This story requires a subscription
This includes a single user license.
The owner of 13 LNG carriers said on Wednesday vessel operating revenues were $84.7 million for the April-May period, a drop compared to $86.7 million in the second quarter last year and from $90.2 million in the prior quarter.
The shipping firm controlled by billionaire John Fredriksen reported net income of $21.8 million in the second quarter, down compared to $39 million in the same quarter last year, and down compared to $33.2 million in the prior quarter.
Average time charter equivalent (TCE) rate was $72,385 per day in the second quarter of 2024, and compares $76,539 per day for the first quarter 2024, and $77,218 per day in the second quarter of 2023.
Flex LNG declared a dividend for the second quarter 2024 of $0.75 per share.
The company has 12 LNG carriers on fixed hire time charters, including to US LNG exporter Cheniere, while the LNG carrier Flex Artemis trades in the spot market.
In May, the company secured a new charter deal with a “large Asian LNG importer” for the 2019-built 173,400-cbm, Flex Constellation, the company’s fourth contract so far this year.
In April, Flex LNG clinched a time charter extension from US LNG exporter Cheniere for its 2018-built 173,400-cbm LNG carrier, Flex Endeavour.
Prior to this, Flex secured two charter extensions from UK-based energy giant BP for the 2019-built 173,400-cbm, Flex Courageous, and the 2020-built 173,400-cbm LNG carrier, Flex Resolute.
Seasonally low spot rates
CEO Øystein Kalleklev said Flex LNG’s second quarter “came in as guided with revenues of $84.7 million, which was in line with our guidance of “close to $85 million.”
He said the second quarter is generally the weakest quarter of the year, and this was also the case this year with spot earnings bottoming out during the first half of the quarter in line with the normal seasonal pattern.
“Seasonally low spot rates affected the quarterly earnings for Flex Artemis, our only ship on variable hire linked to the spot market, as well as Flex Constellation, which traded spot for a short period during April and May before she commenced a 10-month fixed hire time charter in May,” he said.
This new time charter is this fixed until end of first quarter 2025 with the charterer having an option to extend the vessels by one year until end of first quarter 2026.
“The seasonal slowdown in the market during the second quarter is also the reason why we put two ships in drydock during the quarter,” Kalleklev said.
During the quarter, Flex LNG completed the five-year special survey of the sister ships Flex Constellation and Flex Courageous according to plan and budget.
“Both ships were back in operation during the quarter, and we have no more drydocking stays planned for the rest of the year,” he said.
“We expect our revenues to increase in the second half of the year due a new fixed hire contract for Flex Constellation, higher earnings for the ship with variable hire as spot rates have been picking up and the fact that we have no more scheduled off-hire for the year,” he said.
“For the third quarter, we therefore expect revenues to increase to approximately $90 million,” Kalleklev said.
Two new financing facilities
“While we recently carried out a balance sheet optimization program, we haven’t stopped exploring ways to further optimize our balance sheet,” he said.
Hence, Flex LNG announced two new financing facilities.
On the back of the recent charter extension of Flex Endeavour, Flex LNG has secured an “attractive” $160 million sale and leaseback maturing in 2034,” Kalleklev said.
Additionally, Flex LNG has secured a new $270 million bank loan for Flex Aurora and Flex Ranger which will mature in 2030.
These two new facilities will refinance an existing $375m bank facility, subject to final documentation and customary closing conditions.
“The $375 million facility is our first scheduled debt maturity in Q2-2028. Hence, by refinancing this facility we have not only addressed our first debt maturity, but we have achieved lower cost of financing, extended debt maturity and repayment profile while at the same time raising net cash proceeds of approximately $97 million,” Kalleklev said.
At quarter-end, Flex LNG had a “healthy” cash balance of $370 million.
“Our pro-forma cash balance adjusted for this refinancing thus increase to a solid $467 million,” he said.
“The combination of a solid cash position, high degree of earnings visibility with minimum 47 years of firm backlog which may grow to 66 years if charterers utilize their extension options, improved earnings outlook for the second half of the year and the positive long-term outlook for the LNG market all contribute to Flex LNG being well positioned and this is reflected in our dividend,” Kalleklev said.
