Q1 2024 FLEX LNG Ltd Earnings Call
It's from the end of Q1 'twenty five to end of Q1, 'twenty seven and there is a further option had until Q1 'twenty 'twenty nine which we do expect will be utilized.
Additionally, our tenure, which have charter flex endeavor now for getting close to three yes, actually I was slightly more than three years.
Extended this contract which has been extended also in the past extending this contract now by 500 days from Q3 of 2030 to a Q1 'twenty two 'twenty 32. So this is now the second longest contract we have in our portfolio.
And lastly, we also have secured a contract for flex constellation on new contract. This is the ship you has all the picture of the funnel on the front page. We had this ship on a close to three year contract starting in 'twenty. One she was redelivered.
In March from that charter, we took it into a dry dock and traded her Boston and and we were able to find a 10 months firm charter beginning in May and which takes this ship until end of Q1 2025, and we're all sort of charter has the option to take that.
Ship until 'twenty 'twenty six as we have said in the past, which we also said in our Q4.
Presentation back in February we were a bit hmm cautious.
Of course, you said in terms of the market. There is a lot of ships for delivery. This year, while the number of molecules coming through the market is on the low side. So the balance looks a bit in favor of charters Autozone owners and we therefore were happy to find a good contract forklift flex constellation taking out of the spot market for this year.
And this year, we have two dry dockings, the sister ships of constellation and courageous as I mentioned with two constellation into Doc end of March.
Speaker Change: Finalize that according to plan and budget and all we have her sister ship flex courageous doing a similar exercise she's out of dock and we're doing the final modification and expect to have the ship back in operation and back on D C and of mate.
Q2 is the soft this quarter due to seasonality. So we do expect our time charter equivalent earnings to be reduced slightly in Q2, which has been the norm.
Speaker Change: Since we started this company we expect this our average rates to be around 72 to 74000 as we do have one ship on variable higher charter and we also had constellation exposed to the spot market for a short period of time in Q2, and thus revenues with two shifts out of Drydocking.
Speaker Change: The spot market as mentioned, we expect revenues to be.
Speaker Change: Close to 85 million for Q2.
Speaker Change: Once again the board is pleased to announce our 75 cents per share dividend for the quarter, we have changed a bit how we are paying out the dividend we're paying it out from contributed surplus which might have an effect from some of our shareholders in terms of dividend taxation. This dip.
Speaker Change: Ends on where you are invested in any form.
Speaker Change: It means that now the last four quarters, we have paid out the dividend of $3 12, and half cents per share implying a yield of around 11%. The stock was up a bit here in Oslo. This morning, It's now up about 1% however liquidity in the Norwegian market is fairly limited as most people.
Speaker Change: We're investing in this company is doing that in U S and U S is yet to open open up snow in 25 minutes and we will see how the market react in any case, we are in a very strong financial position. We have added more contract backlog than we have consumed this year and these factors all support.
Speaker Change: Our dividend capacity and I will come back to the dividend in more detail shortly.
Speaker Change: Just to touch upon the guiding as mentioned, we delivered $90 2 million, we guided the revenues of around 90, adjusted EBITDA came in slightly higher than the guiding we guided approximately $70 million delivered 78.6 and also the T. C. In line with guidance as mentioned Q2 is the softest quarter.
Speaker Change: We also have two ships in Drydock for this quarter. So we expect slightly lower.
Speaker Change: Revenues and adjusted EBITDA for that quarter, and then typically in our you know in Q3, we will have all ships back in operation that tend to be a better quarter.
Speaker Change: <unk> the ship we have on our variable are higher and usually Q4 is the strongest quarter as we are heading into the winter season, where demand is speaking.
Speaker Change: Two ships in Drydock and both of these are according to schedule and budget. We expect the capex related to this drydocking to be around 5 million and that 5 million will then be at.
Speaker Change: Depreciated over the five year docking cycles about a million dollars a year in depreciation from this.
Speaker Change: Drydocking.
Speaker Change: Having a look at the ships constellation here on the left hand side and then courageous when she was in Doc Doc. She is now built to the ulcer alongside Kai on the odd where we're doing the final preparation to take them out to sea and back on T. C end of May.
Speaker Change: Looking at our fleet portfolio today, we are still at 50 S of minimum charter backlog and there is a couple of options attached there. We do expect most of the options to be declared which will then bring the charter backlog.
Speaker Change: Closer probably to 69 years and the 50 S minimum.
Speaker Change:
Speaker Change: As you can see we have ships coming off in transitory tree and ever recently extended to 2032 vigilant last year was extended to 2031, and we have two ships with a supermajor maturing 'twenty 'twenty nine.
