Flex LNG - Time Charter for Flex Endeavour extended to 2032
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Insights
Extending the Time Charter period for Flex LNG's vessel, Flex Endeavour, represents a signal of stability in revenue streams for the company. In the volatile energy sector, long-term contracts are a haven for companies like Flex LNG, especially when considering the operational costs associated with running a fleet of LNG carriers. This extension not only guarantees cash flow well into the end of the next decade but also reflects positively on Flex LNG's customer service and reliability, which are key competitive metrics in the industry.
From an investment perspective, such news might be reassuring for shareholders as consistency in the company's earnings can translate into steadier share prices. Moreover, the option for an additional year's extension could potentially spell further revenue stability beyond 2032. However, investors should also consider the market conditions for LNG transportation closer to the extension period, as shifts in demand for LNG, changes in shipping rates and regulatory changes could affect the profitability of the extended charter.
The exercise of the 500-day extension option translates into a better-than-expected operational certainty for Flex LNG, which can then be leveraged in financial planning and forecasts. This kind of development is typically well-received by the market as it reduces uncertainty and improves visibility into the company's future earnings. In turn, it can lead to a positive reassessment of Flex LNG's valuation metrics, like the price-to-earnings ratio, by reflecting a lower risk profile.
While the immediate stock market reaction to this announcement could be positive, assessing the deal's financial impact requires understanding the terms of the charter extension, such as the day rate compared to current and forecasted market rates. It's also essential to keep an eye on the counterparty risk associated with the charterer, particularly if they account for a significant portion of Flex LNG's revenue.
An aspect that should not be overlooked is the risk profile of the LNG transportation sector, which is subject to geopolitical tensions, environmental regulations and the cyclical nature of the commodity markets. The extension of the charter period may mitigate some operational risks by providing long-term employment for the vessel; however, it also exposes Flex LNG to potential market changes that could impact the attractiveness of the terms in the future.
For instance, if the LNG market faces an oversupply and charter rates decrease, Flex LNG will still benefit from a locked-in rate, which could be above-market at that point. On the flip side, if rates were to significantly increase, the company could potentially miss out on higher earnings unless the contract includes provisions to renegotiate the rates.
HAMILTON, Bermuda, April 12, 2024 /PRNewswire/ -- Flex LNG, Ltd. ("Flex LNG" or the "Company") (OSE/NYSE: FLNG) is pleased to announce that the charterer of Flex Endeavour has exercised an option to extend the firm period of the Time Charter by 500 days, from the third quarter 2030 to the first quarter of 2032. As announced on November 23, 2022, in connection with the extension of three ships, the charterer has one further option to extend the Time Charter period by one additional year to 2033.
Øystein Kalleklev, CEO of Flex LNG Management AS, commented:
"We are glad to share another contract extension, bringing the total to three so far this year and evidencing the fact that our charterers like the service we provide. We have so far added about 4.4 years of additional firm backlog while we have been consuming about 3.6 years of backlog, thus putting us at a slight surplus in terms of contract backlog. With this extension, our total firm backlog stands at a solid 51 years, which may increase to 69 years in the event charterers are utilizing all their extension options."
About FLEX LNG
Flex LNG is a shipping company focused on the growing market for Liquefied Natural Gas (LNG). Our fleet consists of thirteen LNG carriers on the water and all of our vessels are state-of-the-art ships with the latest generation two-stroke propulsion (MEGI and X-DF). These modern ships offer significant improvements in fuel efficiency and thus also carbon footprint compared to the older steam and four-stroke propelled ships. We have built up a significant contract backlog, having 11 of our 13 vessels on long term fixed rate charter contracts and one vessel on variable hire time charter. Flex LNG is listed both on the New York Stock Exchange as well as Oslo Stock Exchange under the ticker FLNG.
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CONTACT
For more information please contact:
Knut Traaholt, Chief Financial Officer of Flex LNG Management AS
Telephone: +47 23 11 40 00
Email: IR@flexlng.com
View original content:https://www.prnewswire.com/news-releases/flex-lng---time-charter-for-flex-endeavour-extended-to-2032-302115517.html
SOURCE Flex LNG
FAQ
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