Q3 2022 FLEX LNG Ltd Earnings Call
Presentation I must thank Alex I have the CEO of Flex LNG management, and I will be joined by our CFO Knuth, Paul Holt, who will run you through the numbers a bit later in the presentation.
Following the presentation, we will have a Q&A session, where you can either use the web chat function or send an email to IR at flex LNG Dot com. If you have any questions and we will.
Also some of the question in the Q&A session. Following the presentation.
Before we begin we just want to highlight our disclaimer regarding forward looking statements and the use of non-GAAP measures and the arguments to the completeness of detail. We can give in this presentation. So please W. Also our earnings release together with this presentation.
So let's start with the highlights our revenues for the quarter came in at $91 million, which was in line with our previous guidance of $90 million.
Earnings were strong net income and adjusted net income was 47 and $42 million translating into earnings per share and adjusted earnings per share of 88, and 79 cents respectively.
During the quarter freight and product markets were booming and this affected both short term and long term rates positively.
During the quarter, we had three ships commencing new time charters flex and the pious and flex Amber commenced a new seven year time charters, which we announced in June and this replace the shorter term time charters.
We had for the ships pile to this announcement. We also had effects of who are which was delivered as the final fifth chips to China are at the end of the quarter.
I'll see if bulk new it's been basically refinancing ships and we have recently secured $630 million of refinancing for four of the seven ships, we intend to refinance and with these refinancings for these only these four ships we are already surpassing the.
100 million target with it in terms of cash release. These four ships altogether will release around $110 million. So for phase one and phase two with today expect to release.
A minimum of $300 million of cash release.
And Chris will give some more details on this shortly.
For fourth quarter, we expect slightly better numbers driven by flex Artemis, which is the only ship we have on our variable higher time charter with spot market booming. She's we are also making more money on this ship. So revenues for fourth quarter is expected to be somewhere around $95 million to $98 million also in line.
With previous guidance of 90 to 100 million.
We have full contract coverage for 2023, and a minimum coverage of 91% for 2024 as we have two ships hauling of charters in the middle of 'twenty 'twenty. Four there is however options by the charter to extend the ships. So the first truly open ship, we have available today is actually middle of 'twenty.
26, so with a strong contract coverage.
Strong financial results and a healthy cash balance our board has therefore declared a quarterly dividend of 75 cents per share.
So far this year that means we have declared 275.
<unk> per share in dividends, which is also in line with our earnings per share of $2 76, if.
If we add Q4, we have paid three and a half dollars of dividends for the last 12 months, which implies a yield of around 10% with today's stock price.
So as I mentioned, we have a very good coverage as you can see from our fleet.
Overview, we have two ships, which could possibly come open in 2024, but as I mentioned there are options by the charters to extend them. The ships. So the first truly open shape as flex vigilant 'twenty 'twenty six and then we also have three ships coming open are fully opened 2027, we do think this is where a good time.
<unk> there is a lot of LNG coming to the market in this window and with new building prices going up to the range of $250 million. We do think that these ships will be attractive for re contracting at or hopefully even better rates than we have today as you can see flex Artemis they won't ship with <unk>.
Variable higher structure, which is this flagging of our revenues for Q4 this year.
Dividend as I mentioned, no big surprises there a consensus estimate for our dividend. This quarter. It's also 75 cents.
Bringing the last 12 months dividends to three and a half dollar.
In total.
We have gone through our decision factors for how we are planning our dividend in details during the last couple of quarters. As you can see here. It's a lot of Green lights. Our earnings are strong market outlook is good we have as I mentioned, a very strong contract backlog.
Cash position today is $271 million and with the balance sheet optimization program. We expect this cash pile to go even further covenant compliance we are flying with a.
Green flag.
We don't have any upcoming debt maturities, we don't have any capex liabilities, except of ordinary dry docking for the ships. So it's no problem paying out dividends for us for sure. We are also after several request by shareholders introducing our dividend reinvestment plan. So those people who are.
Like to reinvest the dividend and new Flex LNG SaaS will now have the opportunity guarantee to do so.
So.
If you look at our peer.
You will see a big number for this year, which is $75 million, which is our gain on interest rate swaps. So far this year.
We also made $18 4 million on interest rate swaps.
Last year. So in total we have actually made 93 million on interest rate swaps since 2021.
So why is that.
During our Q.
Q4 presentation in February 20.
'twenty one.
