Q3 2023 FLEX LNG Ltd Earnings Call

Turning space out of 84 cents.

Just the numbers, where we are eliminating gains on derivatives came in at $36 1 million of adjusted net income translating into 60 67 cents per share.

During the quarter, we had altered in LNG carriers back in operation, We completed the Drydocking program in the first half of the year with won't ship in docking at the first quarter and then we took out three ships during Q2 for their five year Special survey that means we are done for the year and we only.

Half two ships for the eye docking next year so.

All the ships back in operation and a stronger spot market positively impacting flight flex Artemis, which is on our valuable higher that is the key reason for avenues going from the second quarter to the third quarter.

The overall LNG market, both for Aten product is balanced with high inventories of gas in Europe prior to the winter season.

And that has also resulted in in and gas prices coming down to more normalized level from there theyre very high levels, we saw last season.

And with the strongest spot market, we do expect our revenues to pick up slightly in Q4 with revenues are about 97 to 99 million also in the high end of the guidance. So with the strong numbers in Q T and the strong guidance for Q4, we are well on track to meet our financial guidance for the year 300.

$70 million of revenues and adjusted EBITDA of 290 to 295 million so with a good numbers our strong financial position a complete the dry docking program. The board has decided to pay a special dividend of traveling half cents on top of the regular.

75 cents of dividend. This gives an attractive yield of 87.5 cents per share and if you look at the dividend over the last 12 months. It should give a yield of about 11% a $3 37 five cents in total during the last 12.

Months, so let's look at the guidance.

We are walking the talk when it comes to our guidance we are spot on delivering the guidance. We provided in Q4. When we reported in February revenues are expected to come in at around $370 million in line with guidance. Adjusted EBITDA also in line with guidance and we have also guided the time charter.

Trivalent rate 40, yes, we have guided about 80000, and we do expect time charter equivalent earnings on average to come in at about $80000, where as you might recall. We also did a guidance on docking we expected 8200 days of Fiat in relation to the four dry dockings with it.

Liberal debt on 77 days and then we also guided on the Capex for the docking $18 million to $20 million.

Did it.

20 million. So also those parameters are exactly on the guidance provided.

So let's look at the portfolio of ships.

We have 13 ships in the portfolio as I mentioned all back in operation 12 of the ships on fixed higher rate and then as I mentioned flex Artemis on available higher link.

Linked to the spot market rates.

First a truly open ships. We have is 2027, we do have flex Ranger truly open end of Q1, 'twenty 'twenty seven flex feed them. There is an option to a photo charters to keep that shifts to twenty-nine flexor who are and volunteers.

Our our film until 'twenty six, but the charters has an option to.

To extend those to 2028, which we think is.

Fairly likely FX School ages and resolution.

We do expect those charter the charter to exercise those options and bring those ships.

Into 2029, so the only ships, where we see a potential of getting back in the near term is flex constellation that ship is fixed until.

Q2 next year or the charter has an option to extend that ship by train two or one year.

The declared a three year option she will be a truly open 2027, let's.

Let's see we will know when we are presenting of Q4 numbers in February whether they ship has been extended or not it makes optimists as I mentioned this on a variable time charter with a minimum period until Q3, 'twenty 'twenty five but also where the charter has the option to extend their chip and well into 'twenty two already.

And Ana as I will come back to you in the market section. We do think these positions are very attractive when comparing to the overall fleet.

Supply and demand and also where new building prices have been heading.

So before handing over to Knuth, let's review the dividend.

67 of adjusted earnings for this quarter are slightly higher for normalized or a normal basic earnings. We are paying then a special dividend on top of the regular 75 cents, giving a total dividend for the quarter of 87 five cents.

Which gives in total this dividend I mentioned $3 37.5 cents last 12 months.

And of course, the decision factors, we use in order to determine the appropriate dividend level, we have been covered I.

Well in the past our earnings and cash flow is back to the dark green market outlook, we have downgraded to light when and this is just a reflection of the fact that next year 'twenty 'twenty. Four there are more ships then molecules hitting the water, which has softened the term rates are the last six months or so.

