So this is still up in the air a bit. These trade wars are volatile. Suddenly there is tariffs and then there are 30 days grace. So we just have to monitor the development. But in any case, there is a lot of LNGs coming to the market. And unless there is a really big trade war here, we do expect a lot of new US projects to come in to the pipe here. Also given the fact that Europe also is expected to have some trade conflict with the U.S., where President Trump is really forcing Europe to be buying more LNG from the U.S. Touching upon the freight market, which is the market which we are active in, as I mentioned, the market was behaving quite normal during 2024, actually a bit firmer during the summer months than we expected. But once we came into the winter season, rather than the market or the freight rates shooting up, which is usually the case, They slumped, and they have continued to slump throughout 2025, where they are now at the rock bottom level at around $10,000 per day, which makes it very uneconomically, especially for the older tonnage. What are the drivers? It's, of course, the change in trading pattern where more cargoes are going to Europe, cutting down the sailing distance, and this is freeing up a lot of ships. As you can see here on the left-hand side of the graph, a lot of ships, around 35 ships available in the market. This is softening then the freight rates. We also saw during last year a big grow in spot fixtures. As kind of the cargo prices have come down, the panic has been alleviated. More of the charters are tapping into the spot market given the vessel availability, fixing their ships on spot voyages rather than fixing them on longer term contracts. So in that regard, I think we have done well. We have been utilized at window during 2021, 22, 23 and also into 24, fixing a lot of ships on longer term contracts rather than just playing spot. Looking at the most inefficient ships, the steam tonnage, generally we could say there are three types of ships here. It's the older steam ships. There are still around 200 of these ships in the market. And then there are the tri-fuel or dual-fuel diesel electric ships. And then we have the modern ships, the two-stroke, which has, of course, better economics, given that they are larger and has a much more efficient propulsion system. Rates for steam tonnage, we pegged it here on the Affinity and Clarkson numbers at $2,500 per day. If we look at the Fernley number today, the rate for steam tonnage, it's actually zero. So we have been talking about this for a long time. It's an overdue scrapping cycle for steam tonnage. These ships have been surviving because you have had generally quite good markets, especially in 22 and 23 and into 2021. at least the first quarter of 2024. So given the slump in the market and making these ships unattractive, we do expect to see a big uptick in scrapping this year, next year and the coming years. Driven not only by economics, but also by environmental rules which put a disadvantage on these ships, except for the fuel EU maritime, which I'm going to cover also lately. In terms of new building prices, they have stabilized at around 255 million dollars per ship. Delivery window now generally being 2028. Elevated new building prices and also fairly high interest rate in recent history is also then driving up long-term charter rates in order to invest in new ships. You need a rate at least in the mid-80,000 to get a reasonable return on such an investment. So longer-term rates are holding up. for those contracting ships for delivery 2028 and onwards. Looking at the order book, it's a big wall of new buildings hitting the market, and it's one of the reasons why we try to fix our ships until 2027, 2028, where we think the market looks better balanced. For 2024, we were expecting 68 ships for delivery. Given the soft market, there's been some slippage, which usually happens in a soft market. So only 60 ships for delivery last year, meaning there will be more ships for delivery in 2025, 1993, we expect, and then 83 ships for delivery in 2026 and 2027. As you should note here, most of the ships, or almost all of them, are built towards long-term charters. Given the elevated new building prices and given the size of the order book, there's hardly any speculative ordering here. There are a few ships which are uncommitted for delivery in 25, 26, 27. And then from 28 onwards, all those ships are either for long-term projects and also the Qatari, which has expanded their fleet by more than 120 ships in order to renew their fleet and also to have more ships for the big expansion going on in Qatar. So if we look at the market here, we have been in a phase with limited growth now the last two years, and then the growth will pick up in 25, continue to grow in 26, 27 onwards, which will rebalance the market together with scrapping of older ships. So when it comes to older ships, we put out the different types of ships here. As I mentioned, less efficient ships