Speaker Change: We have a freedom also with a supermajor maturing 27, both where the charter has the option to extend that chip to twenty-nine resolute and courageous raised less I mentioned extended from Q1 'twenty five to Q1 'twenty seven in there. They also have an option, which we expect to be declared taking those ships too.
Speaker Change: 2029.
10 years also have two ships are more are they have endeavored and vigilant there have volunteers on a rule of law firm.
Speaker Change: Parity as to Q1 'twenty six we ought to have an option to take those ships to 28, and then a 10 year or so I have a fifth chips flex Ranger, which was extended in November 2022 until end of Q1, 'twenty 'twenty seven so that's except for constellation. That's the first truly open ship, we have flex constellation.
Speaker Change: As mentioned and she had the dockings day. She was in a short period of time in the spot market and what she has no. One at 10, one charter where the charter has the option to extend that contract until end of Q1, 2020 six so a lot of calls reached 100% covered for this year and then we have one ship on a variable a higher charter where.
Speaker Change: That higher is linked to the spot market.
Speaker Change: That is firm until Q3 of 2025, both Heather charter has five.
Speaker Change: Five single option until.
Speaker Change: Q3 are transitory and given the fact, they're paying market rate for the freight with the and they lose the remaining options. If they are not declaring the first option. We would expect at least a couple of these options to be declared.
Speaker Change: So that backlog of course, together with our sound financial position creates a good environment for paying good dividends.
Speaker Change: Once again, we are paying the regular 75 cents per share.
Speaker Change: Approximately $40 million the last 12 quarters now or three years, we have paid out $510 million in dividends and counting as we have illustrated here on the on the slide.
Speaker Change: So just before handing.
Speaker Change: Handing over to <unk> and the financials, just the kind of key decision criteria as for the dividend that we have covered also in the past.
Speaker Change: We have become a bit a color blind on green lights.
Speaker Change: After the presentation back in February I believe it was seventh February we want that we had a bit cautious outlook on the spot market, but having such a number of greenlight, we forgot to take down the market outlook. The yellow we have taken it down to yellow now given that the fact that there are numerous ships in the spot market.
Speaker Change: And a bit soft spot market is dragging down the point end of the term rate curve, except for that earnings and cash flow are strong we have been growing the backlog increasing their earnings visibility by these new contracts. This year, we have a lot of cash 383 million that newt recover flying Carlos on all that.
Speaker Change: Governance, no debt maturities before 'twenty eight capex liabilities are Segal, we don't have ships under construction. So capex liabilities only related to the ships that we are drydocking and we have done more or less the dry dockings for this year, so with that I give it to you are accurate.
Speaker Change: Thank you yourself.
Speaker Change: So let's have a look at the financial highlights for the quarter revenues in the first quarter came in at the 90 million $19 2 million or that calculates to a time charter per day of 76500.
Speaker Change: So the <unk>.
Speaker Change: Lower numbers.
Speaker Change: For the first quarter versus the fourth quarter, that's explained by the seasonal softer spot market impacting the revenues from flex Artemis as well as some off hire days for flex constellation while she entered drydocking.
Speaker Change: Operating expenses in the first quarter is lower.
Speaker Change: At $16 7 million and the reduction is explained by timing effects of one we expense certain operating expenses.
As you may recall and differ in the fourth quarter, we had a number of swing sets are expensed on our fleet, while we had a zero in the first quarter. So operating expenses will be a bit lumpy in between quarters, but we stick to our guidance.
Speaker Change: The Opex per day of 14900 for the full year.
Speaker Change: Interest expenses during the quarter is a fairly flat quarter on quarter, but as you see on the gain on derivatives.
Speaker Change: In the first quarter, we booked a net gain of seven 3 million.
Speaker Change: That includes a 700000 in unrealized gains and a $6 6 million in realized gains.
Speaker Change: During the quarter, we have also amended.
Speaker Change: One of our interest rate swap, we have reduced the duration of a $50 million.
Speaker Change: The interest rate swap and thereby we have received cash proceeds of 5 million.
Speaker Change: And I will come back to that later.
Speaker Change: That results in a nothing com for the quarter of $33 2 million or 62 cents per share.
Speaker Change: If you look at the adjusted numbers here, we adjust out unrealized gains of both interest rate derivatives and from foreign currencies. So we strip out the 700000 for the interest rate derivatives and also the FX loss of 400000.
Speaker Change: And then we add back the 5 million we received from the amendment of the interest rate derivative, where we reduced the tenure of that swap to July 2025.
Speaker Change: And that gives us a adjusted net income of 37 million $37 9 million or 70 cents per share.
Speaker Change: If you look at the cash flow for the quarter. We received a 49 million from operations now we have slightly higher.
