John Fredriksen’s Flex LNG is expecting to make more money from an LNG carrier that is being redelivered from charter unexpectedly early.
The Oslo and New York-listed company said it had received notice from a trading house named by brokers as Trafigura that the three-year extension option for the 173,400-cbm Flex Constellation (built 2019) will not be used.
The ship was secured on a three-year deal in May 2021 at a fixed rate of $80,000 per day.
Redelivery is set for the second quarter of 2024.
Chief executive Oystein Kalleklev said this fits well with the scheduled five-year special survey which is due during the second or third quarter.
“For 2024, we only have two ships scheduled for drydock, in contrast to four ships during 2023,” he added.
Charter coverage is 95% for 2024 following the redelivery.
Kalleklev said term rates for charters of between one and 10 years are currently being quoted at $90,000 to $100,000 per day by brokers.
“Consequently, we believe the vessel is well positioned to be re-contracted at more attractive levels than the previous contract,” the CEO said.
Fearnley Securities said with limited modern tonnage available, rates of up to $100,000 would imply earnings per share of up to $2.63, against the investment bank's current estimate of $2.60.
The vessel will be marketed for short and long-term opportunities ahead of the winter season, which the company considers good timing.
Flex noted the ship is a ME-GI carrier with a partial reliquefication system.
Environmental edge
The engines have negligible methane slip guaranteed by the maker to be less than 0.2 grammes per KWh, about 20 times less than the methane slip for dual-fuel diesel-electric vessels, the company said.
Kalleklev added he is “upbeat about the prospects for rechartering the ship at attractive levels given her environmentally-friendly specification”.
In November, Flex LNG said it was optimistic about fixing LNG carriers that were next due to come open at stronger rates from 2027.
Speaking on a third-quarter results call, Kalleklev identified the 174,000-cbm Flex Ranger (built 2018) as the firm’s first available vessel. He also highlighted the Flex Constellation.
The CEO mentioned several other ships, for which the company expects charterers will declare the options they are holding.
Flex LNG had 12 of its 13 LNG carriers chartered out on fixed-hire charters at that time.
A lone vessel, the 173,400-cbm Flex Artemis (built 2020), was fixed on a variable spot rate.