So with that I hand, it over to Knudsen and our Earth with a market update thank you.

Thank you were saying.

Let's look at the key financial highlights for the quarter on.

On the revenue side, the all certain vessels were in full operations.

The combined with the increased earnings under the variable index charter for the flex Artemis the revenues to increase by approximately 8 million to $94 6 million.

Our operating expenses are slightly lower this quarter.

At the close to $17 million or <unk>.

AR 13100.

Per day.

As we have explained before the opex is a bit bumpy between the quarters.

And we have guided opex for the full year at 14500, and we have some expenses that will come in Q4. So we are we're guiding towards the the opex per day for the full year of 14500.

Net interest expenses, which includes a $6 7 million in realized gains from our derivative portfolio came in at close to $21 million and equal to last quarter.

And then a longer long term interest continued to increase in the quarter and we book our unrealized gains of 9 million, which then results into a net income of 45.1 million for the quarter that gives our earnings per share of 84 cents.

And then adjusting for the unrealized gains we have adjusted net income of $36 1 million or adjusted earnings per share or 67 cents.

Looking at the balance sheet, it's remains a clean and.

And simple.

On the asset side, we have cash of 429 million and then we have 13 vessels more or less sister vessels with an age of close to four yes. The book value of our $2 2 million.

And as a reminder, these assets are acquired are at the low point in the cycle. So they are much lower than the <unk>.

Asset values in the market today, and the current new building prices.

And I gave so say book equity of 875 million or 32%.

If you look at our funding portfolio are about 50% of that is from long term leases and 50% is our term loans in our CF from traditional banks.

And nothing out of the cash we have on balance sheet. We ended up with a net debt position of a $1 4 billion.

And if we look at our debt maturity profile. Our first maturity is done in 2028 and the combination of this financing gives us a very attractive funding portfolio and we have this 400 million and Rcs.

At which time, we can repay in between quarters and save interest rate cost them at the same time. It gives us the Optionality to act if there are opportunities in the market.

This quarter with deep dive a little bit more into our balance sheets and show her.

The difference between the depth and our book values and how.

The depth is repaid much faster than the book values are depreciated.

On the balance sheet, we depreciate over 35 years onto a conservative a scrap value and as you see on the right hand side.

The recent retirements in of LNG carriers.

Closer to 240 years on average.

So even the book values are depreciating faster than the economic life of these vessels and at the same time the book values are low compared to the current market.

However, our funding portfolio and Theres from particularly from the leasing houses under traditional banks. They are more conservative. So our depth is repaid over approximately at H suggested the repayment profile of 21 years and I guess as we repay this.

Our depth of one seven times faster than the book values are depreciated. So we are done.

Saving up about $40 million per year.

Yeah.

Oh interest rate portfolio are now combined so consist of a portfolio of $720 million combined.

Which net of utilization of the Rcs gives us a hedge ratio of about 65% for the next quarters are as you know we've been quite actively managing this portfolio AR and AR. That's how it gives us now a book value.

One balance sheet $67 5 million.

If we look at the period from January 2021, we have realized and unrealized gains from this portfolio of 128 million.

So we're quite pleased with the exposure we have today and believe that should protect us in discovered high interest rate environment.

And that concludes the financing and back to you guys that.

Thank you Chris.

Inefficient, so let's look at the overall market.

Volume growths are fairly muted this year in the past LNG export coal has been typically a seven 8% because we are in a period now where with the lower export coal I will come back to this a bit later in the presentation.

About 3% growth.

Year to date through October not surprisingly, maybe U S is a big contributor to the growth going $6 7 million ton or out of the 8 million tonne and thus becoming.

The biggest export or again 70 million tonnes slightly ahead of Australia, and Qatar, two or the big export nations.

In Russia, despite the woven crane. They are exporting healthy levels are 26 million tonnes slightly below the levels last year and one outlier. This this year has been Algeria, which has been growing at a X.

Both rapidly in both the pipeline and LNG.

Close to 40% with 11 million tonnes.

