FLEX LNG Ltd.

Hi everybody and welcome to first quarter 2025 result presentation. My name is Marius Foss, I am the interim CEO of FlexLNG and as usual I'm joined by our CFO Knut Roholt who will guide you through the financials in a bit. We will cover the financials, market update and conclude the earnings presentation with a Q&A session. If you have any questions you can use the chat function or send questions to our IR at flexlng.com.

And before we begin, as a quick reminder, today's presentations will include forward-looking statements.

We will also be using non-GAAP measures.

Adjusting for non-cash items, we booked 29.4 million in adjusted net income, implying a 54 cents in adjusted earnings per share. Last quarter, we added up to 37 years on new contracts backlog for Flex Consolation, Flex Courageous, and Flex Resolute. This opened up for a very attractive refinancing. We have therefore initiated the balance sheet optimization program 3.0, and Knut will guide on this later in the presentation. On the fleet, Flex Constellation was re-delivered from time charter in late February and has been traded in the spot market since. Lastly, Flex Artemis, who is currently trading on a variable index, will be re-delivered from a five-year time charter and we expect to get her back sometime in Q3 2025. We reconfirmed the full-year 2025 revenues and earnings guidance provided last quarter. We expect full-year revenues to come in at the range of $340 to $360 million, and we expect the TCE to be between $72,000 and $77,000 per day. Similarly, we expect the EBITDA to approach $250 to $270 million. The board has declared 75 cents per share dividend, implying the last 12 months dividends of $3 per share or a dividend yield of 12%. This distribution to shareholders is supported by our Fortress balance sheet with $410 million in cash and a solid contract backlog. Looking at our contract coverage, we are well covered over the next years, with 59 years of minimum firm backlog, which may grow to 88 years if the charters declare all their options. Flex Artemis is currently on a variable market higher, and the financial impact for having her re-delivered in 2025 is limited. The vessel has the full relic on board and making her very attractive to charters, in particular for long-haul transportation of LNG. Flex Constellation was relived from her 312-day charter in the end of February and has since then been trading in the spot market. The vessel will commence her 15-year time charter during the first half of 2026. Overall, we have a solid backlog and we are well positioned to benefit from the increasing LNG export volumes coming 2028-2030. Despite lower freight rates and two of our vessels opened by Q3 2025, our strong backlog means that we expect 2025 revenues to be similar to the 2024 levels. TCE is expected to be in the mid-70s per day, translating to revenues between $340 and $360 million. We have four ships undergoing special five-year survey in 2025 compared to just two last year, which we have factored into our guidance. Flex Aurora and Flex Resolute will enter dry dock later in the quarter, whereas Flex Artemis and Flex Amber will enter into the third quarter. We aim to provide a clear and transparent framework for dividends payouts guided by a defined set of decision factors. These factors include earnings and cash flow, contract backlog, balance sheet strength, capex, and debt maturity profile. Over the last three to four quarters, we have maintained a cautious outlook for near-term LNG market, and this view remains unchanged. Worth noticing the traffic lights, and we are bullish on the long-term story. However, as shown on the previous slides, Flex benefits from a strong charter backlog, and as Knut will guide shortly, maintains a fortress balance sheet. Considering these factors, the board has declared an ordinary quarterly dividend of 75 cents per share. This brings our trailing 12 months dividend to $3 per share, representing a yield of 12%. With that, I will hand it over to you, Knut.

