Good day and thank you for standing by, and welcome to the Flex LNG Q2 2021 Earnings Presentation Conference Call. Currently, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] And right now, I would like to hand the conference to our first speaker today, our CEO, Øystein Kalleklev. Please go ahead, sir. Øystein Kalleklev: Thank you and welcome to today's Flex LNG webcast where we will be presenting our second quarter results. I'm Øystein Kalleklev, the CEO of Flex LNG Management, and I will be joined today by our CFO, Knut Traaholt, who will walk and talk you through the numbers a bit later in the presentation before we conclude with the Q&A session. If you like to ask a question, you can either than ask by teleconference or use the chat function. On the cover page today, we have a picture of our recent addition to the fleet, Flex Vigilant, which is our thirteenth and last ship for delivery. She was delivered according to plan on May 31, and immediately commenced a time charter with Cheniere with a minimum period of three years, and I will return to that shortly. So disclaimer before we start the presentation, I will remind you of the disclaimer with regards to among others, forward-looking statements, non-GAAP measures and completeness of detail. We also recommend that the presentation is read together with the earnings report which we also released today. So let's go Slide number 3, highlights. The LNG market is booming. And if anything, we actually think the LNG prices are at the moment a bit too hot. The Asian spot LNG prices, JKM, is at about $17 per million btu. This is the highest seasonal price in nearly a decade, and…

Thank you, Øystein. And let's turn to Slide 7. In the second quarter last year or since second quarter last year, we have more than doubled the fleet with the newbuilding program which is now completed. As Flex Vigilant was delivered in end of May, she had 30 days available during the second quarter; so we had earnings from 12.3 vessels in Q2. Therefore, Q3 will be the first quarter where we will have the earnings capacity from the full 13 vessel fleet. And turning to Slide 8. As Øystein already has mentioned, our TC earnings for Q2 was $57,800 per day. This is down from the $75,400 per day in Q2 -- Q1, and the lower TCE is explained by the normal seasonality where Q2 is a low quarter; this impacts our earnings from the vessels trading spots and the vessels on variable higher contracts. As we from Q3 and onwards, we'll phase in more of the long-term contracts agreed in Q2, the seasonality effect that's experienced in Q2 will be reduced going forward. The TCE for the first half of the year was solid at $66,340 per day, a substantial increase compared to the same period last year. Our operating expenses were impacted by extra costs related to COVID-19, and in particular, related to crude changes in Asia. If we look at the first six months, with an OpEx of $13,600 per day in OpEx; that's about $500 per day which is related to COVID. Hence, the underlying operating expenses remains within the guided level of $13,000 per day. As mentioned by Øystein, we do continue to face challenging crude changes, in particular in Asia, higher lube oil prices and general supply chain challenges for delivery of spare parts. Hence, we expect that the operating expenses continue to…

[Operator Instructions] Okay, we will now take our first question, and it comes from the line of Randy Givens from Jeffries. Your line is now open.

Hey gentlemen, how it's going? Øystein Kalleklev: Hi Randy, good you can make it. I was thinking maybe you were busy with some workouts.

Yes, yes, finished those earlier, but a long-time listener, first-time caller. I guess two questions. One, on the share repurchase minimum level or maximum level. The last couple of quarters, you increased it by $2 a share this quarter by $1. Kind of what was the thinking of that to $15? And where do you see your current NAV? Øystein Kalleklev: Yes, it's a good question. I think actually, I've already more or less answered your question about the NAV with my kind of back-of-the-envelope calculation of what it would cost to make a new Flex LNG. And as mentioned, it would be probably $2.7 billion of ships, then add all the costs and you had to issue stock at $24 and missing out on the dividend. So I do think that the NAV is well above our book value of our stocks, which is around $16. So NAV is -- if you are putting in $210 million on chips, it should be more than $20. But, you know, you analysts, I guess you can come up with a lot of different estimates on this. But as far as I can see from some of the analysts sending out the post today seems to be in that range. In terms of the buybacks, why the certain level? I think once we have financing in place for all the shifts in November, and we started to feel we're comfortable about the outlook, we initiated a buyback program because I have been saying for some time that the stock has been on Black Friday prices for some time, and so we implemented that. And at that time, I do think that the stock price was trading at around -- maybe around $8 -- $7, $8; so we put the threshold of $10. Things started to look better and the share price appreciated, so we moved it to $12, and then $14. And at least now, we are getting into more sensible valuation with the stock recently trading at around $14. We increased it to $15 in order to be able to have the opportunity buy the stock in the market. However, that said, of course, we do have our main principal shareholder, John Fredrikson family, which has a stake today of around 47%; so there are some limitation to how aggressive we can be on the buybacks. But we felt it's sensible to increase the threshold to $15, so we can be in the market on days like this when the stock is not performing very, very well and buying back the stock. But in general, of course, we do prefer paying dividends; so -- but we're trying to do both, and by increasing the threshold, we can do a bit of both. As I mentioned, we do also think there is room to increase the dividend in the second half of the year.

