Q4 2023 FLEX LNG Ltd Earnings Call

Unnamed Speaker: provided in Q4 for Q4 of around 97 to 99 million. Net income and adjusted net income came in at 19.4 million and 37.8 million, respectively. Just a reminder, we have a rather big portfolio of interest rate derivatives where we've hedged ourselves against the higher interest rates we are today experiencing. And in the adjusted numbers, we only include the realized gain and loss on derivatives, while we take the change; unrealized change in value is included in the net income numbers.

Our Q4 and of around 97% to 19 9 million.

Net income and adjusted net income came in at $19 4 million and tourists 7.8 million respectively. At just a reminder, we have all the big portfolio of interest rate derivatives, where we have hedged ourself against a higher interest rate, we are today experiencing and in the adjusted numbers we own.

They include the realized gain or loss on derivatives, while we take the changed unrealized changes in value or included in the net income numbers put us as Knut will tell you shortly and all we have made rather big gains on on derivatives. During the last three years to total of $116 million positive.

Unnamed Speaker: But, as Knut will tell you shortly, we have made rather big gains on derivatives during the last three years, to a total of 116 million euros. This translates into our earnings per share and adjusted earnings per share of 36 cents and 70 cents, respectively. As we are now in February and heading out of the peak heating season, not surprisingly, rates are softening, following the seasonal pattern where, typically, freight rates find a bottom at around March before starting to fire up again for the summer season. And I will cover more of the freight market in detail later in the presentation. As we have recently announced, we have received an extension on one of our ships, Flex Resolute. She has now been on a time charter for about two years.

So this translate into our earnings per share and adjusted earnings per share of 36 cents and 70 cents respectively.

As we all know in February and heading out of there.

Peak heating season.

Not surprisingly our rates are softening and.

Following the seasonal pattern, where typically they find the right way to find the bottom at around March before starting to fire up again for the summer season.

And I will cover more of the freight market in detail later in the presentation as we have recently announced we have.

Got all received all our extension of one of our ships flex resolute.

It has now been on our time charter.

For about two years. This time charter is for P. S. Whereas the charter a supermajor has the option to extend by two plus two yes.

Unnamed Speaker: This time the charter is for three years, where the charterer, a supermajor, has the option to extend by two plus two years. And they have now declared the first option, taking this vessel firm until at least the first quarter of 2027. Then, as we announced on January 8th, we have re-delivery of Flex Constellation either end of Q1 or in Q2. This ship has been on a three-year time charter with a trading house, and we will get her back, and we plan to carry out the dry docking of this ship before then marketing her for spot medium-term or longer-term time charters, depending a bit on the market conditions. For next quarter Q1, which we are already way into, we expect rates to soften a bit, depending a bit on where the spot market is trading as we have one ship on a variable time charter, Flex Artemis, so we expect time charter equivalent earnings of somewhere around $75,000 to $80,000 per day. Guiding also in terms of revenues and adjusted EBTR, around 90 million of revenues and 70 million of adjusted EBTR, quite similar to the results achieved

And they have no declared the first option taking this vessel film until at least first quarter of 'twenty 'twenty seven.

Then as we announced on January eight we have the delivery of flex constellation either end of Q1 or in Q2 of.

This ship has been on a per year time charter with a trading house and we will get that back and we plan to carry out the dry docking of the ship.

Before the end marketer for sports medium term or longer term time charters, depending on based on the market conditions.

For next quarter Q1, which we are already way into we expect.

Rates to soften a bit depending on based on where the spot market is trading as we have one ship on a variable time charter flex Artemis. So we expect time charter equivalent earnings of somewhere around 75 to $80000 per day.

Yeah.

Guiding and also in terms of revenues and adjusted EBITDA are around 90 million of revenues and 70 million of adjusted EBITDA are quite similar to the sales achieved in Q1 last year.

Unnamed Speaker: We have two dockings scheduled for this year. Last year, as some of you might recall, we were carrying out dry docking, the first dry docking, five-year special survey of four ships altogether. This year, we only have two ships. It's Constellation, which we will dock end of Q1 or Q2, depending on when we get her back, and then Courageous is scheduled for dry docking in the second quarter.

We have two dockings scheduled for this year last year as some of you might recall, we were carrying out drydocking. The first drydocking five year Special survey of four ships altogether.

This year, we only have two ships, it's the constellation, which we will dock here end of Q1 or Q2, depending run we get her back and then courageous is schedule for Drydocking in the second quarter.

Unnamed Speaker: So with strong results and a very healthy backlog, which I will cover shortly, we are pleased to once again pay out a dividend of 75 cents per share for the fourth quarter. So this gives, in total, a dividend for the full year 2023 of $3.125 per share, and that should give a yield of around 11%. The stock market here in Oslo is down today.

So with the strong results.

Very healthy backlog, which I will cover shortly.

We are pleased to once again pay out our dividend of 75 cents per share for the fourth quarter. So their skiffs in total our dividend for the full year 2023 of $3 at and traveling half cents per share.

And that should give all of you.

Yield of around 11%.

Rock market here in Oslo is two don't today, all stock sort of cohorts a bit don't five and half percent driven a bit by the sentiment around the equity capital markets day, where they cut their dividend and equitable is down five 6% today and lagging on the energy sector. So hopefully we can provide you some info and <unk>.

Unnamed Speaker: Our stock has recovered a bit, down 5.5%, driven a bit by the sentiment around Equinor's capital markets day, where they cut their dividend, and Equinor is down 5-6% today and dragging down the energy sector. So hopefully, we can provide you with some info and give you some comfort on the results of Flex LNG despite the kind of sell-off in the energy market here in Oslo today. So let's review our guidance. Last year we provided fairly detailed guidance for the full year given the fact that we had 100% coverage for the year. So we guided them on three key measures.

Do you have comfort on the results of our.

Of flex LNG, despite their kind of sell off in the energy market here in Oslo today, So let's review our guidance so.

Last year, we provided a fairly detailed guidance for the full year given the fact, we had 100% covenants for the year. So we guided on three key measures.

Unnamed Speaker: Time Charter Equivalent, which is the average rate we obtain on our ships. We guided at approximately $80,000 for the full year, delivered slightly better in Q4 as that's the peak season, $81,100, and on average for the year, we ended up at $79,500. So, very much in line with the guidance provided. For revenues, we guided for approximately $370,000, and I'm pleased to say we beat that by $1,371,000. And then we guided the last measure was adjusted EBITDA of $290,000 to $295,000. We delivered $290,000, and the reason why we didn't meet that midpoint is that we had some technical off-fire days last year. We have had extremely few technical off-fire days during the more than five years we've been trading these ships, but we had some last year and it affected that adjusted EBITDA slightly. Looking forward to Q1, as I said, it will be more or less similar to the numbers we delivered in Q1 last year.

Charter equivalent.

Which is the average rate we obtain on ships, we guided at approximately $80000 for the Trulia.

Delivered slightly better in Q4 as that's their peak peak season, 81100 and average for the year. We ended up at 79500, so very much in line with the guidance provided revenues, we guided approximately 370 million and I'm pleased to say, we beat that by $1 million.

$371 million and then we guided the last mass show was adjusted EBITDA of $290 million to $295 million, we delivered 290 and the reason why we did didn't meet the mid point is we had some technical off hire days last year, we have had extremely few technical off.

Five days during the more than five years, we had been trading these ships, but we had some last year and affected slightly on that just a debit there.

And looking forward to Q1 as I said, it will be more or less similar to the numbers. We delivered Q1 last year it depends a bit on the timing of the constellation of docking and and also how the spot market is performing both revenues of our 90 adjusted EBITDA 170, and then.

Unnamed Speaker: Depends a bit on the timing of the Constellation docking and also how the spot market is performing, but revenues of around 90, adjusted EBITDA of around 70, and then a range here on the TC achieved of 75 to 80 000 today. So, during the last couple of years, you know, we took delivery of the first ship, Flex LNG, on 9th January 2018 and then the sister ship, on 11th January 2018. And then we've been building up the numbers of ships on the water. The last ship we took delivery of was on, I believe it was May 30th or May 31st 2021, the Flex Vigilant.

A range here on the T C achieved off 75% to $80000 per day so.

During the last couple of years and all we took delivery of the first ship flex endeavor and I in January of 2018, and then the sister ship 11th January trying to 18, and then we've been building up the numbers of ships on the water lost chip. We took delivery off was in I believe it was may 30 at tomato. The first 2021 the flex.

Unnamed Speaker: So from Q3 2021, we had all our fleet on the water generating earnings, and then we started off with most of our ships in the spot market. That really paid off in 2021 when the market was roaring, a bit more challenging during COVID. And then from 2021-22 onwards, we mostly locked in rather long charters on all our ships and stabilized both the revenues and then the adjusted EBTR since basically all our costs are fixed. And as you can see, variability in the adjusted EBTR is very small.

So from a Q3 2021 we had all of fleet on the water generating earnings and then.

We started off with most of our ships in the spot market that really paid off in 'twenty, one when the market was growing a bit more challenging during COVID-19 and then from 'twenty. One 'twenty two onwards, we mostly locked in a rather long charters on all our ships and stabilized both the revenues and then.

The adjusted EBITDAR since basically all our costs are fixed and as you can see a variability and now just there but they are is very small we had a bit of a dip in in Q2 last year, but that was mainly driven by the fact that we carried out of dockings of three ships in Q2 last year. This year as I mentioned we.

Unnamed Speaker: We had a bit of a dip in Q2 last year, but that was mainly driven by the fact that we carried out dockings of three ships in Q2 last year. This year, as I mentioned, we only have dockings of two ships. Looking at the fleet profile, this backlog I mentioned is backed by high contract coverage. We have very limited open ships near term. This year, we are already 94% covered on contracts. We have one ship, as I mentioned, the Flex Constellation, coming back from a three-year time charter, opening up end of Q1, early Q2, and as I mentioned, we plan to dock her. That typically takes around 20 days, and then she will be available for a good period of time, I think, once we are out of the bottom of the market, usually.