Thank you, Nagesh. So let's look at the financial highlights for the first quarter. Headline revenues came in at 88.4 million. Or when we exclude EUAs, so related to EU's emission trading systems, the revenues were 86.8 million. That's equivalent to time charter per day of 73,900. The reduction in revenues compared to the fourth quarter is primarily due to seasonal lower spot market impacting the variable higher contract for Flex Artemis. And also then Flex Constellations traded in the spot market in March after she was re-delivered from her TC contract. Operating expenses came in at 18.1 million or around 15,500 per day. And this is in line with our full year guidance and slightly higher than the fourth quarter. But vessel OPEX, they can be a bit bumpy depending on timing effects. So for the full quarter or for the full year, we maintain our OPEX guidance of 15,500. Interest expense came in at 22.2 million, a reduction of 3.3 million compared to the fourth quarter. This is explained by lower base rates, but also the effect of amending one of the term loans to an RCF and therefore reducing our drawn debt during the quarter. On the derivative portfolio, we have a net loss of 7.3 million. And this includes net unrealized loss of 11 million and the realized gains of 3.7 million. And the 3.7 million is then the positive carry, reducing our interest expense. Net income came in at 18.7 million. However, adjusting for non-cash items like the unrealized losses on the derivative portfolio, the adjusted net income came in at 29.4 million or 54 cents per share in adjusted earnings. As a reminder, we adjust our numbers for non-cash items to have comparable numbers quarter over quarter. If we look at the differences in net income of 26.5 million compared with the fourth quarter, all of this is related to unrealized gains and losses on our interest rate derivative portfolio. In the fourth quarter, we had 15 million of unrealized gains, while we in this quarter have 11 million of unrealized losses, in total 26 million. Looking at the cash flow for the quarter, we generated 49 million in cash flow from operations, which was offset by negative working capital movements of 5.7 million. We have also paid 2.6 million in prepayment of dry dock expenditures for the four upcoming dockings this year. In addition, we have 27 million in scheduled depth installments and we distributed 41 million to our shareholders for the dividend. Ending the quarter with a solid cash balance of 410 million. Looking at the balance sheet, We have an overall clean and transparent balance sheet with mainly cash and chips on the asset side. And as a reminder, these 13 modern vessels with an average age of 5.5 years were ordered and delivered in low point in the cycle. Therefore, these are recorded on the balance sheet at 165 million per vessel. Looking at our capitalization, we have a decent book equity ratio, and with a net debt position of 1.4 billion, this equates to a net debt per vessel of approximately 106 million per ship. Once again, interest rate markets have experienced significant volatility, and this is also in the first quarter. In response, we have remained active in adding exposure when we deem it attractive. In the first quarter, 35 million of our existing interest rate swaps matured. And on the final day of the quarter, we entered into 100 million in new interest rate swaps, bringing our total notional swap exposure to 700 million at the end of the quarter. This swap of the volume have a weighted average duration of 3.5 years and weighted average fixed rate of 2.1%. Following the liberation day, there was further volatility and we added additional 150 million for two-year swaps and increased our swap portfolio to 850 million. These additional swaps were entered into at a weighted average rate of approximately 3.5% and a duration of two years. And these swaps provides us with the 75 to 80 basis point positive carry until the Fed begins to cut rates. If we look at our exposure, we have a hedge ratio of about 70% over the next 24 months. And we will continue to monitor the market to add even more exposure if both short-term and long-term rates drop. As announced earlier, we have initiated the balance sheet optimization program 3.0 with the aim to free up additional 120 million in free cash. Today, we also announced that we have secured an attractive Jolko financing. It's a lease for the Flex Courageous on the back of the new contract announced last quarter. This financing is expected to be closed in the second quarter and will release about 40 million in cash proceeds. It will reduce our cost of debt by one and a half percent per annum and then further extend our debt maturities. The two other ships we are targeting are the Flex Resolute and the Flex Constellation. If we look here, we are addressing the depth maturity in 2028 for Flex Resolute. And the aim here is to secure a similar Jolko financing as the Flex Courageous. The Flex Constellation has a very attractive 15-year contract to a solid counterparty. So we are targeting here a back-to-back financing for that ship. We are in discussions for both Flex Resolute and Flex Constellation, and we target to secure commitments and signing and drawdown of these in the second half of 2025. Both today's balance sheet, but also after this balance sheet optimization 3.0, we maintain our Fortress balance sheet. We have stable cash flows from our contract portfolio, and we have a very solid cash position at the quarter end of 410 million, which is then set to grow following the planned refinancings. And as a reminder, we maintain a RCF capacity of 414 million, which is used for cash management and reduce interest rate costs. We have limited capex liabilities. Our first step maturity is for Flex Resolute in 2028. But as just mentioned, this is being addressed and then our next maturity would be in 2029. So the Fortis balance sheets supports the flex journey and giving commercial and financial flexibility. Today, we have also released our seventh ESG report. It's the ESG report for 2024. And we recommend that you have a reading of it. It explains how we deal with ESG matters and in particular also emissions and safety and governance in our operations. We are proud to show that we have a very efficient and safe operations with zero loss time injury frequency for 2024. And that's a true testament to the health and security of our seafarers and in FLEX everyone deserves to be safe at their workplace and get home and safely to their loved ones after work. As reported earlier we have also this CDP rating where we achieved a B scoring for 2024. So thank you to the FlexLNG team for great achievements and also for helping out producing this report. Today, we have also submitted the application for the delisting to Oslo Stock Exchange. The proposal to delist was approved by our AGM on the 8th of May, and we have now commenced the full process for a formal delisting on the Stock Exchange. We expect that Oslo Stock Exchange will conclude on the application to delist within the second quarter, and that the last day of trading will be sometime in the second half of 2025. The last day of trading is decided by Oslo Stock Exchange, and they will separately announce this by a stock exchange disclosure. If you have shares trading on Oslo Stock Exchange and you would like to continue on the flex journey, We encourage you to reach out to your bank or your broker to initiate the process of transferring from Euronext Oslo Securities to our New York Stock Exchange traded shares. We have prepared a Q&A section on our website under Investors and OCD Listing where you may find more information about the next steps and the process. And that concludes the financial sections. And over to you, Marius, for an update on the LNG market.

