FLEX LNG Ltd. (FLNG) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed outlook. Financial performance is stable, with strong dividend yield and cash balance, but no YoY growth mentioned. Market strategy is cautious, focusing on existing fleet rather than expansion, and future demand is uncertain due to potential oversupply. The Q&A reveals management's reluctance to commit to new orders, indicating uncertainty. Overall, strong dividends and financial health are balanced by market risks and management's cautious stance, leading to a neutral sentiment.

Key Financial Performance

Revenues (Q4 2025) $87.5 million or $85 million excluding EUAs related to emission trading system. No specific year-over-year change mentioned.

Fleet Average TCE (Q4 2025) $70,100 per day. No specific year-over-year change mentioned.

Net Income (Q4 2025) $21.6 million, implying earnings per share of $0.40. Adjusted net income was $23.3 million or adjusted earnings per share of $0.43. No specific year-over-year change mentioned.

Cash Balance (Year-End 2025) $448 million. No specific year-over-year change mentioned.

Dividend (2025) $0.75 per share for the 18th consecutive quarter, totaling $3 per share for the year, implying a dividend yield of approximately 11.5%. No specific year-over-year change mentioned.

Full Year TCE (2025) $72,000 per day. No specific year-over-year change mentioned.

Full Year Revenues (2025) $340 million. No specific year-over-year change mentioned.

Adjusted EBITDA (2025) $251 million. No specific year-over-year change mentioned.

OpEx per Day (Q4 2025) $16,600 per day, higher than previous quarters due to planned engine maintenance. Full year OpEx per day was $15,800, slightly above the guided level of $15,500 per day.

Adjusted Net Income (2025) $101 million. No specific year-over-year change mentioned.

Cash Flow from Operations (2025) $44 million, with net operating cash flow of approximately $36 million after working capital movements and dry docking expenditures.

Debt Repayment (2025) $27 million in scheduled debt installments.

Interest Rate Swap Portfolio Valued at $17.5 million on the balance sheet, with an average fixed rate of 2.5%. Unrealized and realized gains since January 2021 total $132 million.

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Operating Highlights

Dry Docking Completion: Flex Volunteer completed dry dock in January and is now trading in the spot market.

Spot Market Exposure: Three vessels (Flex Volunteer, Flex Aurora, and Flex Artemis) are marked for long-term contracts but currently have spot market exposure.

Revenue Guidance: Full year 2026 revenues expected to be between $310 million and $340 million.

Adjusted EBITDA: Expected to be around $225 million to $255 million for 2026.

LNG Export Growth: Global LNG exports rose 4% in 2025, driven by a 25% increase in U.S. exports.

European LNG Demand: Europe's LNG imports increased by 24% in 2025, replacing Russian pipeline gas with U.S. LNG.

Asian LNG Demand: China and India reduced LNG imports in 2025, with China relying more on domestic production and pipeline imports.

New LNG Supply: Significant new LNG export volumes expected from North America and Qatar in 2026 and beyond.

Fleet Utilization: Close to 100% technical uptime achieved in 2025, with dry docking days significantly below budget.

Operating Expenses: OpEx per day for 2025 was $15,800, slightly above the guided level, with a 2026 budget of $16,000 per day.

Dividend Distribution: Declared $0.75 per share dividend for Q4 2025, marking the 18th consecutive quarterly dividend.

Contract Backlog: 50 years of minimum firm backlog, potentially growing to 75 years if all options are exercised.

Market Positioning: Positioned for long-term growth with exposure to an attractive shipping market later in the decade.

New Building Orders: 35 new LNG vessels ordered in 2025, with a focus on modern tonnage for future market needs.

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Risk or Challenges

Spot Market Volatility: The company has limited spot exposure in 2026 with three vessels trading in the spot market. However, the spot market is expected to be volatile, with modest earnings expectations due to new LNG export volumes, geopolitical uncertainties, potential terminal congestions, and a large number of new ships being delivered.

Charter Non-Renewal: One of the company's charters has decided not to declare a one-year option for the vessel Flex Aurora, which will return to the fleet in March. This creates uncertainty in securing new contracts for the vessel.

Dry Docking Costs and Downtime: The company plans to complete three dry dockings in 2026, with an average cost of $5.9 million per docking and an average downtime of 20 days per vessel. This will temporarily reduce operational capacity and increase costs.

Cost Inflation: Operational expenses (OpEx) are expected to increase in 2026, driven by technical expenses for scheduled maintenance and cost inflation, particularly related to crew changes.

Uncommitted New Builds: A significant number of new LNG vessels are being delivered in 2026 and 2027, with approximately 45 vessels currently uncommitted. This could lead to oversupply in the market, putting downward pressure on spot rates.

European Gas Storage Levels: European gas storage levels are currently low, which could lead to increased demand for LNG imports. However, this demand is uncertain and could impact the company's ability to secure favorable spot rates.

Aging Fleet and Scrapping: A record number of older steam vessels are being scrapped due to low spot rates, and many are rolling off long-term contracts. This could impact market dynamics and competition.

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Guidance & Outlook

Revenue Expectations: Full year revenues for 2026 are expected to be between $310 million and $340 million.

