Flex LNG Q2 2026 Earnings Call Transcript

On Wednesday, Flex LNG (NYSE: FLNG ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

83. The company maintained its full-year revenue guidance between $345 and $370 million and expects TCE to be between $73,000 and $78,000 per day. 75 per share, continuing its streak of consistent dividend payments since 2021. The company completed all scheduled five-year special surveys for its fleet with the dry docking of Flex Vigilant, and no further dry dockings are planned until 2028.

S. The company has 51 years of minimum firm contract backlog and is marketing its vessels for spot and near-term contracts. Operational costs were slightly higher due to crew travel costs, but financial efficiency improved with lower interest expenses and gains on interest rate derivatives. Flex LNG maintains a strong cash position of $397 million and a robust equity ratio, with no significant debt maturities until 2029.

The LNG shipping market outlook remains cautious with a softer spot market, but the company is optimistic about potential improvements in Q4. Full Transcript H. Marius Foss, CEO Welcome back to Flex LNG second quarter 2026 result presentation. Hope you all have a great summer.

My name is H. Marius Foss, I'm the CEO of Flex LNG, and today I'm joined by our CFO, Knut Traaholt, who will walk you through the financials later in the presentation. Today we will summarize the second quarter results and provide an update on the LNG shipping market. As always, we will conclude this webcast with a Q&A session.

com. Before we start, we would like to highlight the following: we are using certain non-GAAP measures such as TCE, adjusted EBITDA, and adjusted net income. S. GAAP.

The reconciliations of these non-GAAP measures are available in the earnings report released today. There are also limitations to the completeness of our presentation. Therefore, we encourage you to read the quarterly report together with today's presentation. And with that, back to you, Marius.

H. Marius Foss, CEO Thank you, Knut. Let's begin with the highlights of the quarter. We are happy to present very strong results for the second quarter.

S. This is our second-best quarter since the fourth quarter of 2021. The fleet average TCE during the quarter ended up at $86,100 per day. 83.

79. Flex Artemis and Flex Volunteer have traded in a strong spot market in the second quarter and contributed to our solid quarterly results. We continue to see elevated geopolitical uncertainty in the LNG space as the conflict in Iran causes disruption to the LNG flow from the region. Lastly, with the dry docking of Flex Vigilant in June, we have completed all scheduled five-year special surveys for our fleet.

We maintain our full-year guidance from last quarter and expect revenues to come in between $345 and $370 million. Similarly, we expect the TCE to come in somewhere between $73,000 and $78,000 per day. We expect adjusted EBITDA to come in between $255 and $280 million. 75 per share.

75 per share, and we have now distributed around $850 million since 2021 including special dividends. 7%. Flex Vigilant completed her dry dock in Denmark in June, and this was the third and final dry docking for 2026. The average cost per dry docking came in around $6 million per vessel as guided, and we spent on average 17 days in dry dock per vessel.

Flex Vigilant marks the final five-year special survey in our fleet of 13 vessels. Looking ahead, we have no dry dockings coming up in 2027, and we will commence our first 10-year docking in 2028. Let's have a look at our contract backlog. Looking at our total contract coverage, we have 51 years of minimum firm backlog, which may grow to 78 years if all options are declared.

In the near term, we have close to 89% coverage for remaining available days in 2026. Flex Artemis and Flex Volunteer have both been trading in the spot market in the second quarter and will come open at the end of the third quarter. We are now marketing the vessels both for spot and near-term contracts. With our good contract coverage for the remainder of the year, we maintain our guidance, which we upgraded last quarter.

This means that we expect full-year revenues to come in between $345 to $370 million. Similarly, we expect TCE to come in somewhere between $73,000 and $78,000 per day. Lastly, we expect the adjusted EBITDA to come in between $255 and $280 million. 75 per share.

Let us briefly revisit decision factors for the dividends. We maintain the orange level for market outlook. This reflects a softer spot market and a heavy schedule of newbuilding deliveries. -led export capacity currently under construction.

