Flex Lng Ltd. · NYSE:FLNG
Flex Lng — Q4 2017 Earnings Presentation
32 slides from Flex Lng's earnings presentation, Feb 27, 2018
Slide 1: Fourth Quarter 2017 & Investor Day Presentation
Fourth Quarter 2017 & Investor Day Presentation 27 February 2018 11 | | 2017 2018
Slide 2: Disclaimer
Disclaimer • THIS PRESENTATION (THE “PRESENTATION”) HAS BEEN PRODUCED BY FLEX LNG LTD. ("FLEX LNG" OR "THE COMPANY”), SOLELY FOR PRESENTATION PURPOSES AND DOES NOT PURPORTE TO GIVE A COMPLETE DESCRIPTION OF THE COMPANY, ITS BUSINESS OR ANY OTHER MATTER DESCRIBED HEREIN. • THE PRESENTATION DOES NOT C
Slide 3: Table of contents
Table of contents 01 01 02 Business Update 02 Financial Update 03 03 Market Outlook 04 04 Summary 33 | | 2017 2018
Slide 4: Business Update
04 01 04 Business Update 44 | | 2018 2017 2018
Slide 5: Highlights for Fourth Quarter 2017
Business Update Highlights for Fourth Quarter 2017 FLEX LNG delivers profitable results for the fourth quarter • FLEX LNG extended options on two chartered-in vessels and secured profitable employment for the remaining charter periods • Chartered-in vessels delivered TCE of about $42k in line with Q
Slide 6: FLEX LNGC Fleet Development
FLEX LNGC Fleet Development Owned Fleet Chartered-in Vessels 6 173,400 173,400 173,400 173,400 2 173,400 170,000 174,000 174,000 • 6 LNG MEGI vessels • 2 chartered-in TFDE vessels; sub-charterered on multi- - 2 vessels delivered in January 2018 month basis on a profitable basis - 4 vessels under con
Slide 7: LNG Market Summary
LNG Market Summary Global LNG Trade Continues to Surge Global LNG Production Reached 291 mt in 2017 • The wave of new LNG production coming from the US, Australia and Russia, is quickly tranforming the market • Additional ~100 mtpa of LNG capacity under construction • LNG continues to gain market sh
Slide 8: Financial Update
02 02 Financial Update 88 | | 2018 2017 2018
Slide 9: Income Statement
Income Statement Income Statement as of 31 December 2017 Unaudited Figures in USD, 000 Q4 2017 Q3 2017 2017 2016 Voyage revenues 7 860 9 758 27 329 0 Voyage related costs -5 803 -12 985 -36 532 0 Administrative expenses -812 -848 -3 409 -1 483 EBITDA 1 245 -4 075 -12 612 -1 483 Depreciation -1 -1 -2
Slide 10: Balance Sheet
Balance Sheet Balance Sheet as of 31 December 2017 Flexible financing for flexible business model Unaudited Figures in USD, 000 YE 2017 YE 2016 YTD 2017 YE 2016 Newbuildings & capitalised costs 594 937 212 472 Share capital 3 680 1 279 Vessel purchase prepayment 72 000 0 Share premium 885 323 563 17
Slide 11: Flexible Financing Secured for Two First LNGCs
Flexible Financing Secured for Two First LNGCs Documentation and closing conditions for $ 315m secured TLF in place before deliveries Flexible financing for playing the recovery cycle in LNGC market • No requirement for fixed employment of vessels • No financial covenants linked to earnings of vesse
Slide 12: Robust Financing with High Potential Free Cashflow
Robust Financing with High Potential Free Cashflow Free cash flow p.a. per vessel based on different rate assumption given bank financing Free cashflow in $ million per vessel given different rate assumptions: Loan tranche per vessel $105 000 000 TC-rate/Utilization 60 % 70 % 80 % 90 % 100 % Margin
Slide 13: Evolution of LNGC Financing
Evolution of LNGC Financing LNG evolving from utility business to global tradeable commodity business LNG 1.0 LNG 2.0 LNG 3.0 • 1960s to mid 2000s • Mid-2000s - today • Today - Future • Traditional model • Portfolio players • Commoditization of LNG • Point-to-point trade • More portfolio trade • Wor
Slide 14: Capital in Scarce Supply for Shipping Sector
Capital in Scarce Supply for Shipping Sector Reduction in volume for both bank financing as well as capital market products (bonds and public/private equity) • Shipping sector, including LNGC, have historically been “over-banked” which have resulted in relative low historical capital return due to o
Slide 15: Financing Options for Remaining LNGC Newbuildings
Financing Options for Remaining LNGC Newbuildings From Q3-17 presentation US$ millions 250 Financing options for FLEX Firm base debt Expected firm base debt RAINBOW: 200 A) Add 4th tranche to TLF 150 Under evaluation 100 B) Sale-leaseback 50 Under evaluation 0 C) $ 270m Sterna RCF Q1-2018 Q2-2018 Q3
Slide 16: Market Outlook
03 03 Market Outlook 16 || 2018 16 2017 2018
Slide 17: 2017 Ends Strong for LNG Shipping
