FLEX LNG Q4 2025 Earnings Call - Strong cash and fat dividend, but 2026 TCE hinges on three spot-exposed vessels

Marius Foss, CEO, FLEX LNG: Hi everybody, welcome to FLEX LNG’s fourth quarter 2025 results presentation. My name is Marius Foss, I am the CEO of FLEX LNG, and today I am joined with our CFO, Knut Traaholt, who will take us through the financials later in our presentation. Today we will cover the Q4 and full year 2025 results, provide an update on the LNG shipping market, and as always we will conclude this webcast with a Q&A session. Before we start we would like to highlight the following: we are using certain non-GAAP measures such as TCE, adjusted EBITDA, and adjusted net income. These are supplements to the earnings report reported in accordance with US GAAP. The reconciliation of these non-GAAP measures is available in the Q4 earnings report.

There are also limitations to the completeness of our presentation, therefore we encourage you to read the quarterly report together with this presentation. With that let us begin and back to you, Marius. We sailed in revenues of $87.5 million, or $85 million excluding the EUA related to emission trading system. The fleet averaged TCE during the quarter ended up at $71,100 per day. Net income for the fourth quarter came in at $21.6 million, implying an earnings per share at $0.40. When adjusting for unrealized losses and interest rate swap and FX ending up with adjusted net income of $23.3 million, or adjusted earnings per share of $0.43. We completed the drydock of FLEX Volunteer in January. She is now trading in the spot market.

We received a notice from ONR Charters that they will not declare the one-year options on the good vessel FLEX Aurora, and we expect to have her back in our fleet in March. Our spot exposure in 2026 is limited to three vessels: FLEX Volunteer, FLEX Aurora, and the FLEX Artemis, and all three vessels are marked for long-term contracts. The remaining 10 vessels are on time charters. We are today presenting guidance for the full year, and with three vessels in the spot market we are presenting wide ranges reflecting exposure to the volatile spot markets. We expect full year revenues to be between $310 million and $340 million, and we expect a TCE per day around $65,000-$75,000 per day.

Adjusted EBITDA is expected to come in at around $225 million-$255 million for the full year. FLEX LNG has a very robust financial position. We are with a cash balance of $448 million at the year end. No debt matures prior to 2029, and we have a solid contract backlog. The board has declared another $0.75 per share dividend. This is the 18th consecutive dividend of $0.75 per share, and we have distributed then around $770 million since 2021. Our last 12 months dividend is $3 per share, implying a dividend yield of approximately 11.5%. When looking at the 2025 figures the short summary is that we delivered in line with our guidance.

The full year TCE ended at $72,000 per day, and we sailed in revenues of $340 million. Our adjusted EBITDA came in at $251 million. We traded 2 vessels in the spot market in 2025: the FLEX Artemis and the FLEX Constellation, and we completed 4 drydockings in 2025: FLEX Aurora and FLEX Resolute in Q2, FLEX Amber and FLEX Artemis in Q3. With that, let us have a look at our contract backlog. In 2026 we have 78% of available days fixed on long-term charters. As you can see in the bottom of this slide, FLEX Artemis and FLEX Volunteer are now trading in the spot market while FLEX Aurora will be redelivered from her current charters in March. We are actively marketing all three vessels for both spot and long-term contracts.

Further in 2027 we have options for FLEX Resolute, FLEX Courageous, and FLEX Freedom. These options are due to be declared during this year. The spot market was a roller coaster last year with soft rates in the start of the year while we saw a rally in Q4 with spot fixtures for more than two strokes reaching up to $175,000 per day. We expect 2026 to be equally volatile and active market with many fixtures. There is a lot of new LNG export volumes ramping up. Continued geopolitical uncertainties potential congestions both at import and export terminals but at the same time there is also a lot of new buildings being delivered. Therefore we have modest expectations for the earnings from our spot exposure exposed vessel this year.