I only have a docking of.

Two ships.

Looking at the fleet profile. So this backlog I mention is backed by high contract coverage. We have gradually limited open ships near term. This year, we are already at 94% coverage on contracts at we have one ship as I mentioned, the flex constellation coming back from up here.

I'm charter opening up end of Q1 early Q2, and as I mentioned, we plan to Docker that typically takes.

Our own 20 days and then she will be available.

At a good period of time I think once we are out of there at the bottom of the market. Typically so we also have won't ship are linked to the spot market by the fact, she has a variable time charter, it's the flex Artemis, which is on a five year charter, but rather a charterer has options to extend that contract by a further five yes.

Unnamed Speaker: So we also have one ship linked to the spot market by the fact she has a variable time charter. It's the Flex Artemis, which is on a five-year charter but where the charterer has the option to extend that contract by a further five years. As mentioned, Flex Resolute has recently been extended to 2027. There is a similar option for the sister ship, Flex Courageous, so let's see if we also add some more backlog here during the year.

As mentioned flex resolute recently extended to trend to 27.

There is a similar option for their sister ship <unk>.

<unk> courageous so let's see if you also add some more backlog held during the year and then as you see we have very limited open.

Unnamed Speaker: And then, as you see, we have very limited open availability here in the near term. We will have a bit softer market in terms of volumes hitting the market compared to ships for 2024-2025, and then there's a lot of new LNG coming to the market in 2026, 2027, 2028 and onwards. And actually, that's a period now where contracting of ships is tailing off because of the very high ship prices. So we think we are well positioned, with a minimum 50 years of charter backlog. We think we will add some more charter backlog this year with the declaration of further options, which could bring the total up to a total of 71 years.

Our open availability here in near term, we will have a bit softer market in terms of volumes hitting the market compared to ships.

24, 25, and then Theres a lot of new LNG coming to the market 26, 27, 28 and onwards.

And actually that superior nowhere contracting of ships are tailing off because of the very high ship prices. So we think we're well positioned minimum 50 years of charter backlog. We think we will add some more charter backlog this year by a declaration of further options and.

Which could bring the total up to on total of 75 one years.

Unnamed Speaker: And all these charters are blue-chip counterparts. Looking at dividends, we have a stable business backed by a lot of first-class backlog, and we are generating substantial cash flow, and as I've covered in the past, we are a very shareholder-oriented company where we do think that all these earnings belong to shareholders, and we are paying them out regularly on a quarterly basis. This quarter we are paying out 75 cents, slightly higher than the adjusted earnings, given the fact that we have a very sound financial position with 411 million in cash, no upcoming maturities, a lot of backlog, and very limited CapEx liabilities since we have no ships under construction and CapEx liabilities are limited to dry dockings, and this year we have the dry docking of two ships which should be in the range of 10 million altogether in CapEx for We listed this company almost five years ago now, June 2019 in New York at $11. We paid out almost the same amount, $9, in dividends.

And all these charters are blue chip Counterparties.

Looking at dividends. So we have a stable business backed by a lot of first class backlog and we are generating substantial cash flow and as I covered in the past we are a very shareholder oriented company, where we do think that all these earnings belongs to shareholders and we.

We are paying this out regularly on a quarterly basis. This quarter, we are paying out 75 cents slightly higher than the adjusted earnings given the fact that we have a where is a sound financial position with $411 million of cash no upcoming maturities.

A lot of backlog.

And were you limited capex liabilities since we have no ships under construction in Capex liabilities.

<unk> limited two dry dockings and this year, we have drydocking of two ships, which should be in the range of 10 million altogether in capex for those two ships. So so a very solid stable business and the last slide here a bit.

Before her.

Giving it over to ignore at this you know with this business. We have generated substantial returns with listed this company almost five years ago in all at June 2019 in New York at $11.

We paid out almost the same amount of $9 in dividends. If you reinvested the dividends you would do even better and then on top of that we have had a share price appreciation there right now where the stock is at.

Unnamed Speaker: If you reinvested the dividends, you would do even better. And then, on top of that, we have had a share price appreciation. Right now, the stock is down today. So the 280% is a bit less, but still a very good return. And for those who are a fan of Warren Buffett, he knows that the market, in the short run, it's a voting machine.

Don't today, so it's a 280% is a bit less but still a very good return and for those who are fan of Warren Buffett He knows that.

The market in the short run it's a voting machine in the long run, it's a waiting machine and.

Unnamed Speaker: In the long run, it's a waiting machine. And, you know, gravity tends to favor the good businesses. And, as he says in this book, Snowball, time is the friend of wonderful businesses, the enemy of the mediocre.

Gravity tends to favor, they're good businesses and assist us in this book Snowball time, Mr friend of the wonderful business the enemy of the mediocre. So we certainly delivered on that philosophy, we are paying out the free cash flow and in the Russell 2000, consisting of stocks in in in New York We are in.

Unnamed Speaker: So we certainly delivered on that philosophy. We are paying out free cash flow, and in the Russell 2000, consisting of stocks in New York, we are in the top 2% of companies in terms of dividend payout with 11%.

The top 2% of companies in terms of dividend payout with 11% I havent calculated, but probably a 12% today with the stock price. So I think it's a it's a good time to be invested in flex and I will come back and give a bit more update on the market for snow, we will head over to Knut I Hope you gave him a warm.

Unnamed Speaker: I haven't calculated it, but probably 12% today with the stock price. So I think it's a good time to be invested in Flex. And I will come back and give a bit more an update on the market. But first, we will head over to Knut. I hope you give him a warm welcome.

Welcome News.

Unnamed Speaker: Knut is 46 years old today, so it's his birthday. So come here, Knut. And, you know, I hope you can get yourself a beanie afterwards as well as a gift.

46 yesterday, so it's his birthday, so called my E Commerce, New Thunder and I Hope you can get yourself, a b any off the walls as well as a gift hanging over typically a few single you go with the Green Binney if youre not you have again, if you're undecided you have a white one so I'm I'm curious just to see which.

Unnamed Speaker: Here in Norway, typically, if you're single, you go with a green beanie. If you're not, you have a red one. If you're undecided, you have a white one. So I'm curious to see which kind of beanie you're gonna elect to have.

Kind of being that youre going to elect to have last year that was a LNG carrier, which was capped at the age of 46, Yes. Your same age the gone down a.

Unnamed Speaker: Last year, there was an LNG carrier which was scrapped at the age of 46 years, your same age, Gandria. But Knut, he's still operating in the LNG business. Thank you.

But he is still operating in the LNG business like Yours then.

Unnamed Speaker: I think we can head over to the summary of the operational figures for the fourth quarter and for the full year. If you look at operating days, in the second quarter, we had 77 days of fire related to dry docking, and then we had 19 days of technical fire in the first three quarters. In the fourth quarter, we had 100% technical uptime, and that resulted in a technical uptime and commercial availability for the year of 99.6%.

I think we can head over to the summary of the operational figures for the fourth quarter and for the full year.

If you look at operating days.

In the second quarter, we had 77 days of off hire related to the dry docking and then we had in the first three COVID-19 days of technical off by a fire.

In the fourth quarter, we had a 100% technical uptime and that results in a technical uptime and co worker commercial availability for the year of 99.6 present.

Unnamed Speaker: That's a strong testament to our onshore technical and operations team and also for our crew members on board keeping the propeller running. If we look at the time charter equivalent per day, in the fourth quarter, we had 81,100 and then for the full year, 79,500, which is at par with our guidance. OPEX for the fourth quarter is somewhat higher, as guided in the Q3 presentation, and that was mainly related to scheduled maintenance of our auxiliary engines.

That's a strong testament to our onshore technical and operations team.

And also for our crew members on board keeping the propeller running.

If you look at the time charter equivalent per day in the fourth quarter. We had 81100 and then for the full year 79500, which is at par with our guiding.

Opex for the fourth quarter is somewhat higher.

That is a that was guided on the on the Q3 presentation. Although there was mainly related to.

Scheduled maintenance of our auxiliary engines.

Unnamed Speaker: But, as we guided on the total OPEX for the year, we ended up at 14,400 versus the guidance of 14,500. For 2024, we guide an OPEX of $14,900, and that is mainly an increase in crew wages and some technical. That results in revenues of 97 million for the quarter and 371 million for the full year, which is also as guided, and FDA of 76 million for the quarter and 290 million for the full year. That results in an adjusted net income of 38 million for the quarter or 137 million for the year, and in the adjusted numbers, we adjust out unrealized gains and losses from our derivative portfolio, and then, as you may recall from the closing of our balance sheet optimization program in the first quarter, we also strip out the non-cash write-off of debt issuance.

But however, as we guided on the total opex for the year.

We ended up at 14400 versus the guidance of 14500.

For 'twenty, one before we guide in Opex of 14900, 900, and that is mainly an increase in crew wages and some technical.

The results in our revenues of 1990 7 million for the quarter and 371 for the full year, which is also a guided inevitably a of $76 million for the quarter and $290 million for the full year.

The resulting adjusted net income of 38 million for the quarter or 137 million.

For the year.

And in the adjusted numbers, we adjust out unrealized gains and losses from our derivative portfolio.

And then as you may recall from the closing of our balance sheet optimization program in the first quarter. We also strip out the noncash write off of the issuance cost.

So then looking into the more details and we've been through the the revenues and Opex.

Unnamed Speaker: So then looking into the details, and we've gone through the revenues and the OPEX, then the main differences are in the derivative portfolio. The paid interest is on par quarter by quarter, and then the difference is in this quarter and the loss on the derivative portfolio of an unrealized loss of 18.7 million and then a realized gain of 7.1 million, which is offsetting our interest.

Then the main differences on the derivative portfolio. The paid interest is on par quarter by quarter and then the differences on the this quarter and a loss on the derivative portfolio of.

And unrealized loss of $18 7 million and then realized gain of 7.1 million, which is offsetting our interest cost.

