Market Update. January 2019

Transcription

1 Market Update January

2 Company Highlights During 2017 and 2018, Flex LNG has raised $629m of equity and $473m of debt financing to increase its fleet from two to thirteen LNGCs All thirteen LNGCs are large 174k cbm fifth generation vessels fitted with slow speed two stroke dual fuel engines (ME-GI and XDFs) resulting in significant reduction in unit transportation costs compared to steam or tri-fuel vessels Four vessels delivered during 2018, two vessels scheduled for delivery in 2019 and another seven for delivery in 2020/21 Due to well positioned fleet and buoyant market, revenues expected to increase from $19m in Q3 to $ 35m in Q4 2

3 Unique fleet comprising of 13 modern large 5 th generation LNGCs ME-GI and X-DF vessels are the most fuel-efficient and technically advanced LNGCs High Pressure Low pressure ME-GI ME-GI with Partial Reliquefaction System ME-GI with Full Reliquefaction System X-DF Ranger (2018) Endeavour (2018) Reliance (2020) Aurora (2020) Rainbow (2018) Enterprise (2018) Resolute (2020) Amber (2020) Initial Flex LNG LNGCs Constellation (2019) Freedom (2020) Volunteer (2021) Courageous (2019) Vigilant (2021) Acquired in 2017: $329m equity issued Acquired in 2018: $300m equity issued 3 Source: Company

4 The leading owner of 5 th generation LNGCs Flex LNG is the largest owner of 5 th gen LNG vessels Unit transportation costs (round-trip US gulf to China) 14 Open: 13 On Order Trading $/MMBtu 3,5 12 Open: 0 3, Open: 0 Open: 5 2,5 8 9 Open: 4 2, Open: 0 Open: 2 Open: 0 Open: 0 1, , Flex LNG 3 1 Teekay GasLog Maran Gas 2 2 Cardiff BP BW Group 1 NYK 2 Knutsen OAS 0,5 0,0 1st Generation 145k ST 155k ST k 174k ME-GI DFDE/TFDE Fuel Boil Off Port Charges Charter Hire (1) Assuming speed of 16.5 knots (~74 days round trip), term charter rate of USD 70k/day, boil off gas priced at USD 5 / mmbtu, port cost of USD 250k, and allowance for port fees and loadring discharge time. Source: Poten & Partners 4 Based on commercial ownership of the vessels (source: Poten, Clarkson & Company)

5 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 LNG transportation in early phase of recovery Estimated weekly average LNGC spot rates Spot $/Day Natural Gas Prices by Region and Arbitrage US -> Asia $ / Mmbtu LNG 145K CBM Spot (Steam) DF-2S LNG 160K CBM (TFDE) ARB - US -> Asia Delivered Asia Henry HUB US NBP Europe Headline spot rates doubled from 2017 to 2018 due to tighter LNGC market driven by strong demand Arbitrage window expected to improve from Q4-18 to Source: SSY, Affinity, Bloomberg and Company

6 Steep nameplate capacity growth going in to Mmtpa-Post FID Cameron LNG Export T1-3 Incremental LNG capacity growth Cameroon FLNG Coral FLNG Corpus Christi LNG T1-3 Elba LNG Freeport LNG T Ichthys T1 Petronas FLNG (Sabah) Sabine Pass T2-5 Tangguh LNG T3 Wheatstone LNG T1-2 Yamal LNG T1,3, Source: Bloomberg, Poten and Company

7 Resulting in glut of LNG coming to the market Year on Year Change LNG Export Volumes Mmtpa-Post FID 40 Post FID AND Likely LNG Export Projects 600 Mmtpa Other North America Russia Africa Indonesia Malaysia Australia (5) Qatar 100 (10) North America Other Russia Africa Indonesia Malaysia Australia Qatar 7 Source: Bloomberg, Company