Great. I know, very thorough answer there. And I guess, second and the last question, just around the Qatari tenders and maybe growth opportunities there. Is that something Flex is participating in? I mean what are your thoughts on those projects? Øystein Kalleklev: No, of course, it's a fantastic project for the Qatari. As far as I understand there, you will have a very competitive production price on -- it's a very efficient field. You will have the industry lowest call it, the FOB price, so kind of the price in the export [ph] terminal. They will do this 33 million tons first, they probably need 45 ships for that. They have still 25 steamships, which they probably want to replace with that 70 ships, and then they probably need 25, maybe even 30 ships for Golden Pass and there you are a 100 ships. And then, of course, they are planning to add 16 more million tons, so that's another 25 builder [ph] ships. So, we are participating in that, and we are looking into it. Of course, I think with our current stock price, which is well above -- now, well below kind of replacement CapEx; we are not there but we will pursue growth unless it's attractive for us to do so. And with the stock price we have today and the implied valuation per ship, we focus on the dividend and buybacks; and -- so we will only pursue it if it's accretive to our shareholders.

Got it. Well, thanks again for having me. Good catching up. Øystein Kalleklev: Good to hear from you, Randy.

Okay. We will now take our next question, and it comes from the line of Greg Lewis from BTIG. Your line is now open.

Hey, thank you and good afternoon, everybody. Hey Øystein, thanks for the presentation, always super helpful. I was hoping for a little more color around Slide 14 where, I mean, clearly, there has been a nice uptick in charter rates driven by the counter seasonal spot market. But realizing you fixed the five year; I guess a couple of questions here. One is for that multi-year contract you had, how competitive was that process, i.e., was it Flex competing against another competitor? Was there -- I'm kind of curious, any color around the competition for that? And then, just as we think about the one year time charter market, clearly, rates are higher the way to parcel out the breadth or depth of that market, i.e. and say, the last couple of months or quarter versus what was happening in that market. A couple -- last of the quarter before previously? Øystein Kalleklev: Yes. Okay, I will try to start giving you some answers. First, as you alluded to, we have done some -- we've had a significant backlog the last couple of months. In April, we did four, possibly five ships with Cheniere. In relation to that process, of course, all these process are competitive. The charters always try to get the best terms. And so do we as owners, but of course, there's not really that many owners you can go to, to have five new modern ships available in the market. So of course, it's not like it's a big tender with a lot of people because there's no -- really nobody else who could give them maybe with one or two exceptions, we give them that many ships in one go. And I don't think anybody could have done it with those kind of delivery slots…

Okay, he got disconnected, Sir. Okay, we will now take our next question. Our next question comes from the line of J. Mintzmyer from Value Investor's Edge.

Hey, good afternoon Øystein. Congrats on an excellent quarter. Øystein Kalleklev: Good to hear from you, J. So what do you think?

Yes, absolutely. Well, I'm very happy. You reported results exactly within your guidance, but apparently, the market cannot read your Q1 slides. So that's kind of entertaining. But anyways, you have an all-time record high in cash balances, you have no CapEx required, you don't really want to bid on the Qatari vessels or at least that's what I read between the lines. So how much cash do you think you need? Because right now, I think it was $144 million. How much do you think is a responsible amount of cash versus how much is available for repurchases or whatnot? Øystein Kalleklev: I think we have, of course, plenty of cash today and hundred [ph] -- this is a new all-time high. You have asked me in the past, and as I mentioned during the presentation, some of our bank loans, they have a cash covenant which would imply a minimum cash of $70 million; this doesn't apply for all leases but for the ship finance and the bank loans this is the case; so $70 million then. And usually, you would like to have some buffer on this. But given how we have derisked our business, of course, this buffer or cushion needs to be less than probably in the past. So, I think when we have discussed this before and I have alluded to having $100 million of cash is our very satisfactory position for us. As of now we have 44% higher than that; so we are sitting with a lot of cash and that's why we are eager to start distributing more to our shareholders through dividends and buybacks. So, we certainly have more cash than we need.