FLEX Constellation is due to complete her final voyage in March before she will commence her 15-year time charter delivered in direct continuation. Looking at our total contract coverage we have today 50 years of minimum firm backlog which may grow up to 75 years if the charters declare all the options attached. We are optimistic about our open exposure later in this decade. We have greater open exposure during this period which aligns well with our expectations of an attractive shipping market. Significant new supply volumes are set to come on stream creating strong market fundamentals. Let us have a look at the guidance for 2026. We expect full year revenues to be between $310 million and $340 million, and correspondingly we expect the TCE for 2026 to be around $65,000-$75,000 per day.

The range in revenues and TCE reflect our open positions and exposure to the volatile spot markets. Adjusted EBITDA is expected to come in around $225 million-$255 million for the full year. In addition we will complete 3 drydockings in 2026. The docking of the FLEX Volunteer was completed in January, while FLEX Freedom will enter drydock later in February. FLEX Vigilant is expected to drydock in Q2. We have budget around 20 days of off-hire on average and the average cost of $5.9 million per docking. Before handing over to Knut, I want to touch base on the key factors behind the dividend decision. Most of our decision indicators are dark green with a few exceptions. Earnings and cash flow, we have adjusted this to a lighter green reflecting more open exposure. Market outlook, we maintain orange level.

The supply of new LNG volumes is firm but there are simply too many ships delivered ahead of the new volumes. The long-term outlook is however very optimistic. Backlog and visibility. Even though we have a comfortable 50 years of minimum firm backlog it is prudent to maintain light green. Based on these factors the board has declared another quarterly dividend of $0.75 per share. The dividend will be paid out on or about 12th of March for shareholders on record 27th of February. And with that I hand it back to you Knut for a walkthrough through the financials. Thank you Marius. In 2025 we had strong operational performance with close to 100% technical uptime net of the days for drydockings of our 4 vessels.

The drydockings in 2025 were completed on 64 days in total, significantly below the budget at 80 days and hence providing more available days for revenue generation. The TCE for the fourth quarter ended up at slightly above $70,000 per day, resulting in a TCE of $71,700 per day for the full year and then on par with our guidance. OpEx for the fourth quarter was $16,600 per day and as you can see higher than the previous quarters. This is due to planned and scheduled engine maintenance performed based on running hours. Hence we performed more of this in the fourth quarter compared to previous quarter. For the full year OpEx per day was $15,800 and slightly above our guided level of $15,500 per day.

For 2026 we budget OpEx per day to be $16,000. The increase is primarily driven by technical expenses for scheduled maintenance and cost inflation in particular related to crew changes. In summary, the fourth quarter revenues net of EUAs for EU Emissions Trading System was $85 million and $340 million for the full year. The $15 million reduction year-on-year is primarily explained by higher market exposure with FLEX Constellation and FLEX Artemis trading in a softer spot market. Adjusted EBITDA and adjusted net income for the full year ended up at $251 million and $101 million respectively. This is fully in line with our guidance provided earlier last year.

As a reminder, in our adjusted number we adjust for unrealized gains and losses from the interest swap interest rate swap portfolio FX and write-offs of depreciation costs and exit fees related to the three refinancings completed last year. We generated cash flow of $44 million from operations, and net of working capital movements and drydocking expenditures we generated approximately $36 million in net operating cash flow. We repaid $27 million in scheduled debt installments and distributed $41 million to our shareholders. In sum our cash position was reduced with $31 million. This left us with a robust cash balance of $448 million at the end of the year. In addition to our cash position of $448 million we maintain a book equity ratio of 27%.

As noted before, our book values reflect historical low acquisition costs and then adjusted with the regular depreciations. We have also an interest rate swap portfolio for interest rate hedging which is valued at $17.5 million on the balance sheet. The average fixed rate of this interest rate swap portfolio is fixed at 2.5% and we expect to maintain a hedge ratio of around 70% into mid-2027. And since January 2021 this swap portfolio has generated unrealized and realized gains of around $132 million. And with that I hand it back to you, Marius, for the markets section.