being the steam turbine ships, And that's why they have a big penalty on the EU emission trading system. Cost per day for a steamship, 7,200 euros per day. This tax is paid in euro. Euro and dollar is more or less the same today, so you don't really need to have an FX conversion to calculate the dollar amount. Other generation, the tri-fuel or the dual-fuel diesel electric, 5,600 euros a day. And then the more modern ships, the Megi and the XTF, which our fleet consists entirely of. We have nine mega ships and four XTF ships. They have a smaller kind of EU ETS drag, 4,600 euros per day. However... EU, they don't like to make things simple. So while I think most ship owners support this system, we generally like a predictable carbon tax, which is penalizing the less efficient ships. EU has also implemented this year what they call the Fuel EU Maritime, which is a system for decarbonizing maritime fuel. Since LNG is a cleaner burning fuel, you will get kind of reward for burning LNG compared to very low sulfur oil or heavy fuel oil with a scrubber. There is a huge penalty if you are not complying with the fuel EU maritime regulation. The penalty being 2,400 euro per metric ton of VLSFO equivalent. It's a complicated word. So we've taken the numbers from the shipbroker affinity and calculated what will that benefit be. So you can see on our ships, we will get the benefit from pretty big benefit from the fuel EU maritime, more so on the Maggie, which we have nine of, because they have hardly any methane slip. Slightly less benefit on the XTF because of They have a higher methane slip than the mega ships and then a further penalizing of the dual fuel diesel electric or tri fuel diesel electric due to the high methane slip. However, the steamship which doesn't have any methane slip, they do however have a huge fuel consumption. That's why they are being penalized by the EU ETS, but they also get a huge benefit from the fuel EU maritime. I don't really think that they can. It's inconceivable that they will be able to sell these kind of rewards to others, but they can enter into certain pooling arrangements where they can reduce the penalty or kind of swapping costs. for all the parts of the fleet. For example, if you have all the container ships, bulkers or tankers. So in general, we think this system is unnecessary. And given how it's structured today, it's actually favoring the steamships because they are burning a lot of LNG, which is a clean fuel. So we just put up a good old quote from Ronald Reagan and modified it to 2025. The nine most terrifying words in English language in 2025 is not the government, but I'm from the EU and I'm here to help. So more about the EU. They like to make a lot of rules. Some of these rules are also driving business costs. Most of us know the CSDR. We have also gone through the Corporate Sustainability Reporting Directive. We are listed two places in Oslo and in New York. And then we have to comply with both sets of rules, both the US rules and the European Union rules. This is driving up cost for us. It's not like we want to avoid reporting on sustainability. We actually have provided our ESG report every year since 2018, where we give full disclosures on a lot of numbers according to the Sustainability Accounting Standard Board. On top of that, we have added the Global Reporting Initiative. And based on feedback from investors, we also added the carbon disclosure projects. And our ranking will come out on Thursday. Last year, we had a B ranking on the carbon disclosure project reporting. And our ESG report for 2024 will also be available probably around April. However, having to deal with two sorts of regulation, which is quite costly in terms of consultants, auditors and such, And given the fact that 95% of our trading today is on New York Stock Exchange, and the fact that New York Stock Exchange is planning to widen the opening hours or trading hours to 22 hours a day, we have decided to propose to the board for the approval of the annual general meeting in May to delist in Oslo and rather save that money so we can rather spend that focusing on one set of reporting requirements instead of having to deal with two conflicting sets of reporting requirements. So with that, I just think we're going to run through the summary before going for our Q&A session. As mentioned, revenues in line with guiding, we are delivering very strong results, 45 million or 31 million, depending on whether it's the net income or adjusted net income, giving a EPS of 84 or 57 cents. We have added a lot of new backlog during Q4, putting us in a very good position to deal with the slump in the freight market during 2025, as we are guiding very similar results for 2025 as we achieved in 2024. And with a big backlog, a big cash position, once again, we are paying out 75 cents, giving you guys $3 in dividend per share or a yield of 12%. So with that, I think we head over to the Q&A session. Knut, you probably have some questions ready.

