Flex Lng Ltd. · NYSE:FLNG
Flex Lng — Q3 2023 Earnings Presentation
23 slides from Flex Lng's earnings presentation, Nov 8, 2023
Slide 1: Third Quarter 2023 Result Presentation
Third Quarter 2023 Result Presentation November 8, 2023 1 Flex Endeavour in dry-dock April 2023
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS MATTERS DISCUSSED IN THIS PRESENTATION MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES SAFE HARBOR PROTECTIONS FOR FORWARD-LOOKING STATEMENTS IN ORDER TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE INFORMATION ABOUT T
Slide 3: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS Note: 1) Adjusted net income, adjusted EPS, Adjusted EBITDA are non-GAAP measures. A reconciliation to the most directly comparable GAAP measure is included in the earnings report, 2) annualized dividend yield assuming a share price of $31.2 3
Slide 4: We Are Walking the Talk
WE ARE WALKING THE TALK FY2023 Guidance figures Q1-23A Q2-23A Q3-23A Q4-23E FY2023 guidance as per Q4-2022 Revenues $92.5m $86.7m $94.6m ~$98m $370m ~$370m Adj. EBITDA $72.5m $66.2m $74.7m ~$78m $290-295m ~$290-295m TCE, $’000/day(1) $80.2/day $77.2/day $79.2/day ~$82.0/day ~$80.0/day ~$80.0/day REV
Slide 5: High Contract Coverage – Attractive 2027 & 2028 Positions
HIGH CONTRACT COVERAGE – ATTRACTIVE 2027 & 2028 POSITIONS years of minimum contract backlog which may increase to years with charterers’ extension options 5
Slide 6: Earnings Belong to Shareholders
EARNINGS BELONG TO SHAREHOLDERS Note: 1) Adjusted EPS is a non-GAAP measure. A reconciliation to the most directly comparable GAAP measure is included in the earnings report 6
Slide 7: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Note: 1) Net interest expenses include realized gains on derivatives 7
Slide 8: Robust and Clean Balance Sheet
ROBUST AND CLEAN BALANCE SHEET . bn . bn m • 13 modern LNGCs (9x MEGIs, 4x X-DFs) m • Average fleet age of 3.9 years as per end Q3 • Ample cash position of $429m • Book equity ratio of 32% although the fleet was acquired at historical low prices compared m to today’s newbuilding prices. Book equity
Slide 9: Flexible Funding Portfolio with No Maturities Prior 2028
FLEXIBLE FUNDING PORTFOLIO WITH NO MATURITIES PRIOR 2028 Resilience: Debt position Q3-23, $m • No debt maturities prior 2028 ( ) • Sound split between traditional bank financing and leasing • Geographically diverse set of lenders (US, Europe & Asia) Leasing Term loan CF Total debt Cash Net debt Opti
Slide 10: Significant Deleveraging Embedded in the Capital Structure
SIGNIFICANT DELEVERAGING EMBEDDED IN THE CAPITAL STRUCTURE The long-term debt is repaid 1.7x faster than the ships are depreciated, equivalent to $40m per year, while the net leverage is already modest ~40% on current market capitalization LNG carrier Built Retired Age (yrs.) Baltic Energy 1983 2021
Slide 11: Interest Rate Risk Managed by Active Hedging Strategy
INTEREST RATE RISK MANAGED BY ACTIVE HEDGING STRATEGY Hedge ratio1 Q3-23, $m Swaps • Balance sheet value of interest rate swap portfolio totals $67.5m Fixed rate leases • The notional value of the swap portfolio Hedge ra o is $720m, with an average duration of 3.6 years fixed at 1.35% • We have fixe
Slide 12: Trade Up ~3%, China and Europe Competing for Spot LNG
TRADE UP ~3%, CHINA AND EUROPE COMPETING FOR SPOT LNG Top LNG exporters, YTD October 2023, MT +12.4% Top LNG importer, YTD October 2023, MT +2.5% +8.1 MT +6.3 MT % = Percentage change YTD-23 from YTD-22 58 -10.0% Asia demand YTD Oct-2023: 217 MT (223 MT1) + MT = Absolut change YTD-23 from YTD-22 -6.
