LNG market poised for a positive end to 2019

The Oslo-listed company, which also began trading on the New York Stock Exchange in June, has five vessels on the water plus another eight under construction.

News ID: 80424

Date: 21 August 2019 - 08:55

New York Stock Exchange newcomer Flex LNG suffered a higher loss in the second quarter despite higher revenues compared with last year.The company is confident the global LNG market is on track for a strong run on the back of growing demand.

Flex LNG expects market to be tight going into 2020, propping up shipping demand.

FLEX LNG CHIEF EXECUTIVE ØYSTEIN M KALLEKLEV DESCRIBED THE FIRST HALF OF THE YEAR AS ‘A COLD SHOWER’ FOR THE LNG INDUSTRY.

THE prospects of the liquefied natural gas shipping sector are looking up as demand is set for a boost, while the shipping market absorbs new tonnage, according to LNG carrier owner Flex LNG.

“The first half of 2019 has been a cold shower for most LNG industry participants, with the exception of the end consumers, who have benefited from cheap, clean fuel and made significant savings on their utility bills,” said chief executive Øystein M Kalleklev in a statement.

On Tuesday, Flex reported a $3.9m net loss for the second quarter of the year, up from a $2.9m loss during the same period last year, despite a higher operating income that resulted from a larger fleet.

Expenses from interest payments grew, as did losses on derivatives leading to the higher net loss.

The company lost $7.36m in the first six months of 2019, compared with a $4.64m loss in the first half of 2018.

Mr Kalleklev attributed part of the decline in Flex’s fortunes in the first half of the year to European consumers absorbing excess gas supply that resulted from lower prices. Sailing distances thus fell, dragging down shipping demand and rates.

Rates began to stabilise and recover in the second quarter but slow demand from Asia, cooler weather in certain areas and growing supply of LNG weighed down on the price of the product.

Demand for LNG is expected to increase, however, and Flex LNG believes the market is well balanced, despite lower than expected tonne mile growth due muted US–Asia trade, as it is absorbing new tonnage.

“Tighter product markets generally result in higher shipping demand due to arbitrage and re-loads. Hence, we think a tighter product market will positively affect the market balance in 2021,” Mr Kalleklev said.

Following the release of the results, Flex LNG reported that senior management had bought around $67,000 worth of shares in the company.

Mr Kalleklev bought another 5,000 shares at a price of NKr86.2 (9.59). He now holds 20,000 shares in Flex LNG and options for a further 60,000 shares.

Flex LNG chief financial officer Harald Gurvin also bought 2,000 shares at the same price and has options to buy 30,000 more. He now has 7,000 shares in the company.

Flex LNG reported that by the end of the quarter, there were 502 vessels above 125,000 c bm in the global LNG carrier fleet, excluding floating storage and regasification units. The order book at the end of the quarter amounted to 106 conventional LNG carriers, of which 43 were reported as ‘uncommitted’, and 20 ships were scheduled to be delivered this year.

Clarksons recently reported that as of August 1, 2019 there were 578 LNG carriers in the global fleet, with 529 being 100,000 c bm and above. Out of the 135 LNG carriers in the order book, 113 are between 150,000 c bm and 180,000 c bm. The remaining 22 are all  of100,000 c bm and below.

Flex LNG’s eight newbuilds are expected to arrive between the third quarter 2019 and the second quarter 2021.