Speaker Change: That's working capital as we have prepayments in relation to the two dry dockings stardock AR that we have.
Speaker Change: A $26 million in Amortizations of our debt unless we note here.
Speaker Change: If we compare the depreciation of our fleet versus the Amortizations, we pay a 7.5 million more to reduce our debt.
Speaker Change: And here again, the $5 million from the termination of the swap and we pay it out to 40 million.
Speaker Change: In dividends, giving us a and of course, the cash balance of $383 million.
Speaker Change: If you look at our funding portfolio. There are no changes to our debt position, except for a scheduled amortizations and as we highlight here the split of financing between leases and term loans and also the gear.
Speaker Change: Geographically diversified providers of this both from the U S Europe and Asia.
Speaker Change: And then there's a structure we have the 400 million revolving credit facility, which with unused for cash management ophthalmologist Asian jewelry.
Speaker Change: This high interest rate environment.
Speaker Change: And while we have $383 million in available cash.
Speaker Change: We repay our rcs during the quarters to save interest rate cost.
Speaker Change: A reminder, that our first maturity of our loan portfolio is in 2028, and if we have done reverse to our interest rate hedging portfolio, which comprises of the interest rate derivatives, which has a book value today of $45 million.
Speaker Change: And in addition, we have fixed rate leases are elements of that of nearly $200 million that gives us a sound our hedge ratio and this high interest rate environment.
Speaker Change: As I mentioned that during the first quarter, we reduced the duration of a $50 million for giving us $5 million in cash proceeds and post quarter in the second quarter. We did a similar one for another $50 million, which will which gave us a 544.
Speaker Change: <unk> million dollars cash proceeds that you will see in the next quarter.
Speaker Change: Today, We also released our sixth annual ESG report for.
Speaker Change: 2023, which where we explain more about our initiatives for reducing emissions and how we deal with our environmental footprint, our business ethics and code of conduct and also self health and safety for our seafarers and offshore onshore pud.
Speaker Change: So now.
Speaker Change: One of the key highlights here is our 7% reduced emissions compared to 2022.
Speaker Change: And also this report should be read in conjunction with our CDP reporting, which we announced last quarter.
Speaker Change: Where we had a received a b rating improved from B minus in 2022.
Speaker Change: So that concludes the financial section and back to you very soon.
Speaker Change: Thanks.
Speaker Change: Yeah, let's look at the market the best way to start looking at the market is to look at exports and imports.
Speaker Change: As you can see here on the left hand side of the half.
Speaker Change: Three major exporters of LNG with U S no, becoming the largest one.
Speaker Change: 29 million tons in the fourth for four.
Speaker Change: Most of the S, Australia, and Qatar neck and neck. Both of them are 28. So those three countries are the major export us despite the Russia and sanctions on Russia, Theres really not any.
Speaker Change: Widespread.
Speaker Change: Sanctions on Russian LNG, although there are a Russian sanction on the new project from Russia, Arctic LNG, two which I will cover our cover more but despite this our Russia is still growing and maintaining the fourth largest export of LNG My life that the fifth and then there's a lot of other countries.
Speaker Change: In the other bracket, including Norway.
Speaker Change: On the import side, we have seen a marked shift this year and where the cargoes are flowing.
Speaker Change: You up until the storage levels at a very high level.
Speaker Change: And I have been lucky two winters in a row in terms of the winter temperatures and us that the gas requirements and with ample storage levels in Europe Europe has been pulling back from the market and which has also sent prices down to the very.
Speaker Change: Competitive levels and this has opened up a lot of demand in Asia, and especially emerging Asia and.
Speaker Change: China, despite the somewhat disappointing growth in China off the scalping of the COVID-19 policies, a bit more than a year ago that growing very healthy 15% up in Maine have become a once again, they're the biggest the import of Japan.
Speaker Change: That together with the South Korea, and also Taiwan, right, which are the more mature Asian economies, India, a lot of economic growth in India and optimism about India lately growing at the same pace as at China at 15% and then as you can see the highest growth actually.
Speaker Change: And the all the package, which includes a lot of imagination economies of 28% paths. The biggest outlier I would say is Thailand.
Speaker Change: During this year at 1 million tonne.
Speaker Change: A 25% and Thailand and are actually also grew 25% the full year last year. So so we do see that the prices are spurring demand in Asia, which I will cover on the next slide here.
Speaker Change: You do see the take off of the price of.
Speaker Change: LNG come down a lot.
Speaker Change: August 2022 was the peak when I ran the European gas prices hit hundred dollars per million Btu.
On par with $600 per barrel of oil today, we are stabilizing around 11 $12.
Speaker Change: For both the gas LNG in Europe at a gas price in Europe with ETF and then the J Cam wishes the Asian spot prices, where we actually now see a situation where spot LNG is cheaper.