Slide 13: Supply Events Continue to Drive Gas Price Volatility
SUPPLY EVENTS CONTINUE TO DRIVE GAS PRICE VOLATILITY 80 70 60 50 $/MMBTU 40 30 20 10 0 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 May-24 Sep-24 Henry Hub JKM TTF Brent 13% Sourec: Energy Aspect, CNN, Reuters, S&P Global, WSJ, Bloomberg, Financial Times, CME 13
Slide 14: Balanced LNG Market but Spot LNG Still Premium to Crude
BALANCED LNG MARKET BUT SPOT LNG STILL PREMIUM TO CRUDE Spot LNG still premium to crude OIL LNG TTF: $14.2 $83 $87 Arbitrage: $41m DES NWE: $13.5 Henry Hub: $3.3 Cargo value: $54M JKM: $15.8 Cargo value: Cargo value: $13m $63m Full price US cargo typically Henry Hub +15% + tolling fee of $2-3 (howev
Slide 15: Chinese LNG Demand Recovering, Rest of Northeast Asia Muted
CHINESE LNG DEMAND RECOVERING, REST OF NORTHEAST ASIA MUTED China LNG imports, MT Japan/Korea/Taiwan (JKT) LNG imports, MT 10 YTD Oct-2021: ~66 MT 18 YTD Oct-2021: ~118 MT YTD Oct-2022: ~51 MT YTD Oct-2022: ~118 MT YTD Oct-2023: ~58 MT YTD Oct-2023: ~110 MT 16 8 14 6 12 10 4 Chinese LNG demand is re
Slide 16: Full Storage Capacity This Winter in Europe
FULL STORARGE CAPACITY THIS WINTER IN EUROPE European LNG imports, MT EU natural gas storage inventory, % of full 14 100 12 90 80 10 70 8 60 50 6 40 4 30 YTD Oct-2021: ~67 MT 20 2 YTD Oct-2022: ~105 MT Ukraine has also offered up to 15 Bcm of its 31 Bcm YTD Oct-2023: ~103 MT storage capacity to Euro
Slide 17: Prompt Rally in LNG Prices Has Reduced Floating Storage
PROMPT RALLY IN LNG PRICES HAS REDUCED FLOATING STORAGE Daily floating storage, MT 3.0 Floating LNG storage tailing off as prompt prices 2.5 have rallied reducing time spreads. ~30 vessels identified as floating storage per 2.0 early November 2023 1.5 1.0 0.5 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 18: Seasonal Stronger Spot Freight Market Prior Peak Season
SEASONAL STRONGER SPOT FREIGHT MARKET PRIOR PEAK SEASON Headline (2-stroke) spot rates Average distance per laden voyage $/day (in log-scale) Nautical miles 480,000 5,400 2021 2022 YTD 2023 5,000 4,600 240,000 4,200 3,800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 120,000 # of fixtures by indep
Slide 19: Newbuilding Prices and Term Rates Stabilized
NEWBUILDING PRICES AND TERM RATES STABILIZED Source: Clarkson SIN, SSY 19
Slide 20: Waiting for the Next Wave of LNG to Come Onstream
WAITING FOR THE NEXT WAVE OF LNG TO COME ONSTREAM New liquifaction capacity coming onstream, MTPA 2016-2019: First wave of LNG capacity US-China trade war and Covid-19 2025-2029: Second wave of LNG capacity from Australia and the US disrupted FID of new volumes from US and Qatar Imminent FID project
Slide 21: We Are Well Positioned for Next Tightening Cycle
WE ARE WELL POSITIONED FOR NEXT TIGHTENING CYCLE LNG shipping balance, number of ships 350 250 150 50 -50 -150 -250 Expect less tight market 2024/25 Market starts to tighten 2026 -350 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2023 2024 2025 2026 2027 2028 Vessel Supply Shipping
Slide 22: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS Note: 1) Adjusted net income, adjusted EPS and Adj. EBITDA are non-GAAP measures. A reconciliation to the most directly comparable GAAP measure is included in the earnings report, 2) annualized dividend yield assuming a share price of $31.2 22
Slide 23: Thank you! Q&A
Ww Thank you! S Q&A