Thank you, Knut. I'm sure you will have more questions about the Oslo D-listing. The LNG trade from January to April 2025 grew approximately 1% to 143 million tonnes compared... to the same period last year. The top three main exporters, USA, Qatar, and Australia, represent more than 60% of the total LNG trades. US LNG exports increased with more than 20% year over year. And this is explained by new volumes arrived from venture global placements and expansion at the Chinese Corpus Christi. Australia exports declined with circa 7% in the period and is largely explained by Woodside shutting down a train at Northwest Shelf L&D terminal due to declining feedstock and slow upstream developments. Europe has really increased its L&D appetite over the last few months and it comes as Russia halted its pipeline gas export through Ukraine last December. And the European gas inventory levels are at low levels, currently at only 45% full. It should also be noted that we are seeing recovery in overall European gas consumption, as the last four months have seen decline in renewables consumption. While Europe's LNG imports have soared as the continent tries to maintain a fragile gas balance, this has been driven up the LNG prices globally, and overall Asian LNG imports have retreated. This is especially evident by a drop in L&D imports to China, which is down with 24%. China has completely halted the imports from U.S. L&D since February and is rather reselling its contracted volume in the markets. India has also set the flattish growth year over year, and this compares by double-digit L&D imports growth last year. Relatively high LNG prices and other sources of more affordable energy help to explain this trend, as many of the developing Asian countries are price sensitive when it comes to LNG imports. The more mature JKT economics, Japan, South Korea and Taiwan, have seen their LNG imports drop by only 3%. The new building prices for modern LNG carriers built in South Korea have stabilized, and ship brokers continue to call prices of 250 to 255 million per vessel. It should be noted that shipyards are quite busy, and slots offered on these levels are deliveries in 2028 and onwards. This means that the cost of carrying from financing in the period and building supervision would probably push up the all-in-all delivery price for new buildings substantially. We expect new building prices to stay at these levels going forward. Term rates for 5-year and 10-year TCPs are currently quoted between 75,000 and 85,000 per day. However, there are very few recent deals concluded. Approximately 300 LNG vessels are scheduled for delivery over the next five to six years, with over 90% of these secured on long-term charters. A significant portion of this order book relates to Qatar Fleet Renewal Program. In a complying chart, the dark blue bars represent vessels either ordered by Qatar Energy or tied up to Qatar-related TCPs. while the light blue bars reflects non-Qatar-related new buildings. Notably, while more than 70 vessels were originally planned for delivery now in 2024, only around 60 were actually delivered from the shipyards. Approximately 10 vessels have been pushed into 25 delivery windows. And we will not rule out the possibility of similar slippage occurring now in 2025 into 2026. Now, when we talk about the new building delivery profile, it's crucial to look at the full picture, not just what's coming in, but also what quite is slipping out of the active fleet. Take a look at this chart. On the left, you will see a number of idle vessels split between steamers in gray and tri-fuel blue ships in blue. What we are witnessing is a growing group of older vessels, those with efficient cargo economics and outdated propulsion system, essentially being parked. By the end of March 2025, close to 60 vessels were idling. That's not a small number, and it matters because fewer available vessels means less supply, which helps bring balance to the overall markets. But it doesn't stop there. More and more of these vessels are being put in layup, either warm or cold. And it's not just steamers anymore. We see tri-fuels also starting to join that list. Bringing a cold layup vessel back into service is not cheap. It's very costly and it's very time consuming. So what happens next? Well, the natural conclusion is scrapping. So far in 2025, only three steamers have already gone for recycling. But the number might be even higher. Several others are quietly being offered for sale. And frankly, the chance for them finding a new buyer is slim. Scrapping is therefore becoming a more realistic option. Bottom line, while the order book is substantial, the market is shedding the last efficient vessels and the place of big role shaping a big future for balance between supply and demand. Let's wrap up the market section with a slide that might look familiar, but one that's very important to revisiting. The outlook for new L&D supply remains strong and the wave is building. Over the next few years, we will see a steady stream of new volumes entering into the market, driven in particular by Qatar and the United States. And in just a few past weeks, we have seen two major developments from the U.S. that underscore this momentum. Woodside have taken FID on the Lusiana LNG project. This is a significant greenfield development. Three trains, each of 5.5 million tons per annum, for a total of 6.5 yearly tons. The project has been expansion capacity and permits for two additional trains, which would bring the total capacity up to 27.6 yearly tons. First LNG is expected in 2029. Energy Transfer made their headlines during its first quarter call, announcing its ambition to take FID on the Lake Charles LNG project. Also, 16.5 million tons per year by the end of the year. Another major step forward. So what does that mean for Flex LNG? It means momentum. It means confidence in the long-term demand for LNG. And most importantly, it means more ships will be needed. With these projects in the horizon, we see a bright future for LNG shipping and we are well positioned to ride the next wave. We deliver strong quarterly results with solid profit and robust cash generation. Our balance sheet optimization program is underway and our guidance for 2025 remains firmly intact. With continued earnings strength and healthy charter outlook, as well as supported dividend yield of 12%, we are well positioned to deliver long-term value to our shareholders. With that, let's open the floor for questions.

