Hi, welcome everybody to Flex LNG's First Quarter Results Presentation. I'm Oystein Kalleklev, CEO of Flex LNG Management and will be joined by our CFO, Knut Traaholt, who will walk you through the numbers a bit later in this webcast. As usual, we will conclude with our Q&A session where the best question can win our Flex on the Beach Summer kits which I will be presenting a bit later in the presentation. Please use the chat function to pose a question or you can also send a email to ir@flexlng.com So, before we start, just a friendly reminder about our disclaimer in the presentation. We will be giving some forward-looking statements and there are also limitation to the completeness of details we can provide in such presentation. So, with that let's review the highlights for the quarter. Revenues came in at $92.5 million, which was in line with our guidance of $90 million to $93 million. Average time charter equivalent earnings for the ships were slightly above $80,000 per day, also in line with the guidance for the year of about $80,000. This resulted in strong numbers with adjusted net income of $35.2 million for the quarter, translating into $0.66 per share. During the quarter, we completed the balance sheet optimization program, where we have refinanced all the 13 ships in our fleet with attractive long-term financing. Through this process, we have also released $387 million of cash proceeds in total, and this boosted our cash balance at quarter end to $475 million, an all-time high which translates into about $9 per share in cash. We have also recently carried out the first two dry dockings of Flex Endeavour and Flex Enterprise, both according to schedule and budget. During Q2, we will do another two dockings, so in total…

Thank you, Oystein. And as already mentioned revenues for the quarter came in at $92.5 million. That gives us a time charter earnings average for the fleet of close to 80,200. OpEx another strong quarter where we maintained OpEx control where we have OpEx per day of 13,400. If we look more into the details. On the revenues we have $5.5 million lower than last quarter. And that is driven by lower seasonal earnings on the variable hire contract and the off-hire days related to dry docking of the Flex Enterprise. Then we have some more non-cash item on the income statement. The net loss on derivatives is $2.8 million. As you can see in the notes on the side, it's $7.8 million in unrealized mark-to-market loss from the derivatives. And then we have realized gains of $5 million from the swap portfolio which is sort of our carry cost. With the completion of the balance sheet optimization program, we have exit cost of our debt. It's $8.8 million of write-off of debt issuance costs and then a termination fee of $1.4 million. That gives us a net income for the quarter of $16.5 million or earnings per share of $0.31. Adjusted for the non-cash items, we have adjusted net income of $35.2 million and then resulting in adjusted earnings per share of $0.66 per share. So let's have a look at the details on the adjustments that we have made to arrive at the adjusted net income. If we look at the quarter-on-quarter differences on the net income, operating income is $6 million lower, driven by the off-hire in connection with the drydocking of Flex Enterprise and the seasonal lower revenues under the variable higher contract for the Flex Artemis. Quarter-on-quarter adaptation cost is $8.5 million, which is basically…

Thank you, Knut. Okay. Let's have a look at the market. LNG export change in the first four months of the year, the period January to end of April, we saw about 5% growth in the market. And for the first time in a long time, actually the biggest driver was North America because of the outage on the Freeport export terminal in the US. So the growth came from Qatar and Australia, the two big other players in the LNG export market and then actually Norway as well where we had the Hammerfest plant running now for the full quarter. Other countries contributed by about 2.5 million tonnes. On the import side, we do see the same trend we saw last year, where Europe is really gobbling up spot cargoes in order to replace the lost volumes from Russian pipeline gas. So -- and in Asia, it's been a bit slow start for China. Growth was flat during January and February. And then we did see that growth in the Chinese market started to fire up from March and onwards as they have been lessing the -- or basically scrapping the COVID policies they have had in place for some time now. If we look at the gas prices, it's been a very volatile ride last -- during the summer of COVID European gas prices was as low as $1 per million Btu, or translating into let's call it $6 per barrel of oil. After the Russian innovation of Ukraine really we saw a big rally in global LNG prices where Europe bought up a lot of spot cargoes. And we saw a peak of European gas prices at about $100. So we had a rent from $1 to $100 on the gas prices this equates to about $600…

Yes. Thanks a lot for the questions coming in. There's a lot of questions, and we'll try to take them in order and sequence. But maybe, we can start off a question forwarded from the investor Janne Harrington. She was on CNBC and put up a couple of questions and they've been forwarded.

Okay.

So -- and that starts off with, how does the low natural gas prices in the US impact Flex LNG?

