John Fredriksen-controlled Flex LNG is bullish on the long-term outlook for the LNG carrier market as it eyes up prospects for three of its vessels which will redeliver in the next two years.
In a first-quarter results statement, Flex LNG chief executive Oystein Kalleklev said that in the past 13 months the company has fixed nine of its 13 LNG carriers on time-charters with the minimum period of these contracts ranging from three to five years.
Kalleklev said this gives the company “comfortable earnings visibility”.
“We still have three ships which will be redelivered from existing time charterers during the next 23 months and given the strong term market and general lack of available modern tonnage we are upbeat about the prospects of re-contracting these ships at attractive terms,” he said.
The company also published its annual environment, social and governance (ESG) report today which revealed a jump in gross global Scope 1 emissions for its fleet to 727 999 metric tonnes of CO2 equivalent for 2021 up from 485 793 mt/CO2e a year earlier.
Flex said this was due to a higher number of fleet operating days but also charterers’ decisions to switch to very low sulphur fuel oil and ultra-low sulphur marine diesel and gas oil as prices for natural gas soared.
Flex LNG’s first quarter 2022 net income climbed to $55.8m, up from $47.2m in the same period a year earlier.
But operating income for the first three months of this year slipped to $38.4m, from $47.8m in the corresponding quarter for 2021.
Vessel operating revenues also fell to $74.6m from $81.3m in the first quarter of 2021.
Flex said this was due to a “weakening spot market” that affected three of its LNG carriers on market-linked contracts and its spot-trading vessel, the 174,000-cbm Flex Volunteer (built 2021) which was idle for most of the first quarter. But it said the figures were in line with its guidance.
Voyage and administrative expenses were slightly higher year-on-year.
“With 98% contract coverage for the year and three of our 13 ships on variable hire contracts linked to the spot market, we do expect gradually increased revenues in the next three quarters as we also guided in February,” Kalleklev said.
“The first quarter was a fantastic period to be a cargo owner with high demand and elevated prices for LNG given the global energy crunch.”
But Kalleklev added that the spot freight market for the period was “challenging” as the LNG trade abruptly shifted towards Europe resulting in shorter sailing distances and more available ships.
He said sentiment turned positive from the end of February with spot rates for modern tonnage recovering to “above the seasonal average” and one-year and three-year time-charter rates “remaining very strong”.
Kalleklev said charterers are willing to pay “a substantial premium to spot rates to lock in large fuel-efficient ships on longer periods as the forward market also price in a much tighter freight market in the second half of the year”.
Flex declared a dividend for the quarter of 75 cents per share.