Speaker Change: Then contracted LNG so about approximately one third of this market the spot market, where people are contracting the LNG on a spot basis, while there the older part of the market has contracted the LNG, which is typically priced towards oil prices.
Speaker Change: After this go into oil of around 20% and rehab flatlined.
Speaker Change: Flatlined, that's around $2, which makes it a very profitable for U S export oil to export natural gas out of of U S to international markets.
Speaker Change: And our SaaS Steven in Bloomberg had a covered in article recently in Bloomberg. The spices are spurring demand in <unk> in Asia and of course, it has a huge impact on on on this price drop, especially as a recovery in Europe, which is where it depends on the.
Speaker Change: On the spot prices when they fall they import those basically get a lot more LNG for the mono mono and it's almost like a tax relief.
Speaker Change: So Ed just to give some more details to European LNG imports lagging as I mentioned, 20% behind last year because of the Apple stores levels demand.
Speaker Change: The man sub erosion, although we do see some green shoots in terms of demand.
Speaker Change: Coming back in Europe with these prices.
Speaker Change: And then also as a sum of a contribution from renewables, while in Asia, we see a much higher demand than last year.
Speaker Change: And in the high range of the last couple of years.
Speaker Change: I mentioned Europe the region, the most dependent on spot.
Speaker Change: Spot cargos.
Speaker Change: Natural gas storage levels came out very high.
Speaker Change: Into this winter out of the season, we are around 67% food storage level, Norway. When we have started the injection season and that are the target for you is that you want to get to 90% are truly storage level by end of November and I do think we will be on track too.
Speaker Change: To meet that target.
Speaker Change: But as I said Europe is very dependent on spot cargos.
Speaker Change: And it falls on the last couple of years now of being the buyer or first in last resort now they are pulling a bit back from the market Theyre, leaving room for emerging markets. Then absolutely. We have said in the past year of say energy policy is a bit like a Jon Bon Jovi song.
Speaker Change: It's a living on a prayer, hoping that the weather will be good.
Speaker Change: And.
Speaker Change: What they have to be paying off in order to.
Speaker Change: And ties those cargoes to go to Europe, rather than Asia.
Speaker Change: Asia.
Speaker Change: I wish it also means that when you see on contracting of new LNG, it's not a it's it's almost harder there that's a European superpowers signing of a flexible portfolio contracts.
Speaker Change: This being you know eni shell to Tal Akron or buying a flexible LNG from especially U S where they can pay that worldwide. As there is so much political uncertainty about the regulatory framework for natural gas in Europe.
Speaker Change: When you have a 20 year horizon.
Speaker Change: Looking at our bottlenecks.
It's been a lot in the media lately I am more most recently with the Suez Canal.
Speaker Change: So our traffic through the Suez has been.
Speaker Change: Very limited.
More or less non existing this year after there who theory balanced starting you're targeting a marine traffic and we do see Qatar have started to divert cargoes to Cape of good hope 3 million tons.
Speaker Change: This winter season, which is.
Speaker Change: Basically infinity.
Speaker Change: We have also had the congestion issues in Panama, especially in la.
Speaker Change: End of last year, but we also see it now with the auction prices in Panama being very high we've seen close to $2 million in auction fees for Panama. So we see a huge drop in U S. LNG go into Panama and they all are there being sent the long way.
Speaker Change: U S to Asia, where Cape of good hope as soon as it's not really our viable alternative which both of these two trends are dragging out sailing distances and thus requiring more ships then if the economy were walking portfolio, which is in general good for shipping market as she.
Speaker Change: It has to stay longer and that's you require more ships for each cargo in order to move the cargos and we have had some couple of questions lately about two topics I will just cover them briefly.
What we see all of these questions about what about the closer of plateau of Hormuz, what will the impact be for Ram.
Speaker Change: Indian market. So of course, they are too big.
Speaker Change: LNG export in that region.
Speaker Change: So while our in oil it's a lot about Saudi Arabia about 20% of their oil is flowing through the strength of our mills, which is a rather narrow spread.
Speaker Change: A bit similar LNG ahead of the bigger producers are Qatar and the United Arab Emirates. So while on oil it's about 20% of the market. It's quite similar for LNG about 20% of all LNG is traveling through this narrow stripe and of course, a closer of this would be a devastating and not only.
Speaker Change: For the export but also for the world economy as.
Speaker Change: Energy prices would soar, we think that is a very very low probability, but it's a high impact and on the right hand side here you can see the two major export does see Qatar and the United Arab Emirates, where those cargoes have gone the last 16 months from January to transplant.
Speaker Change: Three until end of April.