Unnamed Speaker: That gives us a net income of 19.4 for the quarter, and if we then adjust out the non-cash items, we have an adjusted net income of 37.8 million, or adjusted earnings per share of 77. The balance sheet remains pretty much the same. We have the schedule, the depreciation of our vessels, and then $411 million of cash on the asset side. So we keep it very simple, and that results in a book equity of $848 million, or a book equity ratio of 31%.

That gives us a net income of $19 four for the quarter and if we don't adjust out the.

The noncash items, we have adjusted net income of 37 point.

8 million or adjusted earnings per share of 17 cents.

The balance sheet.

Mines are pretty much the same we have a.

The schedule depreciation of our vessels and then $411 million of cash on the asset side, we keep it very simple and that results in a book equity of $848 million or book equity ratio of 31%.

Unnamed Speaker: And then, as a reminder, these book values reflect that these vessels were ordered at a low point in the cycle and therefore do not reflect the market value today. On the funding side, our debt portfolio, we did a complete refinancing of our fleet with the balance sheet optimization program that was concluded in the first quarter this year or last year. And that gives us a flexible blending of both long-term leases, up to 12 years for some of them, and then the traditional bank portfolio, where we have structured $400 million of our debt as a non-amortizing, up to six-year revolving credit facility.

And then as a reminder, this book values reflects that these vessels were ordered at the low point in the cycle and therefore, it does not reflect the market value today.

Today.

On the funding side, Oh that portfolio, we did a complete refinancing over over our of our fleet with the balance sheet optimization program that was concluded in the first quarter this year or last year.

And.

That gives us a flexible.

Blending of both long term leases are up to 12 years for some of them and then there are the traditional bank portfolio, where we have structured $400 million of adapt as a non amortizing up two six year.

Our revolving credit facility.

And when we have a 410 million 11 million of cash available that gives us a flexible tool.

Unnamed Speaker: And when we have 410 million, 411 million of cash available, that gives us a flexible tool for cash management. So we can repay the RCFs in between quarters. And then we reduce the interest rate cost, and we pay 70 basis points in commitment fees. If we look at the depth of the maturity profile, our first maturity is in 2028, and that's related to our bank financing.

To for cash management, so we can repay the our chefs in between quarters and then we reduced the interest rate cost and we paid 70 basis points in commitment fee.

If you look at the depth maturity profile. Our first maturity is in 2028, and that's related to our bank financing.

Unnamed Speaker: So we have a lot of headroom ahead of us, and this is a very supportive financing position to be in support of business and our business community. We have been quite active in the interest rate market for the last three years. We entered the market with a lot of additions, with long-term interest rates swapped in 2021. As the interest rates have increased, we have also added more but also amended the duration profile to make use of the gains and reduce the tail end risk of this portfolio. So today we have hedging of our interest through traditional interest rate swaps but also off balance sheet items like fixed rate leases.

So we are we have a lot of headroom ahead of us and this is a very supportive financing position to be in the support of the of the of the business and our business case.

We have over the last three years been quite active in the interest rate markets. We entered into the market in a with a lot of additions with long term interest rates swap in 2021.

As the interest rates have increased and we have also added more but also amended the duration profile.

To make.

Make use of the gains and reduce the tail end risk of this portfolio.

So today, we have a hedging of our interests through traditional interest rates swaps, but also off balance sheet items like fixed rate leases.

Unnamed Speaker: Uh... For this year, we have an average net hedging ratio of about 65%, and then it tails off more or less equal, as you will see in the forward curve of the SOFR rates going forward. We are monitoring the interest rate market pretty closely, and we are looking into when to add more exposure on the tail and to increase our hedge ratio from 25% and on. And that concludes the financing sector. And back to you, Aysen. And so, in terms of interest rate hedging, Jay Powell was on 60 Minutes on Sunday and talked about the interest rate market and said that March would be a bit premature for a cut, but May seems very likely, and he doesn't rule out bigger cuts down the road.

For this year, we have an average not hatching ratio of about 65%.

And then it tails off more or less equal ads as you would see in the forward curve of the of the sofa rates going forward. We are monitoring the interest rate markets pretty closely and we are looking into went to add more exposure on the tail end.

To increase our hedge ratio.

From 'twenty five and onwards.

And that concludes the financial sector and back to you I said, okay. Thank you guys.

So.

In terms of the the interest net hedging you know a J Paul he was on 60 minutes on Sunday and talked about the interest rate market and it seems like March will be a bit premature for cat, but may it seems very likely and it doesn't rule out the bigger cuts down the road. So I think we have a profile of the hedging which is very much.

Unnamed Speaker: So I think we have a profile of the hedging, which is very much in line with a pivot from the Fed within this year, which we have expected and positioned ourselves for as inflation is starting at least to subdue. In terms of the LNG market, we had another event earlier, which seems to be the case every year. Twenty-two was all about curtailing Russian pipeline gas to Europe prior to the invasion and subsequent to the invasion, when we had the blowing up of the pipeline and the gas lines. So this year has been a bit more calm, I would say.

In line with.

Our pivot from had within this year, which we have expected and position ourself for as a inflationary starting at least to subdue habits.

In terms of the LNG market there has on order mental yes, it seems to be the case every year.

Front there are two was all about curtailment of Russian.

Pipeline gas two two to you what a pile to the innovation and our subsequent to the innovation when we had the blow off of the.

The gas lines. So this year has been a bit more of a column I would say we have seen the LNG prices migrating down to more normal levels. We did have a peak in and and.

Unnamed Speaker: We have seen LNG prices migrate down to more normal levels. We did have our peak in export LNG price last August 2022 of $100 per million BTU, equating to around $600 per barrel of oil. We are now down to more normal levels, $8, $9 now, which means that LNG is cheap again. And when things are cheap, people tend to consume more of them.

Export LNG price last August of our August 2022 of $100 per million Btu equating to around $600 per barrel of oil we are known down to more normal levels.

Eight $9 now, which means that the LNG is cheap again.

And when things are cheap people tend to consume more of it. So we are now at a big discount to oil and more importantly, also we are at a huge discount to especially diesel. So this means that it's firing up the demand in our new reagents.

Unnamed Speaker: So we are now at a big discount to oil. But more importantly, also, we are at a huge discount to diesel, especially. This means that it's firing up demand in new regions. And actually, in the longer term, it's better to have a more sound price of the product, otherwise you will have demanded.

And and they you know actually in longer term, it's better to have a more sound.

Sound price of the product otherwise you will have demand destruction.

Unnamed Speaker: In terms of the exporters and importers, we have a swap of the thrones. We have China coming back as the biggest LNG importer again after, you know, they became the biggest in 21. They implemented the zero COVID policies, which resulted in China reducing its LNG import by 22 of 20%. They are bouncing back in 23 and retaking the throne as the biggest importer for the second time. Japan has traditionally been the biggest, but Japan is firing up the nukes and also coal power plants.

In terms of the export of an importance we have as a swap of of the tranche, we have China coming back being the biggest LNG imports again after oh. They they became the biggest in 'twenty one they implemented a C or a call with policies, which resulted in China, reducing its LNG imports in 22 of 20.

And they are bouncing back.

In in 'twenty three.

And really taking the throne as the biggest importer for the second time, Japan has traditionally been the biggest but Japan.

It's firing of the nukes and also the power coal power plants. They built I believe 40 of those since the Fukushima. So so we do see that the Japan demand has been on the soft side.

Unnamed Speaker: They built, I believe, 40 of those since Fukushima. So we do see that Japanese demand has been on the soft side. But, as I will come back to, there are emerging Asian countries which are snapping up these cheaper cargoes. Last year was a year with limited new capacity being installed.

As I will come back to Theyre, all imagination countries, which is the.

Snapping up these cheaper cargos.

Last year was a year with limited new capacity being come are being installed. Although we did have our volume growth of around 3% driven by U S, particularly.

Unnamed Speaker: Although we did have a volume growth of around 3% driven by the US, particularly the restart of Freeport contributed with a lot of new volumes. This year was also a year with fairly muted export capacity being implemented. And there is some uncertainty about Arctic LNG2. So 13 million tons; half of this is about Arctic LNG2. The first frame, this is operational; they are planning to commission it during Q1. So we'll see how the Russians are managing to sell these cargoes. The experience in the crude markets, both oil and products, seems to be that the Russians are very good at finding loopholes and finding customers who are willing to buy these cargoes. So this will be one of the key questions for this year, but certainly if they are moving the cargoes, they will be very torn mileage.

The restart of the Port contributed with a lot of new volumes. This year also I are with a fairly muted the export capacity being implemented and there are some certainty about the Arctic LNG two so 13 million tonnes for the half of this is about the Arctic LNG two are the first trend.

This is operational they are planning to commissioning it during Q1, so we'll see how egg.

How are the Russians are managing to sell these cargos.

Terence from the crude markets are both the oil and politics seems to be the Russians our finance good at finding loopholes in and finding customers who are willing to buy these cargo. So this will be one of the key questions for this year, but for certainly if they are moving the cargos they will be where it on wireless intense.

Live.

Unnamed Speaker: Fragile maritime supply chains have been a big factor. That sounds like something negative, you know, but for shipping, it isn't necessarily a bad thing. We thrive on inefficiencies; inefficiencies mean typically higher tonne mileage and also maybe higher tonne time, so it means you need more ships in order to shift cargo. So we had the drought in Panama, and we still have the drought in Panama; the water levels in Gatun Lake, the main freshwater supply for the canal, this is our water escalator, which needs to be refilled with water all the time.

Fragile maritime supply chain has been a big factor that sounds like something negative.

For shipping it doesn't isn't necessarily a negative we thrive on inefficiencies inefficiencies means typically a higher tonne mileage and and also may be highest on time so it.

Means you need more ships in order to shift cargo. So we had a drop in Panama, we still have the drop in Panama their water level thing Gatun Lake that main freshwater supply for the canal. This is a water escalator, which needs to be refilled with water. All the time the water levels are still at low level, there are still jurisdiction and in a number of.