Thank you Knut. Well done. This robust financial position provides us highly commercial and financial flexibility going forward. Summarizing the export volumes for 2025, it was a year of growth for LNG with Europe clearly leading the demand. Global energy export rose 4% on a year-over-year for around 429 million tons driven by strong U.S. growth up 25% versus 2024. The rapid ramp-up from Plaquemines LNG combined with new supply from Corpus Christi accounted to the majority net growth in the U.S. Outside North America new volumes additional were limited while Russia LNG export declined 2 million tons largely due to sanctions. Australia saw a large decline due to heavy maintenance. On the demand side Europe absorbed the majority of the increased volumes with imports up 24% year-over-year reinforcing its role as a key balancing market.

Asia, on the other hand, was more mixed. Fast-growing markets such as China and India saw reduced imports year-to-year. In 2025 China reduced its imports with 15% from 2024 and relied more on domestic production, increased pipeline imports, especially from the Power of Siberia pipeline. This is also impacted by the geopolitical events and the trade war with the U.S. India is typically a price-sensitive LNG importer and while JKM traded above the $10 mark, India tends to import more LPG. On the more mature LNG market Japan, South Korea, and Taiwan LNG imports were in sum unchanged from 2024. The U.S. supplied most of the new volumes in Europe in 2025 and Europe has effectively switched its reliance from Russian pipeline flows to the U.S. LNG.

The explanation of the big jump in LNG imports in 2025 is clear on the right-hand side of this slide. European gas storage levels entered 2026 well below normal and are now said to be around 40% at the risk to fall to levels not seen since 2022. If Europe ends the winter with low storage levels huge amount of gas will be needed to inject it to return stock to minimal levels ahead of next winter. Most are used to meet daily demand so Europe’s total buying requirements in the coming months could be enormous. Hence we expect strong demand pull from Europe. As long as Europe will maintain a high demand in 2026 there will be fewer intra-basin voyages putting a lid on the spot market.

This is also reflected in the expectation for 2026 spot rates. However, the third wave of LNG supply is underway and we saw in Q2 last year ramp-up of new export capacity can suddenly absorb a lot of tonnage in short time. This is very well illustrated in the ramp-up of LNG Canada which moved a lot of tonnage away into the Pacific Basin. Total new building orders in 2025 was 35 down from 79 in 2024. Ordering momentum has carried out in 2026 with around 20 new building orders record as early in February. Vessels ordered in 2025 2026 are scheduled for delivery late 2025 or 2029. A meaningful share of these orders remain without attached contracts.

This signals growing confidence in a firm shipping market later in this decade, a period that aligns well with our open exposure. The newbuilding prices remain fairly stable for $250 million for a standard two-stroke vessel built in Korea. This is supportive for asset values for existing tonnage including our fleet. We do not expect newbuilding prices to fall materially any time soon. 23 newbuildings were delivered in the fourth quarter 2025 bringing the total deliveries up to 79 up from 60 in 2024. With 6 vessels already delivered this year the remaining order book is estimated to around 290 vessels equivalent to around 40% of the existing fleet. 90-95 vessels are expected to be delivered in 2026 including roughly 20 units that slipped from 2025.

Of the total order book, approximately 45 vessels are currently uncommitted. This profile means that while there will be a lot of new tonnage entering the market in 2026 and 2027. With a lot of new modern tonnage entering the market, the steam vessels rolling off long-term contracts. We saw a record high 15 steam vessels scrapped in 2025. This is a strong signal. We expect recycling activity to continue. Spot rates to steam vessels are quoted currently under $5,000 per day effectively pushing these vessels out of the market. The shipbroker SSY believes close to 100 steam vessels will roll off their long contracts over the coming years. These vessels are expected to exit the active trade either scrapped or enter into regional trades.

