Good afternoon, ladies and gentlemen. And thank you for standing by. Welcome to today's Flex LNG Second Quarter 2019 Earnings Presentation. [Operator Instructions] I must advise you that this conference is being recorded today Tuesday, the 20th of August 2019. And now I would now like to hand the conference over to your speakers today, Oystein Kalleklev, CEO and the CFO, Harald Gurvin. Please go ahead.

Thank you and hi everyone. Welcome to the second quarter earnings presentation for Flex LNG. My name is Oystein Kalleklev. And I am the CEO of Flex LNG management, and I will guide you through today's presentation together with our CFO, Harald Gurvin, who will run through the numbers a bit later in the presentation. A replay of the webcast will also be available at flexlng.com. Flex LNG is a shipping company focused on the growing market for seaborne transportation of liquefied natural gas and since 17th of June, we've been listed both in Oslo and New York Stock Exchange under the ticker FLNG. So a disclaimer with regards to, among others, forward-looking statement and completeness of details. The full disclosure is available in the presentation, and we recommend that the presentation is read together with the interim financial report and our annual report which all listed on our website. So then let's move on to the highlights for the quarter. In the second quarter, we delivered revenues of $19 million in line with both first quarter 2019 as well as third quarter of 2018. TCE has docked slightly on Q1 on $43,000 per day to $46,000 per day due to less positioning cost resulting in our adjusted EBITDA of $11.5 million compared to $8.7 million in the first quarter. Due to unrealized non-cash mark-to-market loss on the revenue of $2.2 million in the second quarter, the net loss for a quarter was $3.9 million compared to $3.4 million in the first quarter. The first half of the year was negatively impacted by lower transportation demand which adversely impacted freight rate. Utilization and dollar sentiment, a very mild winter and glut of LNG hitting the market in the first half of the year resulted in plummeting spot prices for gas…

Thank you, Oystein. Revenues for the quarter came in at $19 million in line with the first quarter revenues of $19.1 million. Adjusted EBITDA for the quarter was $11.3 million, up from $8.7 million in the first quarter, mainly due to lower voyager expenses due to increase utilization of fleet in a quarter and lower administrative expenses due to costs associated with the US listing in the first quarter, partly offset by increased operating expenses costs due to delivery of Flex Constellation beginning of June. The result for the second quarter also includes a $2.2 million negative non-cash mark-to-market on derivatives relating to interest rate swaps enter into in connection with the financing of the Flex Constellation. Net loss for the quarter including the $2.2 million mark-to-market was $3.9 million compared to net loss of $3.4 million in the previous quarter. Then moving on to our balance sheet for June 30th. Following delivery of Flex Constellation in June, our assets consisted of five vessels on the water with an aggregate book value of $982 million at quarter end. In addition, we have booked vessel purchase through payments of $385 million relating today's vessels under construction which represents advance payments on these. We had a cash position of $26 million at quarter end which is excludes the $270 million available under revolving facility provided by Sterna. Total debt at quarter end was $567 million or which approximately $30 million is due over the next 12-months and as classified as current liabilities. Total equity as per June 30th was $820 million giving a very strong equity ratio of 58%. Looking at our cash flow, the operational cash flow was $9.4 million for the second quarter mainly due to improved utilization of the fleet during quarter and a positive working capital adjustment of…

Okay. Thanks Harald. I will now proceed with the update on the freight market to start with the conclusion of the first half of 2019 has been disappointed in terms of trading in sales. It is fair to say that we had higher expectation for 2019 than what have materialized so far. Following the boom in the fourth quarter, the market went through a disruption in the first quarter this year with rates and utilization levels plummeting. The chart to the left illustrate this by development for the three types-- different types of LNG carriers, older steam vessels, 160,000 cubic four-stroke diesel electric vessels and lastly the modern 2 stroke vessels. It is the latter which consists entirely of. Headline rates for low and modern 2 stroke vessels have today rebounded to around $75,000 per day. The key drivers for the softer phase market in the first half of the year were primarily due to three reasons. Firstly and seasonably mild winter not only in Asia but also in Europe due to the El Nino. Secondly, a glut of LNG entering the market pushing down the product prices and thus with harsh economics and cost based in trade. Lastly, our shifting trading pattern favoring shorter halts to Europe instead of Asia. These factors resulted in higher vessel availability and also a less-- and also less need and also a need for repositioning vessels from Pacific into Atlantic during the first half of the year. Headline rates however mark the importance of ballast bonus and utilization. Today ballast bonus conditions are generally more advantageous than in the first half of the year with full hire and full compensation for ballast leg currently. Terms of ballast conditions due to Flex type of shipping availability as illustrated in the chart to the right.…

[Operator Instructions] And the first question comes from the line of Greg Lewis from BTIG. Please go ahead.