Unnamed Speaker: The water levels are still at a low level, there are still restrictions in the number of transits, and this will stay in place until at least the summer when we will see whether there is a sufficient rain season in Panama to replenish those water resources. Until the end of the year, we had similar issues with the Suez Canal there. It's not about water, it's about war, and the Houthi rebels attacking maritime traffic, and today there are no LNG carriers going through the Red Sea to utilize the Suez Canal. And, of course, this has some effect on tonne mileage, especially for Qatari volumes going all the way through the Cape of Good Hope to reach European customers rather than going the shortcut through Suez. So let's look at a bit on the export and import side.

Transits and and this will stay in place until at least the summer when we will see whether there is a sufficient rain season in Panama to replenish those water resources.

The format of the year, we had the similar issues with the Suez Canal. There, it's not about water, it's about war and whose data barrels are attacking the maritime.

Traffic and today, there are no LNG carriers going through the Red sea to utilize the Suez Canal and of course.

This has some effect on ton miles, especially for the Qatari volumes going all the way through Cape of good hope to and the.

European customers, rather than going to shortcut through Suez. So, let's look at the a bit on the export and import side.

Unnamed Speaker: As mentioned, strong growth from the US actually grew 27% in Q4 and 13% for the year, flat for Australia and Qatar, the two other major exporters. Russia is the fourth biggest exporter, with fairly flat volume export from Russia. There are no sanctions on LNG. There are some sanctions by the US and UK, which are not allowing Russian cargoes, but for the remaining countries, they are happy to take this cargo, and especially the EU, which has been boosting their imports of Russian LNG. Malaysia fairly flat, Algeria was one of the outliers last year, growing healthy through 2023. On the import side, as I mentioned, China bouncing back 16%, still a bit below the levels we've seen in 2021 prior to the COVID restriction, and now with the price of LNG being competitive, we expect China to grow quite healthy also in 2024. Japan is on a bit of a decline, and South Korea and Taiwan are fairly flat.

As mentioned stronghold from U S actually grew 27% in Q4 and.

13% 40, yeah.

Flat for Australia, and Qatar the two other major exporters in Russia is the fourth biggest export are fairly flat.

Volume exports from Russia are.

Theres no sanction on LNG, the awesome sanctioning by the U S and U K, which are not allowing a Russian cargoes, but for the remaining countries. They are happy to take these cargo and especially EU, who have been boosting their imports of Russian LNG My.

My life. They are fairly flat Algeria was one of the outliers last years, a growing healthy to 2023 on the import side as I mentioned, China bouncing back 16% still a.

A bit below the levels, we've seen in <unk> and 2021 prior to the Covid restriction and now with the price of LNG being competitive we expect China to grow quite healthy also in 2024.

Japan is on a bit of a decline.

And South Korea, Taiwan fairly flat the big or the driver you know if you follow macroeconomics, India has been enjoying a very long boom now and with prices coming down to this level. So we see strong growth in India. If you look at the Q4 growth factor half 43%, adding.

Unnamed Speaker: The big driver, if you follow macroeconomics, India has been enjoying a very long boom now, and with prices coming down to this level, we see strong growth in India. If you look at the Q4 growth factor here, 43%, adding 15% for the year. So we expect this to continue. And the rest of the world, you see very strong growth in Q4 driven, as I said, by these low prices. Europe is fairly flat, and I will cover that in more detail shortly.

15% for the year. So we expect this to continue in the rest of World you see where is loan growth in Q4, driven by this low prices Europe fairly flat and I will cover that in more detail shortly.

Unnamed Speaker: So, just to summarize the big movers and shakers, the US, growing steady, Algeria, as I mentioned, Qatar, Flat, and Egypt, where there have been issues with feed gas from Israel, given the conflict in the area. They have not been, we have had shutdowns of feed gas from Israel to Egypt liquefaction plants. There's also been domestic demand for this gas, so they've been exporting less than in the past. However, this is not that important for the shipping market. Egypt is very close to the main import nations in Europe, so it's got very low ton mileage on this voyage. Yeah, heading back to Europe. In Europe, he has been the lucky man the last two seasons.

So just to summarize the big Air Movers, and Shakers U S call instead, the Algeria as I mentioned.

Cut off flat in Egypt are where they are.

Has been issues with the feed gas from Israel, given their conflict in the area and they have not been they really have had shutdowns of feed gas for me Israel to Egypt.

Perfection plants Theres also been domestic demand for this gas so they had been exporting less than in the past. However, this is not that important for the shipping market. Egypt is very close to the main import nations in Europe. So it's a very low tonne mileage on these voyages.

Yeah heading back to Europe in Europe has been the Lucky man the last two seasons.

European LNG imports used to be at around 80 85 million tonnes. Once at the Russian started to reduce the flow of cargos of gas to Europe, you have a path to turn around very quickly to get access to this LNG cargoes and this is mostly U S.

Unnamed Speaker: European LNG imports used to be at around 80-85 million tons. However, once the Russians started to reduce the flow of gas to Europe, Europe had to turn around very quickly to get access to these LNG cargoes, and this is mostly the US where you have flexible LNG cargoes. And as I mentioned, they pushed the price all the way up to $100 per million BTU, making LNG unaffordable for emerging Asia. But with two winters in a row with fairly mild weather, Europe has been able to fill up its inventories.

Where you have flexible LNG cargoes.

They have been bidding up the price and as I mentioned, they paid the price all the way up to $100 per million Btu.

Making LNG and affordable for emerging Asia.

And and but with two winters in a row with a fairly mild weather and the.

Europe has been able to fill up at our inventories. This is also driven by what I will cover on the next slide the Manso version of demand destruction. These kind of high prices is of course affecting behavior and use of LNG. So.

Unnamed Speaker: This is also driven by what I will cover on the next slide, demand subversion or demand destruction. These kinds of high prices are, of course, affecting behavior and the use of LNG. So gas consumption in Europe has fallen off a cliff, and it's now briefly bouncing back. But as you can see on the right-hand side, inventory levels in Europe are quite healthy. We have some time still to go. Usually, the heating season lasts until the 1st of April.

<unk> consumption in Europe has fallen off a cliff.

And it's no shortly bounce bouncing back, but as you can see here on the right hand side inventory levels in Europe are quite healthy we have some time still to go usually the kind of the the season, where heating season last until first of April. So we're really drawing down this inventory and then once we are getting into spring Europe will need to fill up at it.

Unnamed Speaker: So we'll be drawing down this inventory. And then once we're getting into the spring, Europe will need to fill up its inventory levels again in order to be prepared for the next winter. So as I mentioned on the last slide, Europe had a huge demand destruction on the gas side, driven by these high prices. Demand in 2022 was down 12%.

Inventory levels again in order to be prepared.

For the next winter so as I mentioned on last slide the Yugo pad has a huge demand destruction on the gas side driven by these high prices.

<unk> la in 'twenty, two was down 12%, it's been weak in in 2023 but we do see some green shoots there on the graph on the right hand side, we have seen.

Unnamed Speaker: It's been weak in 2023, but we do see some green shoots there. On the graph on the right-hand side, we have seen European gas demand bouncing back, driven by the residential and commercial sectors, also driven by industry. But we haven't really seen it on the power side yet. So this is something we will monitor, and we do expect low prices will affect consumer behavior. Looking at emerging Asia, as I mentioned, there is a region where we see demand really bouncing back. Japan imports are on the weak side, China is up, but we do see some of these other countries, as mentioned, India, but not only India. Thailand had very strong growth last year. Bangladesh and Pakistan, which have been forced out of the market by these high prices, are now returning and buying up more cargo.

European gas demand bouncing back driven by the residential and commercial sector.

And also driven by industry, we haven't really seen it on the on the on the power side. Yet. So this is something we will monitor and we do expect low prices will affect consumer behavior.

Looking at the emerging Asia as I mentioned, there is some a region, where we see demand really bouncing back Japan imports on the weak side, China is up but we do see some of these other countries as mentioned in India, but not only India, Thailand, where just loan growth last year in Bangladesh, and Pakistan, which has been forced.

Out of the market by these high prices on our two owning and buying up more cargos.

And then the big item, which has been recently is the U S moratorium on more.

Unnamed Speaker: And then the big item which has been recently, the US moratorium on more export licenses. So the US has grown to become the biggest LNG exporter in a very short time. And actually, while exports now are at around 85 million tons, with the projects in the pipeline in the US, the US is set to almost double its exports from existing projects regardless of this decision. However, it's unfortunate that we have this situation.

Exports the licenses so U S has grown to become a.

The biggest LNG export or in a very short time and actually while exports in Ottawa at around 85 million tonnes with the projects in the pipeline in U S.

<unk> is set to almost double its exports from existing projects regardless of this decision. However, it's unfortunate that the.

We have this situation Europe is still in desperate need of getting access to more LNG to kind of.

Unnamed Speaker: Europe is still in desperate need of getting access to more LNG to kind of fill the gap from the Russian curtailment. And of course, the rest of the world is also reliant on LNG in order to force out coal. Coal consumption is huge, and if we are to do something with this, of course, renewable energy is a solution, but LNG is certainly a solution to reducing coal consumption.

Fill the gap from the Russian curtailment.

And of course, the rest of the World is also reliant on LNG in order to force out coal the.

Coal consumption is huge if we ought to do something with this of course can you believe solution, but LNG is certainly a solution to reducing the coal consumption. So there are a couple of project in U S, which has been more of a let's forget therefore F. I E. This year and we mentioned some of the the big projects as a company was passed to the Sabine pass ex.

Unnamed Speaker: So there are a couple of projects in the US which have been more or less ready for FID this year. And we mentioned some of the big projects there, Calcius Pass 2, the Sabine Pass expansion, Port Arthur expansion, Lake Charles, who had a license to export but were not allowed to renew it or extend it, so they have to apply for a new one, Commonwealth, Delfin, and Freeport Train 4. So all of these projects now are in a bit of limbo. As a former US politician said, all politics is local. This was Tip O'Neill.

