FLEX LNG LTD., an emerging leader in the Liquefied Natural Gas (“LNG”) shipping, reports unaudited results for the three months ended March 31, 2018.
Highlights for Q1 2018:
• On January 9 and 11, 2018 Flex LNG successfully took delivery of its first LNGC newbuildings the Flex Endeavour and the Flex Enterprise, respectively.
• Flex Endeavour commenced it’s time charter to Uniper Global Commodities (“Uniper”), a leading international energy company headquartered in Germany while Flex Enterprise was operating in the spot market.
• Reported Revenues of $15.1m compared to $1.3m in Q1 2017.
• Reported a positive EBITDA of $2.4m compared to a negative EBITDA of $2.4m in Q1 2017.
• Reported Net Loss of $ 1.8m compared to a Net Loss in Q1 2017 of $ 1.0m due to weak utilization of the Flex Enterprise during the quarter as well as increased financing costs related to $ 315m term loan facility.
• The Company transitioned from IFRS to US GAAP on 1 January 2018. There were no changes to the balance sheet as a result of this change in accounting principles.
Other and Subsequent Events:
• On 18 April 2018 Flex LNG entered into a 12 months time-charter agreement with Enel Trade S.p.A. (“Enel”). The time charter period of 12 months will commence during the second half of 2019. Enel also has the option to extend the contract by an additional 12 months subsequent to the firm period.
• On 28 May 2018, Flex LNG received credit approval for a sale leaseback of the LNGC newbuilding Flex Rainbow with an Asian Lessor (“Lessor”) based on term sheet signed by the parties 20 March 2018. The sale price under the lease is approx. 75% of the relevant ship building price for Flex Rainbow and where the remaining 25% represent the advance hire for the ten year lease period.
• On May 28, Flex LNG entered into an agreement to acquire two 174,000 CBM X-DF LNGC newbuildings under construction at HHI for an attractive price of $ 184m each vessel which includes building supervision. Payment terms are favorable with 20 per cent of amount due following signing of such agreement while remaining 80 per cent is due at delivery. Hence seller is funding part of pre-delivery capex which illustrate commitment and support of the largest shareholder.
• Jonathan Cook, Chief Executive Officer of Flex LNG Management Ltd, decided on 28 May 2018 to resign his position to pursue other interests. The Board has decided to appoint Board member Marius Hermansen as Interim CEO and will actively pursue recruitment process of a permanent Chief Executive Officer. The Company has also hired Marius Foss as Head of Commercial. Mr. Foss comes from a similar role at Golar LNG Ltd.
• Following the changes in management 28 May and the recruitment of Mr Foss, the Board has increased its focus on building a strong team around the Company’s modern LNGC fleet, and given the market outlook, transportation of LNG will be the Company’s core focus going forward
Øystein M Kalleklev, CFO comments:
“Although we are disappointed by the financial performance in first quarter, we are pleased to be able to announce an attractive sale-leaseback of Flex Rainbow. This lease enables the Company to grow organically based on its existing paid-in equity by the acquisition of two additional high specification LNGC newbuildings at very attractive terms and conditions. The newbuildings are both fitted with X-DF propulsion, giving us a broader offering to our customers once delivered from yard mid-2020. The market for LNG transportation is cyclically recovering from lows experienced beginning of first quarter and we remain very confident about the long-term structural prospects for this market and are thus positioning for this up-turn with this accretive fleet expansion.”
The Company remains well positioned with its eight slow speed two stroke LNG carriers set for delivery in 2018-2020. The delivery of these vessels coincides with the significant increase in new LNG production capacity coming to the market as well as increased sailing distances due to US volumes and increased trading activity. The market sentiment is improving and spot rates paid for LNG carriers have increased since end of the quarter. We currently believe that the market will prefer the substantial improvement in unit freight cost of these larger and more fuel efficient vessels.
Two of the ME-GI LNGCs were delivered by Daewoo Shipbuilding and Marine Engineering Co. Ltd. (“DSME”) in January 2018; two ME-GI LNGCs are currently under construction at Samsung Heavy Industries (SHI) and are scheduled to be delivered to the Company in the second and third quarters of 2018. Two ME-GI LNGCs are expected to be delivered to the Company by DSME in second and third quarters of 2019 while the remaining two X-DF LNGCs are scheduled for delivery from Hyundai Heavy Industries (HHI) in second and third quarter of 2020.
On April 18 2018 FLEX entered into a time-charter agreement with Enel Trade S.p.A. (“Enel”), a company of the Enel Group, a multinational power company and one of the world’s leading integrated electricity and gas operators. The time charter period of 12 months will commence during the second half of 2019. Enel also has the option to extend the contract by an additional 12 months subsequent to the firm period. FLEX LNG intends to employ the LNG carrier FLEX Enterprise for this business, however the Company also has the option to nominate one of its sister vessels.
Results for the Three Months Ended March 31, 2018
The Company reports a net loss of $1.8m and earnings per share of $(0.00) for the first quarter of 2018 compared with a net loss of $1.0m and a loss per share of $(0.00) for the first quarter of 2017.
Voyage Revenue amounted to $15.1m in the first quarter, and related to two vessels that were chartered in by the Company and our two own ME-GI vessels. Voyage revenue for the first quarter 2017 was nil as the Company did not have any vessels in its operating fleet.
Voyage Costs, including the costs to charter in vessels, voyage related costs, and broker commissions amounted to $3.1 m in the first quarter 2018.
Administrative expenses amounted to $0.8 m in the first quarter, compared to $0.7m, in the same periods in the prior year.
In the quarter ended 31 March 2018, the Company’s cash balance increased by $29.0m compared to a decrease of $13.4m in Q1 2017. The Q1 2018 increase was mainly driven by loan proceeds of $210.0m.
In 2017 the Company signed a $315m secured term loan facility (the “TLF”) to finance the first three of its newbuildings – DSME HN 2447 (Flex Endeavour), DSME HN 2448 (Flex Enterprise) and SHI HN 2107 (Flex Ranger) with a group of six banks. Two loan tranches of each $105m were utilized in connection with deliveries of Flex Endeavour and Flex Enterprise in January 2018.
The remaining $105m loan tranche is expected to be utilized in connection with the delivery of Flex Ranger scheduled end of June 2018. The tenor of the TLF is five years from the date of the last newbuilding financed under the TLF, resulting in an average term of approximately 5.4 years.
On 28 May 2018, Flex LNG received credit approval for a sale leaseback of the LNGC newbuilding Flex Rainbow with an Asian Lessor (“Lessor”) based on term sheet signed by the parties 20 March 2018. The sale price under the lease is approx. 75% of the relevant ship building price for Flex Rainbow and where the remaining 25% represent the advance hire for the ten year lease period.
The Company has as of 31 March 2018 also a $ 270m revolving credit facility in place with Sterna Finance Limited (the “Sterna RCF”) which is utilized by $ 60m at quarter-end. The Credit Facility can be drawn from and repaid at the Company’s discretion, providing the Company growth capital while minimizing interest expense during the construction phase of its LNGC newbuildings. This is a strong indication of the support and commitment of the
Company’s largest shareholder.
In 2017, the Company completed the transfer of its shares from the Oslo Axess exchange to the main Oslo Børs. The transfer has increased the Company’s visibility among the investment community and facilitated better trading liquidity in the Company’s shares evident from average traded volumes on the Oslo Stock Exchange.
367,972,382 ordinary shares were outstanding as of 31 March 2018, and the weighted average number of shares outstanding for the period was 367,972,382.