Flex LNG Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 20, 2025

Key Takeaways

  • Positive Sentiment: Flex LNG reported Q2 TCE per day of $72,000 and GAAP net income of $17.7 million (EPS $0.33), with adjusted net income of $24.8 million (EPS $0.46), and reconfirmed full‐year guidance of $350–370 million in revenues and $250–270 million in adjusted EBITDA.
  • Positive Sentiment: The company completed its $175 million refinancing of Flex Courageous (net proceeds $43 million) and signed documentation for two more financings, which will add ~$90 million in cash and extend debt maturities to 2035 at a blended cost of ~1% as part of its balance sheet optimization program 3.0.
  • Positive Sentiment: Flex LNG launched a $50 million share buyback program independent of Q3 dividend considerations and declared a quarterly dividend of $0.75 per share (12% yield), supported by a “fortress” balance sheet with $413 million in cash.
  • Neutral Sentiment: Two drydockings (Flex Aurora and Flex Resolute) were completed below the guided maximum off-hire days at an average cost of $5.7 million per vessel, with two additional dockings scheduled in Singapore later this year.
  • Positive Sentiment: The company highlighted a strong contracted backlog covering 56 years of chartered vessel capacity (up to 85 years including options), insulating it from short‐term spot market volatility and positioning it to benefit from long‐term LNG demand growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Flex LNG Q2 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

A quick note, we will be using some non GAAP measures such as TCE, adjusted EBITDA and adjusted net income. These are supplements to the results reported in accordance with U. S. GAAP and a reconciliation of these are available in the earnings report. As there are limitations to the completeness of the presentation, we encourage you to read the SEC filings and the quarterly report together with the presentation.

Operator

If you have any questions, please use the chat functions on the webcast or send an email to irflexlnd dot com and we will cover that in the Q and A session. And with that, let's begin and over to you, Marius.

Speaker 1

Thank you, Knut. We sailed in $86,000,000 or $84,000,000 excluding EUAs. The TCE during the quarter ended up at $72,000 per day. Net income for the quarter came in at $17,700,000 implying an EPS of $0.33 per share. Adjusting for the unrealized losses on the Deverence and exit costs for Croatia's refinancing, we end up with an adjusted net income of $24,800,000 or adjusted earnings per share at $0.46 The balance sheet optimization program three point zero is progressing according to plan.

Speaker 1

In May, we completed the $175,000,000 refinancing of Flex Coracious, generating net proceeds of approximately $43,000,000 Today, we are announcing that we have signed the documentation of the refinancing of Flex Constellation and the Flex Resolute. We are targeting closing of same in the third quarter, subject to customary closing conditions. Knut will speak more about that later in the presentation. We announced this morning the launch of a share buyback program for $50,000,000 Any purchase under the buyback program is made independent of the next dividend considerations for Q3. Lastly, as a reminder, Flex LNG is delisting from Oslo Stock Exchange and last day of listing is September 15.

Speaker 1

We reconfirm our full year 2025 guidance of revenues of $350,000,000 to $370,000,000 and TCE per day around $72,000 to $77,000 per day. Similarly, we reconfirm our guidance for expected adjusted EBITDA of approximately $250,000,000 to $270,000,000 for the full year. The Board has declared a 75% share dividend, resulting in last twelve months dividend of $3 per share. This implies dividend yield of 12% on a share price of $25 The dividend is supported by our Fortress balance sheet with $413,000,000 in cash and a solid contract backlog. We have completed two of our four drydocking so far this year.

Speaker 1

The drydocking of the Flexa Aurora and Flexa Resolute was completed in June and early July, respectively, and went straight back to service for the charterer's ex yard, minimizing off hire days. We are pleased that both dockings were completed below our guided max twenty days of off hire. We have two more dry dockings in 2025. Flex Amber is currently undertaking a five year dry docking in Singapore, where Flex Artemis will enter dry dock late in August, also in Singapore. Three of the four dry dockings are carried out in Singapore, whilst Flexarora completed in Europe.

Speaker 1

On average, the docking cost is estimated around $5,700,000 per vessel, slightly above our previous estimates. The increase is due to higher costs in Europe compared to Singapore. Thank you to our technical team and our crew on board for results and safe execution of the dry dockings. A strong backlog result in earning visibility, even with two vessels open for the rest of the year. We are reaffirming our guidance range of full year 2025 revenues for $340,000,000 to $360,000,000 and we maintain our TCE range of $72,000 to $77,000 per day.

Speaker 1

As such, we are reaffirming our full year 2025 adjusted EBITDA range from $250,000,000 to $270,000,000 Looking at our contract coverage, we are very well covered for the next years with fifty six years of minimum backlog, which might grow up to eighty five years if the charters do declare all the options. As you can see from this slide, we have two vessels in the spot market. Flex Artemis is concluding her last voyage on her current time charter and will be delivered to us late in August, and then go straight into dry dock in Singapore. We are now marking the vessel open ex dry dock. Flex Constellation has enjoyed some short term employment since she was redelivered to us in late February.