Pension Port Arthur expansion like Charles who had a license to export which we're not allowed to renew it or extend it. So they have to a python you one Commonwealth Delphine and people are paying for so all of these projects now are in a bit of limbo.

As former U S politician said.

All politics is local.

One tip O'neill.

Unnamed Speaker: So this is driven by, of course, Biden has to reach out to the voters on the green side or the left side of his party in order to secure the election coming up in November. But for this project, it's unfortunate, but we do think that they will come back again, regardless of whether it's Mr. Trump or Mr. Biden who wins the election, because these are huge projects that are very important for the allies. It's very important for the economy, creating jobs, and these projects are ready to go once they get this permit from the Department of Energy to export to the countries buying the cargo. So, let's look at the maritime inefficiencies again. Yesterday I found a new word, canarly ballism.

So this is driven by of course by it and have to reach out to the wolters.

Wolters on the green side or the left side of his body in order to secure the election coming up in November.

But for this project is unfortunate we do think that they will come back again, regardless of whether it's Mr. Trump or Mr. Biden, who wins the election, because these are huge projects, which are very important for the allies. It's very important for the economy, creating jobs and these projects are ready to go.

Once they get this permit from the department of energy to export to a to the countries are buying these cargos.

So let's look at the maritime inefficiencies again so.

Yesterday I found upon your award can hardly abolish them. So this is related to the fact, we have had these issues with the first Panama Canal did what really driven down.

Unnamed Speaker: So this is related to the fact we have had these issues with First Panama Canal, the drought has really driven down the number of transit of LNG ships going via Panama. All the ships are going for the safe route, the Cape of Good Hope, as also the fees in order to skip the queue in Panama have reached new highs. We were up all the way to about $4 million to skip the queue last autumn, or actually more like winter than autumn.

The number of transit of LNG ships going via Panama, All the ships are going for a safe through its Cape of good hope as also the fees in order to skip the Q in Panama have reached new highs. We went all the way to about $4 million to skip the queue last autumn or actually more winter and autumn.

So so this has driven our ships to Gerardo go.

Unnamed Speaker: So this has driven ships to rather go via the Cape of Good Hope, where you also have certainty on your schedule. And then lastly, the Suez Canal, where all traffic has gone, given the unsure security situation there. So this has driven up Cape routing, which is, of course, good for the tonne mileage and absorption of shipping capacity. I'll get more details on the Suez Canal. Flows in the LNG market are more or less that what is being produced in Asia is being consumed in Asia. So the Australian projects are typically going to Southeast Asia, and so the swing factor tends to be the American volumes, which are flexible in nature. But there are still the Qatari.

We are Cape of good Hope, where you also have certainty on your scheduled and then lastly, and I'll add this is Suez Canal were all traffic has gone given the onshore securities situation. There. So this has driven op capable thing which of course is good for the ton mile. It's N and absorbed.

<unk> of shipping capacity.

I'll give more details on the Suez Canal of course.

Flows in a in a in a in the LNG market is more or less that what is being produced in Asia is being consumed in Asia.

Palin.

J S outgrowing typically to southeast Asia, and so the swing factor will tend to be the American volumes, which are flexible in nature.

There are still the Qatari Qatar is a big player got always exporting about 80 million ton stay will grow a lot and with the new expansion projects they have.

Unnamed Speaker: Qatar is a big player, exporting about 80 million tons. They will grow a lot with the new expansion projects they have. So they sell quite a few cargoes to Europe. And if you are going via Suez, it's a big shortcut rather than going through the Cape of Good Hope, which is the case today. Now, let's dig into the shipping market. So here we have a graph of the headline rates assessment for a modern tonnage two-stroke. And we can see on this line, the gray one being the rates achieved last year, and the dark blue, the average for the last couple of years, and then the light blue being this year so far.

So they sell quite a few cargoes to Europe and if you are going we are so yes, it's a big shortcut rather than going to the Cape of good hope, which is the case to date.

Let's dig into the shipping market. So yeah, we have a graph of the headline rates assessment for a modem tarnish two stroke and we can see on this line the gray one being are there.

<unk> achieved last year and the dark blue the average for the last couple of years and then the light blue being this year. So far so we have the seasonal softness we have seen all the older. Yes, and then the dotted line being the future of freight rates or where do you expect.

Unnamed Speaker: So we have the seasonal softness we have seen all the other years, and then the dotted line is the future freight rates. So we do expect the market to find a bottom, and then, as usual, you will have a seasonal peak. Once we are getting into, I would say, August, and September, typically, then you see a ramp up in the rate.

At the market to find a bottom and then as you surely we will have a seasonal peak.

Once we are getting into I would say August September typically and then you'll see a ramp up in the rates. So we do think that we are well positioned with constellation doing docking in Q2 and being ready in the market. Once it's ready for takeoff later in the air and and and and we could also have some some morale is held depending on the price structure of LNG.

Unnamed Speaker: So we do think that we are well positioned with Constellation doing docking in Q2 and being ready in the market once it's ready for takeoff later in the year. And we could also have some summer rallies depending on the price structure of LNG. If there is a contango, which is often the case, we will have more build-up of floating storage, and Constellation is a partial relic ship, very well suited to such a trade. Average distances. I mentioned that a lot of US cargo has been going to Europe, given Europe's desperate need to get access to LNG, which has reduced the distance being sailed. But with prices now low and more demand from Asia, and also the inefficiencies in Suez, we could see a better picture on tonne mileage going forward.

If if there is a contango, which is often the case, we will have more buildup of floating storage and constellation is are partially ship.

Very well fitted for such upgrades.

Atlas distances I mentioned, a lot of the U S cargo has been going to Europe, given europes desperate need to get access to LNG, which has been.

You said that the distance being sale, but with prices now low and more demand from Asia.

Also the inefficiencies and Suez, we could see a better picture on the ton mile issue going forward.

Unnamed Speaker: New building prices have gone up a lot, as Knut mentioned, we contracted ships when they were cheap, so we have been contracting ships back in 17-18, paying about 185 million dollars per ship. Ship price today has fallen a bit from 265 to 262, but you know if you take that number, it's an increase in the price of a ship of 80 million dollars. We have 13 ships, so that's a billion dollars in appreciation of the ships since we contracted them. So you know, we have a book equity of 860 million or so. If you add that appreciation, you are at a value-added equity of 1.65 billion.

Your billing process has gone off pallets are.

As Chris mentioned, we contracted ships when they were cheap. So we have been contracting ships back in 17 18 paying about <unk>.

Hundred and $85 million per ship share price today are falling a bit from 265 to 262, but you know if you. If you take that number it's a it's a increase in the price of a ship of $80 million.

We have 13 ships. So that's $1 billion in appreciation of the ships since we contracted them here. So you know we have a book equity of $860 million. So if you add that appreciation you all at the value of adjusted equity of 165 billion and all of our market cap today.

Unnamed Speaker: And our market cap today is around 1.5 billion. So we do still think we have a very good kind of net asset value protecting our assets and also backed by the charter backing. So these kind of high prices on the new building side also means that you need to have a higher rate in order to defend such an investment. Keep in mind interest rates have gone from zero to around 4% on long-term interest rates, which means that in order to build a new ship, contract a new ship and give a rate for a long-term charter, we see that rates are at around $100,000 per day, which is substantially higher than the approximate $80,000 we achieved last year.

It's around one 5 billion. So we do still think we have a very good kind of net asset value of protecting our assets and also backed by that the charter backlog I mentioned, so these kind of high prices on the new building side.

Also it means that you need to have a higher rate in order to defend such investment keep in mind interest that's gone from zero to also stabilize now today at around 4% on long term interest rates, which means that in order to build a new ship contract a new ship in and gave a rate for a long term charter we see that the rates are.

All at a $100000 per day, which is substantially higher than the approximate 80000, we achieved last.

Last year. So we do think we will find good opportunities to re contract of tall niche once it come open.

Unnamed Speaker: So we do think we will find good opportunities to recontract or tarnish once it comes open at better rates. We have seen softness in the shorter-term rates, and we actually now have a contango structure in the term rates where longer-term charters are more expensive than shorter-term ones, reflecting the fact that we have a lot of ships for delivery this year with a bit muted volume growth on the export side, but which should give us a lot of opportunities to recontract ships, as I show on this next slide. The contracting of ships is, of course, tailing off. The high prices and, of course, the rather big order book already mean that very few people are contracting merely on speculation. Out of this order book of around 300 ships, 93 percent is contracted for a long-term contract. And we see little of any speculative new building contracting at all.

At better rates.

We have seen softness in there.

Shorter term rates and we actually don't all have a contango structure in the thermal as well longer term charters are more expensive than shorter term.

And the fact that we have a lot of ships will deliver this year with a bit muted the volume growth on the export side, but you know, which should give us a lot of opportunities to a two rig contract ships because as I show on this next slide.

Contracting of ships is of course tailing off the high prices and of course, a rather big order books already means that very few people are contracting on speculation out of this order book of around 300 chips, 93% is contracted towards our long term con.

Track and we see.

Little of and any.

Speculative new building contracting at all and we do see the number of ships delivering tailing off.

Unnamed Speaker: And we do see the number of ships for delivering tailings off, which fits very well with the export story where a lot of volumes are coming to the market from 2025, 2026, 2027 and onwards. And once we have this moratorium in the US, we have a lot of projects ready to be FID'd, which I think will happen, where startup of these volumes will come from 2027, 2028, 2029, when we also do have quite a lot of ships open. So another thing I've been talking about for more than six years is the technological change. So when we contracted ships back in 1718, we contracted the newest type of ships. It's a two-stroke engine; it's a super efficient ship.

Which fits very well with all soda export story, where a lot of volumes are coming to the market from 'twenty five 'twenty six 'twenty seven and onwards and once we have this small out of them and you asked whether we have a lot of projects ready to be F. I did which I think will happen.