Hello, thank you.

I hope, Greg, you notice I said answer-and-question session. So this is - so I guess you have the answers and I have the questions.

Okay. Hi, guys. So I guess my first question is it seems like the market the LNG spot rates have been more kind of just like grinding higher over the last month. I think if we would look back in previous years, it was a lot more like I guess spiking higher. Just kind of curious what you're seen in the market and why were it looks like we're seeing this more of a like methodical ramp up in pricing as opposed to some of the volatility was seen in past summers when rates started moving higher?

Okay. Yes, I know I share your view. I think you know we had a very good sentiment in April, May where the market turned up very quickly and availability of ships -- so end of May I would say looked very good, however, we had this leg down in the gas prices suddenly over to summer gas prices just collapsed. We had this double whammy of not only you had a mild winter in Asia but that the summer was not as hot either. So at least not before August. And during August temperatures in Japan has been hitting a 40 degree centigrade. So it's starting at least to be become a bit more cooling demand. So you had low heating demand and the beginning of the summer low cooling demand in Asia and Europe it's been quite hot. So the collapse in product prices over to summer also resulted in the shipping demand softening and June July's been fairly flat in terms of freight. While we know see that increased cooling demand and demand from Asia is pushing cargoes into Asia which means highest on mileage JKM been jumping up from around $4 to $4.70 and is trading less ships available and pushing and basically the rates up to around $75,000 per day today. That said, we don't really have that volatility except for maybe our stock price which has been very volatile but when it comes to the trade market, I think the reason why you haven't seen this same kind of volatility is the reload market. There happen to be really been those net backs to switch cargoes to Asia so far at least in a season. And those are the kind of the super profits cargoes. However, that said we have till middle of August last year that the rates went $300,000 per day in the middle of September. So things can happen during the coming month, if you look at the positioning list of available tonnage, that's not really a lot of ships around them particularly not the big ones which are the petrol ships for the US volumes where parcel size tend to be bigger and their hole is longer and there's a lot of US volumes being ramped now with more volumes than [Indiscernible]. People, it's also [Indiscernible] demand so this is kind of creating a positive sentiment in the face market and that the trend is definitely upward in terms of pace and we are also heading into a season where people will start looking more for the Contango type buying the cargo spot and reduce the --increase the level of delayed discharge where people are waiting for this discharge and basically floating storage.

Okay, great. And then just and then just another question I had. You kind of like, it seemed like we're touching on it throughout the earnings call. I mean you mentioned the fact that you were able to get rid of the covenants around the dividend on removal of the debt that had the covenants restricting dividends; you kind of highlighted your cash breakeven, kind of talking about liquidity. As we think about Flex clearly the goal this company is to catch the odd cycle start returning cash to shareholders. But as we think about the timing of that you, this month you'll take delivery of six of your six vessels so you still have some new builds you need to address, financing looks be in place. How is the company today thinking about realizing it's still kind of early days for you guys? How are you guys thinking about dividends and/or buybacks as we sort of move forward or through this the next couple quarters which probably looks like it's going to be fairly attractive?

Yes. I think most people thought maybe 2019 should have been our highest market and we also positioning for 2019 to be fairly a good year for ship owners due to the reasons I explained the market turn out a bit different at least in all areas is heading in the right direction. Also it has been hammered price implicitly as 165 million per ship, which is what bottom I think and I always say if you assume 200 million per ship, the stock price would be almost a double. So, of course, we as you know on the other side, we raised $300 million of equity in October. So we're really not dependent on selling any more stocks and we’ve decided to do our U.S. listing without printing any shares. So we're not really dependent on raising equities. So forth it's more about actually returning equities to shareholders, which are our main focus right now as the price of the stock is, would be interesting. Looking at buying back I think it's a bit early for us, we guided 60,000 earnings in Q3 which case at least positive for shareholders. And then Q4 will be interesting to see. We're very well positioned for Q4 and if rates goes up we’ll of course make, we will aim to make considerably higher TCE in Q4 than Q3. And then we are similar to older sea tanker companies like Frontline, Ship Finance, and Golden Ocean. We have a majority shareholder with a big stake here have around 44%. So, he is also interested in receiving some of the earnings from the company and it's additionally in this system, we have been shareholder family and paid out dividends when we are taking excess cash flow. Right now for 2019, we haven't saved this excess cash flow, however, we have created the cash buffer by utilizing a lot of financing this year, which gives us more than $100 million of cash after delivery of wages, which is a very comfortable situation to be in that you don't have to buy or sell any stocks. You don't have to kind of raise any more liquidity, except of course putting in place financing for the next seven newbuildings.