On a year to date Ah Yeah, and then it's about 100 million tonnes for the rest of the producers on the import side European demand. This year has been fairly flat.

Uh huh.

There has been a less gas demand in Europe. This year compared to our previous yes are we seeing a uptick in gas demand in Europe in October 1st time in a long time, we have seen a European gas demand picking up but again you know European demand is quite strong because a lot of Russian pipe.

Nine gas, which has been curtailed needs to be replaced with LNG and European demand yesterday. It is yeah 103 million ton similar to last year. So actually overall its China growing are the imports at 12% year to date with 6 million tons more imported while Japan, which is.

The filing of the Nu X I answered yourself demand by about 10%, leaving room for the Europeans.

So I was already touched upon that it's been a lot of supply events. The last couple of years, we had the the walk in Ukraine of course, which which stalled SKU curtailed.

Russian pipeline gas to Europe, especially with this happened when we had the explosion of the north and pipeline. We also have like a explosion on big U S. Export plant, if we bought which sense. These two events sent prices of LNG all the way up to 100 dollar per million Btu with equates to close to $600 per barrel of oil.

Oil since then prices have come down a lot and during the summer we actually saw the lowest prices on island and a spot LNG that we have seen since summer of 'twenty 'twenty. One that supports the hub by Wall Street Journal then during the summer when prices hit kind of parity with the con.

Practice, the LNG, which is typically being sold 20, 25% discount to oil this adopted line called Brent or in percent.

Then during the summer we saw a bigger outages in Norway, we had deferred maintenance season for Norwegian gas exports to Europe. First this was the field doing a COVID-19 because of you know difficulties of maintenance during 'twenty to 2020 or 'twenty one.

And then last year during the energy crisis Norwegian maintenance season will said the field again, so the maintenance season for Norwegian pipeline gas export has been where along this this yes, and we had a big bounce back in Norwegian pipeline gas exports to Europe in October after that.

Hitting a four year low in September so with the Norwegian all suggest and the the head of threats or fair of strike in Australia, Curtailing LNG exports.

LNG prices have rallied to the autumn.

And I'll know at around $15, a pretty good a premium to the contracted price of LNG and if you're looking for what is it.

Prices seems to be stabilizing at this kind of level. So if you look at the overall market in terms of prices gas is still very cheap in US This is the Henry hub you do find places like West, Texas, where gas is much cheaper than a $3 as well.

But you know this gives us a very good economics of exporting gas.

Electrifying, it and shipping it to international markets, our big parcel off LNG has a cargo value of $13 million in U S. If you. If you if you put the liquefaction cost us or the tolling fee is a sunk and then you can make $40 million to $50 million shipping that cargo either to Europe.

Hope or to Asia, which is a longer routes, which then entail more shipping cost so even though prices on four LNG has come down to more normal levels. They are still elevated reflecting the tight product market. The LNG today at around $15, which is the average of the year.

And in the Asian prices is equivalent to about $87 per barrel of oil still a $4 premium to two oil price about two third of the volumes being shipped all linked to oil prices at a discount and these are these are contracts volumes typically.

Shift hands for about 10 to $12 per million Btu I at a discount to the oil prices.

And if you look at our drill down to some of the market as I mentioned, China has been bouncing back in terms of demand after their scrap the C O Kobe policies, but the levels are still below the levels. We had seen in 2021, but above the levels. We had seen last year at 58 million.

Tom So far.

So there are room for further growth in the Chinese demand, but are the Chinese demand is typically more price sensitive and the economic recovery have been somewhat.

Muted compared to maybe your expectations then on the the other big and Northeast Asian market, Japan, Korea, Taiwan, It's mostly Japan dragging down our demand. The other two key markets Korea, and Taiwan are fairly flat, but with the startup of more nuclear power in Japan. There they are.

And Shire why way from from buying quite expensive LNG.

Looking at Europe, which has been the big buyer of spot LNG. The last couple of years, we are at a level similar to last year.

But well ahead of the levels, we saw in 2021 pile to the curtailment of Russian pipeline gas to.

Two you have them.

And but with muted gas demand in Europe, we.