Speaker 1

She will trade in the spot market until commencement of her fifteen year time charter during 2026. In sum, we have a solid contract backlog, which insulates us from soft short term market, and we are well positioned to benefit from increasing LNG volumes coming onstream in the future. We and Flex LNG are committed to maintain a shareholder friendly dividend policy and delivering shareholder returns. We aim to provide a transparent framework for dividend payouts guided by a defined set of decision factors. This includes earning visibility, contract backlog, balance sheet strength and debt maturity profile.

Speaker 1

While we maintain our cautious short term outlook on the LNG market, we remain bullish on the long term LNG story. We have a very strong charter backlog and maintain a fortress balance sheet. On the back of this, the Board has declared an ordinary quarterly dividend of $0.75 per share. The dividend will be paid out to shareholders on record September 5. The payments date September 18 for shareholders in New York Stock Exchange and September 23 for shareholders on Oslo Stock Exchange.

Speaker 1

With that, I will hand this over to Knut.

Operator

Thank you, Marius. And let's walk through the key financial highlights of the quarter. Revenues for the first quarter came in at SEK86 million or SEK84 million net of E raised. This translates into a time charter equivalent of $72,000 per day. This represents a slight drop compared to the first quarter, which is primarily due to the seasonal softer spot market impacting earnings for the Flex Constellation who operated in the spot market and Flex Artemis, which is on a variable hire contract.

Operator

We also had two vessels in dry dock in the second quarter, reducing the number of operational days impacting the revenues. Revenues for the first half of the year was approximately $171,000,000 net of E raise. On the operating expenses, it came in at $18,200,000 or around $15,400 per day. And this is in line with our full year 2025 guidance and slightly lower than the first quarter. Vessel OpEx can vary somewhat from quarter to quarter due to timing effects.

Operator

However, we maintain our full year OpEx guidance of around 15,500. As you will note in the report, we booked $1,600,000 in extinguishment costs for the refinancing of Flex Corages and a net loss on the derivatives of NOK1.3 million. This includes realized gains of NOK4.3 million and unrealized losses of NOK5.7 million. This results in a net income of NOK17.7 million for the quarter or CAD0.33 per share. Adjusting for the unrealized losses of the derivatives and extinguishment costs for the financing, we end up with an adjusted net income of $24,800,000 or adjusted earnings per share of $0.46 Looking at the cash flow for the quarter, we started the quarter with $410,000,000 in cash.

Operator

We generated NOK44 million from operations, which was offset by negative working capital movements of NOK7 million, as well as NOK11 million in drydocking expenditures. These expenditures include both costs for the two dry dockings completed in the quarter, as well as prepayment for the cost for the next two dry dockings scheduled in the third quarter. We paid $27,000,000 in scheduled debt installments. And as you can see, we realized $43,000,000 in net proceeds from the refinancing of the Flex Courageous. Net of $41,000,000 in dividends, the cash balance at the end of the quarter came in at $413,000,000 With the closing of the financings announced today, we will add additional $90,000,000 to our cash balance in the third quarter.

Operator

Today, we are pleased to announce additional two new financings for the Flex Resolute and Flex Constellation. With the closing of these transactions, we are concluding the balance sheet optimization program three point zero and freeing up NOK132 million in liquidity, pushing out the maturity profile and reducing the cost of debt. The new financing of Flex Resolutions is Japanese Jolco on the same terms as for the Flex Courageous concluded in May. This addresses our first debt maturity in 2028 and push out the maturity date to 02/1935. The new lease comes with an attractive blended cost of debt of so far plus 1%.

Operator

And as you can see the repayment profile is slightly lower and that is due to the fact that Resolute is one year younger than the Courageous and the financings are on the exactly the same terms. We are also announcing a new fifteen point five years 180,000,000 bank facility with a margin of 165 basis points for the Flex constellation. This financing is back to back with a fifteen years charter contract for Flex Constellation. However, it allows us to make full drawdown now prior to commencement of the contract. For the first seven point five years the facility is repaid on an age adjusted repayment profile of twenty five years.

Operator

While the last eight years is on a twenty two years profile to zero. We are grateful for the trust and support from our financing partners. Both the new coming in for these financing and the ones who have provided the previous financing of these three ships. Thank you. On the interest rate portfolio, we have made no additions to the portfolio since the million added in April.