We are focused on a couple of factors impacting our business one of course a trade.
Trade War, there was a big trade war with the U S and China. This is really resulted in.
Cargo flows from U S to China drying up during 2019 and and flow of cargos from U S to China didn't really assume after the phase one trade agreement was agreed between China and U S. In our in January of 'twenty 'twenty.
And we also have the globalization, which has been a factor for a lot of different industries. This has not really been the case for LNG as received more than more countries is entering this industry. Both on the import and export side COVID-19 of course was where emerging focus.
Early 2021 in western countries, we have a mostly a fifth is behind us, but it's impacting China's LNG demand quite a lot with their imports this year being down 22%, so which has been.
Fortunate for you of facing gas shortage energy transition.
It's still a very relevant question, making coal history, which economists pitstop has not really been the case as coal consumption has gone incredibly much due to the energy shortages. ESG is also a focus for US we are expanding our ESG reporting.
We have all annual ESG report according to the sustainability of Canada Accounting Standard Board, where we are also implementing the global reporting initiative and we are now also finally disclosing our numbers for the carbon disclosure project, which will be available with the school in early.
December this year.
And then the last thing, which has been driving all our interest rate swap is the free money back in February of 'twenty 'twenty. One we said one of the big drivers here is the theme on the and the monoplane thing so where the remedy as we said for COVID-19 was all cases tension fiscal and monetary.
Seamless on unprecedented scale and we are now seeing the effects of this free and easy money.
This we asked if this would result in higher inflation and whether that super cycle would be replaced by a commodity super cycle.
And we said that we will walk and that really that worried because usually in a commodity super cycle and legit and commodities are doing well in shipping as part of that value change, regardless with interest rates at rock bottom level, while inflation was picking up and and fiscal and monetary easing.
It was being pushed forward on an unprecedented scale, we felt it was prudent to take more coverage for it.
The effect of higher interest rates and that has resulted in huge gains for us in terms of these interest rate swaps.
So if we look at what has been happening since we were pissed off this slide back in February 2021, it's really gone well.
Very much according to what.
What we were thinking could happen actually started already in March 2021 with the big fiscal stimulus by the new President Biden with the Covid relief package the build back better.
Our plan was however reduced.
By by Congress.
We also saw the energy shock starting way ahead of the.
Russian invasion of cane already October 'twenty.
'twenty one.
MS ran this cover with the energy shock because Europe was entering a winter with very low gas inventories driven also by the fact that the Russian we're holding back flows.
And this resulted in.
The gas price in Europe, doubling the first weeks of December 2021 from 30 to $60 per million Btu, which was really unprecedented level at that time.
And in February trying to transit through the markets also became anxious that this inflation would not be transitory.
However on February 24 Ah trial.
2022 Russia invaded Ukraine, and we had the market route and a flight to quality and long term interest rates really fell a lot. So in fact, we actually doubled down on our bets and we entered $200 million more of interest rate swaps for 10 years at a low rate of only one seven.
Perfect.
With the the walk in Ukraine. We also saw a lot of supply shocks affecting a lot of shipping segments and energy sectors.
And suddenly.
Energy security, which has been our dormant.
Let's say for a long time came back in Vogue because of the vulnerabilities. We saw after this walk in their claim started.
We also saw that the market started to realize that.
The Federal reserve was behind the curve and.
Finally in March.
This year the federal reserve started to hike interest rates first by 25 basis points than 50, and then we have had this jump four hikes of 75 basis points driving the federal reserve policy rates from cereal to set for Sailpoint, 25% to now three.
75% to 4% than the market expecting these rights to peak out somewhere around maybe 5%. So of course that is also one of the drivers then that Oh, we have made so much mark to market gains on our swaps. We are also seeing our politicians realizing that Anna.
It's complex, it's not really a one solution. It's a pilot it's abbas.
Emissions is both affordability and it's about security. So we do see some more realism by policymakers and how to make the energy markets work and then lastly here.
Then the last cover we are presenting is Europe at winter apparel, they'll spend are anxious market that Europe with the and with a lot of gas shortage. This winter I will come back to this in the market presentation. This hasn't materialized because of lack because Europe has been a.
Bill to source a lot of LNG because of the Covid Lockdowns in China, and it's also driven by demand destruction and very favorable winter weather in Europe . So far. So also I would also highlight that.
If you want to have more insight on the energy markets and the.