Time Charter Equivalent (TCE) Projections: The expected TCE for 2026 is around $65,000 to $75,000 per day, reflecting exposure to the volatile spot markets.

Adjusted EBITDA: Adjusted EBITDA is expected to come in around $225 million to $255 million for the full year 2026.

Dry Docking Plans: Three dry dockings are planned for 2026: Flex Volunteer (completed in January), Flex Freedom (scheduled for February), and Flex Vigilant (expected in Q2). Each docking is budgeted for around 20 days and an average cost of $5.9 million.

Market Trends and Expectations: 2026 is expected to be a volatile and active market with many fixtures. There is significant new LNG export volume ramping up, continued geopolitical uncertainties, potential congestion at import/export terminals, and a large number of new buildings being delivered. Modest earnings are expected from spot-exposed vessels this year.

Long-Term Market Outlook: The company is optimistic about open exposure later in the decade, expecting an attractive shipping market due to significant new supply volumes coming online, creating strong market fundamentals.

Operational Expenditure (OpEx): OpEx per day for 2026 is budgeted at $16,000, driven by technical expenses for scheduled maintenance and cost inflation, particularly related to crew changes.

Dividend Policy: The Board has declared a quarterly dividend of $0.75 per share, reflecting a cautious but optimistic outlook based on market conditions and financial performance.

Fleet and Contract Coverage: 78% of available days in 2026 are fixed on long-term charters. The company is actively marketing three vessels (Flex Volunteer, Flex Aurora, and Flex Artemis) for both spot and long-term contracts.

New LNG Export Capacity: Over 200 million tonnes of new export capacity is expected to come online globally, with significant contributions from North America and Qatar. This is expected to drive market growth and align with the company's open exposure.

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Shareholder Return Plan

Dividend Declaration: The Board has declared another $0.75 per share dividend, marking the 18th consecutive dividend of this amount. This brings the total dividends distributed since 2021 to approximately $770 million.

Dividend Yield: The last 12 months' dividend is $3 per share, implying a dividend yield of approximately 11.5%.

Dividend Payment Date: The dividend will be paid out on March 12th for shareholders on record as of February 27th.

Shareholder Distribution: In 2025, the company distributed $41 million to shareholders.

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Key Q&A

Q:Can you provide more details about the upcoming options in the fleet overview and their likelihood of being declared?

A:The CEO stated that they are also waiting for updates on the options and cannot comment on when they are due. However, these options will not affect the fleet portfolio of 75% in 2026. The CEO mentioned that 2027 and 2028 are interesting periods due to increased volumes and will report back when the options are due.

Q:What are the decision factors regarding future dividend payments?

A:The Principal Financial Officer explained that each dividend payment is decided by the Board at each meeting. The company has a solid financial position with a high cash balance and a large contract backlog. Future decision factors will consider the visibility of trading spot vessels and whether open ships secure long-term contracts.

Q:Do you consider new buildings similar to other owners given the recent surge in new building orders?

A:The CEO stated that they are in a position to order ships if needed but prefer to be disciplined and not order without a contract attached. The cost of a modern 2-stroke new building is about $250 million, and a 10-year contract benchmark is $85,000, which is not seen as a good investment. They are ready to discuss new contracts with charters if needed but prefer to focus on their current fleet.

Q:Will you order new ships while nearly half of the fleet is exposed in the market for 2028 and 2029?

A:The CEO emphasized the benefit of focusing on their current fleet, which is still considered new and has undergone 5-year services. They believe their fleet is of good quality and in line with new orders, so they will stay disciplined and prioritize their existing ships.

Q:Review of Unclear Management Responses

A:The management avoided giving a direct answer regarding the timing of the upcoming options in the fleet overview, stating they are waiting for updates and will inform the market when the options are due.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

FLNG Transcript

FLEX LNG Ltd. (FLNG) Q4 2025 Earnings Call Transcript

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The earnings call presents a mixed picture: strong contract backlog and dividend policy are positives, but spot market softness, drydocking costs, and charter non-renewals pose challenges. The Q&A reveals optimism about market growth but lacks clarity on certain options, leading to uncertainty. The company's commitment to dividends and strong cash position are offset by risks in market exposure and interest rate impacts. Given the market cap of $1.5 billion, these factors suggest a neutral stock price movement in the short term.

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The earnings call summary shows a solid financial performance with consistent TCE and a robust balance sheet, supported by a high dividend yield and a share buyback program. Despite some market challenges, such as competition and reduced LNG imports in China and India, the company maintains a positive long-term outlook. The Q&A section indicated cautious but strategic cash management and potential growth opportunities. Given the company's small market cap, the positive factors, including strong shareholder returns and optimistic guidance, are likely to result in a positive stock price movement.

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The earnings call presents a mixed picture: strong financial performance with EPS exceeding expectations and a solid backlog providing stability. However, the cautious market outlook and potential operational challenges temper enthusiasm. The high dividend yield is a positive, but concerns about market conditions and management's unclear responses in the Q&A add uncertainty. The company's market cap suggests moderate volatility, leading to a neutral prediction for short-term stock movement.

FLNG Slides

FLEX LNG Q4 2025 slides: Solid performance amid spot market challenges

2026-02-11

FLNG Report

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