Already. So maybe we should start taking two steps back and looking at the natural gas market. And we use abbreviation for certain pricing hubs, JKM, TTF, and also Henry Hub. There's a question here if we can explain more. what these hubs are and the interlinks between them.

Yeah, I think I did it in the slide with the gas prices, with Henry Hub being the main index in the US, JKM being the spot price for LNG in Asia, meaning Japan-Korea market, and then TTF being the virtual gas hub in the Netherlands, which is a big importer and a kind of a central hub in the pipeline network in Northwest Europe. Of course, there are a lot of other gas hubs. Last year, 2024, the average price on the Vaha gas hub in the US, which is West Texas, the average price was zero. So actually, they were producing more gas than they could export, so they have to give it away with a price of zero. So these kind of, in UK, for example, you have the national balancing point, but these three indexes, Henry Herb, TTF, JKM are the most relevant.

Do you see pricing on TTF and JKM? When do you see cargo moving the other way around?

Yeah, we had a good question earlier today about that. What is the sweet spot for these kind of prices? In general, if you're doing shipping, you would like to have sailing distances as long as possible because that is driving up demand for shipping. So I think in a sweetpot scenario, you would have Henry Hubbett around where it is today, $3 or so. Generally, there is a liquefaction toll, so you need to have a certain margin to move that cargo to Europe. If Henry Hub is $3, we'd probably like to have $7, $8 in Europe and then maybe $8 to $9 in Asia because then you would incentivize people to send the cargoes to Asia rather than sending them all the cargoes to Europe. And at the same time, you would like to have gas pricing coming down. $15 is at a level where people would rather like to burn coal. If we are to replace coal with natural gas, we need to get prices lower. If you have $10, a barrel of oil is 5.8 million BTU, meaning that $10 gas price means $58 per barrel of oil. So then it's also cheap, comparable to oil. So that's the level where we want to have it, where it's not destroying demand, but actually stimulating demand and stimulating substitution away from coal.

Yeah. We touched upon in the presentations with the new president, Mr. Trump, in office, day one scrapping the moratorium. Do you see any movement in new FIDs or when do you expect to see these FIDs being taken and new products again?

There is a lot of projects now. So the people who have these projects, they have not been idling now for 13 months since the Biden moratorium. So while this moratorium has been in place, I think everybody understood that this moratorium would be removed. whether or not Trump won. So even with Kamala Harris, we would expect the moratorium to be lifted, although probably it would take a bit more time. With Trump, it was removed immediately. So while this process has been ongoing, those projects have been signing up new SPAs or sale and purchase agreements for LNG, what you call the offtake agreement. So typically, if you have a big LNG export, it's quite capital intensive. You would probably like to have contracts for 80-90% of that volume in order to make that investment. So a lot of these projects now have a very high level of contracted LNG, which means that a lot of the projects are also ready to push the button this year on Greenlight for expansion, and then typically it takes three or four years. for first cargo to be produced. Placamina Snow, which is owned by Venture Global, which recently did the IPO in the US market, they managed to do the first cargo after 30 months after the FID. On the previous project, Calcius Pass, it was also something similar. I believe it was 28 months. So although it's not like 30 months and you get full production, then you need to ramp it up over a period of time. So in general, I think three to four years is a good. So if they do the FID this year, you could see those volumes coming from 28, 29. as we also shown in the graph where we expected the growth to come from those projects. So first we will have growth from the pipeline of projects already under construction, being mostly Qatar and US, and then there's a new wave of FIDs. However, it's not very constructive with the trade rhetoric from Trump. which tend to scare away buyers because if suddenly there are tariffs, that might make it uneconomically to take those LNG cargoes to those import nations who have acquired them. So we would like to see a toning down of the trade rhetoric. That would be very helpful for the LNG market for sure.

Yeah, that leads into the next question because they push forward one week and Trump introduces tariffs and there's a lot of questions on geopolitical risk, but in particular on tariffs against China. And how do you see that play out?

Yeah, this time, no big surprise. The Chinese has been preparing for this. So they had their playbook ready. So once he put on that new tariff, they had a ready playbook for what to do. And not surprisingly, like they did last time, they are slapping on a tariff 15% on LNG. Last time this happened, 18-19, they started with 10% tariff, increasing it to 25% and you had this 13 months window where they didn't import a single LNG cargo from the US. And then finally they had like a trade phase one where China again started to import a lot of LNG and actually committed to import a lot more LNG from US together with soybeans and oil. So I'm not surprised that they're coming with this retaliation. As I understand, Trump will talk to Xi Jinping this week already. But I think it's not going to be sorted out very quickly. China has a huge trade surplus already. Donald Trump is a very mercantilist in terms of trade. He thinks that the trade deficit with every country should be more or less zero, which doesn't really make sense from an economic perspective. So we would expect this to last for some time, whether there will be a grand bargain, maybe a trade agreement phase two. Let's see. I think for Trump, his favorite president is Reagan, and he made certain similar agreements with the Japanese in the 80s, and I think that is the plan, and we'll see how that develops. I think in general, anyway, the cargoes, they will be produced, and it's just where they will end up. So in case China imports less LNG from the U.S., then Japan and South Korea... Thailand, other countries will import more also Europe and then China will just have to substitute the US LNG with other LNG and very soon they will also have the alternative of sourcing LNG from Canada from the LNG Canada project.