This slide shows the 3 waves of global LNG capacity and why the period we are now entering really matters. We are entering the third wave of LNG and it’s larger than ever seen before. Over 200 million tons of new export capacity is expected to come on stream or around 50% growth in the global liquefaction capacity. Most of this growth is concentrated in two places, the North America and Qatar. Qatar North Field East is expected to begin deliveries late this year with new trains coming online thereafter. In addition, LNG Canada will continue to ramp up towards full capacity in 2026 alongside increased output from Corpus Christi in the U.S. This widely anticipated startup of Golden Pass LNG is expected later in 2026 providing a further boost of U.S. liquefaction capacity. With that, let’s move on to the Q&A session.

Moderator/Unidentified, FLEX LNG: Thank you Marius. That hands us over to the Q&A sessions and questions that have been submitted. Thank you for all of those who have sent us questions for this quarterly presentation. There is a number of questions regarding the upcoming options that you walked through in the fleet overview. Can you give any more color on around these options and the likelihood of being declared?

Marius Foss, CEO, FLEX LNG: Thank you. That’s a good question. We are also waiting for that. I can’t really comment on when these options are due but the charters will do so during 2026. Regardless if they are declared or not these options will not have any effect with our fleet portfolio of 75% in 2026. So we all have seen in our presentation 2027 and 2028 is an interesting period with the increased volumes. So it’s yeah we also interesting to see if the charters are sharing the same as we have shared in this presentation today or not. So we will report back when these options are due and inform the market accordingly.

Moderator/Unidentified, FLEX LNG: Now with FLEX Aurora being redelivered and we have increased market exposure, there are also a number of questions on the decision factors and how this should be viewed regarding future dividend payments. I think we can start off with saying that each dividend payment is a decision made by the board at each board meeting ahead of the quarterly presentation. So it’s difficult to say something about the future of dividends. But what we can say is on the decision factors; yes, we have adjusted some, but the majority of the decision factors are dark green or light green. In the decision, it’s important here to view that we have a very solid financial position with a high cash balance to support the dividend. And we also have a large contract backlog which are not subject to options being declared or not.

One thing that we are monitoring and will be assisted into evaluating future decision factors will be the visibility, in particular the trading of the spot vessels, and also if any of these open ships will get another long-term contract. There are also a number of questions here on new buildings and the recent surge in new building orders, in particular in the start of the year, and on FLEX and on fleet growth. Do you consider new buildings similar to these owners?

Marius Foss, CEO, FLEX LNG: Thank you. With what you have explained now, with the position we are in, we are in position to order ship if needed, but we are trying to be, say, disciplined and not to order if we don’t have a contract attached. As explained in our presentation, now is that the new building in modern two-stroke today is about $250 million and the benchmark for a ten-year contract is, say, $85,000 give or take. And in our calculations that’s not really a good investment for a ship owner. So we are trying to be patient, disciplined and also working with our charters that if new buildings should be needed we are ready to go to the yard and discuss new contracts with our charters if somebody wants support with us.

But speculatively we see others are ordering that and that’s a good sign of where we are heading. I think the exposure we have with the current open ships coming open later will mean that we are in very good position to get these ships extended or new contracts.

Moderator/Unidentified, FLEX LNG: Yeah, there is a follow-up comment to that to support that. There is: will we order ships, newbuildings, while we have nearly half of the fleet exposed in the market for 2028-2029?

Marius Foss, CEO, FLEX LNG: No, I think we should take the benefit of what we have on the water, which still is considered as new building. They have now basically the entire fleet has been through a five-year service, and I believe all our ships live in dry docks now are better than new. So, I think we have a good quality tonnage, which the size is in line with the new orders, so we will focus on that first. Stay disciplined.

Moderator/Unidentified, FLEX LNG: That covers the main topics of the questions we received today. That concludes the Q&A session.

Marius Foss, CEO, FLEX LNG: Thank you Knut. Thank you for all joining into our webcast today. We would like to welcome you all back to our Q1 2026 presentation which will be back in May. Thank you.