The winter I would also recommend the smartphone market a podcast, where a new board member Susan and myself have recently joined to discuss discuss the the LNG market more in detail. So with that I think I'll give it over to you.
For our financial review.
Thank you Stan.
Let's look at the key financial highlights for the quarter.
In the third quarter, we delivered revenues of $91 million or TCE of $76000 per day.
The increase in revenues is explained by the three time charter contracts mentioned by our eastern and somewhat higher earnings under the variable higher contract for the flex Artemis.
Operating expenses of $17 million for the quarter or Opex per day of 14600.
The opex is higher than the guided level of 13000 per day.
As explained this quarter by <unk> <unk>.
<unk> higher COVID-19 related expenses crew changes and extended Handovers.
Going forward as restrictions are lifted.
Expect COVID-19 related cost to slowly go away and.
With the extended Handovers, we have already performed that this cost should taper off and we should return to normalized levels.
Interest expenses this quarter is higher due to the increase in interest rate levels, but it is mitigated by our derivative portfolio and I will return with more details on the derivative portfolio later in the presentation.
This quarter, we have extinguishment cost of debt of $13 million, which is related to the refinancing of the endeavor and flex enterprise leases.
The purchase option prices higher than the book value of the debt.
If we were considered a total refinancing of these two vessels.
These costs will be paid back Oh in approximately two years as the new terms are more attractive.
This gave us nothing from of $47 million or earnings per share of 88 cents and then adjusted net income of 42 million or 79 cents per share.
If we look at our balance sheet of $2 6 million.
Sure.
Is the 30th Russell State of the art LNG LNG sales with an average age of three years and as a reminder, these vessels in the book values reflected these vessels were acquired at a low point in the cycle.
We have a robust cash balance of 271 million and equity of $890 million, giving us a book equity ratio of 34%.
Looking at the.
The cash flow for the quarter main contributor is our cash flow from operations and working capital.
We paid $26 million in repayments, which is as a reminder, in Q1 and Q3 with a somewhat higher amortization due to a semiannual repayment schedule under the ECA facilities.
During the quarter, we realized some of our swaps.
Nothing in a gain of $9 million and then we have our dividend for last quarter of payment of 66 million, which included $26 million in the special dividend. So at the end of the quarter, we had 271 million on account.
If we look at our interest rate portfolio.
We continue to manage that actively.
During Q3, and Q4, we have amended and terminated swaps.
So the notional value of our swap portfolio today.
Today is 641 million and in combination with a fixed interest rate at least we have a hedge ratio of about 47%, excluding any utilization of the Rcs.
The amendments we have done we have terminated a number of swaps as we see here in Q3, which released $9 3 million and then continued into Q4 when the interest rate levels were high we terminated swaps and realized $14 4 million.
The plan for the use of this cash is to maintain that on the account to continue servicing their.
Interest going forward.
We have also amended a.
Longer duration swaps and made them shorter.
And therefore, we now have a total balance of both cash lease and swaps, which will protect us going forward for higher interest.
If you look at our optimization program and the phase III today, we are pleased to announce that we have met our $100 million target.
We have commitments for.
Financing, which will release $110 million.
These include leases and bank facilities, and we also invite new banks to our banking group, while we also expand our geographical diversity of where we can raise financing.
This financing meets all of our priorities.
And then we have about four vessels are remaining for refinancing where we see the potential to further release.
Up to $100 million.
If we look at the financings that we today announced.
On the Q2 presentation, we indicated that they are.
Financing for the enterprise today, we can announce that that has been signed document that drove by the end of Q3.
It's a $150 million.
Facility with a margin of 170 basis points and the Telenor, which is back to back with the contract.
Today, We also announced a new bank financing for the flex resolute.
Also $150 million with a margin of 175 basis points.
Also at Turner, which is back to back with the contract and that is expected to be <unk>.
Documented undrawn ahead of Q4.
We also announced two leases of four the flex Artemis in the flex somber.
With a combined or a margin of 215 basis points.
It's all in all a.
12 year tenor for this and then average repayment profile of about 22 years.
We're very pleased with these financing and we're now considering a.
Financing of the flex.
Rainbow on the back of the 10 year contract.
Which then can include flex over as a replacement vessel for the financing concluded earlier this year for the flex Rainbow.
We are also evaluating the options for the flex freedom under Flex vigilant and we'll come back with that as soon as we have more news to announce.
