FLEX LNG Ltd

OSE:FLNG

Earnings Call Transcript 2018-Q3

[Operator]

Good day, and welcome to the Flex LNG Q3 2018 Earning Presentation Conference Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Mr. Øystein M. Kalleklev. Please go ahead, sir.

[Øystein M. Kalleklev, Chief Executive Officer]

Thank you, and welcome to the Third Quarter Earnings Presentation for Flex LNG. My name is Øystein Kalleklev. I'm the CEO and CFO of Flex LNG and will guide you through the quarterly presentation today, which is being webcasted live. A replay of the webcast will also be available at flexlng.com.Flex LNG is an Oslo-listed shipping company focused on the growing market for seaborne transportation of liquefied natural gas or LNG.So, first, a disclaimer with regards to, among others, forward-looking statements and completeness of detail. The full disclosure is available in the presentation, and we recommend that the presentation is read together with the interim financial report as well as our annual report, which are both available on our website.On Friday, 23rd of November, we also filed our prospectus for the $300 million equity placement. So if you like to get more detail about the transaction, Flex LNG and/or the underlying LNG market, I would also recommend reviewing the prospectus at our web page, flexlng.com.So let's jump to the highlights. Following the recent acquisition of an additional 5 newbuildings, Flex LNG became the largest owner of fifth-generation LNG carrier with a fleet of 13 vessels. I will shortly give some more details about this transaction.However, in June and July, we took delivery of our remaining 2018 built LNG carriers, being the sister vessels, Flex Ranger and Flex Rainbow, which was delivered from Samsung Heavy Industries on 22nd of June and 9th of July, respectively. Flex Ranger was put in the spot market. And after positioning her towards Atlantic Basin, we fixed our maiden voyage at the end of August with discharge in South Korea early October.Sister vessel, Flex Rainbow, was put on a 6-month time charter subsequent to delivery and mobilization and commencement of her time charter happened on 12th of July. This extra time charter was on basis one condition, which means that the charter was responsible for cost and time associated with positioning gas up and cool down. Consequently, she achieved 100% utilization for the quarter from commencement of this charter.While the headline spot rates were fairly decent during the summer, the market was a bit soft in terms of utilization as there was a fair number of vessels chasing cargo as well as faster European reload market, which was closed due to very high European gas prices over the summer. However, from early September, the freight market started to tighten considerably, resulting in higher charter rates at better terms. Since early September, rates have more than doubled and are now hovering around $200,000 per day for modern fifth-generation vessels.With improved market, we also see better utilization levels and gradual increased interest for multi-month requirement. Consequently, our financial performance significantly improved in third quarter with EBITDA increasing more than fourfold from $3 million in second quarter to $12.7 million in the third quarter.Due to the strength of the market and the burgeoning spot market, we have already fully covered employment for the fourth quarter for our 2 vessels operating in the spot market. Hence, we are thus in position to provide a very upbeat guidance for fourth quarter with revenues expected to increase from $19 million to approximately $35 million.So let me touch a bit more upon the guidance. As we file our prospectus on Friday, 23rd of November, we are therefore reporting our numbers a bit late this quarter. Anyway, long story short, we're sold out already for the fourth quarter, and our spot price -- spot vessels have been repriced at significantly better terms for this quarter. Our speed and position into fourth quarter have been very good with 2 open ships being the Flex Enterprise and Flex Ranger.As we mentioned in our second quarter presentation at the end of August, Flex Enterprise was then fixed at the prevailing market, i.e., $90,000 per day for a round trip Far East to U.S. It's worth mentioning that our large fifth-generation vessels are particularly well suited for the long journeys between U.S. and Far East as the charters get the full benefit of large fuel-efficient vessels. Given the long round trip, Flex Enterprise was back discharging her cargo in the middle of November, and she is now fixed for 2 intra-Asian voyages for the remainder of the year.Once Flex Ranger discharged her maiden cargo in South Korea in early October, she was chartered out to pick up a cargo in U.S. The Sabine Pass cargo was intended to be sold in Far East but has now been sold into Europe, so she is now heading into the Atlantic Basin. Flex Ranger will, nevertheless, stay with the current charter into early 2019, probably picking up our European reload cargo after discharging her U.S. cargo.Revenue guidance of $35 million for the fourth quarter implies that the time charter equivalent or TCE rate per day for the spot vessels are -- now for all the vessels -- or now for the spot vessels are expected to increase from around $50,000 per day in the third quarter to about $130,000 in fourth quarter. This, I think, clearly demonstrates that the earnings potential and premium of modern vessels are very much real.As the time charter have already been entered into, the main uncertainty with the guidance is related to off hire. But so far in the quarter, there have been reported or claims no off hire.So let me touch upon the recent transaction. In October, we completed our $300 million private placement of new shares on 10th of October. The purpose of this equity offering was to finance acquisition of an additional 5 LNG carriers from an affiliate of Geveran, which was announced in connection with the offering. All the vessels are large modern carriers with 174,000 cubic cargo capacity. And they are propelled by efficient dual-fuel, slow-speed, 