John Fredriksen-controlled Flex LNG lifted its earnings guidance on the back of a roaring spot market as the company turned in strong third-quarter figures.
In its quarterly report filed on Tuesday, Flex chief executive Oystein Kalleklev said that in the fourth quarter the company will be "handsomely rewarded" for maintaining a 30% exposure to the spot market that is at "all-time highs".
"We are consequently lifting our revenue estimate for the fourth quarter from previously guided $85m to $100m to about $110m, thus further improving earnings in the near term," he added.
Numbers jump
Flex reported an almost nine-fold jump in its third-quarter net income up at $32.8m, from $3.8m in the corresponding three months of 2020.
Operating revenue for the company soared to $81.8m, up from $33.2m in the same period a year earlier.
Vessel operating revenues increased due to the start of long-term charters and spot market improvements.
Flex said the average time charter equivalent rate for its 13-ship fleet rose to $68,341 per day in the third quarter of 2021, up from $57,780 per day in the preceding three months.
Kalleklev highlighted two new time-charters to an energy major — reported by TradeWinds as BP — secured in November on the company's 173,400-cbm Flex Courageous (built 2019) and Flex Resolute (built 2020), which he said added to the company's growing backlog while de-risking its portfolio.
The CEO said that since April, Flex has secured long-term fixed hire employment for eight of its ships, with charterers holding an option for a ninth vessel next year.
"Our firm contract backlog is now about 33 years with a further 36 years of optional backlog," Kalleklev said, attributing this to owning efficient ships with lower carbon footprints than older generation vessels.
Tightening market
Flex said the LNG freight market has been steadily increasing since the start of November, citing Affinity (Shipping)'s current rate assessments for modern tonnage of $220,000 per day in the Atlantic and Middle East, with those for the Pacific closing on $240,000 per day.
The company said the shipping market would remain tight for the rest of the year with very limited vessel availability in the spot market. It added that portfolio players and traders have pulled back ships available for re-lets, which were more readily available in the spot market during the summer.
During the third quarter, Flex bought back 152,656 shares and to date repurchased 980,000 shares at a total cost of $9.4m, under its buy-back programme.
The company also signed a 10-year sale and charterback agreement on its 174,000-cbm newbuilding Flex Volunteer netting about $37.7m. At the end of the 10 years, Flex has the right to buy the vessel for $80m.
Kalleklev said that given the company's "healthy earnings, positive outlook and super-strong financial position" the board has decided to lift Flex's quarterly dividend from $0.40 per share to $0.75 per share.