Speaker Change: You do see all of these cargoes going to Asia, which makes sense is the shortest routes.
Speaker Change: And especially India, which is very close situated to these two countries. So we don't think this will happen the effects for the world economy of closing this strength is too big both in terms of oil and LNG and actually Iran. It's also very dependent on.
Speaker Change: Getting there and oil cargoes, especially sold which are typically being sold to China. So China also have an interest in keeping their traffic through the Straits open.
Speaker Change: And then the second question, we get quite a lot is Russia, and what will happen with Russia.
Speaker Change: As I mentioned, Russia being the fourth biggest ex border.
Speaker Change: And they're planning to ramp up our Arctic LNG, two should be up and running this project had been hit by sanction.
Speaker Change: Which is postponing their startup of this.
Speaker Change: The Russian state that the first train it should be operational but Theyre planning also to add further trains to this project to more trains, which could bring up the capacity for the project from seven to 20 million tonnes and then they do also have some other projects. So this is a big uncertainty.
Speaker Change: However, what we have seen in the past is are the Russians have been able to get a surprisingly many hydrocarbons on ships.
Speaker Change: If we look at the oil in the petroleum market.
Speaker Change: We do see an off either this week have not.
Speaker Change: <unk> not been able to sanction the Russian LNG. It is really just the U S and the U K, which is not importing Russian LNG, but now that you have left the member states decide themself, whether they want to ban Russian LNG in general we do think that the all their call was how will be produced and we will have a bit of a similar.
Speaker Change: Trading pattern picture that we have seen in the public than the oil side, where the brakes are supporting each other so we do think that the fewer parnell, taking the Russian cargoes. The other countries in the brakes being Brazil.
Speaker Change: India, China, South Africa will are willing buyers of the Russian LNG, which will result in longer sailing distances.
Speaker Change: The limiting factor for Russia being of course.
Speaker Change: The number of ice spiking vessels. They have so they will have to do more ship to ship transfers.
Speaker Change: Also getting these the Arctic LNG two project up and running is more challenging with all the sanctions, but we.
Speaker Change: We do not expect any shutting off of Russian LNG.
Speaker Change: That has not been the case on the oil side, we don't expect it to be happening on the LNG side, either and this could for intentionally be the start of our LNG dock fleet and headwinds have a good article Lucia Hainan paid Vince today about a lot of activity on the steam side, where there's a lot of unknown bias.
Speaker Change: So if you don't have subscription to that.
Speaker Change: You know where.
Speaker Change: I think that at least we can cover the sabbatarian all project in our presentation and we do think that the Russians all planning to do something similar we've seen on the oil and petroleum side, then and that is cargoes will flow and they will be and may be soaking up some of the steam tonnage.
Speaker Change: That would otherwise be scrapped.
Speaker Change: Looking out download the driver here is of course a cold.
Speaker Change: And with the high end.
Speaker Change: LNG prices coal has been coming back a lot and we've seen that in ear. During the energy crisis coal really grew quite a lot. Despite this not being the intended policy of ear with gas prices no comment coming down to Earth. The he has been able to reduce the imports but the.
Speaker Change: China, India, or the big called consumer I'll keep going.
Speaker Change: They're called Consumptions and Theres been a lot of talk about LNG and emissions that came out a new good reports recently from B O G energy in April measuring the <unk> emissions from various sources of both LNG pipeline gas coal et cetera.
To make sure you know that.
Speaker Change: Greenhouse gas emission intensity of these various sources and what.
Speaker Change: What they actually find this U S. LNG is a quite a quite a good in terms of the G O G a mission and a.
Speaker Change: Thus, reducing coal buyer on path in terms of emission and the EIA also came out with a report recently this year well actually the methane emissions from coal.
Speaker Change: Slightly higher than the methane emission for the natural gas value chain. So so we do think that the LNG is a good way of reducing mission not only the G greenhouse gas emissions, but also their pollution emissions this being the sox and Nox the particle matter, which is really detrimental to People's health.
Speaker Change: So we find the LNG is a good solution, but that doesn't mean, we would have to be complacent, we still have to bring down emissions from the LNG value changed and I do think that our ships being the most modern ships with them.
Speaker Change: A lot of these ships in our fleet nine out of 13 being mega ships with hardly without any.
Speaker Change: Methane emissions are a good solution in order to bring down emissions in the value change.
Speaker Change: Okay, and then before concluding just have a bit to look at the LNG shipping market and new building prices have been.
Speaker Change: On the on our appeal a way the last couple of years gone up about 40% from the bottom have stabilized now at around $260 million and this together with a long lead time lead time now typically four years high interest rates have pushed up the long term term rates you need in order.
Speaker Change: To invest in new ships to around $100000 with the softer spot market.