So with that I think this is a concluding pace of what we are planning to do under the balance sheet optimization program. We are fortifying the balance sheet as we now have a stable.
Contract portfolio with long duration.
Doing a phase one and two we free up capital.
But we have RCI capacity so the carry cost of the cash we release is low.
With the new financings.
I have an ambition to further increase our sales capacity and that will support the journey of flex LNG going forward.
And safeguard those through the cycles.
I will now hand, it back to Sam.
Okay. Thank you.
So let's go back to the markets.
LNG exports the first 10 months of the year.
About 5% is driven by U S. Despite the.
Shutdown of Freeport, which.
Is now expected to resume exports early next year.
U S is still growing 11% slide 6 million homes in total Russia. Despite all the sanctions and the curtailments of pipeline gas.
LNG exports out of Russia is continuing to grow and is growing 12% in the first 12 months of adding 3 million tons. We also have 3 million songs from Malaysia, growing 13% and then 4 million tons from the various other markets. If you look at the import side not surprisingly Ma Betsy.
Who is absorbing and soaking up a lot of the LNG.
They are basically importing all the growth in the market and then also the shortfall in demand from other com place are the most notable being China as I mentioned with the cold why COVID-19 restrictions and lockdown still in China, LNG imports is down 22%.
This year.
The high price of LNG is also.
Forcing out to other countries like Bangladesh, Pakistan, India, where the price of LNG, it's become so expensive that they are turning although through coal and other feedstocks for their energy demand. So so there's a demand destruction in all the countries and all of the LNG market is real has halved the euro.
This year, which is able to grow with LNG imports by 37 million pounds or 57%.
The first 10 months of that.
So if we look at the the gas cost sharing in Europe , it's been solved by a couple of factors. It's one the high prices is.
<unk> energy savings and we are seeing especially demand destruction of demand subversion on the industrial side a lot of the households are still being subsidized, which disincentivize energy savings. So all together the gas consumption in Europe . This year is down 12% also driven.
By a very mild beginning of the winter and in October you saw base.
Basically all the big countries in Europe had a worry.
Mild start to October and this has continued so far also into November .
So with the demand for gas in Europe going down in a glut of LNG hitting European import terminals.
So everybody's surprise I would say Ah ha, we are actually now in the middle of November with basically through.
Gas storage levels in Europe , which is also creating further bottlenecks are and this despite Russian pipeline gas are being reduced significantly we are seeing this being tapering down and now with the explosion of the north sea and pipelines.
It's basically only small quantities of gas being exported to Europe .
Ironically enough to Ukraine.
And then we.
We have had all this work is about analgesia or gas situation in Europe for this winter. It seems like it will be solved with that with full guess air levels in Europe , the gas levels in Europe is.
It's sufficient to cover about seven weeks of winter demand. So this gas inventories isn't really that big but next year I think you hope and will face a bit more challenging task this year.
As I mentioned, it's the LNG glut of LNG going into two you hope that that solve the solution together with the demand disruptions.
And and then of course Europe has been Lucky that China has been shutting down and not competing head on head with China for the spot LNG cargoes.
And that's the last time, we saw on the last call the horsetail Russian pipeline flows to Europe .
Home [laughter] much of Russian pipeline flows will go through you have of prom, Russia next year. That's a big question marks if you look at the right hand side golf had with we are looking at.
The change in Europe's gas balance next year and you can still see this 35 million pounds of.
Of our LNG equivalent gas going from from Russia to Europe , that's a big uncertainty Mark about whether these volumes will be coming to Europe next year and that means Europe will either have to import even more LNG, but doesn't really not 35 million phones in the market that needs to be more demand destruction.
And basically there is a gap for next Winter's, which will make also the winter 'twenty three 'twenty four challenging Paul our European consumers.
And so with that backdrop, it's maybe not surprising that gas prices are staying high at elevated levels not in U S shale resources bountiful.
Prices are come down.
At very low levels compared to import nations in Europe , and we see how the ETF or the Dutch gas hub prices and then the dotted line how being the northwest Europe delivered ex ship LNG pie. So with all this glut of LNG coming into your hope their import terminals.
Paul.
Bottled up and and LNG actually has to be sold at a big discount to pipeline gas prices in Europe in order to to divest. It. So right now we actually is also do we see a contango in the gas prices because of the fuel tank.