2-stroke engines, giving very compelling fuel economy compared to steam and tri-fuel vessels.Two of the vessels acquired, the Flex Vigilant and Flex Volunteer, are sister vessels of Flex Aurora and Flex Amber, which we acquired back in May. These 4 vessels have low-pressure X-DF operation system and an efficient cargo containment system with a passive boil-off rate of 0.085%.The remaining 3 vessels acquired, Flex Resolute, Reliance and Freedom, are high-pressure ME-GI vessels fitted with Full Reliquefaction System, which brings the boil-off rate all the way down to 0.035%. This makes them ideal candidates for longer-term contracts where the vessels might be idle and/or slow-steam for part of the carriers under the time charter and where a Full Reliquefaction System can provide fuel savings in such circumstances.The purchase price for the 5 vessels was $180 million each, with an additional CapEx of $6 million for the Full Reliquefaction System for each of the 3 new ME-GI vessels. This purchase price compares very favorably with newbuilding prices, particularly when taking into account early deliveries lost from middle of 2020 to beginning of 2021. It includes newbuilding supervision cost, which typically cost $2 million to $3 million, and the fact that Flex LNG only paid 30% of the acquisition price before delivery.With this transaction, we have since early 2017 built the fleet up from 2 to 13 vessels. We started 2017 with 2 vessels under construction, Flex Ranger and Rainbow. During 2017, we raised approximately $330 million in connection with the acquisition of the 4 sister vessels, Flex Endeavour, Enterprise, Constellation and Courageous. Then we acquired the Flex Aurora and Amber, as mentioned, back in May, where we raised the terms for this transaction to the sale leaseback of Flex Rainbow.And now with the recent equity placement, we acquired 5 additional LNG carriers, bringing the vessel tally to 13, with a mixed bag of vessels with high- and low-pressure fuel gas systems being the ME-GI and the X-DF system as well as vessels with Partial and Full Reliquefaction Systems. Hence, our fleet consists of modern vessels with technical specifications, which fits very well with different charters' preferences depending on how they intend to trade the vessel.So with this recent transaction, we also became the leading owner of modern fifth-generation LNG carriers with the fleet consisting of, as mentioned, 13 vessels. In contrast to most of the other shipping companies listed here, all vessels have also not been charted out on longer-term contracts. This means we are in position to benefit from the tight shipping market by either paying the spot market or seeking longer-term contracts. We will probably do a bit of both.Fifth-generation LNG carriers are the large modern type, which provide significant fuel savings compared to the previous generation LNG carriers. Due to also larger parcel size, the unit transportation costs for our vessels are considerably lower, which means charters can pay a higher rate as they are also paying the fuel cost under these charters.This also is what's happening in the market today with now a greenfield market developing. There's a number here on the right-hand side in relation to the unit costs. It's a slide from Poten, which utilized the FOB price of $5 per million BTU for the boil-off gas. While you could argue that a more applicable number is maybe more like $10, which is the price LNG attached today in the primary end-user market, this would make the comparison even more favorable for the fifth-generation vessels.So let's begin to the income statement. We recently announced the recruitment of Harald Gurvin as our new CFO, and he will join us from Ship Finance International where he's been the last 12 years, of which the last 6 years as their CFO. Given the fact it's my last time presenting the numbers, I'm very pleased to announce that we are back in black after significant improvement in our financial performance for the third quarter. With 4 vessels on the water for the most of the third quarter, as Flex Rainbow commenced her charter from yard on 12th of July, our revenues grew from $7 million to $19 million for the third quarter. This represents a TCE of about $53,000 per day for the fleet on average.Spot earnings for Flex Enterprise were on the top side for July and August; while Flex Ranger, which was chasing her maiden voyage, was positioned into the Atlantic Basin subsequent to delivery from yard. This meant utilization was a bit low for Flex Ranger in the third quarter, which is not uncommon in connection with such first voyage when vessels lack pirate certificate. That said, both our 2 spot vessels was very well positioned into the fourth quarter, which is demonstrated by our guidance.Given higher charter revenues, our EBITDA of $12.7 million increased by more than fourfold in third quarter compared to the $3 million reported in the second quarter. Given more vessels on the water in third quarter, our depreciation increased to $5.5 million, giving us our EBIT of about $7.2 million. Given 4 vessels on the water for the third quarter, our financial expenses associated with the financing of the vessels grew from about $3.2 million to $6.1 million. Hence, the net profit for the quarter was $1.2 million versus a loss in the previous quarter of about $2.9 million.Next slide is the balance sheet as of September 30. At the end of the third quarter, our assets consisted of 4 vessels on the water booked at about $820 million in total. In addition, we have booked investment of altogether $146 million in relation to the 4 vessels under construction where this sum is the advance payment made by us. When adding about $17 million of cash and some working capital, our balance sheet is about $988 million in total.Our right-hand side of the balance sheet consists of $517 million of equity, which represents an equity ratio of about 52%, which is a very solid capitalization for such a capital-intensive shipping company. In addition, we have raised $472.5 million of external debt during 2018. As we are amortizing this