Speaker Change: We have now.
Speaker Change: Short term rates the five year term is actually being lower than the time 10 year charter rate typically shorter duration time charter rates tend to be higher than the long term.
Speaker Change: But right now there's a whole rate curve is in Guangdong contango, given the near term weakness in the spot market and this is of course driven by what we see here on the next slide a lot of ships coming for delivery 'twenty, four and 'twenty five while the new volumes to the markets are typically coming end of <unk>.
Speaker Change: <unk> five into 'twenty, six and onwards, which I will.
Speaker Change: Give some more details on shortly we however, do you see that with these high prices.
Speaker Change: Contracting activity has been a bit more subdued lately, it's mostly been Qatar active buying more of the ships they have reserved.
Speaker Change: As they are rapidly expanding their capacity and need ships than we do actually now have a situation, where we have our order book batching, all the way out to <unk> 31, and that said, even though there's a lot of ships for delivery.
Speaker Change: More or less all of these ships are contracted they are not contracted on speculation and there are two reasons for this.
Speaker Change: Because of the high growth, which I will cover shortly in the market you need more ships to take that growth and then it's the fact that we have a lot of older steam ships, which are.
Speaker Change: Economically and competitively and why are we do see a need to renew the fleet and scrap. These older ships. So we need new ships to replace those older ships and looking at rates today with that.
Speaker Change: Spot rates for modern partners at around 50000 that means the steam ships are making rates in the low $20000 and which means that when you take in the cost of talking. These ships. These are very expensive ships to dock because they are old.
Speaker Change: It means that these ships are running.
Speaker Change: We're running at the Opex level. So if you add the pressure if you had the installment and interest cost on top of that these ships are not making any money at all so that together with a lot of these ships coming off long term contracts. We think as also described in trade winds today will result in more steam ships being scrapped in the call.
Speaker Change: Yes, and that together with more growth will rebalance the market sometime from end of 'twenty five 'twenty six 'twenty seven onwards, when we have ships available again in the market. So.
Speaker Change: Before concluding just showing the different projects Qatar.
Speaker Change: Almost doubling the capacity of our export going from 77 million tons expected to be 142 million ton by end of this decade U S. Despite the move out to him from Biden. They are set to almost double our exports.
Speaker Change: We do expect after the election and the moratorium will be lifted in U S. A lot of these U S project, which are ready to go will be sanctioned and we will see more growth from U S. As mentioned palm trends and 'twenty five onwards, when we have ships open and we can re contract them.
Speaker Change: As I mentioned that the long term rates are at around $100000 last year. We made 80000 on average on all ships, where we do think that will give us an opportunity to re contract chips at better rates later this decade, so to conclude.
Speaker Change: As mentioned revenues in line with guidance net income and adjusted income.
Speaker Change: So the trip and $38 million, respectively, giving us 63, or 70 cents of apps, depending on the measure we have done a lot of contracts. This year for three extension and one new contract as mentioned, our Drydocking saga going according to plan.
Speaker Change: We do expect Q2 as usual to be the softest quarter for the year, but once we get both chips back in operation in Q3 and spot market stipulate get tighter in Q3 and even more so in Q4, we expect our.
Revenues and earnings to bounce back in Q3 and Q4.
Speaker Change: And with that and the strong contract position, we are declaring a dividend 75 cents, 11% yield and this new test dimension, we have a very good.
Speaker Change: Our financial position to keep on paying this dividend, which has been $510 million. The last three yes, so with that let's see who you are winning there.
Knut: Flex them a gift in the Q&A session Knut.
Speaker Change: I think you have to move all this stuff.
Speaker Change: Let's see.
Knut: Yes.
Speaker Change: Do you want some sunglasses.
Speaker Change: Okay. Thank you for the questions do you have something.
Speaker Change: You mentioned I, maybe should kick off with one of the covenants you mentioned it.
Speaker Change: At the end here.
Speaker Change: Theres been a number of comments regarding the dividend and the sustainability of the dividend.
Speaker Change: Yeah.
Speaker Change: You have a in a motor elaborate and Theres also comas our questions about what the decision factors are for the board. We have we have listed a number of them in line nine unbeliever. This year. So maybe you can elaborate around the decision process and your view on the sustainability of the of the.
Speaker Change: A dividend level.
Speaker Change: I think it's a couple of items of course, we look at the earnings so.
Speaker Change: I think the best measure and that's why we have the adjusted numbers is the adjusted earnings per share 70 cents.
Speaker Change: There. We only include the realized gains and not the unrealized gains. So we are paying out slightly more than.
Speaker Change: Oh earnings today.
Speaker Change: But it's not much it's slightly more.
Speaker Change: In terms of.