As a startup of these volumes will come from 27 28 29. When we also do have quite a lot of ships open.

So another thing I've been talking about now for Ah, Yeah, close more than six years.

Is that the technology change so when we contracted ships back in 17 18, we contracted the newest type of ships. Its a two stroke engine is a super efficient ships at.

Unnamed Speaker: It's about 60% more fuel efficient than the old steam turbine generation of ships. Those ships were contracted typically, you know, in the 1990s into 2000 against a 20 year time charter, 20 year, maybe even 25 year time charter. And these ships are now rolling off those legacy contracts. And you know, given the inefficiency of these ships, given the poor environmental profile of the ships, we see a few charterers extending these ships. So we have about 24 steam turbine ships expected to be redelivered from a long-term contract this year, 25 next year, and 12 there. So these replacements of old inefficient ships will result in more opportunities for modern tonnage in terms of fleet renewal by the charter. So, as I mentioned, it was 46-year-old ships being scrapped last year, six ships in total. The year before, when the market was super hot, it was seven ships. We will be coming into our age now where we will have double digits of scrapping of older tonnage because it's overdue.

About 60% more fuel efficient than the old steam turbine generation of ships.

Those ships were contracted typically in our in the 19 nineties into 2000 against a 20 year time charter frankly are maybe even 25 year time charter and these ships are now rolling.

Rolling off those legacy contracts and you know given the inefficiency of the ships given the poor environmental.

We'll file off the ships, we see a few charters extending these ships. So we have about 24 steam turbine ships.

Expected to be redelivered from a long term contract. This year 25 next year trial. There. So this replacement of our old inefficient ships will result in more opportunities for modern tonnage in terms of fleet renewal by the charters So as I mentioned.

It was a 46 year old ships being scrapped last year six ship in total they are before it was one in 'twenty one when the market was Super Hot It was seven ships, we will be coming into our age now where we will have double digit of scrapping of older tonnage because it's overdue and the only reason it hasn't.

Unnamed Speaker: The only reason it hasn't happened is that these ships have been on long-term charters and are not in the spot market. And then let's look at the export market. I mentioned a bit muted on the growth this year given the uncertainty about Arctic LNG2, and then from 2025, 2026, 2027, we will have a big growth in this export market. There are 70 million tons of ready project also for FID. The Northfield Qatar project will, of course, go ahead regardless of what Biden is doing in the U.S., and they might even add further volumes.

Happen is that these ships had been on long term charters and not being in the spot market.

And and then.

Let's look at the export market I mentioned a bit muted on the growth this year given.

The uncertainty about Arctic LNG, two and then from 'twenty five 'twenty six 'twenty seven we will have a big out of this export market.

There are 70 million ton of Red The project also for F. I D. Their Northfield, Qatar project will of course go ahead, regardless of what the Biden is doing in the U S and I might even add further volumes.

Unnamed Speaker: And then we do have this project in the U.S. in limbo where we need to have a resolution on this moratorium before these projects can be greenlighted and add further growth to the market. So before concluding, we will come with our annual ESG report later, probably around April. So we have an annual ESG report with a lot of measures, but we have also been part of the CDP, Carbon Disclosure Project, where we file for a lot of data and get a score. We got our 23 results yesterday, February 6th, and we've been ticked up from B- to B.

And then we do have this project in the U S. In limbo, where we need to have a resolution on this more auto room before these projects can be greenlighted and adding further go to the market so before concluding.

Well, we'll come with our annual ESG report later, probably around April. So we have annual ESG report with a lot of measures, but we're also.

<unk> been part of the CDP carbon disclosure project, where we are filing for Oh, all of daytime getting a score we got wall or are trying to treat yourself yesterday February 6th.

And we have been ticked up from B minus to B. So I think that's a pretty good result for us given the lean organization. We have in terms of reporting on all these measures so before for wig head for the Q&A session I, just going to repeat the main highlights revenues 19.

Unnamed Speaker: So I think that's a pretty good result for us, given the lean organization we have in terms of reporting on all these measures. So before we head for the Q&A session, I'm just going to repeat the main highlights, revenues of 97.2 million, in line with the guidance we are delivering. 37.8 million adjusted net income, which is the most applicable number which gives earnings per share adjusted of 70 cents.

$7 2 million in line with guidance, we are delivering.

$37 8 million adjusted net income, which is the most applicable number which gives our earnings per share adjusted of 70 cents. We are a bit in a softer market now which is no surprise, we will be ready for the spot market with flex constellation in the second quarter. After we have been carried out right.

Unnamed Speaker: We are a bit in a softer market now, which is no surprise. We will be ready for the spot market with Flex Constellation in the second quarter after we have carried out the dry docking offer. We're happy to have a two-year extension of Resolute to 27, adding further backlog to our fleet.

Docking offer we're happy to have our two year extension of Tesla 27, adding further backlog to our fleet and then we are guiding similar numbers for Q1 this year as last year, a bit softer because of the the spot market the affecting the variable higher time charter and then.

Unnamed Speaker: And then we are guiding similar numbers for Q1 this year as last year, a bit softer because of the spot market affecting the variable hire time charter. And then we might do some docking in Q1 or most of it we do expect to take place in Q2. So with good numbers and a healthy financial position, we are declaring a quarterly dividend of 75 cents, bringing it up to 3.25 for the year.

We might do some docking in Q1 or or or most of it we do expect to take place in Q2, so with a good numbers healthy financial position, we are declaring a quarterly dividend 75 cents, bringing it up to three 125 40, yeah and.

Unnamed Speaker: And that should give a yield of probably 12% now. Okay, great. So, Knut, let's see if we have any questions. Yes, thank you for the questions that you have sent in.

That should give a yield of oh, 11th is probably 12% now [laughter]. Okay. That's so can it.

Let's see if we have some questions. Yes. Thank you for the for the questions that you have something and I think we start off again with the woman knocked off from Jefferies.

Unnamed Speaker: And I think we start off again with Omar Nokta from Jefferies, and there are a number of questions regarding the Red Sea and also the Panama Canal. So from Omar, these restrictions, are they enough to offset the new building deliveries and lead to a tighter market? I think for the Red Sea, it mostly affects Qatar.

And Theres a number of questions regarding.

The Red Sea and also Panama Canal.

And so from Omar.

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These restrictions are they enough to offset the new building deliveries in and lead to a tighter market.

I can't put a N C. It's mostly affect Qatar, Qatar, they might get a bit short on shipping and need to re letting some ships in order to.

Unnamed Speaker: Qatar might get a bit short of shipping and need to re-let some ships in order to have sufficient capacity to move the Qatari volumes to Europe. So I think it depends a bit more on the trading pattern. Who is going to be the major puller of cargoes this year? Is Europe going to be desperate to be the buyer of first and last resort? Or is Europe going to stay a bit more back now and leave some more room for the Asian countries?

To have sufficient capacity to move the Qatari volumes.

Volumes to Europe, So I think it depends a bit more on the trading pattern, who is going to be the major furlough of cargoes. This year is you are going to be a desperate to be the buyer of first and last that I saw all Europe.

They are a bit more back now and leave some more room for the Asian countries that will affect the market more Panama.

Unnamed Speaker: That will affect the market more. It's never been that important for LNG. A lot of the LNG ships route via the Cape of Good Hope anyway. So we've been frank about the fact that this year we do see a bit more ships than molecules. But on the other hand, we also do expect that, finally, we will have scrapping. Usually, people don't scrap their ships in a good market. We have had very good markets, 21, 22, 23.

It's never been that important for LNG a lot of the LNG ships. They they they route via Cape of good hope anyway. So I am we been frankly about the fact that this year, we we do see a bit more ships, then then molecules, but though on the other hand, we also do expect that finally, we will have.

Scrapping you know usually people don't scrap the ships in a good market. We have had very good the market is 'twenty one 'twenty two 'twenty three it doesn't give a lot of incentives to scrap a ship, but keep in mind. When these ships are getting older.

Unnamed Speaker: It doesn't give a lot of incentives to scrap a ship. But keep in mind when these ships are getting older, and you know, they're already a bit outdated in technology. Are you then willing to commit a lot of money to dry dock those ships? And typically, you have to replace a lot of these older systems.

And you know they all are they a bit outdated on their technology are you then willing to commit a lot of more near to Drydock. Those ships and typically you have to replace a lot of these older systems. So so I think that.

Unnamed Speaker: So I think that will be a bit more important. I think also that the price curve for gas will be important because if you have a contango structure in the price curve for gas or LNG, you will have floating storage, which typically any year can take out 40, 50 ships off the fleet in a kind of this contango trade. So that I think is probably a more important driver, and following up on the Red Sea. The insurance rates have increased if you're trading in that area. And also, there may be other costs associated with being there. How is that affecting Flex?

That will be a bit more important I think also that the price curve off.

Gas will be important.

Because if you have a contango structure in the price curve off of gas. So LNG you will have floating storage, which typically any year can take out 40 50 ships of the fleet.

In kind of this contango trade so that.

And I think it's a probably a more important driver.

Following up on the Red Sea.

The insurance rates have increased if you're trading in that area.

And also the there may be other costs associated with being there how is that affecting flex yeah.

Unnamed Speaker: Yeah, right now, there is not a single LNG ship in the Red Sea. But you know, before everything blew up, we also had ships going through that area, as the situation at that time was considered to be a moderate risk for ships without a link to Israel. But that drove up the price of the insurance. So typically, you need war risk insurance in order to go through that area. The biggest provider of war risk is the Norwegian War Risk Fund.

Right now it's it's it's no not a single LNG ship in a in a in a in the Red Sea, but you know before everything blew up.

We have also had the ships going through that area as the situation at that time was.

Consider to be moderate risk.

Four ships without the linked to his fan.

So but that drove up the price of the ensure them. So typically you need a walk us control ones in order to go through that area are the biggest provider of war risk is the Norwegian war risk funds.