debt, as of September 30, we had about $461 million gross debt outstanding, of which about $23 million is due over the next 12 months and others classified as current liabilities.Given the fact that we raised $300 million in October for acquisition of 5 additional newbuilding, our balance sheet has changed since end of September. The main change, except $300 million increase in equity, is 5 additional newbuildings booked at about $275 million, which represents the 30% advance payment for these newbuildings. Additionally, our cash balance was boosted by about $23 million, which is the residual amount from the equity raised after cost associated with the equity raise.Given the fact we also have our $270 million revolving credit facility with Sterna Finance, which is not drawn and thus fully available, we can say that our liquidity situation to be very comfortable. Despite limited backlog, we have a very resilient and robust capitalization with ample liquidity available. This means we have a very large cushion vis-à-vis our key financial covenants being 25% booked equity level and a certain minimum liquidity level, of which 5% cash in relation to net interest-bearing debt is the most important measure.So let's dig a bit deeper into our cash flow. Our operational cash flow was positive by about $5.2 million in third quarter and about $10.7 million for the year-to-date. During the year, we have invested about $234 million in the 4 newbuildings delivered, which have now all been delivered. In addition, we paid $73.6 million of advanced payment for Flex Aurora and Amber, subsequent to the acquisition announced in connection with our second quarter presentation.Hence, total investment this year have been $308 million. These investments have been financed by drawing a total of $472.5 million of external debt. At the beginning of the year, we had $160 million outstanding balance under the revolving credit facility with Sterna Finance. The external financing rates have also been utilized to repay this amount in full. Hence, as mentioned previously, the $270 million is now currently available.I apologize here for the financing cash flow numbers being a bit confusing. The reason for this is the fact that we have drawn and repaid amounts under the Sterna facility during the year, and the figures here are presented on gross basis, in line with applicable accounting principles.However, to summarize, we raised $472.5 million of external financing and repaid $160 million. This means a net increase in investments of $312.5 million, which is in line with our investment cash flow of $308 million this year. At the end of the quarter, we had about $17 million in cash at hand in addition to the mentioned $270 million available under the Sterna RCF.When it comes to our funding and capitalization, this situation is very satisfactory as we raised $300 million of fresh equity in October. At the end of third quarter, we have $17 million of cash at hand. Of approximately $295 million net proceeds from the equity offering, we spent $275 million on prepayment of CapEx, thus boosting cash balance by about $20 million to $37 million after cost associated with the equity raise. As market has been very healthy in Q4, actual cash balance raised, however, at the higher level. In addition, we have, as mentioned earlier, $270 million available liquidity under the Sterna RCF, leaving us with available liquidity of more than $300 million.Following the acquisition of 5 additional newbuildings, we have investment commitments for newbuildings of about $1.65 billion or an average $183 million per vessel. This includes the free relay kits as well as newbuilding supervision for all the vessels.Before the recent transaction, we have prepaid $146 million or 20% of the CapEx commitment related to the 4 existing newbuildings. Following the recent transaction, we prepaid another $275 million of CapEx, bringing the total amount to $421 million as we prepaid 30% for the 5 additional newbuildings rather than 20%. This leaves us with about $1.2 billion of remaining CapEx for the 9 newbuildings in our fleet. This equates to about $136 million per vessel of remaining CapEx. Adjusted for available liquidity, this number is $102 million per newbuilding.During 2018, we have drawn total of $472.5 million of debt for the 4 vessels on the water. Three vessels are financed by a secure bank loan with tenure of about 5.5 years, while Flex Rainbow has been financed through a sale leaseback with a tenure of 10 years. This equates to average leverage on existing vessels of $131 million or $118 million on a weighted basis when taking into account we have only done sale leaseback for 1 vessel. The 3 vessels were financed with clearly low leverage bank finance. That said, we have some flexibility featured in the bank financing where we can add leverage in case of longer-term employment or swap collateral in order to optimize financing for such longer-term contracts.Given the outlook for LNG shipping, we do think we are -- we're invested more than $800 million of equity on our balance sheet following the recent equity offering. We have demonstrated our ability to finance vessels where the market has been fairly soft at levels in line with the funding requirements for the 9 newbuildings. This financing had been put in place without any requirements for longer-term employment, so we are now very well positioned to capitalize on what we think will be a very strong market as we have elected to be open in the market rather than pursuing longer-term contracts too early in the cycle.Based on our existing financing, our average cash-back even is around $50,000 per day. This means we generate substantial free cash flow for our vessels going forward. A TCE of $100,000 per day means these vessels can generate $18 million of free cash flow. This is free cash flow after OpEx, finance expenses, installments and general admin expenses, i.e., money in the bank.Right now, we have 4 vessels on the water. Middle of next year, we have 6 vessels in the market. In 2020, we are at 11 vessels. And finally, in second quarter 2021, we will