Speaker Change: But how we look at it of course, we have our contract portfolio.
Speaker Change: And as I mentioned, we do have some ships coming off charter later in this decade from 26, 27, 28 onwards, where we do see the ability to possibly re contract those ships.
Speaker Change: At a higher rate levels.
Speaker Change: Another factor is the fact that we have $383 million of cash and every quarter.
Speaker Change: We are paying down our debt.
Speaker Change: So that kind of amount once your depth get slower you also your interest costs get slower so that means that.
Speaker Change: When you have $383 million of cash we could do either two things we could do what you would call out a dividend recap, we don't need to have $383 million on our GAAP balance sheet, we could probably pay a huge one.
Speaker Change: One off dividend off.
Speaker Change: $250 million or so and then auto stay on our lower cash balance level. However, we have strict deal all of this cash as a 400 million revolvers. So we don't really pay the cost of having it the cost of carrying it will reduce the revolver.
Speaker Change: During the interim of quarters, where we're paying our own 70 basis points to have it.
Speaker Change: On standby until 'twenty eight.
Speaker Change: It's always it's more about.
Speaker Change: All those kind of factors with we do think options will be declared a lot of these options have higher rates. So we do think that eventually over time our earnings will grow.
Speaker Change: And then over time, our interest expenses will fall.
Speaker Change: Once we are deleveraging as well as a Skinner children S. Golf, we are de leveraging seven and a half million dollars more per quarter than our depreciation. So we are quite comfortable with that we can run this company with the.
Less than $100 million of cash we don't have a lot of working capital. We saw this quarter, we had a bit of a buildup in working capital mostly due to prepayment.
Speaker Change: Pre payment of dry dockings, but we are on a time charter business, which means that all charters are paying is higher the first day of the month at the latest and then typically we are paying all our expenses later in the month and then depth in areas. So that means that it's very you know we have a negative.
Speaker Change: Working capital to run the business, so I think that makes sense.
Speaker Change: Quite easy to also model the cash flow.
Speaker Change: No we're paying out a bit more because we have the money to do it and then eventually down the road. We think this will kind of stabilize at the level where earnings will be up in interest expenses will be down because kind of if you look at the Opex 14900, <unk> most of our cost is finance cost is installments.
Speaker Change: <unk> and interest I also do believe my personal view is that at one time had a.
Speaker Change: Fed will pivot.
Speaker Change: It's only one time that we have had fed hiking interface at this kind of level without there theyre, having any effect on the real economy and that's been in 1994. So I do eventually think that we will see a pivot where.
Speaker Change: Reis will be coming down as well and we have kind of anticipated that in terms of correcting a bit on our duration of our hedges.
In order to be able to benefit from that as well.
Speaker Change: And then of course, we have the decision criteria, which we have shown in the slide deck.
Speaker Change: And sugar for Al Mcrobbie from BTG asked.
Speaker Change: With no maturities until 2028 have you given a thought of prepaying some of the death to increase the financial flexibility and as we as we discussed in the presentation. We have the $400 million Rcs and then between quarters, we use that to prepay it down to reduced.
Speaker Change: Sure.
Speaker Change: The interest rate cost and in essence, it is a reduction of that in between quarters, but we maintained the commitment which in fact in our view increases our financial flexibility if there are.
Speaker Change: Investments that can be made but also to support the business case and in general it's like having a checkbook out there without where he limited costs and we can jump on any opportunity. We have in the past provided bids on several ships a lot of ships to be honest.
Speaker Change: We can then pizza bidding on those ships without having to go through our investment bankers and bankers to underwrite the financing falls, we can bid because we have the revolver there and gives us a lot of flexibility if we pay it back we don't get it back so it reduced the flexibility and the Cyprus exactly into the next topic of how to fund it.
Speaker Change: And investments.
Speaker Change: Circle questions or more specific we've been sort of a muted on new buildings on the speculative side.
Speaker Change: But the question more on the opportunities to order new buildings backed by a long term contracts lately, it's been mostly Qatar being active in the tender market are holding more than hundred ships based on these tenders and contract.
Speaker Change: Im not participating in that for instance, we have expanded in the past.
Speaker Change: So that's been a few very few tenders for new buildings are also being a reflection of the fact that the.
Speaker Change: New building prices are high lead time as high once you have it risk free rate that five 3% and you have to wait for four years to get the ship that also dragster. After the cost of that ships. So that's $260 million might easily become $280 million to $185 million when you're also adding.
Speaker Change: In supervision costs. So so that means if you do a calculation on it that's why you get to these rates of $100000 today, there's a lot of modern ships on the water Maggie access.
Speaker Change: It means that instead of doing tenders.
Speaker Change: For new builds are more people are looking at the existing tonnage we find it more favorable to auto bidding on our ships we have constantly.