Unnamed Speaker: And the price we saw for the price of getting insurance to go through that area went up 10 times. Today, it's probably a lot more, but we haven't asked for a quote because we haven't had any instructions to go through that area. However, in our time charter, it's basically, we are a private driver. So we show up with our ship and a crew. And under a time charter, it's the charterer who is responsible for the routing and instruction to the ships where to trade. That also means that the charterer is responsible for taking the cost associated with that trade. So if the charter elects to go through Suez, there will be a Suez tariff to pay, which they will have to pocket. And they will also have to cover the war risk associated with that. So that is something they will put into account when deciding on the ship. The same goes with Panama.

And the price we saw on the pricing of getting I insurance to go through that area went up 10 times today, it's a it's probably a lot more but we haven't asked for a quote because we haven't had any instruction to go.

To that area. However, in all time charter. It's it's basically we are a private driver. So we show up with a ship.

And the crew and.

And under the time charter, it's the charter who is responsible for Duluth thing and the instruction to the ships were to two eight that also means that as charter is responsible for taking the cost associated with that trade. So if the charter elect to go through Suez there will be at Suez tariff to pay with.

They will have to pocket and they will also have to cover their war risk associated with that so that is something they will put into account when instructing the ship. The same goes with Panama, if they go to Panama and they paid $3 million in order to skip the Q, we are not paying that it's their inflection how to trade the ship they have to carry all the cost associated.

Unnamed Speaker: If they go to Panama, and they pay $3 million in order to skip the queue, we are not paying that. It's their instruction on how to trade a ship. They have to carry all the costs associated with that, and from this year, this also includes the EU ETS. So it's the emission trading system of the European Union that started to be implemented for the maritime sector this year, which means that if we take a ship into Europe, we will need to buy carbon quotas for the emissions associated with that trade. So typically, if you take US cargo to Europe, you will pay carbon emissions for 50% of the route because it's one ballast leg and one laden leg.

With that and form this year. This also includes the EU ETS that so it's the emission trading system of European Union started to be implemented for the maritime sector. This year, which means that if we take a ship into Europe, we will need to buy a carbon.

Quote us for the emission associated with that trade. So typically if you take a U S cargo through Europe, you will pay a carbon emission for 50% of the route because it's one ballast the leg and one laden leg.

Unnamed Speaker: But again, this is a cost of the trade. We pass this cost on to our charters as they are the ones deciding where the ship goes. And of course, this has created some issues in relation to the Red Sea, because our journalists typically ask you, are you sending your ship to the Red Sea? But under a time charter, and every single voyage in LNG shipping is a time charter, regardless if that's a spot voyage, a short voyage, a term charter, it's a time charter. And under a time charter, the charterer is the one instructing the ship. We will have to follow those instructions.

But again this is a cost of the trade we pass these costs through our charters as they are the ones deciding where the ship goes and of course. This is great. There are some some issues in relation to the Red Sea because John list. They typically ask you are you sending you ship to the Red Sea and but you know under a time charter on air.

Every single voyage in LNG shipping is a time charter regardless, if that's a spot voyage are short voyage attempt charter, it's a time charter and under a time charter charter is the one inflicting the ship we will have to follow them at those inflection we have a contractual obligation to do so however.

Unnamed Speaker: We have a contractual obligation to do so. However, in our standard time charter, there is certain provision in relation to safety, so the master has to assess the situation, together with us, whether it's safe to comply with those instructions. If it's not, then, of course, we can refuse.

In our standard time charter there is certain provision in relation to safety. So the master has to assess the situation together with us whether it's safe to comply.

Comply with those inflections. If it's not then of course, we can redirect but you know that also opens you up to litigation what is safe and what is not safe, it's a bit of ambiguity and we rely on advice form.

Unnamed Speaker: But you know, that also opens you up to litigation, what is safe and what is not safe. There is a bit of ambiguity. And we rely on advice from outside advisors, as well as the people writing the war risk insurance, in order to make that assessment.

Outside of advisers as well as the people why things are war risk insurance.

In order to make that assessment.

Unnamed Speaker: And while we are at Kost, there's a question here on demand for crew with the big new order book and deliveries of new buildings in the coming years. How do you see demand for crew and the situation for Flex? Yes, it's a very relevant question because, off the top of my head, there are about 1.6 million seafarers in the world. A lot of this used to be Russian crew, which these days there are certain restrictions on those, and a lot of that crew base were LNG officers. So that means that you need to replace, you know, in some instances, that crew because, you know, you might not be able to pay them. So that has also created some issues. You have Ukrainians, which is also a maritime nation where a lot of Ukrainians have elected to stay at home and fight the war rather than be at sea.

And while well cost there's a question here on the demand for crew with the big New order.

Order book and deliveries of new buildings in the coming years, how do you see demand for crew and the situation Publix has a.

It's a very relevant question because.

Top of my head that was about $1 6 million seafarers in the world.

A lot of this used to be rushing through which these days.

Had there are certainly a restriction on those in a lot of that.

Our crew base, where LNG offices, so that means that you need to replace.

In some instances that through because you know you might not be able to pay them.

So that has also created some issues you have acquaintance, which is also a matter of termination where a lot of Ukrainians have elected to auto stay at home and fight the war rather than than being etsy.

Unnamed Speaker: So yes, it's not that easy. However, the LNG business is maybe the most technical, sophisticated part of the shipping industry, maybe together with container ships. So that means you will typically always be able to attract talent for this business, which means basically, you need to poach people, the best people from the tanker space or the LPG space. So basically, you're passing on the problems.

So yes, it's a it's it's it's not that easy. However, you know LNG business is maybe the most technically sophisticated path off theyre shaping our industry, maybe together with container ships. So that means you will typically always be able to attract talent for this.

Business, which means basically we need to poach people the best people from the tanker space or the LPG space. So basically you're passing on the problems and at the bottom of the sector. You typically have small drybulk. So so then you cascading the problem Don and yes.

Unnamed Speaker: And at the bottom of the sector, you typically have small rivals. So you're cascading the problem down. And yes, it's getting harder to get people. LNG will always be able to find people.

It's getting harder to get people LNG will always be able to to find people, but the but you know these are sophisticated chips you cannot let everybody just run these ships because theres a lot of technology in Egypt. So it's getting harder we are able to do it we try to retain or true we try to be a good employer so that people.

Unnamed Speaker: But you know, these are sophisticated ships; you cannot let everybody just run these ships because there's a lot of technology in these ships. So it's getting harder, but we are able to do it, we try to retain our crew, and we try to be a good employer, so people want to sail with FlexLNG. And we have questions from BTIG, and they're related to Flex Constellation and the rechartering options and alternatives. And what's your preference?

You'll want to sell with a flex LNG.

And we have a question from BTG and is related to flex constellation and.

The re chartering or options and alternatives and what's your preference.

Unnamed Speaker: This is Greg. This is Greg. Good to see you, Greg.

Greg you're it's Greg here.

See you Greg here.

Unnamed Speaker: Rechartering opportunities. Let's see. We need to get a kind of firm re-delivery date. But our plan is that once we get back to Docker and market her, we've already been around talking to people. If we had a contract, we would, of course, announce that. So given the nature of this business and the name of the company, we are flexible. We are open to doing shorter, longer, and medium-term contracts. We really need to see what the economics is. And then if it makes sense, we are open to fixing long term. But if we don't get the numbers we want, we are happy to trade a ship back again in the spot market. We've been out of it for some time now, and I have to say we missed out on action.

He is shopping opportunities, let's say.

Where we need to get a kind of affirm our re delivery date, then but our plan is to once we get that back to the doctor in market, where we already had been around talking to people. We are if we have a contract we would of course on announced us. So so given you know the nature of this business and the name of the.

Tony we're flexible we're open to do shorter or longer medium term, we really need to see what is the economics and then if it makes sense to really open to fix long, but if we don't get the numbers. We want we are happy to trade the ship back again in the spot market. We have been out of it for some time now and I have to say we missed action.

Unnamed Speaker: But we are super comfortable with that. We have 94% coverage for this year, so we can afford to have our ship on the spot market if we deem that to be more attractive than finding a term date. Then there are a number of questions on the EU ETS. How are we prepared?

But that the you know we are super comfortable but that with 94% coverage for this year. So we can afford to have our ship in the spot market, if we deem that to be more attractive than finding a term deal.

Then there's a number of question on the EU ETS.

How are we prepared how is that a is there any cost for us.

Unnamed Speaker: How is that? Is there any cost for us? Yeah, I think I already covered that. It's part of the time charter logic. So the charterer instructing the ship, if they're instructing the ship to go into the EU, that is associated with the cost of trade, which is the EU ETS. So we have amended our time charter so that they typically either they will buy the carbon quotas and surrender them to us, and we will surrender them to the EU, or we will buy them for the charter and send them a bill for those carbon emissions and then surrender them to the For us, it's not a cost. It's a pass-on to the charters. And, of course, in the end, they need to pass that cost on to somebody, and that is Mr. Consumer. So there's no tax without any cost.

I think I already covered as part of the time charter logic. So are the charter instructing them if they're inspecting the ship to go into your that is associated with cost of trade, which is the U S. So we have amended our time charter.

Two where kind of we will typically they either they will buy the carbon are both us and surrendered to Austin, we will surrender them to ear or we buy them for the charter and send them a bill for those carbon emissions and then sort of another theory.

It's not of course, it's a pass on to.

Two the charters and of course, our Indiana, they need to pass that cost to somebody and that is Mr. Consumer. So there's no tax without any cost. So in the end of the day, it's the consumer paying this tax.

Unnamed Speaker: So at the end of the day, it's the consumer paying this tax, not us. Then we're transitioning over to business development and capital allocation. So maybe we'll start with the growth questions. How do you plan to grow Flex LNG beyond the $30 investment? Yeah, we've had this question for some time.

That's not us.

Done with segue going over to business development and capital allocation.

So maybe we'll start with the with the growth of the questions. How you how do you plan to grow flex LNG beyond the 13 vessels.

It's a we have had this question now for some time.