take delivery of the last newbuilding, and the tally has increased to 13 vessels in operation. This means we are uniquely positioned to generate substantial free cash flow in the near future.Consequently, we are relaxed with our funding situation. We are already in discussion with financiers about financing for the 2019 newbuildings. Given the fact that we have a comfortable liquidity situation with more than $300 million of liquidity, we can, today, actually take delivery of the 2019 vessels without raising any external financing.As vessels under contract tend to get better financing terms and the fact that there is commitment fees associated with raising financing ahead of deliveries, we have hold off putting in place financing for the 2019 vessels. We do, however, intend to put in place financing early next year ahead of deliveries. And this, we do expect will be in line with the parameters described here.So I will move on to a brief update on the market, and then we are talking about the physical market, which seems to be a bit disconnected from what is happening in the financial market in relation to our recent stock price development. To summarize the current status of the LNG price market, it's very bullish. We are now in the early phase of the recovery cycle for LNG shipping after 4 challenging years in the period 2014 to 2017. Following the Fukushima incident, the market for LNG transportation was experiencing a boom, which resulted in excess transportation capacity as a lot of shipowners had fairly good access to capital and placed too many orders. Don't forget that this was in a period where particularly the MLP market was very liquid. Furthermore, the down cycle in shipping rates were also due to delays in bringing new LNG capacity on stream, which has particularly been the case for Australian brands. The last of the Australian megaprojects are now coming on stream. And for a short period of time, Australia will be the country with the largest liquefaction capacity in the world before Qatar expands its 77 million tonnes per annum to 110 million, as previously announced.What I like with the recovery now is the fact that it's structural. The fundamental drivers for LNG shipping are very positive, and this means the markets have balanced out in a fairly quick manner when talking -- taking into account excess share volume of capacity. This rebalancing has also occurred without much capping, which is normally how more mature shipping segments with limited world trades have new equilibrium.The rates started to rebound before winter season 2017/'18 as China, in particular, increased their demand by about 45% during 2017, and China is continuing to go at a similar pace in 2018 as natural gas is a very small part of their energy matrix, and they have a very strong political will to clean up the air quality in the metropolitan areas.When it comes to spot rates, there is now a 3-tier market. The most liquid spot rate is high fuel rate as the majority of vessels in the spot market are made up by these vessels, which are typically 5 to 10 years with about 160,000 cubic meters of cargo capacity. The lower rate is the steam rate, which is the rate for old inefficient steam vessels, which typically handle smaller parcel of around 140,000 cubic meters. The highest rates are paid in the premium segment, which are modern LNG carriers propelled by an efficient dual-fuel stock engine with a large cargo capacity of around 170,000 to 180,000 cubic meters. Our fleet consists entirely of this new type of LNG carriers, which commands a premium to tri-fuel vessels of typically around $15,000 to $20,000 per day.The product we are shipping is LNG, and this is transported from producing areas to consuming areas. Hence, over the longer run, the price of the end product affects freight trends. What has been remarkable is when there is the fact that the freight market is so strong despite limited arbitrage opportunities in the market due to strong European gas prices.Despite Henry Hub spot price being volatile and moving upwards due to lower U.S. inventories, the forward price for natural gas in the U.S. is more or less unaffected by this short-term spike. The forward price for Henry Hub is below $3 per million BTU for the foreseeable future, which bodes well for future export demand out of the North America. Also keep in mind that a lot of projects under consideration in North America sourced gas in areas like West Texas where there are ample associated gas from shale production and, thus, the price of gas is much cheaper than Henry Hub.Next slide is a snapshot of the charter market. As the market had tightened during the second half of the year due to a combination of higher demand, growing some mileage and less deliveries from the yard, availability of vessels today is very limited, which is also evident from the fact that we are sold out for the rest of the year. What's interesting to see is that the market is sold out despite limited arbitrage demand, which typically absorbs shipping capacity in the winter season. This structural tightness bodes well for the market going forward in our view.With less availability of ships and strong demand, the forces of economics means rates goes up to rebalance the market. And right now, rates for modern fifth-generation tonnage is around $200,000 per day. This means that our vessel can generate a very high free cash flow, and our cash breakeven is around $50,000, as mentioned.Next slide gives an overview of the supply side of LNG, which is basically the demand side for the shipping side. The wave of Australian trends is now coming to an end with the last projects being commissioned. However, start-up trends tend to ramp up production over some time, so we expect Australia to also provide substantial growth to the market in 2019 with production of around 80 million tonnes in 2019 versus 70 million tonnes in 2018. If so, Australia will become the largest producer of LNG in 2019.Growth in the near future is, however, predominantly coming from the U.S. with start-up of several unit trains being Corpus Christi, Cameron, Sabine