We have seen all our inventory level sitting about 99, 5% food before now we really starting the big consumption season during the winter season.

It's worth noting that also.

Crane has although the European bias to utilize about half of the gas storage levels in entertain a 15 billion cubic meters. So far only a fraction of this has been utilized so there is still room to store more than gas in Europe if they.

Mccain storage levels are utilized.

At.

Looking at floating storage typically when you have tank tops or where you have a situation where gas is more expensive in the future. Then today, we do see a buildup of floating storage on ships.

And this has become quite unusual and doing that.

Early winter season, and we are actually saw it this seriousness rattle a rapid buildup in floating storage with the prompt prices reacting.

Positively.

You know.

Pumped prices going up because of the Norwegian maintenance season, and the federal for a strike in Australia that economics of floating storage have gone down and we have not see a reduction in the number of ship floating with with the with cargoes.

And of course this is also releasing more ships.

To the market so.

We have had one we have seen this dip in in floating storage. We also seen a dip in the spot prices, but that had bought bonds back and the spot rates are at very good levels. We are talking spot rates for modern tonnage at around $200000, but they and they are acting in accordance with the seasonal pattern.

One where you have higher rates in the winter season.

We have made this a scale on the left hand side in logarithmic scale. So it seems like it's not far away from there from the numbers, we've seen last year, but actually they are about half the levels as we saw record rates last season with rates hitting about half a million dollars per day.

The forward the line or the dotted line is the forward prices for freight for the rest of the air. So we do expect rates to stay at this elevated level for the remainder of the year. Despite the fact that we have seen a fairly low point mileage. This year on the right hand side on the top top golf value do you see the average.

Sailing distance, which is a fairly low you know.

Affecting the fact that Europe is buying a lot of the spot cargos compared to 'twenty 'twenty. One are also worth noting fixture activity has gone down the term market has been active a lot of the.

Charters have been fixing ships on term contracts in order to take advantage of the incredible cargo economics cargo economics, which are still attractive today, even though spot LNG prices have come down and with all the charters being fairly long shipping there are less spot fixtures in the market as you can see her own.

The golf on the iPhone side are in the bottom.

And also maybe worth mentioning also that a lot of the fixture or actually most of the fixtures being done are being done by charters not independent owners as independent owners had.

More or less left the spot market today.

So let's look at the more of the two of them are market, where we are.

Exposed.

As a as a new building prices have been picking up and now stabilizing at very high levels of about $265 million.

For our new building today and.

This has also pushed up the two of them are rates are in in tandem with higher interest rates with higher interest rates and higher investment are in order to build a new ship you need higher turn rates and 10 year term rates has stabilized at around $100000 per day, we as I mentioned in the earlier in the presentation. We have guide.

At $80000 for this year. So we do think that there are.

Opportunity to fix our ships when they are coming off charter at higher levels. The five year rate, it's about hundred and $15000 per day.

And so I look at the outlook for the public market. We have had the opposite we are in a period now as I.

I also mentioned in the beginning with muted export gold we had a wave of.

Of volumes coming to the market from 216 to $2 19, predominantly big projects in Australia, and Big project in U S are enabled by the shale revolution than with the trade war breaking out between the U S and China and then once that was.

Solved more or less in January of 'twenty 'twenty, we had COVID-19 for a extended period and that has impacted our peoples ability to sanction new volumes. So once we came out of Covid, we have seen a flurry of new projects and these projects typically it takes some time to come to market.

So we do expect the new wave of LNG export growth to start from a ball trend next year 'twenty 'twenty four but the real growth, we're not really seeing before 'twenty five 'twenty six and on walls when a when a lot of new volumes, including U S volumes and including the big expansion in Qatar is coming to the market and that will be.

A lot of demand for shipping, which is the next topic in the last topic I will cover so if we look at Ras al we in terms of supply and demand. This is always a very difficult calculation.

And we have made our own model, but this model has is a basis a recent model from affinity. There is about 300 ships under construction today, it's a massive number but that's not shown on the last call. There is also a massive amount of new LNG coming to the market, especially from 'twenty five 'twenty six owned.