And that moves us over to the fleet and the fleet balance. There are sort of two questions here, starting off with opportunities. There are uncommitted ships in the new building fleet and there are also existing modern ships in the fleet. Do you see that open up opportunities in this market for... attractive acquisitions or M&A opportunities?

There's just a handful of uncommitted ships. There's very few and we certainly know who the owners are of those ships. You know, in general, I've been saying this for years. I don't want to repeat myself too much, but we have a very good company. We have very happy customers who are repeating customers, comes back and extends the chips with us for longer periods. As I mentioned, we deliver very good products. Operations, you saw the technical off-fire, 99.7% uptime. As I mentioned, lost time injury frequency or key health and safety measure was zero, which is the theoretical minimum in 2024. So we have a good operation. We have a good setup. We have good access to financing, being both equity capital markets and debt markets. So we could easily scale this company more. We're always open if somebody, who have modern ships, who would like to consolidate and be part of a bigger company, then we are open to grow our company and we can do that easily without adding much cost. So we are open to consolidation. Buying ships is very easy. You just pay the highest price, the higher than anybody else, then you will be able to grow your fleet. What we try to be is disciplined, so we are paying the right price and a price that makes sense for the Flex LNG shareholders.

Then on fleet balancing, we've talked about the steam tankers and scrapping, and the question here relates more to conversion projects to import terminals, either for the steam tankers or the tri-fuels. Would that help the fleet balance in the short term?

It's like 200 steamships, so you can't have 200 FSUs. So I think really a lot of these older ships, typically they were put on a 20, 25 year charter when they were built. And we have shown in the past, we have had certain graphs about this on the role of steam tonnage on existing legacy contracts. So there's a... lot of steamships coming open, and they will find a very hard time in the spot market. Nobody wants to fix those ships. As I mentioned, Fernlis is quoting rate for steamships today at zero. So we do think that scrapping will certainly pick up. Steel prices are still pretty well, at a well level. So you get $15 million or so for scrapping that ship, which has no future. So we think that... A lot of these ships will be scrapped. Some might be converted to floating storage ships. Some may be FSRUs. Some may be power ships, which actually will drive demand for LNG as those need to be fueled by LNG. And actually, the tri-fuels are better candidates for LNG. fsu conversions but we do expect some of the first generation of dual fuel diesel electric we will also find a difficult time in the market because they are subscale and as i mentioned on this environmental metrics both the eu ets and the fuel maritime they score very poorly

On the steam tankers, we talked about scrapping due to high cost for the 20-25 year special surveys and they're earning zero today. So Claire Pennington asks, the cash burn, what kind of OPEX levels are they for either cold storage or in operations? For how long will they survive?

You know, the OPEX is quite similar. So a steamship, let's call it $15,000 a day in OPEX. Of course, you can put a ship in layup, then you can either do it a cold layup or a warm layup. Warm layup being that you have a crew on board. So if you have a crew on board, basically you will have those running costs. Then there is a cost of layup that really depends on where you are laying up the cost, the ship, if there are certain port costs or not. this varies you rather want to have cold weather so you don't get too much barnacles on the on the hull but in general these ships have lived out their life they are not economically so of course you can put a ship in warm layup for a short period of time but given the numerous ships coming here the wall of ships coming in 25 26 27 we don't we don't really see that the market turning up very quickly and that's why we built the backlog so I think that it's better probably to retire those ships. Time value of money is quite high today, you know, even after the Fed has cut their interest rates. The interest rates is like four and a half percent. So if you are delaying that kind of, if you scrap the ship, you get a 15 million dollar payout if you are instead waiting and incurring costs and then if you're incurring those costs with the the layup they will also have other implications you will lose your certificates this what you generally what we call the sire certificate you might have extra cost for rebooting the ship which will drive also up the cost of reactivation. So in general, I think the steamships really aren't lay-up candidates, they are scrapping candidates today, which is going to be helpful in terms of bringing back the the market balance to 2027. I believe last quarter in November, we had a graph showing how we and SSY expect the market balance to develop, where we see that the market going back to a better balance in 2027 and where they then are assuming 53 steamships to be scrapped within that timeframe. Last year it was eight ships. Market was okay last year. Now market is not okay. So we do think that this number of steam ships, 50 or so ships to be scrapped, seems actually a bit low now, given the outlook.

