John Fredriksen’s Flex LNG remains receptive to merger and takeover opportunities, but any potential partner has to be the right one.
Chief executive Oystein Kalleklev told an earnings call: “Of course we have said for many, many years we are certainly open for consolation.”
He sees a lot of potential deals out there due to the fragmented nature of gas vessel shipowning.
The vast majority of energy shipping companies are private, with very few in the public domain, he pointed out.
“So we think it would make sense to have a bigger public vehicle, make it more relevant and interesting for especially bigger institutional shareholders,” Kalleklev said.
“But we don’t want to go to bed with strangers. We want to go to bed with people we share the same values, philosophy, ethics, and also the fleet [with].”
Due to Flex LNG’s modern vessels, he does not see any value in merging with a company controlling a lot of steam-turbine tonnage.
“So we need to find all those parameters so that we can have a marriage rather than a one-night stand,” he said.
The CEO was also asked about expansion through newbuildings.
He said the company is always monitoring the market, but ordering does not make sense.
“If we contract a ship today, if we’re super lucky maybe we get a ship in 2027, but the slot availability is now getting into 2028,” he told the call.
Focusing on existing vessels
“That means that we are spending, let’s say, $262m today to get a ship in 2028. So we are not seeing that money for four years.”
With interest and supervision costs, the vessel could end up costing $285m.
“Is that a better use of cash than paying dividends? So far we haven’t been convinced that it’s better to spend that much money on new ships, so we [would] rather focus on the ships we have,” Kalleklev told the call.
“We are not set to pursue growth so Knut [Traaholt, chief financial officer] and I can be happy with having a bigger fleet.”
The priority is return on equity and paying out money to shareholders.
“We’re not going to pursue growth just to be big, we would rather be big on dividends.”