So how will this bad market balance out we do see next year volume growth in terms of exports are quite muted while there will be a lot of ships in the market. That's also that's more export coals coming to the market in 'twenty five but there's also a lot of ships.

And in addition, it's worth noting that.

And about 200 off the ships in the fleet today, all the old steam turbine propelled ships with which are too small and very inefficient.

We have shown in our presentation in the past about Hollywood steam ships are coming off charters by 2027. So these are ships that have been fixed typically 2025 year contract or a contract and once they are rolling off those contracts.

The charters will typically not extend those ships because of the inefficiency of the ships. So that this means that we have aligned had the blue topped op.

<unk>, which is the shipping balance they've all ships continue to trade then it's reasonable to assume that some of the steam ships will leave the market. It's because they are coming off charter. It's also because of the decarbonization goals, which have come in in force and also new the carbonization, who is coming into force from.

January next year, which is the EU ETS, which is a carbon tax for shipping. So all of these drivers will drive scrapping up.

And then it's a question how much scrapping will pick up.

As shown.

Shown in this golf earlier today average scrapping age is 40, we do think that number will come down a bit. So the dotted line here is that eventually the scrap the 25% of the steam fleet fleet, but eventually I by 'twenty two early I think most of the steam ships.

I've left the market. So they the green line is basically reducing our the.

The 100 ships coming off charter by 2027, and then of course, you do see that this market is starting to balancing in 'twenty six and then becoming tight from 'twenty to 'twenty seven and you know if you look at our portfolio of ships. We have two ships truly open in 'twenty to 'twenty seven Q1, and Q2 and then the last next to.

Ships coming its really open as Q2, 'twenty 'twenty eight and.

When you look at the shipping balance the export growth number of ships and then adjust for sailing distance and scrapping we do see that this market will be a bit loose.

The 24, 25, and then starting to tighten in 2006, and becoming increasingly tight from 27, and 28, which I think really gave us a good opportunity to fix ships for longer contract duration at higher levels than.

And then we have today as evidenced from the term rates. So with that I think we conclude with a summary of the highlights.

Revenues as I mentioned came in high end of the guidance $94 6 million, giving us a $45 1 million of net income or 84 cents per share our adjusted numbers for where we are just all these unrealized gains on derivatives and you talked about a $36 1 million or 67 cents per share.

As I mentioned again, all our ships are back in operation, We will only have two ships for Drydocking next year.

The song as spot market will impact flex Artemis positively not only in Q3, but also in Q4. So we are guiding even stronger numbers for Q4 with revenues of 97 to 99 million, which means that we are well position to deliver on our guidance.

And then we will come up and provide you with our new guidance. When we are reporting Q4 numbers in February and with a good financial position strong numbers.

Oh glad to once again provide a special dividend of 12, and a half half cents on top of the regular 75 cents, which I hope gives you a very attractive.

One <unk>.

Being invested in flex LNG, so with that I think we conclude the presentation and we are pick up with some questions. Knut So let's see what we have of questions from the audience. Thank you.

Yeah.

Okay.

Let's see what we have of question because it.

We delivered results with again, thank you for all the questions and I think we're as before we start off with the question from overlooked or from Jefferies.

What's driving the divergence between the time charter rates and the spot rates it appears to be moving in different directions over the past seven weeks, yeah, they've been living separate lives are the dog. Good reasons for this are spot rates are for US you know usually a single voyage in.

Oh, we are entering into this.

The Houston project prices of our conductive for freight.

So you know you usually do you see that the spot.

Spot rates are high at this time of the year to a market is it more about future expectations for you know whether it's the next 12 months or three years. So.

Five years, so that is more driven by the outlook and the outlook for the rest of the areas where they are good with rates at around $200000. If you're fixing a ship now on a one year time charter you basically are fixing for next year.

Our recent fixture so recent quotations for 12 months. This is about 100000, which you know historically, it's a fantastic number but of course, it's been sliding.

And it's been sliding.

Because of our you know people do see that there are a lot of ships for delivery next year.