It's a complex question. That's a more answer than just one. It's short term and long term. Of course in the long term, if prices for natural gas stays very low in US, of course, this will centile new drilling activity, which is of course crucial in order to hold production up. This has not been a problem so far. We set new records all the time on US gas production. And one of the reason is that, wells are becoming more gases as you are drilling. But you need to have a sustainable return on equity on our capital in this project. So we don't really like that prices are this low. Of course, short term wise that means that exporting cargoes out of US is very profitable, because the price difference between US gas prices and international gas prices are bigger, which means that those people exporting cargoes are making more money on LNG, and this is also the case actually on LPG. So, it's a bit like the story about Goldilocks. You don't want it to be too hot. You don't want it to be too cold, so you need to find some kind of sweet spot. I think luckily, of course, most -- a lot of the wells you're not really drilling for gas some -- the wells you're also drilling for oil and the gas is just associated gas. So, you also have to see it in connection with oil prices, which have been pretty firm. So as long as oil price is pretty firm you will be drilling for oil and usually then you will find associated gas. But where you are looking for dry gas, you need probably to have higher prices in the US than what you have had today. But keep in mind, gas prices in U.S. has also been quite volatile, where there have been periods of time, where people have been taking in also on selling gas domestically in the U.S.

And then it's a question on shipping, and shipping has historically been a volatile sector, or there are different segments into it, but mentions that historically investors have been burned on shipping companies. What's the difference with Flex? Does the charter agreements make it different than other shipping companies?

Yes, of course. Shipping has always been volatile. So it's a derivative of the global GDP, and usually trade historically at least have been growing quicker than GDP. But this was also a problem on the downside when GDP growth slows less shipping activity. I think what makes Flex difference from most commodity shipping segments is, of course, the fact that we have taken out a lot of this commercial risk by fixing our ships on long-term charters, where we have very high level of earnings visibility. And this you can also see earnings and revenues. So if you look at the revenue graph, we're showing for the guidance for this year, there were small changes in the in the revenues from one quarter to the next, because of the stability. We have two long-term charters. And also actually revenues are quite stable over the years not only the quarters. So I think we are different in that regard, because we have a bit different commercial strategy than most commodity shipping companies.

And that brings us into the dividend and how secure it is with the U.S. treasury yielding 5% is Flex in internati for people looking for higher yield?

Yes. Those [ph] have had a bad time since global financial crisis, because actually they have had pretty bad the last 40 years or so, because interest rate be going down and the yield you are getting on your savings become less and less -- more or less every year. Now the last year or so it's been picking up, but real interest rate has been still been pretty low because of the high level of inflation. Yes, 5% is the short-term interest rate today. I don't -- but markets don't really think that yields will stay at this elevated level short term, while one-year treasury yields is 4.8% today, three-year is 4%. And then if you go all the way to 10 years you are back to 3.5%. So I think if you are investing for income investing what you're getting in a safe asset today. Let's see, we have a debt ceiling coming up here, but it's a fairly safe investment tenure government bonds in the U.S. That gives you 3.5%. We are giving a much better return. As I mentioned about 11% yield here the last 12 months based on the dividend. Of course, this dividend is also safe in the fact that we have no ships open this year. The earliest possible ship is next year where we have this 95% coverage if you assume options will not be exercised. We think it's more probable than not. And actually then the first open ship is 2027. So that gives us a very visible cash flow of income, which as we have also said in the presentation, these earnings belong to the shareholder and we are motivated to pay that out as dividend and that should give you a much better yield than what you are getting on government bonds these days.

So then let's turn to the questions on the market. What's your outlook for your LNG transport out of US for 2023, 2024?

I think last quarter ,our Q4 report, we had a graph on our projected supply situation for 2023. We are assuming 16 million tonnes of growth growing global exports going from 400 million to 416 million. This might be a bit low when we see the EIA numbers. But half of that is US. So kind of the free port coming back on stream is most of this effect. And then the remaining growth is from rest of the world. 2024 will be a year where we will have very muted export growth. But then from 25 and onwards there will be more exports. So that's why we feel it's been a good strategy for us to fix our ship in this window where global growth in exports will be low before this all takes off again from 2025 2026 2027 onwards when our ships are coming up.

And we then look at the import regions. Last year and this year, there's been a lot of imports to Europe. Is Europe and EU an important market for Flex?