Operator

The overview now includes the fixed rate element for the new Jollcoulies for Flexgras Solute, resulting in about 70% hedge ratio in the next quarters. Our swap portfolio is today 50,000,000 with an average duration of three years and fixed at an average interest rate of 2.3%. Since January 2021, this portfolio has generated unrealized and realized gains of $131,000,000 So with the new financings freeing up additional liquidity, we are fortifying our balance sheet even further. Together with a sound contract portfolio, limited CapEx liabilities and no debt maturity before 2029, This gives us a solid commercial platform and provide us financial flexibility. On this slide, we are again reminding our shareholders on Oslo Stock Exchange about the delisting with the last day of trading on the September 15.

Operator

We encourage shareholders to contact their broker or investment advisor to transfer the Oslo listed shares to the New York listed share if you would like to continue the journey with Flex. Following the last day of trading the shares registered with Euronext Securities Oslo or commonly known as VPS will for practical purposes be illiquid due to the administrative burden on transferring the shares after the delisting. So we remind the shareholders to be mindful and take action before the last day of trading. For the dividend, the payment date of the Q2 dividend comes after the delisting date from Oslo. So please be aware that shareholders on record on September 5 will receive the dividend to the VPS account irrespective of the delisting.

Operator

As already mentioned, we have today announced a $15,000,000 buyback program. And the program will last until the Q3 reporting in November. This will enable us to buy back shares in both New York and in Oslo. If we will utilize the program and buy back shares such will be announced in accordance with the rules of the respective stock exchanges. And more details on the program are found in the separate stock exchange disclosure made today.

Operator

As the program is limited in size and time, our considerations for dividend for the third quarter will be made independently of any purchases under the program. We find it natural to have a buyback program as part of our financial toolkit. And we will reassess the scope of the program before the third quarter presentation. And with that, I hand it back to you, Majors.

Speaker 1

Thank you, Knut. I'm very impressed with your new financing. So thank you to you and your team. Flex LNG is in better shape than ever. The LNG trade from January to July 2025 grew approximately 2% to two forty five million tonnes compared to the same period last year.

Speaker 1

Looking at the export side, the top three exports were again U. S, Qatar and Australia, representing more than 62% of the total LNG trade. U. S. LNG exports amounted to 60,000,000 tonnes and increased with more than 20% over year to year.

Speaker 1

There is a lot of new volumes coming to the market from the ramp up of Entrue Global's Plaquemines and the expansion of Cheniere's Corpus Christi. We would also like to note that Freeport LNG had some downtime during 2024 due to hurricane season, also contributing to a high growth year to year in 2025. There is a lot of talk about Russian gas and sanctions. Earlier this year, the EU sanctioned the Baltic LNG Russian terminals, explaining the 5% drop year to year. As a side note, we would like to mention that Canada joined the ranks of exporters with LNG Canada shipping the first commercial cargo in July.

Speaker 1

This has absorbed tonnage away from the spot market, and we expect similar dynamics when the new project comes on stream. Total European LNG import amounted to 74,000,000 tonnes in the January July period, up 24% from same period last year. Turning our focus to Asia. We see that more mature region, Japan, South Korea and Taiwan represent in some the largest LNG importer with 79,000,000 tons, down just 1% compared to the last year. Japan is on track to becoming the single largest LNG importer in 2025 as China, India have reduced their imports in 2025.

Speaker 1

Chinese imports are down around 19%, whereas India is down 11% year to year. There are several factors explaining the drop in imports to China and India. One factor is, of course, the strong demand pull to Europe as European LNG importers are deemed less price sensitive than many of the growing Asian economics. China and India have turned their attention to coal and LPG. Chinese economic slowdown and U.

Speaker 1

S.-China trade tension during the first half of the year have also resulted in lower LNG imports. On this slide, we are looking at two key dynamics for the LNG demand in Europe. On the left hand side, you will see U. S. LNG export flows by destination year on year.

Speaker 1

The yellow bars represent Europe and the dark blue in Asia. Europe has absorbed a very large share of U. S. LNG, replacing Russian gas. This has reduced ton miles, which is partly explained in the soft spot market.

Speaker 1

Now turning to the right hand side. This chart shows European gas storage levels. Inventories started off at relatively healthy levels, but have since drawn down sharply and bottomed out at around 30% earlier this year. The last few months supply of both pipeline gas and LNG have lifted the current levels to around 70% today. We expect inventories to meet the new EU targets later this year, though European remains exposed for a cold winter.

Speaker 1

On this slide, we illustrate accelerating contracting momentum and new project FIDs. On the left hand side, you will see signed SPA's volumes. We continue to see a strong appetite for long term LNG volumes, and the Zynet SBI remain around 50,000,000 tonnes in the 2025. We see strong activity from Asian buyers. On the right hand side, look at the FIDs.

Speaker 1

While in 2022 and 2023 already delivered a large project, Plaquemines and Port Arthur, then in 2027 activity slowed somewhat as the Biden administration imposed export moratorium for new projects. The moratorium was lifted by Trump administration, and we have seen fresh wave of FIDs, including Cheniere Corpus Christi Train eight and Train nine, Venture Global CP2 and Woodside's Luciana LNG projects. These new projects will absorb a lot of tonnage. Approximately 300 LNG vessels are scheduled for delivery over the next years. You can see that the bulk of fleet growth concentrates to this year, 2026 and 2027.