There are less molecules hitting the water. So so it's a bit softer it's also driven by <unk>.

LNG prices of modern tonnage.

More efficient than older ships. So in a way of 800000 is the right rate for a modern tonnage is less for our older type of ships, but again. This is also driven that the spreads that are driven by where the LNG prices are and right now today $15. It's quite conducted for modern tonnage it's of course much less fallout.

Our steam ship, which is consuming about 60% more fuel in order to move the same amount of cargo at and then if you go further down the road you know you have.

Five year time charters 10 years charters, we don't really see.

Many people fixing 10 years prompt so when people are fixing a ship pumped it's mostly one to three years are.

Last year, when we fixed a lot of ships. There was it was more pumped interest for longer term, we have seen declining interest for term the loss.

Five six months.

So now I'll ask you if you will of those fixtures. So but you know still hundred thousand. It's good level, we do expect the usual seasonal pattern, where spot markets are peaking and pi.

Prior to peak winter season, and then that we do see a decline in the in the spot rates. When we're getting into next early next year and this as usual also result of the fact that are typically a lot of new building deliveries are skewed towards the beginning of this year, yes, where they get the next year Windage and then increase.

The availability of ships in the market. So I do think when we do have the Q4 report in February and term rates are probably higher than spot rates.

And as a follow up question, so you're touching upon the opponents that it's about.

How liquid as the time charter market between the different durations of one year three year five in the tenure I think.

This is sometimes a question we'd go out get them people do think that this term market is very liquid it's not it was very illiquid unusually illiquid last year when when we did the tenure of all the pumped on Rainbow and then seven year charters for.

For Oh, and the Python Amber and then we also fixed.

Three ships, which in the air for a longer duration.

It was the term market was fairly illiquid until the summer and it's been less liquid since once the spot rates come down.

From there you know elevated levels do you know if you can fix a ship $400000 for 12 months.

You might the hard to do that then fix the ship for five years at $110000 to your other older spot market. So so it is it's become significantly less liquid.

We only had the LNG report from Q3, where they actually have a golf on the number of term deals.

I'm up to three or five years I can't remember, but we haven't seen a pretty big decline in interim deals being done.

However, if you know.

If if if rates get competitive enough you will probably see a pickup in in activity.

Hum.

Then there was a couple of questions on the Panama Canal and the situation around there can you update those what's the status with the Panama Canal. Yeah. It was been a very exciting day, but you know that I, maybe I should start from the beginning it was just give you a description of what's happening in Panama. So.

In 2009, they the Panama authorities decided to expand they cannot.

And the reason for this was due to the increase in container traffic, especially between China and U S. China became a member of <unk>.

We'll trade organization in December 2001, and we saw a rapid increase in trade and then we also saw a new class of container ships with a wider beam, which could then carry a lot more containers than the older type of ships. So this was called now that new Panamax typically around 14000 Teu.

So they expanded the canal in order to facilitate more container traffic and once the quick Eh can all opened eventually they had been gradually able to increase capacity in the canal for boat the Neo Panamax law and the older Canal to about 40 transit are there.

And usually they they they operate with 36 ships, but the peak season, Fortyish daily transit or they were typically the new big ships.

These are ships without a which has a beam of less than 50 meters.

Which includes the LNG ships, but it's a it's wider than 32 meters dealerships that usually it's about 10 transit of these kind of new Panamax ships every day.

However, when they made the decision to expand the kind of all in 2009 U S was a big importer of gas today.

Today U S is the biggest L. LNG exports in the world and by far the biggest exporter of LPG. This means that you know when they expand they can all they never foresee that suddenly use you'd bid would be this huge export though so we always had the you know every yeah. They can all has become more than more.

Because of these are you know the growth in trade basically from U S bulk container, but also then <unk>.

<unk> and LPG. So what has happened this year with El Nino has been a drop.

And.

The canal is fed by a water source called Gatun Lake and Wonder.

When theres less rainfall. This is a very wet place usually it's about 200 days of rainfall area. When it's been less a handful this year, there's not been enough water because every time you.