2017 Ends Strong for LNG Shipping Shipping recovery continued, spot rates rose to highest levels in 4 years COMPANY SNAPSHOT The fourth quarter saw headline rates double LNG Spot Shipping Rates • Cold Asian winter, a strong Chinese push from coal- USD/day ST TFDE MEGI/X-DF Assessment 100,000 to-gas,
Slide 18: LNG Market Expanded by 11% in 2017
LNG Market Expanded by 11% in 2017 LNG exports reaches 291 mt in 2017, up 11% on 2016 • An additional ~30 mtpa of LNG was produced. New projects in US and Australia represented 22 mtpa of this growth. • 2018 will see more projects and additional trains coming online from these regions: Cove Point T1
Slide 19: Structural Drivers for Increased LNG Demand
Structural Drivers for Increased LNG Demand Top four LNG Importing Countries 19 || 2017 19 2018 Source: SEB, FT, Reuters, Texas A&M University, the Australian
Slide 20: Structural Growth in Natural Gas Will Drive Tonnage Demand
Structural Growth in Natural Gas Will Drive Tonnage Demand IEA: Change in global primary demand for different scenarios Natural gas only fossil fuel with significant growth in both scenarios IEA: Change in LNGC shipping demand LNGC fleet estimated to double in numbers Source: IEA. LNGC fleet include
Slide 21: The Start of US LNG Exports has Pushed up Tonne-Mile Demand
The Start of US LNG Exports has Pushed up Tonne-Mile Demand Global average distances increasing primarily driven by new US volumes (Sabine Pass) COMPANY SNAPSHOT Source: Reuters 21 || 2017 21 2018
Slide 22: LNG Fleet Development
LNG Fleet Development Orderbook represents 21% of total LNGC fleet COMPANY SNAPSHOT Source: Clarkson 22 || 2017 22 2018
Slide 23: Vessels Coming Off Long-Term Charter Over Next Five Years
Vessels Coming Off Long-Term Charter Over Next Five Years Steam ships to be replaced by more modern tonnage ST DFDE/TFDE MEGI Q2-18 2 Q3-18 5 Q4-18 5 1 Q1-19 8 2 Q2-19 13 1 2 Q3-19 14 2 2 Q4-19 17 3 2 Q1-20 24 4 2 Q2-20 26 5 2 Q3-20 27 5 2 Q4-20 32 6 2 Q1-22 42 8 3 Q2-21 42 8 4 Q3-21 43 10 4 Q4-21 4
Slide 24: MEGI / X-DF Leads LNG Fleet Evolution on Size and Efficiency
MEGI / X-DF Leads LNG Fleet Evolution on Size and Efficiency COMPANY SNAPSHOT 280 71 vessels ST TFDE & Other MEGI & X-DF Existing LNGC Fleet: 240 450 vessels Size (‘000 cbm) 200 160 324 vessels 120 - 5 10 15 20 25 30 35 40 45 Age (years) Source: Affinity LNG 24 || 2017 24 2018
Slide 25: 57% of LNGC Orderbook Delivers in 2018
57% of LNGC Orderbook Delivers in 2018 94COMPANY SNAPSHOT vessels currently on the orderbook • Over half of the orderbook, or 54 vessels, are scheduled to deliver during 2018 • 15 ships in total are available for long-term charter from H2 2019 (12 uncommitted ships on order, 3 existing ships) LNG Or
Slide 26: Project Vessels Delivering Early – Impact on Spot Market
Project Vessels Delivering Early – Impact on Spot Market Three new US LNG export projects have reported delays to their start up • Cove Point was originally planned to begin being exports in late 2017 but latest update has commissioning cargoes starting in April 2018 • Cameron LNG was originally sch
Slide 27: LNG Shipping Market Balance
LNG Shipping Market Balance COMPANY SNAPSHOT The LNG shipping market is expected to gradually tighten from the end of 2018, with Australia, the U.S. and Russia being the driving forces for soaking up tonnage • During Q2-Q3 2018 shipping balance is forecasted to increase due to delivery of newbuildin
Slide 28: Right Ships at the Right Time
Right Ships at the Right Time MEGI/XDF Available for Long-Term Chartering Vast majority of LNGC orderbook is committed to long term charters # Vessels • Currently, there are 94 LNGC under construction 60 • ~90% of the LNGC newbuildings on order have long- 3 Long Term Employment 2 term employment to
Slide 29: FSRU Strategy
FSRU Strategy The improved pricing and liquidity of the LNG market keeps stimulating downstream gas demand and opens new markets • Recent countries joining the club of LNG imports include Colombia, Pakistan, Jordan, Dubai, Abu Dhabi, Turkey, Lithuania, Kuwait • Key FSRU drivers include security of s
Slide 30: Summary
05 04 05 Summary 30 || 2018 30 2017 2018
Slide 31: Summary of Fourth Quarter 2017
Summary of Fourth Quarter 2017 Positive results for Fourth Quarter • Net income of $ 1.3m • Financing of first three FLEX newbuildings completed LNG shipping market is still on track for a gradual recovery • New supply drives demand for tonnage - shipping balance expected to tighten from Q4 2018 Suc
Slide 32: Thank You
Thank You 27 February 2018 32 || 2017 32 2018