Pass, Freeport and Elba during 2019. These trains also have the added benefit of increasing ton/mileage due to their increased sailing distance to end users. In total, the LNG production is expected to increase from about 325 million tonnes in 2018 to about 450 million tonnes in 2025 and around 550 million tonnes in 2030.So we have now considered the supply side of LNG and the demand side for LNG carriers, which remain very compelling. In order to move LNG from the liquefaction down to the end user, they need to transport this, and this is done by LNG carriers. The order book for LNG vessels is currently 92 according to our figures. And this -- and of this, 6 vessels are icebreaking vessels constructed for the Yamal project in the Russia Federation. Flex LNG have 2 vessels for delivery in mid-2019, 5 for delivery in 2020 and 2 for delivery in 2021. Hence, about 1/4 of the open order book are vessels owned by Flex LNG as we have so far not pursued longer-term employment, rather instead waited for the market to heat up, which is very much the case today.So as presented on previous slide, LNG production is expected to grow from about 325 million tonnes in 2018 to about 400 million in 2020, 2021. This is 23% growth. In the same period, the LNGC fleet is expected to grow from about 460 vessels to 550 vessels. This represents growth of about 20%. Hence, when taking into account the increased ton/mileage as a result of increased sailing distances and the fact that the earliest newbuilding slots are for 2021, the market for seaborne LNG transportation will continue to be tight in the coming years, and Flex LNG is uniquely positioned to capitalize on this.So to something a bit different in the end. One of the drivers for LNG being the only hydrocarbon with any long-term growth is the environmental footprint of natural gas compared to fuel of this 19th century coal and the fuel of the 20th century, namely oil. Traditionally, there's been a lot of focus in the reduction in global warming by switching from coal to natural gas as CO2 emissions from natural gas is about half of that of coal. However, in October, World Health Organization arranged the first global conference focused on air pollution and health. And this is really a big challenge the world is facing. As they reported, 92% of the global population breathes unhealthy air, resulting in about 6.5 million premature deaths annually, which make it to one of the world's most significant forces of premature death.Switching from coal to natural gas is a very quick and cost-efficient way of making big improvements in local air quality. This was demonstrated by the Chinese government last winter. In Q4 2017, concentration of fine particular matters was reduced by a staggering 54% in Beijing compared to Q4 2016, and one of the reason was increased use of natural gas. We have seen that the Chinese have been more lax with regards to pollution this winter due to fear of economic slowdown. However, given the large problem air pollution represent, the citizens in the metropolitan areas put this concern on the top of the list. Hence, we continue to see very strong growth in LNG demand from China with about 40% growth in 2018, growing the demand from about 40 million tonnes to 55 million tonnes. We do also expect increased demand from India, which is growing steadily at high rates and where you will actually find the 10 most polluted cities in the world measured by fine particular pollution.Next slide elaborates a bit further in South Asia, which is the main market for LNG. Air pollution is also a major health problem, with average loss in life expectancy in this region of close to 3 years due to air pollution, of which PM2.5 is the major contributor. This means air pollution is a bigger health risk than tobacco, cancer and water sanitation and on par with dietary risk in South Asia.As mentioned, CO2 emission can be cut by about half by switching from coal to natural gas. However, reduction in local air pollutions are much higher. Sulfur dioxide or SOx, which is the pollution covered by IMO 2020, can be cut by 99%. Nitrogen oxide or NOx, which is covered by the IMO Tier III requirements, can be cut 80% to 90%. Carbon monoxide can be cut by about 90%. And particulate matter can be reduced by about 90% to 99%, depending on the type of particulate. Mercury can be eliminated entirely. Hence, switching from coal to gas is as much about health policy as energy and environmental policies.You could also argue educational policy as highly polluted air has an adverse effect on cognitive development not only in children but also in adults. Hence, increased switching to -- away from coal to natural gas will not only contribute to less global warming, cleaner cities, but also better lives and smarter kids.So to summarize. We have significant improvement in our financial performance in the third quarter as the underlying market has improved. Our EBITDA grew from $3 million to $12.7 million, and we are back in black. The market for LNG shipping is tight with very limited availability of vessels and all-time high charter rates. Due to the strong market, we have already covered Q4 as much -- at much better spot rates, implying that our revenues will jump from $19 million to about $35 million in fourth quarter, which also bodes well for the bottom line in the next quarter.We do expect LNG market to continue to be tight in the years to come as there is a lot of new LNG hitting the market near term and long term. Thus, we expect that the underlying demand for the LNG vessels will exceed the supply of vessels coming out from the yard in the near term. Furthermore, natural gas have very good growth prospect and LNG in particular. Not only is gas cheaper and abundant, but switching from coal to natural gas also significantly improves the global climate and not least the local climate, as previously described. With our fleet of 13 modern LNG carriers open for employment opportunities, Flex LNG is uniquely positioned to a strong LNG shipping market.So that's it. I pass the word back to the operator for any questions. Thanks.

