FLEX LNG Ltd

NYSE:FLNG

Earnings Call Analysis

Flex LNG Reports Strong Earnings, Bullish Q4 Outlook

Flex LNG reported third-quarter revenues of $94.6 million at the guidance's high end, leading to a robust net income of $45.1 million or $0.84 per share. Adjusted net income stood at $36.1 million, or $0.67 per share. Backed by a balanced LNG market, the company anticipates Q4 revenues between $97 million to $99 million, aligning with the upper tier of their annual guidance. Accordingly, the yearly revenue target is $370 million with an adjusted EBITDA of $290 to $295 million. Reflecting their strong financial standing and positive outlook, Flex LNG has announced a special dividend of $0.125 in addition to the regular $0.35 dividend per share, totaling $3.375 per share over the last year.

Company Performs Strongly with Optimistic Outlook

Flex LNG, steered by CEO Oystein Kalleklev, has had an impressive quarter, with revenues soaring to $94.6 million, which was on the higher end of their $90 million to $95 million forecast. The company enjoyed robust earnings, with a net income of $45.1 million, amounting to $0.84 per share. After adjusting for derivatives gains, the adjusted net income was $36.1 million or $0.67 per share. Their successful quarter is partly thanks to the full reinstatement of ships after drydocking during Q2 for special surveys, coupled with a strong seasonal spot market that especially benefited the Flex Artemis.

Stable LNG Market Fuels Positive Results

The LNG market is currently well-balanced, with Europe's high gas inventory levels stabilizing LNG prices—although prices are maintaining a premium over Brent oil prices. The equilibrium in the market has allowed Flex LNG to navigate effectively through varied market conditions.

Projected Revenue Growth and Continued Financial Strength

Looking ahead, Flex LNG is projecting higher revenues for Q4 in the range of $97 million to $99 million, topping their annual guidance scale of $90 million to $100 million. The company anticipates concluding the year with total revenues around $370 million and an adjusted EBITDA between $290 million and $295 million. This forecast points to a profitable closing of the year for Flex LNG.

Aggressive Dividend Strategy Rewards Shareholders

Reflecting their strong financial health and confidence in continued success, the company's board has decided to pay an additional special dividend of $0.125 on top of their regular $0.35 per share, culminating in a dividend of $0.875 per share. Over the past year, dividends have totaled $3.375 per share, yielding an impressive 11% for its investors. This aggressive dividend strategy demonstrates Flex LNG's commitment to sharing its prosperity with shareholders.

Upcoming Events and Shareholder Incentives

Flex LNG is also preparing for a full video webcast to provide a comprehensive market update and field questions during a Q&A session. Engaged investors can anticipate chances to win branded gifts, indicating the company's commitment to engaging with and rewarding its investor community.

Earnings Call Transcript 2023-Q3

[Øystein Kalleklev, executive]

Hi, everybody. I'm Oystein Kalleklev, CEO of Flex LNG. And today, we are delivering our third quarter numbers. So let's review the highlights. Revenues for the quarter came in at $94.6 million in the high end of our guidance of $90 million to $95 million. This resulted in strong earnings with net income of $45.1 million, translating to $0.84 per share. Adjusted for the gains on our derivatives, adjusted net income came in at $36.1 million or $0.67, respectively.

As you might recall, we have been doing drydocking of four ships this year. But in Q3, we had all the touring ships back in operation, taking out three ships during Q2 for the special survey for 5-year class. We have also seen seasonally stronger spot market, and this is positively impacting the earnings we have on Flex Artemis, and these are the two main reasons why revenues are higher in Q3 than Q2.

Overall, the LNG market, both freight and product is well balanced with high gas inventory levels in Europe now prior to the heating season. That means LNG prices have come down to more normal levels, but they are still at a premium to Brent oil price.

With a good spot market heading into the winter season, we do expect even better numbers for Artemis in Q4. So we expect revenues to be somewhere around $97 million to $99 million for Q4, also in the high end of our $90 million to $100 million guidance. So with good numbers in Q3, even stronger numbers in Q4, we are well on track to deliver our guidance for the year, $370 million of revenues and an adjusted EBITDA of $290 million to $295 million.

So with good numbers, good outlook and a very strong financial position, where we are sitting on $429 million of cash, the Board has decided to once again pay a special dividend of $0.125 on top of the regular $0.35 per share. This gives a dividend per share of $0.875 per share. In total, we have paid out $3.375 per share of dividend, last 12 months, which provides a running yield of about 11%, which I hope is attractive for our investors.

So don't forget our full video webcast at 3:00 Central European Time, 9:00 Eastern Standard Time. We will give a good update on the market, and we will conclude with a Q&A session, where the best question will win a gift consisting of the Flex LNG Thermos, which comes in nicely in the winter season as well as our Flex LNG beanie from the Norwegian brand, [ Amazon ]. So I hope you join the full webcast, and thank you for listening in.