Oslo-based Flex LNG, a specialist in latest-generation, large-capacity LNG carriers, has just launched its latest vessel, Flex Courageous, as the group sails into bumper profits from a buoyant short-term charter market.
Scheduled for delivery on 19 August 2019 from the Daewoo Shipbuilding and Marine Engineering, the M-type vessel will be the group’s sixth carrier in operation, with another eight under construction. The launch of the carrier, which was right on schedule, follows that of Flex Rainbow in July.
Like Flex Courageous, all these newbuilds will be equipped with slow-speed, two-stroke engines, either electronically controlled gas injection (MEGI) or X-dual fuel.
All built at South Korean shipyards, the next wave of vessels are due for delivery between 2020 and 2021 in the middle of what chief executive Oystein Kalleklev describes as a “tight LNG shipping market due to a combination of a large increase in liquefaction capacity in the near, medium and long term, limited fleet growth, increased tonne mileage, and increased focus on improving air quality [that] favours the ongoing switch from coal to natural gas.”
Flex LNG is reaping the benefits of a decision to avoid long-term charters during the downturn. “Unlike the vast majority of other LNG shipping companies, we decided to strategically pursue shorter-term employment until the shipping market showed signs of rebalancing,” said Mr Kalleklev in the report for Q3 2018. “The market has now rebalanced with current fixtures now being agreed at all-time high rates.”
The wisdom of Flex LNG’s strategy is showing up in a swathe of black ink. In Q3, the group posted revenues of US$19M, more than US$9M up on the corresponding quarter in 2017. That came on top of a doubling of revenues for the first nine months, up from last year’s US$19.5M to more than US$41M.
Even better, earnings before interest tax and depreciation (EBITDA) in Q3 more than tripled while revenues for Q4 are expected to explode, up to US$35M.
Looking ahead, Flex LNG has already funded the newbuilds now under construction. The company raised US$300M during Q3 through a heavily oversubscribed private placement that demonstrates investors’ faith in the LNG carrier industry. The group’s current fleet is fully chartered.
An upbeat chief executive predicts the group “is very well positioned to reap the benefit of our strategy”. This was shown by rosy predictions for the final quarter of 2018 but also by the continuing strong outlook for 2019.