8 Tonnage demand by key LNG export areas ~2,2 x Vsl ~2,2 x Vsl ~1,5 x Vsl ~1,4 x Vsl ~0,8 x Vsl ~1,2 x Vsl Country / Region 2018 % of Supply Multiplier New Export MT 2019E Vessel Demand New % split Supply Africa 10 % 1,46 0,70 9 % Australia 22 % 1,16 10,5 12,2 21 % Qatar 24 % 1,39 23 % South East Asia 15 % 0,83 14 % U.S. 7 % 2,19 15,0 32,9 10 % Row 22 % 1,50 7,0 15,4 23 % Volume weighted multiplier 1,34 33,2 60 1,37 # of Vessels needed to deliver 1 MT of LNG gradually increasing as especially US and Northern Russia (winter) volume grows. 2018/2019 the multiplier is expected to increase by 2,5%, absolute volume by 9%, fleet by ~10% 8 Source: Poten and Company

9 Nautical miles Shipping multiple Why 1.3x multiple for LNGC? Basic assumptions: Average size of 155,000 cbm is capacity of 68,350 tonnes Sample routes 3,5 3 Average sailing distance: 4,000 nautical ,5 miles RT 8,000 nautical miles ,5 Average speed (ballast/laden): 15 knots Average RT inc discarge/loading time: 29 days ,5 2% time spent for dry-docking 0 0 Average utilization: 90% Yearly lifting capacity per vessel: 750,000 Gives multiple per mmpta of about 1.3 x 9 Source: Company

10 Half of US cargoes going far east in 2018 US cargo destinations for % 6% 29% 52% Asia Europe Lat America Middle East 10 Source: Poten and Reuters

11 MT/M Larger than usual movement in inventories 2,00 World Exported less Imported LNG Balance (Adjusted for boil-off) 30,00 1,50 1,00 0,50 20,00 10,00 - (0,50) (1,00) (1,50) # Vessels - (10,00) (20,00) (2,00) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 vsl 5y Avg vsl y avg (30,00) In periods where Exports surpasses Demand, storage appears Vessel demand increases in the build up towards peak demand As imports catch up, inventories are drawn and vessel availability grows 11 Source: KPLER and Company

12 El Nino conditions have resulted in higher temperatures in Pacific Sea Surface Temperature anomaly December Source: Australian Bureau of Metrology

13 # Vessels Nautical Miles Very few uncommitted vessels available before H Order book for large LNG carriers Average sailing distances (laden) 18 Committed Open Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr About 105 LNGC orders including 6 Arc 7 LNGCs Very limited open vessels before H Increased sailing distances due to US/Russian volumes supportive of LNGC demand 13 Source: Fearnleys and DNB

14 # No of Vesels Ketchup effect on ordering 80 LNG Contracting activity vessels 110 vessels 14 Source: Poten

15 Switching to LNG is as much health policy as energy and/or environmental policy In South Asia, air pollution larger health risk than tobacco, cancer, water sanitation and on par with dietary risk If the air pollution improves from China's level to the American EPA standard level, that means that would improve everyone's education by around one year 15 Source: Texas A&M University, NPR and Science News

16 Air pollution: a glocal problem 9 out of 10 people breathe unhealthy air. 6.5 million pre-mature deaths every year caused by outdoor and household air pollution. 16 Source: WHO/FT

17 Summary Right Ships Right Time Right Market Four LNGCs on the water and nine LNGCs under construction, all fitted with 5 th generation propulsion (two-stroke low-speed engines) providing substantial fuel savings and larger parcel size The market have re-balanced and is now in early phase of recovery with higher charter rates and utilization as well as increased interest for longer term contracts LNGC market have very strong long-term fundamentals due to increased demand for LNG, emissions focus and commoditization of LNG resulting in more trading Right Owner The principal shareholder has evidenced unrivaled performance in building strong shipping companies and is supportive of Flex LNG in relation to credit and S&P transactions 17

18 Q&A 18