Tank inventories and the fact that winter has been so mild of course, the winter is not gonna stay this mile for the whole season. So once temperatures are getting closer to say hold gas consumption will go off and this is meaning that gas for delivery in future is at a higher price than today and this is also in <unk>.
Devising a floating storage of LNG, which I will also come back to shortly as we can see that the Asian spot market that Jay can market is also at similar levels to Europe .
Meaning that the.
That's a we expect prices have also to stay at elevated levels and with China, possibly coming back to the market there will be more competition for the European sourcing spot cargoes.
As I mentioned the bottlenecks are everywhere in Europe . These days, it's on the import terminals.
And it's also actually these days on the on the storage tanks and this has resulted in a huge buildup in ships tied up in floating storage space, especially in Europe , but also other accomplish these days because of the contango structure in the price curve, where you can sell your cargoes at.
At a later date at the higher price than today and today. We are at all time high level of around 40 ships being tied up in such floating storage, which is of course that taking out a lot of ships from the spot market or the general freight market, which is also then making the freight market very tight.
So looking at the spot freight market.
It's been on such a big Bull run now with that we actually have to change the access to logarithmic scale.
We've gone to all Muslims during the summer we had a very good spring rally in the <unk>.
Spot freight market than the people the shutdown happen really San spot market down again.
But then with the buildup of ships in floating storage.
That's been scarce ships available in the market and this is 10th spot freight.
After around half a million dollars per day.
And above all seasonal records in the past, however, with such strong rates.
That's a it's a reflection of the fact that there's not really many ships available in the market. So the numbers of spot fixtures has gone down.
A lot and of course, a lot of the fixtures too which is being done or conclude the today are really less well basically charters, who are long shipping can optimize the poll Graham released a ship for a short period of time and real at that in the spot market for for sure that's on voyages, where they can make.
A lot of money as evident from these costs.
So.
Also at the long term market's been recovering its been calling also be flat because of the fact that new building prices has gone up and I've talked about at all that the inflation. The yards has a very big order book packed with LNG ships packed with container ships. So the new building prices going from 180 to 200.
<unk> 50 million. So it translates to a 17 million dollar per ship in case. If you have all 13 ships. This $900 million increase in the value of LNG carriers in a rather short period of time and of course with higher interest rates and higher new building prices you have to have a higher.
Charter rate.
So if you look at the five year time charter rate for a prompt delivery. We are now above $130000 per day, but that said that's not really that many ships available on a prompt basis Si shown on the previous call off with the liquidity and the freight market.
Looking at that.
LNG flows this all on the left side hand side are the EF idea. So.
The project being sanctioned for ER for a green light off of new capacity and this all also we're including what we think is the possible of new that is really in our fight with between the old export projects to get a green light for the project to add more LNG to the market.
Of course, the main problem today is a lack of LNG with the all.
All of the Russian gas pipeline gas to Europe suddenly gone this needs to be replaced by a lot of new LNG and so far you have been lucky in order to be able to buy the spot cargoes since China has been the way, but with China coming back we do expect them to start increasing their imports and then they'll need to.
More LNG in the market and actually what we're seeing is that the Chinese auto <unk> signing up for the most and you LNG. So we do expect a bit muted volume growth. This.
Yes, it's a rather low next year again, a bit muted on the volume side. The same for 'twenty four but then that's really a big ramp up of new LNG coming to the market 'twenty five 'twenty six and then I gave you.
Also do you expect quite a lot for 27 once some of these new projects are being sanctioned and so this gives us a good timing in the sense that we have ships coming open in 26 27. So we don't have that much market exposure.
In 'twenty three 'twenty four when when volume growth is muted and where you could have a risk of.
Not that one time mitigating that the low tonne.
Mileage growth, we have seen this year because this year ton mileage is down but the freight market has been good because <unk> gone off because of congestion and ships being in floating storage.
So that's the highlights I'm.
I'm going to just run through them quickly again revenues 91 million in line with guidance, we expect earnings to improve in Q4, driven by a better spot market. So revenues next quarter somewhere around 95 to 98 million also in line with previous guidance this quarter, we delivered.
Earnings of 47, or 42 million on adjusted basis, which gives our earnings per share of $88.79.
We are basically on the financing side. So that's going to present today, we're just refi a secured refinancing of four LNG and we're already ahead of the 100 million dollar target for balance sheet optimization phase two we do expect that altogether for phase one on phase two we will be able to.