Yes, it certainly seems that way. You got about $40 million of extra cash, as you kind of alluded to there. Look, you increased your repurchase authorization to $15 a share. Right now in the U.S. markets, I know you had to convert to Oslo and whatnot but it trades about $14.20. So I was just curious you have 3 million more shares authorized to repurchase. Is there any appetite for something like, say, a $15 tender offer, you could do 3 million shares at $15 for $45 million. But that would take care of your cash balance, and it would also add extreme value to shareholders. Any thoughts on that on that? Øystein Kalleklev: It's something we consider in the past. And when we opted for this program back in November, we -- there's a couple of ways you can do it. And I think when we started it in November, we saw that the volatility in the stock price were keeping a lot of investors awake at night. And by us coming into the market, then my regulation under such a buyback program, we can buy up to 25% of applicable volume. So you can buy 25% of the daily volume, this is calculated over the last month or so. So, you can really come in and stabilize the share price to some extent. And then, you also get more information during the road. I think in November, a lot of analysts were concerned about the 54 ships for delivery in 2021. I think we were a bit more a bit because we were very bullish on volumes. And with 25 million tons expected increase in 2021. So, I felt we started a bit, we didn't want to scare off people that we were spending too much money on this, and we have incrementally used this and incremental increased the threshold in order to -- as we have seen, things have been turning brighter and brighter along the ride, and we bought back so far 900,000 stocks. But there are certain limitations, as I mentioned also to Greg, we have a shareholder which has a very big position in the company, 47%, I gave [ph] John Frederick family. So, there are some implications if he goes above 50% which we would like to avoid. But so far, we have just decided to buy back in the market and rather pushing the dividends up. But if we do see that there are disconnect, I wouldn't rule out we're doing something more than just buying in the market. But let's see, the stock price in America last night closed at $15.84; so it seems to be very volatile these days.

Yes. Certainly a good explanation, Øystein. And I think some new investors maybe just didn't read the previous guidance but I'm sure they'll be happy with Q3 and they're going to be really happy with Q4. Always good talking to you. Øystein Kalleklev: Yes. Good to talk to you as well.

Okay. We will now take our next question, and it comes from the line of Joe Frieder [ph], shareholder. Your line is now open.

Great, thank you. I'm a private investor. I've been with you since the U.S. IPO. Thanks again for meeting your goals and being very transparent. A lot of us here, we're really confident in you all. And thank you so much for having grid lines on Slide 5. So now we're up-to-date [ph]. Øystein Kalleklev: Okay. We will keep that in mind for future.

So my question is around your forecast. Last quarter, you gave a three-month forecast. This quarter, you've only given two. So my question is when you look at Slide 4, your backlog. When you look at Q4 and 1Q, you're about the same. So what's different in 1Q other than a quarter further that you're not giving that forecast for Q1? Øystein Kalleklev: It's a good question. I -- usually, historically we have only provided guidance for the next quarter. So when we did all these contracts in April and May, we had a significant link to our backlog. So, we've helped in order for people to understand the economic rationale of this and financial implications; we decided to do something we have not done in the past, which is actually to guide for the rest of the year, so we didn't guide just Q2 but also Q3 and Q4. So when we are presenting today, we basically have said that we repeat that guidance. So, we repeat the guidance we had -- last time we have narrowed the variability, a bit on the revenues, but more or less, they are the same. So we haven't really kind of started a new kind of principle of guiding the next three quarters. But it's a good point and once we are reporting again in November, of course, we can consider trying to give some more guidance on 2022. But keep in mind, that we do have ships on variable higher contracts and these spot rates which are feeding into these indexes tend to fluctuate quite a lot. So once you're getting further down the road, the variability in the revenues will, of course, increase. And we have some ships coming off charter in -- during Q1 next year. So how will the market be in Q1 next year? It really depends on how the winter will be. Will we have a repeat of the last winter? Will we have a -- it seems like the probability of our warm winter is fairly low given the 70% of La Nina [ph]. But that's really the -- once you're getting very far into the future on these kind of things, the variability in the revenue guidance become much bigger, and then kind of the value of providing it might become a bit less. But we can have a look at it and maybe we can provide some numbers on at least the number of days booked for 2022. But as you can see from the fleet overview, the coverage for 2022, 2023 and even into 2024 is pretty high.

So, I'm not suggesting that you do three quarters or more every time. I was just curious to see what was different, and I think you've answered that. So thank you. Øystein Kalleklev: Yes. Okay, thanks.

[Operator Instructions] Øystein Kalleklev: Okay. No, we got one question by chat. It was about our dry dock schedule. So some people were asking, when do we have the dry dock on these ships? So in general, the rule is that you dry dock the ship every fifth year. So in 2018, we had a delivery of four ships; so they will be due for dry docking then in 2023. We have two ships in 2019 which is due for docking in '24, four ships in '20 due for docking in '25, and then three ships in '21 which is due for docking in 2026. So typically, our dry docking takes something between 15 to 20 days in the dock, costs somewhere around $2.5 million on to $3 million, depending a bit on how well you are maintaining your ships during the operations. So, that's -- I hope that answered that question. Or did you have one more? Okay, okay. With that, I think we conclude today's presentation. I wish you a good day, and thank you for listening in. And we will be back with Q3 numbers. As we have guided, we expect higher revenues in Q3 and probably presenting those in the middle of November. So, I hope you will join us. Thank you.

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