Speaker 1

Less than 30 of these vessels are uncommitted, and most of new vessels are already tied up to Qatar or other long term projects. From 2028 onwards, however, deliveries fall sharply with fewer than 10 vessels a year expected beyond 2029. This profile means that while there will be a lot of new tonnage entering the market in the mid term, however, our backlog gives a strong isolation from the fleet growth. The newbuilding prices for modern LNG carriers built in South Korea has stabilized, and ship brokers called prices around $250,000,000 per vessel. The shipyards are quite busy and the slots offered are to be delivered in 2028 onwards.

Speaker 1

This means that the cost of carry on from financing in the period and supervision will push up the all in delivered price. We expect new build prices to stay at these levels going forward. Term rates for five years and ten years time charter are currently quoted around $80,000 for delivery within the next twelve months. However, there are very few recent deals concluded. We continue to see a significant number of vessels idling both steam vessels and tri fuels.

Speaker 1

As many as 64 ships or 9% of the active fleet is effectively out of play today. A continuing reduction in supply will have tightened effect on the market. For vessels moving into coal layup or the barrier for re evacuate is costly and slow, in many cases equivalent to a quiet exit from the fleet. From there, scrapping becomes a natural next step. Ship owners have increasingly offered steam vessels for sale as they roll off the long term contracts and struggle to compete in today's market.

Speaker 1

So far in 2025, eight vessels have been scrapped, matching the total of twenty twenty four. With steam vessels now up for sale, this figure is likely to raise. We are seeing a falling age profile of scrapper ships. Once averaging around forty years, it has now dropped to about twenty five years. Steam vessels coming off contracts have limited commercial opportunities going forward.

Speaker 1

Even though the spot market for modern two strokes have recovered from low in Q1 twenty twenty five and is now around $35,000 to $40,000 per day. This is below historical norms. We observed from brokers position list that available tonnage is tightening, especially in The Atlantic going forward. This spot market historically firms up going into September. On the right side of this slide, you will see the average and maximum spot rates for September throughout December, from 2018 to 2024.

Speaker 1

Even before the European energy crisis, this period consistently delivered some of the strongest returns of our market. However, last year in mind, we had to be mindful of number of ships being delivered for the rest of the year. That summarizes today's presentation, and we will now move on to Q and A session.

Operator

Thank you, Majors. And that leads us over to the Q and A sessions. And thanks everyone who has submitted a question to us today. Majors, we have a number of questions regarding the upcoming options for the Flex Aurora and Flex Volunteer, both in terms of likelihood of being declared and timing of these options.

Speaker 1

Thank you. That's a very good question. We're also waiting for those dates to come. And the only thing I can say today is that first option is due now in Q4 twenty twenty five and the other option is in Q1 twenty twenty six. So we shall revert once we can say more about that.

Operator

And today we are also announcing refinancing, building up our cash balance. There are questions on how to spend it, but in particular question for you is on fleet growth and potential new buildings. How do you look at reinvestments in newbuildings today?

Speaker 1

I would love to add on newbuildings to the Flex LNG fleets. At the time, we did 13 speculatively order and have been able to fix them out on term business. Right now, we are exploring with the new and existing partners if somebody would like to join us to order with a contract attached, which I find is important to go forward if you're to order more. But ordering a new building on the prices that we have talked speculatively, is very difficult as long as the term market not justify a new building investment today.

Operator

So then there is also follow-up questions. So what we are doing with all the cash that we have on our balance sheet. As a reminder, we have $413,000,000 of RCF capacity, which we are not utilizing in between quarters, which is an effective cash management way to have that capacity ready when we need it. And I think as Marius also alluded to, we have a sort of a strict capital discipline. But one of the ways is reflected in the share buyback program that we announced today, which is made independent of dividend considerations.

Operator

But we have that capacity to do that without disturbing the dividend. We also have a number of questions regarding the delisting. Many of them are detailed. We've covered a lot in our presentation. But we also recommend you to have a look at on our website.

Operator

There's a dedicated page for the delisting covering all the items that you will need to know. But we also encourage people to contact their broker or investment advisors for the shareholders of Oslo Stock Exchange to look at how to transfer the share to the New York Stock Exchange share before the last day of trading. It's important as following the delisting, the shares registered with VPS will be very difficult to transfer and to sell when we are no longer listed on Oslo Stock Exchange. So please have a look on our website.

Speaker 1

Okay. Thank you, Knut. That should be all for today. Thank you for everybody participating on this presentation. We are looking forward to see you back in November for our Q3 presentation.

Speaker 1

Thank you.

Operator

Thank you.

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