Pissed off or are shipped through the canal. This is like a water elevator you put the ship through the canal and Youre lifted above water level and then Don again. So every time one ship goes through it's like 50 million gallons of water being lost due to see which is almost 200 million.

200 million liters of water.

So you consume a lot of water actually you consume I believe it's like they cannot consume four and a half times more water than the entire population of Panama and this is freshwater so it's not so.

So with the draft now Panama has restricted the numbers of of Daily Transit first from 36 to 32 and now read last week. There were further restriction, where this daily allowance will go down to 18 five fab alloy. So this means.

There will be a lot less space and ships, especially.

Especially LNG and LPG ships need to.

Find different routes. So if you're exporting out of your <expletive> you'd much rather go maybe it was serious or Cape of good hope in order to carry your cargo to a destination, which typically is Asia.

So the container ships are the one who are paying the most and that's why they get better access and then they'll have less room for LNG and LPG ships. So no recently they can all has stopped the auctions for a week and they have restarted it today and not surprisingly we smashed all records today, so that price for.

Kind of spots slots in Panama today.

<unk> reached 3 million $3 nine.

$3.975 million, so almost $4 million in order to get a spot auction slot in Panama on top of that you also have to pay the regular transit fees. So you are getting close to four and a half million to use technology, so that as pricing out a lot of ships, including LNG ships from the canal and that's why you.

You see a lot of increase in sailing distances for both LNG and LPG ships force and flex we have all our ships on time charter. This means that we are basically the <unk> driver for our clients. They tell us where to go if they go with we are totaling station they pay for the tolling station, they inflect where we.

We go so if they choose to utilize the Panama canal it will be for their account not ours and we get a daily daily higher and then they pay all the costs associated with the trade this being the Panama Canal duties Port tooth this or next year their ear a carbon tax.

Sure.

Okay and then a final question is on the market than the market rates are almost 50 and Oh sure. The five year term rates is 115000 per day versus the 10 year of about 100000 dollar per day, which basically imply that at the.

The time charter rates in the future for between six and 10 is about 85 K per day.

So this is the opposite of our assumption of the tightening market from 2020. It says so does the market believed that the steam ships will be scrapped or does it imply more new bins.

Or is there.

I think it's mostly the third factor because.

That's very few deals don't pumped at 10 years, we did it with flex Rainbow last year, but except for that that I don't really have seen those kind of deals being done. So the 10 year charter rate is mostly for new buildings. So people are putting down $265 million to build a new ship they get the ships and 27 early 28, so it's a pretty long lead time.

So their cost when you take into at the time on the value of that chip is.

Getting approaching $300 million. So when you make such a sizable investment you want to have some security of cash flow. So that's why typically owners. They are asking to get a 10 year charter in order to make such an investment. So the 10 year rate is more of a reflection of their the tender market with ships for forward deliver.

The five year rate is more for a pump delivery, which reflect what people do you expect.

The rates to be over the next five years, while it's higher 10 year time charter rate is more where people believe.

The rates would be from 2027 to 2037 so.

It's a bit comparing apples and bananas.

And moving over to our to flex and business development are under Peterson says that the there's an active M&A environment in shipping and the hours Flex management interested though currently seeking out business for consolidation of opportunities. Yeah. I think we've said this in.

The Pos and shipping there are quite a lot of S&P transaction, it's a bit different for LNG usual more industrial owners. So that all fuel transaction or all of that said theres been more transaction in LNG shipping. The last 18 months doesn't they'll spin or maybe its 24 months than theres been in probably the history.

If LNG shipping industry. So I do we do participate in.

Transaction that happens, we do see them on the radar, we sometimes put in bids and we are happy to consolidate the business, where we have a good setup, where we can expand our fleet without adding much costs.

But you know we also have to pay the right price you have to find the right asset and you have then you have to pay the right price. So so we are looking at that we're of course always exploring the the odd market for new builds we've seen the prices being becoming a bit elevated and given the fact, we have as I.