Unnamed Speaker: You know, we're looking at the market, but you know, Stewart's of the shareholder's capital, you know, if we, if we contract a ship today, if we're super lucky, maybe we get a ship in 27, but you know, the slot availability is now getting into 28. So that means that we are spending, let's say, $262 million today to get a ship in 2028. So we are not seeing that money for four years. It's not the price, it's not 262 because, you know, we need to have supervision. We might need to draw a loan, a building loan with a bank, which needs an interest rate. The interest rate is 4%. They might want a margin of 2%, so that's 6%. So once you're taking that into account,

We're looking at the market birthday in a way off.

Curious off the shareholders' capital and our fear if a contract is shipped today.

And if we're super Lucky, maybe we get the shipping 27, but they know their slots availability are now getting into 28. So that means that we are spending, let's say 262 million today to get the shipping 28, so it's for whether or not we are not seeing that money for four years.

It's not the price is not 262, because you know we need to have supervision, we might need to do the oil alone or building loan with a bank, which needs a interest rate interest rate is 4% they might want the margin, 2%. So at 6%. So once you are taking that into account.

Unnamed Speaker: You know, the cost of that chip is not 262, it's maybe 285 or so. That means that, hmm, is that a better use of cash than paying dividends? You know, so far, we haven't been convinced that it's better to spend that much money on new ships, so we'd rather focus on the ships we have. We have one ship now open in Q2. We have Flex LNG fully open in Q27.

The cost of that chip is not 262, it's maybe at 285 or so that means that hmm is that a better yourself all cash than paying dividends.

So far we haven't been convinced that its better to spend that much money on new ships. So we'd rather focus on the ships. We have we have one ship now open in Q2, we have flex Ranger fully open in 'twenty seven.

Unnamed Speaker: We might have some ships open in 28, 29, you know, so why not focus on the ships we have open 27, 28 rather than splashing out all this money on new ships? So we are not there to pursue growth because Knut and I can be happy with having a bigger fleet. Our number one, number two, and number three focus is return on equity, return of that money to shareholders, and dividends. We're not going to pursue growth just to be big. We'd rather be big on dividends. And there's a question related to that on paying dividends versus buying back our own share. Yeah. How do you look at share buybacks? Yeah, we've done that in the past. So we did this; it was the end of 2020 into early 21. So we bought back about a million shares at that time because we deemed it very attractive. Haven't; I'll have to check the stock price after the webcast and see.

We might have some ships opening 28, 29 and O. So why not focus on the ships. We have opened 27 28, rather than splashing out all this morning ownership. So we.

We are not there to pursue growth because gluten I can be here and I'm happy with having a bigger fleet all number one number two and number three focus is return on equity.

None of that money to shareholders through dividends and we're not going to pursue growth just to be big we ought to be a big on dividends.

And then there's a question related to that on paying dividends versus buying back.

Oh sure Yeah, how do you look at the share buybacks, yeah, we have done it in the past. So we did this who I will say.

End of 'twenty 'twenty into 'twenty one.

Bought back about a million shares at that time, we because we deemed it a very attractive.

Haven't and have to check this stock price after the webcast and CSO.

We are open to do that if we feel our stock is getting.

Too much suffering a because of sentiment you we might we might elect to buy back some shares for sure. So so we're open to that could.

Could be it could be an alternative not ruling it out but for this quarter. We are focusing now on paying a dividend and let's see what happens so it really depends on where we see the best use of the company's cash.

Unnamed Speaker: So, you know, we're open to doing that if we feel the stock is getting, to focus on, And you mentioned growth for new buildings. Richard Diamond from Castlewood Capital asks, is there any room for industry consolidation? And would you consider a NAV to NAV acquisition? Hey, yes, Richard. Hi to you. I hope you have a good time in Dallas.

And you mentioned growth through new buildings.

Diamond from Kosovo capital asks is there any room for industry consolidation and would you consider a enough to know of acquisition.

Hey, yes, Richard the I too I hope you have a good time in Dallas.

Yeah of course, we have said for many many years. We are certainly open for constellation. We think there is a lot of constellation of opportunities because it's quite fragmented on the owner side a lot of Oh actually the vast majority of LNG shipping companies are privates, where.

Unnamed Speaker: Yeah, of course, we have said for many, many years that we are certainly open to consolation. We think there are a lot of consolation opportunities because it's quite fragmented on the owner side. A lot of, or actually the vast majority of LNG shipping companies are private, where you're in the public domain. So we think it could make sense to have a bigger public vehicle that is more relevant and interesting for especially bigger institutional shareholders. But you know, we don't want to go to bed with strangers; we want to go to bed with people who share the same values, philosophy, ethics, and also the fleet in terms of having a modern efficient fleet. We don't see any value in emerging with somebody who has a lot of steam tonnage. So we need to find all those parameters so that we can have a marriage rather than a one-night stand. And then there is Is it technically possible?

A few in the public domain. So we think it could make sense to have a bigger public vehicle make it more relevant and interesting for especially bigger institutional shareholders, but you know we don't want to go to bed with strangers, we want to go to bed with people we had share the same values philosophy.

The ethics and also the fleets in terms of having a modern and efficient fleet, we don't see any value in and merging with somebody who has a lot of steam tonnage. So so we need to find all those parameters. So that we can have a oh I imagine so rather than a one night stand.

And then a question on reinvestment in our existing fleet.

And then particularly on the air lubrication system is a technical possible is it economically sensible to do that.

Unnamed Speaker: Is it economically sensible to do that? Air lubrication has been something that has been coming up in the last couple of years. So I'll just give you a highlight of what that is.

And lubrication has been something that has been coming off the last couple of years. So just give you a highlight of what that is it's basically you are putting a compressor ownership and you're making small horse now holds under the hood.

Unnamed Speaker: It's basically you are putting a compressor on a ship and you're making small holes under the hull. And that compressor is taking air and compressing it, and it's creating bubbles under the hull. So the theory behind this is that these bubbles under the hull are going to reduce the draft when you're going through water. But, of course, ships are going through water. It creates a lot of resistance.

And that's a that's a compressor is taking it and compressing it and it's creating bubbles under the hull. So the theory behind this is this burst under the hull is going to reduce the draft when youre going through water of course ships are going through water. It creates a lot of resistance.

Unnamed Speaker: And if you can reduce that drag, you could potentially then either save fuel or reduce or increase speed. I think for our ships, they are very modern and efficient. So when we looked at it when we contracted, we weren't totally convinced. And as far as we understand, we did the right choice because the first generation of air lubrication system has not lived up to the promise. The makers of these systems are saying that the second generation is a lot better. We'll see when we get the data.

And if you can reduce that drag you could.

Potentially than either save fuel or reduce or increase speed and I think for all ships. They are very modern and efficient. So we looked at it when we contract it we werent totally convinced and as far as we understand we did the right choice because the first generation of air lubrication system has not lived up to.

Two the promises.

They make yourself. These systems are saying that the second generation is a lot better let's see when we get the data.

Unnamed Speaker: And, you know, a lot of ships today are being built with this system. On our ships, because the efficiency of the engine is about 50-52% thermal efficiency, that means that at natural boiler speed, we still have a very high speed of 17.5-18 knots. So we don't really need more speed. If you add this, you might go... And then, but you also need to utilize natural boiler speed, so, you know... Putting this on and getting like a turbo boost going from 80 to 90 knots doesn't really make a lot of sense. On older ships, it could make sense as part of your strategy to improve your carbon emission indicator because your ship then, if you have a tri-fuel or so, you have a speed of 15 knots, and you need to force boil-off in order to go quicker. If you're adding this, you get higher speed.

And you know a lot of ships today are being built with the system.

All of our ships.

Of course, the efficiency of the engine is like 50 52 per cent thermal efficiency that means that all natural boiler speed, we still have a very high speed of 17 and a half to 18, not so we don't really need more speed.

If you add this the work it might goes and then but you also need to utilize natural boil off speed. So you know.

Putting this on and getting like a tubal from going from 18 to 19 loss doesn't really make a lot of sense on older ships. It could make sense as part of your strategy to improve your carbon emission indicator because my might Youll ship. Then if you have a five year loss over here you have a speed of 15 nordson.

You need to force boil off in order to go quicker if you're adding this you'll get the highest speeds and so then it makes more sense to put it on the older ship. However.

Unnamed Speaker: So then it makes more sense to put it on an older ship. However... On older ships, you might not want to invest that much money because it's less technically efficient. So, but that said, we've seen this happening also on the retrofit side; it's quite easy to retrofit the air lubrication system. We saw this on our 10 year tri-fuel recently, where they put this on while she was doing a 10 year special survey. So it's open, but we are not considering it at the moment, but down the road, if the price of carbon is continuing to increase, if the carbon emission system is worldwide, where you have to pay for it, and you get a more monetary incentive to reduce emissions, then we might consider it, but certainly not before these ships do a 10 year special.

On the older ships, you might not want to invest that much money because it's a less technical efficient so but that said we've seen this happening also on the retrofit side, it's quite easy to retrofit the air lubrication system, we've seen it on a 10 year Typhoon recently, where they put this on while she was doing or 10 years.

Special survey.

So it's open but we are not considering at the moment, but down the road if price of carbon is continuing to increase if the carbon emission system.

It's worldwide the way you have to pay for it and you get a more monetary incentives to reduce our emissions then we might consider it but certainly not before these ships are doing 10 year Special survey.

Unnamed Speaker: I think we'll round off with the last question. And that's more of a tip to retail investors that want to follow the daily development in the LNG spot rates. And the question is, if the BLNG2, on the Baltics, quoted on CME, is a good proxy for our open positions or not, Yeah, it's a bit of a problem that there's very...

I think we will round off with the last question and that's more of a tips to retail investors. They want to follow the daily development in the LNG spot rates and the question is if.

And to be LNG too.

On Baltics.

I quoted on CME, if that is a good proxy for our open positions are or are there other.

Yeah, it's a bit of a problem this that are elsewhere.