Thank you so much. And the next question comes from the line of [Indiscernible]. Please go ahead.

Yes, good afternoon. I was wondering given that about 30% of LNG trade goes for the strike of almost if you have witnessed any big inflation in insurance rates?

Inflation in insurance or

In insurance, yes, insurance --

Yes, of course, the insurance premium for going into -- has ballooned, we wouldn't to sail into space of homer except if we want to pick up our cargo, and there is a lot of cargos in that area, always producing around 80 million tons a year. So every day is more or less, of course the vessels picking up cargos in that area, and we are also open to trade into that area, we have a vessel on its way into that --in Qatar these days. However, the insurance payment, every voyage in LNG shipping is a time chart. What it means that -- they take --you offer them the ship but they’ve paid for the car, the insurance, canal duties, port fees, so it's a bit like if you go to -- and you rent a car, you have to take out the insurance. You have to pay for the fuel. So the same concept that is for LNG shipping and in all the inflated insurance payments is of course a cost that the charters have to take into account.

But is it material on the OpEx?

No. I wouldn't say material. No, no. There hasn't been any incident with LNG ships and these ships are running into this in and out of this area typically is around 90 knots. So they're not the easiest target.

And the next question comes from the line of [Indiscernible] Please go ahead.

Hello. Maybe a little bit of a repeat from previous question, but I just wonder if you can elaborate a little bit more on the dynamic that happened last year compared to how the set up is for this October, November time frame. I mean so far the rates are approximately the same or slightly below last year and the ship availability is quite low currently. I mean what is required to get a similar kind of squeeze up? Is that --is it possible to expect or is it unlikely?

I think you are right we are in a fairly similar situation also this heading year has developed very similar to 2018. On balance actually the market is much tighter in 2019 than 2018 because you have much less vessels entering the market. Last year you have more than 50 ships; this year you have -- we expect 39 ships. There are a lot of new volumes in the market. So in a kind of like excel -- exercise the market is much tighter in 2019 and that's why most people also were very bullish on 2019. However, the product prices are lower this year and the kind of the spread between the different bases is a bit slightly less. So, we know --we have decided to go fairly short on the third quarter to have ships available in the fourth quarter. So we think the fourth quarter will be extremely tight on shipping. How high the rate will go is it's hard to predict. There are two factors working against each other. The one factor is that the market is tighter this year. You don't have capacity to have 35 ships in floating storage this season because there are not that many ships around. And then the other factors are the spreads and of course the forward curve is actually not a very good predictor of future prices. And I'll let you forward passes of the paper market then if you look at the forward price for this winter when we were in September you have the high spot prices throughout the season at above $10. And we ended up all the way down to $4 and actually lower in Europe. So and the product prices are you know it's just a guess but the product prices are deeper…

Thank you. And the next question comes from the line of [Indiscernible]. Please go ahead.

Thanks for taking my question. I had three if that's okay. How much -- can you say how much of Q4 your Q4 capacity has you already locked in pricing on? Second question, how many ships do you think or estimate is already engaged in some form of storage? And the third question was do you think the tender the Qatar is carrying out or reported to be carrying out both of shipyards and also allowing existing ship owners to offer ships into that tender, do you think that will be of interest to many existing ship owners as opposed to just the odds? And if that's something you would consider effectively kind of selling forward capacity and number of phase out.