Yeah. It's not really, we who decide where the cargoes will be flowing. We charter auto ships on time charter. So the charter will then have the opportunity to trade the ship worldwide including Europe and they actually instruct us where the ship will be going. So we don't really have an impact on that. They are deciding where they find the best price for the cargoes. But of course, with all the Russian gas coming through pipelines, which has been shut down, this means that Europe has a large deficit of gas. And basically what they have been doing now for the last year or so is to replace some of that Russian pipeline gas with LNG. Of course, there are not enough LNG to fill the whole gap and that's why Europe needs to be a bit patient here until new LNG is coming on stream. And until that, you will have a pretty tight market where we have seen prices at a level which has been demand destructing. Right now, prices come down to more fairly normal levels, but expectations is for higher prices when we're coming into the peak winter seasons.

And now with LNG pricing being more moderated. Have you seen Asia return to the import?

Yeah. We've shown it in a couple of graphs here that we see some more growth from Asia. We do see this also in the routing of our ships. We see more ships going to Asia than have been the case recently. And of course, suddenly then when LNG in all ways, let's call it 20% 25% discount to oil and coal prices are pretty elevated as well. That is stimulating demand. And I think it's stimulating demand and at a good time also because inflation has been high in Europe because of the high gas prices with the energy prices coming down now that will put less pressure on the inflation. And of course, with China reflecting their economy having actually cheaper energy prices will probably help in the recovery of the Chinese economy as well.

Then we have a question from Mike Ott [ph], which goes more on the fleet and the steam tankers. It's a topic you've covered over the years. But it's been mentioned that this will be uncompetitive and scrapped and that has not materialized that. There's been some scrapping, but it's been very low. And, of course, the reason for that is that the shipping market has been tight. There has been to solve -- in peril, it's been a total lack of ships available in the market. So when we have such high rates, people are trading the ships longer because still even our steamship, which has a lot of disadvantages compared to modern ships. They can still make a decent return. And I think as long as that is the case, the people have been trading them. And also keep in mind a lot of new regulation came in force from 2023 and onwards. So eventually as this regulation is tightened in terms of the CII requirements also the European carbon taxation, which is becoming increasingly more expensive to comply with. That will reduce the fleet of steamships going forward. So it's taken maybe a bit more time than some people expected, but this is mostly due to the very favorable freight economics, which then results in those ships leaving a bit longer than maybe some people anticipated.

Then we have questions on the open vessels in 2027. So if we start off with one timing of securing a contract that. Is it more realistic that these charters will be signed in 12, 24 or 36 months?

Yeah. I think, we evidenced it last year. When I went to our fleet list, we showed several of our ships. We extended quite a lot of ships last year. Most recently in November, we extended ships, which were not coming open before 2026 for longer durations all the way possibly to 2033. So we do see people now looking for ships for 2027 even people looking for ships for 2028. There are tenders there are discussions in the market. So I think we are well-positioned to participate in those discussions. And as I mentioned here we are competing against very expensive ships that need a high charter rate and probably a duration in order to defend that investment. So I think I wouldn't rule out that we will be able to also this year add more backlog to the fleet let's say we have 13 ships in operation. So every year we are losing 13 years of backlog. Hopefully we will be able to add more than 13 years of backlog, so that actually we are not eating off that backlog but rather expanding our backlog that I would say would be the aim and I don't rule out that happening within 12 months rather than the 24 or 36 months.

And a question from Min-Jung [ph]. Considering the aging technology gap between 2027 new building and the two stocks in the Flex fleet. Will the vessels achieve the same market rates as a new building?

Yeah, I think so because kind of the change in technology that has happened has, of course, happened abruptly. We had from steam to four stock medium-speed diesel electric ships and then eventually to the Direct Drive slow speed two stock ships. As you can see from the pictures here, we have both on the front page and on the docking slide, the ships are in prime condition. When they come out of yard, they look brand-new. And the propulsion system is actually the same you have in the new builds. It's a slope speed to stock engine. There might be some more gadget on a new ship for delivery 2027-2028. Maybe they have air lubrication system. But so far the effect of the air lubrication systems have been -- not everybody is as happy with it as the poster promise. Some ships might have a shaft generator, but that doesn't really affect much on the fuel consumption. It's really more effects on the OpEx cost or the maintenance costs. So there's not really any change fuel cost in that sense. So three of our ships have full reliq systems. Four of them have partial reliq systems. So I think these are comparable to the new modern ships that are being built now to $260 million. And also actually there is some benefit the fact that most of our ships are sisterships. They have been trading on most important export terminals and they already cleared. So every time you go to a new terminal you need to do a ship so compatibility study. We have done a lot of them. So all our ships more or less are kind of already vetted and approved for most terminals around the world. So -- so maybe there might be a small discount given the fact they are not as brand new, but the technology is basically the same.

