John Fredriksen-controlled Flex LNG has logged its highest net income to date and is bullish about its first quarter charter rates, but the company is preparing for challenging markets.
Reporting fourth-quarter results, Flex LNG Management chief executive Oystein Kalleklev said that based on fixtures to date, the company anticipates that the time-charter equivalent rates for its vessels in the first quarter of 2020 will be close to $70,000 per day.
That compares to $94,000 per day in the last three months of 2019.
He said this was despite the demand slump in the first quarter due to a record warm winter and the recent coronavirus outbreak.
Pre-tax income for the three months to the end of December jumped to $23.9m, the highest quarterly figure the company has recorded, and up on $15.2m recorded in the same period for 2018.
Annual net income for 2019 came in at $17m, a jump from the $11.8m logged in the previous year.
Flex reported revenue of $52m for the fourth quarter 2019, compared to $29.8m in the preceding three months.
“Due to the uncertainty and disruptions created by the coronavirus and associated low gas prices, we have elected to be cautious by maintaining a $0.10 dividend for the fourth quarter, and for the time being rather preserve liquidity, which stood at close to $130 million at year-end," Kalleklev said.
“This gives us a comfortable financial position to handle the current market situation. While the freight and gas markets are currently challenging, LNG continues to be a long-term story with expected annual growth of around 3 to 4% for the next two decades as natural gas, and to greater extent LNG, is the transition fuel for a cleaner and more sustainable future.”
Kalleklev described 2019 as “an eventful and productive year” for the company.
“We are also pleased that several of our charterers are returning customers,” he said, detailing contract extensions on two of its LNG carriers and the long-term charter with trader Gunvor on the 173,400-cbm newbuilding Flex Artemis which delivers this summer.
Flex also announced it has taken on Ben Martin, who formerly worked on gas and tanker chartering at Trafigura, as its new chief commercial officer. Martin joins the company on 1 April and will work alongside chartering chief Marius Foss.
In a comment, Martin said the LNG market is undergoing “unprecedented changes” but added that Flex is “well positioned for the future”.
Kalleklev said: “During the year we were also successful in securing about $1.3bn of attractive long-term financing, which boosted our liquidity position and enables us to run our ships at industry low cash break-even levels.”
Flex currently has six LNG carriers on the water, four of which it has transitioned into its newly set up in-house management arm Flex LNG Fleet Management.
The company has a further seven remaining under construction – five for delivery this year and two to follow in 2021.
