Oslo-listed Flex LNG has talked up its net asset value due to a steep rise in the cost of new vessels.
“Newbuilding prices has gone up a lot. We contracted ships when they were cheap,” chief executive Oystein Kalleklev told investors on an earnings call.
Back in 2017 and 2018, the shipowner paid only $185m per LNG carrier, he said.
The price today is $262m, having dropped a little from $265m, Kalleklev explained.
“If you take that number, it’s an increase in the price of a ship of $80m. We have 13 ships so that’s a billion dollars in appreciation … since we contracted them,” he added.
Kalleklev said the company’s book equity is $860m.
With the fleet appreciation added as value-adjusted equity, the market cap of $1.5bn is exceeded, he said.
“So, we do still think we have a very good net asset value protecting our assets and also backed by the charter backlog,” Kalleklev told the call.
Current elevated newbuilding costs mean owners need higher rates to “defend such an investment”, he explained.
Kalleklev also pointed out that interest rates have gone from essentially zero to 4%.
Little room for speculation
Kalleklev also envisages “good opportunities” to fix ships at better rates when they come off charters.
“We have seen softness in the shorter-term rates and we actually have a contango structure in the term rates where longer-term charters are more expensive than shorter-term,” he said.
“The high prices and of course the rather big orderbook already mean that very few people are contracting on speculation,” Kalleklev added.
He said 93% of the 300 or so LNG carriers on order are backed by long-term contracts.
“And we do see the number of ships for delivery tailing off, which fits very well with the export story where a lot of volumes are coming to the market from 2025, 2026, 2027 and onwards,” he concluded.