We keep all the considerations in orange. Given the continued elevated geopolitical risk, there is still uncertainty around the duration of the Iran conflict and the timing of normalization of the Qatari supply. 75 per share. This brings dividend paid over the last 12 months to $3 per share.

The dividend will be paid on about 17th of September to shareholders of record as of 3rd of September. And with that I hand it over to you, Knut, for final financial updates. 7 million excluding e-rates. The higher revenues were driven by high spot earnings for Flex Volunteer and Flex Artemis, while both Flex Constellation and Flex Aurora contributed by having a full quarter of earnings under the new contracts that commenced in March.

On the cost side, vessel OPEX was higher quarter over quarter as the second quarter was impacted by higher crew travel costs related to the disruptions in the Middle East. The average OPEX per day in the second quarter was $16,200, while the average OPEX for the first six months of the year was around $16,100 per day. We maintain our OPEX guidance of $16,000 per day for the full year. Interest expense continued to improve, reflecting lower loan margins and active management of our RCF facilities.

4 million was unrealized gains. 79. This is more than double that of the first quarter, so overall this was a very strong quarter impacted by improved revenues from the spot market, new contracts, completion of dry docking, continued cost control, and improved financial efficiency. On the cash flow, during the quarter we generated strong cash flow from operations of $63 million, up from $37 million in the first quarter.

The increase was mainly driven by higher revenues as explained on the previous slide. This includes $19 million in positive change in working capital and $5 million of capex related to the dry dockings this year, and the reduction in receivables during the quarter was related to timing of advanced charter hire receipts. We repaid $28 million in scheduled debt installments and distributed $41 million to our shareholders. In sum, our net cash flow was $8 million in the quarter, and that resulted in a cash position of $397 million at the end of the quarter.

So looking at our balance sheet, we maintain a clean balance sheet with main ships and close to $400 million in cash, and our debt financing comprises a combination of bank loans, which gives us flexibility, and attractive long-term leases. 4%. And as noted before, our book values reflect historical costs adjusted with regular depreciations. Our interest rate swap portfolio is unchanged and was valued at $22 million at the end of the second quarter.

46%. We expect to maintain a hedge ratio of around 70% into mid next year. And with that I hand it back to you, Marius, for the market outlook. H.

Marius Foss, CEO Thank you, Knut. Let's have a look at the LNG trade. Global LNG trade volumes are broadly flat year to date, down less than 1% compared with the same period last year. On the supply side, the key development has been significant reduction in the Qatari exports, down around 29 million tonnes.

, where exports are up 23% or close to 40 million tonnes. We have also seen continued growth from Australia and Russia. Other exporters have contributed strongly and are up 6 million tonnes from last year. These include LNG Canada, but also West Africa exporters including Algeria and Senegal.

Industry sources report that global export capacity ran at 96% utilization in July, excluding Qatar. This is above 90% utilization seen last year and a five-year average of 86%. On the demand side, imports into JKT remain resilient while Europe and China are down compared to last year. At the same time, India and other importing markets have continued to grow.

The key takeaway is that despite a significant disruption from one of the world's largest LNG exporters, Qatar, global trade volumes have remained resilient. S. supply means more LNG coming into the Atlantic Basin. This will likely have a positive ton-mile effect when those volumes move into Asia.

Let's have a look a bit closer to the supply side. The reduction in Middle East LNG volumes has been significant. Combined exports from Qatar and UAE are currently down around 63% compared to the normal levels. As you can see from the left-hand side, exports dropped very sharply earlier in the year, and while volumes have started to recover, they remain below historical levels.

S. has continued to ramp up LNG exports. S. liquefaction capacity is up around 14 million tonnes year on year, supported by the ramp-up of the new capacity, particularly in the Plaquemines.

It is also worth a mention that the long-anticipated Golden Pass is slowly but steadily increasing its production. We expect to see increased loading from Golden Pass going forward and from Port Arthur as it comes on stream next year. S. growth, and that shift is positive for the shipping demand.