Speaker Change: Constellation coming up in 'twenty five 'twenty six we have a range of coming up in 2007, we have a wobble in the payer coming open in 28, which means that we can all the bids on the basis of those accessing ship and probably we are more competitive than building a new ship.
Speaker Change: That said of course, we are looking at this from time to time.
Speaker Change: But we.
Speaker Change: We find it more interesting to the market our existing ships, we are looking sometimes for buying secondhand tonnage so far not been successful.
Speaker Change: Now being successful bidding and buying ships is really about having the highest bid so that doesn't mean necessarily make it successful. If you win so we try to always measure kind of Oh.
Speaker Change: If if we are buying older ships, we don't want to impact though.
Speaker Change: Dividend capacity negatively so.
Speaker Change: If buying ships and getting a lower return on that and paying our dividends is what you have to do with all the payout of dividend.
Speaker Change: There's a specific question on a ship technology and size and.
Speaker Change: Would you consider a 180000 cubic for and any advantages by but that size.
Speaker Change: Yeah Vantage is this a six.
Speaker Change: 6000 cubic bigger so that's the main.
Speaker Change: Main upsides.
Speaker Change: There is downside. However, you know it makes it a less a slightly less tradable, possibly you have to do with ship shore Compatibilities third this is a bit easier when most people are doing the 174 case size.
Speaker Change: Which is the kind of the market standard.
Speaker Change: You know for sure where we're open to look at hardware Nathan there are puts and calls.
Speaker Change: What we are most focused on is on price.
We will.
Speaker Change: Measure that towards surprises if buying 180 is a lot more expensive than well maybe not if it's basically the same price well maybe with it.
Speaker Change: And there we have a question from Scott layering in US is why global.
Speaker Change: Was the general perception that the newer is better but commercially there is not too much of a difference between a new building today versus our vessels.
Speaker Change: Can you say something about the commercial.
Speaker Change: Practice and us of our vessels versus the new building.
Speaker Change: It's a you're right Scott.
Speaker Change: Yeah.
Speaker Change: I like three.
Speaker Change: Three or four different technologies you have this theme and then you of course have new steam in all of them and then who is the tri fuel and in that five year segment. You also have a bit the first generation Biofuels and then the second generation in some size difference and then once you get into the twos talk you have a modem.
Speaker Change: These lands in for our ship, which can burn LNG and the thermal efficiency of that engine is basically the same as the old ships as the new builds it's around 50% to 52% thermal efficiency. So on their ships they're building today, it's more about adding more equipment. So maybe they are adding a full array of lake.
Speaker Change: We have Hillary Lake on three out of our ships, we have posture really on four of our ships. So that is a factor maybe you add this air lubrication, which is kind of co peso pushing bubbles under the hull to reduce drag of friction through the water, which optimize speed a bit.
Speaker Change: Some energy saving devices, but a lot of energy saving devices, we are retrofitting to our ships. So so there's very few differences in terms of our Newbuild today and then your billings, we have today and efficiency is more of the same I think theres one benefit of having a ship.
Speaker Change: That's been a painting for some wireless it's been through a lot of ports. It as already checked all the boxes in terms of the shipyard show a compatibility studies. So its a its not like it has to do that work all over again when you have a new ship it's been proven.
Speaker Change: You know sometimes you have some.
Speaker Change: Some new hiccups when you take delivery of the ships, we have found out of those hiccups and we have collected those hiccups, which means you have a ship with a proven track record in terms of operational performance.
Speaker Change: Oh, I think you know people always like new but.
Speaker Change: Our ships are as good as new and if you look at the pictures from some of our dry dockings that these ships looks brand new once they're getting out of the dark after their five year Special survey.
Speaker Change: I think that concludes our Q&A session for this time, yeah, Okay. The gift yeah, let's give it to Scott then because it's a good question. So Scott. So you will be the lucky winner of.
Speaker Change: All this stuff I I showed earlier as well as this abating towel.
Flex on the beach, so I wish you a very good summer I hope you enjoy it the member to use the sunscreen.
Speaker Change: And we will be back in August hopefully when its still summer with our Q2 numbers, which we have guided today and as I mentioned, we do think Q3 will be stronger. Because then we have all ships in operation and typically rates will be higher in August than they are in may.
Speaker Change: So we usually historically, we have starting to be sniffing on six digit numbers once you're getting into and August September.
Speaker Change: It doesn't matter that much 12 out we're fully covered for the air travel if the tortilla chips are on a fixed higher but we have one ship linked to the spot market. So we like the spot market to be good and typically a good spot market also drags up the term rates. So with that thank you for joining and have a good summer.
Speaker Change: [music].