John Fredriksen's Flex LNG has locked away a sizeable portion of its fleet on multi-year time-charters, fixing four vessels to Cheniere Energy with an option for a fifth.
The New York- and Oslo-listed company announced on Wednesday that Cheniere would take the 174,000-cbm newbuilding Flex Vigilant on charter once it leaves the yard in May.
Two more vessels will be delivered to the Houston-based LNG giant in the third quarter and a fourth in the third quarter of 2022, when it will have the option of taking a fifth. The initial quartet will be fixed for three to three and a half years.
"What we are doing is executing on the strategy we implemented back in 2018 when we also decided to take ship management in-house," Flex chief executive Oystein Kalleklev told TradeWinds following the announcement.
He said that due to something of a "challenging market" in both 2019 and 2020, the term market was not that attractive.
"We have delayed putting ships on term charters and rather opted for more spot exposure, as we have had the financial muscles to be able to pursue such strategy which has not been possible for some of the owners with speculative tonnage," Kalleklev said.
"That strategy has turned out quite well with time charge equivalent [rates] of $64,000 per day and $60,000 per day in 2019 and 2020 respectively.
"With the market now being firmer and term interest increasing we are electing to build backlog to increase our earnings visibility," he added.
In a statement, Kalleklev called Cheniere a "first class charterer" and said the deal would "add substantial revenue backlog" for the company, though financial details were not disclosed.
Two-stroke, gas-injection LNG carriers, which make up Flex's 13-ship fleet, saw charter rates rise to the high-$60,000 per day to low-$70,000 per day range for one-year charters earlier this month.
Rates for tri-fuel diesel-electric (TFDE) ships climbed to about $55,000 per day.
Meanwhile, a TFDE-powered LNG carrier would earn between $36,000 and $40,000 per day in the spot market, depending on route, figures from Poten & Partners showed.
Which ships?
Flex LNG did not name which ships would be delivered to Cheniere beyond the Flex Vigilant.
According to the company's annual report published in March, the 174,000-cbm Flex Aurora (built 2020) and the 173,400-cbm Flex Resolute (built 2020) are due to come off charter in the third quarter, but both have options to extend.
No ships' charters are scheduled to expire in the third quarter of 2022, but Flex has five ships currently trading in the spot market, including its newest, the 173,400-cbm Flex Freedom and the 174,00-cbm Flex Volunteer (both built 2021).
The news appeared to appease shareholders, with Flex's New York-listed shares jumping $1.39 to close at $10.44 on Wednesday. All the gains were made after the company's announcement.