Okay. Thanks. Okay, let's talk with a few hope and I won't think it give away too many features, heading features but what I can tell you in Q4 we had six ships on a water. We have two ships on what I would call term contract meaning one year or longer. So we have fix ranger lot of with NL, she entered that contract in June. That time operates for that is in 80s, and then we have also announced a one year time charter for our Flex Enterprise which was commenced around April. But she is on market index rate so if Q4 rates go also up or down we are exposed to the spot market for that vessel. So what I can say is we have five vessels then exposed to the spot market for Q4. And we generally decided to go fairly short on the pay rate. We didn't want to sell out all of those [Indiscernible] coverage already have in the summer. So I think we have very good position for Q4. When it comes to your second question, ship storage. We do see some reports that late discharged meaning that the definition there is that the cargo is discharged more than 15 days later than kind of normal schedule. We do see some indications of the late discharge or floating storage standard, it's very minimal. I think most people get this from September onwards. And we have received increased from traders for floating storage but we will see. I think there will be floating storage this season as well. As I mentioned, I don't think you have capacity to take out as many ships and deposit price differential don't incentivize that level of floating storage either. When it comes to the Qatar, so we…

Thank you. And the next question comes from the line of [Indiscernible] Please ask and go head.

Hi, good afternoon. So you said that you're implied NAV per ship based on the current market cap is $1.65 million per ship. That's a very important statement. Could you please give us just a bird eye view to as to how you reach this number especially how you treat your SLB ships? Do you consider as part of your NAV and how you reached that number?

I think if you look at most analysts also there's been a flurry of panelists sending out the research report, they said they will conclude on more less the same number, but the math here are fairly simple, it's basically you would have to take the ships you have in your portfolio and the ships and you have to take the enterprise value. So for us it would be today we have around $820 million of equity. We have debt of, if we do this-- if we do this post globe, still we have around $800 million of debt. Then you remove the $100 million of cash. Then you have net interest-bearing debt of $700 million. And then you have to add the remaining CapEx. So the remaining CapEx is $934 million. And then you kind of get what is EV with the remaining CapEx being treated then as a debt. And then of course our market cap is not the book equity. The book equities around 820, I didn't really check stock prices too much today, but it's around $500 million. So if you add $500 million, $700 million and the remaining CapEx $934 million, you get the enterprise value and you divid it by 13 ships and you arrive at around $165 million per ship.

Okay. But when you did the sale and leaseback transaction of these ships aren't they in effect sold? They're not your ships anymore so as a denominator in NAV, yes please go ahead.

Obviously, we would treat it as a financial lease so we put that debt obligation on the balance sheet as ordinary debt. And we depreciate the ships and the reason why we can also do this is the fact that we have purchase options or to say the choice, -- good options so of course for all practical purposes we do intend to buy the ships back. Usually the ships as the [Glovis ships] they have a purchase price of $75 million when they're 10 years old and 11.5 or 10 years after lease whichever or 11.5 years, so it's really likely we would utilize that option to buy them back. And I believe they also have a boost and for the book only is there is also a fixed cost structure at 50% of the $157.5 million which then should be around $78 million when the ships are ten years, so we do expect that all ships will be bought back as either the end of the lease or potentially during the lease because we also have options to buy them back during the life of lease.

All right, thank you. And perhaps one more quick question. Until recently you mostly talked about the strength of spot market and that Flex want to be chartering the ships in the spot market. I believe this is the first time you start talking about long-term contracts. So what changed in last --in your strategy that you are now looking more at long term contract?

It's not really a change in strategy. I think we've been trying to hammer around this year after year but it's not coming through. So I think I have to make a slide on this last time. So what we have decided to do is just place our ships short term while the market is improving. So when we started getting vessels in 2018, it wasn't really a good shipping market until the end of the year. Then in 2019, it's been a bit disappointing first half of the year and it's heating up now. So what you typically would try to do it is to charter your ships on a longer- term contract when the spot price is higher than the period price. So right now of course till the spot prices have rebounded to $75,000, the one year PCE is still higher than the spot price. So what we try to achieve here is to add areas to our backlog once the spot prices go above the period charter and also as we are adding more ships. And it is okay we still operate five big ships in the spot market but next year we get five ships for delivery. And it's a bit more challenging having 11 ships or 13 ships in 2021 exposed to the spot market. So we are gradually building backlog as we are building a fleet. And this is one of the reasons why we also last year decided to integrate or shift management systems. This is not a process that is very quick to do. So by Q4, we expect to have in-house ship management, which makes us better position in terms of securing the longer term employment. So it's always been our strategy to add backlog to the portfolio as we have increased and as the market is becoming tighter with spot prices at higher levels. End of Q&A

Thank you so much. And there are no further questions at the moment. So please go ahead. Speakers, please go ahead.

Okay, doesn't seem to be any more questions. So then I thank you everybody for participating. And wish you continue happy day.

Thank you so much. That does conclude our conference for today. Thank you for participating. You may all disconnect.