And then we have -- moving on to the more on the balance sheet and the financing and Scott McFadden been looking at our long-term debt and total liabilities. It's been rising over the past quarters. He would like us to discuss our attitude towards the total debt levels. And if we have any plans to reduce that.

Maybe you should answer that.

Yes. So we completed this balance sheet optimization program basically refinancing the full 13 vessel fleet. That has been -- the background for that was the transition for Flex both on the backlog of contracts that's been building up and increasing over time. That gives us access to new capital or to new debt at better terms. So we have increased our repayment profile, reduced our credit margins, improved the maturity profile. So that's the argument for us for refinancing the full fleet. And then we have not really pushed for higher leverage, but we have released 40 -- nearly $400 million of cash and that has been structured as a bullet RCF. So if we have excess cash we can reduce the RCF and thereby also implicit the debt level as long as we don't need the cash. But it gives us the flexibility to act and support the business going forward.

Yes. So it means it's not amortizing for those who is not into refining industry and means really we have like a big $400 million credit line available at basically three days notice. We pay only around 0.7% interest rate per annum in the commitment fee to keep it around and it gives us a lot of financial flexibility. We don't utilize this at all time. We utilized at quarter end to show that we have this cash available, but it's a low cost of having. And also another factor here is that we have had the best financing market, I would say, since 2007. I was doing ship financing back then. Last time we had something similar good financing market, I would say, was 2014, our CFO then and I did about $2 billion of financing that year. I think actually 2022 has been a better financing market for us. So, Knut's been doing then yes, basically $2 billion of financing. And then we have secured that financing for a very long period of time from 2028 to 2025. So, that financed and locked in on very good terms, terms which I don't think is replica today given where funding costs from banks have gone up since the collapse of Silicon Valley Bank, Credit Suisse, First Republic. So, I think we are in very good shape. You should finance -- get financing when a chip and lock it in and that's exactly what we've done.

And on the graph we have on the -- or the slide we have on the balance sheet, you see there that the book values on our balance sheet is based on nearly all-time low vessel values when they were acquired. So, if you look at the leverage levels on the book values, they are rather conservative compared to the market values and also considering the contract backlog that we have.

Yes. And we are contracted ships when they were cheap we tried to as good as we can lock them in on long-term charters when rates are high and then finance them when liquidity is plentiful and cheap. So, I think we've done a pretty good job so far.

And that comes back to the recurring question about how to expand it. What's the plan for growth? How do you plan to spend the large pile of cash? Is it a reduction of debt, acquisitions, buyback, fleet growth?

Yes, I think we -- of course, the biggest item here is dividends. We paid out $200 million of dividend in the last 12 months or the last four quarters. So, that is of course the main source of spending money. We think newbuildings are pricing these days. If we order, I'm not sure, whether we get a '27 slot, maybe it would be '28. We have two ships coming up in '27, two ships early '28. We do think, it's been the business for us to fix those ships on longer-term contracts, rather than building new ships and try to compete with those ships with our existing fit. So we try to be disciplined. And we structured the financing as Knut mentioned on our very flexible manner, where the cost of having that debt is low. And then, we will see. This is a long LNG. It's a long-term business. So, we just try to be disciplined when call it new building prices are high. And then, we have access to capital cheaply, where we can act on opportunities if we see opportunities -- if not, we will just keep on doing what we're doing, fixing ships and paying dividends. And I hope that is appreciated by most investors.

I think, we'll round off then as a contender for the battle wells. Do you ever get tired of winning?

Well.

You don't have to answer. But I think we round it off and now it's a time to disclose.

Let's talk about the window, because that's going to be -- [indiscernible] who had a good question about technology on new buildings today versus the ships we have in our fleet. I think that's a good question. It's something we talked about in the past, but it's been a while since [indiscernible]. So congratulations to you, you will have the full summer kit.

And then, before we adjourn I just think I want to say thank you to all our seafarers, to all the people in the docks, who have done a fantastic job on Flex Endeavor and the Flex Enterprise dockings which has been perfect in terms of budget and timing and the ships are back with our charters who are happy to trade them again. We have two more to go this year. Next year, we will only have two dry dockings. So, with that I also would like to thank all or I would like to extend to our Norwegian viewers, that I hope you all have a happy constitution they have tomorrow, May 17 is the biggest day in Norway, whereas a lot of celebration. So, with that thank you everybody and we will be back in August with our second quarter presentation. We will also be in New York on June 20 and onwards for presentation. So, for those who are interested, maybe you can join the Marine Money Conference and we will do some presentation there as well. Okay. Thank you.