Let us have a look at the demand side on the competition between Europe and Asia for the LNG. Europe entered the year with relatively low gas inventories. Inventories are today 61% full, the lowest level in over 15 years and below the 73% seen last year. This means Europe still has a substantial requirement to rebuild inventories ahead of the winter season.

S. LNG is highly flexible and can move between Europe and Asia depending on their relative pricing. S. LNG flows between the two regions.

S. LNG volumes, although the balance has shifted through the year. S. LNG exports.

If European storage remains low, Europe will need to keep bidding on Atlantic cargoes, while lack of Qatari volumes could pull more of those volumes into Asia. If you're looking at the newbuildings, we stand out on this slide. Ordering activity remains very strong, even with newbuilding prices holding around $250 million and the term rates remaining at more moderate levels. We have already seen around 60 newbuildings ordered so far this year.

A number of these are made without any employment contracts. This year orders are well above last year's figures of 35 vessels. That tells us there is still significant confidence in the long-term LNG shipping market. At the same time, elevated newbuilding prices continue to provide support for the value of modern existing tonnage, including our fleet.

The orderbook remains substantial with around 285 vessels to be delivered going forward, equivalent to roughly 38% of existing fleet. However, the majority of these vessels are already tied up with Qatar or other long-term employment, and the number of open vessels remains fairly limited. Contract activity remains at very high levels. LNG SPAs volumes signed in the first half of 2026 are already about 30 million tonnes per year.

This continued appetite for long-term LNG supply is important because it provides the commercial basis required for new projects to reach FID. We have already seen around 28 million tonnes of projects reach FID so far this year, including Venture Global's expansion of CP2, Commonwealth, and Delfin, and there are additional projects that could reach FID later this year, up to 39 million tonnes. S. This would take the potential FIDs in 2026 up to around 67 million tonnes.

The key takeaway is that the next wave of LNG supply continues to gain momentum, supported by strong customer contracting and a healthy pipeline of projects moving forward to FID. Let's have a look at the spot market for the modern two-strokes. We have seen increasing vessel availability both west and east of Suez, and that continues to put a weight on the spot rates. It is worth mentioning that the number of vessels available today is in line with the five-year historical averages.

This comes at the time when the LNG fleet is growing. It tells that the newbuildings are being absorbed by going straight into the programs after being delivered from the shipyards. We did see a sharp spike in the rates earlier this year, but since then rates have normalized, and we have seen some pressure on the spot rates over the last few weeks. As we move into the second half of the year, we would normally expect some historical seasonal tightening.

We have two vessels coming open in the end of the third quarter, well positioned for a potential strong winter market. With that, let's turn into a Q&A session. OPERATOR (Operator) Thank you, Marius. And thank you to everyone who has submitted questions on our webcast and also to our investor relations email.

There's been a lot of things happening during the quarter, in particular in the Middle East and with the Strait of Hormuz. So we have a number of questions coming in around that and also how that has impacted our operations. So in specific, the question is: do we have any trade in that area or through the Strait of Hormuz, and have we had any ships being stuck inside the Strait of Hormuz? H.

Marius Foss, CEO Thank you. I'm pleased to confirm that all vessels in the Flex fleet of 13 vessels—none of them have been trading inside since end of February. So our charterers' clients are trading elsewhere for the time being. OPERATOR (Operator) And there's also then a follow-up question around this, as there's a number of additional insurances that are needed to be trading through the Strait of Hormuz.

And the question is specifically who pays for this insurance and what insurance is needed to be trading here? H. Marius Foss, CEO Yeah, it's required to have insurance when you sail into high-risk areas. So if and when our ships are ordered to other high-risk areas, this extra coverage will be paid for by the charterers who are instructing the vessel to such areas.

OPERATOR (Operator) And sticking to the Strait of Hormuz, it's more the market view and the outlook—therefore, first of all the resumption of LNG export out of Qatar and UAE, but also more on the normalization of the transit through the Strait of Hormuz. What's your view on that? H. Marius Foss, CEO Well, we believe that the Strait of Hormuz will remain closed throughout 2026.

So we could potentially look at an interesting market going forward for LNG and other shipping segments.