John Fredriksen-controlled Flex LNG has boosted its time charter coverage for its 13-vessel LNG carrier fleet in weak spot market conditions.
Reporting its first-quarter results, chief executive Oystein Kalleklev said Flex has added 6.2 years of new backlog in charters so far this year.
He highlighted the three charter extensions reported by the company during the quarter.
The company secured two-year extensions for its 173,400-cbm Flex Resolute (built 2020) and Flex Courageous (built 2019) — which are both on charter to BP — through until the first quarter of 2027, along with fresh options that would extend their hire into early 2029.
Cheniere Energy also took up its option on the 173,400-cbm Flex Endeavour (built 2018), which extended its firm period on the ship to the first quarter of 2032.
Kalleklev said Flex opted to charter out its 173,400-cbm Flex Constellation (built 2019) on a 10-month time charter with one-year extension period following its redelivery and five-year dry-docking.
The vessel is fixed to JERA Global Markets.
The CEO said the company opted for a time charter over trading the ship on the spot market as it expected a more challenging freight market in the near term due to the glut of newbuilding deliveries.
Flex said the average spot rate for a modern two-stroke LNG carrier was around $59,000 per day in the first quarter, down from about $95,000 per day in the same period of 2023.
This depressed term rates, but levels for longer periods have since stabilised at “healthy levels”.
Kalleklev said the firm backlog is at 50 years and may increase to 69 years if charterers take up all their extension options.
The company has 100% firm contract coverage for the rest of 2024 and 91% for 2025.
“This attractive backlog gives us a very high level of earnings visibility and also insulates us against any near-term market weakness,” he said.
“Given our backlog of an average of four years per ship, our ships will come open in a window where we consider the market balance to be significantly more favourable as the third wave of LNG is coming on stream from end of 2025 onwards.”
He added that Flex expects to see “a substantial uptick” in the scrapping of older steam tonnage, which it said is becoming commercially obsolete, and this will further improve market fundamentals.
First-quarter net income doubled to $33.2m from $16.5m a year earlier.
Operating income slipped back to $51.9m from $55m in first three months of 2023.
Vessel operating revenues were also down at $90.2m from $92.5m a year earlier.
The company said the decrease was largely due to a seasonal fall in spot market rates that affected the variable hire contract for its 173,400-cbm Flex Artemis (built 2020).
The Flex Courageous is undergoing its scheduled dry-docking, which is due to be completed by the end of May.
Flex has four dry-dockings scheduled for 2025 and three in 2026.