[Operator]

[Operator Instructions]

[Øystein M. Kalleklev, Chief Executive Officer]

It all seems to be very clear then. Very good. Okay...

[Operator]

We will take our first question -- pardon the interruption, sir. We'll take our first question from Anders Wennberg from Catella.

[Anders Wennberg, Senior Fund Manager]

It's Anders Wennberg from Catella. Congratulations to a good quarter and a good guidance also for the fourth quarter. I wonder how much of the spot -- I mean, on your 2 spot ships, are they -- do they have business going into January and February also? Or when will they be open to the market again?

[Øystein M. Kalleklev, Chief Executive Officer]

Thank you, Anders. I think we described it in the slide, we gave illustration of the position. So both the vessels will be open again, clearly, early in January. Of course, there are some pluses and minus days attached to the time charter, but we expect them to be back around 10th of January for Enterprise, maybe middle of January for Flex Ranger. So they covered well into January. We do see that there are very limited visibility on available tonnage in the near future. So with such a strong market, it's not unlikely that we are able to fix them well ahead of the delivery date, which has been the case for our fixture for the fourth quarter.

[Anders Wennberg, Senior Fund Manager]

Okay. I mean, the spot rates are obviously extremely strong currently. Do you think you could get something close to that also for January closure?

[Øystein M. Kalleklev, Chief Executive Officer]

Yes, usually, January is a busy month. It's very hard to predict the market. But we are very, very positive and upbeat about it. Of course, the rates now are at a very high level. Whether it's feasible to get a similar level, yes, I would think so. It depends on when you fix the vessels. We are already receiving requests from charters to when our vessels are open and whether we are willing to do some charters for them. So as of today, I would say our expectation is to achieve rates in line with what we have been doing for the spot vessels in the fourth quarter.

[Operator]

[Operator Instructions] It appears there are no further question at this time. Sir, I would like to turn the conference back to you for any additional or closing remarks.

[Øystein M. Kalleklev, Chief Executive Officer]

Okay. Thank you very much, and thank you for everyone participating in the webcast today, and I wish you a merry Christmas. Thank you. Bye-bye.

[Operator]

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect your line.