Then we're ready for the Q&A session. And we have received a number of questions. So thank you for everyone who has submitted. A number of these questions relates to the market. and with the soft spot market rates and Artemis being delivered and the Constellation trading in the spot market until she commenced her long-term contract. How do you view the summer market and the winter market and the prospects for these two ships?

Thank you, Knut. Artemis has not been delivered yet. She will be re-delivered later in the year. But if you look at 2025 so far, we have amazingly seen the highest amount of fixtures being concluded in the spot markets for two strokes. And at the same time, we have seen the rates are hovering on a very low side from single digits up to double digits, maxing at, say, $35,000 to $40,000 per day. So Flex Constellation is currently trading in the spot market and we plan to do so until delivery in first quarter 2026. While, as you mentioned, Flex Artemis is coming back to us in August and she will do a dry dock. So we are marketing the vessel open thereafter. She has since delivery been trading on the market index with our customer. And I'm sure when we put her back to market, we will at least be able to player in the market. She has been one of our best contributors since delivery. And of course, we are seeking term employment on her this autumn.

You mentioned that there's been very high activity in the spot market. Some of the questions are related to activity in more of the longer term contracts. What can you say about the number of fixtures or activity tenders for long term contracts?

The charters are in a rush to secure long-term contracts while the spot market is at its right now. So while we have high activity on the spot, the levels are moving low. So we are currently in the doldrums waiting for things to pick up. And then I'm sure there are a lot of people who will... enter and secure tonnage but a little bit early as of now but we are seeing signs of contracts and interest for particularly Artemis this autumn and also into the Q1 26. So we are hopeful that she will be employed.

Then we have a number of questions for our delisting on the Oslo Stock Exchange. Some of them are detailed, so we do recommend to go to our website. We have a special or separate Q&A session for our delisting. And if there are further questions, please reach out to us on our investor email, ir.flexlng.com. And as a reminder, first, Oslo Stock Exchange will need to conclude on the application, and they will have a separate announcement of that, also them announcing the last day of trading.

With that, I would like to thank everybody for listening to our broadcast, and we want to welcome you back to our Q2 presentation in August. Thank you.