Release more than $300 million of free cash for this refinancing of the fleet, while also improving our financial terms or panels and the auto financing terms. We are fully covered for next year. We have very strong coverage as I mentioned two ships, possibly open 20 <unk>.
Before but the first truly open ships.
Is 26 and 27, when we see a lot of new LNG coming to the market and where we will be competing with chips with a much higher pi staggard than us. So we are very confident we will be able to secure new long term employment at hopefully even better rates than we are having today.
Not surprisingly then maybe we are declaring again 75 cents of ordinary quarterly dividends. This gives a dividend so far this year of $2 $75 per share or the last 12 months of three and a half dollars and given our stock price of around $34. This should give you a yield of around 10.
So thank you and that's it for US today, we will now do a Q&A session and I were both me includes real parties peso.
I Hope I Hope you are all set in some good questions. Thank you.
Okay, then we already from some.
Question, Sir I think we have about 20 minutes for questions before we are heading for the airport going to New York for Investor meetings. So if you are in New York, We will be on the Marine Monet Conference in New York on Thursday, talking about LNG and shipping strategy in general So hope you, where it will be the Fas and feasible.
This time, we have had a lot of questions. We all have the competition here with some giveaways for their best questions and that has resulted in a wave of questions, which we're happy with and we have also given some gifts for those people are giving the best question number one.
Future looks bright you have to wear shades flex LNG shares and if that shedding is not enough. We also have a cap maybe if you can sort.
So I don't believe in my head you want to try this on Av.
Safety.
Number one so we also have the reflex.
FX <unk> band, So, let's see who is winning all giveaways this time.
Yes, and lots of questions. Since you mentioned and I think we've kicked off a lot like last quarter with the questions from a doctor from from Jefferies.
He starts off with.
The Index League the vessel the flex Artemis.
Can you remind us of how the earnings are calculated.
Guessing there is a ceiling of around.
This is a ceiling of 100000 in the floor about 50000 per day, yeah. It's a machine before we have more ships on index now we only have one ship on the index, but still we got a lot of focus on this so that.
Charter hire is tied to the spot market there is a ceiling and.
And we have communicated the floor is around our cash breakeven level. When it comes to the ceiling is much higher than under a thousand keeping.
Keep in mind, we are generating $91 million of revenues in Q T. We are saying that this will go to $95 million to $98 million.
For Q4 earnings in Q3 for their sponsorship for the Optima shippers plenty good already.
And we are saying that the earnings are increasing in a five to 7 million.
Does 92 days in Q4, so basically we should be growing the revenues for that ship somewhere around 50 to $60000 per day.
That means that the ceiling.
It's a lot higher than Hollywood I won't comment specifically on that for competitive reasons.
Okay, and then follows up with the question regarding the vessels coming open in 2026 and 2027.
The charter's interest for those vessels.
Any indications on the rates and duration.
Yeah, that's a lot of interests keep in mind, though the first available ships you can get is 27 and 27 all the book at the yards are getting pretty packed. So soon we are talking to us to try to add prices out through 50 interest rates are up we have hedged all of that risk so that means in order for people.
To calculate the good return they basically need maybe 10 12 year time charters and public rates starting at nine so that means that as we shown on the golf long term rates are picking up a lot and we think we can benefit from that we are having the same ships, it's Maggie XD after to stock their efficient ships. So.
What we can offer with maybe some more flexibility in terms of the duration of the time chopper.
So we have ships coming open in that window, but I think we can get better rates than we have on average today.
And I would say interest is high given the fact that yes. The order book is big but the value, where if you and committed chips in the in the order book. So we are working on that we are meeting people. We get there are tenders in the market for these kind of deliveries loss. That's why we also upbeat about the prospects for <unk>.
Contacting ships for longer durations at better rates.
And then a question from <unk> on those machine.
For the vessels, where the firm having to do something in.
In 2024, so it's a question on the on the option periods.
How are the.
Rates the same or is there any adjustments.
I think if you look at the in our presentation. There's two ships coming open possibly in 2024, it's the vigilant there are extension option for two years for that ship. So that's the first truly open ship, we have in the middle of 2026.
And then as the constellation.
So similar period middle of 2020 for the charter that can extend the ship for pay more yes.
In general I would say option rates tend to be higher than the firm right. It's our option. We are not there to give away options for fee, usually if you'll give our option do you want to get paid and that's usually either through a higher rate on the film period or a higher option rates.