Then moving over to our fleet, and there are basically questions related to two of our ships. It's a flex constellation and a 15-year contract. I think we covered this last quarter as well. But it's a question, is this related to or linked to a particular liquefaction project or an SBA?

No, it's really linked to a portfolio. So we haven't disclosed the charter. I think Tradewinds have done that for us. But what we have said is a huge Asian industrial LNG buyer or agglomerator. So they buy a lot of LNG. It's one of the biggest LNG buyers out there. They buy LNG from a lot of different projects and they need to renew their fleet of ships, finding the most efficient ships. And this ship will go into their portfolio where they source LNG worldwide from various projects.

And then following up on a 15-year contract in this period, are there a lot of other 10-year opportunities or similar tenders out there?

Right now it's a pretty slow market. It's really the cargo owners or the charters who can pick and choose what ships they want. Given where the rates are today, most people are doing, as I shown on the graph earlier today, spot fixtures gone up a lot. That typically happen when there is too many ships in the market. Nobody really are in any rush to fix ships on longer term contracts. They rather just tap into the spot market whenever they have a need for a ship. I expect that to continue until the market tightens. And also then when people expect it to tighten, so typically what happens is that, of course, people are dynamic here. So once you see that the market is gradually tightening, somebody wants to be smarter than others and kind of jump on the wagon before it leaves and try to fix some chips on longer-term charters before the rates pick up. So that is something that... Not sure that's going to happen this year, but probably when we are getting into 26 and 27.

Another chip is the Flex Artemis on a variable hire contract. I believe the question is more of a reminder. How does this variable hire contract work?

We fixed that chip on a variable hire contract back. It was the first contract. term deal we did. We did that at the end of 2019 and we announced it was with Gunro, which is one of the big LNG traders. Initial period, firm period was five years for home delivery. That ship was delivered August 17th from DSME, which is now called Hanwha 2020. So it should go on a variable charter where the rate is set for each voyage with a certain floor. So the rate cannot be lower than a certain floor, and it cannot be higher than a certain ceiling. So in that range, we will get a rate, and the rate will be pegged depending on the spot rates observed for modern tonnage, meaning MEGI, XDF, MEGA, the two-stroke ships. So this firm period is coming to an end then in August 2025. The charters do have five single year options. All of those options are also at a similar index. So meaning that, you know, if they declare the options, they will also benefit from having a rate linked to the spot market. So right today, of course, they are paying a rate increase. at the floor, maybe not too surprisingly. And once we're getting closer to August, we will know whether they will extend that ship. If not, we will do the five-year special survey of that ship and have it ready for the winter market. It's a very attractive ship. It's together with Resolute and the Freedom, the most efficient ship we have with a so-called full re-liquefaction plant. So they have two compressors where they can take the boil off down to zero zero three five percent meaning that we can kind of form a ship which is a thermos minus 162 centigrade you always have a heating up of that cargo and that heat creates a gas vapor we utilize that gas vapor to burn as fuel on the ship on these three ships we have a full relic system where you can basically reliquify almost all of the boil of gas. So in case you are waiting or you have to take down speed, you can regulate that with these compressors. We also have four ships with a partial relic system. So it's one of the best ships. So hopefully they will continue with the ship as a happy customer. But we will know once we're getting closer to the final maturity of that contract.

I think that concludes the Q&A session, so it's time to announce a winner. Yes, okay, do you have an idea? We have received a lot of good questions from Claire Pennington from Independent Commodity Intelligence Services.

Also known as ISIS, but it's not the ISIS. It's a friendly one. Yeah, it's the friendly ISIS, yes. So, okay. Thank you, Dan Clare. You have been asking me a lot of questions during the year. So you will have these swanky socks. As I mentioned, cold cargo. But you will keep your warm feet. I will send you two of these pairs. And that concludes today's presentation. It's my 30th quarterly presentation. So I'm looking forward to presentation 31 in May. So thank you, everybody, for listening in. And I hope to see you soon again.