Flex LNG - Third Quarter 2023 Earnings Release

November 8, 2023
Hamilton, Bermuda

Flex LNG Ltd. ("Flex LNG" or the "Company”) today announced its unaudited financial results for the three months and nine months ended September 30, 2023.

Highlights:

* Vessel operating revenues of $94.6 million for the third quarter 2023, compared to $86.7 million for the second quarter 2023.
* Net income of $45.1 million and basic earnings per share of $0.84 for the third quarter 2023, compared to net income of $39.0 million and basic earnings per share of $0.73 for the second quarter 2023.
* Average Time Charter Equivalent¹ ("TCE") rate of $79,207 per day for the third quarter 2023, compared to $77,218 per day for the second quarter 2023.
* Adjusted EBITDA¹ of $74.7 million for the third quarter 2023, compared to $66.2 million for the second quarter 2023.
* Adjusted net income¹ of $36.1 million for the third quarter 2023, compared to $28.2 million for the second quarter 2023.
* Adjusted basic earnings per share¹ of $0.67 for the third quarter 2023, compared to $0.53 for the second quarter 2023.
* The Company declared a dividend for the third quarter 2023 of $0.875 per share, consisting of a quarterly dividend of $0.75 per share and a special dividend of $0.125 per share. The dividend is payable to shareholders on record as of November 28, 2023 on or around December 5, 2023.

Øystein M. Kalleklev, CEO of FLEX LNG Management AS, commented:
"After successfully completing our drydock program for the year during the second quarter when we temporarily took out three ships for five-year special survey in drydock, we had all 13 LNG carriers back in full operation during the third quarter. Higher vessel availability coupled with a stronger spot market, which positively impacted our single ship on a spot-market linked, variable rate time charter, resulted in quarterly revenues increasing by $7.9m from $86.7m in the second quarter to $94.6m in the third quarter. Hence, we delivered quarterly revenues in the top end of our guidance of $90-95m.

Strong freight income also trickles down to healthy earnings with net income for the quarter of $45.1m, equating to quarterly earnings per share of $0.84. Once again, we recorded gains on our portfolio of interest rate swaps which is hedging our cashflow against higher interest rates with gains of $15.7m consisting of $6.7m of realized gains and $9m of unrealized gains. Since we eliminate unrealized gains in our adjusted numbers, adjusted net income and adjusted earnings per share were $36.1m and $0.67 respectively. We have been ahead of the curve, hedging interest rate risk prior to Fed aggressively ramping up rates and since beginning of 2021, we have in total recorded $128m of gains on our interest rate swaps.

With seasonally stronger spot market heading into the winter season, we expect a further increase in revenues in the fourth and last quarter of the year with expected revenues of $97-99m. This is also in the high end of our guidance of $90-100m. With the third quarter numbers presented today and the guidance for fourth quarter, we are thus well on track to deliver on our revenue guidance for the year of $370m, our adjusted EBITDA target of $290-295m and the overall average Time Charter Equivalent guidance of $80,000 per day.

The overall freight and product market today ahead of the peak winter season is fairly balanced. The LNG product market is well supplied as supply curtailments have recently been limited despite the noise. That said, spot LNG prices remain at about $15/mmbtu which still reflects a tight market with LNG being priced at premium to crude oil which is somewhat unusual in historical context. As LNG export growth will continue to be fairly muted the next two years, we do expect the LNG product market to stay tight as European buyers will continue to be buyers both of first and last resort. Active buying by Europeans also means Atlantic cargoes will continue to be pulled towards Europe instead of Asia which will put a dent on sailing distances in the near term. The spot freight market will therefore continue to experience a very high level of volatility depending on season. From the end of 2025 we do however see a wave of new LNG coming onstream, and we expect these volumes to gradually alleviate market tightness and make LNG affordable to consumers with shallower pockets. Consequently, with newbuilding deliveries peaking at end of 2025, we do see incrementally tighter shipping market from 2026 onwards. We therefore think our two fully open ships in 2027 and two fully open ships in 2028 are attractively positioned for re-contracting opportunities. This is particularly the case given the elevated newbuilding prices which have pushed up term rates to very attractive levels for owners of modern fuel-efficient tonnage.

Given our quadfecta of strong numbers, completed drydocking program, very solid cash position of $429m and the compelling long-term outlook, the Board has decided this time to declare a special dividend of $0.125 on top of our regular quarterly dividend of $0.75 bringing the quarterly dividend per share for the third quarter to $0.875. During the last twelve months, we have thus paid out dividends of $3.375 per share which provides our shareholders with an attractive annualized running yield of about 11 per cent.”

Third Quarter 2023 Result Presentation
In connection with the earnings release, a video webcast will be held at today at 15:00 CET (9:00 a.m. ET).

In order to attend the live video webcast use the following link:

Third Quarter 2023 Earnings Presentation

A Q&A session will be held after the conference/webcast. Information on how to submit questions will be given at the beginning of the session.

In conjunction with the quarterly results, we have published a short video in which Øystein Kalleklev, CEO of Flex LNG, discusses the highlights of the third quarter. The video can be accessed through the following link:

Link YouTube

The presentation material which will be used in the live video webcast can be downloaded on www.flexlng.com and replay details will also be available at this website.

For further information, please contact:

Mr. Knut Traaholt, Chief Financial Officer of Flex LNG Management AS
Telephone: +47 23 11 40 00
Email: ir@flexlng.com

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Forward-Looking Statements
Matters discussed in this press release 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 their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "expect," "forecast," "anticipate," "estimate," "intend," "plan," "possible," "potential," "pending," "target," "project," "likely," "may," "will," "would," "should," "could" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although management believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, there can be no assurance that the Company will achieve or accomplish these expectations, beliefs or projections. As such, these forward-looking statements are not guarantees of the Company’s future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements. The Company undertakes no obligation, and specifically declines any obligation, except as required by applicable law or regulation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors. Further, the Company cannot assess the effect of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include: unforeseen liabilities, future capital expenditures, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the LNG tanker market, the impact of public health threats and outbreaks of other highly communicable diseases, including the length and severity of the COVID-19 outbreak and its impact on the LNG tanker market, changes in the Company’s operating expenses, including bunker prices, dry-docking and insurance costs, the fuel efficiency of the Company’s vessels, the market for the Company’s vessels, availability of financing and refinancing, ability to comply with covenants in such financing arrangements, failure of counterparties to fully perform their contracts with the Company, changes in governmental rules and regulations or actions taken by regulatory authorities, including those that may limit the commercial useful lives of LNG tankers, customers' increasing emphasis on environmental and safety concerns, potential liability from pending or future litigation, general domestic and international political conditions or events, including the recent conflicts between Russia and Ukraine, as well as the developments in the Middle East, including any escalation of armed conflict in Israel and Gaza, which remain ongoing as of the date of this press release, business disruptions, including supply chain disruption and congestion, due to natural or other disasters or otherwise, potential physical disruption of shipping routes due to accidents, climate-related incidents, or political events, vessel breakdowns and instances of off-hire, and other factors, including those that may be described from time to time in the reports and other documents that the Company files with or furnishes to the U.S. Securities and Exchange Commission ("Other Reports”). For a more complete discussion of certain of these and other risks and uncertainties associated with the Company, please refer to the Other Reports.

¹ Time Charter Equivalent rate, Adjusted EBITDA, Adjusted net income/(loss) and Adjusted earnings/(loss) per share are non-GAAP measures. A reconciliation to the most directly comparable GAAP measure is included in the end of this earnings report.

Attachment

• Flex LNG - Earnings Results Q3 2023