Only the presentation of our four ships open two in 2007, two in 28 with auto stayed focused on fixing those ships for longer term contracts rather than adding more ships on top of that but that said we are open for constellation if we find owners with the right assets in the right attitude, we're happy to consolidate and be part of our biggest.

All right.

And are there alternative growth is through new buildings and MS do them from LNG program Dot coms, so as to Qatar energy plans to book more than hundred LNG carriers at yards in South Korea and China.

The.

What is flex our houses we are viewing this whenever you.

When will flex booked is 14 15.

I think.

Time flies, but I think we had a slide on on the Qatari order I think must be more than two years ago. So if you look through our slide deck, where we had a calculation where we said this is.

As I mentioned, some time ago was that.

Qatar will probably order more than hundred chips, and because we had a lot of banks are worried about this that you know are they going to build too many ships and and add too much supply to the market. The dog good reasons for the Qatari, making such big investments altogether, there to serve the hundred and 51 births at.

Three Korean yards, and one Chinese yards Hum who don't.

And the reason for this number one.

They are expanding their export capacity by 49 million tons, so depending on trade pattern, you're probably needs.

72.

80, maybe even more than that ships just to cover the new volumes than they do have about 25 steam ships.

Which probably will be replaced when they are coming off charter. So Dan you are at least at around 100 ships and then they do have which I didnt touch upon on this golf, where we have the supply and demand.

It just stayed focus on the steam ships, because it's easier to do to simplify with that but you know they have 45 slow speed diesel ships.

Hips, which our LNG carriers that cannot burn LNG. So these ships are burning marine diesel, which is quite costly and when you have cheap LNG from the liquefaction plant and they are consuming a lot of power in order to really clarify all the boil off gas. So eventually these ships might also.

Be considered scrapping candidates and these are huge ships ranging from 216000 cubic to 265, so if you're replacing one of their ships you need more than one conventional ships. So so.

So I think that explains why they are holding so many ships we are not participating in the Qatari tender.

Well, we have looked at it but you know wed rather focus on one on ships and if if there are good opportunities. We will act on them we have the.

Necessary financial resources to add ships, but we are always focused on having the right capital.

Discipline, making sure we can pay good.

Dividends to investors, who are investing in our company and not trying to just build a big flip to in order to satisfy our growth ambition. So our ambition is to deliver the best possible shareholders at all.

And you mentioned the capital discipline and are paying dividends.

Couple of questions around the dividend policy and how to foresee or expect a special dividend.

Uh huh.

You know, we tried to simplify our dividend policy, yeah, even with some decision factors and an angry and lights.

You know basically we are paying out everything we were owning actually loss lie lately, we have been paying out slightly more.

And then we have been earning a because we have.

Our substantial cash balance.

They're a good job in the last year, when we did the balance sheet optimization program. When we released $387 million of cash from that program.

Which kind of enable us to pay back some of the capital in addition to.

Also the return on capital so that's the one off capital as well as return on capital because if you look at our balance sheet today, it's packed with cash and also actually the net leverage of our fleet is very low compared to past.

So Palo Alto has a comment on that today, we have net leverage on our ships of $108 million per ship when you compare that to the market value of the ships are you get to a very low leverage.

So we do think that it's fair for us to return some of that cash and then the cash we keep we're not just sitting on that money in the bank as Chris mentioned, we do have a 400 million revolver, which we can utilize on short notice, where we can pay that back and rather than paying the bank a cabinet margin on top of that.

Interest that we can.

Pay a commitment fee of only 0.7% per annum, which gives us a lot of cash of Optionality. So you can expect the dividend policy to remain the same where we're paying back whereas substantial dividends.

Based on all our healthy earnings and also sound financial position.

Okay Rockshaft Q&A sessions. So question is yeah, who is winning and that's almost.

And Oh this nice being in there.

It's getting cold here in Oslo.

Yeah, I think we're going to send this to you Omar since you are always coming up with questions for the Q&A session. So once it get cold in New York You I Hope you will do some promotion for us.

Okay.

Thank you everybody for listening and we will be back in February for our Q4 numbers, where we also will provide our guidance for 'twenty 'twenty four. Thank you. Thank you.