And then we have a number of questions about the fleet development.
How to grow the fleet do you have any new building plans plans to expand into Fsrus or consolidations. Yeah. I think we get this question every quarter. What we have said we want to be disciplined we have ships coming open. This 'twenty six 'twenty seven delivery slightly ahead of some of the new buildings for delay.
Every now and also when.
LNG export volumes is it kind of going tremendously after a bit muted period now from 22 to 24, So I'll focus Dennis.
No not running through you are buying all the chipset to 50, everybody can do that if they have the money what we want to do with secure employment for the existing ships, we have and that is our main focus.
And then of course, having a good return on equities or we can pay this dividend. We opened two to go away, but we just feel a new building prices are stiff if we're now investing $250 million that shipped it would be more difficult for us to pay that dividend and also that capital will be idle to maybe end of 2027 wooden jud.
And the return.
So yes, the yardstick of prices to 50, but also the opportunity cost of tying off that capital for such a long period. We also have to take into account. So if you calculate and you're losing that dividend for those couple of years, you're tying up the capital. We also take that into consideration when making investment decisions.
As we've said in the past we opened for consolidation.
Find suitable ships we.
We have a scalable platform, we can easily go the fleet by twice as many ships without recruiting many people are and we have in those management, which has delivered fantastic results for also so we are open to do it but you know our number one priority is to deliver good returns for shareholders and our efficient transport.
Good service level for our customers and if we do that I think we will do well.
<unk> no.
I think that market is that it's been resurrected because of the.
Problems in Europe , where you had to add a lot of.
Import capacity very quickly so it's been good for those people who have fsrus.
And then I think there will be a conversion market for existing ships you can convert them into fsrus all modern ships are.
Basically two modern to convert them into SRU I think the 160 <unk> HIFU South there are better candidates for being converted to fsrus because they are diesel electric they have four diesel electric motors and you need a lot of electricity as well to generate kind of the re gas okay. So but.
But that would be good for us the more ships that are leaving the existing fleet. The less ships that are in the fleet in every shape, you're converting to I am sorry, you are employing as fsrus that need more cargos and that those will be transported by the.
Existing LNG carriers, including ourselves.
Moving over to the market, we have a question from Mike Lawton.
How do you see Asia ton mile.
Demand for this winter, giving the high probability of linear.
Yeah. It's a it seems like we will have a triple dip lanny now this year I think it's the total time in recorded history, we have a blip usually that means a cold snap in Asia, sometimes also theoretically should be in Europe , even though the winter has started mild but it's too early to to sell <unk>.
Yes, the winter goods, becoming any.
Any of that data sooner so in general it should be colder weather what else. This has an effect on tonne mileage it really depends on where the Asia suddenly they get a cold snap and stopped importing desperately cargoes because one thing.
In Asia, It's the fact that they have very limited storage space. So it is it's more like LNG in Asia is just in time.
Because they don't have the same underground gas storage levels, we have in in Europe . So we saw this happening.
Jan already trying to 'twenty, one with the cold snap in Asia, and suddenly we had a wave of <unk> of cargoes going to to Asia and that really resulted in a very strong.
Spot market for freight also in January and February 2021 that could drive upon the mileage.
But so far this year ton mile has been very muted because the cargos are flowing.
Predominantly to the U S cargoes up flowing predominantly to Europe , if that switch to a shop on my list will they go up and we will probably have less pablum when all the ships in floating storage is liquidating their cargos than those cargos than that on my list will.
Mitigate that there are the lower upon time.
And we have a question on the Opex and the increased opex level.
In Q.
Q3.
And an explanation for that is that a new level.
Let's say that.
Q3, we still had some COVID-19 related cost is related to current time and COVID-19 testing that is facing off and we are no longer subject to.
To strict quarantine and testing as the easing of the restrictions in particular in Asia.
We have also had a large number of crew changes and new on signers, which are reaching resulted in extended and handovers versus higher cost that should also taper off.
And we have also had some.
Suppliers, which were expensed in Q3, but for the remaining part of the year. We do believe that we should come back to the guided level of around 13000 per day and this is something we are monitoring continuously but also as we said in the presentation. The inflation has been higher than.
And a lot of people expected not us we hedged.
13 months before F had started to do in case the rates from zero and actually we're benefiting from a strong dollar in the sense that we have a lot of cost for the seafarers in local currency and a strong dollar means that they will have the same purchasing power even if you have some inflation.
And then moving up.
Popular team, it's our cash balance and our refinancing phase one and two where we released a lot of cash.
What's your plan to to use all this cash flow.
I think you explained well its course.
We have the best financing market I've seen in a long time last time I seen something similar to this was 2014, but I think the market for financing today for Blue chip clients as yourself are even better today than 2014 at for those who are second tier.
Third tier financing market today is very challenging so yeah, I think for the Blue Chip Guy.
Guys like US who you have to go back to pile through the financial crisis in 2007, when the Germans, we're calling them on their own ever we find.
Taking them on there when it's available and it's attractively priced and where we can lock in that financing for many many years to come.
Yeah, you know it makes sense and.
And also we are coupling that with our revolver last six Ruth mentioned, so the carrying cost of force of having that cash is not very high. So it gives us optionality value and also gave so investors comfort that our dividend.
Can be sustainable for a very long time, given our contract backlog our market outlook and then are very sound cash position.
Yeah.
And that brings overdo the dividends are cut.
A couple of practical questions one the dividend has been paid.
Then I refer to the information that was distributed this morning on the key information related to the dividends.
U S investors on New York Stock exchange.
The dividend will be paid on or about six of December and in.
In U S dollars and for the investors on Oslo stock exchange overpaid in Nox.
On or about ninth of December but please see the press with well ahead of Christmas. So I just with the Western you will get to how you can spend it all on your family or friends.
But that gives also a question regarding guiding for.
Yeah.
Yeah I got somehow you managed today are wondering why we don't have a special dividend I, we can't really pay a special dividend every quarter then it becomes the ordinary dividends, what we have said.
Fairly you know.
Five census, a comfortable level over time, which is sustainable over a longer time, when we completed the balance sheet optimization phase one we raised $137 million of cash a target was hungry we paid out a special dividend of around $26 million. We are now.
Walking are progressing well on the phase III, let's see.
Next year, what we're doing I can't really guarantee special dividend really depends on the market and the and the.
<unk>, we have but what I can say is we liked dividends wed like to pay out dividends. We are shareholders. We have a big shareholder also in the publishing group, who appreciate the dividend. So we are paying out basically 100% of earnings, but you know where we can have our optionality of topping desktop with special day.
Evidence that we're not gonna guaranteeing what we're saying is we like the ordinary dividend then from time to time, we will evaluate whether it makes sense to produce it.
And you mentioned the nine shareholder has a question there how involved is the main shareholder and decision making in the company of course here Amit shareholder John Public soon is the most successful us shipping investor of all time, probably.
He has been doing this for 60 S is inside a common goal.
So of course he owns 44%.
And we'll take of the company.
Of course, he has a vested interest in the company and the performance of the company. So sure he's heavily involved.
And he's a fantastic guy to tactful for advice as he has seen everything and in the past and he is in boom bust and that's always our for sure. His he is involved in and analyze the business.
I think we'll wrap up with a winner.
A question on Twitter from young Skoula.
One school as to.
Why are the LNG and LPG markets completely detached, but still flex and advanced gas management are the same and so grades.
I think taxes he owns gorilla.
We're seeing you in the neighborhood with some flex katana soon.
Yeah.
Advanced gas, which I'm learning as executive Chairman, our Chief commercial officer months process also chief commercial officer of that company, Yes, it's detached better awesome similar drivers.
<unk> gas number one.
Shale gas has been made you asked the biggest LNG exporter in the world on the LPG side is by far the biggest so 50% of the very large gas carrier cargos.
Out of all of us in our in LNG, it's less so so you know there are some similar drivers although.
D C market as more of a commodity shipping LNG is more of a line of business, where it's more about logistics, having long term relationships and making sure that the cargo is always on time.
On the agency is a bit different as mentioned commodity shipping advanced gas is mostly are therefore spot oriented company and I will be presenting advanced gas results next Thursday. So if you think flex is a bit boring and you'd like to have a bit more excitement in your life. You can also invest in advance.
Gas listed in Oslo stock exchange, which has a lot more spot exposure, which goes up and down right now it's really a nice being a level you see market with threats that are 120000 for the ships that is costing a lot less in LNG carrier. So thank you for your question Jan on the I think you I think we are doing this.
For today and hope to see you back for quarterly presentation in February .
So that's it for us thank you very much for joining.
Thank you.